I.

INTRODUCTION recruitment by private employment agencies of "Filipino

domestic helpers going to Hong Kong" (p. 30, Rollo). The
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, DOLE itself, through the POEA took over the business of
INC., petitioner, deploying such Hong Kong-bound workers.
vs.
HON. RUBEN D. TORRES, as Secretary of the Department In view of the need to establish mechanisms
of Labor & Employment, and JOSE N. SARMIENTO, as that will enhance the protection for Filipino
Administrator of the PHILIPPINE OVERSEAS domestic helpers going to Hong Kong, the
EMPLOYMENT ADMINISTRATION, respondents. recruitment of the same by private employment
agencies is hereby temporarily suspended effective
GRIÑO-AQUINO, J.: 1 July 1991. As such, the DOLE through the
facilities of the Philippine Overseas
This petition for prohibition with temporary restraining order Employment Administration shall take over the
was filed by the Philippine Association of Service Exporters processing and deployment of household
(PASEI, for short), to prohibit and enjoin the Secretary of the workers bound for Hong Kong, subject to
Department of Labor and Employment (DOLE) and the guidelines to be issued for said purpose.
Administrator of the Philippine Overseas Employment
Administration (or POEA) from enforcing and implementing In support of this policy, all DOLE Regional
DOLE Department Order No. 16, Series of 1991 and POEA Directors and the Bureau of Local
Memorandum Circulars Nos. 30 and 37, Series of 1991, Employment's regional offices are likewise
temporarily suspending the recruitment by private directed to coordinate with the POEA in
employment agencies of Filipino domestic helpers for Hong maintaining a manpower pool of prospective
Kong and vesting in the DOLE, through the facilities of the domestic helpers to Hong Kong on a regional
POEA, the task of processing and deploying such workers. basis.

PASEI is the largest national organization of private For compliance. (Emphasis ours; p. 30, Rollo.)
employment and recruitment agencies duly licensed and
authorized by the POEA, to engaged in the business of Pursuant to the above DOLE circular, the POEA issued
obtaining overseas employment for Filipino landbased Memorandum Circular No. 30, Series of 1991, dated July 10,
workers, including domestic helpers. 1991, providing GUIDELINES on the Government processing
and deployment of Filipino domestic helpers to Hong Kong
On June 1, 1991, as a result of published stories regarding the and the accreditation of Hong Kong recruitment agencies
abuses suffered by Filipino housemaids employed in Hong intending to hire Filipino domestic helpers.
Kong, DOLE Secretary Ruben D. Torres issued Department
Order No. 16, Series of 1991, temporarily suspending the
Subject: Guidelines on the Temporary 4. Processing and Deployment
Government Processing and Deployment of
Domestic Helpers to Hong Kong. 5. Welfare Programs

Pursuant to Department Order No. 16, series of II. Documentary Requirements and Other
1991 and in order to operationalize the Conditions for Accreditation of Hong Kong
temporary government processing and Recruitment Agencies or Principals
deployment of domestic helpers (DHs) to Hong
Kong resulting from the temporary suspension Recruitment agencies in Hong Kong intending
of recruitment by private employment agencies to hire Filipino DHs for their employers may
for said skill and host market, the following negotiate with the HWPU in Manila directly or
guidelines and mechanisms shall govern the through the Philippine Labor Attache's Office
implementation of said policy. in Hong Kong.

I. Creation of a joint POEA-OWWA Household xxx xxx xxx

Workers Placement Unit (HWPU)
X. Interim Arrangement
An ad hoc, one stop Household Workers
Placement Unit [or HWPU] under the All contracts stamped in Hong Kong as of June
supervision of the POEA shall take charge of 30 shall continue to be processed by POEA until
the various operations involved in the Hong 31 July 1991 under the name of the Philippine
Kong-DH industry segment: agencies concerned. Thereafter, all contracts
shall be processed with the HWPU.
The HWPU shall have the following functions
in coordination with appropriate units and Recruitment agencies in Hong Kong shall
other entities concerned: submit to the Philippine Consulate General in
Hong kong a list of their accepted applicants in
1. Negotiations with and Accreditation of Hong their pool within the last week of July. The last
Kong Recruitment Agencies day of acceptance shall be July 31 which shall
then be the basis of HWPU in accepting
2. Manpower Pooling contracts for processing. After the exhaustion of
their respective pools the only source of
3. Worker Training and Briefing applicants will be the POEA manpower pool.
 For strict compliance of all concerned. (pp. 31- Unit in Manila for accreditation before their
35, Rollo.) recruitment and processing of DHs shall be
allowed.
On August 1, 1991, the POEA Administrator also issued
Memorandum Circular No. 37, Series of 1991, on the Recruitment agencies in Hong Kong who have
processing of employment contracts of domestic workers for some accepted applicants in their pool after the
Hong Kong. cut-off period shall submit this list of workers
upon accreditation. Only those DHs in said list
TO: All Philippine and Hong Kong Agencies will be allowed processing outside of the
engaged in the recruitment of Domestic helpers HWPU manpower pool.
for Hong Kong
For strict compliance of all concerned.
Further to Memorandum Circular No. 30, series (Emphasis supplied, p. 36, Rollo.)
of 1991 pertaining to the government
processing and deployment of domestic helpers On September 2, 1991, the petitioner, PASEI, filed this petition
(DHs) to Hong Kong, processing of employment for prohibition to annul the aforementioned DOLE and POEA
contracts which have been attested by the Hong circulars and to prohibit their implementation for the
Kong Commissioner of Labor up to 30 June following reasons:
1991 shall be processed by the POEA
Employment Contracts Processing Branch up to 1. that the respondents acted with grave abuse
15 August 1991 only. of discretion and/or in excess of their rule-
making authority in issuing said circulars;
Effective 16 August 1991, all Hong Kong
recruitment agent/s hiring DHs from the 2. that the assailed DOLE and POEA circulars
Philippines shall recruit under the new scheme are contrary to the Constitution, are
which requires prior accreditation which the unreasonable, unfair and oppressive; and
POEA.
3. that the requirements of publication and
Recruitment agencies in Hong Kong may apply filing with the Office of the National
for accreditation at the Office of the Labor Administrative Register were not complied
Attache, Philippine Consulate General where a with.
POEA team is posted until 31 August 1991.
Thereafter, those who failed to have themselves There is no merit in the first and second grounds of the
accredited in Hong Kong may proceed to the petition.
POEA-OWWA Household Workers Placement
Article 36 of the Labor Code grants the Labor Secretary the 2. It assumed from the defunct Overseas
power to restrict and regulate recruitment and placement Employment Development Board the power
activities. and duty:

Art. 36. Regulatory Power. — The Secretary of 3. To recruit and place workers
Labor shall have the power to restrict and for overseas employment of
regulate the recruitment and placement Filipino contract workers on a
activities of all agencies within the coverage of government to government
this title [Regulation of Recruitment and arrangement and in such other
Placement Activities] and is hereby authorized to sectors as policy may dictate . . .
issue orders and promulgate rules and regulations to (Art. 17, Labor Code.) (p.
carry out the objectives and implement the 13, Rollo.)
provisions of this title. (Emphasis ours.)
3. From the National Seamen Board, the POEA
On the other hand, the scope of the regulatory authority of the took over:
POEA, which was created by Executive Order No. 797 on May
1, 1982 to take over the functions of the Overseas Employment 2. To regulate and supervise the
Development Board, the National Seamen Board, and the activities of agents or
overseas employment functions of the Bureau of Employment representatives of shipping
Services, is broad and far-ranging for: companies in the hiring of
seamen for overseas
1. Among the functions inherited by the POEA employment; and secure the best
from the defunct Bureau of Employment possible terms of employment
Services was the power and duty: for contract seamen workers and
secure compliance therewith.
"2. To establish and maintain a (Art. 20, Labor Code.)
registration and/or licensing
system to regulate private sector The vesture of quasi-legislative and quasi-judicial powers in
participation in the recruitment and administrative bodies is not unconstitutional, unreasonable
placement of workers, locally and and oppressive. It has been necessitated by "the growing
overseas, . . ." (Art. 15, Labor complexity of the modern society" (Solid Homes, Inc. vs.
Code, Emphasis supplied). (p. Payawal, 177 SCRA 72, 79). More and more administrative
13, Rollo.) bodies are necessary to help in the regulation of society's
ramified activities. "Specialized in the particular field assigned
to them, they can deal with the problems thereof with more
expertise and dispatch than can be expected from the countries and all other classes of Filipino
legislature or the courts of justice" (Ibid.). workers for other countries.

It is noteworthy that the assailed circulars do not prohibit the Said administrative issuances, intended to
petitioner from engaging in the recruitment and deployment curtail, if not to end, rampant violations of the
of Filipino landbased workers for overseas employment. A rule against excessive collections of placement
careful reading of the challenged administrative issuances and documentation fees, travel fees and other
discloses that the same fall within the "administrative and charges committed by private employment
policing powers expressly or by necessary implication agencies recruiting and deploying domestic
conferred" upon the respondents (People vs. Maceren, 79 helpers to Hongkong. [They are reasonable, valid
SCRA 450). The power to "restrict and regulate conferred by and justified under the general welfare clause of the
Article 36 of the Labor Code involves a grant of police power Constitution, since the recruitment and deployment
(City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" business, as it is conducted today, is affected with
means "to confine, limit or stop" (p. 62, Rollo) and whereas the public interest.
power to "regulate" means "the power to protect, foster,
promote, preserve, and control with due regard for the xxx xxx xxx
interests, first and foremost, of the public, then of the utility
and of its patrons" (Philippine Communications Satellite The alleged takeover [of the business of
Corporation vs. Alcuaz, 180 SCRA 218). recruiting and placing Filipino domestic helpers
in Hongkong] is merely a remedial measure,
The Solicitor General, in his Comment, aptly observed: and expires after its purpose shall have been
attained. This is evident from the tenor of
. . . Said Administrative Order [i.e., DOLE Administrative Order No. 16 that recruitment
Administrative Order No. 16] merely restricted of Filipino domestic helpers going to Hongkong
the scope or area of petitioner's business by private employment agencies are hereby
operations by excluding therefrom recruitment "temporarily suspended effective July 1, 1991."
and deployment of domestic helpers for Hong
Kong till after the establishment of the The alleged takeover is limited in scope, being
"mechanisms" that will enhance the protection confined to recruitment of domestic helpers
of Filipino domestic helpers going to Hong going to Hongkong only.
Kong. In fine, other than the recruitment and
deployment of Filipino domestic helpers for xxx xxx xxx
Hongkong, petitioner may still deploy other class of
Filipino workers either for Hongkong and other
 . . . the justification for the takeover of the newspapers of general circulation. (Emphasis
processing and deploying of domestic helpers supplied, Labor Code, as amended.)
for Hongkong resulting from the restriction of
the scope of petitioner's business is confined Sec. 3. Filing. — (1) Every agency shall file with the
solely to the unscrupulous practice of private University of the Philippines Law Center, three (3)
employment agencies victimizing applicants for certified copies of every rule adopted by it. Rules in
employment as domestic helpers for Hongkong force on the date of effectivity of this Code
and not the whole recruitment business in the which are not filed within three (3) months
Philippines. (pp. 62-65, Rollo.) shall not thereafter be the basis of any sanction
against any party or persons. (Emphasis
The questioned circulars are therefore a valid exercise of the supplied, Chapter 2, Book VII of the
police power as delegated to the executive branch of Administrative Code of 1987.)
Government.
Sec. 4. Effectivity. — In addition to other rule-
Nevertheless, they are legally invalid, defective and making requirements provided by law not
unenforceable for lack of power publication and filing in the inconsistent with this Book, each rule shall become
Office of the National Administrative Register as required in effective fifteen (15) days from the date of filing as
Article 2 of the Civil Code, Article 5 of the Labor Code and above provided unless a different date is fixed by
Sections 3(1) and 4, Chapter 2, Book VII of the Administrative law, or specified in the rule in cases of
Code of 1987 which provide: imminent danger to public health, safety and
welfare, the existence of which must be
Art. 2. Laws shall take effect after fifteen (15) expressed in a statement accompanying the
days following the completion of their rule. The agency shall take appropriate
publication in the Official Gazatte, unless it is measures to make emergency rules known to
otherwise provided. . . . (Civil Code.) persons who may be affected by them.
(Emphasis supplied, Chapter 2, Book VII of the
Art. 5. Rules and Regulations. — The Department Administrative Code of 1987).
of Labor and other government agencies
charged with the administration and Once, more we advert to our ruling in Tañada vs. Tuvera, 146
enforcement of this Code or any of its parts SCRA 446 that:
shall promulgate the necessary implementing
rules and regulations. Such rules and . . . Administrative rules and regulations must
regulations shall become effective fifteen (15) also be published if their purpose is to enforce
days after announcement of their adoption in or implement existing law pursuant also to a
valid delegation. (p. 447.)
 Interpretative regulations and those merely
internal in nature, that is, regulating only the
personnel of the administrative agency and not
the public, need not be published. Neither is
publication required of the so-called letters of
instructions issued by administrative superiors
concerning the rules or guidelines to be
followed by their subordinates in the
performance of their duties. (p. 448.)

We agree that publication must be in full or it is

no publication at all since its purpose is to
inform the public of the content of the laws. (p.
448.)

For lack of proper publication, the administrative circulars in

question may not be enforced and implemented.

WHEREFORE, the writ of prohibition is GRANTED. The

implementation of DOLE Department Order No. 16, Series of
1991, and POEA Memorandum Circulars Nos. 30 and 37,
Series of 1991, by the public respondents is hereby
SUSPENDED pending compliance with the statutory
requirements of publication and filing under the
aforementioned laws of the land.

SO ORDERED.
 SAN JUAN DE DIOS HOSPITAL EMPLOYEES wrong interpretation of RA 59015 and Article 83 of the Labor
ASSOCIATION-AFW/MA. CONSUELO MAQUILING, Code.
LEONARDO MARTINEZ, DOMINGO ELA, JR.,
RODOLFO CALUCIN, JR., PERLA MENDOZA, REX As the Court sees it, the core issue is whether Policy
RAPHAEL REYES, ROGELIO BELMONTE, AND 375 Instructions No. 54 issued by then Labor Secretary (now
OTHER EMPLOYEE-UNION Senator) Franklin M. Drilon is valid or not.
MEMBERS, Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION, AND SAN JUAN DE DIOS The policy instruction in question provides in full as follows:
HOSPITAL, Respondents.
Policy Instruction No. 54
DECISION
To: All Concerned
FRANCISCO, J.:
Subject: Working Hours and Compensation of Hospital/Clinic
Petitioners, the rank-and-file employee-union officers and Personnel
members of San Juan De Dios Hospital Employees
Association, sent on July 08, 1991, a four (4)-page letter with This issuance clarifies the enforcement policy of this
attached support signatures x x x requesting and pleading for Department on the working hours and compensation of
the expeditious implementation and payment by respondent personnel employed by hospital/clinics with a bed capacity of
Juan De Dios Hospital "of the 40 HOURS/5-DAY 100 or more and those located in cities and municipalities with
WORKWEEK with compensable weekly two (2) days off a population of one million or more.
provided for by Republic Act 5901 as clarified for enforcement
by the Secretary of Labors Policy Instructions No. 54 dated Republic Act 5901 took effect on 21 June 1969 prescribes a 40-
April 12, 1988.1 Respondent hospital failed to give a favorable hour/5 day work week for hospital/clinic personnel. At the
response; thus, petitioners filed a complaint regarding their same time, the Act prohibits the diminution of the
claims for statutory benefits under the above-cited law and compensation of these workers who would suffer a reduction
policy issuance2, docketed as NLRC NCR Case No. 00-08- in their weekly wage by reason of the shortened workweek
04815-91. On February 26, 1992, the Labor Arbiter3dismissed prescribed by the Act. In effect, RA 5901 requires that the
the complaint. Petitioners appealed before public respondent covered hospital workers who used to work seven (7) days a
National Labor Relations Commission4 (NLRC), docketed as week should be paid for such number of days for working
NLRC NCR CA 003028-92, which affirmed the Labor Arbiters only 5 days or 40 hours a week.
decision. Petitioners subsequent motion for reconsideration
was denied; hence, this petition under Rule 65 of the Rules of The evident intention of RA 5901 is to reduce the number of
Court ascribing grave abuse of discretion on the part of NLRC hospital personnel, considering the nature of their work, and
in concluding that Policy Instructions No. 54 proceeds from a
at the same time guarantee the payment to them of a full All enforcement and adjudicatory agencies of this Department
weekly wage for seven (7) days. This is quite clear in the shall be guided by this issuance in the disposition of cases
Exemplary Note of RA 5901 which states: involving the personnel of covered hospitals and clinics.

As compared with the other employees and laborers, these Done in the City of Manila, this 12th day of April, 1988.
hospital and health clinic personnel are over-worked despite
the fact that their duties are more delicate in nature. If we offer (Sgd.) FRANKLIN M. DRILON
them better working conditions, it is believed that the brain
drain, that our country suffers nowadays as far as these Secretary
personnel are concerned will be considerably lessened. The
fact that these hospitals and health clinics personnel perform (Emphasis Added)
duties which are directly concerned with the health and lives
of our people does not mean that they should work for a We note that Policy Instruction No. 54 relies and purports to
longer period than most employees and laborers. They are also implement Republic Act No. 5901, otherwise known as An Act
entitled to as much rest as other workers. Making them work Prescribing Forty Hours A Week Of Labor For Government
longer than is necessary may endanger, rather than protect the and Private Hospitals Or Clinic Personnel, enacted on June 21,
health of their patients. Besides, they are not receiving better 1969. Reliance on Republic Act No. 5901, however, is
pay than the other workers. Therefore, it is just and fair that misplaced for the said statute, as correctly ruled by respondent
they may be made to enjoy the privileges of equal working NLRC, has long been repealed with the passage of the Labor
hours with other workers except those excepted by law. (Sixth Code on May 1, 1974, Article 302 of which explicitly provides:
Congress of the Republic of the Philippines, Third Session, All labor laws not adopted as part of this Code either directly
House of Representatives, H. No. 16630) or by reference are hereby repealed. All provisions of existing
laws, orders, decrees, rules and regulations inconsistent
The Labor Code in its Article 83 adopts and incorporates the herewith are likewise repealed. Accordingly, only Article 83 of
basic provisions of RA 5901 and retains its spirit and the Labor Code which appears to have substantially
intent which is to shorten the workweek of covered hospital incorporated or reproduced the basic provisions of Republic
personnel and at the same time assure them of a full weekly Act No. 5901 may support Policy Instructions No. 54 on which
wage. the latters validity may be gauged. Article 83 of the Labor
Code states:
Consistent with such spirit and intent, it is the position of the
Department that personnel in subject hospital and clinics are Art. 83. Normal Hours of Work. -- The normal hours of work
entitled to a full weekly wage for seven (7) days it they have of any employee shall not exceed eight (8) hours a day.
completed the 40-hours/5-day workweek in any given
workweek.
Health personnel in cities and municipalities with a will not hesitate to strike down an administrative
population of at least one million (1,000,000) or in hospitals interpretation that deviates from the provision of the statute.
and clinics with a bed capacity of at least one hundred
(100) shall hold regular office hours for eight (8) hours a Indeed, even if we were to subscribe with petitioners
day, for five (5) days a week, exclusive of time for meals, erroneous assertion that Republic Act No. 5901 has neither
except where the exigencies of the service require that such been amended nor repealed by the Labor Code, we
personnel work for six (6) days or forty-eight (48) hours, in nevertheless find Policy Instructions No. 54 invalid. A perusal
which case they shall be entitled to an additional of Republic Act No. 59018 reveals nothing therein that gives
compensation of at least thirty per cent (30%) of their regular two days off with pay for health personnel who complete a 40-
wage for work on the sixth day. For purposes of this Article, hour work or 5-day workweek. In fact, the Explanatory Note
health personnel shall include: resident physicians, nurses, of House Bill No. 16630 (later passed into law as Republic Act
nutritionists, dietitians, pharmacists, social workers, No. 5901) explicitly states that the bills sole purpose is to
laboratory technicians, paramedical technicians, psychologists, shorten the working hours of health personnel and not to dole
midwives, attendants and all other hospital or clinic out a two days off with pay.
personnel. (Underscoring supplied)
Hence:
A cursory reading of Article 83 of the Labor Code betrays
petitioners position that hospital employees are entitled to a The accompanying bill seeks to grant resident physicians, staff
full weekly salary with paid two (2) days off if they have nurses, nutritionists, midwives, attendants and other hospital
completed the 40-hour/5-day workweek.6 What Article 83 and health clinic personnel of public and private hospitals and
merely provides are: (1) the regular office hour of eight hours clinics, the privilege of enjoying the eight hours a week
a day, five days per week for health personnel, and (2) where exclusive of time for lunch granted by law to all government
the exigencies of service require that health personnel work for employees and workers except those employed in schools and
six days or forty-eight hours then such health personnel shall in courts. At present those hospitals and health clinic
be entitled to an additional compensation of at least thirty personnel including those employed in private hospitals and
percent of their regular wage for work on the sixth day. There clinics, work six days a week, 8 hours a day or 48 hours a
is nothing in the law that supports then Secretary of Labors week.
assertion that personnel in subject hospitals and clinics are
entitled to a full weekly wage for seven (7) days if they have As compared with the other employees and laborers, these
completed the 40-hour/5-day workweek in any given hospital and health clinic personnel are over-worked despite
workweek. Needless to say, the Secretary of Labor exceeded the fact that their duties are more delicate in nature. If we offer
his authority by including a two days off with pay in them better working conditions, it is believed that the brain
contravention of the clear mandate of the statute. Such act the drain, that our country suffers nowadays as far as these
Court shall not countenance. Administrative interpretation of personnel are concerned will be considerably lessened. The
the law, we reiterate, is at best merely advisory,7 and the Court fact that these hospitals and health clinic personnel perform
duties which are directly concerned with the health and lives rules and regulations are hereby issued for the
of our people does not mean that they should work for a implementation of Republic Act No. 5901.
longer period than most employees and laborers. They are also
entitled to as much rest as other workers. Making them work CHAPTER I Coverage
longer than is necessary may endanger, rather than protect,
the health of their patients. Besides, they are not receiving Section 1. General Statement on Coverage. Republic Act No.
better pay than the other workers. Therefore, it is just and fair 5901, hereinafter referred to as the Act, shall apply to:
that they be made to enjoy the privileges of equal working
hours with other workers except those excepted by law. (a) All hospitals and clinics, including those with a bed
capacity of less than one hundred, which are situated in cities
In the light of the foregoing, approval of this bill is strongly or municipalities with a population of one million or more;
recommended. and to

(SGD.) SERGIO H. LOYOLA (b) All hospitals and clinics with a bed capacity of at least one
hundred, irrespective of the size of population of the city or
Congressman, 3rd District Manila municipality where they may be situated.

(A xxx xxx xxx

nnex F of petition, underscoring supplied)
Section 7. Regular Working Day. The regular working days of
Further, petitioners' position is also negated by the very rules covered employees shall be not more than five days in a
and regulations promulgated by the Bureau of Labor workweek. The workweek may begin at any hour and on any
Standards which implement Republic Act No. 5901. Pertinent day, including Saturday or Sunday, designated by the
portions of the implementing rules provide: employer.

RULES AND REGULATIONS IMPLEMENTING Employers are not precluded from changing the time at which
REPUBLIC ACT NO. 5901 the workday or workweek begins, provided that the change is
not intended to evade the requirements of these regulations on
By virtue of Section 79 of the Revised Administrative Code, as the payment of additional compensation.
modified by section 18 of Implementation Report for
Reorganization Plan No. 20-A on Labor, vesting in the Bureau xxx xxx xxx
of Labor Standards the authority to promulgate rules and
regulations to implement wage and hour laws, the following Section 15. Additional Pay Under the Act and C.A. No.
444. (a) Employees of covered hospitals and clinics who are
entitled to the benefits provided under the Eight-Hour Labor SO ORDERED.
Law, as amended, shall be paid an additional compensation
equivalent to their regular rate plus at least twenty-five
percent thereof for work performed on Sunday and Holidays,
not exceeding eight hours, such employees shall be entitled to
an additional compensation of at least 25% of their regular
rate.

(b) For work performed in excess of forty hours a week,

excluding those rendered in excess of eight hours a day during
the week, employees covered by the Eight-Hour Labor Law
shall be entitled to an additional straight-time pay which must
be equivalent at least to their regular rate.

If petitioners are entitled to two days off with pay, then there
appears to be no sense at all why Section 15 of the
implementing rules grants additional compensation
equivalent to the regular rate plus at least twenty-five percent
thereof for work performed on Sunday to health personnel, or
an additional straight-time pay which must be equivalent at
least to the regular rate [f]or work performed in excess of forty
hours a week xxx. Policy Instructions No. 54 to our mind
unduly extended the statute. The Secretary of Labor moreover
erred in invoking the spirit and intent of Republic Act No.
5901 and Article 83 of the Labor Code for it is an elementary
rule of statutory construction that when the language of the
law is clear and unequivocal, the law must be taken to mean
exactly what it says.9 No additions or revisions may be
permitted. Policy Instructions No. 54 being inconsistent with
and repugnant to the provision of Article 83 of the Labor
Code, as well as to Republic Act No. 5901, should be, as it is
hereby, declared void.

WHEREFORE, the decision appealed from is AFFIRMED. No

costs.
ESTER M. ASUNCION, petitioner, v. NATIONAL LABOR 2. Habitual tardiness - You have late (sic) for 108 times. As
RELATIONS COMMISSION, Second Division, MABINI shown on the record book.
MEDICAL CLINIC and DR. WILFRIDO JUCO, respondents.
3. Loitering and wasting of company time - on several
KAPUNAN, J.: occasions and witnessed by several employees.

In her petition filed before this Court, Ester Asuncion prays 4. Getting salary of an absent employee without
that the Decision, dated November 29, 1996, and the acknowledging or signing for it.
Resolution, dated February 20,1997, of the public respondent
National Labor Relations Commission, Second Division, in 5. Disobedience and insubordination - continued refusal to
NLRC CA. 011188 which reversed the Decision of the Labor sign memos given to you.1
Arbiter, dated May 15, 1996 be set aside.
Petitioner was required to explain within two (2) days why
The antecedents of this case are as follows: she should not be terminated based on the above charges.

On August 16, 1993, petitioner Ester M. Asuncion was Three days later, in the morning of August 12, 1994, petitioner
employed as an accountant/bookkeeper by the respondent submitted her response to the memorandum. On the same
Mabini Medical Clinic. Sometime in May 1994, certain officials day, respondent Dr. Juco, through a letter dated August 12,
of the NCR-Industrial Relations Division of the Department of 1994, dismissed the petitioner on the ground of disobedience
Labor and Employment conducted a routine inspection of the of lawful orders and for her failure to submit her reply within
premises of the respondent company and discovered upon the the two-day period.
disclosure of the petitioner of (documents) violations of the
labor standards law such as the non-coverage from the SSS of This prompted petitioner to file a case for illegal termination
the employees. Consequently, respondent Company was before the NLRC.
made to correct these violations.
In a Decision, dated May 15, 1996, Labor Arbiter Manuel
On August 9, 1994, the private respondent, Medical Director Caday rendered judgment declaring that the petitioner was
Wilfrido Juco, issued a memorandum to petitioner charging illegally dismissed. The Labor Arbiter found that the private
her with the following offenses: respondents were unable to prove the allegation of chronic
absenteeism as it failed to present in evidence the time cards,
1. Chronic Absentism (sic) - You have incurred since Aug. 1993 logbooks or record book which complainant signed recording
up to the present 35 absences and 23 half-days. her time in reporting for work. These documents, according to
the Labor Arbiter, were in the possession of the private
respondents. In fact, the record book was mentioned in the
notice of termination. Hence, the non-presentation of these finding the private respondents as having failed to present
documents gives rise to the presumption that these documents evidence relative to petitioner's absences and tardiness, the
were intentionally suppressed since they would be adverse to NLRC agrees with the Labor Arbiter. However, the NLRC
private respondent's claim. Moreover, the Labor Arbiter ruled ruled that petitioner had admitted the tardiness and absences
that the petitioner's absences were with the conformity of the though offering justifications for the infractions. The decretal
private respondents as both parties had agreed beforehand portion of the assailed decision reads:
that petitioner would not report to work on Saturdays. The
handwritten listing of the days when complainant was absent WHEREFORE, premises considered, the appealed decision is
from work or late in reporting for work and even the hereby VACATED and SET ASIDE and a NEW ONE entered
computerized print-out, do not suffice to prove that dismissing the complaint for illegal dismissal for lack of merit.
petitioner's absences were unauthorized as they could easily
be manufactured.2Accordingly, the dispositive portion of the However, respondents Mabini Medical Clinic and Dr. Wilfrido
decision states, to wit: Juco are jointly and solidarily ordered to pay complainant
Ester Asuncion the equivalent of her three (3) months salary
WHEREFORE, Premises Considered, judgment is hereby for and as a penalty for respondents' non-observance of
rendered declaring the dismissal of the complainant as illegal complainant's right to due process.
and ordering the respondent company to immediately
reinstate her to her former position without loss of seniority SO ORDERED.4
rights and to pay the complainant's backwages and other
benefits, as follows: Petitioner filed a motion for reconsideration which the public
respondent denied in its Resolution, dated February 19, 1997.
1) P73,500.00 representing backwages as of the date of this Hence, petitioner through a petition for certiorari under Rule
decision until she is actually reinstated in the service; 65 of the Rules of Court seeks recourse to this Court and raises
the following issue:
2) P20,000.00 by way of moral damages and another P20,000.00
representing exemplary damages; and THE PUBLIC RESPONDENT ERRED IN FINDING THAT
THE PETITIONER WAS DISMISSED BY THE PRIVATE
3) 10% of the recoverable award in this case representing RESPONDENT FOR A JUST OR AUTHORIZED CAUSE.
attorney's fees.
The petition is impressed with merit.
SO ORDERED.3
Although, it is a legal tenet that factual findings of
On appeal, public respondent NLRC rendered the assailed administrative bodies are entitled to great weight and respect,
decision which set aside the Labor Arbiter's ruling. Insofar as we are constrained to take a second look at the facts before us
because of the diversity in the opinions of the Labor Arbiter upon which her tardiness (and absences) was based, the
and the NLRC.5 A disharmony between the factual findings of respondent (company) failed to establish (through) any of
the Labor Arbiter and those of the NLRC opens the door to a these documents and the handwritten listing,
review thereof by this Court.6 notwithstanding, of (sic) the days when complainant was
absent from work or late in reporting for work and even the
It bears stressing that a worker's employment is property in computerized print-outs, do not suffice to prove the
the constitutional sense. He cannot be deprived of his work complainant's absences were unauthorized as they could
without due process. In order for the dismissal to be valid, not easily be manufactured. x x x12
only must it be based on just cause supported by clear and
convincing evidence,7 the employee must also be given an In IBM Philippines, Inc. v. NLRC,13 this Court clarified that the
opportunity to be heard and defend himself. 8 It is the liberality of procedure in administrative actions is not absolute
employer who has the burden of proving that the dismissal and does not justify the total disregard of certain fundamental
was with just or authorized cause.9 The failure of the employer rules of evidence. Such that evidence without any rational
to discharge this burden means that the dismissal is not probative value may not be made the basis of order or decision
justified and that the employee is entitled to reinstatement and of administrative bodies. The Court's ratiocination in that case
backwages.10 is relevant to the propriety of rejecting the unsigned
handwritten listings and computer print-outs submitted by
In the case at bar, there is a paucity of evidence to establish the private respondents which we quote, to wit:
charges of absenteeism and tardiness. We note that the
employer company submitted mere handwritten listing and However, the liberality of procedure in administrative actions
computer print-outs. The handwritten listing was not signed is subject to limitations imposed by basic requirements of due
by the one who made the same. As regards the print-outs, process. As this Court said in Ang Tibay v. CIR, the provision
while the listing was computer generated, the entries of time for flexibility in administrative procedure "does not go so far
and other annotations were again handwritten and unsigned.11 as to justify orders without a basis in evidence having rational
probative value." More specifically, as held in Uichico v. NLRC:
We find that the handwritten listing and unsigned computer
print-outs were unauthenticated and, hence, unreliable. Mere "It is true that administrative and quasi-judicial bodies like the
self-serving evidence of which the listing and print-outs are of NLRC are not bound by the technical rules of procedure in the
that nature should be rejected as evidence without any rational adjudication of cases. However, this procedural rule should
probative value even in administrative proceedings. For this not be construed as a license to disregard certain fundamental
reason, we find the findings of the Labor Arbiter to be correct. evidentiary rules. While the rules of evidence prevailing in the
On this point, the Labor Arbiter ruled, to wit: courts of law or equity are not controlling in proceedings
before the NLRC, the evidence presented before it must at
x x x In the instant case, while the Notice of Termination least have a modicum of admissibility for it to be given some
served on the complainant clearly mentions the record book probative value. The Statement of Profit and Losses submitted
by Crispa, Inc. to prove its alleged losses, without the Ironically, in the memorandum charging petitioner and notice
accompanying signature of a certified public accountant or of termination, private respondents referred to the record book
audited by an independent auditor, are nothing but self- as its basis for petitioner's alleged absenteeism and tardiness.
serving documents which ought to be treated as a mere scrap Interestingly, however, the record book was never presented
of paper devoid of any probative value." in evidence. Private respondents had possession thereof and
the opportunity to present the same. Being the basis of the
The computer print-outs, which constitute the only evidence charges against the petitioner, it is without doubt the best
of petitioners, afford no assurance of their authenticity because evidence available to substantiate the allegations. The purpose
they are unsigned. The decisions of this Court, while adhering of the rule requiring the production of the best evidence is the
to a liberal view in the conduct of proceedings before prevention of fraud, because if a party is in possession of such
administrative agencies, have nonetheless consistently evidence and withholds it, and seeks to substitute inferior
required some proof of authenticity or reliability as condition evidence in its place, the presumption naturally arises that the
for the admission of documents. better evidence is withheld for fraudulent purposes which its
production would expose and defeat.15 Thus, private
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC,14 this respondents' unexplained and unjustified non-presentation of
Court held as incompetent unsigned daily time records the record book, which is the best evidence in its possession
presented to prove that the employee was neglectful of his and control of the charges against the petitioner, casts serious
duties: doubts on the factual basis of the charges of absenteeism and
tardiness.
Indeed, the DTRs annexed to the present petition would tend
to establish private respondent's neglectful attitude towards We find that private respondents failed to present a single
his work duties as shown by repeated and habitual absences piece of credible evidence to serve as the basis for their charges
and tardiness and propensity for working undertime for the against petitioner and consequently, failed to fulfill their
year 1992. But the problem with these DTRs is that they are burden of proving the facts which constitute the just cause for
neither originals nor certified true copies. They are plain the dismissal of the petitioner. However, the NLRC ruled that
photocopies of the originals, if the latter do exist. More despite such absence of evidence, there was an admission on
importantly, they are not even signed by private respondent the part of petitioner in her Letter dated August 11, 1994
nor by any of the employer's representatives. x x x. wherein she wrote:

In the case at bar, both the handwritten listing and computer I am quite surprised why I have incurred 35 absences since
print-outs being unsigned, the authenticity thereof is highly August 1993 up to the present. I can only surmise that
suspect and devoid of any rational probative value especially Saturdays were not included in my work week at your clinic.
in the light of the existence of the official record book of the If you will please recall, per agreement with you, my work
petitioner's alleged absences and tardiness in the possession of days at your clinic is from Monday to Friday without Saturday
the employer company. work. As to my other supposed absences, I believe that said
absences were authorized and therefore cannot be considered from December 1, 1993 up to February 26, 1994 and the notice
as absences which need not be explained (sic). It is also dated 31 May 1994 reminding complainant of her five (5) days
extremely difficult to understand why it is only now that I am absences, four (4) half-days and tardiness for 582 minutes
charged to explain alleged absences incurred way back August (Annex "1" to "1-D" attached to respondent' Rejoinder), fail to
1993.16 show that the notices were received by the complainant. The
allegation of the respondents that the complainant refused to
In reversing the decision of the Labor Arbiter, public received (sic) the same is self-serving and merits scant
respondent NLRC relied upon the supposed admission of the consideration. xxx17
petitioner of her habitual absenteeism and chronic tardiness.
The Court, likewise, takes note of the fact that the two-day
We do not subscribe to the findings of the NLRC that the period given to petitioner to explain and answer the charges
above quoted letter of petitioner amounted to an admission of against her was most unreasonable, considering that she was
her alleged absences. As explained by petitioner, her alleged charged with several offenses and infractions (35 absences, 23
absences were incurred on Saturdays. According to petitioner, half-days and 108 tardiness), some of which were allegedly
these should not be considered as absences as there was an committed almost a year before, not to mention the fact that
arrangement between her and the private respondents that she the charges leveled against her lacked particularity.
would not be required to work on Saturdays. Private
respondents have failed to deny the existence of this Apart from chronic absenteeism and habitual tardiness,
arrangement. Hence, the decision of the NLRC that private petitioner was also made to answer for loitering and wasting
respondent had sufficient grounds to terminate petitioner as of company time, getting salary of an absent employee
she admitted the charges of habitual absences has no leg to without acknowledging or signing for it and disobedience and
stand on. insubordination.18 Thus, the Labor Arbiter found that actually
petitioner tried to submit her explanation on August 11, 1994
Neither have the private respondents shown by competent or within the two-day period given her, but private
evidence that the petitioner was given any warning or respondents prevented her from doing so by instructing their
reprimanded for her alleged absences and tardiness. Private staff not to accept complainant's explanation, which was the
respondents claimed that they sent several notices to the reason why her explanation was submitted a day later.19
petitioner warning her of her absences, however, petitioner
refused to receive the same. On this point, the Labor Arbiter The law mandates that every opportunity and assistance must
succinctly observed: be accorded to the employee by the management to enable
him to prepare adequately for his defense.20 In Ruffy v.
The record is bereft of any showing that complainant was ever NLRC,21 the Court held that what would qualify as sufficient
warned of her absences prior to her dismissal on August 9, or "ample opportunity," as required by law, would be "every
1994. The alleged notices of her absences from August 17, until kind of assistance that management must accord to the
September 30, 1993, from October until November 27, 1993, employee to enable him to prepare adequately for his
defense." In the case at bar, private respondents cannot be
gainsaid to have given petitioner the ample opportunity to
answer the charges leveled against her.

From the foregoing, there are serious doubts in the evidence

on record as to the factual basis of the charges against
petitioner. These doubts shall be resolved in her favor in line
with the policy under the Labor Code to afford protection to
labor and construe doubts in favor of labor.22 The consistent
rule is 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. The employer must affirmatively
show rationally adequate evidence that the dismissal was for a
justifiable cause.23 Not having satisfied its burden of proof, we
conclude that the employer dismissed the petitioner without
any just cause. Hence, the termination is illegal.

Having found that the petitioner has been illegally terminated,

she is necessarily entitled to reinstatement to her former
previous position without loss of seniority and the payment of
backwages.24

WHEREFORE, the Decision of the National Labor Relations

Commission, dated November 29, 1996 and the Resolution,
dated February 20, 1997 are hereby REVERSED and SET
ASIDE, and the Decision of the Labor Arbiter, dated May 15,
1996 REINSTATED.

SO ORDERED.
 LETRAN CALAMBA FACULTY and EMPLOYEES therefor their compensation for overloads. It only takes into
ASSOCIATION, Petitioner, v. NATIONAL LABOR account the pay the faculty members receive for their teaching
RELATIONS COMMISSION and COLEGIO DE SANJUAN loads not exceeding eighteen (18) units. The teaching
DE LETRAN CALAMBA, INC., Respondent. overloads are rendered within eight (8) hours a day.

DECISION 4) Respondent has not paid the wage increases required by

Wage Order No. 5 to its employees who qualify thereunder.
AUSTRIA-MARTINEZ, J.:
5) Respondent has not followed the formula prescribed by
Assailed in the present Petition for Review on Certiorari under DECS Memorandum Circular No. 2 dated March 10, 1989 in
Rule 45 of the Rules of Court is the Decision1 of the Court of the computation of the compensation per unit of excess load or
Appeals (CA) promulgated on May 14, 2002 in CA-G.R. SP overload of faculty members. This has resulted in the
No. 61552 dismissing the special civil action for certiorari filed diminution of the compensation of faculty members.
before it; and the Resolution2 dated November 28, 2002,
denying petitioner's Motion for Reconsideration. 6) The salary increases due the non-academic personnel as a
result of job grading has not been given. Job grading has been
The facts of the case are as follows: an annual practice of the school since 1980; the same is done
for the purpose of increasing the salaries of non-academic
On October 8, 1992, the Letran Calamba Faculty and personnel and as the counterpart of the ranking systems of
Employees Association (petitioner) filed with Regional faculty members.
Arbitration Branch No. IV of the National Labor Relations
Commission (NLRC) a Complaint3 against Colegio de San 7) Respondent has not paid to its employees the balances of
Juan de Letran, Calamba, Inc. (respondent) for collection of seventy (70%) percent of the tuition fee increases for the years
various monetary claims due its members. Petitioner alleged 1990, 1991 and 1992.
in its Position Paper that:
8) Respondent has not also paid its employees the holiday pay
xxx for the ten (10) regular holidays as provided for in Article 94 of
the Labor Code.
2) [It] has filed this complaint in behalf of its members whose
names and positions appear in the list hereto attached as 9) Respondent has refused without justifiable reasons and
Annex "A". despite repeated demands to pay its obligations mentioned in
paragraphs 3 to 7 hereof.
3) In the computation of the thirteenth month pay of its
academic personnel, respondent does not include as basis x x x x4
The complaint was docketed as NLRC Case No. RAB-IV-10- 2. The petition to declare strike illegal (NLRC Case No. RAB-
4560-92-L. IV-3-6555-94-L) is hereby dismissed, but the officers of the
Union, particularly its President, Mr. Edmundo F. Marifosque,
On January 29, 1993, respondent filed its Position Paper Sr., are hereby reprimanded and sternly warned that future
denying all the allegations of petitioner. conduct similar to what was displayed in this case will
warrant a more severe sanction from this Office.
On March 10, 1993, petitioner filed its Reply.
SO ORDERED.5
Prior to the filing of the above-mentioned complaint,
petitioner filed a separate complaint against the respondent Both parties appealed to the NLRC.
for money claims with Regional Office No. IV of the
Department of Labor and Employment (DOLE). On July 28, 1999, the NLRC promulgated its
Decision6 dismissing both appeals. Petitioner filed a Motion
On the other hand, pending resolution of NLRC Case No. for Reconsideration7 but the same was denied by the NLRC in
RAB-IV-10-4560-92-L, respondent filed with Regional its Resolution8 dated June 21, 2000.
Arbitration Branch No. IV of the NLRC a petition to declare as
illegal a strike staged by petitioner in January 1994. Petitioner then filed a special civil action for certiorari with the
CA assailing the above-mentioned NLRC Decision and
Subsequently, these three cases were consolidated. The case Resolution.
for money claims originally filed by petitioner with the DOLE
was later docketed as NLRC Case No. RAB-IV-11-4624-92-L, On May 14, 2002, the CA rendered the presently assailed
while the petition to declare the subject strike illegal filed by judgment dismissing the petition.
respondent was docketed as NLRC Case No. RAB-IV-3-6555-
94-L. Petitioner filed a Motion for Reconsideration but the CA
denied it in its Resolution promulgated on November 28, 2002.
On September 28, 1998, the Labor Arbiter (LA) handling the
consolidated cases rendered a Decision with the following Hence, herein Petition for Review based on the following
dispositive portion: assignment of errors:

WHEREFORE, premises considered, judgment is hereby I

rendered, as follows:
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING
1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV- THAT THE FACTUAL FINDINGS OF THE NATIONAL
11-4624-92-L) are hereby dismissed for lack of merit;
LABOR RELATIONS COMMISSION CANNOT BE for excess loads or overloads does not fall under any of the
REVIEWED IN CERTIORARI PROCEEDINGS. enumerated exclusions and considering that the said
overloads are being performed within the normal working
II period of eight hours a day, it only follows that the overloads
should be included in the computation of the faculty members'
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING 13th-month pay.
TO RULE SQUARELY ON THE ISSUE OF WHETHER OR
NOT THE PAY OF FACULTY MEMBERS FOR TEACHING To support its argument, petitioner cites the opinion of the
OVERLOADS SHOULD BE INCLUDED AS BASIS IN THE Bureau of Working Conditions of the DOLE that payment of
COMPUTATION OF THEIR THIRTEENTH MONTH PAY. teaching overload performed within eight hours of work a day
shall be considered in the computation of the 13th-month
III pay.11

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING Petitioner further contends that DOLE-DECS-CHED-TESDA
THAT THE DECISION OF THE NATIONAL LABOR Order No. 02, Series of 1996 (DOLE Order) which was relied
RELATIONS COMMISSION IS SUPPORTED BY upon by the LA and the NLRC in their respective Decisions
SUBSTANTIAL EVIDENCE AND IN NOT GRANTING cannot be applied to the instant case because the DOLE Order
PETITIONER'S MONETARY CLAIMS.9 was issued long after the commencement of petitioner's
complaints for monetary claims; that the prevailing rule at the
Citing Agustilo v. Court of Appeals,10 petitioner contends that in time of the commencement of petitioner's complaints was to
a special civil action for certiorari brought before the CA, the include compensations for overloads in determining a faculty
appellate court can review the factual findings and the legal member's 13th-month pay; that to give retroactive application
conclusions of the NLRC. to the DOLE Order issued in 1996 is to deprive workers of
benefits which have become vested and is a clear violation of
As to the inclusion of the overloads of respondent's faculty the constitutional mandate on protection of labor; and that, in
members in the computation of their 13th-month pay, any case, all doubts in the implementation and interpretation
petitioner argues that under the Revised Guidelines on the of labor laws, including implementing rules and regulations,
Implementation of the 13th-Month Pay Law, promulgated by should be resolved in favor of labor.
the Secretary of Labor on November 16, 1987, the basic pay of
an employee includes remunerations or earnings paid by his Lastly, petitioner avers that the CA, in concluding that the
employer for services rendered, and that excluded therefrom NLRC Decision was supported by substantial evidence, failed
are the cash equivalents of unused vacation and sick leave to specify what constituted said evidence. Thus, petitioner
credits, overtime, premium, night differential, holiday pay and asserts that the CA acted arbitrarily in affirming the Decision
cost-of-living allowances. Petitioner claims that since the pay of the NLRC.
In its Comment, respondent contends that the ruling Respondent avers that the DOLE Order is an administrative
in Agustilo is an exception rather than the general rule; that the regulation which interprets the 13th-Month Pay Law (P.D. No.
general rule is that in a Petition for Certiorari, judicial review 851) and, as such, it is mandatory for the LA to apply the same
by this Court or by the CA in labor cases does not go so far as to the present case.
to evaluate the sufficiency of the evidence upon which the
proper labor officer or office based his or its determination but Moreover, respondent contends that the Legal Services Office
is limited only to issues of jurisdiction or grave abuse of of the DOLE issued an opinion dated March 4, 1992,12 that
discretion amounting to lack of jurisdiction; that before a party remunerations for teaching in excess of the regular load, which
may ask that the CA or this Court review the factual findings includes overload pay for work performed within an eight-
of the NLRC, there must first be a convincing argument that hour work day, may not be included as part of the basic salary
the NLRC acted in a capricious, whimsical, arbitrary or in the computation of the 13th-month pay unless this has been
despotic manner; and that in its Petition for Certiorari filed included by company practice or policy; that petitioner
with the CA, herein petitioner failed to prove that the NLRC intentionally omitted any reference to the above-mentioned
acted without or in excess of jurisdiction or with grave abuse opinion of the Legal Services Office of the DOLE because it is
of discretion. fatal to its cause; and that the DOLE Order is an affirmation of
the opinion rendered by the said Office of the DOLE.
Respondent argues that Agustilo is not applicable to the
present case because in the former case, the findings of fact of Furthermore, respondent claims that, contrary to the
the LA and the NLRC are at variance with each other; while in asseveration of petitioner, prior to the issuance of the DOLE
the present case, the findings of fact and conclusions of law of Order, the prevailing rule is to exclude excess teaching load,
the LA and the NLRC are the same. which is akin to overtime, in the computation of a teacher's
basic salary and, ultimately, in the computation of his 13th-
Respondent also avers that in a special civil action month pay.
for certiorari, the discretionary power to review factual
findings of the NLRC rests upon the CA; and that absent any As to respondent's alleged non-payment of petitioner's
findings by the CA of the need to resolve any unclear or consolidated money claims, respondent contends that the
ambiguous factual findings of the NLRC, the grant of the writ findings of the LA regarding these matters, which were
of certiorari is not warranted. affirmed by the NLRC and the CA, have clear and convincing
factual and legal bases to stand on.
Further, respondent contends that even granting that the
factual findings of the CA, NLRC and the LA may be reviewed The Court's Ruling
in the present case, petitioner failed to present valid
arguments to warrant the reversal of the assailed decision. The Court finds the petition bereft of merit.
As to the first and third assigned errors, petitioner would have The non-academic members of the Union cannot legally insist
this Court review the factual findings of the LA as affirmed by on wage increases due to "Job Grading". From the records it
the NLRC and the CA, to wit. appears that "Job Grading" is a system adopted by the School
by which positions are classified and evaluated according to
With respect to the alleged non-payment of benefits under the prescribed qualifications therefor. It is akin to a merit
Wage Order No. 5, this Office is convinced that after the lapse system whereby salary increases are made dependent upon
of the one-year period of exemption from compliance with the classification, evaluation and grading of the position held
Wage Order No. 5 (Exhibit "1-B), which exemption was by an employee.
granted by then Labor Minister Blas Ople, the School settled
its obligations to its employees, conformably with the The system of Job Grading was initiated by the School in
agreement reached during the management-employees Schoolyear 1989-1990. In 1992, just before the first of the two
meeting of June 26, 1985 (Exhibits "4-B" up to "4-D", also money claims was filed, a new Job Grading process was
Exhibit "6-x-1"). The Union has presented no evidence that the initiated by the School.
settlement reached during the June 26, 1985 meeting was the
result of coercion. Indeed, what is significant is that the Under the circumstances obtaining, it cannot be argued that
agreement of June 26, 1985 was signed by Mr. Porferio Ferrer, there were repeated grants of salary increases due to Job
then Faculty President and an officer of the complaining Grading to warrant the conclusion that some benefit was
Union. Moreover, the samples from the payroll journal of the granted in favor of the non-academic personnel that could no
School, identified and offered in evidence in these cases longer be eliminated or banished under Article 100 of the
(Exhibits "1-C" and 1-D"), shows that the School paid its Labor Code. Since the Job Grading exercises of the School
employees the benefits under Wage Order No. 5 (and even were neither consistent nor for a considerable period of time,
Wage Order No. 6) beginning June 16, 1985. the monetary claims attendant to an increase in job grade are
non-existent.
Under the circumstances, therefore, the claim of the Union on
this point must likewise fail. The claim of the Union that its members were not given their
full share in the tuition fee increases for the Schoolyears 1989-
The claim of the Union for salary differentials due to the 1990, 1990-1991 and 1991-1992 is belied by the evidence
improper computation of compensation per unit of excess load presented by the School which consists of the unrefuted
cannot hold water for the simple reason that during the testimony of its Accounting Coordinator, Ms. Rosario
Schoolyears in point there were no classes from June 1-14 and Manlapaz, and the reports extrapolated from the journals and
October 17-31. This fact was not refuted by the Union. Since general ledgers of the School (Exhibits "2", "2-A" up to "2-G").
extra load should be paid only when actually performed by The evidence indubitably shows that in Schoolyear 1989-1990,
the employees, no salary differentials are due the Union the School incurred a deficit of P445,942.25, while in
members. Schoolyears 1990-1991 and 1991-1992, the School paid out, 91%
and 77%, respectively, of the increments in the tuition fees jurisdiction, the appellate court has no reason to look into the
collected. correctness of the evaluation of evidence which supports the
labor tribunals' findings of fact.
As regards the issue of non-payment of holiday pay, the
individual pay records of the School's employees, a sample of Settled is the rule that the findings of the LA, when affirmed
which was identified and explained by Ms. Rosario Manlapaz by the NLRC and the CA, are binding on the Supreme Court,
(Exhibit "3"), shows that said School employees are paid for all unless patently erroneous.16 It is not the function of the
days worked in the year. Stated differently, the factor used in Supreme Court to analyze or weigh all over again the evidence
computing the salaries of the employees is 365, which already considered in the proceedings below.17 In a Petition for
indicates that their regular monthly salary includes payment Review on Certiorari, this Court's jurisdiction is limited to
of wages during all legal holidays.13 reviewing errors of law in the absence of any showing that the
factual findings complained of are devoid of support in the
This Court held in Odango v. National Labor Relations records or are glaringly erroneous.18 Firm is the doctrine that
Commission14 that: this Court is not a trier of facts, and this applies with greater
force in labor cases.19 Findings of fact of administrative
The appellate court's jurisdiction to review a decision of the agencies and quasi-judicial bodies, which have acquired
NLRC in a petition for certiorari is confined to issues of expertise because their jurisdiction is confined to specific
jurisdiction or grave abuse of discretion. An extraordinary matters, are generally accorded not only great respect but even
remedy, a petition for certiorari is available only and finality.20 They are binding upon this Court unless there is a
restrictively in truly exceptional cases. The sole office of the showing of grave abuse of discretion or where it is clearly
writ of certiorari is the correction of errors of jurisdiction shown that they were arrived at arbitrarily or in utter
including the commission of grave abuse of discretion disregard of the evidence on record.21 We find none of these
amounting to lack or excess of jurisdiction. It does not include exceptions in the present case.
correction of the NLRC's evaluation of the evidence or of its
factual findings. Such findings are generally accorded not only In Petitions for Review on Certiorari like the instant case, the
respect but also finality. A party assailing such findings bears Court invariably sustains the unanimous factual findings of
the burden of showing that the tribunal acted capriciously and the LA, the NLRC and the CA, specially when such findings
whimsically or in total disregard of evidence material to the are supported by substantial evidence and there is no cogent
controversy, in order that the extraordinary writ basis to reverse the same, as in this case.22
of certiorari will lie.15
The second assigned error properly raises a question of law as
In the instant case, the Court finds no error in the ruling of the it involves the determination of whether or not a teacher's
CA that since nowhere in the petition is there any acceptable overload pay should be considered in the computation of his
demonstration that the LA or the NLRC acted either with or her 13th-month pay. In resolving this issue, the Court is
grave abuse of discretion or without or in excess of its
confronted with conflicting interpretations by different Basic wage is defined by the Implementing Rules of RA 6727
government agencies. as follows:

On one hand is the opinion of the Bureau of Working "Basic Wage" means all remuneration or earnings paid by an
Conditions of the DOLE dated December 9, 1991, February 28, employer to a worker for services rendered
1992 and November 19, 1992 to the effect that if overload is on normal working days and hours but does not include cost
performed within a teacher's normal eight-hour work per day, of living allowances, 13th-month pay or other monetary
the remuneration that the teacher will get from the additional benefits which are not considered as part of or integrated into
teaching load will form part of the basic wage.23 the regular salary of the workers xxx. crvll

This opinion is affirmed by the Explanatory Bulletin on the The foregoing definition was based on Article 83 of the Labor
Inclusion of Teachers' Overload Pay in the 13th-Month Pay Code which provides that "the normal hours of work of any
Determination issued by the DOLE on December 3, 1993 employee shall not exceed eight (8) hours a day." This means
under then Acting DOLE Secretary Cresenciano B. Trajano. that the basic salary of an employee for the purpose of
Pertinent portions of the said Bulletin read as follows: computing the 13th-month pay shall include all remunerations
or earnings paid by an employer for services rendered during
1. Basis of the 13th-month pay computation normal working hours.

The Revised Implementing Guidelines of the 13th-Month Pay 2. Overload work/pay

Law (P.D. 851, as amended) provides that an employee shall
be entitled to not less than 1/12 of the total basic salary earned Overload on the other hand means "the load in excess of the
within a calendar year for the purpose of computing such normal load of private school teachers as prescribed by the
entitlement. The basic wage of an employee shall include: Department of Education, Culture and Sports (DECS) or the
policies, rules and standards of particular private schools." In
"x x x all remunerations or earnings paid by his employer for recognition of the peculiarities of the teaching profession,
services rendered but do not include allowances or monetary existing DECS and School Policies and Regulations for
benefits which are not considered or integrated as part of the different levels of instructions prescribe a regular teaching
regular or basic salary, such as the cash equivalent of unused load, the total actual teaching or classroom hours of which a
vacation and sick leave credits, overtime, premium, night teacher can generally perform in less than eight (8) hours per
differential and holiday pay, and cost-of-living allowances. working day. This is because teaching may also require the
However, these salary-related benefits should be included as teacher to do additional work such as handling an advisory
part of the basic salary in the computation of the 13th month class, preparation of lesson plans and teaching aids, evaluation
pay if by individual or collective agreement, company practice of students and other related activities. Where, however a
or policy, the same are treated as part of the basic salary of the teacher is engaged to undertake actual additional teaching
employees." work after completing his/her regular teaching load, such
additional work is generally referred to as overload. In short, This opinion is later affirmed by the DOLE Order, pertinent
additional work in excess of the regular teaching load is portions of which are quoted below:
overload work. Regular teaching load and overload work, if
any, may constitute a teacher's working day. xxx

Where a teacher is required to perform such overload within 2. In accordance with Article 83 of the Labor Code of the
the eight (8) hours normal working day, such overload Philippines, as amended, the normal hours of work of school
compensation shall be considered part of the basic pay for academic personnel shall not exceed eight (8) hours a
the purpose of computing the teacher's 13th - month pay. day. Any work done in addition to the eight (8) hours daily
"Overload work" is sometimes misunderstood as synonymous work shall constitute overtime work.
to "overtime work" as this term is used and understood in the
Labor Code. These two terms are not the same because 3. The normal hours of work of teaching or academic
overtime work is work rendered in excess of normal working personnel shall be based on their normal or regular teaching
hours of eight in a day (Art. 87, Labor Code). Considering that loads. Such normal or regular teaching loads shall be in
overload work may be performed either within or outside accordance with the policies, rules and standards prescribed
eight hours in a day, overload work may or may not be by the Department of Education, Culture and Sports, the
overtime work. Commission on Higher Education and the Technical
Education and Skills Development Authority. Any teaching
3. Concluding Statement load in excess of the normal or regular teaching load shall be
considered as overload. Overload partakes of the nature of
In the light of the foregoing discussions, it is the position of temporary extra assignment and compensation therefore shall
this Department that all basic salary/wage representing be considered as an overload honorarium if performed within
payments earned for actual work performed during or within the 8-hour work period and does not form part of the regular
the eight hours in a day, including payments for overload or basic pay. Overload performed beyond the eight-hour daily
work within eight hours, form part of basic wage and work is overtime work.26 (Emphasis supplied)cralawlibrary
therefore are to be included in the computation of 13th-month
pay mandated by PD 851, as amended.24(Underscoring It was the above-quoted DOLE Order which was used by the
supplied)cralawlibrary LA as basis for ruling against herein petitioner.

On the other hand, the Legal Services Department of the The petitioner's claim that the DOLE Order should not be
DOLE holds in its opinion of March 4, 1992 that remunerations made to apply to the present case because said Order was
for teaching in excess of the regular load shall be excluded in issued only in 1996, approximately four years after the present
the computation of the 13th-month pay unless, by school case was initiated before the Regional Arbitration Branch of
policy, the same are considered as part of the basic salary of the NLRC, is not without basis. The general rule is that
the qualified teachers.25
administrative rulings and circulars shall not be given b) Profit sharing payments;
retroactive effect.27
c) All allowances and monetary benefits which are not
Nevertheless, it is a settled rule that when an administrative considered or integrated as part of the regular basic salary of
or executive agency renders an opinion or issues a statement the employee at the time of the promulgation of the Decree on
of policy, it merely interprets a pre-existing law and the December 16, 1975.
administrative interpretation is at best advisory for it is the
courts that finally determine what the law means.28 Under a later set of Supplementary Rules and Regulations
Implementing Presidential Decree 851 issued by the then
In the present case, while the DOLE Order may not be Labor Secretary Blas Ople, overtime pay, earnings and other
applicable, the Court finds that overload pay should be remunerations are excluded as part of the basic salary and in
excluded from the computation of the 13th-month pay of the computation of the 13th-month pay.
petitioner's members.
The exclusion of cost-of-living allowances under Presidential
In resolving the issue of the inclusion or exclusion of overload Decree 525 and Letter of Instruction No. 174 and profit sharing
pay in the computation of a teacher's 13th-month pay, it is payments indicate the intention to strip basic salary of other
decisive to determine what "basic salary" includes and payments which are properly considered as "fringe" benefits.
excludes. Likewise, the catch-all exclusionary phrase "all allowances and
monetary benefits which are not considered or integrated as
In this respect, the Court's disquisition in San Miguel part of the basic salary" shows also the intention to strip basic
Corporation v. Inciong29 is instructive, to wit: salary of any and all additions which may be in the form of
allowances or "fringe" benefits.
Under Presidential Decree 851 and its implementing rules,
the basic salary of an employee is used as the basis in the Moreover, the Supplementary Rules and Regulations
determination of his 13th month pay. Any compensations or Implementing Presidential Decree 851 is even more emphatic
remunerations which are deemed not part of the basic pay is in declaring that earnings and other remunerations which are
excluded as basis in the computation of the mandatory bonus. not part of the basic salary shall not be included in the
computation of the 13th-month pay.
Under the Rules and Regulations Implementing Presidential
Decree 851, the following compensations are deemed not part While doubt may have been created by the prior Rules and
of the basic salary: Regulations Implementing Presidential Decree 851 which
defines basic salary to include all remunerations or earnings
a) Cost-of-living allowances granted pursuant to Presidential paid by an employer to an employee, this cloud is dissipated
Decree 525 and Letter of Instruction No. 174; in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of
basic salary earnings and other remunerations paid by "c.) work performed on any special holiday shall be paid an
employer to an employee. A cursory perusal of the two sets of additional compensation of at least thirty percent (30%) of the
Rules indicates that what has hitherto been the subject of a regular wage of the employee."
broad inclusion is now a subject of broad exclusion. The
Supplementary Rules and Regulations cure the seeming It is likewise clear that premium for special holiday which is at
tendency of the former rules to include all remunerations and least 30% of the regular wage is an additional
earnings within the definition of basic salary. compensation other than and added to the regular wage or basic
salary. For similar reason it shall not be considered in the
The all-embracing phrase "earnings and other remunerations" computation of the 13th -month pay.30
which are deemed not part of the basic salary includes within
its meaning payments for sick, vacation, or maternity leaves, In the same manner that payment for overtime work and work
premium for works performed on rest days and special performed during special holidays is considered as additional
holidays, pay for regular holidays and night differentials. As compensation apart and distinct from an employee's regular
such they are deemed not part of the basic salary and shall not wage or basic salary, an overload pay, owing to its very nature
be considered in the computation of the 13th-month pay. If and definition, may not be considered as part of a teacher's
they were not so excluded, it is hard to find any "earnings and regular or basic salary, because it is being paid for additional
other remunerations" expressly excluded in the computation work performed in excess of the regular teaching load.
of the 13th-month pay. Then the exclusionary provision would
prove to be idle and with no purpose. The peculiarity of an overload lies in the fact that it may be
performed within the normal eight-hour working day. This is
This conclusion finds strong support under the Labor Code of the only reason why the DOLE, in its explanatory bulletin,
the Philippines. To cite a few provisions: finds it proper to include a teacher's overload pay in the
determination of his or her 13th-month pay. However, the
"Art. 87 - Overtime work. Work may be performed beyond eight DOLE loses sight of the fact that even if it is performed within
(8) hours a day provided that the employee is paid for the the normal eight-hour working day, an overload is still an
overtime work, additional compensation equivalent to his additional or extra teaching work which is performed after the
regular wage plus at least twenty-five (25%) percent thereof." regular teaching load has been completed. Hence, any pay
given as compensation for such additional work should be
It is clear that overtime pay is an additional compensation other considered as extra and not deemed as part of the regular or
than and added to the regular wage or basic salary, for reason basic salary.
of which such is categorically excluded from the definition of
basic salary under the Supplementary Rules and Regulations Moreover, petitioner failed to refute private respondent's
Implementing Presidential Decree 851. contention that excess teaching load is paid by the hour, while
the regular teaching load is being paid on a monthly basis; and
In Article 93 of the same Code, paragraph that the assignment of overload is subject to the availability of
teaching loads. This only goes to show that overload pay is not
integrated with a teacher's basic salary for his or her regular
teaching load. In addition, overload varies from one semester
to another, as it is dependent upon the availability of extra
teaching loads. As such, it is not legally feasible to consider
payments for such overload as part of a teacher's regular or
basic salary. Verily, overload pay may not be included as basis
for determining a teacher's 13th-month pay.

WHEREFORE, the instant petition is DENIED. The assailed

Decision and Resolution of the Court of Appeals
are AFFIRMED.

SO ORDERED.
 II. BASIC PRINCIPLES affirmed it. The motion for reconsideration of the Secretary's
resolution was denied. Hence, this petition in which the
SINGER SEWING MACHINE COMPANY, petitioner Company alleges that public respondents acted in excess of
vs. jurisdiction and/or committed grave abuse of discretion in
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. that:
CHAGUILE, JR., and SINGER MACHINE COLLECTORS
UNION-BAGUIO (SIMACUB), respondents. a) the Department of Labor and Employment (DOLE)
has no jurisdiction over the case since the existence of
GUTIERREZ, JR., J.: employer-employee relationship is at issue;

This is a petition for certiorari assailing the order of Med- b) the right of petitioner to due process was denied
Arbiter Designate Felix B. Chaguile, Jr., the resolution of then when the evidence of the union members' being
Labor Secretary Franklin M. Drilon affirming said order on commission agents was disregarded by the Labor
appeal and the order denying the motion for reconsideration Secretary;
in the case entitled "In Re: Petition for Direct Certification as
the Sole and Exclusive Collective Bargaining Agent of c) the public respondents patently erred in finding that
Collectors of Singer Sewing Machine Company-Singer there exists an employer-employee relationship;
Machine Collectors Union-Baguio (SIMACUB)" docketed as
OS-MA-A-7-119-89 (IRD Case No. 02-89 MED). d) the public respondents whimsically disregarded the
well-settled rule that commission agents are not
On February 15, 1989, the respondent union filed a petition for employees but are independent contractors.
direct certification as the sole and exclusive bargaining agent
of all collectors of the Singer Sewing Machine Company, The respondents, on the other hand, insist that the provisions
Baguio City branch (hereinafter referred to as "the Company"). of the Collection Agency Agreement belie the Company's
position that the union members are independent contractors.
The Company opposed the petition mainly on the ground that To prove that union members are employees, it is asserted that
the union members are actually not employees but are they "perform the most desirable and necessary activities for
independent contractors as evidenced by the collection agency the continuous and effective operations of the business of the
agreement which they signed. petitioner Company" (citing Article 280 of the Labor Code).
They add that the termination of the agreement by the
The respondent Med-Arbiter, finding that there exists an petitioner pending the resolution of the case before the DOLE
employer-employee relationship between the union members "only shows the weakness of petitioner's stand" and was "for
and the Company, granted the petition for certification the purpose of frustrating the constitutionally mandated rights
election. On appeal, Secretary of Labor Franklin M. Drilon of the members of private respondent union to self-
organization and collective organization." They also contend
that under Section 8, Rule 8, Book No. III of the Omnibus all collections made and turned over plus a bonus on said
Rules Implementing the Labor Code, which defines job- collections; (d) an agent is required to post a cash bond of
contracting, they cannot legally qualify as independent three thousand pesos (P3,000.00) to assure the faithful
contractors who must be free from control of the alleged performance and observance of the terms and conditions
employer, who carry independent businesses and who have under the agreement; (e) he is subject to all the terms and
substantial capital or investment in the form of equipment, conditions in the agreement; (f) the agreement is effective for
tools, and the like necessary in the conduct of the business. one year from the date of its execution and renewable on a
yearly basis; and (g) his services shall be terminated in case of
The present case mainly calls for the application of the control failure to satisfy the minimum monthly collection performance
test, which if not satisfied, would lead us to conclude that no required, failure to post a cash bond, or cancellation of the
employer-employee relationship exists. Hence, if the union agreement at the instance of either party unless the agent has a
members are not employees, no right to organize for purposes pending obligation or indebtedness in favor of the Company.
of bargaining, nor to be certified as such bargaining agent can
ever be recognized. The following elements are generally Meanwhile, the respondents rely on other features to
considered in the determination of the employer-employee strengthen their position that the collectors are employees.
relationship; "(1) the selection and engagement of the They quote paragraph 2 which states that an agent shall utilize
employee; (2) the payment of wages; (3) the power of only receipt forms authorized and issued by the Company.
dismissal; and (4) the power to control the employee's conduct They also note paragraph 3 which states that an agent has to
— although the latter is the most important element" (Mafinco submit and deliver at least once a week or as often as required
Trading Corporation v. Ople, 70 SCRA 139 [1976]; a report of all collections made using report forms furnished
Development Bank of the Philippines v. National Labor by the Company. Paragraph 4 on the monthly collection quota
Relations Commission, 175 SCRA 537 [1989]; Rosario Brothers, required by the Company is deemed by respondents as a
Inc. v. Ople, 131 SCRA 72 [1984]; Broadway Motors Inc. v. control measure over the means by which an agent is to
NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity perform his services.
Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).
The nature of the relationship between a company and its
The Collection Agency Agreement defines the relationship collecting agents depends on the circumstances of each
between the Company and each of the union members who particular relationship. Not all collecting agents are employees
signed a contract. The petitioner relies on the following and neither are all collecting agents independent contractors.
stipulations in the agreements: (a) a collector is designated as a The collectors could fall under either category depending on
collecting agent" who is to be considered at all times as an the facts of each case.
independent contractor and not employee of the Company; (b)
collection of all payments on installment accounts are to be The Agreement confirms the status of the collecting agent in
made monthly or oftener; (c) an agent is paid his this case as an independent contractor not only because he is
compensation for service in the form of a commission of 6% of explicitly described as such but also because the provisions
permit him to perform collection services for the company The respondents' contention that the union members are
without being subject to the control of the latter except only as employees of the Company is based on selected provisions of
to the result of his work. After a careful analysis of the the Agreement but ignores the following circumstances which
contents of the agreement, we rule in favor of the petitioner. respondents never refuted either in the trial proceedings
before the labor officials nor in its pleadings filed before this
The requirement that collection agents utilize only receipt Court.
forms and report forms issued by the Company and that
reports shall be submitted at least once a week is not 1. The collection agents are not required to observe
necessarily an indication of control over the means by which office hours or report to Singer's office everyday
the job of collection is to be performed. The agreement itself except, naturally and necessarily, for the purpose of
specifically explains that receipt forms shall be used for the remitting their collections.
purpose of avoiding a co-mingling of personal funds of the
agent with the money collected on behalf of the Company. 2. The collection agents do not have to devote their
Likewise, the use of standard report forms as well as the time exclusively for SINGER. There is no prohibition
regular time within which to submit a report of collection are on the part of the collection agents from working
intended to facilitate order in office procedures. Even if the elsewhere. Nor are these agents required to account for
report requirements are to be called control measures, any their time and submit a record of their activity.
control is only with respect to the end result of the collection
since the requirements regulate the things to be done after the 3. The manner and method of effecting collections are
performance of the collection job or the rendition of the left solely to the discretion of the collection agents
service. without any interference on the part of Singer.

The monthly collection quota is a normal requirement found 4. The collection agents shoulder their transportation
in similar contractual agreements and is so stipulated to expenses incurred in the collections of the accounts
encourage a collecting agent to report at least the minimum assigned to them.
amount of proceeds. In fact, paragraph 5, section b gives a
bonus, aside from the regular commission every time the 5. The collection agents are paid strictly on commission
quota is reached. As a requirement for the fulfillment of the basis. The amounts paid to them are based solely on
contract, it is subject to agreement by both parties. Hence, if the amounts of collection each of them make. They do
the other contracting party does not accede to it, he can choose not receive any commission if they do not effect any
not to sign it. From the records, it is clear that the Company collection even if they put a lot of effort in collecting.
and each collecting agent intended that the former take control They are paid commission on the basis of actual
only over the amount of collection, which is a result of the job collections.
performed.
 6. The commissions earned by the collection agents are We are convinced from the facts that the work of
directly deducted by them from the amount of petitioner's agents or registered representatives more
collections they are able to effect. The net amount is nearly approximates that of an independent contractor
what is then remitted to Singer." (Rollo, pp. 7-8) than that of an employee. The latter is paid for the
labor he performs, that is, for the acts of which such
If indeed the union members are controlled as to the manner labor consists the former is paid for the result thereof . .
by which they are supposed to perform their collections, they ..
should have explicitly said so in detail by specifically denying
each of the facts asserted by the petitioner. As there seems to xxx xxx xxx
be no objections on the part of the respondents, the Court finds
that they miserably failed to defend their position. Even if an agent of petitioner should devote all of his time
and effort trying to sell its investment plans he would not
A thorough examination of the facts of the case leads us to the necessarily be entitled to compensation therefor. His right to
conclusion that the existence of an employer-employee compensation depends upon and is measured by the
relationship between the Company and the collection agents tangible results he produces."
cannot be sustained.
Moreover, the collection agent does his work "more or less at
The plain language of the agreement reveals that the his own pleasure" without a regular daily time frame imposed
designation as collection agent does not create an employment on him (Investment Planning Corporation of the Philippines v.
relationship and that the applicant is to be considered at all Social Security System, supra; See alsoSocial Security System v.
times as an independent contractor. This is consistent with the Court of Appeals, 30 SCRA 210 [1969]).
first rule of interpretation that the literal meaning of the
stipulations in the contract controls (Article 1370, Civil Code; The grounds specified in the contract for termination of the
La Suerte Cigar and Cigarette Factory v. Director of Bureau of relationship do not support the view that control exists "for the
Labor, Relations, 123 SCRA 679 [1983]). No such words as "to causes of termination thus specified have no relation to the
hire and employ" are present. Moreover, the agreement did means and methods of work that are ordinarily required of or
not fix an amount for wages nor the required working hours. imposed upon employees." (Investment Planning Corp. of the
Compensation is earned only on the basis of the tangible Phil. v. Social Security System, supra)
results produced, i.e., total collections made (Sarra v.
Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. The last and most important element of the control test is not
of the Philippines v. Social Security System, 21 SCRA 924 [1967] satisfied by the terms and conditions of the contracts. There is
which involved commission agents, this Court had the nothing in the agreement which implies control by the
occasion to rule, thus: Company not only over the end to be achieved but also over
the means and methods in achieving the end (LVN Pictures,
Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).
The Court finds the contention of the respondents that the the contractor and of the latter's subcontractor, if any,
union members are employees under Article 280 of the Labor shall be paid in accordance with the provisions of this
Code to have no basis. The definition that regular employees Code.
are those who perform activities which are desirable and
necessary for the business of the employer is not In the event that the contractor or subcontractor fails to
determinative in this case. Any agreement may provide that pay the wages of his employees in accordance with this
one party shall render services for and in behalf of another for Code, the employer shall be jointly and severally liable
a consideration (no matter how necessary for the latter's with his contractor or subcontractor to such employees
business) even without being hired as an employee. This is to the extent of the work performed under the contract,
precisely true in the case of an independent contractorship as in the same manner and extent that he is liable to
well as in an agency agreement. The Court agrees with the employees directly employed by him.
petitioner's argument that Article 280 is not the yardstick for
determining the existence of an employment relationship xxx xxx xxx
because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for There is "labor-only" contracting where the person
purposes of determining the right of an employee to certain supplying workers to an employer does not have
benefits, to join or form a union, or to security of tenure. substantial capital or investment in the form of tools,
Article 280 does not apply where the existence of an equipment, machineries, work premises, among others,
employment relationship is in dispute. and the workers recruited and placed by such persons
are performing activities which are directly related to
Even Section 8, Rule 8, Book III of the Omnibus Rules the principal business of such employer. In such cases,
Implementing the Labor Code does not apply to this the person or intermediary shall be considered merely
case.1âwphi1Respondents assert that the said provision on job as an agent of the employer who shall be responsible to
contracting requires that for one to be considered an the workers in the same manner and extent as if the
independent contractor, he must have "substantial capital or latter were directly employed by him." (p. 20)
investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the It can readily be seen that Section 8, Rule 8, Book Ill and
conduct of his business." There is no showing that a collection Article 106 are relevant in determining whether the employer
agent needs tools and machineries. Moreover, the provision is solidarily liable to the employees of an alleged contractor and/or
must be viewed in relation to Article 106 of the Labor Code sub-contractor for unpaid wages in case it is proven that there is
which provides: a job-contracting situation.

Art. 106. Contractor or subcontractor. — Whenever an The assumption of jurisdiction by the DOLE over the case is
employer enters into a contract with another person for justified as the case was brought on appeal by the petitioner
the performance of the former's work, the employees of itself which prayed for the reversal of the Order of the Med-
Arbiter on the ground that the union members are not its dismissed and the temporary restraining order issued by the
employees. Hence, the petitioner submitted itself as well as the Court on December 21, 1989 is made permanent.
issue of existence of an employment relationship to the
jurisdiction of the DOLE which was faced with a dispute on an SO ORDERED.
application for certification election.

The Court finds that since private respondents are not

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

. . . The question of whether employer-employee

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

WHEREFORE, the Order dated June 14,1989 of Med-Arbiter

Designate Felix B. Chaguile, Jr., the Resolution and Order of
Secretary Franklin M. Drilon dated November 2, 1989 and
December 14, 1989, respectively are hereby REVERSED and
SET ASIDE. The petition for certification election is ordered
MANILA GOLF & COUNTRY CLUB, INC., petitioner, Labor by the PTCCEA on behalf of the same
vs. caddies of the Manila Golf and Country Club,
INTERMEDIATE APPELLATE COURT and FERMIN the case being titled "Philippine Technical,
LLAMAR, respondents. Clerical, Commercial Association vs. Manila
Golf and Country Club" and docketed as Case
NARVASA, C.J.: No. R4-LRDX-M-10-504-78; it appears to have
been resolved in favor of the petitioners therein
The question before the Court here is whether or not persons by Med-Arbiter Orlando S. Rojo who was
rendering caddying services for members of golf clubs and thereafter upheld by Director Carmelo S.
their guests in said clubs' courses or premises are the Noriel, denying the Club's motion for
employees of such clubs and therefore within the compulsory reconsideration; 1
coverage of the Social Security System (SSS).
(2) a compulsory arbitration case initiated
That question appears to have been involved, either directly or before the Arbitration Branch of the Ministry of
peripherally, in three separate proceedings, all initiated by or Labor by the same labor organization, titled
on behalf of herein private respondent and his fellow caddies. "Philippine Technical, Clerical, Commercial
That which gave rise to the present petition for review was Employees Association (PTCCEA), Fermin
originally filed with the Social Security Commission Lamar and Raymundo Jomok vs. Manila Golf
(SSC) via petition of seventeen (17) persons who styled and Country Club, Inc., Miguel Celdran, Henry
themselves "Caddies of Manila Golf and Country Club- Lim and Geronimo Alejo;" it was dismissed for
PTCCEA" for coverage and availment of benefits under the lack of merit by Labor Arbiter Cornelio T.
Social Security Act as amended, "PTCCEA" being Linsangan, a decision later affirmed on appeal
the acronym of a labor organization, the "Philippine Technical, by the National Labor Relations Commission on
Clerical, Commercial Employees Association," with which the the ground that there was no employer-
petitioners claimed to be affiliated. The petition, docketed as employee relationship between the petitioning
SSC Case No. 5443, alleged in essence that although the caddies and the respondent Club. 2
petitioners were employees of the Manila Golf and Country
Club, a domestic corporation, the latter had not registered In the case before the SSC, the respondent Club filed answer
them as such with the SSS. praying for the dismissal of the petition, alleging in substance
that the petitioners, caddies by occupation, were allowed into
At about the same time, two other proceedings bearing on the the Club premises to render services as such to the individual
same question were filed or were pending; these were: members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the
(1) a certification election case filed with the petitioners were not subject to the direction and control of the
Labor Relations Division of the Ministry of
Club as regards the manner in which they performed their preference regardless of the respondent club's
work; and hence, they were not the Club's employees. group rotation system and has the discretion on
whether or not to pay a caddy. As testified to
Subsequently, all but two of the seventeen petitioners of their by petitioner Llamar that their income depends
own accord withdrew their claim for social security coverage, on the number of players engaging their
avowedly coming to realize that indeed there was no services and liberality of the latter (TSN, pp. 10-
employment relationship between them and the Club. The 11, Feb. 26, 1980). This lends credence to
case continued, and was eventually adjudicated by the SSC respondent's assertion that the caddies are
after protracted proceedings only as regards the two holdouts, never their employees in the absence of two
Fermin Llamar and Raymundo Jomok. The Commission elements, namely, (1) payment of wages and (2)
dismissed the petition for lack of merit, 3ruling: control or supervision over them. In this
connection, our Supreme Court ruled that in the
. . . that the caddy's fees were paid by the golf determination of the existence of an employer-
players themselves and not by respondent club. employee relationship, the "control test" shall
For instance, petitioner Raymundo Jomok be considered decisive (Philippine
averred that for their services as caddies a Manufacturing Co. vs. Geronimo and Garcia, 96
caddy's Claim Stub (Exh. "1-A") is issued by a Phil. 276; Mansal vs. P.P. Coheco Lumber Co.,
player who will in turn hand over to 96 Phil. 941; Viana vs.
management the other portion of the stub Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et
known as Caddy Ticket (Exh. "1") so that by this al. vs. The Manila Hotel Co., 101 Phil. 358, LVN
arrangement management will know how Pictures Inc. vs. Phil. Musicians Guild, et al.,
much a caddy will be paid (TSN, p. 80, July 23, L-12582, January 28, 1961, 1 SCRA 132. . . .
1980). Likewise, petitioner Fermin Llamar (reference being made also to Investment
admitted that caddy works on his own in Planning Corporation Phil. vs. SSS 21 SCRA
accordance with the rules and regulations (TSN, 925).
p. 24, February 26, 1980) but petitioner Jomok
could not state any policy of respondent that Records show the respondent club had reported
directs the manner of caddying (TSN, pp. 76-77, for SS coverage Graciano Awit and Daniel
July 23, 1980). While respondent club Quijano, as bat unloader and helper,
promulgates rules and regulations on the respectively, including their ground men, house
assignment, deportment and conduct of caddies and administrative personnel, a situation
(Exh. "C") the same are designed to impose indicative of the latter's concern with the rights
personal discipline among the caddies but not and welfare of its employees under the SS law,
to direct or conduct their actual work. In fact, a as amended. The unrebutted testimony of Col.
golf player is at liberty to choose a caddy of his Generoso A. Alejo (Ret.) that the ID cards
 issued to the caddies merely intended to The Intermediate Appellate Court gave short shirt to the first
identify the holders as accredited caddies of the assigned error, dismissing it as of the least importance. Nor, it
club and privilege(d) to ply their trade or would appear, did it find any greater merit in the second
occupation within its premises which could be alleged error. Although said Court reserved the appealed SSC
withdrawn anytime for loss of confidence. This decision and declared Fermin Llamar an employee of the
gives us a reasonable ground to state that the Manila Gold and Country Club, ordering that he be reported
defense posture of respondent that petitioners as such for social security coverage and paid any
were never its employees is well taken.4 corresponding benefits, 8 it conspicuously ignored the issue
of res adjudicata raised in said second assignment. Instead, it
From this Resolution appeal was taken to the Intermediate drew basis for the reversal from this Court's ruling
appellate Court by the union representing Llamar and Jomok. in Investment Planning Corporation of the Philippines vs. Social
After the appeal was docketed 5 and some months before Security System, supra 9 and declared that upon the evidence,
decision thereon was reached and promulgated, Raymundo the questioned employer-employee relationship between the
Jomok's appeal was dismissed at his instance, leaving Fermin Club and Fermin Llamar passed the so-called "control test,"
Llamar the lone appellant. 6 establishment in the case — i.e., "whether the employer
controls or has reserved the right to control the employee not
The appeal ascribed two errors to the SSC: 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,"
(1) refusing to suspend the proceedings to await — the Club's control over the caddies encompassing:
judgment by the Labor Relations Division of
National Capital Regional Office in the (a) the promulgation of no less than twenty-
certification election case (R-4-LRD-M-10-504- four (24) rules and regulations just about every
78) supra, on the precise issue of the existence of aspect of the conduct that the caddy must
employer-employee relationship between the observe, or avoid, when serving as such, any
respondent club and the appellants, it being violation of any which could subject him to
contended that said issue was "a function of the disciplinary action, which may include
proper labor office"; and suspending or cutting off his access to the club
premises;
(2) adjudicating that self same issue a manner
contrary to the ruling of the Director of the (b) the devising and enforcement of a group
Bureau of Labor Relations, which "has not only rotation system whereby a caddy is assigned a
become final but (has been) executed or number which designates his turn to serve a
(become) res adjudicata." 7 player;
 (c) the club's "suggesting" the rate of fees time, which was dismissed for lack of merit by the Labor
payable to the caddies. Arbiter, which was afterwards affirmed by the NLRC itself on
the ground that there existed no such relationship between the
Deemed of title or no moment by the Appellate Court was the Club and the private respondent. And, as if matters were not
fact that the caddies were paid by the players, not by the Club, already complicated enough, the same respondent, with the
that they observed no definite working hours and earned no support and assistance of the PTCCEA, saw fit, also
fixed income. It quoted with approval from an American contemporaneously, to initiate still a third proceeding for
decision 10 to the effect that: "whether the club paid the caddies compulsory social security coverage with the Social Security
and afterward collected in the first instance, the caddies were Commission (SSC Case No. 5443), with the result already
still employees of the club." This, no matter that the case which mentioned.
produced this ruling had a slightly different factual cast,
apparently having involved a claim for workmen's Before this Court, the petitioner Club now contends that the
compensation made by a caddy who, about to leave the decision of the Med-Arbiter in the certification case had never
premises of the club where he worked, was hit and injured by become final, being in fact the subject of three pending and
an automobile then negotiating the club's private driveway. unresolved motions for reconsideration, as well as of a later
motion for early resolution. 11 Unfortunately, none of these
That same issue of res adjudicata, ignored by the IAC beyond motions is incorporated or reproduced in the record before the
bare mention thereof, as already pointed out, is now among Court. And, for his part, the private respondent contends, not
the mainways of the private respondent's defenses to the only that said decision had been appealed to and been
petition for review. Considered in the perspective of the affirmed by the Director of the BLR, but that a certification
incidents just recounted, it illustrates as well as anything can, election had in fact been held, which resulted in the PTCCEA
why the practice of forum-shopping justly merits censure and being recognized as the sole bargaining agent of the caddies of
punitive sanction. Because the same question of employer- the Manila Golf and Country Club with respect to wages,
employee relationship has been dragged into three different hours of work, terms of employment, etc. 12 Whatever the
fora, willy-nilly and in quick succession, it has birthed truth about these opposing contentions, which the record
controversy as to which of the resulting adjudications must before the Court does not adequately disclose, the more
now be recognized as decisive. On the one hand, there is the controlling consideration would seem to be that, however,
certification case [R4-LRDX-M-10-504-78), where the decision final it may become, the decision in a certification case, by the
of the Med-Arbiter found for the existence of employer- very nature of that proceedings, is not such as to foreclose all
employee relationship between the parties, was affirmed by further dispute between the parties as to the existence, or non-
Director Carmelo S. Noriel, who ordered a certification existence, of employer-employee relationship between them.
election held, a disposition never thereafter appealed
according to the private respondent; on the other, the It is well settled that for res adjudicata, or the principle of bar by
compulsory arbitration case (NCR Case No. AB-4-1771-79), prior judgment, to apply, the following essential requisites
instituted by or for the same respondent at about the same must concur: (1) there must be a final judgment or order; (2)
said judgment or order must be on the merits; (3) the court private respondent, that said issue was there squarely raised
rendering the same must have jurisdiction over the subject and litigated, resulting in a ruling of the Arbitration Branch (of
matter and the parties; and (4) there must be between the two the same Ministry of Labor) that such relationship did not
cases identity of parties, identity of subject matter and identity exist, and which ruling was thereafter affirmed by the
of cause of action. 13 National Labor Relations Commission in an appeal taken by
said respondent. 16
Clearly implicit in these requisites is that the action or
proceedings in which is issued the "prior Judgment" that In any case, this Court is not inclined to allow private
would operate in bar of a subsequent action between the same respondent the benefit of any doubt as to which of the
parties for the same cause, be adversarial, or contentious, "one conflicting ruling just adverted to should be accorded
having opposing parties; (is) contested, as distinguished from primacy, given the fact that it was he who actively sought
an ex parte hearing or proceeding. . . . of which the party them simultaneously, as it were, from separate fora, and even
seeking relief has given legal notice to the other party and if the graver sanctions more lately imposed by the Court for
afforded the latter an opportunity to contest it" 14 and a forum-shopping may not be applied to him retroactively.
certification case is not such a proceeding, as this Court
already ruled: Accordingly, the IAC is not to be faulted for ignoring private
respondent's invocation of res adjudicata; on contrary, it acted
A certification proceedings is not a "litigation" correctly in doing so.
in the sense in which the term is commonly
understood, but mere investigation of a non- Said Court’s holding that upon the facts, there exists (or
adversary, fact-finding character, in which the existed) a relationship of employer and employee between
investigating agency plays the part of a petitioner and private respondent is, however, another matter.
disinterested investigator seeking merely to The Court does not agree that said facts necessarily or logically
ascertain the desires of the employees as to the point to such a relationship, and to the exclusion of any form
matter of their representation. The court enjoys of arrangements, other than of employment, that would make
a wide discretion in determining the procedure the respondent's services available to the members and guest
necessary to insure the fair and free choice of of the petitioner.
bargaining representatives by the employees.15
As long as it is, the list made in the appealed decision detailing
Indeed, if any ruling or judgment can be said to operate as res the various matters of conduct, dress, language, etc. covered
adjudicata on the contested issue of employer-employee by the petitioner's regulations, does not, in the mind of the
relationship between present petitioner and the private Court, so circumscribe the actions or judgment of the caddies
respondent, it would logically be that rendered in the concerned as to leave them little or no freedom of choice
compulsory arbitration case (NCR Case No. AB-4-771- whatsoever in the manner of carrying out their services. In the
79, supra), petitioner having asserted, without dispute from the very nature of things, caddies must submit to some
supervision of their conduct while enjoying the privilege of petitioner. He may work with any other golf
pursuing their occupation within the premises and grounds of club or he may seek employment a caddy or
whatever club they do their work in. For all that is made to otherwise with any entity or individual without
appear, they work for the club to which they attach themselves restriction by petitioner. . . .
on sufference but, on the other hand, also without having to
observe any working hours, free to leave anytime they please, . . . In the final analysis, petitioner has no was of
to stay away for as long they like. It is not pretended that if compelling the presence of the caddies as they
found remiss in the observance of said rules, any discipline are not required to render a definite number of
may be meted them beyond barring them from the premises hours of work on a single day. Even the group
which, it may be supposed, the Club may do in any case even rotation of caddies is not absolute because a
absent any breach of the rules, and without violating any right player is at liberty to choose a caddy of his
to work on their part. All these considerations clash frontally preference regardless of the caddy's order in the
with the concept of employment. rotation.

The IAC would point to the fact that the Club suggests the rate It can happen that a caddy who has rendered
of fees payable by the players to the caddies as still another services to a player on one day may still find
indication of the latter's status as employees. It seems to the sufficient time to work elsewhere. Under such
Court, however, that the intendment of such fact is to the circumstances, he may then leave the premises
contrary, showing that the Club has not the measure of control of petitioner and go to such other place of work
over the incidents of the caddies' work and compensation that that he wishes (sic). Or a caddy who is on call
an employer would possess. for a particular day may deliberately absent
himself if he has more profitable caddying, or
The Court agrees with petitioner that the group rotation another, engagement in some other place. These
system so-called, is less a measure of employer control than an are things beyond petitioner's control and for
assurance that the work is fairly distributed, a caddy who is which it imposes no direct sanctions on the
absent when his turn number is called simply losing his turn caddies. . . . 18
to serve and being assigned instead the last number for the
day. 17 WHEREFORE, the Decision of the Intermediate Appellant
Court, review of which is sought, is reversed and set aside, it
By and large, there appears nothing in the record to refute the being hereby declared that the private respondent, Fermin
petitioner's claim that: Llamar, is not an employee of petitioner Manila Golf and
Country Club and that petitioner is under no obligation to
(Petitioner) has no means of compelling the report him for compulsory coverage to the Social Security
presence of a caddy. A caddy is not required to System. No pronouncement as to costs. SO ORDERED.
exercise his occupation in the premises of
ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), On June 14, 1974, private respondent Limjoco resigned from
INC., petitioner, office to pursue his private business. Then on October 30, 1975,
vs. he filed a complaint against petitioner Encyclopaedia
NATIONAL LABOR RELATIONS COMMISSION, HON. Britannica with the Department of Labor and Employment,
LABOR ARBITER TEODORICO L. ROGELIO and claiming for non-payment of separation pay and other
BENJAMIN LIMJOCO, respondents. benefits, and also illegal deduction from his sales
commissions.
TORRES, JR., J.:
Petitioner Encyclopaedia Britannica alleged that complainant
Encyclopaedia Britannica (Philippines), Inc. filed this petition Benjamin Limjoco (Limjoco, for brevity) was not its employee
for certiorari to annul and set aside the resolution of the but an independent dealer authorized to promote and sell its
National Labor Relations Commission, Third Division, in products and in return, received commissions therefrom.
NLRC Case No. RB IV-5158-76, dated December 28, 1988, the Limjoco did not have any salary and his income from the
dispositive portion of which reads: petitioner company was dependent on the volume of sales
accomplished. He also had his own separate office, financed
WHEREFORE, in view of all the foregoing, the the business expenses, and maintained his own workforce.
decision dated December 7, 1982 of then Labor The salaries of his secretary, utility man, and sales
Arbiter Teodorico L. Dogelio is hereby representatives were chargeable to his commissions. Thus,
AFFIRMED, and the instant appeal is hereby petitioner argued that it had no control and supervision over
DISMISSED for lack of merit. the complainant as to the manner and means he conducted his
business operations. The latter did not even report to the office
SO ORDERED.1 of the petitioner and did not observe fixed office hours.
Consequently, there was no employer-employee relationship.
Private respondent Benjamin Limjoco was a Sales Division
Manager of petitioner Encyclopaedia Britannica and was in Limjoco maintained otherwise. He alleged that he was hired
charge of selling petitioner's products through some sales by the petitioner in July 1970, was assigned in the sales
representatives. As compensation, private respondent received department, and was earning an average of P4,000.00 monthly
commissions from the products sold by his agents. He was as his sales commission. He was under the supervision of the
also allowed to use petitioner's name, goodwill and logo. It petitioner's officials who issued to him and his other
was, however, agreed upon that office expenses would be personnel, memoranda, guidelines on company policies,
deducted from private respondent's commissions. Petitioner instructions and other orders. He was, however, dismissed by
would also be informed about appointments, promotions, and the petitioner when the Laurel-Langley Agreement expired.
transfers of employees in private respondent's district. As a result thereof, Limjoco asserts that in accordance with the
established company practice and the provisions of the
collective bargaining agreement, he was entitled to
termination pay equivalent to one month salary, the unpaid 5. To pay complainant his unpaid clothing
benefits (Christmas bonus, midyear bonus, clothing allowance, allowance in the total amount of P600.00; and
vacation leave, and sick leave), and the amounts illegally
deducted from his commissions which were then used for the 6. To pay complainant his accrued sick leave
payments of office supplies, office space, and overhead equivalent to 15 days per year of service or the
expenses. total amount of P6,000.00.2

On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a On appeal, the Third Division of the National Labor Relations
decision ruled that Limjoco was an employee of the petitioner Commission affirmed the assailed decision. The Commission
company. Petitioner had control over Limjoco since the latter opined that there was no evidence supporting the allegation
was required to make periodic reports of his sales activities to that Limjoco was an independent contractor or dealer. The
the company. All transactions were subject to the final petitioner still exercised control over Limjoco through its
approval of the petitioner, an evidence that petitioner memoranda and guidelines and even prohibitions on the sale
company had active control on the sales activities. There was of products other than those authorized by it. In short, the
therefore, an employer-employee relationship and necessarily, petitioner company dictated how and where to sell its
Limjoco was entitled to his claims. The decision also ordered products. Aside from that fact, Limjoco passed the costs to the
petitioner company to pay the following: petitioner chargeable against his future commissions. Such
practice proved that he was not an independent dealer or
1. To pay complainant his separation pay in the contractor for it is required by law that an independent
total amount of P16,000.00; contractor should have substantial capital or investment.

2. To pay complainant his unpaid Christmas Dissatisfied with the outcome of the case, petitioner
bonus for three years or the amount of Encyclopaedia Britannica now comes to us in this petition
12,000.00; for certiorari and injunction with prayer for preliminary
injunction. On April 3, 1989, this Court issued a temporary
3. To pay complainant his unpaid mid-year restraining order enjoining the enforcement of the decision
bonus equivalent to one-half month pay or the dated December 7, 1982.
total amount of P6,000.00;
The following are the arguments raised by the petitioner:
4. To pay complainant his accrued vacation
leave equivalent to 15 days per year of service, I
or the total amount of P6,000.00;
The respondent NLRC gravely abused its
discretion in holding that "appellant's
 contention that appellee was an independent policies which the sales managers follow and impose on their
contractor is not supported by evidence on respective agents. It should be noted that in petitioner's
record". business of selling encyclopedias and books, the marketing of
these products was done through dealership agreements. The
II sales operations were primarily conducted by independent
authorized agents who did not receive regular compensations
Respondent NLRC committed grave abuse of but only commissions based on the sales of the products.
discretion in not passing upon the validity of These independent agents hired their own sales
the pronouncement of the respondent Labor representatives, financed their own office expenses, and
Arbiter granting private respondent's claim for maintained their own staff. Thus, there was a need for the
payment of Christmas bonus, Mid-year bonus, petitioner to issue memoranda to private respondent so that
clothing allowance and the money equivalent of the latter would be apprised of the company policies and
accrued and unused vacation and sick leave. procedures. Nevertheless, private respondent Limjoco and the
other agents were free to conduct and promote their sales
The NLRC ruled that there existed an employer-employee operations. The periodic reports to the petitioner by the agents
relationship and petitioner failed to disprove this finding. We were but necessary to update the company of the latter's
do not agree. performance and business income.

In determining the existence of an employer-employee Private respondent was not an employee of the petitioner
relationship the following elements must be present: 1) company. While it was true that the petitioner had fixed the
selection and engagement of the employee; 2) payment of prices of the products for reason of uniformity and private
wages; 3) power of dismissal; and 4) the power to control the respondent could not alter them, the latter, nevertheless, had
employee's conduct. Of the above, control of employee's free rein in the means and methods for conducting the
conduct is commonly regarded as the most crucial and marketing operations. He selected his own personnel and the
determinative indicator of the presence or absence of an only reason why he had to notify the petitioner about such
employer-employee relationship.3 Under the control test, an appointments was for purpose of deducting the employees'
employer-employee relationship exists where the person for salaries from his commissions. This he admitted in his
whom the services are performed reserves the right to control testimonies, thus:
not only the end to be achieved, but also the manner and
means to used in reaching that end.4 Q. Yes, in other words you were
on what is known as P&L basis
The fact that petitioner issued memoranda to private or profit and loss basis?
respondents and to other division sales managers did not
prove that petitioner had actual control over them. The A. That is right.
different memoranda were merely guidelines on company
Q. If for an instance, just Q. In this Exhibit "2" you were
example your sales informing Encyclopaedia
representative in any period did Britannica that you have hired a
not produce any sales, you certain person and you were
would not get any money from telling Britannica how her salary
Britannica, would you? was going to be taken cared of, is
it not?
A. No, sir.
A. Yes, sir.
Q. In fact, Britannica by doing
the accounting for you as Q. You said here, "please be
division manager was merely informed that we have
making it easy for you to appointed Miss Luz Villan as
concentrate all your effort in division trainer effective May 1,
selling and you don't worry 1971 at P550.00 per month her
about accounting, isn't that so? salary will be chargeable to the
Katipunan and Bayanihan
A. Yes, sir. Districts", signed by yourself.
What is the Katipunan and
Q. In fact whenever you hire a Bayanihan District?
secretary or trainer you merely
hire that person and notify A. Those were districts under my
Britannica so that Encyclopaedia division.
Britannica will give the salaries
and deduct it from your Q. In effect you were telling
earnings, isn't that so? Britannica that you have hired
this person and "you should
A. In certain cases I just hired charge her salary to me," is that
people previously employed by right?
Encyclopaedia Britannica.
A. Yes, sir.5
xxx xxx xxx
Private respondent was merely an agent or an independent
dealer of the petitioner. He was free to conduct his work and
he was free to engage in other means of livelihood. At the time of Limjoco, who as admitted by the latter had other "conflict of
he was connected with the petitioner company, private interest" requiring his personal attention.
respondent was also a director and later the president of the
Farmers' Rural Bank. Had he been an employee of the In ascertaining whether the relationship is that of employer-
company, he could not be employed elsewhere and he would employee or one of independent contractor, each case must be
be required to devote full time for petitioner. If private determined by its own facts and all features of the relationship
respondent was indeed an employee, it was rather unusual for are to be considered.6 The records of the case at bar showed
him to wait for more than a year from his separation from that there was no such employer-employee relationship.
work before he decided to file his claims. Significantly, when
Limjoco tendered his resignation to petitioner on June 14, As stated earlier, "the element of control is absent; where a
1974, he stated, thus: person who works for another does so more or less at his own
pleasure and is not subject to definite hours or conditions of
Re: Resignation work, and in turn is compensated according to the result of his
efforts and not the amount thereof, we should not find that the
I am resigning as manager of the EB Capitol relationship of employer and employee exists.7 In fine, there is
Division effective 16 June 1974. nothing in the records to show or would "indicate that
complainant was under the control of the petitioner" in respect
This decision was brought about by conflict of the means and methods 8 in the performance of
with other interests which lately have complainant's work.
increasingly required my personal attention. I
feel that in fairness to the company and to the Consequently, private respondent is not entitled to the
people under my supervision I should benefits prayed for.
relinquish the position to someone who can
devote full-time to the Division. In view of the foregoing premises, the petition is hereby
GRANTED, and the decision of the NLRC is hereby
I wish to thank you for all the encouragement REVERSED AND SET ASIDE.
and assistance you have extended to me and to
my group during my long association with SO ORDERED.
Britannica.

Evidently, Limjoco was aware of "conflict with other interests

which . . . have increasingly required my personal attention"
(p. 118, Records). At the very least, it would indicate that
petitioner has no effective control over the personal activities
SUSAN G. CARUNGCONG, petitioner, regarding remuneration (overriding commissions in
vs. accordance with a fixed schedule), limitation of authority, and
NATIONAL LABOR RELATIONS COMMISSION, SUN termination of the agreement inter alia by written notice
LIFE ASSURANCE CO. OF CANADA, LANCE KEMP and "without cause."3
MERTON DEVEZA, respondents.
Subsequently, Carungcong and Sun Life executed another
NARVASA, C.J.: Agreement — "made and effective as of January 1, 1986" — by
which the former was named New Business Manager with the
Susan Carungcong began her career in the insurance industry function generally "to manage a New Business Office
in 1974 as an agent of Sun Life Assurance Company of Canada established by the . . (latter), . . to obtain applications for life
(hereinafter Sun Life). She signed an "Agent's Agreement" with insurance policies and other products offered by or distributed
Sun Life on September 10, 1974 (retroactive to June, 1974),1 in through Sun Life and to perform such other duties in
virtue of which she was designated the latter's "agent to solicit connection therewith as Sun Life may require from time to
applications for . . (its) insurance and annuity policies." The time."4 The Agreement governed such matters as the New
contract set out in detail the terms and conditions — Business Manager's duties; limitations on authority;
particularly those concerning the commissions payable to her compensation; expenses; termination of relation, by among
— under which her relationship with the company would be others, notice in writing with or without cause. Like the
governed. This contract was superseded some five years later "Career Agent's (or Unit Manager's) Agreement" first signed by
when she signed two (2) new agreements, both dated July 1, Carungcong,5 this latest Agreement stressed that the "New
1979. Business Manager in performance of his duties defined herein,
shall be considered an independent contractor and not . . an
The first, denominated "Career Agent's (or Unit Manager's) employee of Sun Life," and that "(u)nder no circumstance shall
Agreement," dealt with such matters as the agent's the New Business Manager and/or his employees be
commissions, his obligations, limitations on his authority, and considered employees of Sun Life."
termination of the agreement by death, or by written notice
"with or without cause." It declared that the "Agent shall be an Now, it appears that sometime in November, 1989. Ms. Eleizer
independent contractor and none of the terms of . . (the) Sibayan, Manager of Sun Life's Internal Audit Department,
Agreement shall be construed as creating an employer- commenced an inquiry into the special fund availments of
employee relationship."2 Carungcong and other New Business Managers; this, allegedly
because the Company's Vice President for Far East Asia,
The second was titled, "MANAGER'S Supplementary respondent Lance Kemp, had been receiving reports of
Agreement." Making explicit reference to the first (Agent's [the anomalies in relation thereto from unit managers and
Unit Manager's] Agreement) "which became effective on the agents.6 These special fund availments are governed by the
1st day of July, 1979." said second contract — explicitly following portion of the Agreement of January 1, 1986 under
described as a "further agreement" — contained provisions the sub-head, "New Business Manager's Expenses," viz:
 Sun Life agrees to reimburse the New Business with Sun Life of Canada dated June 10, 1974 and
Manager for actual reasonable expenses properly January 1, 1986, respectively, the Management has
incurred in performing his duties as New Business decided to terminate you as Agent and New Business
Manager provided such expenses are within the Manager of Sun Life of Canada effective immediately.
guidelines issued by Sun Life from time to time and are
incurred for the purposes of gaining or producing Carungcong promptly instituted proceedings for vindication
income and that they are accounted for in the manner in the Arbitration Branch of the National Labor Relations
established by Sun Life and made known to the New Commission January 16, 1990. There she succeeded in
Business Manager. obtaining a favorable judgment.9 Labor Arbiter Ernesto S.
Dinopol found that there existed an employer-employee
Such reimbursement by Sun Life of said expenses will relationship between her and Sun Life; ruled that she had been
be made only upon the submission by the New illegally dismissed, thus entitled to reinstatement without loss
Business Manager of a statement in form and content of seniority rights and other benefits; and ordered Sun Life,
acceptable to Sun Life detailing said expenses with and its co-respondents Lance Kemp and Merton
attached receipts. Deveza,10 jointly and severally to pay her P12,475,973.25 as
"back commissions," P8,000,000.00 as moral damages,
It also appears that Ms. Sibayan drew up a report (Summary P2,000,000.00 as exemplary damages, and P2,047,597.32 as
of Availments)7 after having examined and analyzed the attorney's fees — a total of P22,523,570.57.11
pertinent records, and interviewed the unit managers and
agents mentioned in the receipts presented by Carungcong to On appeal, the National Labor Relations Commission reversed
support her claims for reimbursement of expenses for 1987, the Arbiter's judgment. It affirmed that no employment
1988 and 1989. Thereafter, on January 4, 1990, and again on relationship existed between Carungcong and Sun Life.
January 10, 1990, Carungcong was confronted with and asked Nevertheless, it awarded to her P2,696,252.00 as "lost average
to explain the discrepancies set out in Sibayan's report. On commission" on the ground that during the appeal, she had
January 11, 1990, she was given a letter signed by "Merton V. neither been restored to work nor reinstated in
Deveza, CLU, Director, Marketing," which advised of the payroll.12 However, the NLRC later eliminated this monetary
termination of her relationship with Sun Life, viz.:8 award in a second decision promulgated on October 28, 1994
on the basis of a motion for reconsideration of Sun Life and its
In our meeting with you yesterday we presented the co-respondents. The NLRC declared itself without competence
charge of fraudulent reimbursement of the Branch to make such an award absent an employment relationship
Special Fund against you. Accordingly, you admitted between the parties.13
having committed said act.
Opting not to file a motion for reconsideration of the
For dishonesty, disloyalty and breach of your Agent's Commission's judgment,14 Carungcong forthwith initiated the
Agreement and New Business Manager's Agreement special civil action of certiorari at bar (after obtaining an
extension of time to do so), in which she seeks invalidation of fact of administrative agencies are accorded respect, if not
the Commission's decision of October 28, 1994, and indeed finality, by this Court. The assert that jurisprudence
consequent restoration of the Labor Arbiter's awards. and Carungcong's admissions before the Labor Arbiter negate
the existence of an employment relationship; that in truth
Carungcong claims that although she was not, as "new Carungcong was duly informed of the charge of fraud and
business manager," required either to account for her time or dishonesty, a charge supported by adequate proof; and that
perform her duties in a fixed manner, she was nonetheless an therefore the cancellation of the business relationship between
employee subject to the control and supervision of Sun Life them and Carungcong was valid and legal, effected with due
like any other managerial employee. She brands as ludicrous process and for just cause.
the accusation leveled against her, of having defrauded Sun
Life of the sum of P6,000.00, since her annual income at that The facts involved in this case are laid bare in considerable
time was in excess of P3,000,000.00.15She contends that the detail, and the issues identified and extensively discussed by
accusation was a mere fabrication of her Unit Managers, Jorge the parties, in their pleadings, namely: respondents' Comment
Chua and Corazon de Mesa, who were promoted to Branch dated May 4, 1995;19 petitioner's Reply thereto dated
Managers after termination of her employment,16 and that she September 11, 1995; 20 respondents' Rejoinder of October 31,
actually had no hand in the preparation of the vouchers 1995;21 their Manifestation dated November 2, 1995,
involved in the imputed anomaly, this task being entrusted to submitting copies of their exhibits in the proceedings a
the branch office secretary, Lilet Ginete, selected and hired by quo;22 Comment on the petition of the Office of the Solicitor
Sun Life. General, dated November 22, 199523 — in which it makes
common cause with Carungcong; petitioner's Sur-Rejoinder
She also contends that in dismissing her, Sun Life failed to dated December 11, 1995;24 her Counter-Manifestation of
observe procedural due process. She was not furnished with December 11, 1995, submitting copies of her own exhibits in
copies of the audit report of her supposedly fraudulent use of the proceedings below;25 respondents' Reply (dated January 8,
her special fund availments, and was never afforded an 1996) to the Comment of the Solicitor General's Office;26 the
opportunity to be heard by Sun Life officials prior to Addendum to Respondents' Comment, dated July 15,
termination of her employment.17 She assails the decisions of 1997;27 and petitioner's "Reply to
the NLRC as tainted with bias and grave abuse of discretion, Private Respondents' 'Addendum' filed without leave of court,
particularly in ignoring the "deluge of evidence" adduced before with Motion to Expunge . . ," dated July 30, 1997.28
the labor arbiter.
The record does indeed disclose what Carungcong calls a
On the other hand, Sun Life and its co-respondents argue that "deluge of evidence" submitted by the parties before the Labor
the challenged decisions were in fact precisely based on Arbiter. Carungcong submitted two (2) affidavits of hers
Carungcong's so-called "deluge of evidence," and thus cannot in (Exhibits A and B) in lieu of her direct examination, and
any sense be deemed "capricious, whimsical, arbitrary or numerous documents marked as Exhibits C to Z, inclusive,
despotic."18 They invoke the familiar rule that the findings of and from AA to ZZ, and again from AAA to EEE and EEE-1
(to FFF and FFF-7).29 Sun Life and its co-respondents in turn impartially or credibility the Court has been cited to no
submitted more than thirty-eight (38) exhibits, including the persuasive cause for doubt or misgiving. Jorge Chua31 and
affidavits of five witnesses.30 Facts are thereby established Corazon de Mesa32 deposed that as regards the special fund
which the Court cannot ignore. raised by Carungcong for prizes, awards, and outings, they
had in fact contributed thereto but the latter had made it
As already mentioned, as Sun Life's New Business Manager, appear that she had raised and disbursed the entire fund by
Carungcong had the prerogative under her contract to claim herself, and although she later obtained reimbursement
reimbursement "for actual reasonable expenses properly therefor in the sum of more than P30,000.00, she never
incurred in performing . . (her) duties . . ." Reimbursement was returned to them what they had contributed.
to be made by Sun Life "only upon . . (her) submission . . of a
statement in form and content acceptable to Sun Life detailing Chua and de Mesa also denied Carungcong's claim that she
said expenses with attached receipts." Availing of this had treated them to food and drinks on December 7, 1987
prerogative, Carungcong presented several statements of at Kimpura (the bill amounting to P570.90), at Jade Garden on
reimbursable expenses (appending the corresponding January 20, 1988 (the bill being P734.16), or at Flavors &
receipts), on the strength of which she duly received full Spices on November 5, 1988 (the bill coming to P420.66).33 De
reimbursement from Sun Life. These statements included Mesa also affirmed that contrary to Carungcong's claim, she
claims for reimbursement for: had not been treated by the latter at the Kamayan (the chit
being in the sum of P1,099.71) or at Tropical Hut (the bill
1) more than P30,000.00, representing the cost of prizes or P378.50).34
awards ostensibly advanced by Susan Carungcong; and
Robert Tan belied Carungcong's claim that she had paid for
2) several sums of money, representing the cost of food and their food or drinks at the Emerald Garden (the bill presented
drinks shouldered by Carungcong for dinner or snacks in being in the sum of P742.33) or at Sugarhouse (the bill being
various restaurants and on different dates to which she had P220.02).35
supposedly invited agents of Sun Life, namely: Jorge Chua,
Unit Manager, Prosperity Unit; Corazon de Mesa, Dynamic Lucila L. Natividad also belied Carungcong's assertion that
Unit: Robert Tan, Royal Unit; NNBO; Lucila L. Natividad, she had treated her at the Flavours and Spices (the bill being
Samaritan Unit; Cristina J, Gloton, NNBO; Cynthia Suan; P834.48).36
Zenaida B. Lim; Maynard Granados.
So, too, Cristina J. Gloton gave the lie to Carungcong's claim
The record reveals the fraudulent character of these claims, that she
that is to say, the unclean hands with which Carungcong has had treated her at the Hotel Intercontinental (the bill on one
come to court. Her claims are categorically belied by no less occasion being P559.98).37
than the eight (8) insurance managers and agents specifically
named by her in her supporting documents, about whose
Cynthia Suan denied having been entertained by Carungcong Agreement" first signed by her,44 that in the performance of her
at the Manila Peninsula (the bill supposedly being in the sum of duties defined herein. Carungcong would be considered an
P359.75).38 independent contractor and not . . an employee of Sun Life,"
and that "(u)nder no circumstance shall the New Business
Zenaida B. Lim confirmed her earlier denial that Carungcong Manager and/or his employees be considered employees of
had paid for their snacks at Bing-Bing's (the bill being Sun Life."
P182.40).39
It is germane to advert to the fact, which should by now be
Maynard Granados denied, among other things, that he was apparent, that Carungcong was not your ordinary run-of-the-
treated to dinner by Carungcong at the Hotel mill employee, nor even your average managerial employee or
Intercontinental on March 29, 1988 (the bill being supposedly supervisor. Her stated annual income from her occupation is
P437.95).40 impressive by any standards: "in excess of P3,000,000.00,"
exclusive of overriding commissions.45Certainly, she may not
The record thus appears to establish adequate cause for Sun be likened to an ordinary person applying for employment, or
Life to terminate its relationship with Susan Carungcong. Her an ordinary employee striving to keep his job, under the moral
attention was drawn to the perfidious nature of her claims for dominance of the hiring entity or individual. By no means
reimbursement; she was accorded an opportunity to explain may Carungcong be considered as dealing, or having dealt,
the same; she refused to do so. with Sun Life from an inferior position, as a disadvantaged,
morally-dominated person. She must be deemed as having
Prescinding therefrom, the contracts she had willingly and transacted with Sun Life's executives on more or less equal
knowingly signed with Sun Life41 repeatedly and clearly terms.
provided that said agreements were terminable by either party
by written notice with or without cause. Her "Career Agent's These considerations impel concurrence with the conclusions
(or Unit Manager's) Agreement" inter alia provided for of the challenged decision and resolution of respondent
termination of the agreement by death, or by written notice Commission which considered Carungcong as an independent
"with or without cause,"42 Her "MANAGER'S Supplementary contractor, not an employee of Sun Life. It is significant that
Agreement." effective July 1, 1979, contained provisions this issue of the precise status of Carungcong as an
regarding termination of the agreement inter alia by written independent contractor, evidently deemed decisive by
notice "without cause."43 A subsequent agreement by which respondent Commission, was discussed by it at some length
she was named Manager for New Business, dated January 1, not once, but twice, first in its Decision of July 29, 1994, and
1986, similarly provided for termination of relation, by among then in its second Decision of October 28, 1994 resolving the
others, notice in writing with or without cause. separate motions for reconsideration of the parties.

Noteworthy is that this last agreement of January 1, 1986 In the Decision of July 29, 1994, the Commission said:46
emphasized, like the "Career Agent's (or Unit Manager's)
A thorough review of the facts and evidence adduced adverted to by complainant are latent in the kind of
on record compels us to rule in the negative (on "the business she is into and are mainly aimed at promoting
question of whether or not complainant Carungcong is the results the parties so desire and do not necessarily
a regular employee of respondents"). Complainant, to create any employer-employee relationships, where the
our considered view is not, contrary to the findings employers' controls have to interfere in the methods
erroneously made in the challenged decision below, a and means by which the employee would like to
regular employee of respondents but an independent employ to arrive at the desired results.
contractor.
This is not without any jurisprudential support as
Her contracts/agreements since she started as earlier pointed out by herein respondent. The Supreme
insurance agent, then as unit manager and finally as Court in the case of Insular Life Assurance
business/branch manager expressly say so. Besides, it Co., Ltd. versus National Labor Relations Commission and
cannot be gainsaid that complainant was never aware Melencio Basiao (179 SCRA 459) emphatically
of her status as such, for indicated in the very face of discoursed in this wise:
her latest contract is the fact that she was accorded all
the chances she needed to seek professional and legal Logically, the line should be drawn
advice relative thereto before she signed the said between rules that merely serve as
contract. guidelines towards the achievement of
the mutually desired result without
Indeed, as adverted to by herein respondents, the dictating the means or methods to be
contracts/agreements entered into by the parties employed in attaining it, and those that
herein are the laws between the said parties. control to fix the methodology and bind
or restrict the party hired to the use of
Moreover, it is true that complainant Carungcong's such means. The first, which aim only to
duties and functions derived from her then existing promote the result, create no employer-
agreements/contracts were made subject to rules and employee relationship unlike the second,
regulations issued by respondent company, and for which address both the result and the
that matter, have likewise been made subject of certain means used to achieve it. The distinction
limitations imposed by said respondent company. acquires particular relevance in the case of
Nonetheless, these are not sufficient to accord the effect an enterprise affected with public interest
of establishing employer-employee relationship absent and is on that account subject to regulation
in this case. This is so because the insurance business is by the State with respect, not only to the
not just any other ordinary business. It is one that is relations between insurer and insured but
imbued with public interest hence, it must be governed also to the internal affairs of the Insurance
buy the rules and regulations of the state. The controls company. Rules and regulations
 governing the conduct of the business percentage from the said agents' production as part of
are provided for in the Insurance Code her commission.
and enforced by the Insurance
Commissioner. It is therefore usual and In the second judgment of October 28, 1994,47 respondent
expected for an insurance company to Commission stressed the following points:
promulgate a set of rules to guide its
commission agents in selling its policies Arrayed against complainant's arguments that she was
that they may not run afoul of the law respondent's employee are her own admissions during
and what it requires or prohibits. the trial on the merits. Said differently, her admissions
(Emphasis supplied.) completely diluted the supposed potency or her theory
that an employer-employee relationship existed.
Complainant having admitted that she was free to Complainant admitted that her renumerations were
work as she pleases, at the place and time she felt based on her levels of production (TSN, June 27, 1991,
convenient for her to do so is not unlike Melencio page 72 et seq.). She admitted she could solicit
Basiao in the aforequoted case (supra) where in spite of insurance anywhere or at any time she deemed
the controls imposed by respondents, she suffered no convenient (TSN, May 31, 1991, page 33 et seq.). She
interference whatsoever in relation to the manner and never accounted for her working time (TSN, May 20,
methodology she used for her to achieve her desired 1991, page 66 et seq.) or that daily working hours" were
results, this is clear from her testimony given in this never applicable to her situation (TSN, May 20, 1991,
wise: page 75). She gave unequivocal testimony that she
performed her duties as a New Business Manager, i.e.,
"A. Yes, and as I said as a branch manager, monitoring, training, recruitment and sales, at her own
we have no specific time to stay in the office time and convenience, at however she deemed
because its either if I am not in the office, I convenient, and with whomsoever she chose (TSN,
am monitoring my agents in the field or a May 31, 1991, page 35 et seq., TSN, May 20, 1991 page
unit manager I trained them in the field 72, et seq.; TSN, May 31, 1991, page 321 et seq.; TSN,
or recruit." (pp. 28-29, TSN, 31 May May 31, 1991, page 84 et seq.). We cannot help but
1991, Emphasis supplied.) agree with respondents' submission that, plainly,
complainant alone judged the elements of time, place
For that matter, complainant Carungcong was never and means in the performance of her duties and
paid a fixed wage or salary but was mainly paid by responsibilities.
commissions, depending on the level and volume of
her performance/production, the number of trained Complainant's "theory of the case" appears to be
agents, when taken in and assigned to her, being limited to pointing out that respondent company
responsible for her added income as she gets a certain issued rules and regulations to which she should
 conform. However, no showing has been made that SO ORDERED.
such rules and
regulations effectively and actually controlled or
restricted her choice of methods in performing her
duties as New Business Manager. Without such proof,
there can be no plausible reason to believe that her
contractual declaration that she was an independent
contractor has been qualified.

Thus, we see no reason to deviate from our original

conclusion that complainant was never respondents'
employee. Complainant's motion for reconsideration is,
therefore, denied.

Of course, Carungcong disagrees with these dispositions.

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

It should be apparent that no whimsicality, capriciousness, or

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

WHEREFORE, the petition is DISMISSED, with costs against

petitioner.
ROGELIO E. RAMOS and ERLINDA RAMOS, in their own Plaintiff Erlinda Ramos was, until the afternoon
behalf and as natural guardians of the minors, ROMMEL of June 17, 1985, a 47-year old (Exh. "A") robust
RAMOS, ROY RODERICK RAMOS and RON RAYMOND woman (TSN, October 19, 1989, p. 10). Except
RAMOS, petitioners, for occasional complaints of discomfort due to
vs. pains allegedly caused by the presence of a
COURT OF APPEALS, DELOS SANTOS MEDICAL stone in her gall bladder (TSN, January 13, 1988,
CENTER, DR. ORLINO HOSAKA and DRA. PERFECTA pp. 4-5), she was as normal as any other
GUTIERREZ, respondents. woman. Married to Rogelio E. Ramos, an
executive of Philippine Long Distance
KAPUNAN, J.: Telephone Company, she has three children
whose names are Rommel Ramos, Roy
The Hippocratic Oath mandates physicians to give primordial Roderick Ramos and Ron Raymond Ramos
consideration to the health and welfare of their patients. If a (TSN, October 19, 1989, pp. 5-6).
doctor fails to live up to this precept, he is made accountable
for his acts. A mistake, through gross negligence or Because the discomforts somehow interfered
incompetence or plain human error, may spell the difference with her normal ways, she sought professional
between life and death. In this sense, the doctor plays God on advice. She was advised to undergo an
his patient's fate. 1 operation for the removal of a stone in her gall
bladder (TSN, January 13, 1988, p. 5). She
In the case at bar, the Court is called upon to rule whether a underwent a series of examinations which
surgeon, an anesthesiologist and a hospital should be made included blood and urine tests (Exhs. "A" and
liable for the unfortunate comatose condition of a patient "C") which indicated she was fit for surgery.
scheduled for cholecystectomy. 2
Through the intercession of a mutual friend, Dr.
Petitioners seek the reversal of the decision 3 of the Court of Buenviaje (TSN, January 13, 1988, p. 7), she and
Appeals, dated 29 May 1995, which overturned the her husband Rogelio met for the first time Dr.
decision 4 of the Regional Trial Court, dated 30 January 1992, Orlino Hozaka (should be Hosaka; see TSN,
finding private respondents liable for damages arising from February 20, 1990, p. 3), one of the defendants
negligence in the performance of their professional duties in this case, on June 10, 1985. They agreed that
towards petitioner Erlinda Ramos resulting in her comatose their date at the operating table at the DLSMC
condition. (another defendant), would be on June 17, 1985
at 9:00 A.M.. Dr. Hosaka decided that she
The antecedent facts as summarized by the trial court are should undergo a "cholecystectomy" operation
reproduced hereunder: after examining the documents (findings from
the Capitol Medical Center, FEU Hospital and
DLSMC) presented to him. Rogelio E. Ramos, Capitol Medical Center who was to provide
however, asked Dr. Hosaka to look for a good moral support to the patient, to them.
anesthesiologist. Dr. Hosaka, in turn, assured Herminda was allowed to stay inside the
Rogelio that he will get a good anesthesiologist. operating room.
Dr. Hosaka charged a fee of P16,000.00, which
was to include the anesthesiologist's fee and At around 9:30 A.M., Dr. Gutierrez reached a
which was to be paid after the operation (TSN, nearby phone to look for Dr. Hosaka who was
October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, not yet in (TSN, January 13, 1988, pp. 11-12). Dr.
February 27, 1990, p. 13; and TSN, November 9, Gutierrez thereafter informed Herminda Cruz
1989, pp. 3-4, 10, 17). about the prospect of a delay in the arrival of
Dr. Hosaka. Herminda then went back to the
A day before the scheduled date of operation, patient who asked, "Mindy, wala pa ba ang
she was admitted at one of the rooms of the Doctor"? The former replied, "Huwag kang
DLSMC, located along E. Rodriguez Avenue, mag-alaala, darating na iyon" (Ibid.).
Quezon City (TSN, October 19,1989, p. 11).
Thereafter, Herminda went out of the operating
At around 7:30 A.M. of June 17, 1985 and while room and informed the patient's husband,
still in her room, she was prepared for the Rogelio, that the doctor was not yet around (id.,
operation by the hospital staff. Her sister-in- p. 13). When she returned to the operating
law, Herminda Cruz, who was the Dean of the room, the patient told her, "Mindy, inip na inip
College of Nursing at the Capitol Medical na ako, ikuha mo ako ng ibang Doctor." So, she
Center, was also there for moral support. She went out again and told Rogelio about what the
reiterated her previous request for Herminda to patient said (id., p. 15). Thereafter, she returned
be with her even during the operation. After to the operating room.
praying, she was given injections. Her hands
were held by Herminda as they went down At around 10:00 A.M., Rogelio E. Ramos was
from her room to the operating room (TSN, "already dying [and] waiting for the arrival of
January 13, 1988, pp. 9-11). Her husband, the doctor" even as he did his best to find
Rogelio, was also with her (TSN, October 19, somebody who will allow him to pull out his
1989, p. 18). At the operating room, Herminda wife from the operating room (TSN, October 19,
saw about two or three nurses and Dr. Perfecta 1989, pp. 19-20). He also thought of the feeling
Gutierrez, the other defendant, who was to of his wife, who was inside the operating room
administer anesthesia. Although not a member waiting for the doctor to arrive (ibid.). At almost
of the hospital staff, Herminda introduced 12:00 noon, he met Dr. Garcia who remarked
herself as Dean of the College of Nursing at the that he (Dr. Garcia) was also tired of waiting for
Dr. Hosaka to arrive (id., p. 21). While talking to supply to the patient's brain (Id., pp. 19-20).
Dr. Garcia at around 12:10 P.M., he came to Immediately thereafter, she went out of the
know that Dr. Hosaka arrived as a nurse operating room, and she told Rogelio E. Ramos
remarked, "Nandiyan na si Dr. Hosaka, "that something wrong was . . . happening"
dumating na raw." Upon hearing those words, (Ibid.). Dr. Calderon was then able to intubate
he went down to the lobby and waited for the the patient (TSN, July 25, 1991, p. 9).
operation to be completed (id., pp. 16, 29-30).
Meanwhile, Rogelio, who was outside the
At about 12:15 P.M., Herminda Cruz, who was operating room, saw a respiratory machine
inside the operating room with the patient, being rushed towards the door of the operating
heard somebody say that "Dr. Hosaka is room. He also saw several doctors rushing
already here." She then saw people inside the towards the operating room. When informed by
operating room "moving, doing this and that, Herminda Cruz that something wrong was
[and] preparing the patient for the operation" happening, he told her (Herminda) to be back
(TSN, January 13, 1988, p. 16). As she held the with the patient inside the operating room
hand of Erlinda Ramos, she then saw Dr. (TSN, October 19, 1989, pp. 25-28).
Gutierrez intubating the hapless patient. She
thereafter heard Dr. Gutierrez say, "ang hirap Herminda Cruz immediately rushed back, and
ma-intubate nito, mali yata ang pagkakapasok. saw that the patient was still in trendelenburg
O lumalaki ang tiyan" (id., p. 17). Because of the position (TSN, January 13, 1988, p. 20). At
remarks of Dra. Gutierrez, she focused her almost 3:00 P.M. of that fateful day, she saw the
attention on what Dr. Gutierrez was doing. She patient taken to the Intensive Care Unit (ICU).
thereafter noticed bluish discoloration of the
nailbeds of the left hand of the hapless Erlinda About two days thereafter, Rogelio E. Ramos
even as Dr. Hosaka approached her. She then was able to talk to Dr. Hosaka. The latter
heard Dr. Hosaka issue an order for someone to informed the former that something went
call Dr. Calderon, another anesthesiologist (id., wrong during the intubation. Reacting to what
p. 19). After Dr. Calderon arrived at the was told to him, Rogelio reminded the doctor
operating room, she saw this anesthesiologist that the condition of his wife would not have
trying to intubate the patient. The patient's happened, had he (Dr. Hosaka) looked for a
nailbed became bluish and the patient was good anesthesiologist (TSN, October 19, 1989, p.
placed in a trendelenburg position — a position 31).
where the head of the patient is placed in a
position lower than her feet which is an Doctors Gutierrez and Hosaka were also asked
indication that there is a decrease of blood by the hospital to explain what happened to the
 patient. The doctors explained that the patient herein private respondents alleging negligence in the
had bronchospasm (TSN, November 15, 1990, management and care of Erlinda Ramos.
pp. 26-27).
During the trial, both parties presented evidence as to the
Erlinda Ramos stayed at the ICU for a month. possible cause of Erlinda's injury. Plaintiff presented the
About four months thereafter or on November testimonies of Dean Herminda Cruz and Dr. Mariano Gavino
15, 1985, the patient was released from the to prove that the sustained by Erlinda was due to lack of
hospital. oxygen in her brain caused by the faulty management of her
airway by private respondents during the anesthesia phase.
During the whole period of her confinement, On the other hand, private respondents primarily relied on the
she incurred hospital bills amounting to expert testimony of Dr. Eduardo Jamora, a pulmonologist, to
P93,542.25 which is the subject of a promissory the effect that the cause of brain damage was Erlinda's allergic
note and affidavit of undertaking executed by reaction to the anesthetic agent, Thiopental Sodium
Rogelio E. Ramos in favor of DLSMC. Since that (Pentothal).
fateful afternoon of June 17, 1985, she has been
in a comatose condition. She cannot do After considering the evidence from both sides, the Regional
anything. She cannot move any part of her Trial Court rendered judgment in favor of petitioners, to wit:
body. She cannot see or hear. She is living on
mechanical means. She suffered brain damage After evaluating the evidence as shown in the
as a result of the absence of oxygen in her brain finding of facts set forth earlier, and applying
for four to five minutes (TSN, November 9, the aforecited provisions of law and
1989, pp. 21-22). After being discharged from jurisprudence to the case at bar, this Court finds
the hospital, she has been staying in their and so holds that defendants are liable to
residence, still needing constant medical plaintiffs for damages. The defendants were
attention, with her husband Rogelio incurring a guilty of, at the very least, negligence in the
monthly expense ranging from P8,000.00 to performance of their duty to plaintiff-patient
P10,000.00 (TSN, October 19, 1989, pp. 32-34). Erlinda Ramos.
She was also diagnosed to be suffering from
"diffuse cerebral parenchymal damage" (Exh. On the part of Dr. Perfecta Gutierrez, this Court
"G"; see also TSN, December 21, 1989, finds that she omitted to exercise reasonable
p. 6). 5 care in not only intubating the patient, but also
in not repeating the administration of atropine
Thus, on 8 January 1986, petitioners filed a civil case 6 for (TSN, August 20, 1991, pp. 5-10), without due
damages with the Regional Trial Court of Quezon City against regard to the fact that the patient was inside the
operating room for almost three (3) hours. For
after she committed a mistake in intubating patient after her (the patient's) nailbed turned
[the] patient, the patient's nailbed became bluish, belie their claim. Furthermore, the
bluish and the patient, thereafter, was placed in defendants should have rescheduled the
trendelenburg position, because of the decrease operation to a later date. This, they should have
of blood supply to the patient's brain. The done, if defendants acted with due care and
evidence further shows that the hapless patient prudence as the patient's case was an elective,
suffered brain damage because of the absence not an emergency case.
of oxygen in her (patient's) brain for
approximately four to five minutes which, in xxx xxx xxx
turn, caused the patient to become comatose.
WHEREFORE, and in view of the foregoing,
On the part of Dr. Orlino Hosaka, this Court judgment is rendered in favor of the plaintiffs
finds that he is liable for the acts of Dr. Perfecta and against the defendants. Accordingly, the
Gutierrez whom he had chosen to administer latter are ordered to pay, jointly and severally,
anesthesia on the patient as part of his the former the following sums of money, to wit:
obligation to provide the patient a good
anesthesiologist', and for arriving for the 1) the sum of P8,000.00 as actual
scheduled operation almost three (3) hours late. monthly expenses for the
plaintiff Erlinda Ramos reckoned
On the part of DLSMC (the hospital), this Court from November 15, 1985 or in
finds that it is liable for the acts of negligence of the total sum of P632,000.00 as of
the doctors in their "practice of medicine" in the April 15, 1992, subject to its
operating room. Moreover, the hospital is liable being updated;
for failing through its responsible officials, to
cancel the scheduled operation after Dr. Hosaka 2) the sum of P100,000.00 as
inexcusably failed to arrive on time. reasonable attorney's fees;

In having held thus, this Court rejects the 3) the sum of P800,000.00 by way
defense raised by defendants that they have of moral damages and the
acted with due care and prudence in rendering further sum of P200,000,00 by
medical services to plaintiff-patient. For if the way of exemplary damages; and,
patient was properly intubated as claimed by
them, the patient would not have become 4) the costs of the suit.
comatose. And, the fact that another
anesthesiologist was called to try to intubate the
 SO ORDERED. 7 filed on 7 August 1995 a motion to admit the motion for
reconsideration contending that the period to file the
Private respondents seasonably interposed an appeal to the appropriate pleading on the assailed decision had not yet
Court of Appeals. The appellate court rendered a Decision, commenced to run as the Division Clerk of Court of the Court
dated 29 May 1995, reversing the findings of the trial court. of Appeals had not yet served a copy thereof to the counsel on
The decretal portion of the decision of the appellate court record. Despite this explanation, the appellate court still
reads: denied the motion to admit the motion for reconsideration of
petitioners in its Resolution, dated 29 March 1996, primarily
WHEREFORE, for the foregoing premises the on the ground that the fifteen-day (15) period for filing a
appealed decision is hereby REVERSED, and motion for reconsideration had already expired, to wit:
the complaint below against the appellants is
hereby ordered DISMISSED. The counterclaim We said in our Resolution on July 25, 1995, that
of appellant De Los Santos Medical Center is the filing of a Motion for Reconsideration
GRANTED but only insofar as appellees are cannot be extended; precisely, the Motion for
hereby ordered to pay the unpaid hospital bills Extension (Rollo, p. 12) was denied. It is, on the
amounting to P93,542.25, plus legal interest for other hand, admitted in the latter Motion that
justice must be tempered with mercy. plaintiffs/appellees received a copy of the
decision as early as June 9, 1995. Computation
SO ORDERED. 8 wise, the period to file a Motion for
Reconsideration expired on June 24. The
The decision of the Court of Appeals was received on 9 June Motion for Reconsideration, in turn, was
1995 by petitioner Rogelio Ramos who was mistakenly received by the Court of Appeals already on
addressed as "Atty. Rogelio Ramos." No copy of the decision, July 4, necessarily, the 15-day period already
however, was sent nor received by the Coronel Law Office, passed. For that alone, the latter should be
then counsel on record of petitioners. Rogelio referred the denied.
decision of the appellate court to a new lawyer, Atty. Ligsay,
only on 20 June 1995, or four (4) days before the expiration of Even assuming admissibility of the Motion for
the reglementary period for filing a motion for the Reconsideration, but after considering the
reconsideration. On the same day, Atty. Ligsay, filed with the Comment/Opposition, the former, for lack of
appellate court a motion for extension of time to file a motion merit, is hereby DENIED.
for reconsideration. The motion for reconsideration was
submitted on 4 July 1995. However, the appellate court denied SO ORDERED. 10
the motion for extension of time in its Resolution dated 25 July
1995. 9Meanwhile, petitioners engaged the services of another A copy of the above resolution was received by Atty. Sillano
counsel, Atty. Sillano, to replace Atty. Ligsay. Atty. Sillano on 11 April 1996. The next day, or on 12 April 1996, Atty.
Sillano filed before this Court a motion for extension of time to with the Court of Appeals. In their
file the present petition for certiorari under Rule 45. The Court Comment, 12 private respondents contend that the petition
granted the motion for extension of time and gave petitioners should not be given due course since the motion for
additional thirty (30) days after the expiration of the fifteen- reconsideration of the petitioners on the decision of the Court
day (15) period counted from the receipt of the resolution of of Appeals was validly dismissed by the appellate court for
the Court of Appeals within which to submit the petition. The having been filed beyond the reglementary period. We do not
due date fell on 27 May 1996. The petition was filed on 9 May agree.
1996, well within the extended period given by the Court.
A careful review of the records reveals that the reason behind
Petitioners assail the decision of the Court of Appeals on the the delay in filing the motion for reconsideration is
following grounds: attributable to the fact that the decision of the Court of
Appeals was not sent to then counsel on record of petitioners,
I the Coronel Law Office. In fact, a copy of the decision of the
appellate court was instead sent to and received by petitioner
IN PUTTING MUCH RELIANCE ON THE Rogelio Ramos on 9 June 1995 wherein he was mistakenly
TESTIMONIES OF RESPONDENTS DRA. addressed as Atty. Rogelio Ramos. Based on the other
GUTIERREZ, DRA. CALDERON AND DR. communications received by petitioner Rogelio Ramos, the
JAMORA; appellate court apparently mistook him for the counsel on
record. Thus, no copy of the decision of the counsel on record.
II Petitioner, not being a lawyer and unaware of the prescriptive
period for filing a motion for reconsideration, referred the
IN FINDING THAT THE NEGLIGENCE OF same to a legal counsel only on 20 June 1995.
THE RESPONDENTS DID NOT CAUSE THE
UNFORTUNATE COMATOSE CONDITION It is elementary that when a party is represented by counsel,
OF PETITIONER ERLINDA RAMOS; all notices should be sent to the party's lawyer at his given
address. With a few exceptions, notice to a litigant without
III notice to his counsel on record is no notice at all. In the present
case, since a copy of the decision of the appellate court was not
IN NOT APPLYING THE DOCTRINE OF RES sent to the counsel on record of petitioner, there can be no
IPSA LOQUITUR. 11 sufficient notice to speak of. Hence, the delay in the filing of
the motion for reconsideration cannot be taken against
Before we discuss the merits of the case, we shall first dispose petitioner. Moreover, since the Court of Appeals already
of the procedural issue on the timeliness of the petition in issued a second Resolution, dated 29 March 1996, which
relation to the motion for reconsideration filed by petitioners superseded the earlier resolution issued on 25 July 1995, and
denied the motion for reconsideration of petitioner, we
believed that the receipt of the former should be considered in deduced from the mere occurrence of the accident
determining the timeliness of the filing of the present petition. itself. 16 Hence, res ipsa loquitur is applied in conjunction with
Based on this, the petition before us was submitted on time. the doctrine of common knowledge.

After resolving the foregoing procedural issue, we shall now However, much has been said that res ipsa loquitur is not a rule
look into the merits of the case. For a more logical presentation of substantive law and, as such, does not create or constitute
of the discussion we shall first consider the issue on the an independent or separate ground of liability. 17 Instead, it is
applicability of the doctrine of res ipsa loquiturto the instant considered as merely evidentiary or in the nature of a
case. Thereafter, the first two assigned errors shall be tackled procedural rule. 18 It is regarded as a mode of proof, or a mere
in relation to the res ipsa loquiturdoctrine. procedural of convenience since it furnishes a substitute for,
and relieves a plaintiff of, the burden of producing specific
Res ipsa loquitur is a Latin phrase which literally means "the proof of negligence. 19 In other words, mere invocation and
thing or the transaction speaks for itself." The phrase "res ipsa application of the doctrine does not dispense with the
loquitur'' is a maxim for the rule that the fact of the occurrence requirement of proof of negligence. It is simply a step in the
of an injury, taken with the surrounding circumstances, may process of such proof, permitting the plaintiff to present along
permit an inference or raise a presumption of negligence, or with the proof of the accident, enough of the attending
make out a plaintiff's prima facie case, and present a question of circumstances to invoke the doctrine, creating an inference or
fact for defendant to meet with an explanation. 13 Where the presumption of negligence, and to thereby place on the
thing which caused the injury complained of is shown to be defendant the burden of going forward with the proof. 20 Still,
under the management of the defendant or his servants and before resort to the doctrine may be allowed, the following
the accident is such as in ordinary course of things does not requisites must be satisfactorily shown:
happen if those who have its management or control use
proper care, it affords reasonable evidence, in the absence of 1. The accident is of a kind which
explanation by the defendant, that the accident arose from or ordinarily does not occur in the
was caused by the defendant's want of care. 14 absence of someone's negligence;

The doctrine of res ipsa loquitur is simply a recognition of the 2. It is caused by an

postulate that, as a matter of common knowledge and instrumentality within the
experience, the very nature of certain types of occurrences exclusive control of the
may justify an inference of negligence on the part of the defendant or defendants; and
person who controls the instrumentality causing the injury in
the absence of some explanation by the defendant who is 3. The possibility of contributing
charged with negligence. 15 It is grounded in the superior logic conduct which would make the
of ordinary human experience and on the basis of such plaintiff responsible is
experience or common knowledge, negligence may be eliminated. 21
In the above requisites, the fundamental element is the given by non-expert witnesses. 29 Hence, in cases where the res
"control of instrumentality" which caused the damage. 22Such ipsa loquitur is applicable, the court is permitted to find a
element of control must be shown to be within the dominion physician negligent upon proper proof of injury to the patient,
of the defendant. In order to have the benefit of the rule, a without the aid of expert testimony, where the court from its
plaintiff, in addition to proving injury or damage, must show a fund of common knowledge can determine the proper
situation where it is applicable, and must establish that the standard of care. 30 Where common knowledge and experience
essential elements of the doctrine were present in a particular teach that a resulting injury would not have occurred to the
incident. 23 patient if due care had been exercised, an inference of
negligence may be drawn giving rise to an application of the
Medical malpractice 24 cases do not escape the application of doctrine of res ipsa loquitur without medical evidence, which is
this doctrine. Thus, res ipsa loquitur has been applied when the ordinarily required to show not only what occurred but how
circumstances attendant upon the harm are themselves of such and why it occurred. 31 When the doctrine is appropriate, all
a character as to justify an inference of negligence as the cause that the patient must do is prove a nexus between the
of that harm. 25 The application of res ipsa loquitur in medical particular act or omission complained of and the injury
negligence cases presents a question of law since it is a judicial sustained while under the custody and management of the
function to determine whether a certain set of circumstances defendant without need to produce expert medical testimony
does, as a matter of law, permit a given inference. 26 to establish the standard of care. Resort to res ipsa loquitur is
allowed because there is no other way, under usual and
Although generally, expert medical testimony is relied upon in ordinary conditions, by which the patient can obtain redress
malpractice suits to prove that a physician has done a for injury suffered by him.
negligent act or that he has deviated from the standard
medical procedure, when the doctrine of res ipsa loquitur is Thus, courts of other jurisdictions have applied the doctrine in
availed by the plaintiff, the need for expert medical testimony the following situations: leaving of a foreign object in the body
is dispensed with because the injury itself provides the proof of the patient after an operation, 32 injuries sustained on a
of negligence. 27 The reason is that the general rule on the healthy part of the body which was not under, or in the area,
necessity of expert testimony applies only to such matters of treatment, 33 removal of the wrong part of the body when
clearly within the domain of medical science, and not to another part was intended, 34 knocking out a tooth while a
matters that are within the common knowledge of mankind patient's jaw was under anesthetic for the removal of his
which may be testified to by anyone familiar with the tonsils, 35 and loss of an eye while the patient plaintiff was
facts. 28 Ordinarily, only physicians and surgeons of skill and under the influence of anesthetic, during or following an
experience are competent to testify as to whether a patient has operation for appendicitis, 36 among others.
been treated or operated upon with a reasonable degree of
skill and care. However, testimony as to the statements and Nevertheless, despite the fact that the scope of res ipsa
acts of physicians and surgeons, external appearances, and loquitur has been measurably enlarged, it does not
manifest conditions which are observable by any one may be automatically apply to all cases of medical negligence as to
mechanically shift the burden of proof to the defendant to by Erlinda in her brain prior to a scheduled gall bladder
show that he is not guilty of the ascribed negligence. Res ipsa operation presents a case for the application of res ipsa loquitur.
loquitur is not a rigid or ordinary doctrine to be perfunctorily
used but a rule to be cautiously applied, depending upon the A case strikingly similar to the one before us is Voss
circumstances of each case. It is generally restricted to vs. Bridwell, 43 where the Kansas Supreme Court in applying
situations in malpractice cases where a layman is able to say, the res ipsa loquitur stated:
as a matter of common knowledge and observation, that the
consequences of professional care were not as such as would The plaintiff herein submitted himself for a
ordinarily have followed if due care had been mastoid operation and delivered his person
exercised. 37 A distinction must be made between the failure to over to the care, custody and control of his
secure results, and the occurrence of something more unusual physician who had complete and exclusive
and not ordinarily found if the service or treatment rendered control over him, but the operation was never
followed the usual procedure of those skilled in that particular performed. At the time of submission he was
practice. It must be conceded that the doctrine of res ipsa neurologically sound and physically fit in mind
loquitur can have no application in a suit against a physician or and body, but he suffered irreparable damage
surgeon which involves the merits of a diagnosis or of a and injury rendering him decerebrate and
scientific treatment. 38 The physician or surgeon is not required totally incapacitated. The injury was one which
at his peril to explain why any particular diagnosis was not does not ordinarily occur in the process of a
correct, or why any particular scientific treatment did not mastoid operation or in the absence of
produce the desired result. 39 Thus, res ipsa loquitur is not negligence in the administration of an
available in a malpractice suit if the only showing is that the anesthetic, and in the use and employment of
desired result of an operation or treatment was not an endoctracheal tube. Ordinarily a person
accomplished. 40The real question, therefore, is whether or not being put under anesthesia is not rendered
in the process of the operation any extraordinary incident or decerebrate as a consequence of administering
unusual event outside of the routine performance occurred such anesthesia in the absence of negligence.
which is beyond the regular scope of customary professional Upon these facts and under these circumstances
activity in such operations, which, if unexplained would a layman would be able to say, as a matter of
themselves reasonably speak to the average man as the common knowledge and observation, that the
negligent cause or causes of the untoward consequence. 41 If consequences of professional treatment were
there was such extraneous interventions, the doctrine of res not as such as would ordinarily have followed
ipsa loquitur may be utilized and the defendant is called upon if due care had been exercised.
to explain the matter, by evidence of exculpation, if he could. 42
Here the plaintiff could not have been guilty of
We find the doctrine of res ipsa loquitur appropriate in the case contributory negligence because he was under
at bar. As will hereinafter be explained, the damage sustained the influence of anesthetics and unconscious,
 and the circumstances are such that the true charge. Likewise, petitioner Erlinda could not have been guilty
explanation of event is more accessible to the of contributory negligence because she was under the
defendants than to the plaintiff for they had the influence of anesthetics which rendered her unconscious.
exclusive control of the instrumentalities of
anesthesia. Considering that a sound and unaffected member of the body
(the brain) is injured or destroyed while the patient is
Upon all the facts, conditions and unconscious and under the immediate and exclusive control of
circumstances alleged in Count II it is held that the physicians, we hold that a practical administration of
a cause of action is stated under the doctrine justice dictates the application of res ipsa loquitur. Upon these
of res ipsa loquitur. 44 facts and under these circumstances the Court would be able
to say, as a matter of common knowledge and observation, if
Indeed, the principles enunciated in the aforequoted case negligence attended the management and care of the patient.
apply with equal force here. In the present case, Erlinda Moreover, the liability of the physicians and the hospital in
submitted herself for cholecystectomy and expected a routine this case is not predicated upon an alleged failure to secure the
general surgery to be performed on her gall bladder. On that desired results of an operation nor on an alleged lack of skill in
fateful day she delivered her person over to the care, custody the diagnosis or treatment as in fact no operation or treatment
and control of private respondents who exercised complete was ever performed on Erlinda. Thus, upon all these initial
and exclusive control over her. At the time of submission, determination a case is made out for the application of the
Erlinda was neurologically sound and, except for a few minor doctrine of res ipsa loquitur.
discomforts, was likewise physically fit in mind and body.
However, during the administration of anesthesia and prior to Nonetheless, in holding that res ipsa loquitur is available to the
the performance of cholecystectomy she suffered irreparable present case we are not saying that the doctrine is applicable
damage to her brain. Thus, without undergoing surgery, she in any and all cases where injury occurs to a patient while
went out of the operating room already decerebrate and under anesthesia, or to any and all anesthesia cases. Each case
totally incapacitated. Obviously, brain damage, which Erlinda must be viewed in its own light and scrutinized in order to be
sustained, is an injury which does not normally occur in the within the res ipsa loquitur coverage.
process of a gall bladder operation. In fact, this kind of
situation does not in the absence of negligence of someone in Having in mind the applicability of the res ipsa
the administration of anesthesia and in the use of endotracheal loquitur doctrine and the presumption of negligence allowed
tube. Normally, a person being put under anesthesia is not therein, the Court now comes to the issue of whether the Court
rendered decerebrate as a consequence of administering such of Appeals erred in finding that private respondents were not
anesthesia if the proper procedure was followed. Furthermore, negligent in the care of Erlinda during the anesthesia phase of
the instruments used in the administration of anesthesia, the operation and, if in the affirmative, whether the alleged
including the endotracheal tube, were all under the exclusive negligence was the proximate cause of Erlinda's comatose
control of private respondents, who are the physicians-in- condition. Corollary thereto, we shall also determine if the
Court of Appeals erred in relying on the testimonies of the respondents' own testimonies which are reflected in the
witnesses for the private respondents. transcript of stenographic notes are replete of signposts
indicative of their negligence in the care and management of
In sustaining the position of private respondents, the Court of Erlinda.
Appeals relied on the testimonies of Dra. Gutierrez, Dra.
Calderon and Dr. Jamora. In giving weight to the testimony of With regard to Dra. Gutierrez, we find her negligent in the
Dra. Gutierrez, the Court of Appeals rationalized that she was care of Erlinda during the anesthesia phase. As borne by the
candid enough to admit that she experienced some difficulty records, respondent Dra. Gutierrez failed to properly intubate
in the endotracheal intubation 45 of the patient and thus, the patient. This fact was attested to by Prof. Herminda Cruz,
cannot be said to be covering her negligence with falsehood. Dean of the Capitol Medical Center School of Nursing and
The appellate court likewise opined that private respondents petitioner's sister-in-law, who was in the operating room right
were able to show that the brain damage sustained by Erlinda beside the patient when the tragic event occurred. Witness
was not caused by the alleged faulty intubation but was due to Cruz testified to this effect:
the allergic reaction of the patient to the drug Thiopental
Sodium (Pentothal), a short-acting barbiturate, as testified on ATTY. PAJARES:
by their expert witness, Dr. Jamora. On the other hand, the
appellate court rejected the testimony of Dean Herminda Cruz Q: In particular, what did Dra.
offered in favor of petitioners that the cause of the brain injury Perfecta Gutierrez do, if any on
was traceable to the wrongful insertion of the tube since the the patient?
latter, being a nurse, was allegedly not knowledgeable in the
process of intubation. In so holding, the appellate court A: In particular, I could see that
returned a verdict in favor of respondents physicians and she was intubating the patient.
hospital and absolved them of any liability towards Erlinda
and her family. Q: Do you know what happened
to that intubation process
We disagree with the findings of the Court of Appeals. We administered by Dra. Gutierrez?
hold that private respondents were unable to disprove the
presumption of negligence on their part in the care of Erlinda ATTY. ALCERA:
and their negligence was the proximate cause of her piteous
condition. She will be incompetent Your
Honor.
In the instant case, the records are helpful in furnishing not
only the logical scientific evidence of the pathogenesis of the COURT:
injury but also in providing the Court the legal nexus upon
which liability is based. As will be shown hereinafter, private
 Witness may answer if she Q: Where was Dr. Orlino
knows. Ho[s]aka then at that particular
time?
A: As have said, I was with the
patient, I was beside the A: I saw him approaching the
stretcher holding the left hand of patient during that time.
the patient and all of a sudden
heard some remarks coming Q: When he approached the
from Dra. Perfecta Gutierrez patient, what did he do, if any?
herself. She was saying "Ang
hirap ma-intubate nito, mali yata A: He made an order to call on
ang pagkakapasok. O lumalaki the anesthesiologist in the person
ang tiyan. of Dr. Calderon.

xxx xxx xxx Q: Did Dr. Calderon, upon being

called, arrive inside the
ATTY. PAJARES: operating room?

Q: From whom did you hear A: Yes sir.

those words "lumalaki ang
tiyan"? Q: What did [s]he do, if any?

A: From Dra. Perfecta Gutierrez. A: [S]he tried to intubate the

patient.
xxx xxx xxx
Q: What happened to the
Q: After hearing the phrase patient?
"lumalaki ang tiyan," what did
you notice on the person of the A: When Dr. Calderon try (sic) to
patient? intubate the patient, after a while
the patient's nailbed became
A: I notice (sic) some bluish bluish and I saw the patient was
discoloration on the nailbeds of placed in trendelenburg position.
the left hand where I was at.
 xxx xxx xxx succeeded in doing so clearly suffer from lack
of sufficient factual bases. 47
Q: Do you know the reason why
the patient was placed in that In other words, what the Court of Appeals is trying to impress
trendelenburg position? is that being a nurse, and considered a layman in the process
of intubation, witness Cruz is not competent to testify on
A: As far as I know, when a whether or not the intubation was a success.
patient is in that position, there
is a decrease of blood supply to We do not agree with the above reasoning of the appellate
the brain. 46 court. Although witness Cruz is not an anesthesiologist, she
can very well testify upon matters on which she is capable of
xxx xxx xxx observing such as, the statements and acts of the physician
and surgeon, external appearances, and manifest conditions
The appellate court, however, disbelieved Dean Cruz's which are observable by any one. 48 This is precisely allowed
testimony in the trial court by declaring that: under the doctrine of res ipsa loquitur where the testimony of
expert witnesses is not required. It is the accepted rule that
A perusal of the standard nursing curriculum in expert testimony is not necessary for the proof of negligence in
our country will show that intubation is not non-technical matters or those of which an ordinary person
taught as part of nursing procedures and may be expected to have knowledge, or where the lack of skill
techniques. Indeed, we take judicial notice of or want of care is so obvious as to render expert testimony
the fact that nurses do not, and cannot, unnecessary. 49 We take judicial notice of the fact that
intubate. Even on the assumption that she is anesthesia procedures have become so common, that even an
fully capable of determining whether or not a ordinary person can tell if it was administered properly. As
patient is properly intubated, witness such, it would not be too difficult to tell if the tube was
Herminda Cruz, admittedly, did not peep into properly inserted. This kind of observation, we believe, does
the throat of the patient. (TSN, July 25, 1991, p. not require a medical degree to be acceptable.
13). More importantly, there is no evidence that
she ever auscultated the patient or that she At any rate, without doubt, petitioner's witness, an
conducted any type of examination to check if experienced clinical nurse whose long experience and
the endotracheal tube was in its proper place, scholarship led to her appointment as Dean of the Capitol
and to determine the condition of the heart, Medical Center School at Nursing, was fully capable of
lungs, and other organs. Thus, witness Cruz's determining whether or not the intubation was a success. She
categorical statements that appellant Dra. had extensive clinical experience starting as a staff nurse in
Gutierrez failed to intubate the appellee Erlinda Chicago, Illinois; staff nurse and clinical instructor in a
Ramos and that it was Dra. Calderon who teaching hospital, the FEU-NRMF; Dean of the Laguna College
of Nursing in San Pablo City; and then Dean of the Capitol Q: When you said "mahirap yata
Medical Center School of Nursing. 50Reviewing witness Cruz' ito," what were you referring to?
statements, we find that the same were delivered in a
straightforward manner, with the kind of detail, clarity, A: "Mahirap yata itong i-
consistency and spontaneity which would have been difficult intubate," that was the patient.
to fabricate. With her clinical background as a nurse, the Court
is satisfied that she was able to demonstrate through her Q: So, you found some difficulty
testimony what truly transpired on that fateful day. in inserting the tube?

Most of all, her testimony was affirmed by no less than A: Yes, because of (sic) my first
respondent Dra. Gutierrez who admitted that she experienced attempt, I did not see right
difficulty in inserting the tube into Erlinda's trachea, to wit: away. 51

ATTY. LIGSAY: Curiously in the case at bar, respondent Dra. Gutierrez made
the haphazard defense that she encountered hardship in the
Q: In this particular case, insertion of the tube in the trachea of Erlinda because it was
Doctora, while you were positioned more anteriorly (slightly deviated from the normal
intubating at your first attempt anatomy of a person) 52 making it harder to locate and, since
(sic), you did not immediately Erlinda is obese and has a short neck and protruding teeth, it
see the trachea? made intubation even more difficult.

DRA. GUTIERREZ: The argument does not convince us. If this was indeed
observed, private respondents adduced no evidence
A: Yes sir. demonstrating that they proceeded to make a thorough
assessment of Erlinda's airway, prior to the induction of
Q: Did you pull away the tube anesthesia, even if this would mean postponing the procedure.
immediately? From their testimonies, it appears that the observation was
made only as an afterthought, as a means of defense.
A: You do not pull the . . .
The pre-operative evaluation of a patient prior to the
Q: Did you or did you not? administration of anesthesia is universally observed to lessen
the possibility of anesthetic accidents. Pre-operative evaluation
A: I did not pull the tube. and preparation for anesthesia begins when the
anesthesiologist reviews the patient's medical records and
visits with the patient, traditionally, the day before elective Respondent Dra. Gutierrez, however, attempts to gloss over
surgery. 53 It includes taking the patient's medical history, this omission by playing around with the trial court's
review of current drug therapy, physical examination and ignorance of clinical procedure, hoping that she could get
interpretation of laboratory data. 54 The physical examination away with it. Respondent Dra. Gutierrez tried to muddle the
performed by the anesthesiologist is directed primarily toward difference between an elective surgery and an emergency
the central nervous system, cardiovascular system, lungs surgery just so her failure to perform the required pre-
and upper airway. 55 A thorough analysis of the patient's airway operative evaluation would escape unnoticed. In her
normally involves investigating the following: cervical spine testimony she asserted:
mobility, temporomandibular mobility, prominent central
incisors, diseased or artificial teeth, ability to visualize uvula ATTY. LIGSAY:
and the thyromental distance. 56Thus, physical characteristics
of the patient's upper airway that could make tracheal Q: Would you agree, Doctor, that
intubation difficult should be studied. 57 Where the need it is good medical practice to see
arises, as when initial assessment indicates possible problems the patient a day before so you
(such as the alleged short neck and protruding teeth of can introduce yourself to
Erlinda) a thorough examination of the patient's airway would establish good doctor-patient
go a long way towards decreasing patient morbidity and relationship and gain the trust
mortality. and confidence of the patient?

In the case at bar, respondent Dra. Gutierrez admitted that she DRA. GUTIERREZ:
saw Erlinda for the first time on the day of the operation itself,
on 17 June 1985. Before this date, no prior consultations with, A: As I said in my previous
or pre-operative evaluation of Erlinda was done by her. Until statement, it depends on the
the day of the operation, respondent Dra. Gutierrez was operative procedure of the
unaware of the physiological make-up and needs of Erlinda. anesthesiologist and in my case,
She was likewise not properly informed of the possible with elective cases and normal
difficulties she would face during the administration of cardio-pulmonary clearance like
anesthesia to Erlinda. Respondent Dra. Gutierrez' act of seeing that, I usually don't do it except
her patient for the first time only an hour before the scheduled on emergency and on cases that
operative procedure was, therefore, an act of exceptional have an abnormalities (sic). 58
negligence and professional irresponsibility. The measures
cautioning prudence and vigilance in dealing with human However, the exact opposite is true. In an emergency
lives lie at the core of the physician's centuries-old Hippocratic procedure, there is hardly enough time available for the
Oath. Her failure to follow this medical procedure is, fastidious demands of pre-operative procedure so that an
therefore, a clear indicia of her negligence. anesthesiologist is able to see the patient only a few minutes
before surgery, if at all. Elective procedures, on the other hand, deprivation which led to anoxic encephalopathy, 60 was due to
are operative procedures that can wait for days, weeks or even an unpredictable drug reaction to the short-acting barbiturate.
months. Hence, in these cases, the anesthesiologist possesses We find the theory of private respondents unacceptable.
the luxury of time to be at the patient's beside to do a proper
interview and clinical evaluation. There is ample time to First of all, Dr. Jamora cannot be considered an authority in
explain the method of anesthesia, the drugs to be used, and the field of anesthesiology simply because he is not an
their possible hazards for purposes of informed consent. anesthesiologist. Since Dr. Jamora is a pulmonologist, he could
Usually, the pre-operative assessment is conducted at least one not have been capable of properly enlightening the court
day before the intended surgery, when the patient is relaxed about anesthesia practice and procedure and their
and cooperative. complications. Dr. Jamora is likewise not an allergologist and
could not therefore properly advance expert opinion on
Erlinda's case was elective and this was known to respondent allergic-mediated processes. Moreover, he is not a
Dra. Gutierrez. Thus, she had all the time to make a thorough pharmacologist and, as such, could not have been capable, as
evaluation of Erlinda's case prior to the operation and prepare an expert would, of explaining to the court the pharmacologic
her for anesthesia. However, she never saw the patient at the and toxic effects of the supposed culprit, Thiopental Sodium
bedside. She herself admitted that she had seen petitioner only (Pentothal).
in the operating room, and only on the actual date of the
cholecystectomy. She negligently failed to take advantage of The inappropriateness and absurdity of accepting Dr. Jamora's
this important opportunity. As such, her attempt to exculpate testimony as an expert witness in the anesthetic practice of
herself must fail. Pentothal administration is further supported by his own
admission that he formulated his opinions on the drug not
Having established that respondent Dra. Gutierrez failed to from the practical experience gained by a specialist or expert
perform pre-operative evaluation of the patient which, in turn, in the administration and use of Sodium Pentothal on patients,
resulted to a wrongful intubation, we now determine if the but only from reading certain references, to wit:
faulty intubation is truly the proximate cause of Erlinda's
comatose condition. ATTY. LIGSAY:

Private respondents repeatedly hammered the view that the Q: In your line of expertise on
cerebral anoxia which led to Erlinda's coma was due to pulmonology, did you have any
bronchospasm 59 mediated by her allergic response to the occasion to use pentothal as a
drug, Thiopental Sodium, introduced into her system. method of management?
Towards this end, they presented Dr. Jamora, a Fellow of the
Philippine College of Physicians and Diplomate of the DR. JAMORA:
Philippine Specialty Board of Internal Medicine, who
advanced private respondents' theory that the oxygen
A: We do it in conjunction with A: No. That is why I used
the anesthesiologist when they references to support my
have to intubate our patient. claims. 61

Q: But not in particular when An anesthetic accident caused by a rare drug-induced

you practice pulmonology? bronchospasm properly falls within the fields of anesthesia,
internal medicine-allergy, and clinical pharmacology. The
A: No. resulting anoxic encephalopathy belongs to the field of
neurology. While admittedly, many bronchospastic-mediated
Q: In other words, your pulmonary diseases are within the expertise of pulmonary
knowledge about pentothal is medicine, Dr. Jamora's field, the anesthetic drug-induced,
based only on what you have allergic mediated bronchospasm alleged in this case is within
read from books and not by your the disciplines of anesthesiology, allergology and
own personal application of the pharmacology. On the basis of the foregoing transcript, in
medicine pentothal? which the pulmonologist himself admitted that he could not
testify about the drug with medical authority, it is clear that
A: Based on my personal the appellate court erred in giving weight to Dr. Jamora's
experience also on pentothal. testimony as an expert in the administration of Thiopental
Sodium.
Q: How many times have you
used pentothal? The provision in the rules of evidence 62 regarding expert
witnesses states:
A: They used it on me. I went
into bronchospasm during my Sec. 49. Opinion of expert witness. — The opinion
appendectomy. of a witness on a matter requiring special
knowledge, skill, experience or training which
Q: And because they have used he is shown to possess, may be received in
it on you and on account of your evidence.
own personal experience you
feel that you can testify on Generally, to qualify as an expert witness, one must have
pentothal here with medical acquired special knowledge of the subject matter about which
authority? he or she is to testify, either by the study of recognized
authorities on the subject or by practical experience. 63Clearly,
Dr. Jamora does not qualify as an expert witness based on the
above standard since he lacks the necessary knowledge, skill,
and training in the field of anesthesiology. Oddly, apart from played a substantial part in bringing about or actually causing
submitting testimony from a specialist in the wrong field, the injury or damage; and that the injury or damage was either
private respondents' intentionally avoided providing a direct result or a reasonably probable consequence of the act
testimony by competent and independent experts in the or omission. 65 It is the dominant, moving or producing cause.
proper areas.
Applying the above definition in relation to the evidence at
Moreover, private respondents' theory, that Thiopental hand, faulty intubation is undeniably the proximate cause
Sodium may have produced Erlinda's coma by triggering an which triggered the chain of events leading to Erlinda's brain
allergic mediated response, has no support in evidence. No damage and, ultimately, her comatosed condition.
evidence of stridor, skin reactions, or wheezing — some of the
more common accompanying signs of an allergic reaction — Private respondents themselves admitted in their testimony
appears on record. No laboratory data were ever presented to that the first intubation was a failure. This fact was likewise
the court. observed by witness Cruz when she heard respondent Dra.
Gutierrez remarked, "Ang hirap ma-intubate nito, mali yata
In any case, private respondents themselves admit that ang pagkakapasok. O lumalaki ang tiyan." Thereafter, witness
Thiopental induced, allergic-mediated bronchospasm happens Cruz noticed abdominal distention on the body of Erlinda. The
only very rarely. If courts were to accept private respondents' development of abdominal distention, together with
hypothesis without supporting medical proof, and against the respiratory embarrassment indicates that the endotracheal
weight of available evidence, then every anesthetic accident tube entered the esophagus instead of the respiratory tree. In
would be an act of God. Evidently, the Thiopental-allergy other words, instead of the intended endotracheal intubation
theory vigorously asserted by private respondents was a mere what actually took place was an esophageal intubation.
afterthought. Such an explanation was advanced in order to During intubation, such distention indicates that air has
advanced in order to absolve them of any and all entered the gastrointestinal tract through the esophagus
responsibility for the patient's condition. instead of the lungs through the trachea. Entry into the
esophagus would certainly cause some delay in oxygen
In view of the evidence at hand, we are inclined to believe delivery into the lungs as the tube which carries oxygen is in
petitioners' stand that it was the faulty intubation which was the wrong place. That abdominal distention had been
the proximate cause of Erlinda's comatose condition. observed during the first intubation suggests that the length of
time utilized in inserting the endotracheal tube (up to the time
Proximate cause has been defined as that which, in natural the tube was withdrawn for the second attempt) was fairly
and continuous sequence, unbroken by any efficient significant. Due to the delay in the delivery of oxygen in her
intervening cause, produces injury, and without which the lungs Erlinda showed signs of cyanosis. 66 As stated in the
result would not have occurred. 64 An injury or damage is testimony of Dr. Hosaka, the lack of oxygen became apparent
proximately caused by an act or a failure to act, whenever it only after he noticed that the nailbeds of Erlinda were already
appears from the evidence in the case, that the act or omission blue. 67 However, private respondents contend that a second
intubation was executed on Erlinda and this one was around the short neck and protruding teeth. 72 Having failed to
successfully done. We do not think so. No evidence exists on observe common medical standards in pre-operative
record, beyond private respondents' bare claims, which management and intubation, respondent Dra. Gutierrez'
supports the contention that the second intubation was negligence resulted in cerebral anoxia and eventual coma of
successful. Assuming that the endotracheal tube finally found Erlinda.
its way into the proper orifice of the trachea, the same gave no
guarantee of oxygen delivery, the hallmark of a successful We now determine the responsibility of respondent Dr. Orlino
intubation. In fact, cyanosis was again observed immediately Hosaka as the head of the surgical team. As the so-called
after the second intubation. Proceeding from this event "captain of the ship," 73 it is the surgeon's responsibility to see
(cyanosis), it could not be claimed, as private respondents to it that those under him perform their task in the proper
insist, that the second intubation was accomplished. Even manner. Respondent Dr. Hosaka's negligence can be found in
granting that the tube was successfully inserted during the his failure to exercise the proper authority (as the "captain" of
second attempt, it was obviously too late. As aptly explained the operative team) in not determining if his anesthesiologist
by the trial court, Erlinda already suffered brain damage as a observed proper anesthesia protocols. In fact, no evidence on
result of the inadequate oxygenation of her brain for about record exists to show that respondent Dr. Hosaka verified if
four to five minutes. 68 respondent Dra. Gutierrez properly intubated the patient.
Furthermore, it does not escape us that respondent Dr. Hosaka
The above conclusion is not without basis. Scientific studies had scheduled another procedure in a different hospital at the
point out that intubation problems are responsible for one- same time as Erlinda's cholecystectomy, and was in fact over
third (1/3) of deaths and serious injuries associated with three hours late for the latter's operation. Because of this, he
anesthesia. 69 Nevertheless, ninety-eight percent (98%) or the had little or no time to confer with his anesthesiologist
vast majority of difficult intubations may be anticipated by regarding the anesthesia delivery. This indicates that he was
performing a thorough evaluation of the patient's airway prior remiss in his professional duties towards his patient. Thus, he
to the operation. 70 As stated beforehand, respondent Dra. shares equal responsibility for the events which resulted in
Gutierrez failed to observe the proper pre-operative protocol Erlinda's condition.
which could have prevented this unfortunate incident. Had
appropriate diligence and reasonable care been used in the We now discuss the responsibility of the hospital in this
pre-operative evaluation, respondent physician could have particular incident. The unique practice (among private
been much more prepared to meet the contingency brought hospitals) of filling up specialist staff with attending and
about by the perceived anatomic variations in the patient's visiting "consultants," 74 who are allegedly not hospital
neck and oral area, defects which would have been easily employees, presents problems in apportioning responsibility
overcome by a prior knowledge of those variations together for negligence in medical malpractice cases. However, the
with a change in technique. 71 In other words, an experienced difficulty is only more apparent than real.
anesthesiologist, adequately alerted by a thorough pre-
operative evaluation, would have had little difficulty going
In the first place, hospitals exercise significant control in the exception of the payment of wages. In assessing whether such
hiring and firing of consultants and in the conduct of their a relationship in fact exists, the control test is determining.
work within the hospital premises. Doctors who apply for Accordingly, on the basis of the foregoing, we rule that for the
"consultant" slots, visiting or attending, are required to submit purpose of allocating responsibility in medical negligence
proof of completion of residency, their educational cases, an employer-employee relationship in effect exists
qualifications; generally, evidence of accreditation by the between hospitals and their attending and visiting physicians.
appropriate board (diplomate), evidence of fellowship in most This being the case, the question now arises as to whether or
cases, and references. These requirements are carefully not respondent hospital is solidarily liable with respondent
scrutinized by members of the hospital administration or by a doctors for petitioner's condition. 76
review committee set up by the hospital who either accept or
reject the application. 75 This is particularly true with The basis for holding an employer solidarily responsible for
respondent hospital. the negligence of its employee is found in Article 2180 of the
Civil Code which considers a person accountable not only for
After a physician is accepted, either as a visiting or attending his own acts but also for those of others based on the former's
consultant, he is normally required to attend clinico- responsibility under a relationship of patria potestas. 77 Such
pathological conferences, conduct bedside rounds for clerks, responsibility ceases when the persons or entity concerned
interns and residents, moderate grand rounds and patient prove that they have observed the diligence of a good father of
audits and perform other tasks and responsibilities, for the the family to prevent damage. 78 In other words, while the
privilege of being able to maintain a clinic in the hospital, burden of proving negligence rests on the plaintiffs, once
and/or for the privilege of admitting patients into the hospital. negligence is shown, the burden shifts to the respondents
In addition to these, the physician's performance as a specialist (parent, guardian, teacher or employer) who should prove that
is generally evaluated by a peer review committee on the basis they observed the diligence of a good father of a family to
of mortality and morbidity statistics, and feedback from prevent damage.
patients, nurses, interns and residents. A consultant remiss in
his duties, or a consultant who regularly falls short of the In the instant case, respondent hospital, apart from a general
minimum standards acceptable to the hospital or its peer denial of its responsibility over respondent physicians, failed
review committee, is normally politely terminated. to adduce evidence showing that it exercised the diligence of a
good father of a family in the hiring and supervision of the
In other words, private hospitals, hire, fire and exercise real latter. It failed to adduce evidence with regard to the degree of
control over their attending and visiting "consultant" staff. supervision which it exercised over its physicians. In
While "consultants" are not, technically employees, a point neglecting to offer such proof, or proof of a similar nature,
which respondent hospital asserts in denying all responsibility respondent hospital thereby failed to discharge its burden
for the patient's condition, the control exercised, the hiring, under the last paragraph of Article 2180. Having failed to do
and the right to terminate consultants all fulfill the important this, respondent hospital is consequently solidarily responsible
hallmarks of an employer-employee relationship, with the with its physicians for Erlinda's condition.
Based on the foregoing, we hold that the Court of Appeals pulmonary therapist to prevent the accumulation of secretions
erred in accepting and relying on the testimonies of the which can lead to respiratory complications.
witnesses for the private respondents. Indeed, as shown by the
above discussions, private respondents were unable to rebut Given these considerations, the amount of actual damages
the presumption of negligence. Upon these disquisitions we recoverable in suits arising from negligence should at least
hold that private respondents are solidarily liable for damages reflect the correct minimum cost of proper care, not the cost of
under Article 2176 79 of the Civil Code. the care the family is usually compelled to undertake at home
to avoid bankruptcy. However, the provisions of the Civil
We now come to the amount of damages due petitioners. The Code on actual or compensatory damages present us with
trial court awarded a total of P632,000.00 pesos (should be some difficulties.
P616,000.00) in compensatory damages to the plaintiff, "subject
to its being updated" covering the period from 15 November Well-settled is the rule that actual damages which may be
1985 up to 15 April 1992, based on monthly expenses for the claimed by the plaintiff are those suffered by him as he has
care of the patient estimated at P8,000.00. duly proved. The Civil Code provides:

At current levels, the P8000/monthly amount established by Art. 2199. — Except as provided by law or by
the trial court at the time of its decision would be grossly stipulation, one is entitled to an adequate
inadequate to cover the actual costs of home-based care for a compensation only for such pecuniary loss
comatose individual. The calculated amount was not even suffered by him as he has duly proved. Such
arrived at by looking at the actual cost of proper hospice care compensation is referred to as actual or
for the patient. What it reflected were the actual expenses compensatory damages.
incurred and proved by the petitioners after they were forced
to bring home the patient to avoid mounting hospital bills. Our rules on actual or compensatory damages generally
assume that at the time of litigation, the injury suffered as a
And yet ideally, a comatose patient should remain in a consequence of an act of negligence has been completed and
hospital or be transferred to a hospice specializing in the care that the cost can be liquidated. However, these provisions
of the chronically ill for the purpose of providing a proper neglect to take into account those situations, as in this case,
milieu adequate to meet minimum standards of care. In the where the resulting injury might be continuing and possible
instant case for instance, Erlinda has to be constantly turned future complications directly arising from the injury, while
from side to side to prevent bedsores and hypostatic certain to occur, are difficult to predict.
pneumonia. Feeding is done by nasogastric tube. Food
preparation should be normally made by a dietitian to provide In these cases, the amount of damages which should be
her with the correct daily caloric requirements and vitamin awarded, if they are to adequately and correctly respond to
supplements. Furthermore, she has to be seen on a regular the injury caused, should be one which compensates for
basis by a physical therapist to avoid muscle atrophy, and by a pecuniary loss incurred and proved, up to the time of
trial; and one which would meet pecuniary loss certain to be In Valenzuela vs. Court of Appeals, 82 this Court was confronted
suffered but which could not, from the nature of the case, be with a situation where the injury suffered by the plaintiff
made with certainty. 80 In other words, temperate damages can would have led to expenses which were difficult to estimate
and should be awarded on top of actual or compensatory because while they would have been a direct result of the
damages in instances where the injury is chronic and injury (amputation), and were certain to be incurred by the
continuing. And because of the unique nature of such cases, plaintiff, they were likely to arise only in the future. We
no incompatibility arises when both actual and temperate awarded P1,000,000.00 in moral damages in that case.
damages are provided for. The reason is that these damages
cover two distinct phases. Describing the nature of the injury, the Court therein stated:

As it would not be equitable — and certainly not in the best As a result of the accident, Ma. Lourdes
interests of the administration of justice — for the victim in Valenzuela underwent a traumatic amputation
such cases to constantly come before the courts and invoke of her left lower extremity at the distal left thigh
their aid in seeking adjustments to the compensatory damages just above the knee. Because of this, Valenzuela
previously awarded — temperate damages are appropriate. will forever be deprived of the full ambulatory
The amount given as temperate damages, though to a certain functions of her left extremity, even with the
extent speculative, should take into account the cost of proper use of state of the art prosthetic technology.
care. Well beyond the period of hospitalization
(which was paid for by Li), she will be required
In the instant case, petitioners were able to provide only home- to undergo adjustments in her prosthetic devise
based nursing care for a comatose patient who has remained due to the shrinkage of the stump from the
in that condition for over a decade. Having premised our process of healing.
award for compensatory damages on the amount provided by
petitioners at the onset of litigation, it would be now much These adjustments entail costs, prosthetic
more in step with the interests of justice if the value awarded replacements and months of physical and
for temperate damages would allow petitioners to provide occupational rehabilitation and therapy. During
optimal care for their loved one in a facility which generally the lifetime, the prosthetic devise will have to
specializes in such care. They should not be compelled by dire be replaced and readjusted to changes in the
circumstances to provide substandard care at home without size of her lower limb effected by the biological
the aid of professionals, for anything less would be grossly changes of middle-age, menopause and aging.
inadequate. Under the circumstances, an award of Assuming she reaches menopause, for example,
P1,500,000.00 in temperate damages would therefore be the prosthetic will have to be adjusted to
reasonable. 81 respond to the changes in bone resulting from a
precipitate decrease in calcium levels observed
in the bones of all post-menopausal women. In
 other words, the damage done to her would not be inadequate if petitioner's condition remains unchanged for
only be permanent and lasting, it would also be the next ten years.
permanently changing and adjusting to the
physiologic changes which her body would We recognized, in Valenzuela that a discussion of the victim's
normally undergo through the years. The actual injury would not even scratch the surface of the
replacements, changes, and adjustments will resulting moral damage because it would be highly
require corresponding adjustive physical and speculative to estimate the amount of emotional and moral
occupational therapy. All of these adjustments, pain, psychological damage and injury suffered by the victim
it has been documented, are painful. or those actually affected by the victim's condition. 84 The
husband and the children, all petitioners in this case, will have
xxx xxx xxx to live with the day to day uncertainty of the patient's illness,
knowing any hope of recovery is close to nil. They have
A prosthetic devise, however technologically fashioned their daily lives around the nursing care of
advanced, will only allow a reasonable amount petitioner, altering their long term goals to take into account
of functional restoration of the motor functions their life with a comatose patient. They, not the respondents,
of the lower limb. The sensory functions are are charged with the moral responsibility of the care of the
forever lost. The resultant anxiety, victim. The family's moral injury and suffering in this case is
sleeplessness, psychological injury, mental and clearly a real one. For the foregoing reasons, an award of
physical pain are inestimable. 83 P2,000,000.00 in moral damages would be appropriate.

The injury suffered by Erlinda as a consequence of private Finally, by way of example, exemplary damages in the amount
respondents' negligence is certainly much more serious than of P100,000.00 are hereby awarded. Considering the length
the amputation in the Valenzuela case. and nature of the instant suit we are of the opinion that
attorney's fees valued at P100,000.00 are likewise proper.
Petitioner Erlinda Ramos was in her mid-forties when the
incident occurred. She has been in a comatose state for over Our courts face unique difficulty in adjudicating medical
fourteen years now. The burden of care has so far been negligence cases because physicians are not insurers of life
heroically shouldered by her husband and children, who, in and, they rarely set out to intentionally cause injury or death
the intervening years have been deprived of the love of a wife to their patients. However, intent is immaterial in negligence
and a mother. cases because where negligence exists and is proven, the same
automatically gives the injured a right to reparation for the
Meanwhile, the actual physical, emotional and financial cost of damage caused.
the care of petitioner would be virtually impossible to
quantify. Even the temperate damages herein awarded would Established medical procedures and practices, though in
constant flux are devised for the purpose of preventing
complications. A physician's experience with his patients
would sometimes tempt him to deviate from established
community practices, and he may end a distinguished career
using unorthodox methods without incident. However, when
failure to follow established procedure results in the evil
precisely sought to be averted by observance of the procedure
and a nexus is made between the deviation and the injury or
damage, the physician would necessarily be called to account
for it. In the case at bar, the failure to observe pre-operative
assessment protocol which would have influenced the
intubation in a salutary way was fatal to private respondents'
case.

WHEREFORE, the decision and resolution of the appellate

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

SO ORDERED.
JOSE Y. SONZA, petitioner, b. Co-host for Mel & Jay television program, 5:30 to
vs. 7:00 p.m., Sundays.3
ABS-CBN BROADCASTING CORPORATION, respondent.
ABS-CBN agreed to pay for SONZA’s services a monthly
DECISION talent fee of ₱310,000 for the first year and ₱317,000 for the
second and third year of the Agreement. ABS-CBN would pay
CARPIO, J.: the talent fees on the 10th and 25th days of the month.

The Case On 1 April 1996, SONZA wrote a letter to ABS-CBN’s

President, Eugenio Lopez III, which reads:
Before this Court is a petition for review on
certiorari1 assailing the 26 March 1999 Decision2 of the Court Dear Mr. Lopez,
of Appeals in CA-G.R. SP No. 49190 dismissing the petition
filed by Jose Y. Sonza ("SONZA"). The Court of Appeals We would like to call your attention to the Agreement
affirmed the findings of the National Labor Relations dated May 1994 entered into by your goodself on
Commission ("NLRC"), which affirmed the Labor Arbiter’s behalf of ABS-CBN with our company relative to our
dismissal of the case for lack of jurisdiction. talent JOSE Y. SONZA.

The Facts As you are well aware, Mr. Sonza irrevocably resigned
in view of recent events concerning his programs and
In May 1994, respondent ABS-CBN Broadcasting Corporation career. We consider these acts of the station violative of
("ABS-CBN") signed an Agreement ("Agreement") with the the Agreement and the station as in breach thereof. In
Mel and Jay Management and Development Corporation this connection, we hereby serve notice of rescission of
("MJMDC"). ABS-CBN was represented by its corporate said Agreement at our instance effective as of date.
officers while MJMDC was represented by SONZA, as
President and General Manager, and Carmela Tiangco Mr. Sonza informed us that he is waiving and
("TIANGCO"), as EVP and Treasurer. Referred to in the renouncing recovery of the remaining amount
Agreement as "AGENT," MJMDC agreed to provide SONZA’s stipulated in paragraph 7 of the Agreement but
services exclusively to ABS-CBN as talent for radio and reserves the right to seek recovery of the other benefits
television. The Agreement listed the services SONZA would under said Agreement.
render to ABS-CBN, as follows:
Thank you for your attention.
a. Co-host for Mel & Jay radio program, 8:00 to 10:00
a.m., Mondays to Fridays; Very truly yours,
 (Sgd.) resolved only after and as a result of a hearing. Thus,
JOSE Y. SONZA the respondent’s plea of lack of employer-employee
President and Gen. Manager4 relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that
On 30 April 1996, SONZA filed a complaint against ABS-CBN there really is no employer-employee relationship
before the Department of Labor and Employment, National between it and the complainant.
Capital Region in Quezon City. SONZA complained that ABS-
CBN did not pay his salaries, separation pay, service incentive The Labor Arbiter then considered the case submitted for
leave pay, 13th month pay, signing bonus, travel allowance resolution. The parties submitted their position papers on 24
and amounts due under the Employees Stock Option Plan February 1997.
("ESOP").
On 11 March 1997, SONZA filed a Reply to Respondent’s
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the Position Paper with Motion to Expunge Respondent’s Annex 4
ground that no employer-employee relationship existed and Annex 5 from the Records. Annexes 4 and 5 are affidavits
between the parties. SONZA filed an Opposition to the motion of ABS-CBN’s witnesses Soccoro Vidanes and Rolando V.
on 19 July 1996. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is
Meanwhile, ABS-CBN continued to remit SONZA’s monthly to treat talents like SONZA as independent contractors.
talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new The Labor Arbiter rendered his Decision dated 8 July 1997
account with the same bank where ABS-CBN deposited dismissing the complaint for lack of jurisdiction.6 The
SONZA’s talent fees and other payments due him under the pertinent parts of the decision read as follows:
Agreement.
xxx
In his Order dated 2 December 1996, the Labor Arbiter5 denied
the motion to dismiss and directed the parties to file their While Philippine jurisprudence has not yet, with
respective position papers. The Labor Arbiter ruled: certainty, touched on the "true nature of the contract of
a talent," it stands to reason that a "talent" as above-
In this instant case, complainant for having invoked a described cannot be considered as an employee by
claim that he was an employee of respondent company reason of the peculiar circumstances surrounding the
until April 15, 1996 and that he was not paid certain engagement of his services.
claims, it is sufficient enough as to confer jurisdiction
over the instant case in this Office. And as to whether It must be noted that complainant was engaged by
or not such claim would entitle complainant to recover respondent by reason of his peculiar skills and talent
upon the causes of action asserted is a matter to be
as a TV host and a radio broadcaster. Unlike an to be employed in attaining it, and those that control or
ordinary employee, he was free to perform the fix the methodology and bind or restrict the party
services he undertook to render in accordance with hired to the use of such means. The first, which aim
his own style. The benefits conferred to complainant only to promote the result, create no employer-
under the May 1994 Agreement are certainly very employee relationship unlike the second, which
much higher than those generally given to employees. address both the result and the means to achieve it."
For one, complainant Sonza’s monthly talent fees (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R.
amount to a staggering ₱317,000. Moreover, his No. 84484, November 15, 1989).
engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight x x x (Emphasis supplied)7
(8) hours of work per day as he worked only for such
number of hours as may be necessary. SONZA appealed to the NLRC. On 24 February 1998, the
NLRC rendered a Decision affirming the Labor Arbiter’s
The fact that per the May 1994 Agreement complainant decision. SONZA filed a motion for reconsideration, which the
was accorded some benefits normally given to an NLRC denied in its Resolution dated 3 July 1998.
employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement On 6 October 1998, SONZA filed a special civil action for
by the parties and not by reason of employer- certiorari before the Court of Appeals assailing the decision
employee relationship. As correctly put by the and resolution of the NLRC. On 26 March 1999, the Court of
respondent, "All these benefits are merely talent fees Appeals rendered a Decision dismissing the case.8
and other contractual benefits and should not be
deemed as ‘salaries, wages and/or other remuneration’ Hence, this petition.
accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to The Rulings of the NLRC and Court of Appeals
this is the rule that the term or nomenclature given to a
stipulated benefit is not controlling, but the intent of The Court of Appeals affirmed the NLRC’s finding that no
the parties to the Agreement conferring such benefit." employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRC’s decision, the appellate court
The fact that complainant was made subject to quoted the following findings of the NLRC:
respondent’s Rules and Regulations, likewise, does
not detract from the absence of employer-employee x x x the May 1994 Agreement will readily reveal that
relationship. As held by the Supreme Court, "The line MJMDC entered into the contract merely as an agent of
should be drawn between rules that merely serve as complainant Sonza, the principal. By all indication and
guidelines towards the achievement of the mutually as the law puts it, the act of the agent is the act of the
desired result without dictating the means or methods
principal itself. This fact is made particularly true in It may not be amiss to state that jurisdiction over the
this case, as admittedly MJMDC ‘is a management instant controversy indeed belongs to the regular
company devoted exclusively to managing the careers courts, the same being in the nature of an action for
of Mr. Sonza and his broadcast partner, Mrs. Carmela alleged breach of contractual obligation on the part of
C. Tiangco.’ (Opposition to Motion to Dismiss) respondent-appellee. As squarely apparent from
complainant-appellant’s Position Paper, his claims for
Clearly, the relations of principal and agent only compensation for services, ‘13th month pay’, signing
accrues between complainant Sonza and MJMDC, and bonus and travel allowance against respondent-
not between ABS-CBN and MJMDC. This is clear from appellee are not based on the Labor Code but rather on
the provisions of the May 1994 Agreement which the provisions of the May 1994 Agreement, while his
specifically referred to MJMDC as the ‘AGENT’. As a claims for proceeds under Stock Purchase Agreement
matter of fact, when complainant herein unilaterally are based on the latter. A portion of the Position Paper
rescinded said May 1994 Agreement, it was MJMDC of complainant-appellant bears perusal:
which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as ‘Under [the May 1994 Agreement] with
President. respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing
Moreover, previous contracts between Mr. Sonza and bonus consisting of shares of stocks…with FIVE
ABS-CBN reveal the fact that historically, the parties to HUNDRED THOUSAND PESOS (₱500,000.00).
the said agreements are ABS-CBN and Mr. Sonza. And
it is only in the May 1994 Agreement, which is the Similarly, complainant is also entitled to be
latest Agreement executed between ABS-CBN and Mr. paid 13th month pay based on an amount not
Sonza, that MJMDC figured in the said Agreement as lower than the amount he was receiving prior
the agent of Mr. Sonza. to effectivity of (the) Agreement’.

We find it erroneous to assert that MJMDC is a mere Under paragraph 9 of (the May 1994
‘labor-only’ contractor of ABS-CBN such that there Agreement), complainant is entitled to a
exist[s] employer-employee relationship between the commutable travel benefit amounting to at least
latter and Mr. Sonza. On the contrary, We find it One Hundred Fifty Thousand Pesos
indubitable, that MJMDC is an agent, not of ABS-CBN, (₱150,000.00) per year.’
but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Thus, it is precisely because of complainant-appellant’s
Agreement. own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil
Code, rather than the Labor Code, that instead of
 merely resigning from ABS-CBN, complainant- could not re-examine the parties’ evidence and substitute the
appellant served upon the latter a ‘notice of rescission’ factual findings of the NLRC with its own.13
of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring The Issue
to unpaid employee benefits, ‘he is waiving and
renouncing recovery of the remaining amount In assailing the decision of the Court of Appeals, SONZA
stipulated in paragraph 7 of the Agreement but contends that:
reserves the right to such recovery of the other benefits
under said Agreement.’ (Annex 3 of the respondent THE COURT OF APPEALS GRAVELY ERRED IN
ABS-CBN’s Motion to Dismiss dated July 10, 1996). AFFIRMING THE NLRC’S DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-
Evidently, it is precisely by reason of the alleged EMPLOYEE RELATIONSHIP EXISTED BETWEEN
violation of the May 1994 Agreement and/or the Stock SONZA AND ABS-CBN, DESPITE THE WEIGHT OF
Purchase Agreement by respondent-appellee that CONTROLLING LAW, JURISPRUDENCE AND
complainant-appellant filed his complaint. EVIDENCE TO SUPPORT SUCH A FINDING.14
Complainant-appellant’s claims being anchored on the
alleged breach of contract on the part of respondent- The Court’s Ruling
appellee, the same can be resolved by reference to civil
law and not to labor law. Consequently, they are We affirm the assailed decision.
within the realm of civil law and, thus, lie with the
regular courts. As held in the case of Dai-Chi No convincing reason exists to warrant a reversal of the
Electronics Manufacturing vs. Villarama, 238 SCRA decision of the Court of Appeals affirming the NLRC ruling
267, 21 November 1994, an action for breach of which upheld the Labor Arbiter’s dismissal of the case for lack
contractual obligation is intrinsically a civil of jurisdiction.
dispute.9 (Emphasis supplied)
The present controversy is one of first impression. Although
The Court of Appeals ruled that the existence of an employer- Philippine labor laws and jurisprudence define clearly the
employee relationship between SONZA and ABS-CBN is a elements of an employer-employee relationship, this is the first
factual question that is within the jurisdiction of the NLRC to time that the Court will resolve the nature of the relationship
resolve.10 A special civil action for certiorari extends only to between a television and radio station and one of its "talents."
issues of want or excess of jurisdiction of the NLRC.11 Such There is no case law stating that a radio and television
action cannot cover an inquiry into the correctness of the program host is an employee of the broadcast station.
evaluation of the evidence which served as basis of the
NLRC’s conclusion.12 The Court of Appeals added that it
The instant case involves big names in the broadcast industry, ABS-CBN engaged SONZA’s services to co-host its television
namely Jose "Jay" Sonza, a known television and radio and radio programs because of SONZA’s peculiar skills, talent
personality, and ABS-CBN, one of the biggest television and and celebrity status. SONZA contends that the "discretion
radio networks in the country. used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar
SONZA contends that the Labor Arbiter has jurisdiction over experience and qualification as complainant belies
the case because he was an employee of ABS-CBN. On the respondent’s claim of independent contractorship."
other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor. Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from
Employee or Independent Contractor? ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity
The existence of an employer-employee relationship is a status not possessed by ordinary employees, is a circumstance
question of fact. Appellate courts accord the factual findings of indicative, but not conclusive, of an independent contractual
the Labor Arbiter and the NLRC not only respect but also relationship. If SONZA did not possess such unique skills,
finality when supported by substantial evidence.15 Substantial talent and celebrity status, ABS-CBN would not have entered
evidence means such relevant evidence as a reasonable mind into the Agreement with SONZA but would have hired him
might accept as adequate to support a conclusion.16 A party through its personnel department just like any other
cannot prove the absence of substantial evidence by simply employee.
pointing out that there is contrary evidence on record, direct
or circumstantial. The Court does not substitute its own In any event, the method of selecting and engaging SONZA
judgment for that of the tribunal in determining where the does not conclusively determine his status. We must consider
weight of evidence lies or what evidence is credible.17 all the circumstances of the relationship, with the control test
being the most important element.
SONZA maintains that all essential elements of an employer-
employee relationship are present in this case. Case law has B. Payment of Wages
consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the ABS-CBN directly paid SONZA his monthly talent fees with
employee; (b) the payment of wages; (c) the power of no part of his fees going to MJMDC. SONZA asserts that this
dismissal; and (d) the employer’s power to control the mode of fee payment shows that he was an employee of ABS-
employee on the means and methods by which the work is CBN. SONZA also points out that ABS-CBN granted him
accomplished.18 The last element, the so-called "control test", is benefits and privileges "which he would not have enjoyed if he
the most important element.19 were truly the subject of a valid job contract."

A. Selection and Engagement of Employee

All the talent fees and benefits paid to SONZA were the result breach of contract, such as retrenchment to prevent losses as
of negotiations that led to the Agreement. If SONZA were provided under labor laws.23
ABS-CBN’s employee, there would be no need for the parties
to stipulate on benefits such as "SSS, Medicare, x x x and 13th During the life of the Agreement, ABS-CBN agreed to pay
month pay"20 which the law automatically incorporates into SONZA’s talent fees as long as "AGENT and Jay Sonza shall
every employer-employee contract.21Whatever benefits faithfully and completely perform each condition of this
SONZA enjoyed arose from contract and not because of an Agreement."24 Even if it suffered severe business losses, ABS-
employer-employee relationship.22 CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZA’s talent fees during the life of the
SONZA’s talent fees, amounting to ₱317,000 monthly in the Agreement. This circumstance indicates an independent
second and third year, are so huge and out of the ordinary that contractual relationship between SONZA and ABS-CBN.
they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN SONZA admits that even after ABS-CBN ceased broadcasting
agreed to pay SONZA such huge talent fees precisely because his programs, ABS-CBN still paid him his talent fees. Plainly,
of SONZA’s unique skills, talent and celebrity status not ABS-CBN adhered to its undertaking in the Agreement to
possessed by ordinary employees. Obviously, SONZA acting continue paying SONZA’s talent fees during the remaining life
alone possessed enough bargaining power to demand and of the Agreement even if ABS-CBN cancelled SONZA’s
receive such huge talent fees for his services. The power to programs through no fault of SONZA.25
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of SONZA assails the Labor Arbiter’s interpretation of his
an independent contractual relationship. rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that "if it
The payment of talent fees directly to SONZA and not to were true that complainant was really an employee, he would
MJMDC does not negate the status of SONZA as an merely resign, instead." SONZA did actually resign from ABS-
independent contractor. The parties expressly agreed on such CBN but he also, as president of MJMDC, rescinded the
mode of payment. Under the Agreement, MJMDC is the Agreement. SONZA’s letter clearly bears this out.26 However,
AGENT of SONZA, to whom MJMDC would have to turn the manner by which SONZA terminated his relationship with
over any talent fee accruing under the Agreement. ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his
C. Power of Dismissal status as employee or independent contractor.

For violation of any provision of the Agreement, either party D. Power of Control
may terminate their relationship. SONZA failed to show that
ABS-CBN could terminate his services on grounds other than Since there is no local precedent on whether a radio and
television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the Third, WIPR could not assign Alberty work in
present case. The United States Court of Appeals, First Circuit, addition to filming "Desde Mi Pueblo." Alberty’s
recently held in Alberty-Vélez v. Corporación De Puerto Rico contracts with WIPR specifically provided that WIPR
Para La Difusión Pública ("WIPR")27 that a television hired her "professional services as Hostess for the
program host is an independent contractor. We quote the Program Desde Mi Pueblo." There is no evidence that
following findings of the U.S. court: WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x28 (Emphasis supplied)
Several factors favor classifying Alberty as an
independent contractor. First, a television actress is a Applying the control test to the present case, we find that
skilled position requiring talent and training not SONZA is not an employee but an independent contractor.
available on-the-job. x x x In this regard, Alberty The control test is the most important test our courts apply in
possesses a master’s degree in public communications distinguishing an employee from an independent
and journalism; is trained in dance, singing, and contractor.29 This test is based on the extent of control the hirer
modeling; taught with the drama department at the exercises over a worker. The greater the supervision and
University of Puerto Rico; and acted in several theater control the hirer exercises, the more likely the worker is
and television productions prior to her affiliation with deemed an employee. The converse holds true as well – the
"Desde Mi Pueblo." Second, Alberty provided the less control the hirer exercises, the more likely the worker is
"tools and instrumentalities" necessary for her to considered an independent contractor.30
perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other First, SONZA contends that ABS-CBN exercised control over
image-related supplies and services necessary for her the means and methods of his work.
appearance. Alberty disputes that this factor favors
independent contractor status because WIPR provided SONZA’s argument is misplaced. ABS-CBN engaged
the "equipment necessary to tape the show." Alberty’s SONZA’s services specifically to co-host the "Mel & Jay"
argument is misplaced. The equipment necessary for programs. ABS-CBN did not assign any other work to
Alberty to conduct her job as host of "Desde Mi SONZA. To perform his work, SONZA only needed his skills
Pueblo" related to her appearance on the show. Others and talent. How SONZA delivered his lines, appeared on
provided equipment for filming and producing the television, and sounded on radio were outside ABS-CBN’s
show, but these were not the primary tools that Alberty control. SONZA did not have to render eight hours of work
used to perform her particular function. If we accepted per day. The Agreement required SONZA to attend only
this argument, independent contractors could never rehearsals and tapings of the shows, as well as pre- and post-
work on collaborative projects because other production staff meetings.31 ABS-CBN could not dictate the
individuals often provide the equipment required for contents of SONZA’s script. However, the Agreement
different aspects of the collaboration. x x x prohibited SONZA from criticizing in his shows ABS-CBN or
its interests.32 The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did must still pay SONZA’s talent fees in full until the expiry of
not attack ABS-CBN or its interests. the Agreement.

We find that ABS-CBN was not involved in the actual In Vaughan, et al. v. Warner, et al.,36 the United States Circuit
performance that produced the finished product of SONZA’s Court of Appeals ruled that vaudeville performers were
work.33 ABS-CBN did not instruct SONZA how to perform his independent contractors although the management reserved
job. ABS-CBN merely reserved the right to modify the the right to delete objectionable features in their shows. Since
program format and airtime schedule "for more effective the management did not have control over the manner of
programming."34 ABS-CBN’s sole concern was the quality of performance of the skills of the artists, it could only control the
the shows and their standing in the ratings. Clearly, ABS-CBN result of the work by deleting objectionable features.37
did not exercise control over the means and methods of
performance of SONZA’s work. SONZA further contends that ABS-CBN exercised control over
his work by supplying all equipment and crew. No doubt,
SONZA claims that ABS-CBN’s power not to broadcast his ABS-CBN supplied the equipment, crew and airtime needed
shows proves ABS-CBN’s power over the means and methods to broadcast the "Mel & Jay" programs. However, the
of the performance of his work. Although ABS-CBN did have equipment, crew and airtime are not the "tools and
the option not to broadcast SONZA’s show, ABS-CBN was instrumentalities" SONZA needed to perform his job. What
still obligated to pay SONZA’s talent fees... Thus, even if ABS- SONZA principally needed were his talent or skills and the
CBN was completely dissatisfied with the means and methods costumes necessary for his appearance.38Even though ABS-
of SONZA’s performance of his work, or even with the quality CBN provided SONZA with the place of work and the
or product of his work, ABS-CBN could not dismiss or even necessary equipment, SONZA was still an independent
discipline SONZA. All that ABS-CBN could do is not to contractor since ABS-CBN did not supervise and control his
broadcast SONZA’s show but ABS-CBN must still pay his work. ABS-CBN’s sole concern was for SONZA to display his
talent fees in full.35 talent during the airing of the programs.39

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, A radio broadcast specialist who works under minimal
burdened as it was by the obligation to continue paying in full supervision is an independent contractor.40 SONZA’s work as
SONZA’s talent fees, did not amount to control over the television and radio program host required special skills and
means and methods of the performance of SONZA’s work. talent, which SONZA admittedly possesses. The records do
ABS-CBN could not terminate or discipline SONZA even if the not show that ABS-CBN exercised any supervision and control
means and methods of performance of his work - how he over how SONZA utilized his skills and talent in his shows.
delivered his lines and appeared on television - did not meet
ABS-CBN’s approval. This proves that ABS-CBN’s control was Second, SONZA urges us to rule that he was ABS-CBN’s
limited only to the result of SONZA’s work, whether to employee because ABS-CBN subjected him to its rules and
broadcast the final product or not. In either case, ABS-CBN standards of performance. SONZA claims that this indicates
ABS-CBN’s control "not only [over] his manner of work but Logically, the line should be drawn between rules that
also the quality of his work." merely serve as guidelines towards the achievement of
the mutually desired result without dictating the
The Agreement stipulates that SONZA shall abide with the means or methods to be employed in attaining it, and
rules and standards of performance "covering talents"41 of those that control or fix the methodology and bind or
ABS-CBN. The Agreement does not require SONZA to comply restrict the party hired to the use of such means. The
with the rules and standards of performance prescribed for first, which aim only to promote the result, create no
employees of ABS-CBN. The code of conduct imposed on employer-employee relationship unlike the second,
SONZA under the Agreement refers to the "Television and which address both the result and the means used to
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas achieve it.44
(KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics."42 The KBP code applies to broadcasters, The Vaughan case also held that one could still be an
not to employees of radio and television stations. Broadcasters independent contractor although the hirer reserved certain
are not necessarily employees of radio and television stations. supervision to insure the attainment of the desired result. The
Clearly, the rules and standards of performance referred to in hirer, however, must not deprive the one hired from
the Agreement are those applicable to talents and not to performing his services according to his own initiative.45
employees of ABS-CBN.
Lastly, SONZA insists that the "exclusivity clause" in the
In any event, not all rules imposed by the hiring party on the Agreement is the most extreme form of control which ABS-
hired party indicate that the latter is an employee of the CBN exercised over him.
former.43 In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules This argument is futile. Being an exclusive talent does not by
are merely guidelines towards the achievement of the itself mean that SONZA is an employee of ABS-CBN. Even an
mutually desired result, which are top-rating television and independent contractor can validly provide his services
radio programs that comply with standards of the industry. exclusively to the hiring party. In the broadcast industry,
We have ruled that: exclusivity is not necessarily the same as control.

Further, not every form of control that a party reserves to The hiring of exclusive talents is a widespread and accepted
himself over the conduct of the other party in relation to the practice in the entertainment industry.46 This practice is not
services being rendered may be accorded the effect of designed to control the means and methods of work of the
establishing an employer-employee relationship. The facts of talent, but simply to protect the investment of the broadcast
this case fall squarely with the case of Insular Life Assurance station. The broadcast station normally spends substantial
Co., Ltd. vs. NLRC. In said case, we held that: amounts of money, time and effort "in building up its talents
as well as the programs they appear in and thus expects that
said talents remain exclusive with the station for a
commensurate period of time."47 Normally, a much higher fee Agreement with SONZA, who himself is represented by
is paid to talents who agree to work exclusively for a MJMDC. That would make MJMDC the agent of both ABS-
particular radio or television station. In short, the huge talent CBN and SONZA.
fees partially compensates for exclusivity, as in the present
case. As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and
MJMDC as Agent of SONZA his broadcast partner, TIANGCO. MJMDC is not engaged in
any other business, not even job contracting. MJMDC does not
SONZA protests the Labor Arbiter’s finding that he is a talent have any other function apart from acting as agent of SONZA
of MJMDC, which contracted out his services to ABS-CBN. or TIANGCO to promote their careers in the broadcast and
The Labor Arbiter ruled that as a talent of MJMDC, SONZA is television industry.49
not an employee of ABS-CBN. SONZA insists that MJMDC is
a "labor-only" contractor and ABS-CBN is his employer. Policy Instruction No. 40

In a labor-only contract, there are three parties involved: (1) SONZA argues that Policy Instruction No. 40 issued by then
the "labor-only" contractor; (2) the employee who is ostensibly Minister of Labor Blas Ople on 8 January 1979 finally settled
under the employ of the "labor-only" contractor; and (3) the the status of workers in the broadcast industry. Under this
principal who is deemed the real employer. Under this policy, the types of employees in the broadcast industry are
scheme, the "labor-only" contractor is the agent of the the station and program employees.
principal. The law makes the principal responsible to the
employees of the "labor-only contractor" as if the principal Policy Instruction No. 40 is a mere executive issuance which
itself directly hired or employed the employees.48 These does not have the force and effect of law. There is no legal
circumstances are not present in this case. presumption that Policy Instruction No. 40 determines
SONZA’s status. A mere executive issuance cannot exclude
There are essentially only two parties involved under the independent contractors from the class of service providers to
Agreement, namely, SONZA and ABS-CBN. MJMDC merely the broadcast industry. The classification of workers in the
acted as SONZA’s agent. The Agreement expressly states that broadcast industry into only two groups under Policy
MJMDC acted as the "AGENT" of SONZA. The records do not Instruction No. 40 is not binding on this Court, especially
show that MJMDC acted as ABS-CBN’s agent. MJMDC, which when the classification has no basis either in law or in fact.
stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by Affidavits of ABS-CBN’s Witnesses
SONZA and TIANGCO. The President and General Manager
of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by
SONZA, acted as agent of ABS-CBN in entering into the
SONZA also faults the Labor Arbiter for admitting the determination, ask clarificatory questions to further
affidavits of Socorro Vidanes and Rolando Cruz without elicit facts or information, including but not limited to
giving his counsel the the subpoena of relevant documentary evidence, if any
from any party or witness.50
opportunity to cross-examine these witnesses. SONZA brands
these witnesses as incompetent to attest on the prevailing The Labor Arbiter can decide a case based solely on the
practice in the radio and television industry. SONZA views position papers and the supporting documents without a
the affidavits of these witnesses as misleading and irrelevant. formal trial.51 The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of
While SONZA failed to cross-examine ABS-CBN’s witnesses, right.52 If the Labor Arbiter is confident that he can rely on the
he was never prevented from denying or refuting the documents before him, he cannot be faulted for not
allegations in the affidavits. The Labor Arbiter has the conducting a formal trial, unless under the particular
discretion whether to conduct a formal (trial-type) hearing circumstances of the case, the documents alone are
after the submission of the position papers of the parties, thus: insufficient. The proceedings before a Labor Arbiter are non-
litigious in nature. Subject to the requirements of due process,
Section 3. Submission of Position the technicalities of law and the rules obtaining in the courts of
Papers/Memorandum law do not strictly apply in proceedings before a Labor
Arbiter.
xxx
Talents as Independent Contractors
These verified position papers shall cover only those
claims and causes of action raised in the complaint ABS-CBN claims that there exists a prevailing practice in the
excluding those that may have been amicably settled, broadcast and entertainment industries to treat talents like
and shall be accompanied by all supporting documents SONZA as independent contractors. SONZA argues that if
including the affidavits of their respective witnesses such practice exists, it is void for violating the right of labor to
which shall take the place of the latter’s direct security of tenure.
testimony. x x x
The right of labor to security of tenure as guaranteed in the
Section 4. Determination of Necessity of Hearing. – Constitution53 arises only if there is an employer-employee
Immediately after the submission of the parties of their relationship under labor laws. Not every performance of
position papers/memorandum, the Labor Arbiter shall services for a fee creates an employer-employee relationship.
motu propio determine whether there is need for a To hold that every person who renders services to another for
formal trial or hearing. At this stage, he may, at his a fee is an employee - to give meaning to the security of tenure
discretion and for the purpose of making such clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the Employee Stock Option Plan. We agree with the findings of
freedom to offer their services as independent contractors. The the Labor Arbiter and the Court of Appeals that SONZA’s
right to life and livelihood guarantees this freedom to contract claims are all based on the May 1994 Agreement and stock
as independent contractors. The right of labor to security of option plan, and not on the Labor Code. Clearly, the present
tenure cannot operate to deprive an individual, possessed case does not call for an application of the Labor Code
with special skills, expertise and talent, of his right to contract provisions but an interpretation and implementation of the
as an independent contractor. An individual like an artist or May 1994 Agreement. In effect, SONZA’s cause of action is for
talent has a right to render his services without any one breach of contract which is intrinsically a civil dispute
controlling the means and methods by which he performs his cognizable by the regular courts.58
art or craft. This Court will not interpret the right of labor to
security of tenure to compel artists and talents to render their WHEREFORE, we DENY the petition. The assailed Decision
services only as employees. If radio and television program of the Court of Appeals dated 26 March 1999 in CA-G.R. SP
hosts can render their services only as employees, the station No. 49190 is AFFIRMED. Costs against petitioner.
owners and managers can dictate to the radio and television
hosts what they say in their shows. This is not conducive to SO ORDERED.
freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to

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

Nature of SONZA’s Claims

SONZA seeks the recovery of allegedly unpaid talent fees,

13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the
ANGELITO L. LAZARO, Proprietor of Royal Star conditions of work. As such, Laudato could not be deemed an
Marketing, petitioner, employee of Royal Star.5
vs.
SOCIAL SECURITY COMMISSION, ROSALINA After the parties submitted their respective position papers,
LAUDATO, SOCIAL SECURITY SYSTEM and THE the SSC promulgated a Resolution6 dated 8 November 1995
HONORABLE COURT OF APPEALS, respondents. ruling in favor of Laudato.7 Applying the "control test," it held
that Laudato was an employee of Royal Star, and ordered
DECISION Royal Star to pay the unremitted social security contributions
of Laudato in the amount of Five Thousand Seven Pesos and
TINGA, J.: Thirty Five Centavos (P5,007.35), together with the penalties
totaling Twenty Two Thousand Two Hundred Eighteen Pesos
Before us is a Petition for Review under Rule 45, assailing and Fifty Four Centavos (P22,218.54). In addition, Royal Star
the Decision1 of the Court of Appeals Fifteenth Division2 in CA- was made liable to pay damages to the SSC in the amount of
G.R. Sp. No. 40956, promulgated on 20 November 1998, which Fifteen Thousand Six Hundred Eighty Pesos and Seven
affirmed two rulings of the Social Security Commission Centavos (P15,680.07) for not reporting Laudato for social
("SSC") dated 8 November 1995 and 24 April 1996. security coverage, pursuant to Section 24 of the Social Security
Law.8
Private respondent Rosalina M. Laudato ("Laudato") filed a
petition before the SSC for social security coverage and After Lazaro's Motion for Reconsideration before the SSC was
remittance of unpaid monthly social security contributions denied,9 Lazaro filed a Petition for Review with the Court of
against her three (3) employers. Among the respondents was Appeals. Lazaro reiterated that Laudato was merely a sales
herein petitioner Angelito L. Lazaro ("Lazaro"), proprietor of agent who was paid purely on commission basis, not included
Royal Star Marketing ("Royal Star"), which is engaged in the in the company payroll, and who neither observed regular
business of selling home appliances.3 Laudato alleged that working hours nor accomplished time cards.
despite her employment as sales supervisor of the sales agents
for Royal Star from April of 1979 to March of 1986, Lazaro had In its assailed Decision, the Court of Appeals noted that
failed during the said period, to report her to the SSC for Lazaro's arguments were a reprise of those already presented
compulsory coverage or remit Laudato's social security before the SSC.10 Moreover, Lazaro had not come forward with
contributions.4 particulars and specifics in his petition to show that the
Commission's ruling is not supported by substantial
Lazaro denied that Laudato was a sales supervisor of Royal evidence.11 Thus, the appellate court affirmed the finding that
Star, averring instead that she was a mere sales agent whom Laudato was an employee of Royal Star, and hence entitled to
he paid purely on commission basis. Lazaro also maintained coverage under the Social Security Law.
that Laudato was not subjected to definite hours and
Before this Court, Lazaro again insists that Laudato was not Court upheld the existence of an employer-employee
qualified for social security coverage, as she was not an relationship between the insurance company and its agents,
employee of Royal Star, her income dependent on a generation despite the fact that the compensation that the agents on
of sales and based on commissions.12 It is argued that Royal commission received was not paid by the company but by the
Star had no control over Laudato's activities, and that under investor or the person insured.18 The relevant factor remains,
the so-called "control test," Laudato could not be deemed an as stated earlier, whether the "employer" controls or has
employee.13 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
It is an accepted doctrine that for the purposes of coverage methods by which the same is to be accomplished.19
under the Social Security Act, the determination of employer-
employee relationship warrants the application of the "control Neither does it follow that a person who does not observe
test," that is, whether the employer controls or has reserved normal hours of work cannot be deemed an employee.
the right to control the employee, not only as to the result of In Cosmopolitan Funeral Homes, Inc. v. Maalat,20 the employer
the work done, but also as to the means and methods by similarly denied the existence of an employer-employee
which the same is accomplished.14 The SSC, as sustained by relationship, as the claimant according to it, was a "supervisor
the Court of Appeals, applying the control test found that on commission basis" who did not observe normal hours of
Laudato was an employee of Royal Star. We find no reversible work. This Court declared that there was an employer-
error. employee relationship, noting that "[the] supervisor, although
compensated on commission basis, [is] exempt from the
Lazaro's arguments are nothing more but a mere reiteration of observance of normal hours of work for his compensation is
arguments unsuccessfully posed before two bodies: the SSC measured by the number of sales he makes."21
and the Court of Appeals. They likewise put to issue factual
questions already passed upon twice below, rather than It should also be emphasized that the SSC, also as upheld by
questions of law appropriate for review under a Rule 45 the Court of Appeals, found that Laudato was a sales
petition. The determination of an employer-employee supervisor and not a mere agent.22 As such, Laudato oversaw
relationship depends heavily on the particular factual and supervised the sales agents of the company, and thus was
circumstances attending the professional interaction of the subject to the control of management as to how she
parties. The Court is not a trier of facts15 and accords great implements its policies and its end results. We are disinclined
weight to the factual findings of lower courts or agencies to reverse this finding, in the absence of countervailing
whose function is to resolve factual matters.16 evidence from Lazaro and also in light of the fact that
Laudato's calling cards from Royal Star indicate that she is
Lazaro's arguments may be dispensed with by applying indeed a sales supervisor.
precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an The finding of the SSC that Laudato was an employee of Royal
employer-employee relationship. In Grepalife v. Judico,17 the Star is supported by substantial evidence. The SSC examined
the cash vouchers issued by Royal Star to Laudato,23 calling Yet, the circumstances in the 1969 case are very different from
cards of Royal Star denominating Laudato as a "Sales those at bar. Ruling on the question whether jockeys were
Supervisor" of the company,24 and Certificates of Appreciation considered employees of the Manila Jockey Club, the Court
issued by Royal Star to Laudato in recognition of her unselfish noted that the jockeys were actually subjected to the control of
and loyal efforts in promoting the company.25 On the other the racing steward, whose authority in turn was defined by
hand, Lazaro has failed to present any convincing contrary the Games and Amusements Board.31 Moreover, the jockey's
evidence, relying instead on his bare assertions. The Court of choice as to which horse to mount was subject to mutual
Appeals correctly ruled that petitioner has not sufficiently agreement between the horse owner and the jockey, and
shown that the SSC's ruling was not supported by substantial beyond the control of the race club.32 In the case at bar, there is
evidence. no showing that Royal Star was similarly precluded from
exerting control or interference over the manner by which
A piece of documentary evidence appreciated by the SSC is Laudato performed her duties. On the contrary, substantial
Memorandum dated 3 May 1980 of Teresita Lazaro, General evidence as found by the SSC and the Court of Appeals have
Manager of Royal Star, directing that no commissions were to established the element of control determinative of an
be given on all "main office" sales from walk-in customers and employer-employee relationship. We affirm without
enjoining salesmen and sales supervisors to observe this new hesitation.
policy.26 The Memorandum evinces the fact that, contrary to
Lazaro's claim, Royal Star exercised control over its sales WHEREFORE, the Petition is DENIED and the
supervisors or agents such as Laudato as to the means and assailed Decision of the Court of Appeals dated 20 November
methods through which these personnel performed their 1998 is AFFIRMED. Costs against petitioner.
work.
SO ORDERED.
Finally, Lazaro invokes our ruling in the 1987 case of Social
Security System v. Court of Appeals27 that a person who works
for another at his own pleasure, subject to definite hours or
conditions of work, and is compensated according to the result
of his effort is not an employee.28 The citation is odd for Lazaro
to rely upon, considering that in the cited case, the Court
affirmed the employee-employer relationship between a sales
agent and the cigarette firm whose products he sold.29 Perhaps
Lazaro meant instead to cite our 1969 ruling in the similarly-
titled case of Social Security System v. Court of Appeals,30 also
cited in the later eponymous ruling, whose disposition is more
in accord with Lazaro's argument.
 PHILIPPINE GLOBAL COMMUNICATIONS, 3. Management and treatment of employees that may
INC., Petitioner, v. RICARDO DE VERA, Respondent. necessitate hospitalization including emergency cases and
accidents;
DECISION
4. Conduct pre-employment physical check-up of prospective
GARCIA, J.: employees with no additional medical fee;

Before us is this appeal by way of a Petition for Review 5. Conduct home visits whenever necessary;
on Certiorari from the 12 September 2002 Decision1 and the 13
February 2003 Resolution2 of the Court of Appeals in CA-G.R. 6. Attend to certain medical administrative function such as
SP No. 65178, upholding the finding of illegal dismissal by the accomplishing medical forms, evaluating conditions of
National Labor Relations Commission against petitioner. employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
As culled from the records, the pertinent facts are: referred which are medical in nature.

Petitioner Philippine Global Communications, Inc. (PhilCom), The parties agreed and formalized respondent's proposal in a
is a corporation engaged in the business of communication document denominated as RETAINERSHIP
services and allied activities, while respondent Ricardo De CONTRACT4 which will be for a period of one year subject to
Vera is a physician by profession whom petitioner enlisted to renewal, it being made clear therein that respondent will cover
attend to the medical needs of its employees. At the crux of the "the retainership the Company previously had with Dr. K.
controversy is Dr. De Vera's status vis a vis petitioner when the Eulau" and that respondent's "retainer fee" will be at P4,000.00
latter terminated his engagement. a month. Said contract was renewed yearly.5 The retainership
arrangement went on from 1981 to 1994 with changes in the
It appears that on 15 May 1981, De Vera, via a letter dated 15 retainer's fee. However, for the years 1995 and 1996, renewal
May 1981,3 offered his services to the petitioner, therein of the contract was only made verbally.
proposing his plan of works required of a practitioner in
industrial medicine, to include the following: The turning point in the parties' relationship surfaced in
December 1996 when Philcom, thru a letter6bearing on the
1. Application of preventive medicine including periodic subject boldly written as "TERMINATION - RETAINERSHIP
check-up of employees; CONTRACT", informed De Vera of its decision to discontinue
the latter's "retainer's contract with the Company effective at
2. Holding of clinic hours in the morning and afternoon for a the close of business hours of December 31, 1996" because
total of five (5) hours daily for consultation services to management has decided that it would be more practical to
employees; provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal
Backwages:
dismissal before the National Labor Relations Commission
(NLRC), alleging that that he had been actually employed by a) Basic Salary
Philcom as its company physician since 1981 and was From Dec. 31, 1996 to Apr. 10, 2000 =
dismissed without due process. He averred that he was 39.33 mos.
designated as a "company physician on retainer basis" for P44,400.00 x 39.33 mos. P1,750,185.00
reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he 13th Month Pay:
did not give much attention to the designation as anyway he b) 145,848.75
1/12 of P1,750,185.00
worked on a full-time basis and was paid a basic monthly
salary plus fringe benefits, like any other regular employees of Travelling allowance:
c) 39,330.00
Philcom. P1,000.00 x 39.33 mos.

On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes

came out with a decision7 dismissing De Vera's complaint for GRAND TOTAL P1,935,363.75
lack of merit, on the rationale that as a "retained physician"
under a valid contract mutually agreed upon by the parties,
The decision stands in other aspects.
De Vera was an "independent contractor" and that he "was not
dismissed but rather his contract with [PHILCOM] ended
SO ORDERED.
when said contract was not renewed after December 31, 1996".
With its motion for reconsideration having been denied by the
On De Vera's appeal to the NLRC, the latter, in a
NLRC in its order of 27 February 2001,9Philcom then went to
decision8 dated 23 October 2000, reversed (the word used is
the Court of Appeals on a Petition for Certiorari, thereat
"modified") that of the Labor Arbiter, on a finding that De
docketed as CA-G.R. SP No. 65178, imputing grave abuse of
Vera is Philcom's "regular employee" and accordingly directed
discretion amounting to lack or excess of jurisdiction on the
the company to reinstate him to his former position without
part of the NLRC when it reversed the findings of the labor
loss of seniority rights and privileges and with full backwages
arbiter and awarded thirteenth month pay and traveling
from the date of his dismissal until actual reinstatement. We
allowance to De Vera even as such award had no basis in fact
quote the dispositive portion of the decision:
and in law.
WHEREFORE, the assailed decision is modified in that
On 12 September 2002, the Court of Appeals rendered a
respondent is ordered to reinstate complainant to his former
decision,10 modifying that of the NLRC by deleting the award
position without loss of seniority rights and privileges with
of traveling allowance, and ordering payment of separation
full backwages from the date of his dismissal until his actual
pay to De Vera in lieu of reinstatement, thus:
reinstatement computed as follows:
WHEREFORE, premises considered, the assailed judgment of that substantial justice may be served. The exceptional
public respondent, dated 23 October 2000, is MODIFIED. The instances are where:
award of traveling allowance is deleted as the same is hereby
DELETED. Instead of reinstatement, private respondent shall "xxx xxx xxx (1) the conclusion is a finding grounded entirely
be paid separation pay computed at one (1) month salary for on speculation, surmise and conjecture; (2) the inference made
every year of service computed from the time private is manifestly mistaken; (3) there is grave abuse of discretion;
respondent commenced his employment in 1981 up to the (4) the judgment is based on a misapprehension of facts; (5)
actual payment of the backwages and separation pay. The the findings of fact are conflicting; (6) the Court of Appeals
awards of backwages and 13th month pay STAND. went beyond the issues of the case and its findings are
contrary to the admissions of both appellant and appellees; (7)
SO ORDERED. the findings of fact of the Court of Appeals are contrary to
those of the trial court; (8) said findings of facts are
In time, Philcom filed a motion for reconsideration but was conclusions without citation of specific evidence on which
denied by the appellate court in its resolution of 13 February they are based; (9) the facts set forth in the petition as well as
2003.11 in the petitioner's main and reply briefs are not disputed by
the respondents; and (10) the findings of fact of the Court of
Hence, Philcom's present recourse on its main submission that Appeals are premised on the supposed absence of evidence
- and contradicted by the evidence on record."12

THE COURT OF APPEALS ERRED IN SUSTAINING THE As we see it, the parties' respective submissions revolve on the
DECISION OF THE NATIONAL LABOR RELATIONS primordial issue of whether an employer-employee
COMMISSION AND RENDERING THE QUESTIONED relationship exists between petitioner and respondent, the
DECISION AND RESOLUTION IN A WAY THAT IS NOT IN existence of which is, in itself, a question of fact13 well within
ACCORD WITH THE FACTS AND APPLICABLE LAWS the province of the NLRC. Nonetheless, given the reality that
AND JURISPRUDENCE WHICH DISTINGUISH the NLRC's findings are at odds with those of the labor arbiter,
LEGITIMATE JOB CONTRACTING AGREEMENTS FROM the Court, consistent with its ruling in Jimenez v. National Labor
THE EMPLOYER-EMPLOYEE RELATIONSHIP. Relations Commission,14 is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing
We GRANT. on record.

Under Rule 45 of the Rules of Court, only questions of law In a long line of decisions,15 the Court, in determining the
may be reviewed by this Court in decisions rendered by the existence of an employer-employee relationship, has
Court of Appeals. There are instances, however, where the invariably adhered to the four-fold test, to wit: [1] the selection
Court departs from this rule and reviews findings of fact so and engagement of the employee; [2] the payment of wages;
[3] the power of dismissal; and [4] the power to control the
employee's conduct, or the so-called "control test", considered 3. Management and treatment of employees that may
to be the most important element. necessitate hospitalization including emergency cases and
accidents;
Applying the four-fold test to this case, we initially find that it
was respondent himself who sets the parameters of what his 4. Conduct pre-employment physical check-up of prospective
duties would be in offering his services to petitioner. This is employees with no additional medical fee;
borne by no less than his 15 May 1981 letter16 which, in full,
reads: 5. Conduct home visits whenever necessary;

"May 15, 1981 6. Attend to certain medical administrative functions such as

accomplishing medical forms, evaluating conditions of
Mrs. Adela L. Vicente employees applying for sick leave of absence and
Vice President, Industrial Relations subsequently issuing proper certification, and all matters
PhilCom, Paseo de Roxas referred which are medical in nature.
Makati, Metro Manila
On the subject of compensation for the services that I propose
Madam: to render to the corporation, you may state an offer based on
your belief that I can very well qualify for the job having
I shall have the time and effort for the position of Company worked with your organization for sometime now.
physician with your corporation if you deemed it necessary. I
have the necessary qualifications, training and experience I shall be very grateful for whatever kind attention you may
required by such position and I am confident that I can serve extend on this matter and hoping that it will merit acceptance,
the best interests of your employees, medically. I remain

My plan of works and targets shall cover the duties and Very truly yours,
responsibilities required of a practitioner in industrial
medicine which includes the following: (signed)
RICARDO V. DE VERA, M.D."
1. Application of preventive medicine including periodic
check-up of employees; Significantly, the foregoing letter was substantially the basis of
the labor arbiter's finding that there existed no employer-
2. Holding of clinic hours in the morning and afternoon for a employee relationship between petitioner and respondent, in
total of five (5) hours daily for consultation services to addition to the following factual settings:
employees;
The fact that the complainant was not considered an employee basis'. But the same complainant admits in his affidavit that
was recognized by the complainant himself in a signed letter his service for the respondent was covered by a retainership
to the respondent dated April 21, 1982 attached as Annex G to contract [which] was renewed every year from 1982 to 1994.
the respondent's Reply and Rejoinder. Quoting the pertinent Upon reading the contract dated September 6, 1982, signed by
portion of said letter: the complainant himself (Annex 'C' of Respondent's Position
Paper), it clearly states that is a retainership contract. The
'To carry out your memo effectively and to provide a retainer fee is indicated thereon and the duration of the
systematic and workable time schedule which will serve the contract for one year is also clearly indicated in paragraph 5 of
best interests of both the present and absent employee, may I the Retainership Contract. The complainant cannot claim that
propose an extended two-hour service (1:00-3:00 P.M.) during he was unaware that the 'contract' was good only for one year,
which period I can devote ample time to both groups as he signed the same without any objections. The
depending upon the urgency of the situation. I shall readjust complainant also accepted its renewal every year thereafter
my private schedule to be available for the herein proposed until 1994. As a literate person and educated person, the
extended hours, should you consider this proposal. complainant cannot claim that he does not know what contract
he signed and that it was renewed on a year to year basis.17
As regards compensation for the additional time and services
that I shall render to the employees, it is dependent on your The labor arbiter added the indicia, not disputed by
evaluation of the merit of my proposal and your confidence on respondent, that from the time he started to work with
my ability to carry out efficiently said proposal.' petitioner, he never was included in its payroll; was never
deducted any contribution for remittance to the Social Security
The tenor of this letter indicates that the complainant was System (SSS); and was in fact subjected by petitioner to the ten
proposing to extend his time with the respondent and seeking (10%) percent withholding tax for his professional fee, in
additional compensation for said extension. This shows that accordance with the National Internal Revenue Code, matters
the respondent PHILCOM did not have control over the which are simply inconsistent with an employer-employee
schedule of the complainant as it [is] the complainant who is relationship. In the precise words of the labor arbiter:
proposing his own schedule and asking to be paid for the
same. This is proof that the complainant understood that his "xxx xxx xxx After more than ten years of services to
relationship with the respondent PHILCOM was a retained PHILCOM, the complainant would have noticed that no SSS
physician and not as an employee. If he were an employee he deductions were made on his remuneration or that the
could not negotiate as to his hours of work. respondent was deducting the 10% tax for his fees and he
surely would have complained about them if he had
The complainant is a Doctor of Medicine, and presumably, a considered himself an employee of PHILCOM. But he never
well-educated person. Yet, the complainant, in his position raised those issues. An ordinary employee would consider the
paper, is claiming that he is not conversant with the law and SSS payments important and thus make sure they would be
did not give much attention to his job title - on a 'retainer paid. The complainant never bothered to ask the respondent to
remit his SSS contributions. This clearly shows that the Yet, despite the foregoing, all of which are extant on record,
complainant never considered himself an employee of both the NLRC and the Court of Appeals ruled that
PHILCOM and thus, respondent need not remit anything to respondent is petitioner's regular employee at the time of his
the SSS in favor of the complainant."18 separation.

Clearly, the elements of an employer-employee relationship Partly says the appellate court in its assailed decision:
are wanting in this case. We may add that the records are
replete with evidence showing that respondent had to bill Be that as it may, it is admitted that private respondent's
petitioner for his monthly professional fees.19 It simply runs written 'retainer contract' was renewed annually from 1981 to
against the grain of common experience to imagine that an 1994 and the alleged 'renewal' for 1995 and 1996, when it was
ordinary employee has yet to bill his employer to receive his allegedly terminated, was verbal.
salary.
Article 280 of the Labor code (sic) provides:
We note, too, that the power to terminate the parties'
relationship was mutually vested on both. Either may 'The provisions of written agreement to the
terminate the arrangement at will, with or without cause.20 contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to
Finally, remarkably absent from the parties' arrangement is the be regular where the employee has been engaged to perform
element of control, whereby the employer has reserved the in the usual business or trade of the employer, except where
right to control the employee not only as to the result of the the employment has been fixed for a specific project or
work done but also as to the means and methods by which the undertaking the completion or termination of which has been
same is to be accomplished.21 determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in
Here, petitioner had no control over the means and methods nature and the employment is for the duration of the season.'
by which respondent went about performing his work at the
company premises. He could even embark in the private An employment shall be deemed to be casual if it is not
practice of his profession, not to mention the fact that covered by the preceding paragraph: Provided, That, any
respondent's work hours and the additional compensation employee who has rendered at least one (1) year of service,
therefor were negotiated upon by the parties.22 In fine, the whether such is continuous or broken, shall be considered a
parties themselves practically agreed on every terms and regular with respect to the activity in which he is
conditions of respondent's engagement, which thereby negates employed and his employment shall continue while such
the element of control in their relationship. For sure, activity exists.'
respondent has never cited even a single instance when
petitioner interfered with his work.
Parenthetically, the position of company physician, in the case existence of an employment relationship. As it is, the provision
of petitioner, is usually necessary and desirable because the merely distinguishes between two (2) kinds of employees, i.e.,
need for medical attention of employees cannot be foreseen, regular and casual. It does not apply where, as here, the very
hence, it is necessary to have a physician at hand. In fact, the existence of an employment relationship is in dispute.23
importance and desirability of a physician in a company
premises is recognized by Art. 157 of the Labor Code, which Buttressing his contention that he is a regular employee of
requires the presence of a physician depending on the number petitioner, respondent invokes Article 157 of the Labor Code,
of employees and in the case at bench, in petitioner's case, as and argues that he satisfies all the requirements thereunder.
found by public respondent, petitioner employs more than 500 The provision relied upon reads:
employees.
ART. 157. Emergency medical and dental services. - It shall be the
Going back to Art. 280 of the Labor Code, it was made therein duty of every employer to furnish his employees in any
clear that the provisions of a written agreement to the contrary locality with free medical and dental attendance and facilities
notwithstanding or the existence of a mere oral agreement, if consisting of:
the employee is engaged in the usual business or trade of the
employer, more so, that he rendered service for at least one (a) The services of a full-time registered nurse when the
year, such employee shall be considered as number of employees exceeds fifty (50) but not more than two
a regular employee. Private respondent herein has been with hundred (200) except when the employer does not maintain
petitioner since 1981 and his employment was not for a hazardous workplaces, in which case the services of a
specific project or undertaking, the period of which was pre- graduate first-aider shall be provided for the protection of the
determined and neither the work or service of private workers, where no registered nurse is available. The Secretary
respondent seasonal. (Emphasis by the CA itself). of Labor shall provide by appropriate regulations the services
that shall be required where the number of employees does
We disagree to the foregoing ratiocination. not exceed fifty (50) and shall determine by appropriate order
hazardous workplaces for purposes of this Article;
The appellate court's premise that regular employees are those
who perform activities which are desirable and necessary for (b) The services of a full-time registered nurse, a part-time
the business of the employer is not determinative in this case. physician and dentist, and an emergency clinic, when the
For, we take it that any agreement may provide that one party number of employees exceeds two hundred (200) but not more
shall render services for and in behalf of another, no matter than three hundred (300); andcralawlibrary
how necessary for the latter's business, even without being
hired as an employee. This set-up is precisely true in the case (c) The services of a full-time physician, dentist and full-time
of an independent contractorship as well as in an agency registered nurse as well as a dental clinic, and an infirmary or
agreement. Indeed, Article 280 of the Labor Code, quoted by emergency hospital with one bed capacity for every one
the appellate court, is not the yardstick for determining the
hundred (100) employees when the number of employees successive "retainership" agreements of the parties definitely
exceeds three hundred (300). hue to the very statutory provision relied upon by respondent.

In cases of hazardous workplaces, no employer shall engage Deeply embedded in our jurisprudence is the rule that courts
the services of a physician or dentist who cannot stay in the may not construe a statute that is free from doubt. Where the
premises of the establishment for at least two (2) hours, in the law is clear and unambiguous, it must be taken to mean
case of those engaged on part-time basis, and not less than exactly what it says, and courts have no choice but to see to it
eight (8) hours in the case of those employed on full-time that the mandate is obeyed.26 As it is, Article 157 of the Labor
basis. Where the undertaking is nonhazardous in nature, the Code clearly and unequivocally allows employers in non-
physician and dentist may be engaged on retained basis, hazardous establishments to engage "on retained basis" the
subject to such regulations as the Secretary of Labor may service of a dentist or physician. Nowhere does the law
prescribe to insure immediate availability of medical and provide that the physician or dentist so engaged thereby
dental treatment and attendance in case of emergency. becomes a regular employee. The very phrase that they may
be engaged "on retained basis", revolts against the idea that
Had only respondent read carefully the very statutory this engagement gives rise to an employer-employee
provision invoked by him, he would have noticed that in non- relationship.
hazardous workplaces, the employer may engage the services
of a physician "on retained basis." As correctly observed by the With the recognition of the fact that petitioner consistently
petitioner, while it is true that the provision requires engaged the services of respondent on a retainer basis, as
employers to engage the services of medical practitioners in shown by their various "retainership contracts", so can
certain establishments depending on the number of their petitioner put an end, with or without cause, to their
employees, nothing is there in the law which says that medical retainership agreement as therein provided.27
practitioners so engaged be actually hired as
employees,24 adding that the law, as written, only requires the We note, however, that even as the contracts entered into by
employer "to retain", not employ, a part-time physician who the parties invariably provide for a 60-day notice requirement
needed to stay in the premises of the non-hazardous prior to termination, the same was not complied with by
workplace for two (2) hours.25 petitioner when it terminated on 17 December 1996 the
verbally-renewed retainership agreement, effective at the close
Respondent takes no issue on the fact that petitioner's business of business hours of 31 December 1996.
of telecommunications is not hazardous in nature. As such,
what applies here is the last paragraph of Article 157 which, to Be that as it may, the record shows, and this is admitted by
stress, provides that the employer may engage the services of a both parties,28 that execution of the NLRC decision had
physician and dentist "on retained basis", subject to such already been made at the NLRC despite the pendency of the
regulations as the Secretary of Labor may prescribe. The present recourse. For sure, accounts of petitioner had already
been garnished and released to respondent despite the
previous Status Quo Order29 issued by this Court. To all
intents and purposes, therefore, the 60-day notice requirement
has become moot and academic if not waived by the
respondent himself.

WHEREFORE, the petition is GRANTED and the challenged

decision of the Court of Appeals REVERSED and SET ASIDE.
The 21 December 1998 decision of the labor arbiter is
REINSTATED.

No pronouncement as to costs.

SO ORDERED.
ABS-CBN BROADCASTING CORPORATION, petitioner, different dates. They were assigned at the news and public
vs. affairs, for various radio programs in the Cebu Broadcasting
MARLYN NAZARENO, MERLOU GERZON, JENNIFER Station, with a monthly compensation of P4,000. They were
DEIPARINE, and JOSEPHINE LERASAN, respondents. issued ABS-CBN employees’ identification cards and were
required to work for a minimum of eight hours a day,
DECISION including Sundays and holidays. They were made to perform
the following tasks and duties:
CALLEJO, SR., J.:
a) Prepare, arrange airing of commercial broadcasting based
Before us is a petition for review on certiorari of the on the daily operations log and digicart of respondent ABS-
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. CBN;
76582 and the Resolution denying the motion for
reconsideration thereof. The CA affirmed the Decision2 and b) Coordinate, arrange personalities for air interviews;
Resolution3 of the National Labor Relations Commission
(NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII- c) Coordinate, prepare schedule of reporters for scheduled
10-1661-2001) which likewise affirmed, with modification, the news reporting and lead-in or incoming reports;
decision of the Labor Arbiter declaring the respondents
Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and d) Facilitate, prepare and arrange airtime schedule for public
Josephine Lerasan as regular employees. service announcement and complaints;

The Antecedents e) Assist, anchor program interview, etc; and

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is f) Record, log clerical reports, man based control radio.4
engaged in the broadcasting business and owns a network of
television and radio stations, whose operations revolve around Their respective working hours were as follows:
the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it Name Time No. of Hours
generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
a license and authority to operate by the National
Telecommunications Commission. 8:00 A.M.-12:00 noon

Petitioner employed respondents Nazareno, Gerzon, 2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
Deiparine, and Lerasan as production assistants (PAs) on
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs. Sunday

9:00 A.M.-6:00 P.M. (WF) 9 hrs. 5:00 A.M. – 1:00 P.M. – Jennifer Deiparine

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5 1:00 P.M. – 10:00 P.M. – Joy Sanchez

The PAs were under the control and supervision of Assistant Respondent Gerzon was assigned as the full-time PA of the TV
Station Manager Dante J. Luzon, and News Manager Leo News Department reporting directly to Leo Lastimosa.
Lastimosa.
On October 12, 2000, respondents filed a Complaint for
On December 19, 1996, petitioner and the ABS-CBN Rank-and- Recognition of Regular Employment Status, Underpayment of
File Employees executed a Collective Bargaining Agreement Overtime Pay, Holiday Pay, Premium Pay, Service Incentive
(CBA) to be effective during the period from December 11, Pay, Sick Leave Pay, and 13th Month Pay with Damages
1996 to December 11, 1999. However, since petitioner refused against the petitioner before the NLRC. The Labor Arbiter
to recognize PAs as part of the bargaining unit, respondents directed the parties to submit their respective position papers.
were not included to the CBA.6 Upon respondents’ failure to file their position papers within
the reglementary period, Labor Arbiter Jose G. Gutierrez
On July 20, 2000, petitioner, through Dante Luzon, issued a issued an Order dated April 30, 2001, dismissing the complaint
Memorandum informing the PAs that effective August 1, 2000, without prejudice for lack of interest to pursue the case.
they would be assigned to non-drama programs, and that the Respondents received a copy of the Order on May 16,
DYAB studio operations would be handled by the studio 2001.7 Instead of re-filing their complaint with the NLRC
technician. Thus, their revised schedule and other assignments within 10 days from May 16, 2001, they filed, on June 11, 2001,
would be as follows: an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case For
Monday – Saturday Resolution.8 The Labor Arbiter granted this motion in an
Order dated June 18, 2001, and forthwith admitted the
4:30 A.M. – 8:00 A.M. – Marlene Nazareno. position paper of the complainants. Respondents made the
following allegations:
Miss Nazareno will then be assigned at the Research Dept.
1. Complainants were engaged by respondent ABS-CBN as
From 8:00 A.M. to 12:00 regular and full-time employees for a continuous period of
more than five (5) years with a monthly salary rate of Four
4:30 P.M. – 12:00 MN – Jennifer Deiparine Thousand (P4,000.00) pesos beginning 1995 up until the filing
of this complaint on November 20, 2000.
Machine copies of complainants’ ABS-CBN Employee’s III. Marlene Nazareno
Identification Card and salary vouchers are hereto attached as
follows, thus: Exhibit "E" - ABS-CBN Employee’s Identification Card

I. Jennifer Deiparine: Exhibit "E" - ABS-CBN Salary Voucher from Nov.

Exhibit "A" - ABS-CBN Employee’s Identification Card Exhibit "E-1" & 1999 to December 2000

Exhibit "B", - ABS-CBN Salary Voucher from Nov. Exhibit :E-2"

Exhibit "B-1" & 1999 to July 2000 at P4,000.00 Date employed: April 17, 1996

Exhibit "B-2" Length of service: 5 years and one (1) month

Date employed: September 15, 1995 IV. Joy Sanchez Lerasan

Length of service: 5 years & nine (9) months Exhibit "F" - ABS-CBN Employee’s Identification Card

II. Merlou Gerzon - ABS-CBN Employee’s Identification Card Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

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

Exhibit "D" Exhibit "F-3"

Exhibit "D-1" & Exhibit "F-4" - Certification dated July 6, 2000

Exhibit "D-2" - ABS-CBN Salary Voucher from March Acknowledging regular status of

1999 to January 2001 at P4,000.00 Complainant Joy Sanchez Lerasan

Date employed: September 1, 1995 Signed by ABS-CBN Administrative

Length of service: 5 years & 10 months Officer May Kima Hife

Date employed: April 15, 1998 Complainants further pray of this Arbiter to declare them
regular and permanent employees of respondent ABS-CBN as
Length of service: 3 yrs. and one (1) month9 a condition precedent for their admission into the existing
union and collective bargaining unit of respondent company
Respondents insisted that they belonged to a "work pool" from where they may as such acquire or otherwise perform their
which petitioner chose persons to be given specific obligations thereto or enjoy the benefits due therefrom.
assignments at its discretion, and were thus under its direct
supervision and control regardless of nomenclature. They Complainants pray for such other reliefs as are just and
prayed that judgment be rendered in their favor, thus: equitable under the premises.10

WHEREFORE, premises considered, this Honorable Arbiter is For its part, petitioner alleged in its position paper that the
most respectfully prayed, to issue an order compelling respondents were PAs who basically assist in the conduct of a
defendants to pay complainants the following: particular program ran by an anchor or talent. Among their
duties include monitoring and receiving incoming calls from
1. One Hundred Thousand Pesos (P100,000.00) each listeners and field reporters and calls of news sources;
generally, they perform leg work for the anchors during a
and by way of moral damages; program or a particular production. They are considered in the
industry as "program employees" in that, as distinguished
2. Minimum wage differential; from regular or station employees, they are basically engaged
by the station for a particular or specific program broadcasted
3. Thirteenth month pay differential; by the radio station. Petitioner asserted that as PAs, the
complainants were issued talent information sheets which are
4. Unpaid service incentive leave benefits; updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on
to assist. The program assignments of complainants were as
5. Sick leave;
follows:
6. Holiday pay;
a. Complainant Nazareno assists in the programs:
7. Premium pay;
1) Nagbagang Balita (early morning edition)
8. Overtime pay;
2) Infor Hayupan
9. Night shift differential.
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition) Nagbagang Balita

b. Complainant Deiparine assists in the programs: 3) On Saturdays

1) Unzanith (a) Nagbagang Balita

2) Serbisyo de Arevalo (b) Info Hayupan

3) Arangkada (evening edition) (c) Arangkada (morning edition)

4) Balitang K (local version) (d) Nagbagang Balita (mid-day edition)

5) Abante Subu 4) On Sundays:

6) Pangutana Lang (a) Siesta Serenata

c. Complainant Gerzon assists in the program: (b) Sunday Chismisan

1) On Mondays and Tuesdays: (c) Timbangan sa Hustisya

(a) Unzanith (d) Sayri ang Lungsod

(b) Serbisyo de Arevalo (e) Haranahan11

(c) Arangkada (evening edition) Petitioner maintained that PAs, reporters, anchors and talents
occasionally "sideline" for other programs they produce, such
(d) Balitang K (local version) as drama talents in other productions. As program employees,
a PA’s engagement is coterminous with the completion of the
(e) Abante Sugbu program, and may be extended/renewed provided that the
program is on-going; a PA may also be assigned to new
(f) Pangutana Lang programs upon the cancellation of one program and the
commencement of another. As such program employees, their
2) On Thursdays compensation is computed on a program basis, a fixed amount
for performance services irrespective of the time consumed. At
 any rate, petitioner claimed, as the payroll will show, plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate
respondents were paid all salaries and benefits due them amount of PESOS: FIFTY TWO THOUSAND NINE
under the law.12 HUNDRED TEN (P52,910.00).

Petitioner also alleged that the Labor Arbiter had no Respondent Veneranda C. Sy is absolved from any liability.
jurisdiction to involve the CBA and interpret the same,
especially since respondents were not covered by the SO ORDERED.13
bargaining unit.
However, the Labor Arbiter did not award money benefits as
On July 30, 2001, the Labor Arbiter rendered judgment in provided in the CBA on his belief that he had no jurisdiction to
favor of the respondents, and declared that they were regular interpret and apply the agreement, as the same was within the
employees of petitioner; as such, they were awarded monetary jurisdiction of the Voluntary Arbitrator as provided in Article
benefits. The fallo of the decision reads: 261 of the Labor Code.

WHEREFORE, the foregoing premises considered, judgment is Respondents’ counsel received a copy of the decision on
hereby rendered declaring the complainants regular August 29, 2001. Respondent Nazareno received her copy on
employees of the respondent ABS-CBN Broadcasting August 27, 2001, while the other respondents received theirs
Corporation and directing the same respondent to pay on September 8, 2001. Respondents signed and filed their
complainants as follows: Appeal Memorandum on September 18, 2001.

I - Merlou A. Gerzon P12,025.00 For its part, petitioner filed a motion for reconsideration,
which the Labor Arbiter denied and considered as an appeal,
II - Marlyn Nazareno 12,025.00 conformably with Section 5, Rule V, of the NLRC Rules of
Procedure. Petitioner forthwith appealed the decision to the
III - Jennifer Deiparine 12,025.00 NLRC, while respondents filed a partial appeal.

IV - Josephine Sanchez Lerazan 12,025.00 In its appeal, petitioner alleged the following:

_________ 1. That the Labor Arbiter erred in reviving or re-opening this

case which had long been dismissed without prejudice for
P48,100.00 more than thirty (30) calendar days;

2. That the Labor Arbiter erred in depriving the respondent of

its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondent’s d. Lerazan, Josephine Sanchez - 413,607.75
Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading; Total - P 2,561,948.22

4. That the Labor Arbiter erred when he ruled that the 2. To deliver to the complainants Two Hundred Thirty-Three
complainants are regular employees of the respondent; (233) sacks of rice as of 30 September 2002 representing their
rice subsidy in the CBA, broken down as follows:
5. That the Labor Arbiter erred when he ruled that the
complainants are entitled to 13th month pay, service incentive a. Deiparine, Jennifer - 60 Sacks
leave pay and salary differential; and
b. Gerzon, Merlou - 60 Sacks
6. That the Labor Arbiter erred when he ruled that
complainants are entitled to attorney’s fees.14 c. Nazareno, Marlyn - 60 Sacks

On November 14, 2002, the NLRC rendered judgment d. Lerazan, Josephine Sanchez - 53 Sacks
modifying the decision of the Labor Arbiter. The fallo of the
decision reads: Total 233 Sacks; and

WHEREFORE, premises considered, the decision of Labor 3. To grant to the complainants all the benefits of the CBA after
Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and 30 September 2002.
VACATED and a new one is entered ORDERING respondent
ABS-CBN Broadcasting Corporation, as follows: SO ORDERED.15

1. To pay complainants of their wage differentials and other The NLRC declared that the Labor Arbiter acted conformably
benefits arising from the CBA as of 30 September 2002 in the with the Labor Code when it granted respondents’ motion to
aggregate amount of Two Million Five Hundred, Sixty-One refile the complaint and admit their position paper. Although
Thousand Nine Hundred Forty-Eight Pesos and 22/100 respondents were not parties to the CBA between petitioner
(P2,561,948.22), broken down as follows: and the ABS-CBN Rank-and-File Employees Union, the NLRC
nevertheless granted and computed respondents’ monetary
a. Deiparine, Jennifer - P 716,113.49 benefits based on the 1999 CBA, which was effective until
September 2002. The NLRC also ruled that the Labor Arbiter
b. Gerzon, Merlou - 716,113.49 had jurisdiction over the complaint of respondents because
they acted in their individual capacities and not as members of
c. Nazareno, Marlyn - 716,113.49 the union. Their claim for monetary benefits was within the
context of Article 217(6) of the Labor Code. The validity of received their copies of the decision on September 8, 2001
respondents’ claim does not depend upon the interpretation of (except respondent Nazareno who received her copy of the
the CBA. decision on August 27, 2001), they had until September 18,
2001 within which to file their Appeal Memorandum.
The NLRC ruled that respondents were entitled to the benefits Moreover, the CA declared that respondents’ failure to submit
under the CBA because they were regular employees who their position paper on time is not a ground to strike out the
contributed to the profits of petitioner through their labor. The paper from the records, much less dismiss a complaint.
NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16 Anent the substantive issues, the appellate court stated that
respondents are not mere project employees, but regular
Petitioner filed a motion for reconsideration, which the NLRC employees who perform tasks necessary and desirable in the
denied. usual trade and business of petitioner and not just its project
employees. Moreover, the CA added, the award of benefits
Petitioner thus filed a petition for certiorari under Rule 65 of accorded to rank-and-file employees under the 1996-1999 CBA
the Rules of Court before the CA, raising both procedural and is a necessary consequence of the NLRC ruling that
substantive issues, as follows: (a) whether the NLRC acted respondents, as PAs, are regular employees.
without jurisdiction in admitting the appeal of respondents;
(b) whether the NLRC committed palpable error in Finding no merit in petitioner’s motion for reconsideration, the
scrutinizing the reopening and revival of the complaint of CA denied the same in a Resolution17 dated June 16, 2004.
respondents with the Labor Arbiter upon due notice despite
the lapse of 10 days from their receipt of the July 30, 2001 Petitioner thus filed the instant petition for review on
Order of the Labor Arbiter; (c) whether respondents were certiorari and raises the following assignments of error:
regular employees; (d) whether the NLRC acted without
jurisdiction in entertaining and resolving the claim of the 1. THE HONORABLE COURT OF APPEALS ACTED
respondents under the CBA instead of referring the same to WITHOUT JURISDICTION AND GRAVELY ERRED IN
the Voluntary Arbitrators as provided in the CBA; and (e) UPHOLDING THE NATIONAL LABOR RELATIONS
whether the NLRC acted with grave abuse of discretion when COMMISSION NOTWITHSTANDING THE PATENT
it awarded monetary benefits to respondents under the CBA NULLITY OF THE LATTER’S DECISION AND
although they are not members of the appropriate bargaining RESOLUTION.
unit.
2. THE HONORABLE COURT OF APPEALS GRAVELY
On February 10, 2004, the CA rendered judgment dismissing ERRED IN AFFIRMING THE RULING OF THE NLRC
the petition. It held that the perfection of an appeal shall be FINDING RESPONDENTS REGULAR EMPLOYEES.
upon the expiration of the last day to appeal by all parties,
should there be several parties to a case. Since respondents
3. THE HONORABLE COURT OF APPEALS GRAVELY We agree with petitioner’s contention that the perfection of an
ERRED IN AFFIRMING THE RULING OF THE NLRC appeal within the statutory or reglementary period is not only
AWARDING CBA BENEFITS TO RESPONDENTS.18 mandatory, but also jurisdictional; failure to do so renders the
assailed decision final and executory and deprives the
Considering that the assignments of error are interrelated, the appellate court or body of the legal authority to alter the final
Court shall resolve them simultaneously. judgment, much less entertain the appeal. However, this Court
has time and again ruled that in exceptional cases, a belated
Petitioner asserts that the appellate court committed palpable appeal may be given due course if greater injustice may occur
and serious error of law when it affirmed the rulings of the if an appeal is not given due course than if the reglementary
NLRC, and entertained respondents’ appeal from the decision period to appeal were strictly followed.19 The Court resorted
of the Labor Arbiter despite the admitted lapse of the to this extraordinary measure even at the expense of
reglementary period within which to perfect the same. sacrificing order and efficiency if only to serve the greater
Petitioner likewise maintains that the 10-day period to appeal principles of substantial justice and equity.20
must be reckoned from receipt of a party’s counsel, not from
the time the party learns of the decision, that is, notice to In the case at bar, the NLRC did not commit a grave abuse of
counsel is notice to party and not the other way around. its discretion in giving Article 22321 of the Labor Code a liberal
Finally, petitioner argues that the reopening of a complaint application to prevent the miscarriage of justice. Technicality
which the Labor Arbiter has dismissed without prejudice is a should not be allowed to stand in the way of equitably and
clear violation of Section 1, Rule V of the NLRC Rules; such completely resolving the rights and obligations of the
order of dismissal had already attained finality and can no parties.22 We have held in a catena of cases that technical rules
longer be set aside. are not binding in labor cases and are not to be applied strictly
if the result would be detrimental to the workingman.23
Respondents, on the other hand, allege that their late appeal is
a non-issue because it was petitioner’s own timely appeal that Admittedly, respondents failed to perfect their appeal from
empowered the NLRC to reopen the case. They assert that the decision of the Labor Arbiter within the reglementary
although the appeal was filed 10 days late, it may still be given period therefor. However, petitioner perfected its appeal
due course in the interest of substantial justice as an exception within the period, and since petitioner had filed a timely
to the general rule that the negligence of a counsel binds the appeal, the NLRC acquired jurisdiction over the case to give
client. On the issue of the late filing of their position paper, due course to its appeal and render the decision of November
they maintain that this is not a ground to strike it out from the 14, 2002. Case law is that the party who failed to appeal from
records or dismiss the complaint. the decision of the Labor Arbiter to the NLRC can still
participate in a separate appeal timely filed by the adverse
We find no merit in the petition. party as the situation is considered to be of greater benefit to
both parties.24
We find no merit in petitioner’s contention that the Labor 2001 as violative of the NLRC Rules of Procedure and as such
Arbiter abused his discretion when he admitted respondents’ is violative of their right to procedural due process. That while
position paper which had been belatedly filed. It bears suggesting that an Order be instead issued by the Labor
stressing that the Labor Arbiter is mandated by law to use Arbiter for complainants to refile this case, respondents
every reasonable means to ascertain the facts in each case impliedly submit that there is not any substantial damage or
speedily and objectively, without technicalities of law or prejudice upon the refiling, even so, respondents’ suggestion
procedure, all in the interest of due process.25 Indeed, as acknowledges complainants right to prosecute this case, albeit
stressed by the appellate court, respondents’ failure to submit with the burden of repeating the same procedure, thus,
a position paper on time is not a ground for striking out the entailing additional time, efforts, litigation cost and precious
paper from the records, much less for dismissing a time for the Arbiter to repeat the same process twice.
complaint.26 Likewise, there is simply no truth to petitioner’s Respondent’s suggestion, betrays its notion of prolonging,
assertion that it was denied due process when the Labor rather than promoting the early resolution of the case.
Arbiter admitted respondents’ position paper without
requiring it to file a comment before admitting said position Although the Labor Arbiter in his Order dated 18 June 2001
paper. The essence of due process in administrative which revived and re-opened the dismissed case without
proceedings is simply an opportunity to explain one’s side or prejudice beyond the ten (10) day reglementary period had
an opportunity to seek reconsideration of the action or ruling inadvertently failed to follow Section 16, Rule V, Rules
complained of. Obviously, there is nothing in the records that Procedure of the NLRC which states:
would suggest that petitioner had absolute lack of opportunity
to be heard.27 Petitioner had the right to file a motion for "A party may file a motion to revive or re-open a case
reconsideration of the Labor Arbiter’s admission of dismissed without prejudice within ten (10) calendar days
respondents’ position paper, and even file a Reply thereto. In from receipt of notice of the order dismissing the same;
fact, petitioner filed its position paper on April 2, 2001. It must otherwise, his only remedy shall be to re-file the case in the
be stressed that Article 280 of the Labor Code was encoded in arbitration branch of origin."
our statute books to hinder the circumvention by
unscrupulous employers of the employees’ right to security of the same is not a serious flaw that had prejudiced the
tenure by indiscriminately and absolutely ruling out all respondents’ right to due process. The case can still be refiled
written and oral agreements inharmonious with the concept of because it has not yet prescribed. Anyway, Article 221 of the
regular employment defined therein.28 Labor Code provides:

We quote with approval the following pronouncement of the "In any proceedings before the Commission or any of the
NLRC: Labor Arbiters, the rules of evidence prevailing in courts of
law or equity shall not be controlling and it is the spirit and
The complainants, on the other hand, contend that intention of this Code that the Commission and its members
respondents assailed the Labor Arbiter’s order dated 18 June and the Labor Arbiters shall use every and all reasonable
means to ascertain the facts in each case speedily and Thus, the respondent was not deprived of its Constitutional
objectively and without regard to technicalities of law or right to due process of law.29
procedure, all in the interest of due process."
We reject, as barren of factual basis, petitioner’s contention
The admission by the Labor Arbiter of the complainants’ that respondents are considered as its talents, hence, not
Position Paper and Supplemental Manifestation which were regular employees of the broadcasting company. Petitioner’s
belatedly filed just only shows that he acted within his claim that the functions performed by the respondents are not
discretion as he is enjoined by law to use every reasonable at all necessary, desirable, or even vital to its trade or business
means to ascertain the facts in each case speedily and is belied by the evidence on record.
objectively, without regard to technicalities of law or
procedure, all in the interest of due process. Indeed, the failure Case law is that this Court has always accorded respect and
to submit a position paper on time is not a ground for striking finality to the findings of fact of the CA, particularly if they
out the paper from the records, much less for dismissing a coincide with those of the Labor Arbiter and the National
complaint in the case of the complainant. (University of Labor Relations Commission, when supported by substantial
Immaculate Conception vs. UIC Teaching and Non-Teaching evidence.30 The question of whether respondents are regular or
Personnel Employees, G.R. No. 144702, July 31, 2001). project employees or independent contractors is essentially
factual in nature; nonetheless, the Court is constrained to
"In admitting the respondents’ position paper albeit late, the resolve it due to its tremendous effects to the legions of
Labor Arbiter acted within her discretion. In fact, she is production assistants working in the Philippine broadcasting
enjoined by law to use every reasonable means to ascertain the industry.
facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due We agree with respondents’ contention that where a person
process". (Panlilio vs. NLRC, 281 SCRA 53). has rendered at least one year of service, regardless of the
nature of the activity performed, or where the work is
The respondents were given by the Labor Arbiter the continuous or intermittent, the employment is considered
opportunity to submit position paper. In fact, the respondents regular as long as the activity exists, the reason being that a
had filed their position paper on 2 April 2001. What is material customary appointment is not indispensable before one may
in the compliance of due process is the fact that the parties are be formally declared as having attained regular status. Article
given the opportunities to submit position papers. 280 of the Labor Code provides:

"Due process requirements are satisfied where the parties are ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The
given the opportunities to submit position papers". (Laurence provisions of written agreement to the contrary
vs. NLRC, 205 SCRA 737). 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 doubted. In determining whether an employment should be
trade of the employer except where the employment has been considered regular or non-regular, the applicable test is the
fixed for a specific project or undertaking the completion or reasonable connection between the particular activity
termination of which has been determined at the time of the performed by the employee in relation to the usual business or
engagement of the employee or where the work or services to trade of the employer. The standard, supplied by the law
be performed is seasonal in nature and the employment is for itself, is whether the work undertaken is necessary or desirable
the duration of the season. in the usual business or trade of the employer, a fact that can
be assessed by looking into the nature of the services rendered
In Universal Robina Corporation v. Catapang,31 the Court and its relation to the general scheme under which the
reiterated the test in determining whether one is a regular business or trade is pursued in the usual course. It is
employee: distinguished from a specific undertaking that is divorced
from the normal activities required in carrying on the
The primary standard, therefore, of determining regular particular business or trade. But, although the work to be
employment is the reasonable connection between the performed is only for a specific project or seasonal, where a
particular activity performed by the employee in relation to person thus engaged has been performing the job for at least
the usual trade or business of the employer. The test is one year, even if the performance is not continuous or is
whether the former is usually necessary or desirable in the merely intermittent, the law deems the repeated and
usual business or trade of the employer. The connection can be continuing need for its performance as being sufficient to
determined by considering the nature of work performed and indicate the necessity or desirability of that activity to the
its relation to the scheme of the particular business or trade in business or trade of the employer. The employment of such
its entirety. Also, if the employee has been performing the job person is also then deemed to be regular with respect to such
for at least a year, even if the performance is not continuous activity and while such activity exists.34
and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of Not considered regular employees are "project employees," the
the necessity if not indispensability of that activity to the completion or termination of which is more or less
business. Hence, the employment is considered regular, but determinable at the time of employment, such as those
only with respect to such activity and while such activity employed in connection with a particular construction project,
exists.32 and "seasonal employees" whose employment by its nature is
only desirable for a limited period of time. Even then, any
As elaborated by this Court in Magsalin v. National employee who has rendered at least one year of service,
Organization of Working Men:33 whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity
Even while the language of law might have been more actually exists.
definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" worker’s security of tenure, however, can hardly be
It is of no moment that petitioner hired respondents as show that the duration and scope of the project were
"talents." The fact that respondents received pre-agreed "talent determined or specified at the time of their engagement.
fees" instead of salaries, that they did not observe the required Under existing jurisprudence, project could refer to two
office hours, and that they were permitted to join other distinguishable types of activities. First, a project may refer to
productions during their free time are not conclusive of the a particular job or undertaking that is within the regular or
nature of their employment. Respondents cannot be usual business of the employer, but which is distinct and
considered "talents" because they are not actors or actresses or separate, and identifiable as such, from the other undertakings
radio specialists or mere clerks or utility employees. They are of the company. Such job or undertaking begins and ends at
regular employees who perform several different duties under determined or determinable times. Second, the term project
the control and direction of ABS-CBN executives and may also refer to a particular job or undertaking that is not
supervisors. within the regular business of the employer. Such a job or
undertaking must also be identifiably separate and distinct
Thus, there are two kinds of regular employees under the law: from the ordinary or regular business operations of the
(1) those engaged to perform activities which are necessary or employer. The job or undertaking also begins and ends at
desirable in the usual business or trade of the employer; and determined or determinable times.38
(2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to The principal test is whether or not the project employees
the activities in which they are employed.35 were assigned to carry out a specific project or undertaking,
the duration and scope of which were specified at the time the
The law overrides such conditions which are prejudicial to the employees were engaged for that project.39
interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether In this case, it is undisputed that respondents had
a certain employment is regular or otherwise is not the will or continuously performed the same activities for an average of
word of the employer, to which the worker oftentimes five years. Their assigned tasks are necessary or desirable in
acquiesces, much less the procedure of hiring the employee or the usual business or trade of the petitioner. The persisting
the manner of paying the salary or the actual time spent at need for their services is sufficient evidence of the necessity
work. It is the character of the activities performed in relation and indispensability of such services to petitioner’s business or
to the particular trade or business taking into account all the trade.40 While length of time may not be a sole controlling test
circumstances, and in some cases the length of time of its for project employment, it can be a strong factor to determine
performance and its continued existence.36 It is obvious that whether the employee was hired for a specific undertaking or
one year after they were employed by petitioner, respondents in fact tasked to perform functions which are vital, necessary
became regular employees by operation of law.37 and indispensable to the usual trade or business of the
employer.41 We note further that petitioner did not report the
Additionally, respondents cannot be considered as project or termination of respondents’ employment in the particular
program employees because no evidence was presented to "project" to the Department of Labor and Employment
Regional Office having jurisdiction over the workplace within relationship. If SONZA did not possess such unique skills,
30 days following the date of their separation from work, talent and celebrity status, ABS-CBN would not have entered
using the prescribed form on employees’ termination/ into the Agreement with SONZA but would have hired him
dismissals/suspensions.42 through its personnel department just like any other
employee.
As gleaned from the records of this case, petitioner itself is not
certain how to categorize respondents. In its earlier pleadings, In any event, the method of selecting and engaging SONZA
petitioner classified respondents as program employees, and does not conclusively determine his status. We must consider
in later pleadings, independent contractors. Program all the circumstances of the relationship, with the control test
employees, or project employees, are different from being the most important element.
independent contractors because in the case of the latter, no
employer-employee relationship exists. B. Payment of Wages

Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN directly paid SONZA his monthly talent fees with
ABS-CBN Broadcasting Corporation43 is misplaced. In that no part of his fees going to MJMDC. SONZA asserts that this
case, the Court explained why Jose Sonza, a well-known mode of fee payment shows that he was an employee of ABS-
television and radio personality, was an independent CBN. SONZA also points out that ABS-CBN granted him
contractor and not a regular employee: benefits and privileges "which he would not have enjoyed if he
were truly the subject of a valid job contract."
A. Selection and Engagement of Employee
All the talent fees and benefits paid to SONZA were the result
ABS-CBN engaged SONZA’S services to co-host its television of negotiations that led to the Agreement. If SONZA were
and radio programs because of SONZA’S peculiar skills, talent ABS-CBN’s employee, there would be no need for the parties
and celebrity status. SONZA contends that the "discretion to stipulate on benefits such as "SSS, Medicare, x x x and 13th
used by respondent in specifically selecting and hiring month pay which the law automatically incorporates into
complainant over other broadcasters of possibly similar every employer-employee contract. Whatever benefits SONZA
experience and qualification as complainant belies enjoyed arose from contract and not because of an employer-
respondent’s claim of independent contractorship." employee relationship.

Independent contractors often present themselves to possess SONZA’s talent fees, amounting to P317,000 monthly in the
unique skills, expertise or talent to distinguish them from second and third year, are so huge and out of the ordinary that
ordinary employees. The specific selection and hiring of they indicate more an independent contractual relationship
SONZA, because of his unique skills, talent and celebrity rather than an employer-employee relationship. ABS-CBN
status not possessed by ordinary employees, is a circumstance agreed to pay SONZA such huge talent fees precisely because
indicative, but not conclusive, of an independent contractual of SONZA’S unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting Fourth. The degree of control and supervision exercised by
alone possessed enough bargaining power to demand and petitioner over respondents through its supervisors negates
receive such huge talent fees for his services. The power to the allegation that respondents are independent contractors.
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of The presumption is that when the work done is an integral
an independent contractual relationship. part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an
The payment of talent fees directly to SONZA and not to independent business or professional service, such work is a
MJMDC does not negate the status of SONZA as an regular employment of such employee and not an
independent contractor. The parties expressly agreed on such independent contractor.45 The Court will peruse beyond any
mode of payment. Under the Agreement, MJMDC is the such agreement to examine the facts that typify the parties’
AGENT of SONZA, to whom MJMDC would have to turn actual relationship.46
over any talent fee accruing under the Agreement.44
It follows then that respondents are entitled to the benefits
In the case at bar, however, the employer-employee provided for in the existing CBA between petitioner and its
relationship between petitioner and respondents has been rank-and-file employees. As regular employees, respondents
proven. are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47 We quote with
First. In the selection and engagement of respondents, no approval the ruling of the appellate court, that the reason why
peculiar or unique skill, talent or celebrity status was required production assistants were excluded from the CBA is precisely
from them because they were merely hired through because they were erroneously classified and treated as project
petitioner’s personnel department just like any ordinary employees by petitioner:
employee.
x x x The award in favor of private respondents of the benefits
Second. The so-called "talent fees" of respondents correspond accorded to rank-and-file employees of ABS-CBN under the
to wages given as a result of an employer-employee 1996-1999 CBA is a necessary consequence of public
relationship. Respondents did not have the power to bargain respondent’s ruling that private respondents as production
for huge talent fees, a circumstance negating independent assistants of petitioner are regular employees. The monetary
contractual relationship. award is not considered as claims involving the interpretation
or implementation of the collective bargaining agreement. The
Third. Petitioner could always discharge respondents should it reason why production assistants were excluded from the said
find their work unsatisfactory, and respondents are highly agreement is precisely because they were classified and
dependent on the petitioner for continued work. treated as project employees by petitioner.
As earlier stated, it is not the will or word of the employer SO ORDERED.
which determines the nature of employment of an employee
but the nature of the activities performed by such employee in
relation to the particular business or trade of the employer.
Considering that We have clearly found that private
respondents are regular employees of petitioner, their
exclusion from the said CBA on the misplaced belief of the
parties to the said agreement that they are project employees,
is therefore not proper. Finding said private respondents as
regular employees and not as mere project employees, they
must be accorded the benefits due under the said Collective
Bargaining Agreement.

A collective bargaining agreement is a contract entered into by

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

Besides, only talent-artists were excluded from the CBA and

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

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED

for lack of merit. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED.
Costs against petitioner.
ANGELINA FRANCISCO, Petitioner, prepared any legal document and never represented the
vs. company as its Corporate Secretary. However, on some
NATIONAL LABOR RELATIONS COMMISSION, KASEI occasions, she was prevailed upon to sign documentation for
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO the company. 6
ACEDO, DELFIN LIZA, IRENE BALLESTEROS,
TRINIDAD LIZA and RAMON ESCUETA, Respondents. In 1996, petitioner was designated Acting Manager. The
corporation also hired Gerry Nino as accountant in lieu of
DECISION petitioner. As Acting Manager, petitioner was assigned to
handle recruitment of all employees and perform management
YNARES-SANTIAGO, J.: administration functions; represent the company in all
dealings with government agencies, especially with the
This petition for review on certiorari under Rule 45 of the Rules Bureau of Internal Revenue (BIR), Social Security System (SSS)
of Court seeks to annul and set aside the Decision and and in the city government of Makati; and to administer all
Resolution of the Court of Appeals dated October 29, other matters pertaining to the operation of Kasei Restaurant
2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. which is owned and operated by Kasei Corporation. 7
78515 dismissing the complaint for constructive dismissal filed
by herein petitioner Angelina Francisco. The appellate court For five years, petitioner performed the duties of Acting
reversed and set aside the Decision of the National Labor Manager. As of December 31, 2000 her salary was P27,500.00
Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC plus P3,000.00 housing allowance and a 10% share in the profit
NCR CA No. 032766-02 which affirmed with modification the of Kasei Corporation. 8
decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-
NCR Case No. 30-10-0-489-01, finding that private In January 2001, petitioner was replaced by Liza R. Fuentes as
respondents were liable for constructive dismissal. Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured
In 1995, petitioner was hired by Kasei Corporation during its that she would still be connected with Kasei Corporation.
incorporation stage. She was designated as Accountant and Timoteo Acedo, the designated Treasurer, convened a meeting
Corporate Secretary and was assigned to handle all the of all employees of Kasei Corporation and announced that
accounting needs of the company. She was also designated as nothing had changed and that petitioner was still connected
Liaison Officer to the City of Makati to secure business with Kasei Corporation as Technical Assistant to Seiji Kamura
permits, construction permits and other licenses for the initial and in charge of all BIR matters. 9
operation of the company. 5
Thereafter, Kasei Corporation reduced her salary by P2,500.00
Although she was designated as Corporate Secretary, she was a month beginning January up to September 2001 for a total
not entrusted with the corporate documents; neither did she reduction of P22,500.00 as of September 2001. Petitioner was
attend any board meeting nor required to do so. She never not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not only temporary in nature and dependent on the needs of the
receive her salary from the company. She made repeated corporation.
follow-ups with the company cashier but she was advised that
the company was not earning well. 10 To prove that petitioner was not an employee of the
corporation, private respondents submitted a list of employees
On October 15, 2001, petitioner asked for her salary from for the years 1999 and 2000 duly received by the BIR showing
Acedo and the rest of the officers but she was informed that that petitioner was not among the employees reported to the
she is no longer connected with the company. 11 BIR, as well as a list of payees subject to expanded
withholding tax which included petitioner. SSS records were
Since she was no longer paid her salary, petitioner did not also submitted showing that petitioner’s latest employer was
report for work and filed an action for constructive dismissal Seiji Corporation. 13
before the labor arbiter.
The Labor Arbiter found that petitioner was illegally
Private respondents averred that petitioner is not an employee dismissed, thus:
of Kasei Corporation. They alleged that petitioner was hired in
1995 as one of its technical consultants on accounting matters WHEREFORE, premises considered, judgment is hereby
and act concurrently as Corporate Secretary. As technical rendered as follows:
consultant, petitioner performed her work at her own
discretion without control and supervision of Kasei 1. finding complainant an employee of respondent
Corporation. Petitioner had no daily time record and she came corporation;
to the office any time she wanted. The company never
interfered with her work except that from time to time, the 2. declaring complainant’s dismissal as illegal;
management would ask her opinion on matters relating to her
profession. Petitioner did not go through the usual procedure 3. ordering respondents to reinstate complainant to her former
of selection of employees, but her services were engaged position without loss of seniority rights and jointly and
through a Board Resolution designating her as technical severally pay complainant her money claims in accordance
consultant. The money received by petitioner from the with the following computation:
corporation was her professional fee subject to the 10%
expanded withholding tax on professionals, and that she was a. Backwages 10/2001 – 07/2002 275,000.00
not one of those reported to the BIR or SSS as one of the
company’s employees. 12 (27,500 x 10 mos.)

Petitioner’s designation as technical consultant depended b. Salary Differentials (01/2001 – 09/2001) 22,500.00
solely upon the will of management. As such, her consultancy
may be terminated any time considering that her services were
c. Housing Allowance (01/2001 – 07/2002) 57,000.00 2) The awards representing moral and exemplary damages
and 10% share in profit in the respective accounts of
d. Midyear Bonus 2001 27,500.00 P100,000.00 and P361,175.00 are deleted;

e. 13th Month Pay 27,500.00 3) The award of 10% attorney’s fees shall be based on salary
differential award only;
f. 10% share in the profits of Kasei
4) The awards representing salary differentials, housing
Corp. from 1996-2001 361,175.00 allowance, mid year bonus and 13th month pay are
AFFIRMED.
g. Moral and exemplary damages 100,000.00
SO ORDERED. 15
h. 10% Attorney’s fees 87,076.50
On appeal, the Court of Appeals reversed the NLRC decision,
P957,742.50 thus:

If reinstatement is no longer feasible, respondents are ordered WHEREFORE, the instant petition is hereby GRANTED. The
to pay complainant separation pay with additional backwages decision of the National Labor Relations Commissions dated
that would accrue up to actual payment of separation pay. April 15, 2003 is hereby REVERSED and SET ASIDE and a
new one is hereby rendered dismissing the complaint filed by
SO ORDERED. 14 private respondent against Kasei Corporation, et al. for
constructive dismissal.
On April 15, 2003, the NLRC affirmed with modification the
Decision of the Labor Arbiter, the dispositive portion of which SO ORDERED. 16
reads:
The appellate court denied petitioner’s motion for
PREMISES CONSIDERED, the Decision of July 31, 2002 is reconsideration, hence, the present recourse.
hereby MODIFIED as follows:
The core issues to be resolved in this case are (1) whether there
1) Respondents are directed to pay complainant separation was an employer-employee relationship between petitioner
pay computed at one month per year of service in addition to and private respondent Kasei Corporation; and if in the
full backwages from October 2001 to July 31, 2002; affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the work is to be accomplished; and (2) the underlying
the National Labor Relations Commission on one hand, and economic realities of the activity or relationship.
the Court of Appeals on the other, there is a need to reexamine
the records to determine which of the propositions espoused This two-tiered test would provide us with a framework of
by the contending parties is supported by substantial analysis, which would take into consideration the totality of
evidence. 17 circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, where there is no written agreement or terms of reference to
there has been no uniform test to determine the existence of an base the relationship on; and due to the complexity of the
employer-employee relation. Generally, courts have relied on relationship based on the various positions and
the so-called right of control test where the person for whom responsibilities given to the worker over the period of the
the services are performed reserves a right to control not only latter’s employment.
the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of- The control test initially found application in the case of Viaña
control, the existing economic conditions prevailing between v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of
the parties, like the inclusion of the employee in the payrolls, Appeals, 20 where we held that there is an employer-employee
can help in determining the existence of an employer- relationship when the person for whom the services are
employee relationship. performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that
However, in certain cases the control test is not sufficient to end.
give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several In Sevilla v. Court of Appeals, 21 we observed the need to
positions have been held by the worker. There are instances consider the existing economic conditions prevailing between
when, aside from the employer’s power to control the the parties, in addition to the standard of right-of-control like
employee with respect to the means and methods by which the inclusion of the employee in the payrolls, to give a clearer
the work is to be accomplished, economic realities of the picture in determining the existence of an employer-employee
employment relations help provide a comprehensive analysis relationship based on an analysis of the totality of economic
of the true classification of the individual, whether as circumstances of the worker.
employee, independent contractor, corporate officer or some
other capacity. Thus, the determination of the relationship between employer
and employee depends upon the circumstances of the whole
The better approach would therefore be to adopt a two-tiered economic activity, 22 such as: (1) the extent to which the
test involving: (1) the putative employer’s power to control the services performed are an integral part of the employer’s
employee with respect to the means and methods by which business; (2) the extent of the worker’s investment in
equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the worker’s opportunity for dismissal, receiving check vouchers indicating her
profit and loss; (5) the amount of initiative, skill, judgment or salaries/wages, benefits, 13th month pay, bonuses and
foresight required for the success of the claimed independent allowances, as well as deductions and Social Security
enterprise; (6) the permanency and duration of the contributions from August 1, 1999 to December 18,
relationship between the worker and the employer; and (7) the 2000. 26 When petitioner was designated General Manager,
degree of dependency of the worker upon the employer for his respondent corporation made a report to the SSS signed by
continued employment in that line of business. 23 Irene Ballesteros. Petitioner’s membership in the SSS as
manifested by a copy of the SSS specimen signature card
The proper standard of economic dependence is whether the which was signed by the President of Kasei Corporation and
worker is dependent on the alleged employer for his the inclusion of her name in the on-line inquiry system of the
continued employment in that line of business. 24 In the United SSS evinces the existence of an employer-employee
States, the touchstone of economic reality in analyzing relationship between petitioner and respondent corporation. 27
possible employment relationships for purposes of the Federal
Labor Standards Act is dependency. 25 By analogy, the It is therefore apparent that petitioner is economically
benchmark of economic reality in analyzing possible dependent on respondent corporation for her continued
employment relationships for purposes of the Labor Code employment in the latter’s line of business.
ought to be the economic dependence of the worker on his
employer. In Domasig v. National Labor Relations Commission, 28 we held
that in a business establishment, an identification card is
By applying the control test, there is no doubt that petitioner is provided not only as a security measure but mainly to identify
an employee of Kasei Corporation because she was under the the holder thereof as a bona fide employee of the firm that
direct control and supervision of Seiji Kamura, the issues it. Together with the cash vouchers covering petitioner’s
corporation’s Technical Consultant. She reported for work salaries for the months stated therein, these matters constitute
regularly and served in various capacities as Accountant, substantial evidence adequate to support a conclusion that
Liaison Officer, Technical Consultant, Acting Manager and petitioner was an employee of private respondent.
Corporate Secretary, with substantially the same job functions,
that is, rendering accounting and tax services to the company We likewise ruled in Flores v. Nuestro 29 that a corporation who
and performing functions necessary and desirable for the registers its workers with the SSS is proof that the latter were
proper operation of the corporation such as securing business the former’s employees. The coverage of Social Security Law is
permits and other licenses over an indefinite period of predicated on the existence of an employer-employee
engagement. relationship.

Under the broader economic reality test, the petitioner can Furthermore, the affidavit of Seiji Kamura dated December 5,
likewise be said to be an employee of respondent corporation 2001 has clearly established that petitioner never acted as
because she had served the company for six years before her Corporate Secretary and that her designation as such was only
for convenience. The actual nature of petitioner’s job was as services rendered to respondent corporation on a regular basis
Kamura’s direct assistant with the duty of acting as Liaison over an indefinite period of engagement. Respondent
Officer in representing the company to secure construction corporation hired and engaged petitioner for compensation,
permits, license to operate and other requirements imposed by with the power to dismiss her for cause. More importantly,
government agencies. Petitioner was never entrusted with respondent corporation had the power to control petitioner
corporate documents of the company, nor required to attend with the means and methods by which the work is to be
the meeting of the corporation. She was never privy to the accomplished.
preparation of any document for the corporation, although
once in a while she was required to sign prepared The corporation constructively dismissed petitioner when it
documentation for the company. 30 reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of
The second affidavit of Kamura dated March 7, 2002 which employment, where the petitioner is entitled to full
repudiated the December 5, 2001 affidavit has been allegedly backwages. Since the position of petitioner as accountant is
withdrawn by Kamura himself from the records of the one of trust and confidence, and under the principle of
case. 31 Regardless of this fact, we are convinced that the strained relations, petitioner is further entitled to separation
allegations in the first affidavit are sufficient to establish that pay, in lieu of reinstatement. 34
petitioner is an employee of Kasei Corporation.
A diminution of pay is prejudicial to the employee and
Granting arguendo, that the second affidavit validly repudiated amounts to constructive dismissal. Constructive dismissal is
the first one, courts do not generally look with favor on any an involuntary resignation resulting in cessation of work
retraction or recanted testimony, for it could have been resorted to when continued employment becomes impossible,
secured by considerations other than to tell the truth and unreasonable or unlikely; when there is a demotion in rank or
would make solemn trials a mockery and place the a diminution in pay; or when a clear discrimination,
investigation of the truth at the mercy of unscrupulous insensibility or disdain by an employer becomes unbearable to
witnesses. 32 A recantation does not necessarily cancel an an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we
earlier declaration, but like any other testimony the same is ruled that where an employee ceases to work due to a
subject to the test of credibility and should be received with demotion of rank or a diminution of pay, an unreasonable
caution. 33 situation arises which creates an adverse working
environment rendering it impossible for such employee to
Based on the foregoing, there can be no other conclusion that continue working for her employer. Hence, her severance
petitioner is an employee of respondent Kasei Corporation. from the company was not of her own making and therefore
She was selected and engaged by the company for amounted to an illegal termination of employment.
compensation, and is economically dependent upon
respondent for her continued employment in that line of In affording full protection to labor, this Court must ensure
business. Her main job function involved accounting and tax equal work opportunities regardless of sex, race or creed. Even
as we, in every case, attempt to carefully balance the fragile
relationship between employees and employers, we are
mindful of the fact that the policy of the law is to apply the
Labor Code to a greater number of employees. This would
enable employees to avail of the benefits accorded to them by
law, in line with the constitutional mandate giving maximum
aid and protection to labor, promoting their welfare and
reaffirming it as a primary social economic force in
furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and

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

SO ORDERED.
ROGELIO P. NOGALES, for himself and on behalf of the development of leg edema5 indicating preeclampsia,6 which is
minors, ROGER ANTHONY, ANGELICA, NANCY, and a dangerous complication of pregnancy.7
MICHAEL CHRISTOPHER, all surnamed
NOGALES, petitioners, Around midnight of 25 May 1976, Corazon started to
vs. experience mild labor pains prompting Corazon and Rogelio
CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, Nogales ("Spouses Nogales") to see Dr. Estrada at his home.
DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL After examining Corazon, Dr. Estrada advised her immediate
ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE admission to the Capitol Medical Center ("CMC").
ESPINOLA, and NURSE J. DUMLAO, respondents.
On 26 May 1976, Corazon was admitted at 2:30 a.m. at the
DECISION CMC after the staff nurse noted the written admission
request8 of Dr. Estrada. Upon Corazon's admission at the
CARPIO, J.: CMC, Rogelio Nogales ("Rogelio") executed and signed the
"Consent on Admission and Agreement"9 and "Admission
The Case Agreement."10 Corazon was then brought to the labor room of
the CMC.
This petition for review1 assails the 6 February 1998
Decision2 and 21 March 2000 Resolution3 of the Court of Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of
Appeals in CA-G.R. CV No. 45641. The Court of Appeals CMC, conducted an internal examination of Corazon. Dr. Uy
affirmed in toto the 22 November 1993 Decision4 of the then called up Dr. Estrada to notify him of her findings.
Regional Trial Court of Manila, Branch 33, finding Dr. Oscar
Estrada solely liable for damages for the death of his patient, Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr.
Corazon Nogales, while absolving the remaining respondents Estrada ordered for 10 mg. of valium to be administered
of any liability. The Court of Appeals denied petitioners' immediately by intramuscular injection. Dr. Estrada later
motion for reconsideration. ordered the start of intravenous administration of syntocinon
admixed with dextrose, 5%, in lactated Ringers' solution, at the
The Facts rate of eight to ten micro-drops per minute.

Pregnant with her fourth child, Corazon Nogales ("Corazon"), According to the Nurse's Observation Notes,12 Dr. Joel
who was then 37 years old, was under the exclusive prenatal Enriquez ("Dr. Enriquez"), an anesthesiologist at CMC, was
care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her notified at 4:15 a.m. of Corazon's admission. Subsequently,
fourth month of pregnancy or as early as December 1975. when asked if he needed the services of an anesthesiologist,
While Corazon was on her last trimester of pregnancy, Dr. Dr. Estrada refused. Despite Dr. Estrada's refusal, Dr.
Estrada noted an increase in her blood pressure and Enriquez stayed to observe Corazon's condition.
At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 immediate hysterectomy. Rogelio was made to sign a "Consent
of the CMC. At 6:10 a.m., Corazon's bag of water ruptured to Operation."13
spontaneously. At 6:12 a.m., Corazon's cervix was fully
dilated. At 6:13 a.m., Corazon started to experience Due to the inclement weather then, Dr. Espinola, who was
convulsions. fetched from his residence by an ambulance, arrived at the
CMC about an hour later or at 9:00 a.m. He examined the
At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of patient and ordered some resuscitative measures to be
magnesium sulfate. However, Dr. Ely Villaflor ("Dr. Villaflor"), administered. Despite Dr. Espinola's efforts, Corazon died at
who was assisting Dr. Estrada, administered only 2.5 grams of 9:15 a.m. The cause of death was "hemorrhage, post partum."14
magnesium sulfate.
On 14 May 1980, petitioners filed a complaint for
At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low damages15 with the Regional Trial Court16 of Manila against
forceps to extract Corazon's baby. In the process, a 1.0 x 2.5 CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr.
cm. piece of cervical tissue was allegedly torn. The baby came Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the
out in an apnic, cyanotic, weak and injured condition. death of Corazon. Petitioners mainly contended that
Consequently, the baby had to be intubated and resuscitated defendant physicians and CMC personnel were negligent in
by Dr. Enriquez and Dr. Payumo. the treatment and management of Corazon's condition.
Petitioners charged CMC with negligence in the selection and
At 6:27 a.m., Corazon began to manifest moderate vaginal supervision of defendant physicians and hospital staff.
bleeding which rapidly became profuse. Corazon's blood
pressure dropped from 130/80 to 60/40 within five minutes. For failing to file their answer to the complaint despite service
There was continuous profuse vaginal bleeding. The assisting of summons, the trial court declared Dr. Estrada, Dr. Enriquez,
nurse administered hemacel through a gauge 19 needle as a and Nurse Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy, Dr.
side drip to the ongoing intravenous injection of dextrose. Espinola, and Dr. Lacson filed their respective answers
denying and opposing the allegations in the complaint.
At 7:45 a.m., Dr. Estrada ordered blood typing and cross Subsequently, trial ensued.
matching with bottled blood. It took approximately 30 minutes
for the CMC laboratory, headed by Dr. Perpetua Lacson ("Dr. After more than 11 years of trial, the trial court rendered
Lacson"), to comply with Dr. Estrada's order and deliver the judgment on 22 November 1993 finding Dr. Estrada solely
blood. liable for damages. The trial court ruled as follows:

At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the The victim was under his pre-natal care, apparently,
Obstetrics-Gynecology Department of the CMC, was apprised his fault began from his incorrect and inadequate
of Corazon's condition by telephone. Upon being informed management and lack of treatment of the pre-eclamptic
that Corazon was bleeding profusely, Dr. Espinola ordered condition of his patient. It is not disputed that he
misapplied the forceps in causing the delivery because thru the veins, it could only be because this was what
it resulted in a large cervical tear which had caused the was probably the orders of Dr. Estrada.
profuse bleeding which he also failed to control with
the application of inadequate injection of magnesium While the evidence of the plaintiffs shows that Dr. Noe
sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada Espinola, who was the Chief of the Department of
even failed to notice the erroneous administration by Obstetrics and Gynecology who attended to the patient
nurse Dumlao of hemacel by way of side drip, instead Mrs. Nogales, it was only at 9:00 a.m. That he was able
of direct intravenous injection, and his failure to to reach the hospital because of typhoon Didang
consult a senior obstetrician at an early stage of the (Exhibit 2). While he was able to give prescription in
problem. the manner Corazon Nogales may be treated, the
prescription was based on the information given to
On the part however of Dra. Ely Villaflor, Dra. Rosa him by phone and he acted on the basis of facts as
Uy, Dr. Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J. presented to him, believing in good faith that such is
Dumlao and CMC, the Court finds no legal justification the correct remedy. He was not with Dr. Estrada when
to find them civilly liable. the patient was brought to the hospital at 2:30 o'clock
a.m. So, whatever errors that Dr. Estrada committed on
On the part of Dra. Ely Villaflor, she was only taking the patient before 9:00 o'clock a.m. are certainly the
orders from Dr. Estrada, the principal physician of errors of Dr. Estrada and cannot be the mistake of Dr.
Corazon Nogales. She can only make suggestions in Noe Espinola. His failure to come to the hospital on
the manner the patient maybe treated but she cannot time was due to fortuitous event.
impose her will as to do so would be to substitute her
good judgment to that of Dr. Estrada. If she failed to On the part of Dr. Joel Enriquez, while he was present
correctly diagnose the true cause of the bleeding which in the delivery room, it is not incumbent upon him to
in this case appears to be a cervical laceration, it cannot call the attention of Dr. Estrada, Dra. Villaflor and also
be safely concluded by the Court that Dra. Villaflor had of Nurse Dumlao on the alleged errors committed by
the correct diagnosis and she failed to inform Dr. them. Besides, as anesthesiologist, he has no authority
Estrada. No evidence was introduced to show that to control the actuations of Dr. Estrada and Dra.
indeed Dra. Villaflor had discovered that there was Villaflor. For the Court to assume that there were
laceration at the cervical area of the patient's internal errors being committed in the presence of Dr. Enriquez
organ. would be to dwell on conjectures and speculations.

On the part of nurse Dumlao, there is no showing that On the civil liability of Dr. Perpetua Lacson, [s]he is a
when she administered the hemacel as a side drip, she hematologist and in-charge of the blood bank of the
did it on her own. If the correct procedure was directly CMC. The Court cannot accept the theory of the
plaintiffs that there was delay in delivering the blood
needed by the patient. It was testified, that in order of the attending physicians who were employed by the
that this blood will be made available, a laboratory test family of the deceased, such civil liability should be
has to be conducted to determine the type of blood, borne by the attending physicians under the principle
cross matching and other matters consistent with of "respondeat superior".
medical science so, the lapse of 30 minutes maybe
considered a reasonable time to do all of these things, WHEREFORE, premises considered, judgment is
and not a delay as the plaintiffs would want the Court hereby rendered finding defendant Dr. Estrada of
to believe. Number 13 Pitimini St. San Francisco del Monte,
Quezon City civilly liable to pay plaintiffs: 1) By way of
Admittedly, Dra. Rosa Uy is a resident physician of the actual damages in the amount of P105,000.00; 2) By
Capitol Medical Center. She was sued because of her way of moral damages in the amount of P700,000.00; 3)
alleged failure to notice the incompetence and Attorney's fees in the amount of P100,000.00 and to pay
negligence of Dr. Estrada. However, there is no the costs of suit.
evidence to support such theory. No evidence was
adduced to show that Dra. Rosa Uy as a resident For failure of the plaintiffs to adduce evidence to
physician of Capitol Medical Center, had knowledge of support its [sic] allegations against the other
the mismanagement of the patient Corazon Nogales, defendants, the complaint is hereby ordered dismissed.
and that notwithstanding such knowledge, she While the Court looks with disfavor the filing of the
tolerated the same to happen. present complaint against the other defendants by the
herein plaintiffs, as in a way it has caused them
In the pre-trial order, plaintiffs and CMC agreed that personal inconvenience and slight damage on their
defendant CMC did not have any hand or participation name and reputation, the Court cannot accepts [sic]
in the selection or hiring of Dr. Estrada or his assistant however, the theory of the remaining defendants that
Dra. Ely Villaflor as attending physician[s] of the plaintiffs were motivated in bad faith in the filing of
deceased. In other words, the two (2) doctors were not this complaint. For this reason defendants'
employees of the hospital and therefore the hospital counterclaims are hereby ordered dismissed.
did not have control over their professional conduct.
When Mrs. Nogales was brought to the hospital, it was SO ORDERED.18
an emergency case and defendant CMC had no choice
but to admit her. Such being the case, there is therefore Petitioners appealed the trial court's decision. Petitioners
no legal ground to apply the provisions of Article 2176 claimed that aside from Dr. Estrada, the remaining
and 2180 of the New Civil Code referring to the respondents should be held equally liable for negligence.
vicarious liability of an employer for the negligence of Petitioners pointed out the extent of each respondent's alleged
its employees. If ever in this case there is fault or liability.
negligence in the treatment of the deceased on the part
On 6 February 1998, the Court of Appeals affirmed the Villaflor and Nurse Dumlao were notified of the petition at
decision of the trial court.19 Petitioners filed a motion for their counsels' last known addresses. Petitioners reiterated
reconsideration which the Court of Appeals denied in its their imputation of negligence on these respondents. The
Resolution of 21 March 2000.20 Court denied petitioners' Motion for Reconsideration in its 18
February 2004 Resolution.26
Hence, this petition.
The Court of Appeals' Ruling
Meanwhile, petitioners filed a Manifestation dated 12 April
200221 stating that respondents Dr. Estrada, Dr. Enriquez, Dr. In its Decision of 6 February 1998, the Court of Appeals
Villaflor, and Nurse Dumlao "need no longer be notified of the upheld the trial court's ruling. The Court of Appeals rejected
petition because they are absolutely not involved in the issue petitioners' view that the doctrine in Darling v. Charleston
raised before the [Court], regarding the liability of Community Memorial Hospital27 applies to this case. According
[CMC]."22 Petitioners stressed that the subject matter of this to the Court of Appeals, the present case differs from
petition is the liability of CMC for the negligence of Dr. the Darling case since Dr. Estrada is an independent
Estrada.23 contractor-physician whereas the Darling case involved a
physician and a nurse who were employees of the hospital.
The Court issued a Resolution dated 9 September
200224 dispensing with the requirement to submit the correct Citing other American cases, the Court of Appeals further held
and present addresses of respondents Dr. Estrada, Dr. that the mere fact that a hospital permitted a physician to
Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated practice medicine and use its facilities is not sufficient to
that with the filing of petitioners' Manifestation, it should be render the hospital liable for the physician's negligence.28 A
understood that they are claiming only against respondents hospital is not responsible for the negligence of a physician
CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed who is an independent contractor.29
their respective comments. Petitioners are foregoing further
claims against respondents Dr. Estrada, Dr. Enriquez, Dr. The Court of Appeals found the cases of Davidson v.
Villaflor, and Nurse Dumlao. Conole30 and Campbell v. Emma Laing Stevens
Hospital31applicable to this case. Quoting Campbell, the Court of
The Court noted that Dr. Estrada did not appeal the decision Appeals stated that where there is no proof that defendant
of the Court of Appeals affirming the decision of the Regional physician was an employee of defendant hospital or that
Trial Court. Accordingly, the decision of the Court of Appeals, defendant hospital had reason to know that any acts of
affirming the trial court's judgment, is already final as against malpractice would take place, defendant hospital could not be
Dr. Oscar Estrada. held liable for its failure to intervene in the relationship of
physician-patient between defendant physician and plaintiff.
Petitioners filed a motion for reconsideration25 of the Court's 9
September 2002 Resolution claiming that Dr. Enriquez, Dr.
On the liability of the other respondents, the Court of Appeals The petition is partly meritorious.
applied the "borrowed servant" doctrine considering that Dr.
Estrada was an independent contractor who was merely On the Liability of CMC
exercising hospital privileges. This doctrine provides that once
the surgeon enters the operating room and takes charge of the Dr. Estrada's negligence in handling the treatment and
proceedings, the acts or omissions of operating room management of Corazon's condition which ultimately resulted
personnel, and any negligence associated with such acts or in Corazon's death is no longer in issue. Dr. Estrada did not
omissions, are imputable to the surgeon.32 While the assisting appeal the decision of the Court of Appeals which affirmed
physicians and nurses may be employed by the hospital, or the ruling of the trial court finding Dr. Estrada solely liable for
engaged by the patient, they normally become the temporary damages. Accordingly, the finding of the trial court on Dr.
servants or agents of the surgeon in charge while the operation Estrada's negligence is already final.
is in progress, and liability may be imposed upon the surgeon
for their negligent acts under the doctrine of respondeat Petitioners maintain that CMC is vicariously liable for Dr.
superior.33 Estrada's negligence based on Article 2180 in relation to
Article 2176 of the Civil Code. These provisions pertinently
The Court of Appeals concluded that since Rogelio engaged state:
Dr. Estrada as the attending physician of his wife, any liability
for malpractice must be Dr. Estrada's sole responsibility. Art. 2180. The obligation imposed by article 2176 is
demandable not only for one's own acts or omissions,
While it found the amount of damages fair and reasonable, the but also for those of persons for whom one is
Court of Appeals held that no interest could be imposed on responsible.
unliquidated claims or damages.
xxxx
The Issue
Employers shall be liable for the damages caused by
Basically, the issue in this case is whether CMC is vicariously their employees and household helpers acting within
liable for the negligence of Dr. Estrada. The resolution of this the scope of their assigned tasks, even though the
issue rests, on the other hand, on the ascertainment of the former are not engaged in any business or industry.
relationship between Dr. Estrada and CMC. The Court also
believes that a determination of the extent of liability of the xxxx
other respondents is inevitable to finally and completely
dispose of the present controversy. The responsibility treated of in this article shall cease
when the persons herein mentioned prove that they
The Ruling of the Court
 observed all the diligence of a good father of a family CMC alleges that Dr. Estrada is an independent contractor "for
to prevent damage. whose actuations CMC would be a total stranger." CMC
maintains that it had no control or supervision over Dr.
Art. 2176. Whoever by act or omission causes damage Estrada in the exercise of his medical profession.
to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence, if The Court had the occasion to determine the relationship
there is no pre-existing contractual relation between between a hospital and a consultant or visiting physician and
the parties, is called a quasi-delict and is governed by the liability of such hospital for that physician's negligence
the provisions of this Chapter. in Ramos v. Court of Appeals,39 to wit:

Similarly, in the United States, a hospital which is the In the first place, hospitals exercise significant control
employer, master, or principal of a physician employee, in the hiring and firing of consultants and in the
servant, or agent, may be held liable for the physician's conduct of their work within the hospital premises.
negligence under the doctrine of respondeat superior.34 Doctors who apply for "consultant" slots, visiting or
attending, are required to submit proof of completion
In the present case, petitioners maintain that CMC, in allowing of residency, their educational qualifications; generally,
Dr. Estrada to practice and admit patients at CMC, should be evidence of accreditation by the appropriate board
liable for Dr. Estrada's malpractice. Rogelio claims that he (diplomate), evidence of fellowship in most cases, and
knew Dr. Estrada as an accredited physician of CMC, though references. These requirements are carefully
he discovered later that Dr. Estrada was not a salaried scrutinized by members of the hospital administration
employee of the CMC.35 Rogelio further claims that he was or by a review committee set up by the hospital who
dealing with CMC, whose primary concern was the treatment either accept or reject the application. This is
and management of his wife's condition. Dr. Estrada just particularly true with respondent hospital.
happened to be the specific person he talked to representing
CMC.36 Moreover, the fact that CMC made Rogelio sign a After a physician is accepted, either as a visiting or
Consent on Admission and Admission Agreement37 and a attending consultant, he is normally required to attend
Consent to Operation printed on the letterhead of CMC clinico-pathological conferences, conduct bedside
indicates that CMC considered Dr. Estrada as a member of its rounds for clerks, interns and residents, moderate
medical staff. grand rounds and patient audits and perform other
tasks and responsibilities, for the privilege of being
On the other hand, CMC disclaims liability by asserting that able to maintain a clinic in the hospital, and/or for the
Dr. Estrada was a mere visiting physician and that it admitted privilege of admitting patients into the hospital. In
Corazon because her physical condition then was classified an addition to these, the physician's performance as a
emergency obstetrics case.38 specialist is generally evaluated by a peer review
committee on the basis of mortality and morbidity
statistics, and feedback from patients, nurses, interns While the Court in Ramos did not expound on the control test,
and residents. A consultant remiss in his duties, or a such test essentially determines whether an employment
consultant who regularly falls short of the minimum relationship exists between a physician and a hospital based
standards acceptable to the hospital or its peer review on the exercise of control over the physician as to details.
committee, is normally politely terminated. Specifically, the employer (or the hospital) must have the right
to control both the means and the details of the process by
In other words, private hospitals, hire, fire and exercise which the employee (or the physician) is to accomplish his
real control over their attending and visiting task.41
"consultant" staff. While "consultants" are not,
technically employees, a point which respondent After a thorough examination of the voluminous records of
hospital asserts in denying all responsibility for the this case, the Court finds no single evidence pointing to CMC's
patient's condition, the control exercised, the hiring, exercise of control over Dr. Estrada's treatment and
and the right to terminate consultants all fulfill the management of Corazon's condition. It is undisputed that
important hallmarks of an employer-employee throughout Corazon's pregnancy, she was under the exclusive
relationship, with the exception of the payment of prenatal care of Dr. Estrada. At the time of Corazon's
wages. In assessing whether such a relationship in admission at CMC and during her delivery, it was Dr. Estrada,
fact exists, the control test is determining. assisted by Dr. Villaflor, who attended to Corazon. There was
Accordingly, on the basis of the foregoing, we rule no showing that CMC had a part in diagnosing Corazon's
that for the purpose of allocating responsibility in condition. While Dr. Estrada enjoyed staff privileges at CMC,
medical negligence cases, an employer-employee such fact alone did not make him an employee of CMC.42 CMC
relationship in effect exists between hospitals and merely allowed Dr. Estrada to use its facilities43 when Corazon
their attending and visiting physicians.This being the was about to give birth, which CMC considered an emergency.
case, the question now arises as to whether or not Considering these circumstances, Dr. Estrada is not an
respondent hospital is solidarily liable with respondent employee of CMC, but an independent contractor.
doctors for petitioner's condition.
The question now is whether CMC is automatically exempt
The basis for holding an employer solidarily from liability considering that Dr. Estrada is an independent
responsible for the negligence of its employee is found contractor-physician.
in Article 2180 of the Civil Code which considers a
person accountable not only for his own acts but also In general, a hospital is not liable for the negligence of an
for those of others based on the former's responsibility independent contractor-physician. There is, however, an
under a relationship of patria potestas. x x exception to this principle. The hospital may be liable if the
x40 (Emphasis supplied) physician is the "ostensible" agent of the hospital.44 This
exception is also known as the "doctrine of apparent
authority."45 In Gilbert v. Sycamore Municipal Hospital,46 the
Illinois Supreme Court explained the doctrine of apparent hospital to provide complete emergency room care,
authority in this wise: rather than upon a specific physician.

[U]nder the doctrine of apparent authority a hospital The doctrine of apparent authority essentially involves two
can be held vicariously liable for the negligent acts of a factors to determine the liability of an independent-contractor
physician providing care at the hospital, regardless of physician.
whether the physician is an independent contractor,
unless the patient knows, or should have known, that The first factor focuses on the hospital's manifestations and is
the physician is an independent contractor. The sometimes described as an inquiry whether the hospital acted
elements of the action have been set out as follows: in a manner which would lead a reasonable person to
conclude that the individual who was alleged to be negligent
"For a hospital to be liable under the doctrine of was an employee or agent of the hospital.47 In this regard, the
apparent authority, a plaintiff must show that: (1) the hospital need not make express representations to the
hospital, or its agent, acted in a manner that would patient that the treating physician is an employee of the
lead a reasonable person to conclude that the hospital; rather a representation may be general and
individual who was alleged to be negligent was an implied.48
employee or agent of the hospital; (2) where the acts of
the agent create the appearance of authority, the The doctrine of apparent authority is a species of the doctrine
plaintiff must also prove that the hospital had of estoppel. Article 1431 of the Civil Code provides that
knowledge of and acquiesced in them; and (3) the "[t]hrough estoppel, an admission or representation is
plaintiff acted in reliance upon the conduct of the rendered conclusive upon the person making it, and cannot be
hospital or its agent, consistent with ordinary care and denied or disproved as against the person relying thereon."
prudence." Estoppel rests on this rule: "Whenever a party has, by his own
declaration, act, or omission, intentionally and deliberately led
The element of "holding out" on the part of the hospital another to believe a particular thing true, and to act upon such
does not require an express representation by the belief, he cannot, in any litigation arising out of such
hospital that the person alleged to be negligent is an declaration, act or omission, be permitted to falsify it."49
employee. Rather, the element is satisfied if the
hospital holds itself out as a provider of emergency In the instant case, CMC impliedly held out Dr. Estrada as a
room care without informing the patient that the care is member of its medical staff. Through CMC's acts, CMC
provided by independent contractors. clothed Dr. Estrada with apparent authority thereby leading
the Spouses Nogales to believe that Dr. Estrada was an
The element of justifiable reliance on the part of the employee or agent of CMC. CMC cannot now repudiate such
plaintiff is satisfied if the plaintiff relies upon the authority.
First, CMC granted staff privileges to Dr. Estrada. CMC kind of nature, arising from directly or indirectly, or by
extended its medical staff and facilities to Dr. Estrada. Upon reason of said cure, treatment, or retreatment, or
Dr. Estrada's request for Corazon's admission, CMC, through emergency measures or intervention of said physician,
its personnel, readily accommodated Corazon and updated the Capitol Medical Center and/or its staff.
Dr. Estrada of her condition.
x x x x51 (Emphasis supplied)
Second, CMC made Rogelio sign consent forms printed on
CMC letterhead. Prior to Corazon's admission and supposed While the Consent to Operation pertinently reads, thus:
hysterectomy, CMC asked Rogelio to sign release forms, the
contents of which reinforced Rogelio's belief that Dr. Estrada I, ROGELIO NOGALES, x x x, of my own volition and
was a member of CMC's medical staff.50 The Consent on free will, do consent and submit said CORAZON
Admission and Agreement explicitly provides: NOGALES to Hysterectomy, by the Surgical Staff and
Anesthesiologists of Capitol Medical Center and/or
KNOW ALL MEN BY THESE PRESENTS: whatever succeeding operations, treatment, or
emergency measures as may be necessary and most
I, Rogelio Nogales, of legal age, a resident of 1974 M. expedient; and, that I will not hold liable or responsible
H. Del Pilar St., Malate Mla., being the and hereby waive and forever discharge and hold free
father/mother/brother/sister/spouse/relative/ the Surgeon, his assistants, anesthesiologists, the
guardian/or person in custody of Ma. Corazon, and Capitol Medical Center and/or its staff, from any and
representing his/her family, of my own volition and all claims of whatever kind of nature, arising from
free will, do consent and submit said Ma. Corazon to directly or indirectly, or by reason of said operation or
Dr. Oscar Estrada (hereinafter referred to as Physician) operations, treatment, or emergency measures, or
for cure, treatment, retreatment, or emergency intervention of the Surgeon, his assistants,
measures, that the Physician, personally or by and anesthesiologists, the Capitol Medical Center and/or
through the Capitol Medical Center and/or its staff, its staff.52 (Emphasis supplied)
may use, adapt, or employ such means, forms or
methods of cure, treatment, retreatment, or Without any indication in these consent forms that Dr. Estrada
emergency measures as he may see best and most was an independent contractor-physician, the Spouses
expedient; that Ma. Corazon and I will comply with Nogales could not have known that Dr. Estrada was an
any and all rules, regulations, directions, and independent contractor. Significantly, no one from CMC
instructions of the Physician, the Capitol Medical informed the Spouses Nogales that Dr. Estrada was an
Center and/or its staff; and, that I will not hold liable independent contractor. On the contrary, Dr. Atencio, who
or responsible and hereby waive and forever discharge was then a member of CMC Board of Directors, testified that
and hold free the Physician, the Capitol Medical Center Dr. Estrada was part of CMC's surgical staff.53
and/or its staff, from any and all claims of whatever
Third, Dr. Estrada's referral of Corazon's profuse vaginal during her delivery which would be better addressed and
bleeding to Dr. Espinola, who was then the Head of the treated in a modern and big hospital such as CMC. Moreover,
Obstetrics and Gynecology Department of CMC, gave the Rogelio's consent in Corazon's hysterectomy to be performed
impression that Dr. Estrada as a member of CMC's medical by a different physician, namely Dr. Espinola, is a clear
staff was collaborating with other CMC-employed specialists indication of Rogelio's confidence in CMC's surgical staff.
in treating Corazon.
CMC's defense that all it did was "to extend to [Corazon] its
The second factor focuses on the patient's reliance. It is facilities" is untenable. The Court cannot close its eyes to the
sometimes characterized as an inquiry on whether the plaintiff reality that hospitals, such as CMC, are in the business of
acted in reliance upon the conduct of the hospital or its agent, treatment. In this regard, the Court agrees with the
consistent with ordinary care and prudence.54 observation made by the Court of Appeals of North Carolina
in Diggs v. Novant Health, Inc.,57 to wit:
The records show that the Spouses Nogales relied upon a
perceived employment relationship with CMC in accepting "The conception that the hospital does not undertake to
Dr. Estrada's services. Rogelio testified that he and his wife treat the patient, does not undertake to act through its
specifically chose Dr. Estrada to handle Corazon's delivery not doctors and nurses, but undertakes instead simply to
only because of their friend's recommendation, but more procure them to act upon their own responsibility, no
importantly because of Dr. Estrada's "connection with a longer reflects the fact. Present day hospitals, as their
reputable hospital, the [CMC]."55 In other words, Dr. Estrada's manner of operation plainly demonstrates, do far
relationship with CMC played a significant role in the Spouses more than furnish facilities for treatment. They
Nogales' decision in accepting Dr. Estrada's services as the regularly employ on a salary basis a large staff of
obstetrician-gynecologist for Corazon's delivery. Moreover, as physicians, nurses and internes [sic], as well as
earlier stated, there is no showing that before and during administrative and manual workers, and they charge
Corazon's confinement at CMC, the Spouses Nogales knew or patients for medical care and treatment, collecting for
should have known that Dr. Estrada was not an employee of such services, if necessary, by legal action. Certainly,
CMC. the person who avails himself of 'hospital facilities'
expects that the hospital will attempt to cure him, not
Further, the Spouses Nogales looked to CMC to provide the that its nurses or other employees will act on their
best medical care and support services for Corazon's delivery. own responsibility." x x x (Emphasis supplied)
The Court notes that prior to Corazon's fourth pregnancy, she
used to give birth inside a clinic. Considering Corazon's age Likewise unconvincing is CMC's argument that petitioners are
then, the Spouses Nogales decided to have their fourth child estopped from claiming damages based on the Consent on
delivered at CMC, which Rogelio regarded one of the best Admission and Consent to Operation. Both release forms
hospitals at the time.56 This is precisely because the Spouses consist of two parts. The first part gave CMC permission to
Nogales feared that Corazon might experience complications administer to Corazon any form of recognized medical
treatment which the CMC medical staff deemed advisable. remaining respondents to put an end finally to this more than
The second part of the documents, which may properly be two-decade old controversy.
described as the releasing part, releases CMC and its
employees "from any and all claims" arising from or by reason a) Dr. Ely Villaflor
of the treatment and operation.
Petitioners blame Dr. Ely Villaflor for failing to diagnose the
The documents do not expressly release CMC from liability for cause of Corazon's bleeding and to suggest the correct remedy
injury to Corazon due to negligence during her treatment or to Dr. Estrada.60 Petitioners assert that it was Dr. Villaflor's
operation. Neither do the consent forms expressly exempt duty to correct the error of Nurse Dumlao in the
CMC from liability for Corazon's death due to negligence administration of hemacel.
during such treatment or operation. Such release forms, being
in the nature of contracts of adhesion, are construed strictly The Court is not persuaded. Dr. Villaflor admitted
against hospitals. Besides, a blanket release in favor of administering a lower dosage of magnesium sulfate. However,
hospitals "from any and all claims," which includes claims due this was after informing Dr. Estrada that Corazon was no
to bad faith or gross negligence, would be contrary to public longer in convulsion and that her blood pressure went down
policy and thus void. to a dangerous level.61 At that moment, Dr. Estrada instructed
Dr. Villaflor to reduce the dosage of magnesium sulfate from
Even simple negligence is not subject to blanket release in 10 to 2.5 grams. Since petitioners did not dispute Dr. Villaflor's
favor of establishments like hospitals but may only mitigate allegation, Dr. Villaflor's defense remains uncontroverted. Dr.
liability depending on the circumstances.58 When a person Villaflor's act of administering a lower dosage of magnesium
needing urgent medical attention rushes to a hospital, he sulfate was not out of her own volition or was in
cannot bargain on equal footing with the hospital on the terms contravention of Dr. Estrada's order.
of admission and operation. Such a person is literally at the
mercy of the hospital. There can be no clearer example of a b) Dr. Rosa Uy
contract of adhesion than one arising from such a dire
situation. Thus, the release forms of CMC cannot relieve CMC Dr. Rosa Uy's alleged negligence consisted of her failure (1) to
from liability for the negligent medical treatment of Corazon. call the attention of Dr. Estrada on the incorrect dosage of
magnesium sulfate administered by Dr. Villaflor; (2) to take
On the Liability of the Other Respondents corrective measures; and (3) to correct Nurse Dumlao's wrong
method of hemacel administration.
Despite this Court's pronouncement in its 9 September
200259 Resolution that the filing of petitioners' Manifestation The Court believes Dr. Uy's claim that as a second year
confined petitioners' claim only against CMC, Dr. Espinola, resident physician then at CMC, she was merely authorized to
Dr. Lacson, and Dr. Uy, who have filed their comments, the take the clinical history and physical examination of
Court deems it proper to resolve the individual liability of the
Corazon.62 However, that routine internal examination did transfusion to Corazon. Dr. Lacson competently explained the
not ipso facto make Dr. Uy liable for the errors committed by procedure before blood could be given to the patient.65 Taking
Dr. Estrada. Further, petitioners' imputation of negligence into account the bleeding time, clotting time and cross-
rests on their baseless assumption that Dr. Uy was present at matching, Dr. Lacson stated that it would take approximately
the delivery room. Nothing shows that Dr. Uy participated in 45-60 minutes before blood could be ready for
delivering Corazon's baby. Further, it is unexpected from Dr. transfusion.66 Further, no evidence exists that Dr. Lacson
Uy, a mere resident physician at that time, to call the attention neglected her duties as head of the blood bank.
of a more experienced specialist, if ever she was present at the
delivery room. e) Dr. Noe Espinola

c) Dr. Joel Enriquez Petitioners argue that Dr. Espinola should not have ordered
immediate hysterectomy without determining the underlying
Petitioners fault Dr. Joel Enriquez also for not calling the cause of Corazon's bleeding. Dr. Espinola should have first
attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao considered the possibility of cervical injury, and advised a
about their errors.63 Petitioners insist that Dr. Enriquez should thorough examination of the cervix, instead of believing
have taken, or at least suggested, corrective measures to rectify outright Dr. Estrada's diagnosis that the cause of bleeding was
such errors. uterine atony.

The Court is not convinced. Dr. Enriquez is an anesthesiologist Dr. Espinola's order to do hysterectomy which was based on
whose field of expertise is definitely not obstetrics and the information he received by phone is not negligence. The
gynecology. As such, Dr. Enriquez was not expected to correct Court agrees with the trial court's observation that Dr.
Dr. Estrada's errors. Besides, there was no evidence of Dr. Espinola, upon hearing such information about Corazon's
Enriquez's knowledge of any error committed by Dr. Estrada condition, believed in good faith that hysterectomy was the
and his failure to act upon such observation. correct remedy. At any rate, the hysterectomy did not push
through because upon Dr. Espinola's arrival, it was already
d) Dr. Perpetua Lacson too late. At the time, Corazon was practically dead.

Petitioners fault Dr. Perpetua Lacson for her purported delay f) Nurse J. Dumlao
in the delivery of blood Corazon needed.64 Petitioners claim
that Dr. Lacson was remiss in her duty of supervising the In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals,
blood bank staff. Fourth Circuit, held that to recover, a patient complaining of
injuries allegedly resulting when the nurse negligently injected
As found by the trial court, there was no unreasonable delay medicine to him intravenously instead of intramuscularly had
in the delivery of blood from the time of the request until the to show that (1) an intravenous injection constituted a lack of
reasonable and ordinary care; (2) the nurse injected medicine
intravenously; and (3) such injection was the proximate cause
of his injury.

In the present case, there is no evidence of Nurse Dumlao's

alleged failure to follow Dr. Estrada's specific instructions.
Even assuming Nurse Dumlao defied Dr. Estrada's order,
there is no showing that side-drip administration of hemacel
proximately caused Corazon's death. No evidence linking
Corazon's death and the alleged wrongful hemacel
administration was introduced. Therefore, there is no basis to
hold Nurse Dumlao liable for negligence.

On the Award of Interest on Damages

The award of interest on damages is proper and allowed

under Article 2211 of the Civil Code, which states that in
crimes and quasi-delicts, interest as a part of the damages
may, in a proper case, be adjudicated in the discretion of the
court.68

WHEREFORE, the Court PARTLY GRANTS the petition. The

Court finds respondent Capitol Medical Center vicariously
liable for the negligence of Dr. Oscar Estrada. The amounts
of P105,000 as actual damages and P700,000 as moral damages
should each earn legal interest at the rate of six percent (6%)
per annum computed from the date of the judgment of the
trial court. The Court affirms the rest of the Decision dated 6
February 1998 and Resolution dated 21 March 2000 of the
Court of Appeals in CA-G.R. CV No. 45641.

SO ORDERED.
COCA COLA BOTTLERS (PHILS.), INC./ERIC terminate the contract upon giving a thirty (30)-day
MONTINOLA, Manager, Petitioners, written notice to the other.
vs.
DR. DEAN N. CLIMACO, Respondent. 2. The compensation to be paid by the company for the
services of the DOCTOR is hereby fixed at
DECISION PESOS: Three Thousand Eight Hundred (₱3,800.00) per
month. The DOCTOR may charge professional fee for
AZCUNA, J.: hospital services rendered in line with his
specialization. All payments in connection with the
This is a petition for review on certiorari of the Decision of the Retainer Agreement shall be subject to a withholding
Court of Appeals1 promulgated on July 7, 2000, and its tax of ten percent (10%) to be withheld by the
Resolution promulgated on January 30, 2001, denying COMPANY under the Expanded Withholding Tax
petitioner’s motion for reconsideration. The Court of Appeals System. In the event the withholding tax rate shall be
ruled that an employer-employee relationship exists between increased or decreased by appropriate laws, then the
respondent Dr. Dean N. Climaco and petitioner Coca-Cola rate herein stipulated shall accordingly be increased or
Bottlers Phils., Inc. (Coca-Cola), and that respondent was decreased pursuant to such laws.
illegally dismissed.
3. That in consideration of the above mentioned
Respondent Dr. Dean N. Climaco is a medical doctor who was retainer’s fee, the DOCTOR agrees to perform the
hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a duties and obligations enumerated in the
Retainer Agreement that stated: COMPREHENSIVE MEDICAL PLAN, hereto attached
as Annex "A" and made an integral part of this
WHEREAS, the COMPANY desires to engage on a retainer Retainer Agreement.
basis the services of a physician and the said DOCTOR is
accepting such engagement upon terms and conditions 4. That the applicable provisions in the Occupational
hereinafter set forth; Safety and Health Standards, Ministry of Labor and
Employment shall be followed.
NOW, THEREFORE, in consideration of the premises and the
mutual agreement hereinafter contained, the parties agree as 5. That the DOCTOR shall be directly responsible to
follows: the employee concerned and their dependents for any
injury inflicted on, harm done against or damage
1. This Agreement shall only be for a period of one (1) caused upon the employee of the COMPANY or their
year beginning January 1, 1988 up to December 31, dependents during the course of his examination,
1988. The said term notwithstanding, either party may treatment or consultation, if such injury, harm or
damage was committed through professional
 negligence or incompetence or due to the other valid 1. Prompt and adequate treatment of occupational and
causes for action. non-occupational injuries and diseases.

6. That the DOCTOR shall observe clinic hours at the 2. To protect employees from any occupational health
COMPANY’S premises from Monday to Saturday of a hazard by evaluating health factors related to working
minimum of two (2) hours each day or a maximum conditions.
of TWO (2) hours each day or treatment from 7:30 a.m.
to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively 3. To encourage employees [to] maintain good personal
unless such schedule is otherwise changed by the health by setting up employee orientation and
COMPANY as [the] situation so warrants, subject to education on health, hygiene and sanitation, nutrition,
the Labor Code provisions on Occupational Safety and physical fitness, first aid training, accident prevention
Health Standards as the COMPANY may determine. It and personnel safety.
is understood that the DOCTOR shall stay at least two
(2) hours a day in the COMPANY clinic and that such 4. To evaluate other matters relating to health such as
two (2) hours be devoted to the workshift with the absenteeism, leaves and termination.
most number of employees. It is further understood
that the DOCTOR shall be on call at all times during 5. To give family planning motivations.
the other workshifts to attend to emergency case[s];
B. COVERAGE
7. That no employee-employer relationship shall exist
between the COMPANY and the DOCTOR whilst this 1. All employees and their dependents are embraced
contract is in effect, and in case of its termination, the by this program.
DOCTOR shall be entitled only to such retainer fee as
may be due him at the time of termination.2 2. The health program shall cover pre-employment and
annual p.e., hygiene and sanitation, immunizations,
The Comprehensive Medical Plan,3 which contains the duties family planning, physical fitness and athletic programs
and responsibilities of respondent, adverted to in the Retainer and other activities such as group health education
Agreement, provided: program, safety and first aid classes, organization of
health and safety committees.
A. OBJECTIVE
3. Periodically, this program will be reviewed and
These objectives have been set to give full consideration to adjusted based on employees’ needs.
[the] employees’ and dependents’ health:
C. ACTIVITIES
 1. Annual Physical Examination. It is noted that as early as September 1992, petitioner was
already making inquiries regarding his status with petitioner
2. Consultations, diagnosis and treatment of company. First, he wrote a letter addressed to Dr. Willie Sy,
occupational and non-occupational illnesses and the Acting President and Chairperson of the Committee on
injuries. Membership, Philippine College of Occupational Medicine. In
response, Dr. Sy wrote a letter5 to the Personnel Officer of
3. Immunizations necessary for job conditions. Coca-Cola Bottlers Phils., Bacolod City, stating that
respondent should be considered as a regular part-time
4. Periodic inspections for food services and rest rooms. physician, having served the company continuously for four
(4) years. He likewise stated that respondent must receive all
5. Conduct health education programs and present the benefits and privileges of an employee under Article 157
education materials. (b)6 of the Labor Code.

6. Coordinate with Safety Committee in developing Petitioner company, however, did not take any action. Hence,
specific studies and program to minimize respondent made another inquiry directed to the Assistant
environmental health hazards. Regional Director, Bacolod City District Office of the
Department of Labor and Employment (DOLE), who referred
7. Give family planning motivations. the inquiry to the Legal Service of the DOLE, Manila. In his
letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal
8. Coordinate with Personnel Department regarding Service, DOLE, stated that he believed that an employer-
physical fitness and athletic programs. employee relationship existed between petitioner and
respondent based on the Retainer Agreement and the
9. Visiting and follow-up treatment of Company Comprehensive Medical Plan, and the application of the "four-
employees and their dependents confined in the fold" test. However, Director Ancheta emphasized that the
existence of employer-employee relationship is a question of
hospital.
fact. Hence, termination disputes or money claims arising
from employer-employee relations exceeding ₱5,000 may be
The Retainer Agreement, which began on January 1, 1988, was
filed with the National Labor Relations Commission (NLRC).
renewed annually. The last one expired on December 31, 1993.
He stated that their opinion is strictly advisory.
Despite the non-renewal of the Retainer Agreement,
respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter4 dated March 9, An inquiry was likewise addressed to the Social Security
1995 from petitioner company concluding their retainership System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of
agreement effective 30 days from receipt thereof. SSS-Bacolod City, wrote a letter8 to the Personnel Officer of
Coca-Cola Bottlers Phils., Inc. informing the latter that the
legal staff of his office was of the opinion that the services of
respondent partake of the nature of work of a regular SO ORDERED.11
company doctor and that he was, therefore, subject to social
security coverage. In a Decision12 dated February 24, 1997, Labor Arbiter
Benjamin Pelaez dismissed the case for illegal dismissal (RAB
Respondent inquired from the management of petitioner Case No. 06-04-10177-95) in view of the previous finding of
company whether it was agreeable to recognizing him as a Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-
regular employee. The management refused to do so. 10138-94 that complainant therein, Dr. Dean Climaco, is not an
employee of Coca-Cola Bottlers Phils., Inc.
On February 24, 1994, respondent filed a Complaint9 before
the NLRC, Bacolod City, seeking recognition as a regular Respondent appealed both decisions to the NLRC, Fourth
employee of petitioner company and prayed for the payment Division, Cebu City.
of all benefits of a regular employee, including 13th Month
Pay, Cost of Living Allowance, Holiday Pay, Service Incentive In a Decision13 promulgated on November 28, 1997, the NLRC
Leave Pay, and Christmas Bonus. The case was docketed as dismissed the appeal in both cases for lack of merit. It declared
RAB Case No. 06-02-10138-94. that no employer-employee relationship existed between
petitioner company and respondent based on the provisions of
While the complaint was pending before the Labor Arbiter, the Retainer Agreement which contract governed respondent’s
respondent received a letter dated March 9, 1995 from employment.
petitioner company concluding their retainership agreement
effective thirty (30) days from receipt thereof. This prompted Respondent’s motion for reconsideration was denied by the
respondent to file a complaint for illegal dismissal against NLRC in a Resolution14 promulgated on August 7, 1998.
petitioner company with the NLRC, Bacolod City. The case
was docketed as RAB Case No. 06-04-10177-95. Respondent filed a petition for review with the Court of
Appeals.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus
N. Rodriguez, Jr. found that petitioner company lacked the In a Decision promulgated on July 7, 2000, the Court of
power of control over respondent’s performance of his duties, Appeals ruled that an employer-employee relationship existed
and recognized as valid the Retainer Agreement between the between petitioner company and respondent after applying
parties. Thus, the Labor Arbiter dismissed respondent’s the four-fold test: (1) the power to hire the employee; (2) the
complaint in the first case, RAB Case No. 06-02-10138-94. The payment of wages; (3) the power of dismissal; and (4) the
dispositive portion of the Decision reads: employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished.
WHEREFORE, premises considered, judgment is hereby
rendered dismissing the instant complaint seeking recognition The Court of Appeals held:
as a regular employee.
The Retainer Agreement executed by and between the parties, It was stated in paragraph (3) that the doctor agrees to perform
when read together with the Comprehensive Medical Plan the duties and obligations enumerated in the Comprehensive
which was made an integral part of the retainer agreements, Medical Plan referred to above. In paragraph (6), the fixed and
coupled with the actual services rendered by the petitioner, definite hours during which the petitioner must render service
would show that all the elements of the above test are present. to the company is laid down.

First, the agreements provide that "the COMPANY desires to We say that there exists Coca-Cola’s power to control
engage on a retainer basis the services of a physician and the petitioner because the particular objectives and activities to be
said DOCTOR is accepting such engagement x x x" (Rollo, observed and accomplished by the latter are fixed and set
page 25). This clearly shows that Coca-Cola exercised its under the Comprehensive Medical Plan which was made an
power to hire the services of petitioner. integral part of the retainer agreement. Moreover, the times for
accomplishing these objectives and activities are likewise
Secondly, paragraph (2) of the agreements showed that controlled and determined by the company. Petitioner is
petitioner would be entitled to a final compensation of Three subject to definite hours of work, and due to this, he performs
Thousand Eight Hundred Pesos per month, which amount his duties to Coca-Cola not at his own pleasure but according
was later raised to Seven Thousand Five Hundred on the latest to the schedule dictated by the company.
contract. This would represent the element of payment of
wages. In addition, petitioner was designated by Coca-Cola to be a
member of its Bacolod Plant’s Safety Committee. The minutes
Thirdly, it was provided in paragraph (1) of the agreements of the meeting of the said committee dated February 16, 1994
that the same shall be valid for a period of one year. "The said included the name of petitioner, as plant physician, as among
term notwithstanding, either party may terminate the contract those comprising the committee.
upon giving a thirty (30) day written notice to the
other." (Rollo, page 25). This would show that Coca-Cola had It was averred by Coca-Cola in its comment that they
the power of dismissing the petitioner, as it later on did, and exercised no control over petitioner for the reason that the
this could be done for no particular reason, the sole latter was not directed as to the procedure and manner of
requirement being the former’s compliance with the 30-day performing his assigned tasks. It went as far as saying that
notice requirement. "petitioner was not told how to immunize, inject, treat or
diagnose the employees of the respondent (Rollo, page 228).
Lastly, paragraphs (3) and (6) of the agreements reveal that We believe that if the "control test" would be interpreted this
Coca-Cola exercised the most important element of all, that is, strictly, it would result in an absurd and ridiculous situation
control, over the conduct of petitioner in the latter’s wherein we could declare that an entity exercises control over
performance of his duties as a doctor for the company. another’s activities only in instances where the latter is
directed by the former on each and every stage of performance
of the particular activity. Anything less than that would be 1. Reinstate the petitioner with full backwages without
tantamount to no control at all. loss of seniority rights from the time his compensation
was withheld up to the time he is actually reinstated;
To our minds, it is sufficient if the task or activity, as well as however, if reinstatement is no longer possible, to pay
the means of accomplishing it, is dictated, as in this case where the petitioner separation pay equivalent to one (1)
the objectives and activities were laid out, and the specific time month’s salary for every year of service rendered,
for performing them was fixed by the controlling party.15 computed at the rate of his salary at the time he was
dismissed, plus backwages.
Moreover, the Court of Appeals declared that respondent
should be classified as a regular employee having rendered six 2. Pay petitioner moral damages in the amount of
years of service as plant physician by virtue of several ₱50,000.00.
renewed retainer agreements. It underscored the provision in
Article 28016 of the Labor Code stating that "any employee 3. Pay petitioner exemplary damages in the amount of
who has rendered at least one year of service, whether such ₱50,000.00.
service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed, 4. Give to petitioner all other benefits to which a
and his employment shall continue while such activity exists." regular employee of Coca-Cola is entitled from the
Further, it held that the termination of respondent’s services time petitioner became a regular employee (one year
without any just or authorized cause constituted illegal from effectivity date of employment) until the time of
dismissal. actual payment.

In addition, the Court of Appeals found that respondent’s SO ORDERED.17

dismissal was an act oppressive to labor and was effected in a
wanton, oppressive or malevolent manner which entitled Petitioner company filed a motion for reconsideration of the
respondent to moral and exemplary damages. Decision of the Court of Appeals.

The dispositive portion of the Decision reads: In a Resolution promulgated on January 30, 2001, the Court of
Appeals stated that petitioner company noted that its Decision
WHEREFORE, in view of the foregoing, the Decision of the failed to mention whether respondent was a full-time or part-
National Labor Relations Commission dated November 28, time regular employee. It also questioned how the benefits
1997 and its Resolution dated August 7, 1998 are found to under their Collective Bargaining Agreement which the Court
have been issued with grave abuse of discretion in applying awarded to respondent could be given to him considering that
the law to the established facts, and are hereby REVERSED such benefits were given only to regular employees who
and SET ASIDE, and private respondent Coca-Cola Bottlers, render a full day’s work of not less that eight hours. It was
Phils.. Inc. is hereby ordered to:
admitted that respondent is only required to work for two 3. THAT THE HONORABLE COURT OF APPEALS
hours per day. COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING
The Court of Appeals clarified that respondent was a "regular THE FINDINGS OF THE LABOR ARBITERS AND
part-time employee and should be accorded all the THE NATIONAL LABOR RELATIONS
proportionate benefits due to this category of employees of COMMISSION, AND HOLDING INSTEAD THAT
[petitioner] Corporation under the CBA." It sustained its THE PETITIONERS EXERCISED CONTROL OVER
decision on all other matters sought to be reconsidered. THE WORK OF THE RESPONDENT.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc. 4. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
The issues are: SUBSTANTIAL QUESTION OF LAW, IN REVERSING
THE FINDINGS OF THE LABOR ARBITERS AND
1. THAT THE HONORABLE COURT OF APPEALS THE NATIONAL LABOR RELATIONS
COMMITTED REVERSIBLE ERROR, BASED ON A COMMISSION, AND FINDING THAT THERE IS
SUBSTANTIAL QUESTION OF LAW, IN REVERSING EMPLOYER-EMPLOYEE RELATIONSHIP
THE FINDINGS OF THE LABOR ARBITERS AND PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
THE NATIONAL LABOR RELATIONS
COMMISSION, CONTRARY TO THE DECISIONS OF 5. THAT THE HONORABLE COURT OF APPEALS
THE HONORABLE SUPREME COURT ON THE COMMITTED REVERSIBLE ERROR, BASED ON A
MATTER. SUBSTANTIAL QUESTION OF LAW, IN REVERSING
THE FINDINGS OF THE LABOR ARBITERS AND
2. THAT THE HONORABLE COURT OF APPEALS THE NATIONAL LABOR RELATIONS
COMMITTED REVERSIBLE ERROR, BASED ON A COMMISSION, AND FINDING THAT THERE
SUBSTANTIAL QUESTION OF LAW, IN REVERSING EXISTED ILLEGAL DISMISSAL WHEN THE
THE FINDINGS OF THE LABOR ARBITERS AND EMPLOYENT OF THE RESPONDENT WAS
THE NATIONAL LABOR RELATIONS TERMINATED WITHOUT JUST CAUSE.
COMMISSION, AND HOLDING INSTEAD THAT
THE WORK OF A PHYSICIAN IS NECESSARY AND 6. THAT THE HONORABLE COURT OF APPEALS
DESIRABLE TO THE BUSINESS OF SOFTDRINKS COMMITTED REVERSIBLE ERROR, BASED ON A
MANUFACTURING, CONTRARY TO THE RULINGS SUBSTANTIAL QUESTION OF LAW, IN REVERSING
OF THE SUPREME COURT IN ANALOGOUS CASES. THE FINDINGS OF THE LABOR ARBITERS AND
THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE
RESPONDENT IS A REGULAR PART TIME
 EMPLOYEE WHO IS ENTITLED TO examination, how to immunize, or how to diagnose and treat
PROPORTIONATE BENEFITS AS A REGULAR PART his patients, employees of [petitioner] company, in each case."
TIME EMPLOYEE ACCORDING TO THE He likened this case to that of Neri v. National Labor Relations
PETITIONERS’ CBA. Commission,19 which held:

7. THAT THE HONORABLE COURT OF APPEALS In the case of petitioner Neri, it is admitted that FEBTC issued
COMMITTED REVERSIBLE ERROR, BASED ON A a job description which detailed her functions as a radio/telex
SUBSTANTIAL QUESTION OF LAW, IN REVERSING operator. However, a cursory reading of the job description
THE FINDINGS OF THE LABOR ARBITERS AND shows that what was sought to be controlled by FEBTC was
THE NATIONAL LABOR RELATIONS actually the end result of the task, e.g., that the daily incoming
COMMISSION, AND FINDING THAT THE and outgoing telegraphic transfer of funds received and
RESPONDENT IS ENTITLED TO MORAL AND relayed by her, respectively, tallies with that of the register.
EXEMPLARY DAMAGES. The guidelines were laid down merely to ensure that the
desired end result was achieved. It did not, however, tell Neri
The main issue in this case is whether or not there exists an how the radio/telex machine should be operated.
employer-employee relationship between the parties. The
resolution of the main issue will determine whether the In effect, the Labor Arbiter held that petitioner company,
termination of respondent’s employment is illegal. through the Comprehensive Medical Plan, provided
guidelines merely to ensure that the end result was achieved,
The Court, in determining the existence of an employer- but did not control the means and methods by which
employee relationship, has invariably adhered to the four-fold respondent performed his assigned tasks.
test: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the The NLRC affirmed the findings of the Labor Arbiter and
power to control the employee’s conduct, or the so-called stated that it is precisely because the company lacks the power
"control test," considered to be the most important element.18 of control that the contract provides that respondent shall be
directly responsible to the employee concerned and their
The Court agrees with the finding of the Labor Arbiter and the dependents for any injury, harm or damage caused through
NLRC that the circumstances of this case show that no professional negligence, incompetence or other valid causes of
employer-employee relationship exists between the parties. action.
The Labor Arbiter and the NLRC correctly found that
petitioner company lacked the power of control over the The Labor Arbiter also correctly found that the provision in
performance by respondent of his duties. The Labor Arbiter the Retainer Agreement that respondent was on call during
reasoned that the Comprehensive Medical Plan, which emergency cases did not make him a regular employee. He
contains the respondent’s objectives, duties and obligations, explained, thus:
does not tell respondent "how to conduct his physical
Likewise, the allegation of complainant that since he is on call period of 1 year beginning January 1, 1988 to December 31,
at anytime of the day and night makes him a regular employee 1998, but it was renewed on a yearly basis.
is off-tangent. Complainant does not dispute the fact that
outside of the two (2) hours that he is required to be at Considering that there is no employer-employee relationship
respondent company’s premises, he is not at all further between the parties, the termination of the Retainership
required to just sit around in the premises and wait for an Agreement, which is in accordance with the provisions of the
emergency to occur so as to enable him from using such hours Agreement, does not constitute illegal dismissal of respondent.
for his own benefit and advantage. In fact, complainant Consequently, there is no basis for the moral and exemplary
maintains his own private clinic attending to his private damages granted by the Court of Appeals to respondent due
practice in the city, where he services his patients, bills them to his alleged illegal dismissal.
accordingly -- and if it is an employee of respondent company
who is attended to by him for special treatment that needs WHEREFORE, the petition is GRANTED and the Decision and
hospitalization or operation, this is subject to a special billing. Resolution of the Court of Appeals are REVERSED and SET
More often than not, an employee is required to stay in the ASIDE. The Decision and Resolution dated November 28, 1997
employer’s workplace or proximately close thereto that he and August 7, 1998, respectively, of the National Labor
cannot utilize his time effectively and gainfully for his own Relations Commission are REINSTATED.
purpose. Such is not the prevailing situation here.1awphi1.net
No costs.
In addition, the Court finds that the schedule of work and the
requirement to be on call for emergency cases do not amount SO ORDERED.
to such control, but are necessary incidents to the Retainership
Agreement.

The Court also notes that the Retainership Agreement granted

to both parties the power to terminate their relationship upon
giving a 30-day notice. Hence, petitioner company did not
wield the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that
there is nothing wrong with the employment of respondent as
a retained physician of petitioner company and upholds the
validity of the Retainership Agreement which clearly stated
that no employer-employee relationship existed between the
parties. The Agreement also stated that it was only for a
 CALAMBA MEDICAL CENTER, Dr. Desipeda whose attention was called to the above-said
INC., Petitioner v. NATIONAL LABOR RELATIONS telephone conversation issued to Dr. Lanzanas a
COMMISSION, RONALDO LANZANAS AND Memorandum of March 7, 1998 reading:
MERCEDITHA* LANZANAS, Respondents.
As a Licensed Resident Physician employed in Calamba
DECISION Medical Center since several years ago, the hospital
management has committed upon you utmost confidence in
CARPIO MORALES, J.: the performance of duties pursuant thereto. This is the reason
why you were awarded the privilege to practice in the hospital
The Calamba Medical Center (petitioner), a privately-owned and were entrusted hospital functions to serve the interest of
hospital, engaged the services of medical doctors-spouses both the hospital and our patients using your capability for
Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas independent judgment.
(Dr. Merceditha) in March 1992 and August 1995, respectively,
as part of its team of resident physicians. Reporting at the Very recently though and unfortunately, you have
hospital twice-a-week on twenty-four-hour shifts, respondents committed acts inimical to the interest of the hospital, the
were paid a monthly "retainer" of P4,800.00 each.1 It appears details of which are contained in the hereto attached affidavit
that resident physicians were also given a percentage share of witness.
out of fees charged for out-patient treatments, operating room
assistance and discharge billings, in addition to their fixed You are therefore given 24 hours to explain why no
monthly retainer.2 disciplinary action should be taken against you.

The work schedules of the members of the team of resident Pending investigation of your case, you are hereby placed
physicians were fixed by petitioner's medical director Dr. Raul under 30-days [sic] preventive suspension effective upon
Desipeda (Dr. Desipeda). And they were issued identification receipt hereof.7 (Emphasis, italics and underscoring supplied)
cards3 by petitioner and were enrolled in the Social Security
System (SSS).4 Income taxes were withheld from them.5 Inexplicably, petitioner did not give respondent Dr.
Merceditha, who was not involved in the said incident, any
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a work schedule after sending her husband Dr. Lanzanas the
resident physician at the hospital, inadvertently overheard a memorandum,8 nor inform her the reason therefor, albeit she
telephone conversation of respondent Dr. Lanzanas with a was later informed by the Human Resource Department
fellow employee, Diosdado Miscala, through an extension (HRD) officer that that was part of petitioner's cost-cutting
telephone line. Apparently, Dr. Lanzanas and Miscala were measures.9
discussing the low "census" or admission of patients to the
hospital.6
Responding to the memorandum, Dr. Lanzanas, by letter of On April 23, 1998, you still did not report for work despite
March 9, 1998,10 admitted that he spoke with Miscala over the memorandum issued by the CMC Medical Director
phone but that their conversation was taken out of context by implementing the Labor Secretary's ORDER. The same is true
Dr. Trinidad. on April 24, 1998 and April 25, 1998, - -you still did not report
for work [sic].
On March 14, 1998,11 the rank-and-file employees union of
petitioner went on strike due to unresolved grievances over You are likewise aware that you were observed (re: signatories
terms and conditions of employment.12 [sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully
participating as member in the rank-and-file union's concerted
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal activities despite knowledge that your position in the hospital
suspension13 before the National Labor Relations Commission is managerial in nature (Nurses, Orderlies, and staff of the
(NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha Emergency Room carry out your orders using your independent
subsequently filed a complaint for illegal dismissal.14 judgment) which participation is expressly prohibited by the
New Labor Code and which prohibition was sustained by the
In the meantime, then Sec. Cresenciano Trajano of the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis
Department of Labor and Employment (DOLE) certified the and italics in the original; underscoring partly in the original
labor dispute to the NLRC for compulsory arbitration and partly supplied)
and issued on April 21, 1998 return-to-work Order to the
striking union officers and employees of petitioner pending For these reasons as grounds for termination, you are hereby
resolution of the labor dispute.15 terminated for cause from employment effective today, April
25, 1998, without prejudice to further action for revocation of
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the your license before the Philippine [sic] Regulations [sic]
April 22, 1998 order of the Secretary of Labor directing all Commission.17(Emphasis and underscoring
union officers and members to return-to-work "on or April 23, supplied)cralawlibrary
1998, except those employees that were already terminated or
are serving disciplinary actions." Dr. Desipeda thus ordered Dr. Lanzanas thus amended his original complaint to include
the officers and members of the union to "report for work as illegal dismissal.18 His and Dr. Merceditha's complaints were
soon as possible" to the hospital's personnel officer and consolidated and docketed as NLRC CASE NO. RAB-IV-3-
administrator for "work scheduling, assignments and/or re- 9879-98-L.
assignments."
By Decision19 of March 23, 1999, Labor Arbiter Antonio R.
Petitioner later sent Dr. Lanzanas a notice of termination Macam dismissed the spouses' complaints for want of
which he received on April 25, 1998, indicating as grounds jurisdiction upon a finding that there was no employer-
therefor his failure to report back to work despite the DOLE employee relationship between the parties, the fourth requisite
order and his supposed role in the striking union, thus:
or the "control test" in the determination of an employment Director still has the direct supervision and control over the
bond being absent. respondents. The fact is the petitioner's Medical Director still
has to approve the schedule of duties of the respondents. The
On appeal, the NLRC, by Decision20 of May 3, respondents stressed that the petitioner's Medical Director also
2002, reversed the Labor Arbiter's findings, disposing as issues instructions or orders to the respondents relating to
follows: the means and methods of performing their duties, i.e.
admission of patients, manner of characterizing cases,
WHEREFORE, the assailed decision is set aside. The treatment of cases, etc., and may even overrule, review or
respondents are ordered to pay the complainants their full revise the decisions of the resident physicians. This was not
backwages; separation pay of one month salary for every year controverted by the petitioner. The foregoing factors taken
of service in lieu of reinstatement; moral damages together are sufficient to constitute the fourth element, i.e.
of P500,000.00 each; exemplary damages of P250,000.00 each control test, hence, the existence of the employer-employee
plus ten percent (10%) of the total award as attorney's fees. relationship. In denying that it had control over the
respondents, the petitioner alleged that the respondents were
SO ORDERED.21 free to put up their own clinics or to accept other retainership
agreement with the other hospitals. But, the petitioner failed to
Petitioner's motion for reconsideration having been denied, it substantiate the allegation with substantial evidence. (Emphasis
brought the case to the Court of Appeals on certiorari . and underscoring supplied)24

The appellate court, by June 30, 2004 Decision,22 initially The appellate court thus declared that respondents were
granted petitioner's petition and set aside the NLRC ruling. illegally dismissed.
However, upon a subsequent motion for reconsideration filed
by respondents, it reinstated the NLRC decision in an x x x. The petitioner's ground for dismissing respondent
Amended Decision23 dated September 26, 2006 but tempered Ronaldo Lanzanas was based on his alleged participation in
the award to each of the spouses of moral and exemplary union activities, specifically in joining the strike and failing to
damages to P100,000.00 and P50,000.00, respectively and observe the return-to-work order issued by the Secretary of
omitted the award of attorney's fees. Labor. Yet, the petitioner did not adduce any piece of evidence
to show that respondent Ronaldo indeed participated in the
In finding the existence of an employer-employee relationship strike. x x x.
between the parties, the appellate court held:
In the case of respondent Merceditha Lanzanas, the
x x x. While it may be true that the respondents are given the petitioner's explanation that "her marriage to complainant
discretion to decide on how to treat the petitioner's patients, Ronaldo has given rise to the presumption that her
the petitioner has not denied nor explained why its Medical sympat[hies] are likewise with her husband" as a ground for
her dismissal is unacceptable. Such is not one of the grounds
to justify the termination of her employment.25 (Underscoring circumstances, it stresses, are clear badges of the absence of
supplied)cralawlibrary any employment relationship between them.

The fallo of the appellate court's decision reads: This Court is unimpressed.

WHEREFORE, the instant Motion for Under the "control test," an employment relationship exists
Reconsideration is GRANTED, and the Court's decision dated between a physician and a hospital if the hospital controls
June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment is both the means and the details of the process by which the
entered, as follows: physician is to accomplish his task.29

WHEREFORE, the petition is DISMISSED. The assailed Where a person who works for another does so more or less at
decision dated May 3, 2002 and order dated September 24, his own pleasure and is not subject to definite hours or
2002 of the NLRC in NLRC NCR CA No. 019823-99 are conditions of work, and is compensated according to the result
AFFIRMED with the MODIFICATION that the moral and of his efforts and not the amount thereof, the element of
exemplary damages are reduced to P100,000.00 each control is absent.30
and P50,000.00 each, respectively.
As priorly stated, private respondents maintained specific
SO ORDERED.26 (Emphasis and italics in the original; work-schedules, as determined by petitioner through its
underscoring supplied) medical director, which consisted of 24-hour shifts totaling
forty-eight hours each week and which were strictly to be
Preliminarily, the present petition calls for a determination of observed under pain of administrative sanctions.
whether there exists an employer-employee
relationship27 between petitioner and the spouses- That petitioner exercised control over respondents gains light
respondents. from the undisputed fact that in the emergency room, the
operating room, or any department or ward for that matter,
Denying the existence of such relationship, petitioner argues respondents' work is monitored through its nursing
that the appellate court, as well as the NLRC, overlooked its supervisors, charge nurses and orderlies. Without the
twice-a-week reporting arrangement with respondents who approval or consent of petitioner or its medical director, no
are free to practice their profession elsewhere the rest of the operations can be undertaken in those areas. For control test to
week. And it invites attention to the uncontroverted allegation apply, it is not essential for the employer to actually supervise
that respondents, aside from their monthly retainers, were the performance of duties of the employee, it being enough
entitled to one-half of all suturing, admitting, consultation, that it has the right to wield the power.31
medico-legal and operating room assistance fees.28 These
With respect to respondents' sharing in some hospital fees, this preposterous for an employer to report certain persons as
scheme does not sever the employment tie between them and employees and pay their SSS premiums as well as their wages
petitioner as this merely mirrors additional form or another if they are not its employees.36
form of compensation or incentive similar to what
commission-based employees receive as contemplated in And if respondents were not petitioner's employees, how does
Article 97 (f) of the Labor Code, thus: it account for its issuance of the earlier-quoted March 7, 1998
memorandum explicitly stating that respondent is "employed"
"Wage" paid to any employee shall mean the remuneration or in it and of the subsequent termination letter indicating
earning, however designated, capable of being expressed in respondent Lanzanas' employment status.
terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating Finally, under Section 15, Rule X of Book III of
the same, which is payable by an employer to an employee the Implementing Rules of the Labor Code, an employer-employee
under a written or unwritten contract of employment for work relationship exists between the resident physicians and the
done or to be done, or for services rendered or to be rendered training hospitals, unless there is a training agreement
and includes the fair and reasonable value, as determined by between them, and the training program is duly accredited or
the Secretary of Labor, of board, lodging, or other facilities approved by the appropriate government agency. In
customarily furnished by the employer to the employee. x x x respondents' case, they were not undergoing any
(Emphasis and underscoring supplied), specialization training. They were considered non-
training general practitioners,37 assigned at the emergency
Respondents were in fact made subject to petitioner-hospital's rooms and ward sections.
Code of Ethics,32 the provisions of which cover administrative
and disciplinary measures on negligence of duties, personnel Turning now to the issue of dismissal, the Court upholds the
conduct and behavior, and offenses against persons, property appellate court's conclusion that private respondents were
and the hospital's interest. illegally dismissed.

More importantly, petitioner itself provided incontrovertible Dr. Lanzanas was neither a managerial nor supervisory
proof of the employment status of respondents, namely, the employee but part of the rank-and-file. This is the import of
identification cards it issued them, the payslips33 and BIR W-2 the Secretary of Labor's Resolution of May 22, 1998 in OS A-
(now 2316) Forms which reflect their status as employees, and 05-15-98 which reads:
the classification as "salary" of their remuneration. Moreover,
it enrolled respondents in the SSS and Medicare (Philhealth) xxx
program. It bears noting at this juncture that mandatory
coverage under the SSS Law34 is premised on the existence of
an employer-employee relationship,35 except in cases of
compulsory coverage of the self-employed. It would be
In the motion to dismiss it filed before the Med-Arbiter, the medical and other health personnel, whose movement and
employer (CMC) alleged that 24 members of petitioner are services shall be unhampered and unrestricted, as are
supervisors, namely x x x Rolando Lanzonas [sic] x x x. necessary to insure the proper and adequate protection of the
life and health of its patients, most especially emergency cases,
A close scrutiny of the job descriptions of the alleged for the duration of the strike or lockout. In such cases, the
supervisors narrated by the employer only proves that except Secretary of Labor and Employment is mandated to
for the contention that these employees allegedly supervise, immediately assume, within twenty-four hours from
they do not however recommend any managerial action. At knowledge of the occurrence of such strike or lockout,
most, their job is merely routinary in nature and consequently, jurisdiction over the same or certify to the Commission for
they cannot be considered supervisory employees. compulsory arbitration. For this purpose, the contending
parties are strictly enjoined to comply with such orders,
They are not therefore barred from membership in the union prohibitions and/or injunctions as are issued by the
of rank[-]and[-]file, which the petitioner [the union] is seeking Secretary of Labor and Employment or the Commission,
to represent in the instant case.38 (Emphasis and underscoring under pain of immediate disciplinary action, including
supplied)cralawlibrary dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and other
xxx affirmative relief, even criminal prosecution against either or
both of them.
Admittedly, Dr. Lanzanas was a union member in the
hospital, which is considered indispensable to the national x x x x (Emphasis and underscoring supplied)cralawlibrary
interest. In labor disputes adversely affecting the continued
operation of a hospital, Article 263(g) of the Labor Code An assumption or certification order of the DOLE Secretary
provides: automatically results in a return-to-work of
all striking workers, whether a corresponding return-to-work
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.– order had been issued.39 The DOLE Secretary in fact issued a
return-to-work Order, failing to comply with which is
xxx punishable by dismissal or loss of employment status.40

(g) x x x x Participation in a strike and intransigence to a return-to-work

order must, however, be duly proved in order to justify
x x x x. In labor disputes adversely affecting the continued immediate dismissal in a "national interest" case. As the
operation of such hospitals, clinics or medical institutions, it appellate court as well as the NLRC observed, however, there
shall be the duty of the striking union or locking-out employer is nothing in the records that would bear out Dr. Lanzanas'
to provide and maintain an effective skeletal workforce of actual participation in the strike. And the medical director's
Memorandum41 of April 22, 1998 contains nothing more than a
general directive to all union officers and members to return- that when [Dr. Lanzanas] declared that he was going to
to-work. Mere membership in a labor union does not ipso boycott the scheduling of their workload by the medical
facto mean participation in a strike. doctor, he was presumed to be speaking for himself [and] for
his wife Merceditha."46
Dr. Lanzanas' claim that, after his 30-day preventive
suspension ended on or before April 9, 1998, he was never Petitioner's contention that Dr. Merceditha was a member of
given any work schedule42 was not refuted by petitioner. the union or was a participant in the strike remained just that.
Petitioner in fact never released any findings of its supposed Its termination of her employment on the basis of her conjugal
investigation into Dr. Lanzanas' alleged "inimical acts." relationship is not analogous to

Petitioner thus failed to observe the two requirements,before any of the causes enumerated in Article 28247 of the Labor
dismissal can be effected ─ notice and hearing ─ which Code. Mere suspicion or belief, no matter how strong, cannot
constitute essential elements of the statutory process; the first substitute for factual findings carefully established through
to apprise the employee of the particular acts or omissions for orderly procedure.48
which his dismissal is sought, and the second to inform the
employee of the employer's decision to dismiss him.43 Non- The Court even notes that after the proceedings at the NLRC,
observance of these requirements runs afoul of the procedural petitioner never even mentioned Dr. Merceditha's case. There
mandate.44 is thus no gainsaying that her dismissal was both
substantively and procedurally infirm.
The termination notice sent to and received by Dr. Lanzanas
on April 25, 1998 was the first and only time that he was Adding insult to injury was the circulation by petitioner of a
apprised of the reason for his dismissal. He was not afforded, "watchlist" or "watch out list"49 including therein the names of
however, even the slightest opportunity to explain his side. respondents. Consider the following portions of Dr.
His was a "termination upon receipt" situation. While he was Merceditha's Memorandum of Appeal:
priorly made to explain on his telephone conversation with
Miscala,45 he was not with respect to his supposed 3. Moreover, to top it all, respondents have circulated a so
participation in the strike and failure to heed the return-to- called "Watch List" to other hospitals, one of which [was]
work order. procured from Foothills Hospital in Sto. Tomas, Batangas
[that] contains her name. The object of the said list is precisely
As for the case of Dr. Merceditha, her dismissal was worse, it to harass Complainant and malign her good name and
having been effected without any just or authorized cause and reputation. This is not only unprofessional, but runs smack of
without observance of due process. In fact, petitioner never oppression as CMC is trying permanently deprived [sic]
proferred any valid cause for her dismissal except its view that Complainant of her livelihood by ensuring that she is barred
"her marriage to [Dr. Lanzanas] has given rise to the from practicing in other hospitals.
presumption that her sympath[y] [is] with her husband; [and
4. Other co-professionals and brothers in the profession are exemplary damages were correctly awarded,53 the award of
fully aware of these "watch out" lists and as such, her attorney's fees should be reinstated.
reputation was not only besmirched, but was damaged, and
she suffered social humiliation as it is of public knowledge WHEREFORE, the Decision of the Court of Appeals in CA-
that she was dismissed from work. Complainant came from a G.R. SP No. 75871 is AFFIRMED with MODIFICATION in
reputable and respected family, her father being a retired full that the award by the National Labor Relations Commission of
Colonel in the Army, Col. Romeo A. Vente, and her brothers 10% of the total judgment award as attorney's fees is
and sisters are all professionals, her brothers, Arnold and reinstated. In all other aspects, the decision of the appellate
Romeo Jr., being engineers. The Complainant has a family court is affirmed.
protection [sic] to protect. She likewise has a professional
reputation to protect, being a licensed physician. Both her SO ORDERED.
personal and professional reputation were damaged as a result
of the unlawful acts of the respondents.50

While petitioner does not deny the existence of such list, it

pointed to the lack of any board action on its part to initiate
such listing and to circulate the same, viz:

20. x x x. The alleged watchlist or "watch out list," as termed by

complainants, were merely lists obtained by one Dr. Ernesto
Naval of PAMANA Hospital. Said list was given by a
stockholder of respondent who was at the same time a
stockholder of PAMAN[A] Hospital. The giving of the list
was not a Board action.51 (Emphasis and underscoring
supplied)cralawlibrary

The circulation of such list containing names of alleged union

members intended to prevent employment of workers for
union activities similarly constitutes unfair labor practice,
thereby giving a right of action for damages by the employees
prejudiced.52

A word on the appellate court's deletion of the award of

attorney's fees. There being no basis advanced in deleting it, as
 JEROMIE D. ESCASINAS and EVAN RIGOR By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon
SINGCO, Petitioners, v. SHANGRI-LA'S MACTAN ISLAND declared petitioners to be regular employees of Shangri-la. The
RESORT and DR. JESSICA J.R. PEPITO, Respondents. Arbiter thus ordered Shangri-la to grant them the wages and
benefits due them as regular employees from the time their
DECISION services were engaged.

CARPIO MORALES, J.: In finding petitioners to be regular employees of Shangri-la,

the Arbiter noted that they usually perform work which is
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco necessary and desirable to Shangri-la's business; that they
(petitioners) were engaged in 1999 and 1996, respectively, by observe clinic hours and render services only to Shangri-la's
Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her guests and employees; that payment for their salaries were
clinic at respondent Shangri-la's Mactan Island Resort recommended to Shangri-la's Human Resource Department
(Shangri-la) in Cebu of which she was a retained physician. (HRD); that respondent doctor was Shangri-la's "in-house"
physician, hence, also an employee; and that the MOA
In late 2002, petitioners filed with the National Labor Relations between Shangri-la and respondent doctor was an "insidious
Commission (NLRC) Regional Arbitration Branch No. VII mechanism in order to circumvent [the doctor's] tenurial
(NLRC-RAB No. VII) a complaint1 for regularization, security and that of the employees under her."
underpayment of wages, non-payment of holiday pay, night
shift differential and 13th month pay differential against Shangri-la and respondent doctor appealed to the NLRC.
respondents, claiming that they are regular employees of Petitioners appealed too, but only with respect to the non-
Shangri-la. The case was docketed as RAB Case No. 07-11- award to them of some of the benefits they were claiming.
2089-02.
By Decision4 dated March 31, 2005, the NLRC granted
Shangri-la claimed, however, that petitioners were not its Shangri-la's and respondent doctor's appeal and dismissed
employees but of respondent doctor whom it retained via petitioners' complaint for lack of merit, it finding that no
Memorandum of Agreement (MOA)2 pursuant to Article 157 employer-employee relationship exists between petitioner and
of the Labor Code, as amended. Shangri-la. In so deciding, the NLRC held that the Arbiter
erred in interpreting Article 157 in relation to Article 280 of the
Respondent doctor for her part claimed that petitioners were Labor Code, as what is required under Article 157 is that the
already working for the previous retained physicians of employer should provide the services of medical personnel to
Shangri-la before she was retained by Shangri-la; and that she its employees, but nowhere in said article is a provision that
maintained petitioners' services upon their request. nurses are required to be employed; that contrary to the
finding of the Arbiter, even if Article 280 states that if a worker
performs work usually necessary or desirable in the business
of the employer, he cannot be automatically deemed a regular
employee; and that the MOA amply shows that respondent Petitioners' motion for reconsideration having been denied by
doctor was in fact engaged by Shangri-la on a retainer basis, Resolution6 of July 10, 2007, they interposed the present
under which she could hire her own nurses and other clinic recourse.
personnel.
Petitioners insist that under Article 157 of the Labor Code,
Brushing aside petitioners' contention that since their Shangri-la is required to hire a full-time registered nurse, apart
application for employment was addressed to Shangri-la, it from a physician, hence, their engagement should be deemed
was really Shangri-la which hired them and not respondent as regular employment, the provisions of the MOA
doctor, the NLRC noted that the applications for employment notwithstanding; and that the MOA is contrary to public
were made by persons who are not parties to the case and policy as it circumvents tenurial security and, therefore,
were not shown to have been actually hired by Shangri-la. should be struck down as being void ab initio. At most, they
argue, the MOA is a mere job contract.
On the issue of payment of wages, the NLRC held that the fact
that, for some months, payment of petitioners' wages were And petitioners maintain that respondent doctor is a labor-
recommended by Shangri-la's HRD did not prove that it was only contractor for she has no license or business permit and
Shangri-la which pays their wages. It thus credited respondent no business name registration, which is contrary to the
doctor's explanation that the recommendations for payment requirements under Sec. 19 and 20 of the Implementing Rules
were based on the billings she prepared for salaries and Regulations of the Labor Code on sub-contracting.
of additional nurses during Shangri-la's peak months of
operation, in accordance with the retainership agreement, the Petitioners add that respondent doctor cannot be a legitimate
guests' payments for medical services having been paid independent contractor, lacking as she does in substantial
directly to Shanrgi-la. capital, the clinic having been set-up and already operational
when she took over as retained physician; that respondent
Petitioners thereupon brought the case to the Court of Appeals doctor has no control over how the clinic is being run, as
which, by Decision5 of May 22, 2007, affirmed the NLRC shown by the different orders issued by officers of Shangri-la
Decision that no employer-employee relationship exists forbidding her from receiving cash payments and several
between Shangri-la and petitioners. The appellate court purchase orders for medicines and supplies which were
concluded that all aspects of the employment of petitioners coursed thru Shangri-la's Purchasing Manager, circumstances
being under the supervision and control of respondent doctor indubitably showing that she is not an independent contractor
and since Shangri-la is not principally engaged in the business but a mere agent of Shangri-la.
of providing medical or healthcare services, petitioners could
not be regarded as regular employees of Shangri-la. In its Comment,7 Shangri-la questions the Special Powers of
Attorneys (SPAs) appended to the petition for being
inadequate. On the merits, it prays for the disallowance of the
petition, contending that it raises factual issues, such as the
validity of the MOA, which were never raised during the (b) The services of a full-time registered nurse, a part-time
proceedings before the Arbiter, albeit passed upon by him in physician and dentist, and an emergency clinic, when the
his Decision; that Article 157 of the Labor Code does not make number of employees exceeds two hundred (200) but not more
it mandatory for a covered establishment to employ health than three hundred (300); andcralawlibrary
personnel; that the services of nurses is not germane nor
indispensable to its operations; and that respondent doctor is a (c) The services of a full-time physician, dentist and full-time
legitimate individual independent contractor who has the registered nurse as well as a dental clinic, and an infirmary or
power to hire, fire and supervise the work of the nurses under emergency hospital with one bed capacity for every one
her. hundred (100) employees when the number of employees
exceeds three hundred (300).
The resolution of the case hinges, in the main, on the correct
interpretation of Art. 157 vis a vis Art. 280 and the provisions In cases of hazardous workplaces, no employer shall engage
on permissible job contracting of the Labor Code, as amended. the services of a physician or dentist who cannot stay in the
premises of the establishment for at least two (2) hours, in the
The Court holds that, contrary to petitioners' postulation, Art. case of those engaged on part-time basis, and not less than
157 does not require the engagement of full-time nurses as eight (8) hours in the case of those employed on full-time
regular employees of a company employing not less than 50 basis. Where the undertaking is nonhazardous in nature, the
workers. Thus, the Article provides: physician and dentist may be engaged on retained basis,
subject to such regulations as the Secretary of Labor may
ART. 157. Emergency medical and dental services. - It shall be the prescribe to insure immediate availability of medical and
duty of every employer to furnish his employees in any dental treatment and attendance in case of emergency.
locality with free medical and dental attendance and facilities (Emphasis and underscoring supplied)cralawlibrary
consisting of:
Under the foregoing provision, Shangri-la, which employs
(a) The services of a full-time registered nurse when the more than 200 workers, is mandated to "furnish" its employees
number of employees exceeds fifty (50) but not more than two with the services of a full-time registered nurse, a part-time
hundred (200) except when the employer does not maintain physician and dentist, and an emergency clinic which means
hazardous workplaces, in which case the services of a that it should provide or make available such medical and
graduate first-aider shall be provided for the protection of the allied services to its employees, not necessarily to hire or
workers, where no registered nurse is available. The Secretary employ a service provider. As held in Philippine Global
of Labor shall provide by appropriate regulations the services Communications v. De Vera:8
that shall be required where the number of employees does
not exceed fifty (50) and shall determine by appropriate order x x x while it is true that the provision requires employers to
hazardous workplaces for purposes of this Article; engage the services of medical practitioners in certain
establishments depending on the number of their
employees, nothing is there in the law which says that medical Sec. 8. Job contracting. - There is job contracting permissible
practitioners so engaged be actually hired as employees, under the Code if the following conditions are met:
adding that the law, as written, only requires the employer "to
retain", not employ, a part-time physician who needed to stay (1) The contractor carries on an independent business and
in the premises of the non-hazardous workplace for two (2) undertakes the contract work on his own account under his
hours. (Emphasis and underscoring supplied)ςηαñrοblεš own responsibility according to his own manner and method,
νιr†υαl lαω lιbrαrÿ free from the control and direction of his employer or
principal in all matters connected with the performance of the
The term "full-time" in Art. 157 cannot be construed as work except as to the results thereof; andcralawlibrary
referring to the type of employment of the person engaged to
provide the services, for Article 157 must not be read (2) The contractor has substantial capital or investment in the
alongside Art. 2809 in order to vest employer-employee form of tools, equipment, machineries, work premises, and
relationship on the employer and the person so engaged. So other materials which are necessary in the conduct of his
De Vera teaches: business.

x x x For, we take it that any agreement may provide that one Sec. 9. Labor-only contracting. - (a) Any person who undertakes
party shall render services for and in behalf of another, no to supply workers to an employer shall be deemed to be
matter how necessary for the latter's business, even without engaged in labor-only contracting where such person:
being hired as an employee.This set-up is precisely true in the
case of an independent contractorship as well as in an agency (1) Does not have substantial capital or investment in the
agreement. Indeed, Article 280 of the Labor Code, quoted by form of tools, equipment, machineries, work premises and
the appellate court, is not the yardstick for determining the other materials; andcralawlibrary
existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e., (2) The workers recruited and placed by such persons are
regular and casual. x x x10 (Emphasis and underscoring performing activities which are directly related to the
supplied)cralawlibrary principal business or operations of the employer in which
workers are habitually employed.
The phrase "services of a full-time registered nurse" should
thus be taken to refer to the kind of services that the nurse will (b) Labor-only contracting as defined herein is hereby
render in the company's premises and to its employees, not prohibited and the person acting as contractor shall be
the manner of his engagement. considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same
As to whether respondent doctor can be considered a manner and extent as if the latter were directly employed by
legitimate independent contractor, the pertinent sections of him.
DOLE Department Order No. 10, series of 1997, illuminate:
(c) For cases not falling under this Article, the Secretary of of medical services to its employees is required under Art. 157,
Labor shall determine through appropriate orders whether or which are not directly related to Shangri-la's principal
not the contracting out of labor is permissible in the light of business - operation of hotels and restaurants.
the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers As to payment of wages, respondent doctor is the one who
involved. In such case, he may prescribe conditions and underwrites the following: salaries, SSS contributions and
restrictions to insure the protection and welfare of the other benefits of the staff13; group life, group personal accident
workers. (Emphasis supplied)cralawlibrary insurance and life/death insurance14 for the staff with
minimum benefit payable at 12 times the employee's last
The existence of an independent and permissible contractor drawn salary, as well as value added taxes and withholding
relationship is generally established by considering the taxes, sourced from her P60,000.00 monthly retainer fee and
following determinants: whether the contractor is carrying on 70% share of the service charges from Shangri-la's guests who
an independent business; the nature and extent of the work; avail of the clinic services. It is unlikely that respondent doctor
the skill required; the term and duration of the relationship; would report petitioners as workers, pay their SSS premium as
the right to assign the performance of a specified piece of well as their wages if they were not indeed her employees.15
work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and With respect to the supervision and control of the nurses and
payment of the contractor's workers; the control of the clinic staff, it is not disputed that a document, "Clinic Policies
premises; the duty to supply the premises, tools, appliances, and Employee Manual"16 claimed to have been prepared by
materials and labor; and the mode, manner and terms of respondent doctor exists, to which petitioners gave their
payment.11 conformity17 and in which they acknowledged their co-
terminus employment status. It is thus presumed that said
On the other hand, existence of an employer - employee document, and not the employee manual being followed by
relationship is established by the presence of the following Shangri-la's regular workers, governs how they perform their
determinants: (1) the selection and engagement of the workers; respective tasks and responsibilities.
(2) power of dismissal; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with Contrary to petitioners' contention, the various office
the latter assuming primacy in the overall consideration.12 directives issued by Shangri-la's officers do not imply that it is
Shangri-la's management and not respondent doctor who
Against the above-listed determinants, the Court holds that exercises control over them or that Shangri-la has control over
respondent doctor is a legitimate independent contractor. That how the doctor and the nurses perform their work. The
Shangri-la provides the clinic premises and medical supplies letter18 addressed to respondent doctor dated February 7, 2003
for use of its employees and guests does not necessarily prove from a certain Tata L. Reyes giving instructions regarding the
that respondent doctor lacks substantial capital and replenishment of emergency kits is, at most, administrative in
investment. Besides, the maintenance of a clinic and provision nature, related as it is to safety matters; while the letter19 dated
May 17, 2004 from Shangri-la's Assistant Financial Controller,
Lotlot Dagat, forbidding the clinic from receiving cash
payments from the resort's guests is a matter of financial
policy in order to ensure proper sharing of the proceeds,
considering that Shangri-la and respondent doctor share in the
guests' payments for medical services rendered. In fine, as
Shangri-la does not control how the work should be
performed by petitioners, it is not petitioners' employer.

WHEREFORE, the petition is hereby DENIED. The Decision of

the Court of Appeals dated May 22, 2007 and the Resolution
dated July 10, 2007 are AFFIRMED.

SO ORDERED.
GREGORIO V. TONGKO, Petitioner, a) The Agent shall canvass for applications for Life Insurance,
vs. Annuities, Group policies and other products offered by the
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), Company, and collect, in exchange for provisional receipts
INC. and RENATO A. VERGEL DE DIOS, Respondents. issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or
RESOLUTION through the Agent or from policyholders allotted by the
Company to the Agent for servicing, subject to subsequent
BRION, J.: confirmation of receipt of payment by the Company as
evidenced by an Official Receipt issued by the Company
This resolves the Motion for Reconsideration1 dated December directly to the policyholder.
3, 2008 filed by respondent The Manufacturers Life Insurance
Co. (Phils.), Inc. (Manulife) to set aside our Decision of xxxx
November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife The Company may terminate this Agreement for any breach
and petitioner Gregorio Tongko and ordered Manulife to pay or violation of any of the provisions hereof by the Agent by
Tongko backwages and separation pay for illegal dismissal. giving written notice to the Agent within fifteen (15) days
from the time of the discovery of the breach. No waiver,
The following facts have been stated in our Decision of extinguishment, abandonment, withdrawal or cancellation of
November 7, 2008, now under reconsideration, but are the right to terminate this Agreement by the Company shall be
repeated, simply for purposes of clarity. construed for any previous failure to exercise its right under
any provision of this Agreement.
The contractual relationship between Tongko and Manulife
had two basic phases. The first or initial phase began on July 1, Either of the parties hereto may likewise terminate his
1977, under a Career Agent’s Agreement (Agreement) that Agreement at any time without cause, by giving to the other
provided: party fifteen (15) days notice in writing.2

It is understood and agreed that the Agent is an independent Tongko additionally agreed (1) to comply with all regulations
contractor and nothing contained herein shall be construed or and requirements of Manulife, and (2) to maintain a standard
interpreted as creating an employer-employee relationship of knowledge and competency in the sale of Manulife’s
between the Company and the Agent. products, satisfactory to Manulife and sufficient to meet the
volume of the new business, required by his Production Club
xxxx 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), Manager basis) in terms of recruiting in 2000 and, as of today,
Tongko became a Regional Sales Manager.4 continues to remain one of the laggards in this area.

Tongko’s gross earnings consisted of commissions, persistency While discussions, in general, were positive other than for
income, and management overrides. Since the beginning, certain comments from your end which were perceived to be
Tongko consistently declared himself self-employed in his uncalled for, it became clear that a one-on-one meeting with
income tax returns. Thus, under oath, he declared his gross you was necessary to ensure that you and management, were
business income and deducted his business expenses to arrive on the same plane. As gleaned from some of your previous
at his taxable business income. Manulife withheld the comments in prior meetings (both in group and one-on-one), it
corresponding 10% tax on Tongko’s earnings.5 was not clear that we were proceeding in the same direction.

In 2001, Manulife instituted manpower development Kevin held subsequent series of meetings with you as a result,
programs at the regional sales management level. Respondent one of which I joined briefly. In those subsequent meetings
Renato Vergel de Dios wrote Tongko a letter dated November you reiterated certain views, the validity of which we
6, 2001 on concerns that were brought up during the October challenged and subsequently found as having no basis.
18, 2001 Metro North Sales Managers Meeting. De Dios wrote:
With such views coming from you, I was a bit concerned that
The first step to transforming Manulife into a big league the rest of the Metro North Managers may be a bit confused as
player has been very clear – to increase the number of agents to the directions the company was taking. For this reason, I
to at least 1,000 strong for a start. This may seem diametrically sought a meeting with everyone in your management team,
opposed to the way Manulife was run when you first joined including you, to clear the air, so to speak.
the organization. Since then, however, substantial changes
have taken place in the organization, as these have been This note is intended to confirm the items that were discussed
influenced by developments both from within and without the at the said Metro North Region’s Sales Managers meeting held
company. at the 7/F Conference room last 18 October.

xxxx xxxx

The issues around agent recruiting are central to the intended Issue # 2: "Some Managers are unhappy with their earnings
objectives hence the need for a Senior Managers’ meeting and would want to revert to the position of agents."
earlier last month when Kevin O’Connor, SVP-Agency, took to
the floor to determine from our senior agency leaders what This is an often repeated issue you have raised with me and
more could be done to bolster manpower development. At with Kevin. For this reason, I placed the issue on the table
earlier meetings, Kevin had presented information where before the rest of your Region’s Sales Managers to verify its
evidently, your Region was the lowest performer (on a per
validity. As you must have noted, no Sales Manager came stopped anyone from recruiting, I have never heard you
forward on their own to confirm your statement and it took proactively push for greater agency recruiting. You have not
you to name Malou Samson as a source of the same, an been proactive all these years when it comes to agency
allegation that Malou herself denied at our meeting and in growth.
your very presence.
xxxx
This only confirms, Greg, that those prior comments have no
solid basis at all. I now believe what I had thought all along, I cannot afford to see a major region fail to deliver on its
that these allegations were simply meant to muddle the issues developmental goals next year and so, we are making the
surrounding the inability of your Region to meet its agency following changes in the interim:
development objectives!
1. You will hire at your expense a competent assistant who can
Issue # 3: "Sales Managers are doing what the company asks unload you of much of the routine tasks which can be easily
them to do but, in the process, they earn less." delegated. This assistant should be so chosen as to
complement your skills and help you in the areas where you
xxxx feel "may not be your cup of tea."

All the above notwithstanding, we had your own records You have stated, if not implied, that your work as Regional
checked and we found that you made a lot more money in the Manager may be too taxing for you and for your health. The
Year 2000 versus 1999. In addition, you also volunteered the above could solve this problem.
information to Kevin when you said that you probably will
make more money in the Year 2001 compared to Year 2000. xxxx
Obviously, your above statement about making "less money"
did not refer to you but the way you argued this point had us 2. Effective immediately, Kevin and the rest of the Agency
almost believing that you were spouting the gospel of truth Operations will deal with the North Star Branch (NSB) in
when you were not. x x x autonomous fashion. x x x

xxxx I have decided to make this change so as to reduce your span

of control and allow you to concentrate more fully on
All of a sudden, Greg, I have become much more worried overseeing the remaining groups under Metro North, your
about your ability to lead this group towards the new Central Unit and the rest of the Sales Managers in Metro
direction that we have been discussing these past few weeks, North. I will hold you solely responsible for meeting the
i.e., Manulife’s goal to become a major agency-led distribution objectives of these remaining groups.
company in the Philippines. While as you claim, you have not
 xxxx Thus, the threshold issue is the existence of an employment
relationship. A finding that none exists renders the question of
The above changes can end at this point and they need not go illegal dismissal moot; a finding that an employment
any further. This, however, is entirely dependent upon you. relationship exists, on the other hand, necessarily leads to the
But you have to understand that meeting corporate objectives need to determine the validity of the termination of the
by everyone is primary and will not be compromised. We are relationship.
meeting tough challenges next year, and I would want
everybody on board. Any resistance or holding back by A. Tongko’s Case for Employment Relationship
anyone will be dealt with accordingly.6
Tongko asserted that as Unit Manager, he was paid an annual
Subsequently, de Dios wrote Tongko another letter, dated over-rider not exceeding ₱50,000.00, regardless of production
December 18, 2001, terminating Tongko’s services: levels attained and exclusive of commissions and bonuses. He
also claimed that as Regional Sales Manager, he was given a
It would appear, however, that despite the series of meetings travel and entertainment allowance of ₱36,000.00 per year in
and communications, both one-on-one meetings between addition to his overriding commissions; he was tasked with
yourself and SVP Kevin O’Connor, some of them with me, as numerous administrative functions and supervisory authority
well as group meetings with your Sales Managers, all these over Manulife’s employees, aside from merely selling policies
efforts have failed in helping you align your directions with and recruiting agents for Manulife; and he recommended and
Management’s avowed agency growth policy. recruited insurance agents subject to vetting and approval by
Manulife. He further alleges that he was assigned a definite
xxxx place in the Manulife offices when he was not in the field – at
the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo
On account thereof, Management is exercising its prerogative Sts., Salcedo Village, Makati City – for which he never paid
under Section 14 of your Agents Contract as we are now any rental. Manulife provided the office equipment he used,
issuing this notice of termination of your Agency Agreement including tables, chairs, computers and printers (and even
with us effective fifteen days from the date of this letter.7 office stationery), and paid for the electricity, water and
telephone bills. As Regional Sales Manager, Tongko
Tongko responded by filing an illegal dismissal complaint additionally asserts that he was required to follow at least
with the National Labor Relations Commission (NLRC) three codes of conduct.9
Arbitration Branch. He essentially alleged – despite the clear
terms of the letter terminating his Agency Agreement – that he B. Manulife’s Case – Agency Relationship with Tongko
was Manulife’s employee before he was illegally dismissed.8
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 1. Our ruling in the first Insular11 case did not foreclose
through an agent. As sales manager, Tongko was paid the possibility of an insurance agent becoming an
overriding sales commission derived from sales made by employee of an insurance company; if evidence exists
agents under his unit/structure/branch/region. Manulife also showing that the company promulgated rules or
points out that it deducted and withheld a 10% tax from all regulations that effectively controlled or restricted an
commissions Tongko received; Tongko even declared himself insurance agent’s choice of methods or the methods
to be self-employed and consistently paid taxes as such—i.e., themselves in selling insurance, an employer-employee
he availed of tax deductions such as ordinary and necessary relationship would be present. The determination of
trade, business and professional expenses to which a business the existence of an employer-employee relationship is
is entitled. thus on a case-to-case basis depending on the evidence
on record.
Manulife asserts that the labor tribunals have no jurisdiction
over Tongko’s claim as he was not its employee as 2. Manulife had the power of control over Tongko,
characterized in the four-fold test and our ruling sufficient to characterize him as an employee, as shown
in Carungcong v. National Labor Relations Commission.10 by the following indicators:

The Conflicting Rulings of the Lower Tribunals 2.1 Tongko undertook to comply with
Manulife’s rules, regulations and other
The labor arbiter decreed that no employer-employee requirements, i.e., the different codes of
relationship existed between the parties. However, the NLRC conduct such as the Agent Code of Conduct,
reversed the labor arbiter’s decision on appeal; it found the the Manulife Financial Code of Conduct, and
existence of an employer-employee relationship and the Financial Code of Conduct Agreement;
concluded that Tongko had been illegally dismissed. In the
petition for certiorari with the Court of Appeals (CA), the 2.2 The various affidavits of Manulife’s
appellate court found that the NLRC gravely abused its insurance agents and managers, who occupied
discretion in its ruling and reverted to the labor arbiter’s similar positions as Tongko, showed that they
decision that no employer-employee relationship existed performed administrative duties that
between Tongko and Manulife. established employment with Manulife;12 and

Our Decision of November 7, 2008 2.3 Tongko was tasked to recruit some agents in
addition to his other administrative functions.
In our Decision of November 7, 2008, we reversed the CA De Dios’ letter harped on the direction Manulife
ruling and found that an employment relationship existed intended to take, viz., greater agency
between Tongko and Manulife. We concluded that Tongko is recruitment as the primary means to sell more
Manulife’s employee for the following reasons: policies; Tongko’s alleged failure to follow this
 directive led to the termination of his the exclusion of more material evidence to support its
employment with Manulife. conclusion that there is "control."

The Motion for Reconsideration 4. The November 7[, 2008] Decision is judicial
legislation, beyond the scope authorized by Articles 8
Manulife disagreed with our Decision and filed the present and 9 of the Civil Code, beyond the powers granted to
motion for reconsideration on the following GROUNDS: this Court under Article VIII, Section 1 of the
Constitution and contravenes through judicial
1. The November 7[, 2008] Decision violates Manulife’s legislation, the constitutional prohibition against
right to due process by: (a) confining the review only to impairment of contracts under Article III, Section 10 of
the issue of "control" and utterly disregarding all the the Constitution.
other issues that had been joined in this case; (b)
mischaracterizing the divergence of conclusions 5. For all the above reasons, the November 7[, 2008]
between the CA and the NLRC decisions as confined Decision made unsustainable and reversible errors,
only to that on "control"; (c) grossly failing to consider which should be corrected, in concluding that
the findings and conclusions of the CA on the majority Respondent Manulife and Petitioner had an employer-
of the material evidence, especially [Tongko’s] employee relationship, that Respondent Manulife
declaration in his income tax returns that he was a illegally dismissed Petitioner, and for consequently
"business person" or "self-employed"; and (d) allowing ordering Respondent Manulife to pay Petitioner
[Tongko] to repudiate his sworn statement in a public backwages, separation pay, nominal damages and
document. attorney’s fees.13

2. The November 7[, 2008] Decision contravenes settled THE COURT’S RULING
rules in contract law and agency, distorts not only the
legal relationships of agencies to sell but also A. The Insurance and the Civil Codes;
distributorship and franchising, and ignores the the Parties’ Intent and Established
constitutional and policy context of contract law vis-à- Industry Practices
vis labor law.
We cannot consider the present case purely from a labor law
3. The November 7[, 2008] Decision ignores the perspective, oblivious that the factual antecedents were set in
findings of the CA on the three elements of the four- the insurance industry so that the Insurance Code primarily
fold test other than the "control" test, reverses well- governs. Chapter IV, Title 1 of this Code is wholly devoted to
settled doctrines of law on employer-employee "Insurance Agents and Brokers" and specifically defines the
relationships, and grossly misapplies the "control test," agents and brokers relationship with the insurance company
by selecting, without basis, a few items of evidence to
and how they are governed by the Code and regulated by the persons shall transact any insurance business in the
Insurance Commission. Philippines except as agent of a person or corporation
authorized to do the business of insurance in the Philippines."
The Insurance Code, of course, does not wholly regulate the Sections 299 and 300 of the Insurance Code on Insurance
"agency" that it speaks of, as agency is a civil law matter Agents and Brokers, among other provisions, provide:
governed by the Civil Code. Thus, at the very least, three sets
of laws – namely, the Insurance Code, the Labor Code and the Section 299. No insurance company doing business in the
Civil Code – have to be considered in looking at the present Philippines, nor any agent thereof, shall pay any commission
case. Not to be forgotten, too, is the Agreement (partly or other compensation to any person for services in obtaining
reproduced on page 2 of this Dissent and which no one insurance, unless such person shall have first procured from
disputes) that the parties adopted to govern their relationship the Commissioner a license to act as an insurance agent of
for purposes of selling the insurance the company offers. To such company or as an insurance broker as hereinafter
forget these other laws is to take a myopic view of the present provided.
case and to add to the uncertainties that now exist in
considering the legal relationship between the insurance No person shall act as an insurance agent or as an insurance
company and its "agents." broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any
The main issue of whether an agency or an employment commission or other compensation from any insurance
relationship exists depends on the incidents of the company doing business in the Philippines or any agent
relationship. The Labor Code concept of "control" has to be thereof, without first procuring a license so to act from the
compared and distinguished with the "control" that must Commissioner x x x The Commissioner shall satisfy himself as
necessarily exist in a principal-agent relationship. The to the competence and trustworthiness of the applicant and
principal cannot but also have his or her say in directing the shall have the right to refuse to issue or renew and to suspend
course of the principal-agent relationship, especially in cases or revoke any such license in his discretion.1avvphi1.net
where the company-representative relationship in the
insurance industry is an agency. Section 300. Any person who for compensation solicits or
obtains insurance on behalf of any insurance company or
a. The laws on insurance and agency transmits for a person other than himself an application for a
policy or contract of insurance to or from such company or
The business of insurance is a highly regulated commercial offers or assumes to act in the negotiating of such insurance
activity in the country, in terms particularly of who can be in shall be an insurance agent within the intent of this section
the insurance business, who can act for and in behalf of an and shall thereby become liable to all the duties, requirements,
insurer, and how these parties shall conduct themselves in the liabilities and penalties to which an insurance agent is subject.
insurance business. Section 186 of the Insurance Code
provides that "No person, partnership, or association of
The application for an insurance agent’s license requires a definition that on its face may even encompass an
written examination, and the applicant must be of good moral employment relationship, the distinctions between agency and
character and must not have been convicted of a crime employment are sufficiently established by law and
involving moral turpitude.14 The insurance agent who collects jurisprudence.
premiums from an insured person for remittance to the
insurance company does so in a fiduciary capacity, and an Generally, the determinative element is the control exercised
insurance company which delivers an insurance policy or over the one rendering service. The employer controls the
contract to an authorized agent is deemed to have authorized employee both in the results and in the means and manner of
the agent to receive payment on the company’s achieving this result. The principal in an agency relationship,
behalf.15 Section 361 further prohibits the offer, negotiation, or on the other hand, also has the prerogative to exercise control
collection of any amount other than that specified in the policy over the agent in undertaking the assigned task based on the
and this covers any rebate from the premium or any special parameters outlined in the pertinent laws.
favor or advantage in the dividends or benefit accruing from
the policy. Under the general law on agency as applied to insurance, an
agency must be express in light of the need for a license and
Thus, under the Insurance Code, the agent must, as a matter of for the designation by the insurance company. In the present
qualification, be licensed and must also act within the case, the Agreement fully serves as grant of authority to
parameters of the authority granted under the license and Tongko as Manulife’s insurance agent.17 This agreement is
under the contract with the principal. Other than the need for supplemented by the company’s agency practices and usages,
a license, the agent is limited in the way he offers and duly accepted by the agent in carrying out the agency.18 By
negotiates for the sale of the company’s insurance products, in authority of the Insurance Code, an insurance agency is for
his collection activities, and in the delivery of the insurance compensation,19 a matter the Civil Code Rules on Agency
contract or policy. Rules regarding the desired results (e.g., the presumes in the absence of proof to the contrary.20 Other than
required volume to continue to qualify as a company agent, the compensation, the principal is bound to advance to, or to
rules to check on the parameters on the authority given to the reimburse, the agent the agreed sums necessary for the
agent, and rules to ensure that industry, legal and ethical rules execution of the agency.21 By implication at least under Article
are followed) are built-in elements of control specific to an 1994 of the Civil Code, the principal can appoint two or more
insurance agency and should not and cannot be read as agents to carry out the same assigned tasks,22 based necessarily
elements of control that attend an employment relationship on the specific instructions and directives given to them.
governed by the Labor Code.
With particular relevance to the present case is the provision
On the other hand, the Civil Code defines an agent as a that "In the execution of the agency, the agent shall act in
"person [who] binds himself to render some service or to do accordance with the instructions of the principal."23 This
something in representation or on behalf of another, with the provision is pertinent for purposes of the necessary control
consent or authority of the latter."16 While this is a very broad that the principal exercises over the agent in undertaking the
assigned task, and is an area where the instructions can contract between the insurance company and its agent.
intrude into the labor law concept of control so that minute Carungcong dealt with a subsequent Agreement making
consideration of the facts is necessary. A related article is Carungcong a New Business Manager that clearly superseded
Article 1891 of the Civil Code which binds the agent to render the Agreement designating Carungcong as an agent
an account of his transactions to the principal. empowered to solicit applications for insurance. The Grepalife
case, on the other hand, dealt with the proper legal
B. The Cited Case characterization of the appointment of the Ruiz brothers to
positions higher than their original position as insurance
The Decision of November 7, 2008 refers to the first Insular agents. Thus, after analyzing the duties and functions of the
and Grepalife cases to establish that the company rules and Ruiz brothers, as these were enumerated in their contracts, we
regulations that an agent has to comply with are indicative of concluded that the company practically dictated the manner
an employer-employee relationship.24 The Dissenting by which the Ruiz brothers were to carry out their jobs.
Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita Finally, the second Insular Life case dealt with the implications
Carpio Morales also cite Insular Life Assurance Co. v. National of de los Reyes’ appointment as acting unit manager which,
Labor Relations Commission (second Insular case)25 to support like the subsequent contracts in the Carungcong and the
the view that Tongko is Manulife’s employee. On the other Grepalife cases, was clearly defined under a subsequent
hand, Manulife cites the Carungcong case and AFP Mutual contract. In all these cited cases, a determination of the
Benefit Association, Inc. v. National Labor Relations presence of the Labor Code element of control was made on
Commission (AFPMBAI case)26 to support its allegation that the basis of the stipulations of the subsequent contracts.
Tongko was not its employee.
In stark contrast with the Carungcong, the Grepalife, and the
A caveat has been given above with respect to the use of the second Insular Life cases, the only contract or document extant
rulings in the cited cases because none of them is on all fours and submitted as evidence in the present case is the
with the present case; the uniqueness of the factual situation of Agreement – a pure agency agreement in the Civil Code
the present case prevents it from being directly and readily context similar to the original contract in the first Insular Life
cast in the mold of the cited cases. These cited cases are case and the contract in the AFPMBAI case. And while Tongko
themselves different from one another; this difference was later on designated unit manager in 1983, Branch
underscores the need to read and quote them in the context of Manager in 1990, and Regional Sales Manager in 1996, no
their own factual situations. formal contract regarding these undertakings appears in the
records of the case. Any such contract or agreement, had there
The present case at first glance appears aligned with the facts been any, could have at the very least provided the bases for
in the Carungcong, the Grepalife, and the second Insular Life properly ascertaining the juridical relationship established
cases. A critical difference, however, exists as these cited cases between the parties.
dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency
These critical differences, particularly between the present The parties’ legal characterization of their intent, although not
case and the Grepalife and the second Insular Life cases, conclusive, is critical in this case because this intent is not
should therefore immediately drive us to be more prudent and illegal or outside the contemplation of law, particularly of the
cautious in applying the rulings in these cases. Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this
C. Analysis of the Evidence Code (as heretofore already noted) expressly envisions a
principal-agent relationship between the insurance company
c.1. The Agreement and the insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial notice that
The primary evidence in the present case is the July 1, 1977 as a matter of Insurance Code-based business practice, an
Agreement that governed and defined the parties’ relations agency relationship prevails in the insurance industry for the
until the Agreement’s termination in 2001. This Agreement purpose of selling insurance. The Agreement, by its express
stood for more than two decades and, based on the records of terms, is in accordance with the Insurance Code model when it
the case, was never modified or novated. It assumes primacy provided for a principal-agent relationship, and thus cannot
because it directly dealt with the nature of the parties’ lightly be set aside nor simply be considered as an agreement
relationship up to the very end; moreover, both parties never that does not reflect the parties’ true intent. This intent,
disputed its authenticity or the accuracy of its terms. incidentally, is reinforced by the system of compensation the
Agreement provides, which likewise is in accordance with the
By the Agreement’s express terms, Tongko served as an production-based sales commissions the Insurance Code
"insurance agent" for Manulife, not as an employee. To be provides.
sure, the Agreement’s legal characterization of the nature of
the relationship cannot be conclusive and binding on the Significantly, evidence shows that Tongko’s role as an
courts; as the dissent clearly stated, the characterization of the insurance agent never changed during his relationship with
juridical relationship the Agreement embodied is a matter of Manulife. If changes occurred at all, the changes did not
law that is for the courts to determine. At the same time, appear to be in the nature of their core relationship. Tongko
though, the characterization the parties gave to their essentially remained an agent, but moved up in this role
relationship in the Agreement cannot simply be brushed aside through Manulife’s recognition that he could use other agents
because it embodies their intent at the time they entered the approved by Manulife, but operating under his guidance and
Agreement, and they were governed by this understanding in whose commissions he had a share. For want of a better
throughout their relationship. At the very least, the provision term, Tongko perhaps could be labeled as a "lead agent" who
on the absence of employer-employee relationship between guided under his wing other Manulife agents similarly tasked
the parties can be an aid in considering the Agreement and its with the selling of Manulife insurance.
implementation, and in appreciating the other evidence on
record. 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 the terms and conditions of the Agreement. Tongko, for his
relationship with Manulife, the change was solely for purposes part, accepted all the benefits flowing from the Agreement,
of crediting him with his share in the commissions the agents particularly the generous commissions.
under his wing generated. As an agent who was recruiting
and guiding other insurance agents, Tongko likewise moved Evidence indicates that Tongko consistently clung to the view
up in terms of the reimbursement of expenses he incurred in that he was an independent agent selling Manulife insurance
the course of his lead agency, a prerogative he enjoyed products since he invariably declared himself a business or
pursuant to Article 1912 of the Civil Code. Thus, Tongko self-employed person in his income tax returns. This
received greater reimbursements for his expenses and was consistency with, and action made pursuant to the
even allowed to use Manulife facilities in his interactions with Agreement were pieces of evidence that were never
the agents, all of whom were, in the strict sense, Manulife mentioned nor considered in our Decision of November 7,
agents approved and certified as such by Manulife with the 2008. Had they been considered, they could, at the very least,
Insurance Commission. serve as Tongko’s admissions against his interest. Strictly
speaking, Tongko’s tax returns cannot but be legally
That Tongko assumed a leadership role but nevertheless significant because he certified under oath the amount he
wholly remained an agent is the inevitable conclusion that earned as gross business income, claimed business deductions,
results from the reading of the Agreement (the only agreement leading to his net taxable income. This should be evidence of
on record in this case) and his continuing role thereunder as the first order that cannot be brushed aside by a mere denial.
sales agent, from the perspective of the Insurance and the Civil Even on a layman’s view that is devoid of legal considerations,
Codes and in light of what Tongko himself attested to as his the extent of his annual income alone renders his claimed
role as Regional Sales Manager. To be sure, this interpretation employment status doubtful.27
could have been contradicted if other agreements had been
submitted as evidence of the relationship between Manulife Hand in hand with the concept of admission against interest in
and Tongko on the latter’s expanded undertakings. In the considering the tax returns, the concept of estoppel – a legal
absence of any such evidence, however, this reading – based and equitable concept28 – necessarily must come into play.
on the available evidence and the applicable insurance and Tongko’s previous admissions in several years of tax returns
civil law provisions – must stand, subject only to objective and as an independent agent, as against his belated claim that he
evidentiary Labor Code tests on the existence of an employer- was all along an employee, are too diametrically opposed to be
employee relationship. simply dismissed or ignored. Interestingly, Justice Velasco’s
dissenting opinion states that Tongko was forced to declare
In applying such Labor Code tests, however, the enforcement himself a business or self-employed person by Manulife’s
of the Agreement during the course of the parties’ relationship persistent refusal to recognize him as its
should be noted. From 1977 until the termination of the employee.29 Regrettably, the dissent has shown no basis for
Agreement, Tongko’s occupation was to sell Manulife’s this conclusion, an understandable omission since no
insurance policies and products. Both parties acquiesced with evidence in fact exists on this point in the records of the
case. In fact, what the evidence shows is Tongko’s full A glaring evidentiary gap for Tongko in this case is the lack of
conformity with, and action as, an independent agent until his evidence on record showing that Manulife ever exercised
relationship with Manulife took a bad turn. means-and-manner control, even to a limited extent, over
Tongko during his ascent in Manulife’s sales ladder. In 1983,
Another interesting point the dissent raised with respect to the Tongko was appointed unit manager. Inexplicably, Tongko
Agreement is its conclusion that the Agreement negated any never bothered to present any evidence at all on what this
employment relationship between Tongko and Manulife so designation meant. This also holds true for Tongko’s
that the commissions he earned as a sales agent should not be appointment as branch manager in 1990, and as Regional Sales
considered in the determination of the backwages and Manager in 1996. The best evidence of control – the agreement
separation pay that should be given to him. This part of the or directive relating to Tongko’s duties and responsibilities –
dissent is correct although it went on to twist this conclusion was never introduced as part of the records of the case. The
by asserting that Tongko had dual roles in his relationship reality is, prior to de Dios’ letter, Manulife had practically left
with Manulife; he was an agent, not an employee, in so far as Tongko alone not only in doing the business of selling
he sold insurance for Manulife, but was an employee in his insurance, but also in guiding the agents under his wing. As
capacity as a manager. Thus, the dissent concluded that discussed below, the alleged directives covered by de Dios’
Tongko’s backwages should only be with respect to his role as letter, heretofore quoted in full, were policy directions and
Manulife’s manager. targeted results that the company wanted Tongko and the
other sales groups to realign with in their own selling
The conclusion with respect to Tongko’s employment as a activities. This is the reality that the parties’ presented
manager is, of course, unacceptable for the legal, factual and evidence consistently tells us.
practical reasons discussed in this Resolution. In brief,
the factual reason is grounded on the lack of evidentiary What, to Tongko, serve as evidence of labor law control are the
support of the conclusion that Manulife exercised control over codes of conduct that Manulife imposes on its agents in the
Tongko in the sense understood in the Labor Code. The legal sale of insurance. The mere presentation of codes or of rules
reason, partly based on the lack of factual basis, is the and regulations, however, is not per se indicative of labor law
erroneous legal conclusion that Manulife controlled Tongko control as the law and jurisprudence teach us.
and was thus its employee. The practical reason, on the other
hand, is the havoc that the dissent’s unwarranted conclusion As already recited above, the Insurance Code imposes
would cause the insurance industry that, by the law’s own obligations on both the insurance company and its agents in
design, operated along the lines of principal-agent relationship the performance of their respective obligations under the
in the sale of insurance. Code, particularly on licenses and their renewals, on the
representations to be made to potential customers, the
c.2. Other Evidence of Alleged Control 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
Duties of Manulife’s Duties of Grepalife’s
allows the principal an element of control over the agent in a
Manager Managers/Supervisors
manner consistent with an agency relationship. In this sense,
these control measures cannot be read as indicative of labor - to render or recommend - train understudies for the
law control. Foremost among these are the directives that the prospective agents to be position of district manager
principal may impose on the agent to achieve the assigned licensed, trained and
tasks, to the extent that they do not involve the means and contracted to sell Manulife
manner of undertaking these tasks. The law likewise obligates products and who will be
the agent to render an account; in this sense, the principal may part of my Unit
impose on the agent specific instructions on how an account
shall be made, particularly on the matter of expenses and - to coordinate activities of - properly account, record
reimbursements. To these extents, control can be imposed the agents under [the and document the company’s
through rules and regulations without intruding into the labor managers’] Unit in [the funds, spot-check and audit
law concept of control for purposes of employment. agents’] daily, weekly and the work of the zone
monthly selling activities, supervisors, x x x follow up
making sure that their the submission of weekly
respective sales targets are remittance reports of the
met; debit agents and zone
supervisors
- to conduct periodic
training sessions for [the] - direct and supervise the
agents to further enhance sales activities of the debit
their sales skill; and agents under him, x x x
undertake and discharge the
- to assist [the] agents with functions of absentee debit
their sales activities by way agents, spot-check the record
of joint fieldwork, of debit agents, and insure
consultations and one-on- proper documentation of
one evaluation and sales and collections of debit
analysis of particular agents.
accounts
From jurisprudence, an important lesson that the first Insular with the control the managers in the Grepalife case exercised
Life case teaches us is that a commitment to abide by the rules over their employees by presenting the following matrix:31
and regulations of an insurance company does not ipso facto
make the insurance agent an employee. Neither do guidelines Aside from these affidavits however, no other evidence exists
somehow restrictive of the insurance agent’s conduct regarding the effects of Tongko’s additional roles in Manulife’s
necessarily indicate "control" as this term is defined in sales operations on the contractual relationship between them.
jurisprudence. Guidelines indicative of labor law "control,"
as the first Insular Life case tells us, should not merely relate To the dissent, Tongko’s administrative functions as recruiter,
to the mutually desirable result intended by the contractual trainer, or supervisor of other sales agents constituted a
relationship; they must have the nature of dictating the substantive alteration of Manulife’s authority over Tongko
means or methods to be employed in attaining the result, or of and the performance of his end of the relationship with
fixing the methodology and of binding or restricting the party Manulife. We could not deny though that Tongko remained,
hired to the use of these means. In fact, results-wise, the first and foremost, an insurance agent, and that his additional
principal can impose production quotas and can determine role as Branch Manager did not lessen his main and dominant
how many agents, with specific territories, ought to be role as insurance agent; this role continued to dominate the
employed to achieve the company’s objectives. These are relations between Tongko and Manulife even after Tongko
management policy decisions that the labor law element of assumed his leadership role among agents. This conclusion
control cannot reach. Our ruling in these respects in the first cannot be denied because it proceeds from the undisputed fact
Insular Life case was practically reiterated in Carungcong. that Tongko and Manulife never altered their July 1, 1977
Thus, as will be shown more fully below, Manulife’s codes of Agreement, a distinction the present case has with the
conduct,30 all of which do not intrude into the insurance contractual changes made in the second Insular Life case.
agents’ means and manner of conducting their sales and only Tongko’s results-based commissions, too, attest to the primacy
control them as to the desired results and Insurance Code he gave to his role as insurance sales agent.
norms, cannot be used as basis for a finding that the labor law
concept of control existed between Manulife and Tongko. The dissent apparently did not also properly analyze and
appreciate the great qualitative difference that exists between:
The dissent considers the imposition of administrative and
managerial functions on Tongko as indicative of labor law • the Manulife managers’ role is to coordinate activities
control; thus, Tongko as manager, but not as insurance agent, of the agents under the managers’ Unit in the agents’
became Manulife’s employee. It drew this conclusion from daily, weekly, and monthly selling activities, making
what the other Manulife managers disclosed in their affidavits sure that their respective sales targets are met.
(i.e., their enumerated administrative and managerial • the District Manager’s duty in Grepalife is to properly
functions) and after comparing these statements with the account, record, and document the company's funds,
managers in Grepalife. The dissent compared the control spot-check and audit the work of the zone supervisors,
exercised by Manulife over its managers in the present case conserve the company's business in the district through
 "reinstatements," follow up the submission of weekly in the Decision of November 7, 2008, while the other portions
remittance reports of the debit agents and zone suggesting labor law control were highlighted. Specifically,
supervisors, preserve company property in good the following portions of the affidavits were not brought out:32
condition, train understudies for the position of district
managers, and maintain his quota of sales (the failure 1.a. I have no fixed wages or salary since my services
of which is a ground for termination). are compensated by way of commissions based on the
• the Zone Supervisor’s (also in Grepalife) has the duty to computed premiums paid in full on the policies
direct and supervise the sales activities of the debit agents obtained thereat;
under him, conserve company property through
"reinstatements," undertake and discharge the functions of 1.b. I have no fixed working hours and employ my
absentee debit agents, spot-check the records of debit agents, own method in soliticing insurance at a time and place
and insure proper documentation of sales and collections by I see fit;
the debit agents.
1.c. I have my own assistant and messenger who
These job contents are worlds apart in terms of "control." In handle my daily work load;
Grepalife, the details of how to do the job are specified and
pre-determined; in the present case, the operative words are 1.d. I use my own facilities, tools, materials and
the "sales target," the methodology being left undefined except supplies in carrying out my business of selling
to the extent of being "coordinative." To be sure, a insurance;
"coordinative" standard for a manager cannot be indicative of
control; the standard only essentially describes what a Branch xxxx
Manager is – the person in the lead who orchestrates activities
within the group. To "coordinate," and thereby to lead and to 6. I have my own staff that handles the day to day
orchestrate, is not so much a matter of control by Manulife; it operations of my office;
is simply a statement of a branch manager’s role in relation
with his agents from the point of view of Manulife whose 7. My staff are my own employees and received
business Tongko’s sales group carries. salaries from me;

A disturbing note, with respect to the presented affidavits and xxxx

Tongko’s alleged administrative functions, is the selective
citation of the portions supportive of an employment 9. My commission and incentives are all reported to the
relationship and the consequent omission of portions leading Bureau of Internal Revenue (BIR) as income by a self-
to the contrary conclusion. For example, the following employed individual or professional with a ten (10)
portions of the affidavit of Regional Sales Manager John Chua,
with counterparts in the other affidavits, were not brought out
 percent creditable withholding tax. I also remit simply relayed to him with suggestions on how these
monthly for professionals. objectives can be reached through the expansion of a non-
employee sales force.
These statements, read with the above comparative analysis of
the Manulife and the Grepalife cases, would have readily Interestingly, a large part of de Dios’ letter focused on income,
yielded the conclusion that no employer-employee which Manulife demonstrated, in Tongko’s case, to be
relationship existed between Manulife and Tongko. unaffected by the new goal and direction the company had set.
Income in insurance agency, of course, is dependent on
Even de Dios’ letter is not determinative of control as it results, not on the means and manner of selling – a matter for
indicates the least amount of intrusion into Tongko’s exercise Tongko and his agents to determine and an area into which
of his role as manager in guiding the sales agents. Strictly Manulife had not waded. Undeniably, de Dios’ letter
viewed, de Dios’ directives are merely operational guidelines contained a directive to secure a competent assistant at
on how Tongko could align his operations with Manulife’s re- Tongko’s own expense. While couched in terms of a directive,
directed goal of being a "big league player." The method is to it cannot strictly be understood as an intrusion into Tongko’s
expand coverage through the use of more agents. This method of operating and supervising the group of agents
requirement for the recruitment of more agents is not a means- within his delineated territory. More than anything else, the
and-method control as it relates, more than anything else, and "directive" was a signal to Tongko that his results were
is directly relevant, to Manulife’s objective of expanded unsatisfactory, and was a suggestion on how Tongko’s
business operations through the use of a bigger sales force perceived weakness in delivering results could be remedied. It
whose members are all on a principal-agent relationship. An was a solution, with an eye on results, for a consistently
important point to note here is that Tongko was not underperforming group; its obvious intent was to save Tongko
supervising regular full-time employees of Manulife engaged from the result that he then failed to grasp – that he could lose
in the running of the insurance business; Tongko was even his own status as an agent, as he in fact eventually did.
effectively guiding his corps of sales agents, who are bound to
Manulife through the same Agreement that he had with The present case must be distinguished from the second
Manulife, all the while sharing in these agents’ commissions Insular Life case that showed the hallmarks of an employer-
through his overrides. This is the lead agent concept employee relationship in the management system established.
mentioned above for want of a more appropriate term, since These were: exclusivity of service, control of assignments and
the title of Branch Manager used by the parties is really a removal of agents under the private respondent’s unit, and
misnomer given that what is involved is not a specific regular furnishing of company facilities and materials as well as
branch of the company but a corps of non-employed agents, capital described as Unit Development Fund. All these are
defined in terms of covered territory, through which the obviously absent in the present case. If there is a commonality
company sells insurance. Still another point to consider is that in these cases, it is in the collection of premiums which is a
Tongko was not even setting policies in the way a regular basic authority that can be delegated to agents under the
company manager does; company aims and objectives were Insurance Code.
As previously discussed, what simply happened in Tongko’s the answer will not be fully supported by the substantial
case was the grant of an expanded sales agency role that evidence needed.
recognized him as leader amongst agents in an area that
Manulife defined. Whether this consequently resulted in the Under this legal situation, the only conclusion that can be
establishment of an employment relationship can be made is that the absence of evidence showing Manulife’s
answered by concrete evidence that corresponds to the control over Tongko’s contractual duties points to the absence
following questions: of any employer-employee relationship between Tongko and
Manulife. In the context of the established evidence, Tongko
• as lead agent, what were Tongko’s specific functions remained an agent all along; although his subsequent duties
and the terms of his additional engagement; made him a lead agent with leadership role, he was
• was he paid additional compensation as a so-called nevertheless only an agent whose basic contract yields no
Area Sales Manager, apart from the commissions he evidence of means-and-manner control.
received from the insurance sales he generated;
• what can be Manulife’s basis to terminate his status as This conclusion renders unnecessary any further discussion of
lead agent; the question of whether an agent may simultaneously assume
• can Manulife terminate his role as lead agent conflicting dual personalities. But to set the record straight, the
separately from his agency contract; and concept of a single person having the dual role of agent and
• to what extent does Manulife control the means and employee while doing the same task is a novel one in our
methods of Tongko’s role as lead agent? jurisprudence, which must be viewed with caution especially
when it is devoid of any jurisprudential support or precedent.
The answers to these questions may, to some extent, be The quoted portions in Justice Carpio-Morales’
deduced from the evidence at hand, as partly discussed above. dissent,33 borrowed from both the Grepalife and the second
But strictly speaking, the questions cannot definitively and Insular Life cases, to support the duality approach of the
concretely be answered through the evidence on record. The Decision of November 7, 2008, are regrettably far removed
concrete evidence required to settle these questions is simply from their context – i.e., the cases’ factual situations, the issues
not there, since only the Agreement and the anecdotal they decided and the totality of the rulings in these cases – and
affidavits have been marked and submitted as evidence. cannot yield the conclusions that the dissenting opinions
drew.
Given this anemic state of the evidence, particularly on the
requisite confluence of the factors determinative of the The Grepalife case dealt with the sole issue of whether the
existence of employer-employee relationship, the Court cannot Ruiz brothers’ appointment as zone supervisor and district
conclusively find that the relationship exists in the present manager made them employees of Grepalife. Indeed, because
case, even if such relationship only refers to Tongko’s of the presence of the element of control in their contract of
additional functions. While a rough deduction can be made, 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 The dissent pointed out, as an argument to support its
Court’s ruling never implied that this situation existed insofar employment relationship conclusion, that any doubt in the
as the Ruiz brothers were concerned. The Court’s statement – existence of an employer-employee relationship should be
the Insurance Code may govern the licensing requirements resolved in favor of the existence of the relationship.34This
and other particular duties of insurance agents, but it does not observation, apparently drawn from Article 4 of the Labor
bar the application of the Labor Code with regard to labor Code, is misplaced, as Article 4 applies only when a doubt
standards and labor relations – simply means that when an exists in the "implementation and application" of the Labor
insurance company has exercised control over its agents so as Code and its implementing rules; it does not apply where no
to make them their employees, the relationship between the doubt exists as in a situation where the claimant clearly failed
parties, which was otherwise one for agency governed by the to substantiate his claim of employment relationship by the
Civil Code and the Insurance Code, will now be governed by quantum of evidence the Labor Code requires.
the Labor Code. The reason for this is simple – the contract of
agency has been transformed into an employer-employee On the dissent’s last point regarding the lack of jurisprudential
relationship. value of our November 7, 2008 Decision, suffice it to state that,
as discussed above, the Decision was not supported by the
The second Insular Life case, on the other hand, involved the evidence adduced and was not in accordance with controlling
issue of whether the labor bodies have jurisdiction over an jurisprudence. It should, therefore, be reconsidered and
illegal termination dispute involving parties who had two abandoned, but not in the manner the dissent suggests as the
contracts – first, an original contract (agency contract), which dissenting opinions are as factually and as legally erroneous as
was undoubtedly one for agency, and another subsequent the Decision under reconsideration.
contract that in turn designated the agent acting unit manager
(a management contract). Both the Insular Life and the labor In light of these conclusions, the sufficiency of Tongko’s
arbiter were one in the position that both were agency failure to comply with the guidelines of de Dios’ letter, as a
contracts. The Court disagreed with this conclusion and held ground for termination of Tongko’s agency, is a matter that
that insofar as the management contract is concerned, the the labor tribunals cannot rule upon in the absence of an
labor arbiter has jurisdiction. It is in this light that we employer-employee relationship. Jurisdiction over the matter
remanded the case to the labor arbiter for further proceedings. belongs to the courts applying the laws of insurance, agency
We never said in this case though that the insurance agent had and contracts.
effectively assumed dual personalities for the simple reason
that the agency contract has been effectively superseded by the WHEREFORE, considering the foregoing discussion, we
management contract. The management contract provided REVERSE our Decision of November 7,
that if the appointment was terminated for any reason other 2008, GRANTManulife’s motion for reconsideration and,
than for cause, the acting unit manager would be reverted to accordingly, DISMISS Tongko’s petition. No costs.
agent status and assigned to any unit.
SO ORDERED.
PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, and boundary fee of ₱500.00 per day. He claimed that, on
LORIANO D. DALUYON, Petitioners, November 9, 2001, due to the scarcity of passengers, he was
vs. only able to remit ₱400.00 to respondent. On November 11,
AVELINO REGUALOS, Respondent. 2001, he returned to work after his rest day, but respondent
barred him from driving because of the deficiency in the
DECISION boundary payment. He pleaded with respondent but to no
avail.3
NACHURA, J.:
Tresquio was employed by respondent as driver in August
Is the policy of suspending drivers pending payment of 1996. He became a permanent driver in 1997. In 1998, he was
arrears in their boundary obligations reasonable? The Court of assigned to drive a new jeepney for a boundary fee of ₱500.00
Appeals (CA) answered the question in the affirmative in its per day. On November 6, 2001, due to the scarcity of
Decision1 dated December 14, 2006 and Resolution dated July passengers, he was only able to remit ₱450.00. When he
16, 2007. In this petition for review on certiorari, we take a returned to work on November 8, 2001 after his rest day, he
second look at the issue and determine whether the situation was barred by respondent because of the deficiency of ₱50.00.
at bar merits the relaxation of the application of the said He pleaded with respondent but the latter was adamant.4
policy.
On the other hand, Daluyon started working for respondent in
Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio March 1998. He became a permanent driver in July 1998. He
(Tresquio), and Loriano D. Daluyon (Daluyon) were employed was assigned to a relatively new jeepney for a boundary fee of
by respondent Avelino Regualos under a boundary ₱500.00 per day. On November 7, 2001, due to the scarcity of
agreement, as drivers of his jeepneys. In November 2001, they passengers, he was only able to pay ₱470.00 to respondent.
filed separate complaints2 for illegal dismissal against The following day, respondent barred him from driving his
respondent who barred them from driving the vehicles due to jeepney. He pleaded but to no avail.5
deficiencies in their boundary payments.
During the mandatory conference, respondent manifested that
Caong was hired by respondent in September 1998 and petitioners were not dismissed and that they could drive his
became a permanent driver sometime in 2000. In July 2001, he jeepneys once they paid their arrears. Petitioners, however,
was assigned a brand- new jeepney for a boundary fee of refused to do so.
₱550.00 per day. He was suspended on October 9-15, 2001 for
failure to remit the full amount of the boundary. Petitioners averred that they were illegally dismissed by
Consequently, he filed a complaint for illegal suspension. respondent without just cause. They maintained that
Upon expiration of the suspension period, he was readmitted respondent did not comply with due process requirements
by respondent, but he was reassigned to an older jeepney for a before terminating their employment, as they were not
furnished notice apprising them of their infractions and
another informing them of their dismissal. Petitioners claimed November 5, 2001 and ₱80.00 on November 7, 2001. On
that respondent’s offer during the mandatory conference to November 6, 2001, it was Tresquio who incurred an arrear of
reinstate them was an insincere afterthought as shown by the ₱100.00. On November 7 and 9, 2001, petitioner Caong was in
warning given by respondent that, if they fail to remit the full arrear of ₱50.00 and ₱100.00, respectively. Respondent stressed
amount of the boundary yet again, they will be barred from that, during the mandatory conference, he manifested that he
driving the jeepneys. Petitioners questioned respondent’s would renew his lease with petitioners if they would pay the
policy of automatically dismissing the drivers who fail to arrears they incurred during the said dates.6
remit the full amount of the boundary as it allegedly (a)
violates their right to due process; (b) does not constitute a just On March 31, 2003, the Labor Arbiter decided the case in favor
cause for dismissal; (c) disregards the reality that there are of respondent, thus:
days when they could not raise the full amount of the
boundary because of the scarcity of passengers. WHEREFORE, judgment is hereby rendered, DISMISSING the
above-entitled cases for lack of merit. However, respondent
In his Position Paper, respondent alleged that petitioners were Regualos is directed to accept back complainants Caong,
lessees of his vehicles and not his employees; hence, the Labor Tresquio and Daluyon, as regular drivers of his passenger
Arbiter had no jurisdiction. He claimed that he noticed that jeepneys, after complainants have paid their respective
some of his lessees, including petitioners, were not fully arrearages they have incurred in the remittance of their
paying the daily rental of his jeepneys. In a list which he respective boundary payments, in the amount of ₱150.00,
attached to the Position Paper, it was shown that petitioners ₱100.00 and ₱100.00. Complainants, if still interested to work
had actually incurred arrears since they started working. The as drivers, are hereby ordered to report to respondent
list showed that Caong’s total arrears amounted to ₱10,315.00, Regualos within fifteen (15) days from the finality of this
that of Tresquio was ₱10,760.00, while that of Daluyon was decision. Otherwise, failure to do so means forfeiture of their
₱6,890.00. He made inquiries and discovered that his lessees respective employments.
contracted loans with third parties and used the income of the
jeepneys in paying the loans. Thus, on November 4, 2001, he Other claims of complainants are dismissed for lack of merit.
gathered all the lessees in a meeting and informed them that,
effective November 5, 2001, those who would fail to fully pay SO ORDERED.7
the daily rental would not be allowed to rent a jeepney on the
following day. He explained to them that the jeepneys were According to the Labor Arbiter, an employer-employee
acquired on installment basis, and that he was paying the relationship existed between respondent and petitioners. The
monthly amortizations through the lease income. Most of the latter were not dismissed considering that they could go back
lessees allegedly accepted the condition and paid their arrears. to work once they have paid their arrears. The Labor Arbiter
Petitioners, however, did not settle their arrears. Worse, their opined that, as a disciplinary measure, it is proper to impose a
remittances were again short of the required boundary fee. reasonable sanction on drivers who cannot pay their boundary
Petitioner Daluyon’s rent payment was short of ₱20.00 on
payments. He emphasized that respondent acquired the opportunity to be heard. The meeting conducted by
jeepneys on loan or installment basis and relied on the respondent on November 4, 2001 served as sufficient notice to
boundary payments to comply with his monthly petitioners. During the said meeting, respondent informed his
amortizations.8 employees, including petitioners, to strictly comply with the
policy regarding remittances and warned them that they
Petitioners appealed the decision to the National Labor would not be allowed to take out the jeepneys if they did not
Relations Commission (NLRC). In its resolution9 dated March remit the full amount of the boundary.13
31, 2004, the NLRC agreed with the Labor Arbiter and
dismissed the appeal. It also denied petitioners’ motion for Dissatisfied, petitioners filed a motion for reconsideration, but
reconsideration.10 the CA denied the motion in its Resolution dated July 16,
2007.14
Forthwith, petitioners filed a petition for certiorari with the
CA. Petitioners are now before this Court resolutely arguing that
they were illegally dismissed by respondent, and that such
In its Decision11 dated December 14, 2006, the CA found no dismissal was made in violation of the due process
grave abuse of discretion on the part of the NLRC. According requirements of the law.
to the CA, the employer-employee relationship of the parties
has not been severed, but merely suspended when respondent The petition is without merit.
refused to allow petitioners to drive the jeepneys while there
were unpaid boundary obligations. The CA pointed out that In an action for certiorari, petitioner must prove not merely
the fact that it was within the power of petitioners to return to reversible error, but grave abuse of discretion amounting to
work is proof that there was no termination of employment. lack or excess of jurisdiction on the part of respondent. Mere
The condition that petitioners should first pay their arrears abuse of discretion is not enough. It must be shown that public
only for the period of November 5-9, 2001 before they can be respondent exercised its power in an arbitrary or despotic
readmitted to work is neither impossible nor unreasonable if manner by reason of passion or personal hostility, and this
their total unpaid boundary obligations and the need to must be so patent and so gross as to amount to an evasion of a
sustain the financial viability of the employer’s enterprise— positive duty or to a virtual refusal to perform the duty
which would ultimately redound to the benefit of the enjoined or to act at all in contemplation of law.15
employees—are taken into consideration.12
As correctly held by the CA, petitioners failed to establish that
The CA went on to rule that petitioners were not denied their the NLRC committed grave abuse of discretion in affirming the
right to due process. It pointed out that the case does not Labor Arbiter’s ruling, which is supported by the facts on
involve a termination of employment; hence, the strict record.
application of the twin-notice rule is not warranted. According
to the CA, what is important is that petitioners were given the
It is already settled that the relationship between jeepney boundary payments and, in fact, herein petitioners had
owners/operators and jeepney drivers under the boundary already incurred a considerable amount of arrears. He had to
system is that of employer-employee and not of lessor-lessee. put a stop to it as he also relied on these boundary payments
The fact that the drivers do not receive fixed wages but only to raise the full amount of his monthly amortizations on the
get the amount in excess of the so-called "boundary" that they jeepneys. Demonstrating their obstinacy, petitioners, on the
pay to the owner/operator is not sufficient to negate the days immediately following the implementation of the policy,
relationship between them as employer and employee.16 incurred deficiencies in their boundary remittances.

The Labor Arbiter, the NLRC, and the CA uniformly declared It is acknowledged that an employer has free rein and enjoys a
that petitioners were not dismissed from employment but wide latitude of discretion to regulate all aspects of
merely suspended pending payment of their arrears. Findings employment, including the prerogative to instill discipline on
of fact of the CA, particularly where they are in absolute his employees and to impose penalties, including dismissal, if
agreement with those of the NLRC and the Labor Arbiter, are warranted, upon erring employees. This is a management
accorded not only respect but even finality, and are deemed prerogative. Indeed, the manner in which management
binding upon this Court so long as they are supported by conducts its own affairs to achieve its purpose is within the
substantial evidence.17 management’s discretion. The only limitation on the exercise
of management prerogative is that the policies, rules, and
We have no reason to deviate from such findings. Indeed, regulations on work-related activities of the employees must
petitioners’ suspension cannot be categorized as dismissal, always be fair and reasonable, and the corresponding
considering that there was no intent on the part of respondent penalties, when prescribed, commensurate to the offense
to sever the employer-employee relationship between him and involved and to the degree of the infraction.18
petitioners. In fact, it was made clear that petitioners could put
an end to the suspension if they only pay their recent arrears. Petitioners argue that the policy is unsound as it does not
As it was, the suspension dragged on for years because of consider the times when passengers are scarce and the drivers
petitioners’ stubborn refusal to pay. It would have been are not able to raise the amount of the boundary.
different if petitioners complied with the condition and
respondent still refused to readmit them to work. Then there Petitioners’ concern relates to the implementation of the
would have been a clear act of dismissal. But such was not the policy, which is another matter. A company policy must be
case. Instead of paying, petitioners even filed a complaint for implemented in such manner as will accord social justice and
illegal dismissal against respondent. compassion to the employee. In case of noncompliance with
the company policy, the employer must consider the
Respondent’s policy of suspending drivers who fail to remit surrounding circumstances and the reasons why the employee
the full amount of the boundary was fair and reasonable failed to comply. When the circumstances merit the relaxation
under the circumstances. Respondent explained that he of the application of the policy, then its noncompliance must
noticed that his drivers were getting lax in remitting their be excused.
In the present case, petitioners merely alleged that there were opportunity to be heard, or as applied to administrative
only few passengers during the dates in question. Such excuse proceedings, an opportunity to explain one’s side or an
is not acceptable without any proof or, at least, an explanation opportunity to seek a reconsideration of the action or ruling
as to why passengers were scarce at that time. It is simply a complained of. A formal or trial-type hearing is not at all times
bare allegation, not worthy of belief. We also find the excuse and in all instances essential, as the due process requirements
unbelievable considering that petitioners incurred the are satisfied where the parties are afforded fair and reasonable
shortages on separate days, and it appears that only opportunity to explain their side of the controversy at hand. x
petitioners failed to remit the full boundary payment on said x x.
dates.
xxxx
Under a boundary scheme, the driver remits the "boundary,"
which is a fixed amount, to the owner/operator and gets to In the case at bench, private respondent, upon finding that
earn the amount in excess thereof. Thus, on a day when there petitioners had consistently failed to remit the full amount of
are many passengers along the route, it is the driver who the boundary, conducted a meeting on November 4, 2001
actually benefits from it. It would be unfair then if, during the informing them to strictly comply with the policy regarding
times when passengers are scarce, the owner/operator will be their remittances and warned them to discontinue driving if
made to suffer by not getting the full amount of the boundary. they still failed to remit the full amount of the boundary.19
Unless clearly shown or explained by an event that irregularly
and negatively affected the usual number of passengers within WHEREFORE, premises considered, the petition is DENIED.
the route, the scarcity of passengers should not excuse the The Court of Appeals Decision dated December 14, 2006 and
driver from paying the full amount of the boundary. Resolution dated July 16, 2007 are AFFIRMED.

Finally, we sustain the CA’s finding that petitioners were not SO ORDERED.
denied the right to due process. We thus quote with approval
its discussion on this matter:

Having established that the case at bench does not involve

termination of employment, We find that the strict, even rigid,
application of the twin-notice rule is not warranted.

But the due process safeguards are nonetheless still available

to petitioners.

Due process is not a matter of strict or rigid or formulaic

process.1âwphi1 The essence of due process is simply the
 ATOK BIG WEDGE COMPANY, INC., PETITIONER, VS. The said arrangement continued for the next eleven years.
JESUS P. GISON, RESPONDENT.
Sometime thereafter, since respondent was getting old, he
DECISION requested that petitioner cause his registration with the Social
Security System (SSS), but petitioner did not accede to his
PERALTA, J.: request. He later reiterated his request but it was ignored by
respondent considering that he was only a
This is a petition for review on certiorari seeking to reverse and retainer/consultant. On February 4, 2003, respondent filed a
set aside the Decision[1] dated May 31, 2005 of the Court of Complaint[4] with the SSS against petitioner for the latter's
Appeals (CA) in CA-G.R. SP No. 87846, and the refusal to cause his registration with the SSS.
Resolution[2] dated August 23, 2005 denying petitioner's
motion for reconsideration. On the same date, Mario D. Cera, in his capacity as resident
manager of petitioner, issued a Memorandum[5] advising
The procedural and factual antecedents are as follows: respondent that within 30 days from receipt thereof, petitioner
is terminating his retainer contract with the company since his
Sometime in February 1992, respondent Jesus P. Gison was services are no longer necessary.
engaged as part-time consultant on retainer basis by petitioner
Atok Big Wedge Company, Inc. through its then Asst. Vice- On February 21, 2003, respondent filed a Complaint[6] for
President and Acting Resident Manager, Rutillo A. Torres. As illegal dismissal, unfair labor practice, underpayment of
a consultant on retainer basis, respondent assisted petitioner's wages, non-payment of 13thmonth pay, vacation pay, and sick
retained legal counsel with matters pertaining to the leave pay with the National Labor Relations Commission
prosecution of cases against illegal surface occupants within (NLRC), Regional Arbitration Branch (RAB), Cordillera
the area covered by the company's mineral claims. Respondent Administrative Region, against petitioner, Mario D. Cera, and
was likewise tasked to perform liaison work with several Teofilo R. Asuncion, Jr. The case was docketed as NLRC Case
government agencies, which he said was his expertise. No. RAB-CAR-02-0098-03.

Petitioner did not require respondent to report to its office on a Respondent alleged that:
regular basis, except when occasionally requested by the
management to discuss matters needing his expertise as a x x x [S]ometime in January 1992, Rutillo A. Torres, then the
consultant. As payment for his services, respondent received a resident manager of respondent Atok Big Wedge Co., Inc., or
retainer fee of P3,000.00 a month,[3] which was delivered to Atok for brevity, approached him and asked him if he can help
him either at his residence or in a local restaurant. The parties the company's problem involving the 700 million pesos crop
executed a retainer agreement, but such agreement was damage claims of the residents living at the minesite of Atok.
misplaced and can no longer be found. He participated in a series of dialogues conducted with the
residents. Mr. Torres offered to pay him P3,000.00 per month
plus representation expenses. It was also agreed upon by him to do liaison works with the SEC, Bureau of Mines, municipal
and Torres that his participation in resolving the problem was government of Itogon, Benguet, the Courts and other
temporary and there will be no employer-employee government offices.
relationship between him and Atok. It was also agreed upon
that his compensation, allowances and other expenses will be After the crop damage claims and the controversy were
paid through disbursement vouchers. resolved, he was permanently assigned by Atok to take charge
of some liaison matters and public relations in Baguio and
On February 1, 1992 he joined Atok. One week thereafter, the Benguet Province, and to report regularly to Atok's office in
aggrieved crop damage claimants barricaded the only passage Manila to attend meetings and so he had to stay in Manila at
to and from the minesite. In the early morning of February 1, least one week a month.
1992, a dialogue was made by Atok and the crop damage
claimants. Unfortunately, Atok's representatives, including Because of his length of service, he invited the attention of the
him, were virtually held hostage by the irate claimants who top officers of the company that he is already entitled to the
demanded on the spot payment of their claims. He was able to benefits due an employee under the law, but management
convince the claimants to release the company representatives ignored his requests. However, he continued to avail of his
pending referral of the issue to higher management. representation expenses and reimbursement of company-
related expenses. He also enjoyed the privilege of securing
A case was filed in court for the lifting of the barricades and interest free salary loans payable in one year through salary
the court ordered the lifting of the barricade. While Atok was deduction.
prosecuting its case with the claimants, another case erupted
involving its partner, Benguet Corporation. After Atok parted In the succeeding years of his employment, he was designated
ways with Benguet Corporation, some properties acquired by as liaison officer, public relation officer and legal assistant, and
the partnership and some receivables by Benguet Corporation to assist in the ejection of illegal occupants in the mining
was the problem. He was again entangled with claims of Atok.
documentation, conferences, meetings, planning, execution
and clerical works. After two years, the controversy was Since he was getting older, being already 56 years old, he
resolved and Atok received its share of the properties of the reiterated his request to the company to cause his registration
partnership, which is about 5 million pesos worth of with the SSS. His request was again ignored and so he filed a
equipment and condonation of Atok's accountabilities with complaint with the SSS. After filing his complaint with the
Benguet Corporation in the amount of P900,000.00. SSS, respondents terminated his services.[7]

In the meantime, crop damage claimants lost interest in On September 26, 2003, after the parties have submitted their
pursuing their claims against Atok and Atok was relieved of respective pleadings, Labor Arbiter Rolando D. Gambito
the burden of paying 700 million pesos. In between attending rendered a Decision[8]ruling in favor of the petitioner. Finding
the problems of the crop damage issue, he was also assigned no employer-employee relationship between petitioner and
respondent, the Labor Arbiter dismissed the complaint for lack respondent Atok Big Wedge Company Incorporated
of merit. is ORDERED to reinstate petitioner Jesus P. Gison to his
former or equivalent position without loss of seniority rights
Respondent then appealed the decision to the NLRC. and to pay him full backwages, inclusive of allowances and
other benefits or their monetary equivalent computed from the
On July 30, 2004, the NLRC, Second Division, issued a time these were withheld from him up to the time of his actual
Resolution[9] affirming the decision of the Labor Arbiter. and effective reinstatement. This case is
Respondent filed a Motion for Reconsideration, but it was ordered REMANDED to the Labor Arbiter for the proper
denied in the Resolution[10] dated September 30, 2004. computation of backwages, allowances and other benefits due
to petitioner. Costs against private respondent Atok Big
Aggrieved, respondent filed a petition for review under Rule Wedge Company Incorporated.
65 of the Rules of Court before the CA questioning the
decision and resolution of the NLRC, which was later SO ORDERED.[12]
docketed as CA-G.R. SP No. 87846. In support of his petition,
respondent raised the following issues: In ruling in favor of the respondent, the CA opined, among
other things, that both the Labor Arbiter and the NLRC may
a) Whether or not the Decision of the Honorable Labor have overlooked Article 280 of the Labor Code,[13] or the
Arbiter and the subsequent Resolutions of the Honorable provision which distinguishes between two kinds of
Public Respondent affirming the same, are in harmony with employees, i.e., regular and casual employees. Applying the
the law and the facts of the case; provision to the respondent's case, he is deemed a regular
employee of the petitioner after the lapse of one year from his
b) Whether or not the Honorable Labor Arbiter Committed a employment. Considering also that respondent had been
Grave Abuse of Discretion in Dismissing the Complaint of performing services for the petitioner for eleven years,
Petitioner and whether or not the Honorable Public respondent is entitled to the rights and privileges of a regular
Respondent Committed a Grave Abuse of Discretion when it employee.
affirmed the said Decision.[11]
The CA added that although there was an agreement between
On May 31, 2005, the CA rendered the assailed Decision the parties that respondent's employment would only be
annulling and setting aside the decision of the NLRC, the temporary, it clearly appears that petitioner disregarded the
decretal portion of which reads: same by repeatedly giving petitioner several tasks to
perform. Moreover, although respondent may have waived
WHEREFORE, the petition is GRANTED. The his right to attain a regular status of employment when he
assailed Resolution of the National Labor Relations agreed to perform these tasks on a temporary employment
Commission dismissing petitioner's complaint for illegal status, still, it was the law that recognized and considered him
dismissal is ANNULLED and SET ASIDE. Private a regular employee after his first year of rendering service to
petitioner. As such, the waiver was ineffective. THAT THE NATURE OF THE SERVICES HE PROVIDED TO
THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.[14]
Hence, the petition assigning the following errors:
Petitioner argues that since the petition filed by the respondent
I. WHETHER OR NOT THE COURT OF APPEALS DECIDED before the CA was a petition for certiorari under Rule 65 of the
QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND Rules of Court, the CA should have limited the issue on
APPLICABLE RULINGS OF THIS HONORABLE COURT whether or not there was grave abuse of discretion on the part
WHEN IT GAVE DUE COURSE TO THE PETITION FOR of the NLRC in rendering the resolution affirming the decision
CERTIORARI DESPITE THE FACT THAT THERE WAS NO of the Labor Arbiter.
SHOWING THAT THE NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF Petitioner also posits that the CA erred in applying Article 280
DISCRETION. of the Labor Code in determining whether there was an
employer-employee relationship between the petitioner and
II. WHETHER OR NOT THE COURT OF APPEALS DECIDED the respondent. Petitioner contends that where the existence of
QUESTIONS OF SUBSTANCE CONTRARY TO THE LAW an employer-employee relationship is in dispute, Article 280 of
AND APPLICABLE RULINGS OF THIS HONORABLE the Labor Code is inapplicable. The said article only set the
COURT WHEN IT BASED ITS FINDING THAT distinction between a casual employee from a regular
RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT employee for purposes of determining the rights of an
ON A PROVISION OF LAW THAT THIS HONORABLE employee to be entitled to certain benefits.
COURT HAS DECLARED TO BE INAPPLICABLE IN CASE
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE Petitioner insists that respondent is not a regular employee
RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE. and not entitled to reinstatement.

III. WHETHER OR NOT THE COURT OF APPEALS On his part, respondent maintains that he is an employee of
DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO the petitioner and that the CA did not err in ruling in his favor.
LAW AND APPLICABLE RULINGS OF THIS HONORABLE
COURT WHEN IT ERRONEOUSLY FOUND THAT The petition is meritorious.
RESPONDENT IS A REGULAR EMPLOYEE OF THE
COMPANY. At the outset, respondent's recourse to the CA was the proper
remedy to question the resolution of the NLRC. It bears
IV. WHETHER OR NOT THE COURT OF APPEALS stressing that there is no appeal from the decision or
DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO resolution of the NLRC. As this Court enunciated in the case
LAW AND APPLICABLE RULINGS OF THIS HONORABLE of St. Martin Funeral Home v. NLRC,[15] the special civil action
COURT WHEN IT ERRONEOUSLY DIRECTED of certiorari under Rule 65 of the Rules of Civil Procedure,
RESPONDENT'S REINSTATEMENT DESPITE THE FACT which is filed before the CA, is the proper vehicle for judicial
review of decisions of the NLRC. The petition should be indicator of the presence or absence of an employer-employee
initially filed before the Court of Appeals in strict observance relationship. Under the control test, an employer-employee
of the doctrine on hierarchy of courts as the appropriate forum relationship exists where the person for whom the services are
for the relief desired.[16] This Court not being a trier of facts, performed reserves the right to control not only the end
the resolution of unclear or ambiguous factual findings should achieved, but also the manner and means to be used in
be left to the CA as it is procedurally equipped for that reaching that end.[20]
purpose. From the decision of the Court of Appeals, an
ordinary appeal under Rule 45 of the Rules of Civil Procedure Applying the aforementioned test, an employer-employee
before the Supreme Court may be resorted to by the relationship is apparently absent in the case at bar. Among
parties. Hence, respondent's resort to the CA was appropriate other things, respondent was not required to report everyday
under the circumstances. during regular office hours of petitioner. Respondent's
monthly retainer fees were paid to him either at his residence
Anent the primordial issue of whether or not an employer- or a local restaurant. More importantly, petitioner did not
employee relationship exists between petitioner and prescribe the manner in which respondent would accomplish
respondent. any of the tasks in which his expertise as a liaison officer was
needed; respondent was left alone and given the freedom to
Well-entrenched is the doctrine that the existence of an accomplish the tasks using his own means and
employer-employee relationship is ultimately a question of method. Respondent was assigned tasks to perform, but
fact and that the findings thereon by the Labor Arbiter and the petitioner did not control the manner and methods by which
NLRC shall be accorded not only respect but even finality respondent performed these tasks. Verily, the absence of the
when supported by substantial evidence.[17] Being a question element of control on the part of the petitioner engenders a
of fact, the determination whether such a relationship exists conclusion that he is not an employee of the petitioner.
between petitioner and respondent was well within the
province of the Labor Arbiter and the NLRC. Being supported Moreover, the absence of the parties' retainership agreement
by substantial evidence, such determination should have been notwithstanding, respondent clearly admitted that petitioner
accorded great weight by the CA in resolving the issue. hired him in a limited capacity only and that there will be no
employer-employee relationship between them. As averred in
To ascertain the existence of an employer-employee respondent's Position Paper:[21]
relationship jurisprudence has invariably adhered to the four-
fold test, to wit: (1) the selection and engagement of the 2. For the participation of complainant regarding
employee; (2) the payment of wages; (3) the power of this particular problem of Atok, Mr. Torres
dismissal; and (4) the power to control the employee's offered him a pay in the amount of Php3,000.00
conduct, or the so-called "control test."[18] Of these four, the per month plus representation expenses. It was
last one is the most important.[19] The so-called "control test" is also agreed by Mr. Torres and the complainant that
commonly regarded as the most crucial and determinative his participation on this particular problem of Atok
 will be temporary since the problem was then Furthermore, despite the fact that petitioner made use of the
contemplated to be limited in nature, hence, there services of respondent for eleven years, he still cannot be
will be no employer-employee relationship between considered as a regular employee of petitioner. Article 280 of
him and Atok. Complainant agreed on this the Labor Code, in which the lower court used to buttress its
arrangement. It was also agreed that findings that respondent became a regular employee of the
complainant's compensations, allowances, petitioner, is not applicable in the case at bar. Indeed, the
representation expenses and reimbursement of Court has ruled that said provision is not the yardstick for
company- related expenses will be processed determining the existence of an employment relationship
and paid through disbursement vouchers;[22] 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
Respondent was well aware of the agreement that he was benefits, to join or form a union, or to security of tenure; it
hired merely as a liaison or consultant of the petitioner and he does not apply where the existence of an employment
agreed to perform tasks for the petitioner on a temporary relationship is in dispute.[24] It is, therefore, erroneous on the
employment status only. However, respondent anchors his part of the Court of Appeals to rely on Article 280 in
claim that he became a regular employee of the petitioner determining whether an employer-employee relationship
based on his contention that the "temporary" aspect of his job exists between respondent and the petitioner
and its "limited" nature could not have lasted for eleven years
unless some time during that period, he became a regular Considering that there is no employer-employee relationship
employee of the petitioner by continually performing services between the parties, the termination of respondent's services
for the company. by the petitioner after due notice did not constitute illegal
dismissal warranting his reinstatement and the payment of
Contrary to the conclusion of the CA, respondent is not an full backwages, allowances and other benefits.
employee, much more a regular employee of petitioner. The
appellate court's premise that regular employees are those WHEREFORE, premises considered, the petition
who perform activities which are desirable and necessary for is GRANTED. The Decision and the Resolution of the Court of
the business of the employer is not determinative in this Appeals in CA-G.R. SP No. 87846, are REVERSED and SET
case. In fact, any agreement may provide that one party shall ASIDE. The Resolutions dated July 30, 2004 and September
render services for and in behalf of another, no matter how 30, 2004 of the National Labor Relations Commission
necessary for the latter's business, even without being hired as are REINSTATED.
an employee.[23] Hence, respondent's length of service and
petitioner's repeated act of assigning respondent some tasks to SO ORDERED.
be performed did not result to respondent's entitlement to the
rights and privileges of a regular employee.
 MARTICIO SEMBLANTE AND DUBRICK PILAR, receives PhP 2,000 per week or a total of PhP 8,000 per month,
PETITIONERS, VS. COURT OF APPEALS, 19TH DIVISION, while Pilar gets PhP 3,500 a week or PhP 14,000 per month.
NOW SPECIAL FORMER 19TH DIVISION, GALLERA DE They work every Tuesday, Wednesday, Saturday, and Sunday
MANDAUE / SPOUSES VICENTE AND MARIA LUISA every week, excluding monthly derbies and cockfights held on
LOOT, RESPONDENTS. special holidays. Their working days start at 1:00 p.m. and last
until 12:00 midnight, or until the early hours of the morning
DECISION depending on the needs of the cockpit. Petitioners had both
been issued employees’ identification cards[5] that they
VELASCO JR., J.: wear every time they report for duty. They alleged never
having incurred any infraction and/or violation of the cockpit
Before Us is a Petition for Review on Certiorari under Rule 45, rules and regulations.
assailing and seeking to set aside the Decision[1] and
Resolution[2] dated May 29, 2009 and February 23, 2010, On November 14, 2003, however, petitioners were denied
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. entry into the cockpit upon the instructions of respondents,
03328. The CA affirmed the October 18, 2006 Resolution[3] of and were informed of the termination of their services
the National Labor Relations Commission (NLRC), Fourth effective that date. This prompted petitioners to file a
Division (now Seventh Division), in NLRC Case No. V-000673- complaint for illegal dismissal against respondents.
2004.
In answer, respondents denied that petitioners were their
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar employees and alleged that they were associates of
(Pilar) assert that they were hired by respondents-spouses respondents’ independent contractor, Tomas Vega.
Vicente and Maria Luisa Loot, the owners of Gallera de Respondents claimed that petitioners have no regular working
Mandaue (the cockpit), as the official masiador and sentenciador, time or day and they are free to decide for themselves whether
respectively, of the cockpit sometime in 1993. to report for work or not on any cockfighting day. In times
when there are few cockfights in Gallera de Mandaue,
As the masiador, Semblante calls and takes the bets from the petitioners go to other cockpits in the vicinity. Lastly,
gamecock owners and other bettors and orders the start of the petitioners, so respondents assert, were only issued
cockfight. He also distributes the winnings after deducting identification cards to indicate that they were free from the
the arriba, or the commission for the cockpit. Meanwhile, as normal entrance fee and to differentiate them from the general
the sentenciador, Pilar oversees the proper gaffing of fighting public.[6]
cocks, determines the fighting cocks’ physical condition
and capabilities to continue the cockfight, and eventually In a Decision dated June 16, 2004, Labor Arbiter Julie C.
declares the result of the cockfight.[4] Rendoque found petitioners to be regular employees of
respondents as they performed work that was necessary and
For their services as masiador and sentenciador, Semblante indispensable to the usual trade or business of respondents for
a number of years. The Labor Arbiter also ruled that abuse of discretion, since they eventually posted their appeal
petitioners were illegally dismissed, and so ordered bond and that their appeal was so meritorious warranting the
respondents to pay petitioners their backwages and separation relaxation of the rules in the interest of justice.[11]
pay.[7]
In its Decision dated May 29, 2009, the appellate court found
Respondents’ counsel received the Labor Arbiter’s for respondents, noting that referees and bet-takers in a
Decision on September 14, 2004. And within the 10-day appeal cockfight need to have the kind of expertise that is
period, he filed the respondents’ appeal with the NLRC on characteristic of the game to interpret messages conveyed by
September 24, 2004, but without posting a cash or surety bond mere gestures. Hence, petitioners are akin to independent
equivalent to the monetary award granted by the Labor contractors who possess unique skills, expertise, and talent to
Arbiter.[8] distinguish them from ordinary employees. Further,
respondents did not supply petitioners with the tools and
It was only on October 11, 2004 that respondents filed an instrumentalities they needed to perform work. Petitioners
appeal bond dated October 6, 2004. Hence, in a only needed their unique skills and talents to perform their job
Resolution[9] dated August 25, 2005, the NLRC denied the as masiador and sentenciador.[12] The CA held:
appeal for its non-perfection.
In some circumstances, the NLRC is allowed to be liberal in
Subsequently, however, the NLRC, acting on respondents’ the interpretation of the rules in deciding labor cases. In this
Motion for Reconsideration, reversed its Resolution on the case, the appeal bond was filed, although late. Moreover, an
postulate that their appeal was meritorious and the filing of an exceptional circumstance obtains in the case at bench which
appeal bond, albeit belated, is a substantial compliance with warrants a relaxation of the bond requirement as a condition
the rules. The NLRC held in its Resolution of October 18, for perfecting the appeal. This case is highly meritorious that
2006 that there was no employer-employee relationship propels this Court not to strictly apply the rules and thus
between petitioners and respondents, respondents having no prevent a grave injustice from being done.
part in the selection and engagement of petitioners, and that
no separate individual contract with respondents was ever As elucidated by the NLRC, the circumstances obtaining in
executed by petitioners.[10] this case wherein no actual employer-employee exists
between the petitioners and the private respondents
Following the denial by the NLRC of their Motion for [constrain] the relaxation of the rules. In this regard, we find
Reconsideration, per Resolution dated January 12, 2007, no grave abuse attributable to the administrative body.
petitioners went to the CA on a petition for certiorari. In
support of their petition, petitioners argued that the NLRC xxxx
gravely abused its discretion in entertaining an appeal that
was not perfected in the first place. On the other hand, Petitioners are duly licensed “masiador†and
respondents argued that the NLRC did not commit grave “sentenciador†in the cockpit owned by Lucia Loot.
Cockfighting, which is a part of our cultural heritage, has a Decision of the Labor Arbiter.[13] Article 223 of the Labor Code
peculiar set of rules. It is a game based on the fighting ability provides:
of the game cocks in the cockpit. The referees and bet-takers
need to have that kind of expertise that is characteristic of Article 223. Appeal. — Decisions, awards, or orders of the
the cockfight gambling who can interpret the message Labor Arbiter are final and executory unless appealed to the
conveyed even by mere gestures. They ought to have the Commission by any or both parties within ten (10) calendar
talent and skill to get the bets from numerous cockfighting days from receipt of such decisions, awards, or orders. Such
aficionados and decide which cockerel to put in the arena. appeal may be entertained only on any of the following
They are placed in that elite spot where they can control the grounds:
game and the crowd. They are not given salaries by cockpit
owners as their compensation is based on the “arriba†. xxxx
In fact, they can offer their services everywhere because they
are duly licensed by the GAB. They are free to choose which In case of a judgment involving a monetary award, an appeal
cockpit arena to enter and offer their expertise. Private by the employer may be perfected only upon the posting of a
respondents cannot even control over the means and cash or surety bond issued by a reputable bonding company
methods of the manner by which they perform their work. In duly accredited by the Commission in the amount equivalent
this light, they are akin to independent contractors who to the monetary award in the judgment appealed from.
possess unique skills, expertise and talent to distinguish them (Emphasis supplied.)
from ordinary employees.
Time and again, however, this Court, considering the
Furthermore, private respondents did not supply petitioners substantial merits of the case, has relaxed this rule on, and
with the tools and instrumentalities they needed to perform excused the late posting of, the appeal bond when there are
their work. Petitioners only needed their talent and skills to be strong and compelling reasons for the liberality,[14] such as the
a “masiador†and “sentenciador†. As such, they had prevention of miscarriage of justice extant in the case[15] or the
all the tools they needed to perform their work. (Emphasis special circumstances in the case combined with its legal
supplied.) merits or the amount and the issue involved.[16] After all,
technical rules cannot prevent courts from exercising their
The CA refused to reconsider its Decision. Hence, petitioners duties to determine and settle, equitably and completely, the
came to this Court, arguing in the main that the CA committed rights and obligations of the parties.[17] This is one case where
a reversible error in entertaining an appeal, which was not the exception to the general rule lies.
perfected in the first place.
While respondents had failed to post their bond within the 10-
Indeed, the posting of a bond is indispensable to the perfection day period provided above, it is evident, on the other hand,
of an appeal in cases involving monetary awards from the that petitioners are NOT employees of respondents, since their
relationship fails to pass muster the four-fold test of
employment We have repeatedly mentioned in countless
decisions: (1) the selection and engagement of the employee; SO ORDERED.
(2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee’s conduct, which is the
most important element.[18]

As found by both the NLRC and the CA, respondents had no

part in petitioners’ selection and
management;[19] petitioners’ compensation was paid out of
the arriba (which is a percentage deducted from the total bets),
not by petitioners;[20] and petitioners performed their
functions as masiador and sentenciador free from the
direction and control of respondents.[21] In the conduct of
their work, petitioners relied mainly on their “expertise that
is characteristic of the cockfight gambling,†[22] and were
never given by respondents any tool needed for the
performance of their work.[23]

Respondents, not being petitioners’ employers, could

never have dismissed, legally or illegally, petitioners, since
respondents were without power or prerogative to do so in the
first place. The rule on the posting of an appeal bond cannot
defeat the substantive rights of respondents to be free from an
unwarranted burden of answering for an illegal dismissal for
which they were never responsible.

Strict implementation of the rules on appeals must give way to

the factual and legal reality that is evident from the records of
this case.[24] After all, the primary objective of our laws is to
dispense justice and equity, not the contrary.

WHEREFORE, We DENY this petition and AFFIRM the May

29, 2009 Decision and February 23, 2010 Resolution of the CA,
and the October 18, 2006 Resolution of the NLRC.
JOSE MEL BERNARTE, Petitioner, Complainant Bernarte, for instance, was not made to sign a
vs. contract during the first conference of the All-Filipino Cup
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE which was from February 23, 2003 to June 2003. It was only
EMMANUEL M. EALA, and PERRY during the second conference when he was made to sign a one
MARTINEZ,Respondents. and a half month contract for the period July 1 to August 5,
2003.
DECISION
On January 15, 2004, Bernarte received a letter from the Office
CARPIO, J.: of the Commissioner advising him that his contract would not
be renewed citing his unsatisfactory performance on and off
The Case the court. It was a total shock for Bernarte who was awarded
Referee of the year in 2003. He felt that the dismissal was
This is a petition for review1 of the 17 December 2009 caused by his refusal to fix a game upon order of Ernie De
Decision2 and 5 April 2010 Resolution3 of the Court of Appeals Leon.
in CA-G.R. SP No. 105406. The Court of Appeals set aside the
decision of the National Labor Relations Commission (NLRC), On the other hand, complainant Guevarra alleges that he was
which affirmed the decision of the Labor Arbiter, and held that invited to join the PBA pool of referees in February 2001. On
petitioner Jose Mel Bernarte is an independent contractor, and March 1, 2001, he signed a contract as trainee. Beginning 2002,
not an employee of respondents Philippine Basketball he signed a yearly contract as Regular Class C referee. On May
Association (PBA), Jose Emmanuel M. Eala, and Perry 6, 2003, respondent Martinez issued a memorandum to
Martinez. The Court of Appeals denied the motion for Guevarra expressing dissatisfaction over his questioning on
reconsideration. the assignment of referees officiating out-of-town games.
Beginning February 2004, he was no longer made to sign a
The Facts contract.

The facts, as summarized by the NLRC and quoted by the Respondents aver, on the other hand, that complainants
Court of Appeals, are as follows: entered into two contracts of retainer with the PBA in the year
2003. The first contract was for the period January 1, 2003 to
Complainants (Jose Mel Bernarte and Renato Guevarra) aver July 15, 2003; and the second was for September 1 to December
that they were invited to join the PBA as referees. During the 2003. After the lapse of the latter period, PBA decided not to
leadership of Commissioner Emilio Bernardino, they were renew their contracts.
made to sign contracts on a year-to-year basis. During the term
of Commissioner Eala, however, changes were made on the Complainants were not illegally dismissed because they were
terms of their employment. 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 The rest of the claims are hereby dismissed for lack of merit or
fixed.4 basis.

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared SO ORDERED.7

petitioner an employee whose dismissal by respondents was
illegal. Accordingly, the Labor Arbiter ordered the In its 28 January 2008 Decision,8 the NLRC affirmed the Labor
reinstatement of petitioner and the payment of backwages, Arbiter’s judgment. The dispositive portion of the NLRC’s
moral and exemplary damages and attorney’s fees, to wit: decision reads:

WHEREFORE, premises considered all respondents who are WHEREFORE, the appeal is hereby DISMISSED. The Decision
here found to have illegally dismissed complainants are of Labor Arbiter Teresita D. Castillon-Lora dated March 31,
hereby ordered to (a) reinstate complainants within thirty (30) 2005 is AFFIRMED.
days from the date of receipt of this decision and to solidarily
pay complainants: SO ORDERED.9

JOSE MEL RENATO Respondents filed a petition for certiorari with the Court of
BERNARTE GUEVARRA Appeals, which overturned the decisions of the NLRC and
Labor Arbiter. The dispositive portion of the Court of Appeals’
1. backwages from ₱536,250.00 ₱211,250.00 decision reads:
January 1, 2004 up to the
finality of this Decision, WHEREFORE, the petition is hereby GRANTED. The
which to date is assailed Decision dated January 28, 2008 and Resolutiondated
August 26, 2008 of the National Labor Relations Commission
2. moral damages 100,000.00 50,000.00 are ANNULLED and SET ASIDE. Private respondents’
complaint before the Labor Arbiter is DISMISSED.
3. exemplary damages 100,000.00 50,000.00
SO ORDERED.10
4. 10% attorney's fees 68,625.00 36,125.00
The Court of Appeals’ Ruling
TOTAL ₱754,875.00 ₱397,375.00
The Court of Appeals found petitioner an independent
or a total of ₱1,152,250.00 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 respondents to appeal with the NLRC within the reglementary
Appeals held: period.

While the NLRC agreed that the PBA has no control over the The Ruling of the Court
referees’ acts of blowing the whistle and making calls during
basketball games, it, nevertheless, theorized that the said acts The petition is bereft of merit.
refer to the means and methods employed by the referees in
officiating basketball games for the illogical reason that said The Court shall first resolve the procedural issue posed by
acts refer only to the referees’ skills. How could a skilled petitioner.
referee perform his job without blowing a whistle and making
calls? Worse, how can the PBA control the performance of Petitioner contends that the Labor Arbiter’s Decision of 31
work of a referee without controlling his acts of blowing the March 2005 became final and executory for failure of
whistle and making calls? respondents to appeal with the NLRC within the prescribed
period. Petitioner claims that the Labor Arbiter’s decision was
Moreover, this Court disagrees with the Labor Arbiter’s constructively served on respondents as early as August 2005
finding (as affirmed by the NLRC) that the Contracts of while respondents appealed the Arbiter’s decision only on 31
Retainer show that petitioners have control over private March 2006, way beyond the reglementary period to appeal.
respondents. Petitioner points out that service of an unclaimed registered
mail is deemed complete five days from the date of first notice
xxxx of the post master. In this case three notices were issued by the
post office, the last being on 1 August 2005. The unclaimed
Neither do We agree with the NLRC’s affirmance of the Labor registered mail was consequently returned to sender.
Arbiter’s conclusion that private respondents’ repeated hiring Petitioner presents the Postmaster’s Certification to prove
made them regular employees by operation of law.11 constructive service of the Labor Arbiter’s decision on
respondents. The Postmaster certified:
The Issues
xxx
The main issue in this case is whether petitioner is an
employee of respondents, which in turn determines whether That upon receipt of said registered mail matter, our registry
petitioner was illegally dismissed. in charge, Vicente Asis, Jr., immediately issued the first
registry notice to claim on July 12, 2005 by the addressee. The
Petitioner raises the procedural issue of whether the Labor second and third notices were issued on July 21 and August 1,
Arbiter’s decision has become final and executory for failure of 2005, respectively.
That the subject registered letter was returned to the sender that the notice was issued or sent but also as to how, when and
(RTS) because the addressee failed to claim it after our one to whom the delivery and receipt was made. The mailman
month retention period elapsed. Said registered letter was may also testify that the notice was actually delivered.17
dispatched from this office to Manila CPO (RTS) under bill #6,
line 7, page1, column 1, on September 8, 2005.12 In this case, petitioner failed to present any concrete proof as
to how, when and to whom the delivery and receipt of the
Section 10, Rule 13 of the Rules of Court provides: three notices issued by the post office was made. There is no
conclusive evidence showing that the post office notices were
SEC. 10. Completeness of service. – Personal service is actually received by respondents, negating petitioner’s claim
complete upon actual delivery. Service by ordinary mail is of constructive service of the Labor Arbiter’s decision on
complete upon the expiration of ten (10) days after mailing, respondents. The Postmaster’s Certification does not
unless the court otherwise provides. Service by registered mail sufficiently prove that the three notices were delivered to and
is complete upon actual receipt by the addressee, or after five received by respondents; it only indicates that the post office
(5) days from the date he received the first notice of the issued the three notices. Simply put, the issuance of the notices
postmaster, whichever date is earlier. by the post office is not equivalent to delivery to and receipt
by the addressee of the registered mail. Thus, there is no proof
The rule on service by registered mail contemplates two of completed constructive service of the Labor Arbiter’s
situations: (1) actual service the completeness of which is decision on respondents.
determined upon receipt by the addressee of the registered
mail; and (2) constructive service the completeness of which is At any rate, the NLRC declared the issue on the finality of the
determined upon expiration of five days from the date the Labor Arbiter’s decision moot as respondents’ appeal was
addressee received the first notice of the postmaster.13 considered in the interest of substantial justice. We agree with
the NLRC. The ends of justice will be better served if we
Insofar as constructive service is concerned, there must be resolve the instant case on the merits rather than allowing the
conclusive proof that a first notice was duly sent by the substantial issue of whether petitioner is an independent
postmaster to the addressee.14 Not only is it required that contractor or an employee linger and remain unsettled due to
notice of the registered mail be issued but that it should also procedural technicalities.
be delivered to and received by the addressee.15 Notably, the
presumption that official duty has been regularly performed is The existence of an employer-employee relationship is
not applicable in this situation. It is incumbent upon a party ultimately a question of fact. As a general rule, factual issues
who relies on constructive service to prove that the notice was are beyond the province of this Court. However, this rule
sent to, and received by, the addressee.16 admits of exceptions, one of which is where there are
conflicting findings of fact between the Court of Appeals, on
The best evidence to prove that notice was sent would be a one hand, and the NLRC and Labor Arbiter, on the other, such
certification from the postmaster, who should certify not only as in the present case.18
To determine the existence of an employer-employee referee in any basketball game outside of the PBA, without
relationship, case law has consistently applied the four-fold written prior consent of the Commissioner; (c) always to
test, to wit: (a) the selection and engagement of the employee; conduct himself on and off the court according to the highest
(b) the payment of wages; (c) the power of dismissal; and (d) standards of honesty or morality; and (6) imposition of various
the employer’s power to control the employee on the means sanctions for violation of the terms and conditions of the
and methods by which the work is accomplished. The so- contract.
called "control test" is the most important indicator of the
presence or absence of an employer-employee relationship.19 The foregoing stipulations hardly demonstrate control over
the means and methods by which petitioner performs his
In this case, PBA admits repeatedly engaging petitioner’s work as a referee officiating a PBA basketball game. The
services, as shown in the retainer contracts. PBA pays contractual stipulations do not pertain to, much less dictate,
petitioner a retainer fee, exclusive of per diem or allowances, how and when petitioner will blow the whistle and make calls.
as stipulated in the retainer contract. PBA can terminate the On the contrary, they merely serve as rules of conduct or
retainer contract for petitioner’s violation of its terms and guidelines in order to maintain the integrity of the
conditions. professional basketball league. As correctly observed by the
Court of Appeals, "how could a skilled referee perform his job
However, respondents argue that the all-important element of without blowing a whistle and making calls? x x x [H]ow can
control is lacking in this case, making petitioner an the PBA control the performance of work of a referee without
independent contractor and not an employee of respondents. controlling his acts of blowing the whistle and making calls?"20

Petitioner contends otherwise. Petitioner asserts that he is an In Sonza v. ABS-CBN Broadcasting Corporation,21 which
employee of respondents since the latter exercise control over determined the relationship between a television and radio
the performance of his work. Petitioner cites the following station and one of its talents, the Court held that not all rules
stipulations in the retainer contract which evidence control: (1) imposed by the hiring party on the hired party indicate that
respondents classify or rate a referee; (2) respondents require the latter is an employee of the former. The Court held:
referees to attend all basketball games organized or authorized
by the PBA, at least one hour before the start of the first game We find that these general rules are merely guidelines towards
of each day; (3) respondents assign petitioner to officiate the achievement of the mutually desired result, which are top-
ballgames, or to act as alternate referee or substitute; (4) rating television and radio programs that comply with
referee agrees to observe and comply with all the standards of the industry. We have ruled that:
requirements of the PBA governing the conduct of the referees
whether on or off the court; (5) referee agrees (a) to keep Further, not every form of control that a party reserves to
himself in good physical, mental, and emotional condition himself over the conduct of the other party in relation to the
during the life of the contract; (b) to give always his best effort services being rendered may be accorded the effect of
and service, and loyalty to the PBA, and not to officiate as establishing an employer-employee relationship. The facts of
this case fall squarely with the case of Insular Life Assurance In other words, unlike regular employees who ordinarily
Co., Ltd. v. NLRC. In said case, we held that: report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA
Logically, the line should be drawn between rules that merely games are scheduled or three times a week at two hours per
serve as guidelines towards the achievement of the mutually game. In addition, there are no deductions for contributions to
desired result without dictating the means or methods to be the Social Security System, Philhealth or Pag-Ibig, which are
employed in attaining it, and those that control or fix the the usual deductions from employees’ salaries. These
methodology and bind or restrict the party hired to the use of undisputed circumstances buttress the fact that petitioner is an
such means. The first, which aim only to promote the result, independent contractor, and not an employee of respondents.
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve Furthermore, the applicable foreign case law declares that a
it.22 referee is an independent contractor, whose special skills and
independent judgment are required specifically for such
We agree with respondents that once in the playing court, the position and cannot possibly be controlled by the hiring party.
referees exercise their own independent judgment, based on
the rules of the game, as to when and how a call or decision is In Yonan v. United States Soccer Federation, Inc.,23 the United
to be made. The referees decide whether an infraction was States District Court of Illinois held that plaintiff, a soccer
committed, and the PBA cannot overrule them once the referee, is an independent contractor, and not an employee of
decision is made on the playing court. The referees are the defendant which is the statutory body that governs soccer in
only, absolute, and final authority on the playing court. the United States. As such, plaintiff was not entitled to
Respondents or any of the PBA officers cannot and do not protection by the Age Discrimination in Employment Act. The
determine which calls to make or not to make and cannot U.S. District Court ruled:
control the referee when he blows the whistle because such
authority exclusively belongs to the referees. The very nature Generally, "if an employer has the right to control and direct
of petitioner’s job of officiating a professional basketball game the work of an individual, not only as to the result to be
undoubtedly calls for freedom of control by respondents. achieved, but also as to details by which the result is achieved,
an employer/employee relationship is likely to exist." The
Moreover, the following circumstances indicate that petitioner Court must be careful to distinguish between "control[ling] the
is an independent contractor: (1) the referees are required to conduct of another party contracting party by setting out in
report for work only when PBA games are scheduled, which is detail his obligations" consistent with the freedom of contract,
three times a week spread over an average of only 105 playing on the one hand, and "the discretionary control an employer
days a year, and they officiate games at an average of two daily exercises over its employee’s conduct" on the other.
hours per game; and (2) the only deductions from the fees
received by the referees are withholding taxes. 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 liability claim against the association should be dismissed. In
clothes he wore while on the field and traveling. Putting aside finding that the umpire is an independent contractor, the
that the Federation did not, for the most part, control what Court of Appeals of Tennesse ruled:
clothes he wore, the Federation did not supervise Yonan, but
rather evaluated his performance after matches. That the The TSSAA deals with umpires to achieve a result-uniform
Federation evaluated Yonan as a referee does not mean that he rules for all baseball games played between TSSAA member
was an employee. There is no question that parties retaining schools. The TSSAA does not supervise regular season games.
independent contractors may judge the performance of those It does not tell an official how to conduct the game beyond the
contractors to determine if the contractual relationship should framework established by the rules. The TSSAA does not, in
continue. x x x the vernacular of the case law, control the means and method
by which the umpires work.
It is undisputed that the Federation did not control the way
Yonan refereed his games.1âwphi1 He had full discretion and In addition, the fact that PBA repeatedly hired petitioner does
authority, under the Laws of the Game, to call the game as he not by itself prove that petitioner is an employee of the former.
saw fit. x x x In a similar vein, subjecting Yonan to For a hired party to be considered an employee, the hiring
qualification standards and procedures like the Federation’s party must have control over the means and methods by
registration and training requirements does not create an which the hired party is to perform his work, which is absent
employer/employee relationship. x x x in this case. The continuous rehiring by PBA of petitioner
simply signifies the renewal of the contract between PBA and
A position that requires special skills and independent petitioner, and highlights the satisfactory services rendered by
judgment weights in favor of independent contractor status. x petitioner warranting such contract renewal. Conversely, if
x x Unskilled work, on the other hand, suggests an PBA decides to discontinue petitioner’s services at the end of
employment relationship. x x x Here, it is undisputed that the term fixed in the contract, whether for unsatisfactory
soccer refereeing, especially at the professional and services, or violation of the terms and conditions of the
international level, requires "a great deal of skill and natural contract, or for whatever other reason, the same merely results
ability." Yonan asserts that it was the Federation’s training that in the non-renewal of the contract, as in the present case. The
made him a top referee, and that suggests he was an non-renewal of the contract between the parties does not
employee. Though substantial training supports an constitute illegal dismissal of petitioner by respondents.
employment inference, that inference is dulled significantly or
negated when the putative employer’s activity is the result of a WHEREFORE, we DENY the petition and AFFIRM the
statutory requirement, not the employer’s choice. x x x assailed decision of the Court of Appeals.

In McInturff v. Battle Ground Academy of Franklin,24 it was held SO ORDERED.

that the umpire was not an agent of the Tennessee Secondary
School Athletic Association (TSSAA), so the player’s vicarious
G.R. No. 169757 November 23, 2011 operate Celkor and to promote and sell the recording studio's
services to music enthusiasts and other prospective clients. He
CESAR C. LIRIO, doing business under the name and style received a monthly salary of ₱7,000.00. They also agreed that
of CELKOR AD SONICMIX, Petitioner, he was entitled to an additional commission of ₱100.00 per
vs. hour as recording technician whenever a client uses the studio
WILMER D. GENOVIA, Respondent. 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
DECISION 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
PERALTA, J.: more. All the employees of petitioner, including respondent,
rendered overtime work almost everyday, but petitioner never
This is a petition for review on certiorari of the decision of the kept a daily time record to avoid paying the employees
Court of Appeals in CA-G.R. SP No. 88899 dated August 4, overtime pay.
2005 and its Resolution dated September 21, 2005, denying
petitioner’s motion for reconsideration. Respondent stated that a few days after he started working as
a studio manager, petitioner approached him and told him
The Court of Appeals reversed and set aside the resolution of about his project to produce an album for his 15-year-old
the NLRC, and reinstated the decision of the Labor Arbiter daughter, Celine Mei Lirio, a former talent of ABS-CBN Star
with modification, finding that respondent is an employee of Records. Petitioner asked respondent to compose and arrange
petitioner, and that respondent was illegally dismissed and songs for Celine and promised that he (Lirio) would draft a
entitled to the payment of backwages and separation pay in contract to assure respondent of his compensation for such
lieu of reinstatement. services. As agreed upon, the additional services that
respondent would render included composing and arranging
The facts are as follows: musical scores only, while the technical aspect in producing
the album, such as digital editing, mixing and sound
On July 9, 2002, respondent Wilmer D. Genovia filed a engineering would be performed by respondent in his
complaint against petitioner Cesar Lirio and/or Celkor Ad capacity as studio manager for which he was paid on a
Sonicmix Recording Studio for illegal dismissal, non-payment monthly basis. Petitioner instructed respondent that his work
of commission and award of moral and exemplary damages. on the album as composer and arranger would only be done
during his spare time, since his other work as studio manager
In his Position Paper,1 respondent Genovia alleged, among was the priority. Respondent then started working on the
others, that on August 15, 2001, he was hired as studio album.
manager by petitioner Lirio, owner of Celkor Ad Sonicmix
Recording Studio (Celkor). He was employed to manage and 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 Respondent asserts that he was illegally dismissed as he was
would be duly compensated. By mid-November 2001, terminated without any valid grounds, and no hearing was
respondent finally finished the compositions and musical conducted before he was terminated, in violation of his
arrangements of the songs to be included in the album. Before constitutional right to due process. Having worked for more
the month ended, the lead and back-up vocals in the ten (10) than six months, he was already a regular employee. Although
songs were finally recorded and completed. From December he was a so called "studio manager," he had no managerial
2001 to January 2002, respondent, in his capacity as studio powers, but was merely an ordinary employee.
manager, worked on digital editing, mixing and sound
engineering of the vocal and instrumental audio files. Respondent prayed for his reinstatement without loss of
seniority rights, or, in the alternative, that he be paid
Thereafter, respondent was tasked by petitioner to prepare separation pay, backwages and overtime pay; and that he be
official correspondence, establish contacts and negotiate with awarded unpaid commission in the amount of ₱2,000.00 for
various radio stations, malls, publishers, record companies services rendered as a studio technician as well as moral and
and manufacturers, record bars and other outlets in exemplary damages.
preparation for the promotion of the said album. By early
February 2002, the album was in its manufacturing stage. Respondent’s evidence consisted of the Payroll dated July 31,
ELECTROMAT, manufacturer of CDs and cassette tapes, was 2001 to March 15, 2002, which was certified correct by
tapped to do the job. The carrier single of the album, which petitioner,2 and Petty Cash Vouchers3 evidencing receipt of
respondent composed and arranged, was finally aired over the payroll payments by respondent from Celkor.
radio on February 22, 2002.
In defense, petitioner stated in his Position Paper4 that
On February 26, 2002, respondent again reminded petitioner respondent was not hired as studio manager, composer,
about the contract on his compensation as composer and technician or as an employee in any other capacity of Celkor.
arranger of the album. Petitioner told respondent that since he Respondent could not have been hired as a studio manager,
was practically a nobody and had proven nothing yet in the since the recording studio has no personnel except petitioner.
music industry, respondent did not deserve a high Petitioner further claimed that his daughter Celine Mei Lirio, a
compensation, and he should be thankful that he was given a former contract artist of ABS-CBN Star Records, failed to come
job to feed his family. Petitioner informed respondent that he up with an album as the latter aborted its project to produce
was entitled only to 20% of the net profit, and not of the gross one. Thus, he decided to produce an album for his daughter
sales of the album, and that the salaries he received and would and established a recording studio, which he named Celkor
continue to receive as studio manager of Celkor would be Ad Sonicmix Recording Studio. He looked for a
deducted from the said 20% net profit share. Respondent composer/arranger who would compose the songs for the
objected and insisted that he be properly compensated. On said album. In July 2001, Bob Santiago, his son-in-law,
March 14, 2002, petitioner verbally terminated respondent’s introduced him to respondent, who claimed to be an amateur
services, and he was instructed not to report for work. composer, an arranger with limited experience and musician
without any formal musical training. According to petitioner, industry to a common fund with the intention of dividing the
respondent had no track record as a composer, and he was not profits among themselves. Petitioner had no control over the
known in the field of music. Nevertheless, after some time and manner by which respondent composed or arranged
discussion, respondent verbally agreed with petitioner to co- the songs, except on the result thereof. Respondent reported to
produce the album based on the following terms and the recording studio between 10:00 a.m. and 12:00 noon.
conditions: (1) petitioner shall provide all the financing, Hence, petitioner contended that no employer-employee
equipment and recording studio; (2) Celine Mei Lirio shall relationship existed between him and the respondent, and
sing all the songs; (3) respondent shall act as composer and there was no illegal dismissal to speak of.
arranger of all the lyrics and the music of the five songs he
already composed and the revival songs; (4) petitioner shall On October 31, 2003, Labor Arbiter Renaldo O. Hernandez
have exclusive right to market the album; (5) petitioner was rendered a decision,6 finding that an employer-employee
entitled to 60% of the net profit, while respondent and Celine relationship existed between petitioner and respondent, and
Mei Lirio were each entitled to 20% of the net profit; and (6) that respondent was illegally dismissed. The dispositive
respondent shall be entitled to draw advances of ₱7,000.00 a portion of the decision reads:
month, which shall be deductible from his share of the net
profits and only until such time that the album has been WHEREFORE, premises considered, we find that respondents
produced. CELKOR AD SONICMIX RECORDING STUDIO and/ or
CESAR C. LIRIO (Owner), have illegally dismissed
According to petitioner, they arrived at the foregoing sharing complainant in his status as regular employee and,
of profits based on the mutual understanding that respondent consequently, ORDERING said respondents:
was just an amateur composer with no track record
whatsoever in the music industry, had no definite source of 1) To pay him full backwages from date of illegal
income, had limited experience as an arranger, had no dismissal on March 14, 2002 until finality of this
knowledge of the use of sound mixers or digital arranger and decision and, in lieu of reinstatement, to [pay] his
that petitioner would help and teach him how to use the separation pay of one (1) month pay per year of service
studio equipment; that petitioner would shoulder all the reckoned from [the] date of hire on August 15, 2001
expenses of production and provide the studio and equipment until finality of this decision, which as of date amounts
as well as his knowledge in the use thereof; and Celine Mei to full backwages total of 145,778.6 (basic ₱7,000.00 x
Lirio would sing the songs. They embarked on the production 19.6 mos.=₱133,000.00 + 1/12 thereof as 13th month
of the album on or about the third week of August 2002. pay of ₱11,083.33 + SILP ₱7,000/32.62
days=₱214.59/day x 5=₱1,072.96 x 1.58
Petitioner asserted that from the aforesaid terms and yrs.=₱1,695.27); separation pay of ₱22,750.00 (₱7,000.00
conditions, his relationship with respondent is one of an x 3.25 yrs.);
informal partnership under Article 17675 of the New Civil
Code, since they agreed to contribute money, property or
 2) To pay complainant's unpaid commission of petitioner had the power to dismiss him, and that they had the
₱2,000.00; 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.
3) To pay him moral and exemplary damages in the
combined amount of ₱75,000.00. Respondent’s motion for reconsideration was denied by the
NLRC in a Resolution9 dated December 14, 2004.
Other monetary claims of complainant are dismissed for lack
of merit.7 Respondent filed a petition for certiorari before the Court of
Appeals.
The Labor Arbiter stated that petitioner’s denial of the
employment relationship cannot overcome respondent’s On August 4, 2005, the Court of Appeals rendered a
positive assertion and documentary evidence proving that decision10 reversing and setting aside the resolution of the
petitioner hired respondent as his employee.8 NLRC, and reinstating the decision of the Labor Arbiter, with
modification in regard to the award of commission and
Petitioner appealed the decision of the Labor Arbiter to the damages. The Court of Appeals deleted the award of
National Labor Relations Commission (NLRC). commission, and moral and exemplary damages as the same
were not substantiated. The dispositive portion of the Court of
In a Resolution7 dated October 14, 2004, the NLRC reversed Appeals’ decision reads:
and set aside the decision of the Labor Arbiter. The dispositive
portion of the Resolution reads: WHEREFORE, the petition is GRANTED and the assailed
resolutions dated October 14, 2004 and December 14, 2004 are
WHEREFORE, premises considered, the Appeal is GRANTED. hereby REVERSED and SET ASIDE. Accordingly, the decision
Accordingly, the Decision appealed from is REVERSED and, dated October 31, 2003 of the Labor Arbiter
hence, SET ASIDE and a new one ENTERED dismissing the is REINSTATED, with the modification that the awards of
instant case for lack of merit.9 commission and damages are deleted.11(Emphasis supplied.)

The NLRC stated that respondent failed to prove his Petitioner’s motion for reconsideration was denied for lack of
employment tale with substantial evidence. Although the merit by the Court of Appeals in its Resolution12 dated
NLRC agreed that respondent was able to prove that he September 21, 2005.
received gross pay less deduction and net pay, with the
corresponding Certification of Correctness by petitioner, Hence, petitioner Lirio filed this petition.
covering the period from July 31, 2001 to March 15, 2002, the
NLRC held that respondent failed to proved with substantial Petitioner states that respondent appealed to the Court of
evidence that he was selected and engaged by petitioner, that Appeals via a petition for certiorari under Rule 65, which will
prosper only if there is a showing of grave abuse of discretion employer-employee relationship exists between the petitioner
or an act without or in excess of jurisdiction on the part of the and the private respondents, since the petitioner failed to
NLRC.13 However, petitioner contends that the Court of prove such fact by substantial evidence."16
Appeals decided the case not in accordance with law and
applicable rulings of this Court as petitioner could not find Errors of judgment, as distinguished from errors of
any portion in the Decision of the Court of Appeals ruling that jurisdiction, are not within the province of a special civil action
the NLRC acted without or in excess of jurisdiction or with for certiorari, which is merely confined to issues of jurisdiction
grave abuse of discretion amounting to lack or excess of or grave abuse of discretion.17 By grave abuse of discretion is
jurisdiction. Petitioner submits that the Court of Appeals meant such capricious and whimsical exercise of judgment as
could not review an error of judgment by the NLRC raised is equivalent to lack of jurisdiction, and it must be shown that
before it on a petition for certiorari under Rule 65 of the 1997 the discretion was exercised arbitrarily or despotically.18
Rules of Civil Procedure. Moreover, petitioner contends that it
was error on the part of the Court of Appeals to review the The Court of Appeals, therefore, could grant the petition for
finding of facts of the NLRC on whether there exists an certiorari if it finds that the NLRC, in its assailed decision or
employer-employee relationship between the parties. resolution, committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily disregarding evidence
Petitioner’s argument lacks merit. that is material to or decisive of the controversy; and it cannot
make this determination without looking into the evidence of
It is noted that respondent correctly sought judicial review of the parties.19 Necessarily, the appellate court can only evaluate
the decision of the NLRC via a petition for certiorari under the materiality or significance of the evidence, which is alleged
Rule 65 of the Rules of Court filed before the Court of Appeals to have been capriciously, whimsically, or arbitrarily
in accordance with the decision of the Court in St. Martin disregarded by the NLRC, in relation to all other evidence on
Funeral Home v. NLRC,14 which held: record.20 Thus, contrary to the contention of petitioner, the
Court of Appeals can review the finding of facts of the NLRC
Therefore, all references in the amended Section 9 of B.P. No. and the evidence of the parties to determine whether the
129 to supposed appeals from the NLRC to the Supreme NLRC gravely abused its discretion in finding that no
Court are interpreted and hereby declared to mean and refer employer-employee relationship existed between petitioner
to petitions for certiorari under Rule 65. Consequently, all such and respondent.21
petitions should henceforth be initially filed in the Court of
Appeals in strict observance of the doctrine on the hierarchy of Respondent raised before the Court of Appeals the following
courts as the appropriate forum for the relief desired.15 issues:

The Court of Appeals stated in its decision that the issue it had I. RESPONDENT NATIONAL LABOR RELATIONS
to resolve was "whether or not the public respondent [NLRC] COMMISSION COMMITTED GRAVE ABUSE OF
committed grave abuse of discretion when it declared that no DISCRETION IN SHIFTING THE BURDEN OF PROVING
THAT EMPLOYMENT RELATIONS EXISTED BETWEEN points to complainant's hiring as employee so that the case
THE PETITIONER AND THE PRIVATE RESPONDENTS TO comes within the purview of our jurisdiction on labor disputes
THE FORMER, IN VIOLATION OF ESTABLISHED between an employer and an employee. x x x.
PROVISION OF LAWS AND JURISPRUDENCE.
Respondent Lirio's so-called existence of a partnership
II. RESPONDENT NATIONAL LABOR RELATIONS agreement was not substantiated and his assertion thereto, in
COMMISSION COMMITTED GRAVE ABUSE OF the face of complainant's evidence, constitute but a self-
DISCRETION IN HOLDING THAT NO EMPLOYER- serving assertion, without probative value, a mere
EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE invention to justify the illegal dismissal.
PETITIONER AND THE PRIVATE RESPONDENTS.
xxxx
III. RESPONDENT NATIONAL LABOR RELATIONS
COMMISSION COMMITTED GRAVE ABUSE OF Indeed, we find credible that what caused complainant's
DISCRETION IN DISREGARDING THE PETITIONER'S dismissal on March 14, 2002 was due to his refusal to
PAYROLL AND THE PETTY CASH VOUCHERS AS AN respondent's Lirio's insistences on merely giving him 20%
INDICIA OF EMPLOYMENT RELATIONS BETWEEN based on net profit on sale of the album which he composed
PETITIONER AND THE PRIVATE RESPONDENTS.22 and arranged during his free time and, moreover, that salaries
which he received would be deducted therefrom, which
Between the documentary evidence presented by respondent obviously, soured the relations from the point of view of
and the mere allegation of petitioner without any proof by respondent Lirio.23
way of any document evincing their alleged partnership
agreement, the Court of Appeals agreed with the Labor Hence, based on the finding above and the doctrine that "if
Arbiter that petitioner failed to substantiate his claim that he doubt exists between the evidence presented by the employer
had a partnership with respondent, citing the Labor Arbiter’s and the employee, the scales of justice must be tilted in favor
finding, thus: of the latter,"24 the Court of Appeals reversed the resolution of
the NLRC and reinstated the decision of the Labor Arbiter
In this case, complainant's evidence is substantial enough to with modification. Even if the Court of Appeals was remiss in
prove the employment relationship that on August 14, 2001, not stating it in definite terms, it is implied that the Court of
he was hired as 'Studio manager' by respondent Lirio to Appeals found that the NLRC gravely abused its discretion in
manage and operate the recording studio and to promote and finding that no employer-employee relationship existed
sell its services to music enthusiasts and clients, proven by his between petitioner and respondent based on the evidence on
receipt for this purpose from said respondent a fixed monthly record.
compensation of ₱7,000.00, with commission of ₱100.00 per
hour when serving as recording technician, shown by the We now proceed to the main issue raised before this Court:
payroll from July 31, 2001-March 15, 2002. The said evidence Whether or not the decision of the Court of Appeals is in
accordance with law, or whether or not the Court of Appeals monthly salary of ₱7,000.00 (₱3,500.00 every 15th of the month
erred in reversing and setting aside the decision of the NLRC, and another ₱3,500.00 every 30th of the month) with the
and reinstating the decision of the Labor Arbiter with corresponding deductions due to absences incurred by
modification. respondent; and (2) copies of petty cash vouchers,32 showing
the amounts he received and signed for in the payrolls.
In petitions for review, only errors of law are generally
reviewed by this Court. This rule, however, is not The said documents showed that petitioner hired respondent
ironclad.25Where the issue is shrouded by a conflict of factual as an employee and he was paid monthly wages of ₱7,000.00.
perceptions by the lower court or the lower administrative Petitioner wielded the power to dismiss as respondent stated
body, in this case, the NLRC, this Court is constrained to that he was verbally dismissed by petitioner, and respondent,
review the factual findings of the Court of Appeals.26 thereafter, filed an action for illegal dismissal against
petitioner. The power of control refers merely to the existence
Before a case for illegal dismissal can prosper, it must first be of the power.33 It is not essential for the employer to actually
established that an employer-employee relationship existed supervise the performance of duties of the employee, as it is
between petitioner and respondent.27 sufficient that the former has a right to wield the
power.34Nevertheless, petitioner stated in his Position Paper
The elements to determine the existence of an employment that it was agreed that he would help and teach respondent
relationship are: (a) the selection and engagement of the how to use the studio equipment. In such case, petitioner
employee; (b) the payment of wages; (c) the power of certainly had the power to check on the progress and work of
dismissal; and (d) the employer’s power to control the respondent.
employee’s conduct. The most important element is the
employer’s control of the employee’s conduct, not only as to On the other hand, petitioner failed to prove that his
the result of the work to be done, but also as to the means and relationship with respondent was one of
methods to accomplish it.28 partnership.1âwphi1 Such claim was not supported by any
written agreement. The Court notes that in the payroll dated
It is settled that no particular form of evidence is required to July 31, 2001 to March 15, 2002,35 there were deductions from
prove the existence of an employer-employee the wages of respondent for his absence from work, which
relationship.29 Any competent and relevant evidence to prove negates petitioner’s claim that the wages paid were advances
the relationship may be admitted.30 for respondent’s work in the partnership. In Nicario v.
National Labor Relations Commission,36 the Court held:
In this case, the documentary evidence presented by
respondent to prove that he was an employee of petitioner are It is a well-settled doctrine, that if doubts exist between the
as follows: (a) a document denominated as "payroll" (dated evidence presented by the employer and the employee, the
July 31, 2001 to March 15, 2002) certified correct by scales of justice must be tilted in favor of the latter. It is a time-
petitioner,31 which showed that respondent received a honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the dismissed, and entitled to the payment of backwages, and
interpretation of agreements and writing should be resolved in separation pay in lieu of reinstatement.
the former’s favor. The policy is to extend the doctrine to a
greater number of employees who can avail of the benefits WHEREFORE, the petition is DENIED. The Decision of the
under the law, which is in consonance with the avowed policy Court of Appeals in CA-G.R. SP No. 88899, dated August 4,
of the State to give maximum aid and protection of labor. This 2005, and its Resolution dated September 21, 2005, are
rule should be applied in the case at bar, especially since the AFFIRMED.
evidence presented by the private respondent company is not
convincing. x x x37 No costs.

Based on the foregoing, the Court agrees with the Court of SO ORDERED.
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
CHARLIE JAO, PETITIONER, VS. BCC PRODUCTS SALES but the employee of Sobien Food Corporation (SFC), the major
INC., AND TERRANCE TY, RESPONDENTS. creditor and supplier of BCC; and that SFC had posted him as
its comptroller in BCC to oversee BCC’s finances and business
DECISION operations and to look after SFC’s interests or investments in
BCC.[5]
BERSAMIN, J.:
Although Labor Arbiter Felipe Pati ruled in favor of petitioner
The issue is whether petitioner was respondents’ employee or on June 24, 1996,[6] the NLRC vacated the ruling and remanded
not. Respondents denied an employer-employee relationship the case for further proceedings.[7] Thereafter, Labor Arbiter
with petitioner, who insisted the contrary.cralaw Jovencio Ll. Mayor rendered a new decision on September 20,
2001, dismissing petitioner’s complaint for want of an
Through his petition for review on certiorari, petitioner appeals employer-employee relationship between the
the decision promulgated by the Court of Appeals (CA) on parties.[8] Petitioner appealed the September 20, 2001 decision
February 27, 2004,[1]finding no employee-employer of Labor Arbiter Mayor.
relationship between him and respondents, thereby reversing
the ruling by the National Labor Relations Commission On July 31, 2002, the NLRC rendered a decision reversing
(NLRC) to the effect that he was the employee of respondents. Labor Arbiter Mayor’s decision, and declaring that petitioner
had been illegally dismissed. It ordered the payment of unpaid
Antecedents salaries, backwages and 13th month pay, separation pay and
attorney’s fees.[9] Respondents moved for the reconsideration
Petitioner maintained that respondent BCC Product Sales Inc. of the NLRC decision, but their motion for reconsideration
(BCC) and its President, respondent Terrance Ty (Ty), was denied on September 30, 2002.[10] Thence, respondents
employed him as comptroller starting from September 1995 assailed the NLRC decision on certiorari in the CA.
with a monthly salary of P20,000.00 to handle the financial
aspect of BCC’s business;[2] that on October 19,1995, the Ruling of the CA
security guards of BCC, acting upon the instruction of Ty,
barred him from entering the premises of BCC where he then On February 27, 2004, the CA promulgated its assailed
worked; that his attempts to report to work in November and decision,[11] holding:
December 12, 1995 were frustrated because he continued to be
barred from entering the premises of BCC;[3] and that he filed a After a judicious review of the records vis-à-vis the respective
complaint dated December 28, 1995 for illegal dismissal, posturing of the contending parties, we agree with the finding
reinstatement with full backwages, non-payment of wages, that no employer-employee relationship existed between
damages and attorney’s fees.[4] petitioner BCC and the private respondent. On this note, the
conclusion of the public respondent must be reversed for
Respondents countered that petitioner was not their employee being issued with grave abuse of discretion.
 conform with the usual and ordinary experience of
“Etched in an unending stream of cases are the four (4) man. Coming now to the most controlling factor, the records
standards in determining the existence of an employer- indubitably reveal the undisputed fact that the petitioner
employee relationship, namely, (a) the manner of selection company did not have nor did not exercise the power of
and engagement of the putative employee; (b) the mode of control over the private respondent. It did not prescribe the
payment of wages; (c) the presence or absence of power of manner by which the work is to be carried out, or the time by
dismissal; and, (d) the presence or absence of control of the which the private respondent has to report for and leave from
putative employee’s conduct.” Of these powers the power of work. As already stated, the power of control is such an
control over the employee’s conduct is generally regarded as important factor that other requisites may even be
determinative of the existence of the relationship. disregarded. In Sevilla v. Court of Appeals, the Supreme
Court emphatically held, thus:
Apparently, in the case before us, all these four elements are “The “control test,” under which the person for whom the
absent. First, there is no proof that the services of the private services are rendered reserves the right to direct not only the
respondent were engaged to perform the duties of a end to be achieved but also the means for reaching such end,
comptroller in the petitioner company. There is no proof that is generally relied on by the courts.”
the private respondent has undergone a selection procedure as
a standard requisite for employment, especially with such a We have carefully examined the evidence submitted by the
delicate position in the company. Neither is there any proof of private respondent in the formal offer of evidence and
his appointment nor is there any showing that the parties unfortunately, other than the bare assertions of the private
entered into an employment contract, stipulating thereof that respondent which he miserably failed to substantiate, we find
he will receive P20,000.00/month salary as comptroller, before nothing therein that would decisively indicate that the
the private respondent commenced with his work as petitioner BCC exercised the fundamental power of control
such. Second, as clearly established on record, the private over the private respondent in relation to his employment—
respondent was not included in the petitioner company’s not even the ID issued to the private respondent and the
payroll during the time of his alleged employment with the affidavits executed by Bertito Jemilla and Rogelio Santias. At
former. True, the name of the private respondent Charlie Jao best, these pieces of documents merely suggest the existence of
appears in the payroll however it does not prove that he has employer-employee relationship as intimated by the
received his remuneration for his services. Notably, his name NLRC. On the contrary, it would appear that the said sworn
was not among the employees who will receive their salaries statement provided a substantial basis to support the
as represented by the payrolls. Instead, it appears therein as a contention that the private respondent worked at the
comptroller who is authorized to approve the same. Suffice it petitioner BCC as SFC’s representative, being its major
to state that it is rather obscure for a certified public creditor and supplier of goods and merchandise. Moreover, as
accountant doing the functions of a comptroller from clearly pointed out by the petitioner in his Reply to the private
September 1995 up to December 1995 not to receive his salary respondent’s Comment, it is unnatural for SFC to still employ
during the said period. Verily, such scenario does not the private respondent “to oversee and supervise collections of
account receivables due SFC from its customers or clients” like continuing failure of petitioner to render the explanation as to
the herein petitioner BCC on a date later than December, 1995 the non-personal service of the petition on
considering that a criminal complaint has already been respondents.[14] However, upon a motion for reconsideration,
instituted against him. the Court reinstated the petition for review on certiorari and
required respondents to comment.[15]
Sadly, the private respondent failed to sufficiently discharge
the burden of showing with legal certainty that employee- Issue
employer relationship existed between the parties. On the
other hand, it was clearly shown by the petitioner that it The sole issue is whether or not an employer-employee
neither exercised control nor supervision over the conduct of relationship existed between petitioner and BCC. A finding on
the private respondent’s employment. Hence, the allegation the existence of an employer-employee relationship will
that there is employer-employee relationship must necessarily automatically warrant a finding of illegal dismissal,
fail. considering that respondents did not state any valid grounds
to dismiss petitioner.
Consequently, a discussion on the issue of illegal dismissal
therefore becomes unnecessary. Ruling

WHEREFORE, premises considered, the petition is The petition lacks merit.

GRANTED. The assailed Decision of the public respondent
NLRC dated July 31, 2002 and the Resolution dated September The existence of an employer-employee relationship is a
30, 2002 are REVERSED and SET ASIDE. Accordingly, the question of fact. Generally, a re-examination of factual
decision of the Labor Arbiter dated September 20, 2001 is findings cannot be done by the Court acting on a petition for
hereby REINSTATED. 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
SO ORDERED. analyze and weigh again the evidence adduced and
considered in the proceedings below.[16] This rule is not
After the CA denied petitioner’s motion for reconsideration on absolute, however, and admits of exceptions. For one, the
May 14, 2004,[12] he filed a motion for extension to file petition Court may look into factual issues in labor cases when the
for review, which the Court denied through the resolution factual findings of the Labor Arbiter, the NLRC, and the CA
dated July 7, 2004 for failure to render an explanation on why are conflicting.[17]
the service of copies of the motion for extension on
respondents was not personally made.[13] The denial Here, the findings of the NLRC differed from those of the
notwithstanding, he filed his petition for review on certiorari. Labor Arbiter and the CA. This conflict among such
The Court denied the petition on August 18, 2004 in view of adjudicating offices compels the Court’s exercise of its
the denial of the motion for extension of time and the authority to review and pass upon the evidence presented and
to draw its own conclusions therefrom. employed by, Sobien Food Corporation with
the same business address as abovestated;
To prove his employment with BCC, petitioner offered the
following: (a) BCC Identification Card (ID) issued to him 2. In the course of my association with, or
stating his name and his position as “comptroller,” and employment by, Sobien Food
bearing his picture, his signature, and the signature of Ty; (b) a Corporation (SFC, for short), I have been
payroll of BCC for the period of October 1-15, 1996 that entrusted by my employer to oversee and
petitioner approved as comptroller; (c) various bills and supervise collections on account of receivables
receipts related to expenditures of BCC bearing the signature due SFC from its customers or clients; for
of petitioner; (d) various checks carrying the signatures of instance, certain checks due and turned over
petitioner and Ty, and, in some checks, the signature of by one of SFC’s customers is BCC Product
petitioner alone; (e) a court order showing that the issuing Sales, Inc., operated or run by one Terrance L.
court considered petitioner’s ID as proof of his employment Ty, (President and General manager),
with BCC; (f) a letter of petitioner dated March 1, 1997 to the pursuant to, or in accordance with,
Department of Justice on his filing of a criminal case arrangements or agreement thereon; such
for estafa against Ty for non-payment of wages; (g) affidavits of arrangement or agreement is duly confirmed
some employees of BCC attesting that petitioner was their co- by said Terrance Ty, as shown or admitted by
employee in BCC; and (h) a notice of raffle dated December 5, him in a public instrument executed therefor,
1995 showing that petitioner, being an employee of BCC, particularly par. 2 of that certain Counter-
received the notice of raffle in behalf of BCC.[18] Affidavit executed and subscribed on December
11, 1995, xerox copy of which is hereto attached,
Respondents denied that petitioner was BCC’s employee. duly marked as Annex “A” and made integral
They affirmed that SFC had installed petitioner as its part hereof.
comptroller in BCC to oversee and supervise SFC’s collections
and the account of BCC to protect SFC’s interest; that their 3. Despite such admission of an arrangement, or
issuance of the ID to petitioner was only for the purpose of agreement insofar as BCC-checks
facilitating his entry into the BCC premises in relation to his were delivered to, or turned over in favor of
work of overseeing the financial operations of BCC for SFC; SFC, Mr. Terrance Ty, in a desire to blemish my
that the ID should not be considered as evidence of reputation or to cause me dishonor as well as to
petitioner’s employment in BCC;[19] that petitioner executed impute unto myself the commission of a crime,
an affidavit in March 1996,[20] stating, among others, as state in another public instrument executed
follows: therefor in that:

1. I am a CPA (Certified Public Accountant) by “3. That all the said 158 checks were
profession but presently associated with, or unlawfully appropriated by a certain
 Charlie Jao absolutely without any insisted, BCC had already illegally dismissed him and had
authority from BCC and the same were even prevented him from entering the premises of BCC. Given
reportedly turned over by said Mr. Jao the patent animosity and strained relations between him and
to a person who is not an agent or is not respondents in such circumstances, indeed, how could he still
authorized representative of BCC.” efficiently perform in behalf of SFC the essential responsibility
to “oversee and supervise collections” at BCC? Surely,
respondents would have vigorously objected to any
xerox copy of which document (Affidavit) is arrangement with SFC involving him.
hereto attached, duly marked as Annex “B” and
made integral part hereof. (emphasis supplied) 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
and that the affidavit constituted petitioner’s admission of the appropriated some checks without authority from
arrangement or agreement between BCC and SFC for the latter BCC.[22] Petitioner thereby sought to show that he had the
to appoint a comptroller to oversee the former’s operations. authority to receive the checks pursuant to the arrangements
between SFC and BCC. This showing would aid in fending off
Petitioner counters, however, that the affidavit did not the criminal charge respondents filed against him arising from
establish the absence of an employer-employee relationship his mishandling of the checks. Naturally, the circumstances
between him and respondents because it had been executed in petitioner adverted to in his March 1996 affidavit concerned
March 1996, or after his employment with respondents had those occurring before December 11, 1995, the same period
been terminated on December 12, 1995; and that the affidavit when he actually worked as comptroller in BCC.
referred to his subsequent employment by SFC following the
termination of his employment by BCC.[21] Further, an affidavit dated September 5, 2000 by Alfredo So,
br>We cannot side with petitioner. the President of SFC, whom petitioner offered as a rebuttal
witness, lent credence to respondents’ denial of petitioner’s
Our perusal of the affidavit of petitioner compels a conclusion employment. So declared in that affidavit, among others, that
similar to that reached by the CA and the Labor Arbiter to the he had known petitioner for being “earlier his retained
effect that the affidavit actually supported the contention that accountant having his own office but did not hold office” in
petitioner had really worked in BCC as SFC’s representative. It SFC’s premises; that Ty had approached him (So) “looking for
does seem more natural and more believable that petitioner’s an accountant or comptroller to be employed by him (Ty) in
affidavit was referring to his employment by SFC even while [BCC’s] distribution business” of SFC’s general merchandise,
he was reporting to BCC as a comptroller in behalf of SFC. As and had later asked him on his opinion about petitioner; and
respondents pointed out, it was implausible for SFC to still that he (So) had subsequently learned that “Ty had already
post him to oversee and supervise the collections of accounts employed [petitioner] as his comptroller as of September
receivables due from BCC beyond December 1995 if, as he 1995.”[23]
 agreement on terms of employment may be understandable
The statements of So really supported respondents’ position in and expected if he was a common or ordinary laborer who
that petitioner’s association with SFC prior to his supposed would not jeopardize his employment by demanding such
employment by BCC went beyond mere acquaintance with So. document from the employer, but may not square well with
That So, who had earlier merely “retained” petitioner as his his actual status as a highly educated professional.
accountant, thereafter employed petitioner as a “retained”
accountant after his supposed illegal dismissal by BCC raised Petitioner’s admission that he did not receive his salary for the
a doubt as to his employment by BCC, and rather confirmed three months of his employment by BCC, as his complaint for
respondents’ assertion of petitioner being an employee of SFC illegal dismissal and non-payment of wages[25] and the
while he worked at BCC. criminal case for estafa he later filed against the respondents
for non-payment of wages[26] indicated, further raised grave
Moreover, in determining the presence or absence of an doubts about his assertion of employment by BCC. If the
employer-employee relationship, the Court has consistently assertion was true, we are puzzled how he could have
looked for the following incidents, to wit: (a) the selection and remained in BCC’s employ in that period of time despite not
engagement of the employee; (b) the payment of wages; (c) the being paid the first salary of P20,000.00/month. Moreover, his
power of dismissal; and (d) the employer’s power to control name did not appear in the payroll of BCC despite him having
the employee on the means and methods by which the work is approved the payroll as comptroller.
accomplished. The last element, the so-called control test, is
the most important element.[24] Lastly, the confusion about the date of his alleged illegal
dismissal provides another indicium of the insincerity of
Hereunder are some of the circumstances and incidents petitioner’s assertion of employment by BCC. In the petition
occurring while petitioner was supposedly employed by BCC for review on certiorari, he averred that he had been barred
that debunked his claim against respondents. from entering the premises of BCC on October 19, 1995,[27] and
thus was illegally dismissed. Yet, his complaint for illegal
It can be deduced from the March 1996 affidavit of petitioner dismissal stated that he had been illegally dismissed on
that respondents challenged his authority to deliver some 158 December 12, 1995 when respondents’ security guards barred
checks to SFC. Considering that he contested respondents’ him from entering the premises of BCC,[28] causing him to
challenge by pointing to the existing arrangements between bring his complaint only on December 29, 1995, and after BCC
BCC and SFC, it should be clear that respondents did not had already filed the criminal complaint against him. The
exercise the power of control over him, because he thereby wide gap between October 19, 1995 and December 12, 1995
acted for the benefit and in the interest of SFC more than of cannot be dismissed as a trivial inconsistency considering that
BCC. the several incidents affecting the veracity of his assertion of
employment by BCC earlier noted herein transpired in that
In addition, petitioner presented no document setting forth the interval.
terms of his employment by BCC. The failure to present such
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.
 III. HIRING Contract of agreement made and entered into this date by and
between William Ollendorff, of Manila, Philippine Islands,
party of the first part, and Ira Abrahamson, of Manila,
WILLIAM OLLENDORFF, Plaintiff-Appellee, vs. IRA Philippine Islands, party of the second part:chanrobles virtual
ABRAHAMSON, Defendant-Appellant. law library

FISHER, J.: The party of first part hereby agrees to employ the party of the
second part, and the party of the second part hereby obligates
This is an appeal by defendant from a judgment of the Court and binds himself to work for the party of the first part for a
of First Instance of Manila by which he was enjoined for a term of two years from date commencing from the sixth of
term of five years, from September 10, 1915, from engaging in September, one thousand nine hundred and fifteen and
the Philippine Islands in any business similar to or competitive ending on the fifth day of September, one thousand nine
with that of plaintiff.chanroblesvirtualawlibrary chanrobles hundred seventeen, at a salary of fifty peso (50) per week
virtual law library payable at the end of each
week.chanroblesvirtualawlibrary chanrobles virtual law
The record discloses that plaintiff is and for a long time past library
has been engaged in the city of Manila and elsewhere in the
Philippine Islands in the business of manufacturing ladies The party of the second part hereby obligates and binds
embroidered underwear for export. Plaintiff imports the himself to devote his entire time, attention, energies and
material from which this underwear is made and adopts industry to the promotion of the furtherance of the business
decorative designs which are embroidered upon it by Filipino and interest of the party of the first part and to perform during
needle workers from patterns selected and supplied by him. the term of this contract such duties as may be assigned to him
Most of the embroidery work is done in the homes of the by the party of the first part, and failure by the said party of
workers. The embroidered material is then returned to the second part to comply with these conditions to the
plaintiff's factory in Manila where it is made into finished satisfaction of the party of the first shall entitle the party of the
garments and prepared for export. The embroiderers first part to discharge and dismiss the said party of the second
employed by plaintiff are under contract to work for plaintiff part from the employ of the party of the first
exclusively. Some fifteen thousand home workers and eight part.chanroblesvirtualawlibrary chanrobles virtual law library
hundred factory workers are engaged in this work for
plaintiff, and some two and a half million pesos are invested in It is mutually understood and agreed by the parties hereto that
his business.chanroblesvirtualawlibrary chanrobles virtual law this contract, upon its termination, may be extended for a like
library for a longer or a shorter period by the mutual consent of both
contracting parties.chanroblesvirtualawlibrary chanrobles
On September 10, 1915, plaintiff and defendant entered into a virtual law library
contract in the following terms:
The said party of the second part hereby further binds and appears from the evidence that defendant has employed to
obligates himself, his heirs, successors and assigns, that he will work his form some of the same workers employed by the
not enter into or engage himself directly or indirectly, nor plaintiff.chanroblesvirtualawlibrary chanrobles virtual law
permit any other person under his control to enter in or library
engage in a similar or competitive business to that of the said
party of the first part anywhere within the Philippine Islands Shortly after defendant's return to Manila and the
for a period of five years from this date. commencement by him of the discharge of the duties of his
position as local manager of the Philippine Embroidery
Under the terms of this agreement defendant entered the Company, as local manager of the Philippine Embroidery
employ of plaintiff and worked for him until April, 1916, Company, plaintiff commenced this action, the principal
when defendant, on account of ill health, left plaintiff's employ purpose of which is to prevent by injunction, any further
and went to the United States. While in plaintiff's breach of that part of defendant's contract of employment by
establishment, and had full opportunity to acquaint himself plaintiff, by which he agreed that he would not "enter into or
with plaintiff's business method and business connection. The engage himself directly or indirectly . . . in a similar or
duties performed by him were such as to make it necessary competitive business to that of (plaintiff) anywhere within the
that he should have this knowledge of plaintiff's business. Philippine Islands for a period of five years . . ." from the date
Defendant had a general knowledge of the Philippine of the agreement. The lower court granted a preliminary
embroidery business before his employment by plaintiff, injunction, and upon trial the injunction was made
having been engaged in similar work for several perpetual.chanroblesvirtualawlibrary chanrobles virtual law
years.chanroblesvirtualawlibrary chanrobles virtual law library
library
Defendant, as appellant, argues that plaintiff failed to
Some months after his departure for the United States, substantiate the averments of his complaints to the effect that
defendant returned to Manila as the manager of the Philippine the business in which the defendant is employed is
Underwear Company, a corporation. This corporation does competitive with that of plaintiff. The court below found from
not maintain a factory in the Philippine Islands, but send the evidence that the business was "very similar." We have
material and embroidery designs from New York to its local examined the evidence and rare of the opinion that the
representative here who employs Filipino needle workers to business in which defendant is engaged is not only very
embroider the designs and make up the garments in their similar to that of plaintiff, but that it is conducted in open
homes. The only difference between plaintiff's business and competition with that business within the meaning of the
that of the firm by which the defendant is employed, is the contract in question. Defendant himself expressly admitted, on
method of doing the finishing work -- the manufacture of the cross-examination, that the firm by which he is now employed
embroidered material into finished garments. Defendant puts out the same class of foods as that which plaintiff is
admits that both firms turn out the same class of goods and engaged in producing. When two concerns operate in the
that they are exported to the same market. It also clearly same field, produce the same class of goods and dispose them
in the same market, their businesses are of necessity the terms in which the contract was drawn. (Civil Code, art.
competitive. Defendant having engaged in the Philippine 1256.) But even assuming this particular clause of the contract
Islands in a business directly competitive with that of plaintiff, to be invalid, this would not necessarily affect the rest of the
within five years from the date of his contract of employment agreement. The inclusion is an agreement of one or more pacts
by plaintiff, under the terms of which he expressly agreed that which are invalid does not of necessity invalidate the whole
he would refrain form doing that very thing, his conduct contract.chanroblesvirtualawlibrary chanrobles virtual law
constitutes a breach of that library
agreement.chanroblesvirtualawlibrary chanrobles virtual law
library We are of the opinion that the contract was not void as
constituting an unreasonable restraint of trade. We have been
Defendant argues that even assuming that there has been a cited to no statutory expression of the legislative will to which
breach of the agreement, the judgment of the court below is such an agreement is directly obnoxious. The rule in this
nevertheless erroneous, contending that (1) the contract is void jurisdiction is that the obligations created by contracts have
for lack of mutuality; (2) that the contract is void as the force of law between the contracting parties and must be
constituting an unreasonable restraint of trade; (3) that enforce in accordance with their tenor. (Civil Code, art 1091.)
plaintiff has failed to show that he has suffered any estimable The only limitation upon the freedom of contractual
pecuniary damage; and (4) that even assuming that such agreement is that the pacts established shall not be contrary to
damage as to warrant the court in restraining by injunction its "law, morals or public order." (Civil Code, Art. 1255.) The
continuance.chanroblesvirtualawlibrary chanrobles virtual industry of counsel has failed to discover any direct expression
law library of the legislative will which prohibits such a contract as that
before us. It certainly is not contrary to any recognized moral
The contention that the contract is void for lack of mutuality is precept, and it therefore only remains to consider whether it is
based upon that part of the agreement which authorizes contrary to "public order." This term, as correctly stated by
plaintiff to discharge the defendant before the expiration of the Manresa (Commentaries, vol. 8, p. 606) "does not mean, as
stipulated term, should defendant fail to comply with its here used, the actual keeping of the public peace, but signifies
conditions to plaintiff's satisfaction. It is argued that by this the public weal . . . that which is permanent, and essential in
contracts it was sought to impose upon defendant the absolute institutions . . . ." It is the equivalent, as here used and as
obligation of rendering service, while reserving to plaintiff the defined by Manresa, of the term "public policy" as used in the
right to rescind it at will. We are of the opinion that this law of the United States. Public policy has been defined as
question is largely academic. It is admitted that defendant left being that principle under which freedom of contract or
plaintiff's employ at his own request before the expiration of private dealing is restricted for the freedom of contract or
the stipulated terms of the contract. Had plaintiff sought to private dealing is restricted for the good of the community.
discharge defendant without just cause, before the expiration (People's Bank vs. Dalton, 2 Okla., 476.) It is upon this theory
of the term of the employment, it might have been a serious that contracts between private individuals which result in an
question whether he could lawfully do so, notwithstanding unreasonable restraint of trade have frequently being
recognized by article 1255 of our Civil Code, the court of these involved, and the restraint upon one party is not greater than
Islands are vested with like protection to the other party requires, the contract may be
authority.chanroblesvirtualawlibrary chanrobles virtual law sustained. The question is, whether, under the particular
library circumstances of the case and the nature of the particular
contract involved in it, the contract is, or is not, unreasonable.
In the nature of things, it is impossible to frame a general rule (Rousillon vs. Rousillon, L. R. 14 Ch. Div., 351; Leather Cloth
by which to determine in advance the precise point at which Co. vs. Lorsont, L. R. 9 Eq., 345.)
the right of freedom of contract must yield to the superior
interest of community in keeping trade and commerce free Following this opinion, we adopt the modern rule that the
from unreasonable restrictions. Originally the English courts validity of restraints upon trade or employment is to be
adopted the view that any agreement which imposed determined by the intrinsinc reasonableness of restriction in
restrictions upon a man's right to exercise his trade or calling each case, rather than by any fixed rule, and that such
was void as against public policy. (Cyc. vol. 9, p. 525.) In the restrictions may be upheld when not contrary to afford a fair
course of time this opinion was abandoned and the American and reasonable protection to the party in whose favor it is
and English courts adopted the doctrine that where the imposed.chanroblesvirtualawlibrary chanrobles virtual law
restraint was unlimited as to space but unlimited as to time library
were valid. In recent years there has been a tendency on the
part of the courts of England and America to discard these Examining the contract here in question from this stand point,
fixed rules and to decide each case according to its peculiar it does not seem so with respect to an employee whose duties
circumstances, and make the validity of the restraint depend are such as of necessity to give him an insight into the general
upon its reasonableness. If the restraint is no greater than is scope and details of his employers business. A business
reasonably necessary for the protection of the party in whose enterprise may and often does depend for its success upon the
favor it is imposed it is upheld, but if it goes beyond this is owner's relations with other dealers, his skill in establishing
declared void. This is the principle followed in such cases by favorable connections, his methods of buying and selling -- a
the Supreme Court of the United States. In the case of multitude of details, none vital if considered alone, but which
Gibbs vs.Consolidated Gas Co. of Baltimore (130 U.S., 396) the in the aggregate constitute the sum total of the advantages
court said: which the result of the experience or individual aptitude and
ability of the man or men by whom the business has been built
The decision in Mitchel vs. Reynolds (1P. Wms. 181 [Smith's up. Failure or success may depend upon the possession of
Leading Cases, Vol. 1, Pt. II, 508]), is the foundation of rule in these intangible but all important assets, and it is natural that
relation to the invalidity of contracts in restraint of trade; but their possessor should seek to keep them from falling into the
as it was made under a condition of things, and a state of hands of his competitors. It is with this object in view that such
society, different from those which now prevail, the rule laid restrictions as that now under consideration are written into
down is not regarded as inflexible, and has been considerably contracts of employment. Their purpose is the protection of
modified. Public welfare is first considered, and if it be not the employer, and if they do not go beyond what is reasonably
necessary to effectuate this purpose they should be upheld. The obligation imposed upon defendant by the particular
We are of the opinion, and so hold, that in the light of the clause of his contract now under consideration is negative in
established facts the restraint imposed upon defendant by his character. Unless defendant voluntarily complies with his
contract is not unreasonable. As was well said in the case of undertaking there is no way by which the contract can be
Underwood vs. Barker (68 Law J. Ch., 201). "If there is one enforced except by the injunctive power of judicial process.
thing more than another which is essential to the trade and Such negative obligations have long been enforced by the
commerce of this country, it is the inviolability of contract courts in this manner. As stated by High in his well-known
deliberately entered into; and to allow a person of mature age, work on Injunctions (vol. 2, pp. 877-878):
and not imposed upon, to enter into a contract, to obtain the
benefit of it, and then to repudiate it and the obligation which The remedy by injunction to prevent the violation of negative
he has undertaken, is prima facie, at all events, contrary to the agreements, or contracts not to do a particular thing, is closely
interest of any and every country . . . . The public policy which akin to the remedy by way of specific performance of
allows a person to obtain employment on certain terms agreements of an affirmative nature. In both cases the object
understood by and agreed to by him, and to repudiate his sought is substantially one and the same, and by enjoining the
contract, conflicts with, and must, to avail the defendant, for violation of a negative agreement the court of equity in effect
some sufficient reason, prevail over, the manifest public decrees its specific performance. (Lumley vs. Wagner, 1
policy, which, as a rule holds him to his bond . . . DeGex, M. & G., 604.)
.chanroblesvirtualawlibrary chanrobles virtual law library
Where by the terms of a contract imposing a positive
Having held that the contract is valid, we pass to a obligation the obligor is entitled to a specific performance, it
consideration of defendant's objections to its enforcement by will not avail the defendant to show that plaintiff will suffer
injunction.chanroblesvirtualawlibrary chanrobles virtual law no pecuniary damage if the contract is not performed. Upon
library like reasons, when the undertaking is negative in character
and defendant is violating the obligation imposed upon him
It is contended that plaintiff has not proved that he has the court may interfere without requiring proof of actual
suffered any estimable pecuniary damage by reason of damage. (High on Injunctions, par. 1135, citing
defendant's breach of the contract, and that for that reason his Dickenson vs. Grand Junction Canal Co., 15 Beav.,
action must fail. It is further contended that in no event is it 270.)chanrobles virtual law library
proper to enforce such a contract as this by injunction, because
it has not been alleged and proved that the continuance of the The admitted fact that plaintiff has failed to establish proof of
acts complained of will cause plaintiff "irreparable damage." pecuniary damage by reason of the breach of the contract by
These objections can conveniently be considered defendant by the acts committed prior to the issuance of the
together.chanroblesvirtualawlibrary chanrobles virtual law preliminary injunction is, of course, a bar or nay money
library judgment for damages for the breach of the contract, but will
not justify us in permitting defendant to continue to break his
contract over plaintiff's objection. The injury is a continuous injury complained of was continuous in its
one. The fact that the court may not be able to give damages nature.chanroblesvirtualawlibrary chanrobles virtual law
for that part of the breach of the contract which had already library
taken place when its aid was invoked is no reason why it
should countenance a continuance of such disregard of It is true, as held in the case of Liongson vs. Martinez (36 Phil.
plaintiff's rights.chanroblesvirtualawlibrary chanrobles virtual Rep., 948) that "an injunction should never issue when an
law library action for damages would adequately compensate the injuries
caused" But it frequently happens that the acts of the
With respect to the contention that an injunction may only be defendant, while constituting a very substantial invasion of
granted to prevent irreparable injury, the answer is that any plaintiff's rights are of such a character that the damages
continuing breach of a valid negative covenant is irreparable which result therefrom "cannot be measured by any certain
by the ordinary process of courts of law. As stated by High, pecuniary standard." (Eau Claire Water Co. vs. City of Eau
(vol. 2, p. 906) injunctive relief is granted in cases like this Claire, 127 Wis., 154.) The Civil Code (art. 1908) casts upon
"upon the ground that the parties cannot be placed in statu quo, real estate owners liability in damages for the emission, upon
and that damages at law can afford no adequate their premises, of excessive smoke, which may be noxious to
compensation, the injury being a continuous one irreparable by person or property. The injury caused by such a nuisance
the ordinary process of courts of law."chanrobles virtual law might bring about a depreciation in the value of adjoining
library properties, but there is no " certain pecuniary standard" by which
such damages can be measured, and in that sense the
In the case of Gilchrist vs. Cuddy (29 Phil. rep., 542), at page threatened injury is "irreparable" and may appropriately be
552, this court said, citing with approval the case of restrained by injunction.
Wahle vs. Reinbach (76 Ill., 322):
. . . If the nuisance is a continuing one, invading substantial
By "irreparable injury" is not meant such injury as is beyond rights of the complainant in such a manner that he would
the possibility of repair, or beyond possible compensation in thereby lose such rights entirely but for the assistance of a
damages, nor necessarily great injury or great damage, but court of equity he will entitled but for the assistance of a court
that species of injury, whether great or small, that ought not be of equity he will be entitled to an injunction upon a proper
submitted to on the one hand or inflicted on the other; and, showing, notwithstanding the fact the he might recover some
because it is so large on the one hand, or so small on the other, damages in an action at law. (Tise vs. Whitaker-Harvey Co.,
is of such constant and frequent recurrence that no fair or 144 N. C., 507.)
reasonable redress can be had therefor in a court of law.
The injury done the business of a merchant by illegal or unfair
This definition was quoted with approval by the Supreme competition is exceedingly difficult to measure. A diminution
Court of the United States in the case of of the volume of a business may be due to so many different
Donovan vs. Pennsylvania Co., (199 U.S., 279), in which the causes that it is often impossible to demonstrate that it has in
fact been caused by the illegal competition of the defendant.
This is frequently the case in suit for the infringement of
trademark rights, in which the courts may enjoin the
continued use of the infringing mark, although unable to
assess damages for the past
injury.chanroblesvirtualawlibrary chanrobles virtual law
library

The judgment of the trial court is affirmed with costs.

So ordered.
 ALFONSO DEL CASTILLO, Plaintiff- 2. That in consideration of the performance of the duties and
Appellant, v. SHANNON RICHMOND, Defendant-Appellee. obligations above indicated by the said Alfonso del Castillo,
Shannon Richmond hereby agrees to pay the said Alfonso del
JOHNSON, J.: Castillo the salary of P125 each
month.chanroblesvirtualawlibrary chanrobles virtual law
This action was commenced in the Court of First Instance of library
the Province of Albay on the 18th day of October, 1922. Its
purpose was to have declared null and of no effect the 3. That in consideration of the fact that the said Alfonso del
following contract executed and delivered on the 20th day of Castillo has just graduated as a pharmacist and up to the
July, 1915: present time has not been employed in the capacity of a
pharmacist and in consideration of this employment and the
CONTRACT FOR RENDERING SERVICES monthly salary mentioned in this contract, the said Alfonso
del Castillo also agrees not to open, nor own nor have any
Know all men by these presents: chanrobles virtual law library interest directly or indirectly in any other drugstore either in
his own name or in the name of another; nor have any
That Shannon Richmond, of lawful age and a resident of the connection with or be employed by any other drugstore
district of Legaspi, and Alfonso del Castillo, also of lawful age situated within a radius of our miles from the district of
and a resident of the district of Daraga of the municipality and Legaspi, municipality and Province of Albay, while the said
Province of Albay, Philippine Islands, have covenanted and Shannon Richmond or his heirs may own or have open a
agreed one with the other as follows:chanrobles virtual law drugstore, or have an interest in any other one within the
library limits of the districts of Legaspi, Albay, and Daraga of the
municipality of Albay, Province of
1. That Alfonso del Castillo, in consideration of a monthly Albay.chanroblesvirtualawlibrary chanrobles virtual law
remuneration of P125 to be paid to him by Shannon library
Richmond, agrees to enter the employ of said Shannon
Richmond beginning this date, as pharmacist, and to take 4. That either of the parties to this contract may terminate his
charge of the prescription department of the drugstore known relations as employer and employee with or without reason,
as the Botica Americana situated in the district of Legaspi of the and upon thirty days' notice; remaining, nevertheless, in full
municipality and Province of Albay, Philippine Islands, and to force and effect all the other conditions and agreements
perform all the duties and obligations as such pharmacist stipulated in this
together with such other duties in connection with the same contract.chanroblesvirtualawlibrary chanrobles virtual law
that by custom correspond to the pharmacist in a drugstore of library
this kind.chanroblesvirtualawlibrary chanrobles virtual law
library 5. That the said Alfonso del Castillo furthermore agrees not to
divulge or make use of any of the business secrets or private
formulas of the said Shannon and permit plaintiff to establish a competing drugstore in the
Richmond.chanroblesvirtualawlibrary chanrobles virtual law town of Legaspi, as plaintiff has announced his intention to
library do, would be extremely prejudicial to defendant's interest."
The defendant further, in an amended answer, alleges "that
In these terms, we execute this contract for the rendering of this action not having been brought within four years from the
services on this 20th day of July, 1915, in the district of time the contract referred to in the complaint was executed,
Legaspi, municipality and Province of Albay Philippine the same has prescribed." chanrobles virtual law library
Islands.
During the trial of the cause an effort was made to sustain the
(Sgd.) "SHANNON RICHMOND allegations of the complaint that paragraph 3 of the said
"ALFONSO DEL CASTILLO contract constituted an illegal and unreasonable restriction
upon the right of the plaintiff to contract and was contrary to
Signed in the presence of: public policy. The lower court found that it was unnecessary
to pass upon the question of prescription presented by the
(Sgd.) "M. GOYENA defendant.chanroblesvirtualawlibrary chanrobles virtual law
"L. AZANA" library

The said contract was acknowledge before a notary on the Upon a consideration of the merits, the court a quo concluded
same day of its "that the contract the annulment of which is sought by the
execution.chanroblesvirtualawlibrary chanrobles virtual law plaintiff is neither oppressive to him, nor unreasonably
library necessary to protect the defendant's business, nor prejudicial
to the public interest." From that judgment the plaintiff
The plaintiff alleges that the provisions and conditions appealed to this court. In this court the appellant still insists
contained in the third paragraph of said contract constitute an that said contract is illegal, unreasonable, and contrary to
illegal and unreasonable restriction upon his liberty to public policy.chanroblesvirtualawlibrary chanrobles virtual
contract, are contrary to public policy, and are unnecessary in law library
order to constitute a just and reasonable protection to the
defendant; and asked that the same be declared null and void From a reading of paragraph 3 of the contract above quoted, it
and of no effect. The defendant interposed a general and will be seen that the only restriction placed upon the right of
special defense. In his special defense he alleges "that during the plaintiff is, that he shall "not open, nor own, nor have any
the time the plaintiff was in the defendant's employ he interest directly or indirectly in any other drugstore either in
obtained knowledge of his trade and professional secrets and his own name or in the name of another; nor have any
came to know and became acquainted and established friendly connection with or be employed by any other drugstore as
relations with his customers so that to now annul the contract pharmacist or in any capacity in any drugstore situated within
a radius of four miles from the district of Legaspi, municipality
and Province of Albay, while the said Shannon Richmond or Howard vs. Tilden, 121 Iowa, 650.) chanrobles virtual law
his heirs may own or have open a drugstore, or to have an library
interest in any other one within the limits of the districts of
Legaspi, Albay, and Daraga of the municipality of Albay, The public welfare of course must always be considered, and if
Province of Albay." It will be noted that the restrictions placed it be not involved and the restraint upon one party is not
upon the plaintiff are strictly limited (a) to a limited district or greater than protection to the other requires, contracts like the
districts, and (b) during the time while the defendant or his one we are discussing will be sustained. The general tendency,
heirs may own or have open a drugstore, or have an interest in we believe, of modern authority, is to make the test whether
any other one within said limited the restraint is reasonably necessary for the protection of the
district.chanroblesvirtualawlibrary chanrobles virtual law contracting parties. If the contract is reasonably necessary to
library protect the interest of the parties, it will be upheld.
(Ollendorff vs.Abrahamson, 38 Phil., 585.) chanrobles virtual
The law concerning contracts which tend to restrain business law library
or trade has gone through a long series of changes from time
to time with the changing conditions of trade and commerce. In that case we held that a contract by which an employee
With trifling exceptions, said changes have been a continuous agrees to refrain for a given lenght of time, after the expiration
development of a general rule. The early cases show plainly a of the term of his employment, from engaging in a business,
disposition to avoid and annul all contract which prohibited or competitive with that of his employer, is not void as being in
restrained any one from using a lawful trade "at any time or at restraint of trade if the restraint imposed is not greater than
any place," as being against the benefit of the state. Later, that which is necessary to afford a reasonable protection. In all
however, the rule became well established that if the restriant cases like the present, the question is whether, under the
was limited to "a certain time" and within "a certain place," particular circumstances of the case and the nature of the
such contracts were valid and not "against the benefit of the particular contract involved in it, the contract is, or is not,
state." Later cases, and we think the rule is now well unreasonable. Of course in establishing whether the contract is
established, have held that a contract in restraint of trade is a reasonable or unreasonable one, the nature of the business
valid providing there is a limitation upon either time or place. must also be considered. What would be a reasonable
A contract, however, which restrains a man from entering into restriction as to time and place upon the manufacture of
a business or trade without either a limitation as to time or railway locomotive engines might be a very unreasonable
place, will be held invalid. (Anchor Electric Co. vs. Hawkes, restriction when imposed upon the employment of a day
171 Mass., 101; Alger vs. Thacher, 19 Pickering [Mass.] 51; laborer.chanroblesvirtualawlibrary chanrobles virtual law
Taylor vs. Blanchard, 13 Allen [Mass.], 370; Lufkin Rule library
Co. vs. Fringeli, 57 Ohio State, 596; Fowle vs. Park, 131 U.S., 88,
97; Diamond Match Co. vs. Roeber, 106 N.Y., 473; National Considering the nature of the business in which the defendant
Benefit Co. vs. Union Hospital Co., 45 Minn., 272; Swigert and is engaged, in relation with the limitation placed upon the
plaintiff both as to time and place, we are of the opinion, and
so decide, that such limitation is legal and reasonable and not
contrary to public policy. Therefore the judgment appealed
from should be and is hereby affirmed, with costs. So ordered.
PHILIPPINE TELEGRAPH AND TELEPHONE On September 2, 1991, private respondent was once more
COMPANY, * petitioner, asked to join petitioner company as a probationary employee,
vs. the probationary period to cover 150 days. In the job
NATIONAL LABOR RELATIONS COMMISSION and application form that was furnished her to be filled up for the
GRACE DE GUZMAN, respondents. purpose, she indicated in the portion for civil status therein
that she was single although she had contracted marriage a
REGALADO, J.: few months earlier, that is, on May 26, 1991.3

Seeking relief through the extraordinary writ of certiorari, It now appears that private respondent had made the same
petitioner Philippine Telegraph and Telephone Company representation in the two successive reliever agreements
(hereafter, PT & T) invokes the alleged concealment of civil which she signed on June 10, 1991 and July 8, 1991. When
status and defalcation of company funds as grounds to petitioner supposedly learned about the same later, its branch
terminate the services of an employee. That employee, herein supervisor in Baguio City, Delia M. Oficial, sent to private
private respondent Grace de Guzman, contrarily argues that respondent a memorandum dated January 15, 1992 requiring
what really motivated PT & T to terminate her services was her to explain the discrepancy. In that memorandum, she was
her having contracted marriage during her employment, reminded about the company's policy of not accepting married
which is prohibited by petitioner in its company policies. She women for employment.4
thus claims that she was discriminated against in gross
violation of law, such a proscription by an employer being In her reply letter dated January 17, 1992, private respondent
outlawed by Article 136 of the Labor Code. stated that she was not aware of PT&T's policy regarding
married women at the time, and that all along she had not
Grace de Guzman was initially hired by petitioner as a deliberately hidden her true civil status.5Petitioner nonetheless
reliever, specifically as a "Supernumerary Project Worker," for remained unconvinced by her explanations. Private
a fixed period from November 21, 1990 until April 20, 1991 respondent was dismissed from the company effective January
vice one C.F. Tenorio who went on maternity leave.1Under the 29, 1992,6 which she readily contested by initiating a complaint
Reliever Agreement which she signed with petitioner for illegal dismissal, coupled with a claim for non-payment of
company, her employment was to be immediately terminated cost of living allowances (COLA), before the Regional
upon expiration of the agreed period. Thereafter, from June 10, Arbitration Branch of the National Labor Relations
1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, Commission in Baguio City.
private respondent's services as reliever were again engaged
by petitioner, this time in replacement of one Erlinda F. Dizon At the preliminary conference conducted in connection
who went on leave during both periods.2 After August 8, 1991, therewith, private respondent volunteered the information,
and pursuant to their Reliever Agreement, her services were and this was incorporated in the stipulation of facts between
terminated. the parties, that she had failed to remit the amount of
P2,380.75 of her collections. She then executed a promissory
note for that amount in favor of petitioner7. All of these took 1. Decreed in the Bible itself is the universal norm that women
place in a formal proceeding and with the agreement of the should be regarded with love and respect but, through the
parties and/or their counsel. ages, men have responded to that injunction with indifference,
on the hubristic conceit that women constitute the inferior sex.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando Nowhere has that prejudice against womankind been so
handed down a decision declaring that private respondent, pervasive as in the field of labor, especially on the matter of
who had already gained the status of a regular employee, was equal employment opportunities and standards. In the
illegally dismissed by petitioner. Her reinstatement, plus Philippine setting, women have traditionally been considered
payment of the corresponding back wages and COLA, was as falling within the vulnerable groups or types of workers
correspondingly ordered, the labor arbiter being of the firmly who must be safeguarded with preventive and remedial social
expressed view that the ground relied upon by petitioner in legislation against discriminatory and exploitative practices in
dismissing private respondent was clearly insufficient, and hiring, training, benefits, promotion and retention.
that it was apparent that she had been discriminated against
on account of her having contracted marriage in violation of The Constitution, cognizant of the disparity in rights between
company rules. men and women in almost all phases of social and political
life, provides a gamut of protective provisions. To cite a few of
On appeal to the National Labor Relations Commission the primordial ones, Section 14, Article II8 on the Declaration
(NLRC), said public respondent upheld the labor arbiter and, of Principles and State Policies, expressly recognizes the role of
in its decision dated April 29, 1994, it ruled that private women in nation-building and commands the State to ensure,
respondent had indeed been the subject of an unjust and at all times, the fundamental equality before the law of women
unlawful discrimination by her employer, PT & T. However, and men. Corollary thereto, Section 3 of Article XIII9 (the
the decision of the labor arbiter was modified with the progenitor whereof dates back to both the 1935 and 1973
qualification that Grace de Guzman deserved to be suspended Constitution) pointedly requires the State to afford full
for three months in view of the dishonest nature of her acts protection to labor and to promote full employment and
which should not be condoned. In all other respects, the NLRC equality of employment opportunities for all, including an
affirmed the decision of the labor arbiter, including the order assurance of entitlement to tenurial security of all workers.
for the reinstatement of private respondent in her employment Similarly, Section 14 of Article XIII 10 mandates that the State
with PT & T. shall protect working women through provisions for
opportunities that would enable them to reach their full
The subsequent motion for reconsideration filed by petitioner potential.
was rebuffed by respondent NLRC in its resolution of
November 9, 1994, hence this special civil action assailing the 2. Corrective labor and social laws on gender inequality have
aforestated decisions of the labor arbiter and respondent emerged with more frequency in the years since the Labor
NLRC, as well as the denial resolution of the latter. Code was enacted on May 1, 1974 as Presidential Decree No.
442, largely due to our country's commitment as a signatory to
the United Nations Convention on the Elimination of All establishments shall be considered as an employee under
Forms of Discrimination Against Women (CEDAW). 11 Article 138. Article 135, on the other hand, recognizes a
woman's right against discrimination with respect to terms
Principal among these laws are Republic Act No. 6727 12 which and conditions of employment on account simply of sex.
explicitly prohibits discrimination against women with respect Finally, and this brings us to the issue at hand, Article 136
to terms and conditions of employment, promotion, and explicitly prohibits discrimination merely by reason of the
training opportunities; Republic Act No. 6955 13which bans the marriage of a female employee.
"mail-order-bride" practice for a fee and the export of female
labor to countries that cannot guarantee protection to the 3. Acknowledged as paramount in the due process scheme is
rights of women workers; Republic Act No. 7192 14 also known the constitutional guarantee of protection to labor and security
as the "Women in Development and Nation Building Act," of tenure. Thus, an employer is required, as a condition sine
which affords women equal opportunities with men to act and qua non prior to severance of the employment ties of an
to enter into contracts, and for appointment, admission, individual under his employ, to convincingly establish,
training, graduation, and commissioning in all military or through substantial evidence, the existence of a valid and just
similar schools of the Armed Forces of the Philippines and the cause in dispensing with the services of such employee, one's
Philippine National Police; Republic Act No. 7322 15 increasing labor being regarded as constitutionally protected property.
the maternity benefits granted to women in the private sector;
Republic Act No. 7877 16 which outlaws and punishes sexual On the other hand, it is recognized that regulation of
harassment in the workplace and in the education and training manpower by the company falls within the so-called
environment; and Republic Act No. 8042, 17 or the "Migrant management prerogatives, which prescriptions encompass the
Workers and Overseas Filipinos Act of 1995," which prescribes matter of hiring, supervision of workers, work assignments,
as a matter of policy, inter alia, the deployment of migrant working methods and assignments, as well as regulations on
workers, with emphasis on women, only in countries where the transfer of employees, lay-off of workers, and the
their rights are secure. Likewise, it would not be amiss to point discipline, dismissal, and recall of employees. 19 As put in a
out that in the Family Code, 18 women's rights in the field of case, an employer is free to regulate, according to his
civil law have been greatly enhanced and expanded. discretion and best business judgment, all aspects of
employment, "from hiring to firing," except in cases of
In the Labor Code, provisions governing the rights of women unlawful discrimination or those which may be provided by
workers are found in Articles 130 to 138 thereof. Article 130 law. 20
involves the right against particular kinds of night work while
Article 132 ensures the right of women to be provided with In the case at bar, petitioner's policy of not accepting or
facilities and standards which the Secretary of Labor may considering as disqualified from work any woman worker
establish to ensure their health and safety. For purposes of who contracts marriage runs afoul of the test of, and the right
labor and social legislation, a woman working in a nightclub, against, discrimination, afforded all women workers by our
cocktail lounge, massage clinic, bar or other similar labor laws and by no less than the Constitution. Contrary to
petitioner's assertion that it dismissed private respondent from the employer's caprices. 25 Furthermore, it should never be
employment on account of her dishonesty, the record discloses used as a subterfuge for causes which are improper, illegal, or
clearly that her ties with the company were dissolved unjustified. 26
principally because of the company's policy that married
women are not qualified for employment in PT & T, and not In the present controversy, petitioner's expostulations that it
merely because of her supposed acts of dishonesty. dismissed private respondent, not because the latter got
married but because she concealed that fact, does have a
That it was so can easily be seen from the memorandum sent hollow ring. Her concealment, so it is claimed, bespeaks
to private respondent by Delia M. Oficial, the branch dishonesty hence the consequent loss of confidence in her
supervisor of the company, with the reminder, in the words of which justified her dismissal.
the latter, that "you're fully aware that the company is not
accepting married women employee (sic), as it was verbally Petitioner would asseverate, therefore, that while it has
instructed to you." 21 Again, in the termination notice sent to nothing against marriage, it nonetheless takes umbrage over
her by the same branch supervisor, private respondent was the concealment of that fact. This improbable reasoning, with
made to understand that her severance from the service was interstitial distinctions, perturbs the Court since private
not only by reason of her concealment of her married status respondent may well be minded to claim that the imputation
but, over and on top of that, was her violation of the of dishonesty should be the other way around.
company's policy against marriage ("and even told you that
married women employees are not applicable [sic] or accepted Petitioner would have the Court believe that although private
in our company.") 22 Parenthetically, this seems to be the respondent defied its policy against its female employees
curious reason why it was made to appear in the initiatory contracting marriage, what could be an act of insubordination
pleadings that petitioner was represented in this case only by was inconsequential. What it submits as unforgivable is her
its said supervisor and not by its highest ranking officers who concealment of that marriage yet, at the same time, declaring
would otherwise be solidarily liable with the corporation. 23 that marriage as a trivial matter to which it supposedly has no
objection. In other words, PT & T says it gives its blessings to
Verily, private respondent's act of concealing the true nature its female employees contracting marriage, despite the
of her status from PT & T could not be properly characterized maternity leaves and other benefits it would consequently
as willful or in bad faith as she was moved to act the way she respond for and which obviously it would have wanted to
did mainly because she wanted to retain a permanent job in a avoid. If that employee confesses such fact of marriage, there
stable company. In other words, she was practically forced by will be no sanction; but if such employee conceals the same
that very same illegal company policy into misrepresenting instead of proceeding to the confessional, she will be
her civil status for fear of being disqualified from work. While dismissed. This line of reasoning does not impress us as
loss of confidence is a just cause for termination of reflecting its true management policy or that we are being
employment, it should not be simulated. 24 It must rest on an regaled with responsible advocacy.
actual breach of duty committed by the employee and not on
This Court should be spared the ennui of strained reasoning complete the probationary period of 150 days as she was
and the tedium of propositions which confuse through less contracted as a probationary employee on September 2, 1991.
than candid arguments. Indeed, petitioner glosses over the fact That her dismissal would be effected just when her
that it was its unlawful policy against married women, both probationary period was winding down clearly raises the
on the aspects of qualification and retention, which compelled plausible conclusion that it was done in order to prevent her
private respondent to conceal her supervenient marriage. It from earning security of tenure. 27 On the other hand, her
was, however, that very policy alone which was the cause of earlier stints with the company as reliever were undoubtedly
private respondent's secretive conduct now complained of. It those of a regular employee, even if the same were for fixed
is then apropos to recall the familiar saying that he who is the periods, as she performed activities which were essential or
cause of the cause is the cause of the evil caused. necessary in the usual trade and business of PT & T. 28 The
primary standard of determining regular employment is the
Finally, petitioner's collateral insistence on the admission of reasonable connection between the activity performed by the
private respondent that she supposedly misappropriated employee in relation to the business or trade of the
company funds, as an additional ground to dismiss her from employer. 29
employment, is somewhat insincere and self-serving.
Concededly, private respondent admitted in the course of the As an employee who had therefore gained regular status, and
proceedings that she failed to remit some of her collections, as she had been dismissed without just cause, she is entitled to
but that is an altogether different story. The fact is that she was reinstatement without loss of seniority rights and other
dismissed solely because of her concealment of her marital privileges and to full back wages, inclusive of allowances and
status, and not on the basis of that supposed defalcation of other benefits or their monetary equivalent. 30 However, as she
company funds. That the labor arbiter would thus consider had undeniably committed an act of dishonesty in concealing
petitioner's submissions on this supposed dishonesty as a her status, albeit under the compulsion of an unlawful
mere afterthought, just to bolster its case for dismissal, is a imposition of petitioner, the three-month suspension imposed
perceptive conclusion born of experience in labor cases. For, by respondent NLRC must be upheld to obviate the
there was no showing that private respondent deliberately impression or inference that such act should be condoned. It
misappropriated the amount or whether her failure to remit would be unfair to the employer if she were to return to its
the same was through negligence and, if so, whether the fold without any sanction whatsoever for her act which was
negligence was in nature simple or grave. In fact, it was not totally justified. Thus, her entitlement to back wages,
merely agreed that private respondent execute a promissory which shall be computed from the time her compensation was
note to refund the same, which she did, and the matter was withheld up to the time of her actual reinstatement, shall be
deemed settled as a peripheral issue in the labor case. reduced by deducting therefrom the amount corresponding to
her three months suspension.
Private respondent, it must be observed, had gained regular
status at the time of her dismissal. When she was served her
walking papers on January 29, 1992, she was about to
4. The government, to repeat, abhors any stipulation or policy 136 of the Labor Code with regard to discrimination against
in the nature of that adopted by petitioner PT & T. The Labor married women. Thus:
Code state, in no uncertain terms, as follows:
Of first impression is the incompatibility of the
Art. 136. Stipulation against marriage. — It shall respondent's policy or regulation with the codal
be unlawful for an employer to require as a provision of law. Respondent is resolute in its
condition of employment or continuation of contention that Article 136 of the Labor Code
employment that a woman shall not get applies only to women employed in ordinary
married, or to stipulate expressly or tacitly that occupations and that the prohibition against
upon getting married, a woman employee shall marriage of women engaged in extraordinary
be deemed resigned or separated, or to actually occupations, like flight attendants, is fair and
dismiss, discharge, discriminate or otherwise reasonable, considering the pecularities of their
prejudice a woman employee merely by reason chosen profession.
of marriage.
We cannot subscribe to the line of reasoning
This provision had a studied history for its origin can be pursued by respondent. All along, it knew that
traced to Section 8 of Presidential Decree No. 148, 31 better the controverted policy has already met its
known as the "Women and doom as early as March 13, 1973 when
Child Labor Law," which amended paragraph (c), Section 12 of Presidential Decree No. 148, otherwise known
Republic Act No. 679, 32 entitled "An Act to Regulate the as the Women and Child Labor Law, was
Employment of Women and Children, to Provide Penalties for promulgated. But for the timidity of those
Violations Thereof, and for Other Purposes." The forerunner to affected or their labor unions in challenging the
Republic Act No. 679, on the other hand, was Act No. 3071 validity of the policy, the same was able to
which became law on March 16, 1923 and which regulated the obtain a momentary reprieve. A close look at
employment of women and children in shops, factories, Section 8 of said decree, which amended
industrial, agricultural, and mercantile establishments and paragraph (c) of Section 12 of Republic Act No.
other places of labor in the then Philippine Islands. 679, reveals that it is exactly the same provision
reproduced verbatim in Article 136 of the Labor
It would be worthwhile to reflect upon and adopt here the Code, which was promulgated on May 1, 1974
rationalization in Zialcita, et al. vs. Philippine Air Lines, 33 a to take effect six (6) months later, or on
decision that emanated from the Office of the President. There, November 1, 1974.
a policy of Philippine Air Lines requiring that prospective
flight attendants must be single and that they will be It cannot be gainsaid that, with the reiteration
automatically separated from the service once they marry was of the same provision in the new Labor Code,
declared void, it being violative of the clear mandate in Article all policies and acts against it are deemed illegal
and therefore abrogated. True, Article 132 own health, safety, protection and welfare, as
enjoins the Secretary of Labor to establish no basis has been laid therefor. Actually,
standards that will ensure the safety and health respondent claims that its concern is not so
of women employees and in appropriate cases much against the continued employment of the
shall by regulation require employers to flight attendant merely by reason of marriage as
determine appropriate minimum standards for observed by the Secretary of Labor, but rather
termination in special occupations, such as on the consequence of marriage-pregnancy.
those of flight attendants, but that is precisely Respondent discussed at length in the instant
the factor that militates against the policy of appeal the supposed ill effects of pregnancy on
respondent. The standards have not yet been flight attendants in the course of their
established as set forth in the first paragraph, employment. We feel that this needs no further
nor has the Secretary of Labor issued any discussion as it had been adequately explained
regulation affecting flight attendants. by the Secretary of Labor in his decision of May
2, 1976.
It is logical to presume that, in the absence of
said standards or regulations which are as yet In a vain attempt to give meaning to its
to be established, the policy of respondent position, respondent went as far as invoking the
against marriage is patently illegal. This finds provisions of Articles 52 and 216 of the New
support in Section 9 of the New Constitution, Civil Code on the preservation of marriage as
which provides: an inviolable social institution and the family as
a basic social institution, respectively, as bases
Sec. 9. The State shall afford protection to labor, for its policy of non-marriage. In both instances,
promote full employment and equality in respondent predicates absence of a flight
employment, ensure equal work opportunities attendant from her home for long periods of
regardless of sex, race, or creed, and regulate time as contributory to an unhappy married
the relations between workers and employees. life. This is pure conjecture not based on actual
The State shall assure the rights of workers to conditions, considering that, in this modern
self-organization, collective bargaining, security world, sophisticated technology has narrowed
of tenure, and just and humane conditions of the distance from one place to another.
work . . . . Moreover, respondent overlooked the fact that
married flight attendants can program their
Moreover, we cannot agree to the respondent's lives to adapt to prevailing circumstances and
proposition that termination from employment events.
of flight attendants on account of marriage is a
fair and reasonable standard designed for their
 Article 136 is not intended to apply only to the main federal statute prohibiting job discrimination against
women employed in ordinary occupations, or it employees and applicants on the basis of, among other things,
should have categorically expressed so. The sex. 35
sweeping intendment of the law, be it on
special or ordinary occupations, is reflected in Further, it is not relevant that the rule is not directed against
the whole text and supported by Article 135 all women but just against married women. And, where the
that speaks of non-discrimination on the employer discriminates against married women, but not
employment of women. against married men, the variable is sex and the discrimination
is unlawful. 36 Upon the other hand, a requirement that a
The judgment of the Court of Appeals in Gualberto, et woman employee must remain unmarried could be justified as
al. vs. Marinduque Mining & Industrial Corporation 34considered a "bona fide occupational qualification," or BFOQ, where the
as void a policy of the same nature. In said case, respondent, in particular requirements of the job would justify the same, but
dismissing from the service the complainant, invoked a policy not on the ground of a general principle, such as the
of the firm to consider female employees in the project it was desirability of spreading work in the workplace. A
undertaking as separated the moment they get married due to requirement of that nature would be valid provided it reflects
lack of facilities for married women. Respondent further an inherent quality reasonably necessary for satisfactory job
claimed that complainant was employed in the project with an performance. Thus, in one case, a no-marriage rule applicable
oral understanding that her services would be terminated to both male and female flight attendants, was regarded as
when she gets married. Branding the policy of the employer as unlawful since the restriction was not related to the job
an example of "discriminatory chauvinism" tantamount to performance of the flight attendants. 37
denying equal employment opportunities to women simply
on account of their sex, the appellate court struck down said 5. Petitioner's policy is not only in derogation of the provisions
employer policy as unlawful in view of its repugnance to the of Article 136 of the Labor Code on the right of a woman to be
Civil Code, Presidential Decree No. 148 and the Constitution. free from any kind of stipulation against marriage in
connection with her employment, but it likewise assaults good
Under American jurisprudence, job requirements which morals and public policy, tending as it does to deprive a
establish employer preference or conditions relating to the woman of the freedom to choose her status, a privilege that by
marital status of an employee are categorized as a "sex-plus" all accounts inheres in the individual as an intangible and
discrimination where it is imposed on one sex and not on the inalienable right. 38 Hence, while it is true that the parties to a
other. Further, the same should be evenly applied and must contract may establish any agreements, terms, and conditions
not inflict adverse effects on a racial or sexual group which is that they may deem convenient, the same should not be
protected by federal job discrimination laws. Employment contrary to law, morals, good customs, public order, or public
rules that forbid or restrict the employment of married policy. 39 Carried to its logical consequences, it may even be
women, but do not apply to married men, have been held to said that petitioner's policy against legitimate marital bonds
violate Title VII of the United States Civil Rights Act of 1964,
would encourage illicit or common-law relations and subvert
the sacrament of marriage.

Parenthetically, the Civil Code provisions on the contract of

labor state that the relations between the parties, that is, of
capital and labor, are not merely contractual, impressed as
they are with so much public interest that the same should
yield to the common good. 40 It goes on to intone that neither
capital nor labor should visit acts of oppression against the
other, nor impair the interest or convenience of the public. 41 In
the final reckoning, the danger of just such a policy against
marriage followed by petitioner PT & T is that it strikes at the
very essence, ideals and purpose of marriage as an inviolable
social institution and, ultimately, of the family as the
foundation of the nation. 42 That it must be effectively
interdicted here in all its indirect, disguised or dissembled
forms as discriminatory conduct derogatory of the laws of the
land is not only in order but imperatively required.

ON THE FOREGOING PREMISES, the petition of Philippine

Telegraph and Telephone Company is hereby DISMISSED for
lack of merit, with double costs against petitioner.

SO ORDERED.
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and The Employee Code of Conduct of Glaxo similarly provides
PEDRO A. TECSON, petitioners, that an employee is expected to inform management of any
vs. existing or future relationship by consanguinity or affinity
GLAXO WELLCOME PHILIPPINES, INC., Respondent. with co-employees or employees of competing drug
companies. If management perceives a conflict of interest or a
RESOLUTION potential conflict between such relationship and the
employee’s employment with the company, the management
TINGA, J.: and the employee will explore the possibility of a "transfer to
another department in a non-counterchecking position" or
Confronting the Court in this petition is a novel question, with preparation for employment outside the company after six
constitutional overtones, involving the validity of the policy of months.
a pharmaceutical company prohibiting its employees from
marrying employees of any competitor company. Tecson was initially assigned to market Glaxo’s products in
the Camarines Sur-Camarines Norte sales area.
This is a Petition for Review on Certiorari assailing
the Decision1 dated May 19, 2003 and the Resolution dated Subsequently, Tecson entered into a romantic relationship
March 26, 2004 of the Court of Appeals in CA-G.R. SP No. with Bettsy, an employee of Astra Pharmaceuticals3(Astra), a
62434.2 competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in
Albay. She supervised the district managers and medical
Petitioner Pedro A. Tecson (Tecson) was hired by respondent representatives of her company and prepared marketing
Glaxo Wellcome Philippines, Inc. (Glaxo) as medical strategies for Astra in that area.
representative on October 24, 1995, after Tecson had
undergone training and orientation. Even before they got married, Tecson received several
reminders from his District Manager regarding the conflict of
Thereafter, Tecson signed a contract of employment which interest which his relationship with Bettsy might engender.
stipulates, among others, that he agrees to study and abide by Still, love prevailed, and Tecson married Bettsy in September
existing company rules; to disclose to management any 1998.
existing or future relationship by consanguinity or affinity
with co-employees or employees of competing drug In January 1999, Tecson’s superiors informed him that his
companies and should management find that such marriage to Bettsy gave rise to a conflict of interest. Tecson’s
relationship poses a possible conflict of interest, to resign from superiors reminded him that he and Bettsy should decide
the company. which one of them would resign from their jobs, although they
told him that they wanted to retain him as much as possible
because he was performing his job well.
Tecson requested for time to comply with the company policy Because the parties failed to resolve the issue at the grievance
against entering into a relationship with an employee of a machinery level, they submitted the matter for voluntary
competitor company. He explained that Astra, Bettsy’s arbitration. Glaxo offered Tecson a separation pay of one-half
employer, was planning to merge with Zeneca, another drug (½) month pay for every year of service, or a total of ₱50,000.00
company; and Bettsy was planning to avail of the redundancy but he declined the offer. On November 15, 2000, the National
package to be offered by Astra. With Bettsy’s separation from Conciliation and Mediation Board (NCMB) rendered
her company, the potential conflict of interest would be its Decision declaring as valid Glaxo’s policy on relationships
eliminated. At the same time, they would be able to avail of between its employees and persons employed with competitor
the attractive redundancy package from Astra. companies, and affirming Glaxo’s right to transfer Tecson to
another sales territory.
In August 1999, Tecson again requested for more time resolve
the problem. In September 1999, Tecson applied for a transfer Aggrieved, Tecson filed a Petition for Review with the Court of
in Glaxo’s milk division, thinking that since Astra did not have Appeals assailing the NCMB Decision.
a milk division, the potential conflict of interest would be
eliminated. His application was denied in view of Glaxo’s On May 19, 2003, the Court of Appeals promulgated
"least-movement-possible" policy. its Decision denying the Petition for Review on the ground that
the NCMB did not err in rendering its Decision. The appellate
In November 1999, Glaxo transferred Tecson to the Butuan court held that Glaxo’s policy prohibiting its employees from
City-Surigao City-Agusan del Sur sales area. Tecson asked having personal relationships with employees of competitor
Glaxo to reconsider its decision, but his request was denied. companies is a valid exercise of its management prerogatives.4

Tecson sought Glaxo’s reconsideration regarding his transfer Tecson filed a Motion for Reconsideration of the appellate
and brought the matter to Glaxo’s Grievance Committee. court’s Decision, but the motion was denied by the appellate
Glaxo, however, remained firm in its decision and gave Tescon court in its Resolution dated March 26, 2004.5
until February 7, 2000 to comply with the transfer order.
Tecson defied the transfer order and continued acting as Petitioners filed the instant petition, arguing therein that (i) the
medical representative in the Camarines Sur-Camarines Norte Court of Appeals erred in affirming the NCMB’s finding that
sales area. the Glaxo’s policy prohibiting its employees from marrying an
employee of a competitor company is valid; and (ii) the Court
During the pendency of the grievance proceedings, Tecson of Appeals also erred in not finding that Tecson was
was paid his salary, but was not issued samples of products constructively dismissed when he was transferred to a new
which were competing with similar products manufactured by sales territory, and deprived of the opportunity to attend
Astra. He was also not included in product conferences products seminars and training sessions.6
regarding such products.
Petitioners contend that Glaxo’s policy against employees It likewise asserts that the policy does not prohibit
marrying employees of competitor companies violates the marriage per se but only proscribes existing or future
equal protection clause of the Constitution because it creates relationships with employees of competitor companies, and is
invalid distinctions among employees on account only of therefore not violative of the equal protection clause. It
marriage. They claim that the policy restricts the employees’ maintains that considering the nature of its business, the
right to marry.7 prohibition is based on valid grounds.11

They also argue that Tecson was constructively dismissed as According to Glaxo, Tecson’s marriage to Bettsy, an employee
shown by the following circumstances: (1) he was transferred of Astra, posed a real and potential conflict of interest. Astra’s
from the Camarines Sur-Camarines Norte sales area to the products were in direct competition with 67% of the products
Butuan-Surigao-Agusan sales area, (2) he suffered a sold by Glaxo. Hence, Glaxo’s enforcement of the foregoing
diminution in pay, (3) he was excluded from attending policy in Tecson’s case was a valid exercise of its management
seminars and training sessions for medical representatives, prerogatives.12 In any case, Tecson was given several months
and (4) he was prohibited from promoting respondent’s to remedy the situation, and was even encouraged not to
products which were competing with Astra’s products.8 resign but to ask his wife to resign form Astra instead.13

In its Comment on the petition, Glaxo argues that the company Glaxo also points out that Tecson can no longer question the
policy prohibiting its employees from having a relationship assailed company policy because when he signed his contract
with and/or marrying an employee of a competitor company of employment, he was aware that such policy was stipulated
is a valid exercise of its management prerogatives and does therein. In said contract, he also agreed to resign from
not violate the equal protection clause; and that Tecson’s respondent if the management finds that his relationship with
reassignment from the Camarines Norte-Camarines Sur sales an employee of a competitor company would be detrimental
area to the Butuan City-Surigao City and Agusan del Sur sales to the interests of Glaxo.14
area does not amount to constructive dismissal.9
Glaxo likewise insists that Tecson’s reassignment to another
Glaxo insists that as a company engaged in the promotion and sales area and his exclusion from seminars regarding
sale of pharmaceutical products, it has a genuine interest in respondent’s new products did not amount to constructive
ensuring that its employees avoid any activity, relationship or dismissal.
interest that may conflict with their responsibilities to the
company. Thus, it expects its employees to avoid having It claims that in view of Tecson’s refusal to resign, he was
personal or family interests in any competitor company which relocated from the Camarines Sur-Camarines Norte sales area
may influence their actions and decisions and consequently to the Butuan City-Surigao City and Agusan del Sur sales area.
deprive Glaxo of legitimate profits. The policy is also aimed at Glaxo asserts that in effecting the reassignment, it also
preventing a competitor company from gaining access to its considered the welfare of Tecson’s family. Since Tecson’s
secrets, procedures and policies.10 hometown was in Agusan del Sur and his wife traces her roots
to Butuan City, Glaxo assumed that his transfer from the Bicol pose a possible conflict of interest in management
region to the Butuan City sales area would be favorable to him discretion, you agree to resign voluntarily from the
and his family as he would be relocating to a familiar territory Company as a matter of Company policy.
and minimizing his travel expenses.15
…17
In addition, Glaxo avers that Tecson’s exclusion from the
seminar concerning the new anti-asthma drug was due to the The same contract also stipulates that Tescon agrees to abide
fact that said product was in direct competition with a drug by the existing company rules of Glaxo, and to study and
which was soon to be sold by Astra, and hence, would pose a become acquainted with such policies.18 In this regard, the
potential conflict of interest for him. Lastly, the delay in Employee Handbook of Glaxo expressly informs its employees
Tecson’s receipt of his sales paraphernalia was due to the mix- of its rules regarding conflict of interest:
up created by his refusal to transfer to the Butuan City sales
area (his paraphernalia was delivered to his new sales area 1. Conflict of Interest
instead of Naga City because the supplier thought he already
transferred to Butuan).16 Employees should avoid any activity, investment
relationship, or interest that may run counter to the
The Court is tasked to resolve the following issues: (1) responsibilities which they owe Glaxo Wellcome.
Whether the Court of Appeals erred in ruling that Glaxo’s
policy against its employees marrying employees from Specifically, this means that employees are expected:
competitor companies is valid, and in not holding that said
policy violates the equal protection clause of the Constitution; a. To avoid having personal or family interest,
(2) Whether Tecson was constructively dismissed. financial or otherwise, in any competitor
supplier or other businesses which may
The Court finds no merit in the petition. consciously or unconsciously influence their
actions or decisions and thus deprive Glaxo
The stipulation in Tecson’s contract of employment with Glaxo Wellcome of legitimate profit.
being questioned by petitioners provides:
b. To refrain from using their position in Glaxo
… Wellcome or knowledge of Company plans to
advance their outside personal interests, that of
10. You agree to disclose to management any existing their relatives, friends and other businesses.
or future relationship you may have, either by
consanguinity or affinity with co-employees or
employees of competing drug companies. Should it
 c. To avoid outside employment or other The prohibition against personal or marital relationships with
interests for income which would impair their employees of competitor companies upon Glaxo’s employees
effective job performance. is reasonable under the circumstances because relationships of
that nature might compromise the interests of the company. In
d. To consult with Management on such laying down the assailed company policy, Glaxo only aims to
activities or relationships that may lead to protect its interests against the possibility that a competitor
conflict of interest. company will gain access to its secrets and procedures.

1.1. Employee Relationships That Glaxo possesses the right to protect its economic interests
cannot be denied. No less than the Constitution recognizes the
Employees with existing or future relationships either right of enterprises to adopt and enforce such a policy to
by consanguinity or affinity with co-employees of protect its right to reasonable returns on investments and to
competing drug companies are expected to disclose expansion and growth.20 Indeed, while our laws endeavor to
such relationship to the Management. If management give life to the constitutional policy on social justice and the
perceives a conflict or potential conflict of interest, protection of labor, it does not mean that every labor dispute
every effort shall be made, together by management will be decided in favor of the workers. The law also
and the employee, to arrive at a solution within six (6) recognizes that management has rights which are also entitled
months, either by transfer to another department in a to respect and enforcement in the interest of fair play.21
non-counter checking position, or by career
preparation toward outside employment after Glaxo As held in a Georgia, U.S.A case,22 it is a legitimate business
Wellcome. Employees must be prepared for possible practice to guard business confidentiality and protect a
resignation within six (6) months, if no other solution is competitive position by even-handedly disqualifying from
feasible.19 jobs male and female applicants or employees who are
married to a competitor. Consequently, the court ruled than an
No reversible error can be ascribed to the Court of Appeals employer that discharged an employee who was married to an
when it ruled that Glaxo’s policy prohibiting an employee employee of an active competitor did not violate Title VII of
from having a relationship with an employee of a competitor the Civil Rights Act of 1964.23 The Court pointed out that the
company is a valid exercise of management prerogative. policy was applied to men and women equally, and noted that
the employer’s business was highly competitive and that
Glaxo has a right to guard its trade secrets, manufacturing gaining inside information would constitute a competitive
formulas, marketing strategies and other confidential advantage.
programs and information from competitors, especially so that
it and Astra are rival companies in the highly competitive The challenged company policy does not violate the equal
pharmaceutical industry. protection clause of the Constitution as petitioners erroneously
suggest. It is a settled principle that the commands of the
equal protection clause are addressed only to the state or those The Court of Appeals also correctly noted that the assailed
acting under color of its authority.24 Corollarily, it has been company policy which forms part of respondent’s Employee
held in a long array of U.S. Supreme Court decisions that the Code of Conduct and of its contracts with its employees, such
equal protection clause erects no shield against merely private as that signed by Tescon, was made known to him prior to his
conduct, however, discriminatory or wrongful.25 The only employment. Tecson, therefore, was aware of that restriction
exception occurs when the state29 in any of its manifestations when he signed his employment contract and when he entered
or actions has been found to have become entwined or into a relationship with Bettsy. Since Tecson knowingly and
involved in the wrongful private conduct.27 Obviously, voluntarily entered into a contract of employment with Glaxo,
however, the exception is not present in this case. the stipulations therein have the force of law between them
Significantly, the company actually enforced the policy after and, thus, should be complied with in good faith."29 He is
repeated requests to the employee to comply with the policy. therefore estopped from questioning said policy.
Indeed, the application of the policy was made in an impartial
and even-handed manner, with due regard for the lot of the The Court finds no merit in petitioners’ contention that Tescon
employee. was constructively dismissed when he was transferred from
the Camarines Norte-Camarines Sur sales area to the Butuan
In any event, from the wordings of the contractual provision City-Surigao City-Agusan del Sur sales area, and when he was
and the policy in its employee handbook, it is clear that Glaxo excluded from attending the company’s seminar on new
does not impose an absolute prohibition against relationships products which were directly competing with similar products
between its employees and those of competitor companies. Its manufactured by Astra. Constructive dismissal is defined as a
employees are free to cultivate relationships with and marry quitting, an involuntary resignation resorted to when
persons of their own choosing. What the company merely continued employment becomes impossible, unreasonable, or
seeks to avoid is a conflict of interest between the employee unlikely; when there is a demotion in rank or diminution in
and the company that may arise out of such relationships. As pay; or when a clear discrimination, insensibility or disdain by
succinctly explained by the appellate court, thus: an employer becomes unbearable to the employee.30 None of
these conditions are present in the instant case. The record
The policy being questioned is not a policy against does not show that Tescon was demoted or unduly
marriage. An employee of the company remains free to discriminated upon by reason of such transfer. As found by
marry anyone of his or her choosing. The policy is not the appellate court, Glaxo properly exercised its management
aimed at restricting a personal prerogative that belongs prerogative in reassigning Tecson to the Butuan City sales
only to the individual. However, an employee’s area:
personal decision does not detract the employer from
exercising management prerogatives to ensure . . . In this case, petitioner’s transfer to another place of
maximum profit and business success. . .28 assignment was merely in keeping with the policy of
the company in avoidance of conflict of interest, and
thus valid…Note that [Tecson’s] wife holds a sensitive
 supervisory position as Branch Coordinator in her corporation which cannot even assign its
employer-company which requires her to work in close representatives or detail men to new markets calling
coordination with District Managers and Medical for opening or expansion or to areas where the need for
Representatives. Her duties include monitoring sales of pushing its products is great. More so if such
Astra products, conducting sales drives, establishing reassignments are part of the employment contract.33
and furthering relationship with customers, collection,
monitoring and managing Astra’s inventory…she As noted earlier, the challenged policy has been implemented
therefore takes an active participation in the market by Glaxo impartially and disinterestedly for a long period of
war characterized as it is by stiff competition among time. In the case at bar, the record shows that Glaxo gave
pharmaceutical companies. Moreover, and this is Tecson several chances to eliminate the conflict of interest
significant, petitioner’s sales territory covers brought about by his relationship with Bettsy. When their
Camarines Sur and Camarines Norte while his wife is relationship was still in its initial stage, Tecson’s supervisors at
supervising a branch of her employer in Albay. The Glaxo constantly reminded him about its effects on his
proximity of their areas of responsibility, all in the employment with the company and on the company’s
same Bicol Region, renders the conflict of interest not interests. After Tecson married Bettsy, Glaxo gave him time to
only possible, but actual, as learning by one spouse of resolve the conflict by either resigning from the company or
the other’s market strategies in the region would be asking his wife to resign from Astra. Glaxo even expressed its
inevitable. [Management’s] appreciation of a conflict of desire to retain Tecson in its employ because of his satisfactory
interest is therefore not merely illusory and wanting in performance and suggested that he ask Bettsy to resign from
factual basis…31 her company instead. Glaxo likewise acceded to his repeated
requests for more time to resolve the conflict of interest. When
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations the problem could not be resolved after several years of
Commission,32 which involved a complaint filed by a medical waiting, Glaxo was constrained to reassign Tecson to a sales
representative against his employer drug company for illegal area different from that handled by his wife for Astra.
dismissal for allegedly terminating his employment when he Notably, the Court did not terminate Tecson from
refused to accept his reassignment to a new area, the Court employment but only reassigned him to another area where
upheld the right of the drug company to transfer or reassign his home province, Agusan del Sur, was included. In effecting
its employee in accordance with its operational demands and Tecson’s transfer, Glaxo even considered the welfare of
requirements. The ruling of the Court therein, quoted Tecson’s family. Clearly, the foregoing dispels any suspicion
hereunder, also finds application in the instant case: of unfairness and bad faith on the part of Glaxo.34

By the very nature of his employment, a drug salesman WHEREFORE, the Petition is DENIED for lack of merit. Costs
or medical representative is expected to travel. He against petitioners.
should anticipate reassignment according to the
demands of their business. It would be a poor drug SO ORDERED.
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor The pivotal issue in this Petition1 under Rule 45 (then Rule 42)
of the City of ManilaPetitioner, of the Revised Rules on Civil Procedure seeking the reversal of
vs. the Decision2 in Civil Case No. 93-66511 of the Regional Trial
HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, Court (RTC) of Manila, Branch 18 (lower court),3 is the validity
RTC, Manila and MALATE TOURIST DEVELOPMENT of Ordinance No. 7783 (the Ordinance) of the City of Manila.4
CORPORATION, Respondents.
The antecedents are as follows:
DECISION
Private respondent Malate Tourist Development Corporation
TINGA, J.: (MTDC) is a corporation engaged in the business of operating
hotels, motels, hostels and lodging houses.5 It built and opened
I know only that what is moral is what you feel good Victoria Court in Malate which was licensed as a motel
after and what is immoral is what you feel bad after. although duly accredited with the Department of Tourism as a
hotel.6 On 28 June 1993, MTDC filed a Petition for Declaratory
Ernest Hermingway Relief with Prayer for a Writ of Preliminary Injunction and/or
Death in the Afternoon, Ch. 1 Temporary Restraining Order7 (RTC Petition) with the lower
court impleading as defendants, herein petitioners City of
It is a moral and political axiom that any dishonorable Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza,
act, if performed by oneself, is less immoral than if and the members of the City Council of Manila (City
performed by someone else, who would be well- Council). MTDC prayed that the Ordinance, insofar as it
intentioned in his dishonesty. includes motels and inns as among its prohibited
establishments, be declared invalid and unconstitutional.8
J. Christopher Gerald
Bonaparte in Egypt, Ch. I Enacted by the City Council9 on 9 March 1993 and approved
by petitioner City Mayor on 30 March 1993, the
The Court's commitment to the protection of morals is said Ordinance is entitled–
secondary to its fealty to the fundamental law of the land. It is
foremost a guardian of the Constitution but not the conscience AN ORDINANCE PROHIBITING THE
of individuals. And if it need be, the Court will not hesitate to ESTABLISHMENT OR OPERATION OF BUSINESSES
"make the hammer fall, and heavily" in the words of Justice PROVIDING CERTAIN FORMS OF AMUSEMENT,
Laurel, and uphold the constitutional guarantees when faced ENTERTAINMENT, SERVICES AND FACILITIES IN
with laws that, though not lacking in zeal to promote morality, THE ERMITA-MALATE AREA, PRESCRIBING
nevertheless fail to pass the test of constitutionality. PENALTIES FOR VIOLATION THEREOF, AND FOR
OTHER PURPOSES.10
The Ordinance is reproduced in full, hereunder: 10. Dance Halls

SECTION 1. Any provision of existing laws and 11. Motels

ordinances to the contrary notwithstanding, no person,
partnership, corporation or entity shall, in the Ermita- 12. Inns
Malate area bounded by Teodoro M. Kalaw Sr. Street
in the North, Taft Avenue in the East, Vito Cruz Street SEC. 2 The City Mayor, the City Treasurer or any
in the South and Roxas Boulevard in the West, person acting in behalf of the said officials are
pursuant to P.D. 499 be allowed or authorized to prohibited from issuing permits, temporary or
contract and engage in, any business providing otherwise, or from granting licenses and accepting
certain forms of amusement, entertainment, services payments for the operation of business enumerated
and facilities where women are used as tools in in the preceding section.
entertainment and which tend to disturb the
community, annoy the inhabitants, and adversely SEC. 3. Owners and/or operator of
affect the social and moral welfare of the establishments engaged in, or devoted to, the
community, such as but not limited to: businesses enumerated in Section 1 hereof are
hereby given three (3) months from the date of
1. Sauna Parlors approval of this ordinance within which to wind up
business operations or to transfer to any place outside
2. Massage Parlors of the Ermita-Malate area or convert said businesses
to other kinds of business allowable within the
3. Karaoke Bars area, such as but not limited to:

4. Beerhouses 1. Curio or antique shop

5. Night Clubs 2. Souvenir Shops

6. Day Clubs 3. Handicrafts display centers

7. Super Clubs 4. Art galleries

8. Discotheques 5. Records and music shops

9. Cabarets 6. Restaurants
 7. Coffee shops SEC. 5. This ordinance shall take effect upon approval.

8. Flower shops Enacted by the City Council of Manila at its regular

session today, March 9, 1993.
9. Music lounge and sing-along restaurants,
with well-defined activities for wholesome Approved by His Honor, the Mayor on March 30, 1993.
family entertainment that cater to both local (Emphasis supplied)
and foreign clientele.
In the RTC Petition, MTDC argued that
10. Theaters engaged in the exhibition, not only the Ordinance erroneously and improperly included in its
of motion pictures but also of cultural shows, enumeration of prohibited establishments, motels and inns
stage and theatrical plays, art exhibitions, such as MTDC's Victoria Court considering that these were
concerts and the like. not establishments for "amusement" or "entertainment" and
they were not "services or facilities for entertainment," nor did
11. Businesses allowable within the law and they use women as "tools for entertainment," and neither did
medium intensity districts as provided for in they "disturb the community," "annoy the inhabitants" or
the zoning ordinances for Metropolitan Manila, "adversely affect the social and moral welfare of the
except new warehouse or open-storage depot, community."11
dock or yard, motor repair shop, gasoline
service station, light industry with any MTDC further advanced that the Ordinance was invalid and
machinery, or funeral establishments. unconstitutional for the following reasons: (1) The City
Council has no power to prohibit the operation of motels as
SEC. 4. Any person violating any provisions of this Section 458 (a) 4 (iv)12 of the Local Government Code of 1991
ordinance, shall upon conviction, be punished by (the Code) grants to the City Council only the power to
imprisonment of one (1) year or fine of FIVE regulate the establishment, operation and maintenance of
THOUSAND (P5,000.00) PESOS, or both, at the hotels, motels, inns, pension houses, lodging houses and other
discretion of the Court, PROVIDED, that in case of similar establishments; (2) The Ordinance is void as it is
juridical person, the President, the General Manager, or violative of Presidential Decree (P.D.) No. 49913 which
person-in-charge of operation shall be liable thereof; specifically declared portions of the Ermita-Malate area as a
PROVIDED FURTHER, that in case of subsequent commercial zone with certain restrictions; (3)
violation and conviction, the premises of the erring The Ordinance does not constitute a proper exercise of police
establishment shall be closed and padlocked power as the compulsory closure of the motel business has no
permanently. reasonable relation to the legitimate municipal interests sought
to be protected; (4) The Ordinance constitutes an ex post
facto law by punishing the operation of Victoria Court which
was a legitimate business prior to its enactment; (5) ....
The Ordinance violates MTDC's constitutional rights in that: (a)
it is confiscatory and constitutes an invasion of plaintiff's (vii) Regulate the establishment, operation, and
property rights; (b) the City Council has no power to find as a maintenance of any entertainment or
fact that a particular thing is a nuisance per se nor does it have amusement facilities, including theatrical
the power to extrajudicially destroy it; and (6) performances, circuses, billiard pools, public
The Ordinance constitutes a denial of equal protection under dancing schools, public dance halls, sauna
the law as no reasonable basis exists for prohibiting the baths, massage parlors, and other places for
operation of motels and inns, but not pension houses, hotels, entertainment or amusement; regulate such
lodging houses or other similar establishments, and for other events or activities for amusement or
prohibiting said business in the Ermita-Malate area but not entertainment, particularly those which tend to
outside of this area.14 disturb the community or annoy the
inhabitants, or require the suspension or
In their Answer15 dated 23 July 1993, petitioners City of Manila suppression of the same; or, prohibit certain
and Lim maintained that the City Council had the power to forms of amusement or entertainment in order
"prohibit certain forms of entertainment in order to protect the to protect the social and moral welfare of the
social and moral welfare of the community" as provided for in community.
Section 458 (a) 4 (vii) of the Local Government
Code,16 which reads, thus: Citing Kwong Sing v. City of Manila,17 petitioners insisted that
the power of regulation spoken of in the above-quoted
Section 458. Powers, Duties, Functions and provision included the power to control, to govern and to
Compensation. (a) The sangguniang panlungsod, as restrain places of exhibition and amusement.18
the legislative body of the city, shall enact ordinances,
approve resolutions and appropriate funds for the Petitioners likewise asserted that the Ordinance was enacted by
general welfare of the city and its inhabitants pursuant the City Council of Manila to protect the social and moral
to Section 16 of this Code and in the proper exercise of welfare of the community in conjunction with its police power
the corporate powers of the city as provided for under as found in Article III, Section 18(kk) of Republic Act No.
Section 22 of this Code, and shall: 409,19 otherwise known as the Revised Charter of the City of
Manila (Revised Charter of Manila)20 which reads, thus:
....
ARTICLE III
(4) Regulate activities relative to the use of land,
buildings and structures within the city in order to THE MUNICIPAL BOARD
promote the general welfare and for said purpose shall:
 . . . On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr.
(Judge Laguio) issued an ex-parte temporary restraining order
Section 18. Legislative powers. – The Municipal Board against the enforcement of the Ordinance.25 And on 16 July
shall have the following legislative powers: 1993, again in an intrepid gesture, he granted the writ of
preliminary injunction prayed for by MTDC.26
. . .
After trial, on 25 November 1994, Judge Laguio rendered the
(kk) To enact all ordinances it may deem necessary and assailed Decision, enjoining the petitioners from implementing
proper for the sanitation and safety, the furtherance of the Ordinance. The dispositive portion of said Decision reads:27
the prosperity, and the promotion of the morality,
peace, good order, comfort, convenience, and general WHEREFORE, judgment is hereby rendered declaring
welfare of the city and its inhabitants, and such others Ordinance No. 778[3], Series of 1993, of the City of
as may be necessary to carry into effect and discharge Manila null and void, and making permanent the writ
the powers and duties conferred by this chapter; and to of preliminary injunction that had been issued by this
fix penalties for the violation of ordinances which shall Court against the defendant. No costs.
not exceed two hundred pesos fine or six months'
imprisonment, or both such fine and imprisonment, for SO ORDERED.28
a single offense.
Petitioners filed with the lower court a Notice of Appeal29 on 12
Further, the petitioners noted, the Ordinance had the December 1994, manifesting that they are elevating the case to
presumption of validity; hence, private respondent had the this Court under then Rule 42 on pure questions of law.30
burden to prove its illegality or unconstitutionality.21
On 11 January 1995, petitioners filed the present Petition,
Petitioners also maintained that there was no inconsistency alleging that the following errors were committed by the lower
between P.D. 499 and the Ordinance as the latter simply court in its ruling: (1) It erred in concluding that the subject
disauthorized certain forms of businesses and allowed the ordinance is ultra vires, or otherwise, unfair, unreasonable and
Ermita-Malate area to remain a commercial oppressive exercise of police power; (2) It erred in holding that
zone.22 The Ordinance, the petitioners likewise claimed, cannot the questioned Ordinancecontravenes P.D. 49931 which allows
be assailed as ex post facto as it was prospective in operators of all kinds of commercial establishments, except
operation.23 The Ordinance also did not infringe the equal those specified therein; and (3) It erred in declaring
protection clause and cannot be denounced as class legislation the Ordinance void and unconstitutional.32
as there existed substantial and real differences between the
Ermita-Malate area and other places in the City of Manila.24 In the Petition and in its Memorandum,33 petitioners in essence
repeat the assertions they made before the lower court. They
contend that the assailed Ordinance was enacted in the exercise The Court is called upon to shelter these rights from attempts
of the inherent and plenary power of the State and the general at rendering them worthless.
welfare clause exercised by local government units provided
for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and The tests of a valid ordinance are well established. A long line
conjunctively, Section 458 (a) 4 (vii) of the Code.34 They allege of decisions has held that for an ordinance to be valid, it must
that the Ordinance is a valid exercise of police power; it does not only be within the corporate powers of the local
not contravene P.D. 499; and that it enjoys the presumption of government unit to enact and must be passed according to the
validity.35 procedure prescribed by law, it must also conform to the
following substantive requirements: (1) must not contravene
In its Memorandum36 dated 27 May 1996, private respondent the Constitution or any statute; (2) must not be unfair or
maintains that the Ordinance is ultra vires and that it is void for oppressive; (3) must not be partial or discriminatory; (4) must
being repugnant to the general law. It reiterates that the not prohibit but may regulate trade; (5) must be general and
questioned Ordinance is not a valid exercise of police power; consistent with public policy; and (6) must not be
that it is violative of due process, confiscatory and amounts to unreasonable.37
an arbitrary interference with its lawful business; that it is
violative of the equal protection clause; and that it confers on Anent the first criterion, ordinances shall only be valid when
petitioner City Mayor or any officer unregulated discretion in they are not contrary to the Constitution and to the
the execution of the Ordinance absent rules to guide and laws.38 The Ordinance must satisfy two requirements: it must
control his actions. pass muster under the test of constitutionality and the test of
consistency with the prevailing laws. That ordinances should
This is an opportune time to express the Court's deep be constitutional uphold the principle of the supremacy of the
sentiment and tenderness for the Ermita-Malate area being its Constitution. The requirement that the enactment must not
home for several decades. A long-time resident, the Court violate existing law gives stress to the precept that local
witnessed the area's many turn of events. It relished its glory government units are able to legislate only by virtue of their
days and endured its days of infamy. Much as the Court harks derivative legislative power, a delegation of legislative power
back to the resplendent era of the Old Manila and yearns to from the national legislature. The delegate cannot be superior
restore its lost grandeur, it believes that the Ordinance is not to the principal or exercise powers higher than those of the
the fitting means to that end. The Court is of the opinion, and latter.39
so holds, that the lower court did not err in declaring
the Ordinance, as it did, ultra vires and therefore null and void. This relationship between the national legislature and the local
government units has not been enfeebled by the new
The Ordinance is so replete with constitutional infirmities that provisions in the Constitution strengthening the policy of local
almost every sentence thereof violates a constitutional autonomy. The national legislature is still the principal of the
provision. The prohibitions and sanctions therein transgress local government units, which cannot defy its will or modify
the cardinal rights of persons enshrined by the Constitution. or violate it.40
The Ordinance was passed by the City Council in the exercise under the Code.42 The inquiry in this Petition is concerned
of its police power, an enactment of the City Council acting as with the validity of the exercise of such delegated power.
agent of Congress. Local government units, as agencies of the
State, are endowed with police power in order to effectively The Ordinance contravenes
accomplish and carry out the declared objects of their the Constitution
creation.41 This delegated police power is found in Section 16
of the Code, known as the general welfare clause, viz: The police power of the City Council, however broad and far-
reaching, is subordinate to the constitutional limitations
SECTION 16. General Welfare.¾Every local government thereon; and is subject to the limitation that its exercise must
unit shall exercise the powers expressly granted, those be reasonable and for the public good.43 In the case at bar, the
necessarily implied therefrom, as well as powers enactment of the Ordinance was an invalid exercise of
necessary, appropriate, or incidental for its efficient delegated power as it is unconstitutional and repugnant to
and effective governance, and those which are essential general laws.
to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government The relevant constitutional provisions are the following:
units shall ensure and support, among other things, the
preservation and enrichment of culture, promote SEC. 5. The maintenance of peace and order, the
health and safety, enhance the right of the people to a protection of life, liberty, and property, and the
balanced ecology, encourage and support the promotion of the general welfare are essential for the
development of appropriate and self-reliant scientific enjoyment by all the people of the blessings of
and technological capabilities, improve public morals, democracy.44
enhance economic prosperity and social justice,
promote full employment among their residents, SEC. 14. The State recognizes the role of women in
maintain peace and order, and preserve the comfort nation-building, and shall ensure the fundamental
and convenience of their inhabitants. equality before the law of women and men.45

Local government units exercise police power through their SEC. 1. No person shall be deprived of life, liberty or
respective legislative bodies; in this case, the sangguniang property without due process of law, nor shall any
panlungsod or the city council. The Code empowers the person be denied the equal protection of laws.46
legislative bodies to "enact ordinances, approve resolutions
and appropriate funds for the general welfare of the Sec. 9. Private property shall not be taken for public
province/city/municipality and its inhabitants pursuant to use without just compensation.47
Section 16 of the Code and in the proper exercise of the
corporate powers of the province/city/ municipality provided
A. The Ordinance infringes Procedural due process, as the phrase implies, refers to the
the Due Process Clause procedures that the government must follow before it deprives
a person of life, liberty, or property. Classic procedural due
The constitutional safeguard of due process is embodied in the process issues are concerned with what kind of notice and
fiat "(N)o person shall be deprived of life, liberty or property what form of hearing the government must provide when it
without due process of law. . . ."48 takes a particular action.53

There is no controlling and precise definition of due Substantive due process, as that phrase connotes, asks whether
process. It furnishes though a standard to which the government has an adequate reason for taking away a
governmental action should conform in order that deprivation person's life, liberty, or property. In other words, substantive
of life, liberty or property, in each appropriate case, be due process looks to whether there is a sufficient justification
valid. This standard is aptly described as a responsiveness to for the government's action.54 Case law in the United States
the supremacy of reason, obedience to the dictates of (U.S.) tells us that whether there is such a justification depends
justice,49 and as such it is a limitation upon the exercise of the very much on the level of scrutiny used.55 For example, if a law
police power.50 is in an area where only rational basis review is applied,
substantive due process is met so long as the law is rationally
The purpose of the guaranty is to prevent governmental related to a legitimate government purpose. But if it is an area
encroachment against the life, liberty and property of where strict scrutiny is used, such as for protecting
individuals; to secure the individual from the arbitrary fundamental rights, then the government will meet
exercise of the powers of the government, unrestrained by the substantive due process only if it can prove that the law is
established principles of private rights and distributive justice; necessary to achieve a compelling government purpose.56
to protect property from confiscation by legislative
enactments, from seizure, forfeiture, and destruction without a The police power granted to local government units must
trial and conviction by the ordinary mode of judicial always be exercised with utmost observance of the rights of
procedure; and to secure to all persons equal and impartial the people to due process and equal protection of the law.
justice and the benefit of the general law.51 Such power cannot be exercised whimsically, arbitrarily or
despotically57 as its exercise is subject to a qualification,
The guaranty serves as a protection against arbitrary limitation or restriction demanded by the respect and regard
regulation, and private corporations and partnerships are due to the prescription of the fundamental law, particularly
"persons" within the scope of the guaranty insofar as their those forming part of the Bill of Rights. Individual rights, it
property is concerned.52 bears emphasis, may be adversely affected only to the extent
that may fairly be required by the legitimate demands of
This clause has been interpreted as imposing two separate public interest or public welfare.58 Due process requires the
limits on government, usually called "procedural due process" intrinsic validity of the law in interfering with the rights of the
and "substantive due process." person to his life, liberty and property.59
Requisites for the valid exercise entry, presence and exit and thus become the ideal haven for
of Police Power are not met prostitutes and thrill-seekers."64

To successfully invoke the exercise of police power as the The object of the Ordinance was, accordingly, the promotion
rationale for the enactment of the Ordinance, and to free it from and protection of the social and moral values of the
the imputation of constitutional infirmity, not only must it community. Granting for the sake of argument that the
appear that the interests of the public generally, as objectives of the Ordinance are within the scope of the City
distinguished from those of a particular class, require an Council's police powers, the means employed for the
interference with private rights, but the means adopted must accomplishment thereof were unreasonable and unduly
be reasonably necessary for the accomplishment of the oppressive.
purpose and not unduly oppressive upon individuals.60 It
must be evident that no other alternative for the It is undoubtedly one of the fundamental duties of the City of
accomplishment of the purpose less intrusive of private rights Manila to make all reasonable regulations looking to the
can work. A reasonable relation must exist between the promotion of the moral and social values of the community.
purposes of the police measure and the means employed for However, the worthy aim of fostering public morals and the
its accomplishment, for even under the guise of protecting the eradication of the community's social ills can be achieved
public interest, personal rights and those pertaining to private through means less restrictive of private rights; it can be
property will not be permitted to be arbitrarily invaded.61 attained by reasonable restrictions rather than by an absolute
prohibition. The closing down and transfer of businesses or
Lacking a concurrence of these two requisites, the police their conversion into businesses "allowed" under
measure shall be struck down as an arbitrary intrusion into the Ordinance have no reasonable relation to the
private rights62 ¾a violation of the due process clause. accomplishment of its purposes. Otherwise stated, the
prohibition of the enumerated establishments will not per
The Ordinance was enacted to address and arrest the social ills seprotect and promote the social and moral welfare of the
purportedly spawned by the establishments in the Ermita- community; it will not in itself eradicate the alluded social ills
Malate area which are allegedly operated under the deceptive of prostitution, adultery, fornication nor will it arrest the
veneer of legitimate, licensed and tax-paying nightclubs, bars, spread of sexual disease in Manila.
karaoke bars, girlie houses, cocktail lounges, hotels and
motels. Petitioners insist that even the Court in the case Conceding for the nonce that the Ermita-Malate area teems
of Ermita-Malate Hotel and Motel Operators Association, Inc. v. with houses of ill-repute and establishments of the like which
City Mayor of Manila63 had already taken judicial notice of the the City Council may lawfully prohibit,65 it is baseless and
"alarming increase in the rate of prostitution, adultery and insupportable to bring within that classification sauna parlors,
fornication in Manila traceable in great part to existence of massage parlors, karaoke bars, night clubs, day clubs, super
motels, which provide a necessary atmosphere for clandestine clubs, discotheques, cabarets, dance halls, motels and inns.
This is not warranted under the accepted definitions of these
terms. The enumerated establishments are lawful pursuits The Ordinance seeks to legislate morality but fails to address
which are not per se offensive to the moral welfare of the the core issues of morality. Try as the Ordinance may to shape
community. morality, it should not foster the illusion that it can make a
moral man out of it because immorality is not a thing, a
That these are used as arenas to consummate illicit sexual building or establishment; it is in the hearts of men. The City
affairs and as venues to further the illegal prostitution is of no Council instead should regulate human conduct that occurs
moment. We lay stress on the acrid truth that sexual inside the establishments, but not to the detriment of liberty
immorality, being a human frailty, may take place in the most and privacy which are covenants, premiums and blessings of
innocent of places that it may even take place in the substitute democracy.
establishments enumerated under Section 3 of
the Ordinance. If the flawed logic of the Ordinance were to be While petitioners' earnestness at curbing clearly objectionable
followed, in the remote instance that an immoral sexual act social ills is commendable, they unwittingly punish even the
transpires in a church cloister or a court chamber, we would proprietors and operators of "wholesome," "innocent"
behold the spectacle of the City of Manila ordering the closure establishments. In the instant case, there is a clear invasion of
of the church or court concerned. Every house, building, park, personal or property rights, personal in the case of those
curb, street or even vehicles for that matter will not be exempt individuals desirous of owning, operating and patronizing
from the prohibition. Simply because there are no "pure" those motels and property in terms of the investments made
places where there are impure men. Indeed, even the Scripture and the salaries to be paid to those therein employed. If the
and the Tradition of Christians churches continually recall the City of Manila so desires to put an end to prostitution,
presence and universality of sin in man's history.66 fornication and other social ills, it can instead impose
reasonable regulations such as daily inspections of the
The problem, it needs to be pointed out, is not the establishments for any violation of the conditions of their
establishment, which by its nature cannot be said to be licenses or permits; it may exercise its authority to suspend or
injurious to the health or comfort of the community and which revoke their licenses for these violations;67 and it may even
in itself is amoral, but the deplorable human activity that may impose increased license fees. In other words, there are other
occur within its premises. While a motel may be used as a means to reasonably accomplish the desired end.
venue for immoral sexual activity, it cannot for that reason
alone be punished. It cannot be classified as a house of ill- Means employed are
repute or as a nuisance per se on a mere likelihood or a naked constitutionally infirm
assumption. If that were so and if that were allowed, then the
Ermita-Malate area would not only be purged of its supposed The Ordinance disallows the operation of sauna parlors,
social ills, it would be extinguished of its soul as well as every massage parlors, karaoke bars, beerhouses, night clubs, day
human activity, reprehensible or not, in its every nook and clubs, super clubs, discotheques, cabarets, dance halls, motels
cranny would be laid bare to the estimation of the authorities. and inns in the Ermita-Malate area. In Section 3 thereof,
owners and/or operators of the enumerated establishments
are given three (3) months from the date of approval of individual to contract, to engage in any of the common
the Ordinance within which "to wind up business operations or occupations of life, to acquire useful knowledge, to
to transfer to any place outside the Ermita-Malate area or marry, establish a home and bring up children, to
convert said businesses to other kinds of business allowable worship God according to the dictates of his own
within the area." Further, it states in Section 4 that in cases of conscience, and generally to enjoy those privileges long
subsequent violations of the provisions of the Ordinance, the recognized…as essential to the orderly pursuit of
"premises of the erring establishment shall be closed and happiness by free men. In a Constitution for a free
padlocked permanently." people, there can be no doubt that the meaning of
"liberty" must be broad indeed.
It is readily apparent that the means employed by
the Ordinance for the achievement of its purposes, the In another case, it also confirmed that liberty protected by the
governmental interference itself, infringes on the due process clause includes personal decisions relating to
constitutional guarantees of a person's fundamental right to marriage, procreation, contraception, family relationships,
liberty and property. child rearing, and education. In explaining the respect the
Constitution demands for the autonomy of the person in
Liberty as guaranteed by the Constitution was defined by making these choices, the U.S. Supreme Court explained:
Justice Malcolm to include "the right to exist and the right to
be free from arbitrary restraint or servitude. The term cannot These matters, involving the most intimate and
be dwarfed into mere freedom from physical restraint of the personal choices a person may make in a lifetime,
person of the citizen, but is deemed to embrace the right of choices central to personal dignity and autonomy, are
man to enjoy the facilities with which he has been endowed by central to the liberty protected by the Fourteenth
his Creator, subject only to such restraint as are necessary for Amendment. At the heart of liberty is the right to
the common welfare."68 In accordance with this case, the rights define one's own concept of existence, of meaning, of
of the citizen to be free to use his faculties in all lawful ways; universe, and of the mystery of human life. Beliefs
to live and work where he will; to earn his livelihood by any about these matters could not define the attributes of
lawful calling; and to pursue any avocation are all deemed personhood where they formed under compulsion of
embraced in the concept of liberty.69 the State.71

The U.S. Supreme Court in the case of Roth v. Board of Persons desirous to own, operate and patronize the
Regents,70 sought to clarify the meaning of "liberty." It said: enumerated establishments under Section 1 of
the Ordinancemay seek autonomy for these purposes.
While the Court has not attempted to define with
exactness the liberty. . . guaranteed [by the Fifth and Motel patrons who are single and unmarried may invoke this
Fourteenth Amendments], the term denotes not merely right to autonomy to consummate their bonds in intimate
freedom from bodily restraint but also the right of the
sexual conduct within the motel's premises¾be it stressed that others, he ceases to be a master of himself. I cannot
their consensual sexual behavior does not contravene any believe that a man no longer a master of himself is in
fundamental state policy as contained in the any real sense free.
Constitution.72 Adults have a right to choose to forge such
relationships with others in the confines of their own private Indeed, the right to privacy as a constitutional right was
lives and still retain their dignity as free persons. The liberty recognized in Morfe, the invasion of which should be justified
protected by the Constitution allows persons the right to make by a compelling state interest. Morfe accorded recognition to
this choice.73 Their right to liberty under the due process clause the right to privacy independently of its identification with
gives them the full right to engage in their conduct without liberty; in itself it is fully deserving of constitutional
intervention of the government, as long as they do not run protection. Governmental powers should stop short of certain
afoul of the law. Liberty should be the rule and restraint the intrusions into the personal life of the citizen.76
exception.
There is a great temptation to have an extended discussion on
Liberty in the constitutional sense not only means freedom these civil liberties but the Court chooses to exercise restraint
from unlawful government restraint; it must include privacy and restrict itself to the issues presented when it should. The
as well, if it is to be a repository of freedom. The right to be let previous pronouncements of the Court are not to be
alone is the beginning of all freedom¾it is the most interpreted as a license for adults to engage in criminal
comprehensive of rights and the right most valued by civilized conduct. The reprehensibility of such conduct is not
men.74 diminished. The Court only reaffirms and guarantees their
right to make this choice. Should they be prosecuted for their
The concept of liberty compels respect for the individual illegal conduct, they should suffer the consequences of the
whose claim to privacy and interference demands respect. As choice they have made. That, ultimately, is their choice.
the case of Morfe v. Mutuc,75 borrowing the words of Laski, so
very aptly stated: Modality employed is
unlawful taking
Man is one among many, obstinately refusing
reduction to unity. His separateness, his isolation, are In addition, the Ordinance is unreasonable and oppressive as it
indefeasible; indeed, they are so fundamental that they substantially divests the respondent of the beneficial use of its
are the basis on which his civic obligations are built. He property.77 The Ordinance in Section 1 thereof forbids the
cannot abandon the consequences of his isolation, running of the enumerated businesses in the Ermita-Malate
which are, broadly speaking, that his experience is area and in Section 3 instructs its owners/operators to wind
private, and the will built out of that experience up business operations or to transfer outside the area or
personal to himself. If he surrenders his will to others, convert said businesses into allowed businesses. An ordinance
he surrenders himself. If his will is set by the will of which permanently restricts the use of property that it can not
be used for any reasonable purpose goes beyond regulation
and must be recognized as a taking of the property without In Mahon, Justice Holmes recognized that it was "a question of
just compensation.78 It is intrusive and violative of the private degree and therefore cannot be disposed of by general
property rights of individuals. propositions." On many other occasions as well, the U.S.
Supreme Court has said that the issue of when regulation
The Constitution expressly provides in Article III, Section 9, constitutes a taking is a matter of considering the facts in each
that "private property shall not be taken for public use without case. The Court asks whether justice and fairness require that
just compensation." The provision is the most important the economic loss caused by public action must be
protection of property rights in the Constitution. This is a compensated by the government and thus borne by the public
restriction on the general power of the government to take as a whole, or whether the loss should remain concentrated on
property. The constitutional provision is about ensuring that those few persons subject to the public action.83
the government does not confiscate the property of some to
give it to others. In part too, it is about loss spreading. If the What is crucial in judicial consideration of regulatory takings
government takes away a person's property to benefit society, is that government regulation is a taking if it leaves no
then society should pay. The principal purpose of the reasonable economically viable use of property in a manner
guarantee is "to bar the Government from forcing some people that interferes with reasonable expectations for use.84 A
alone to bear public burdens which, in all fairness and justice, regulation that permanently denies all economically beneficial
should be borne by the public as a whole.79 or productive use of land is, from the owner's point of view,
equivalent to a "taking" unless principles of nuisance or
There are two different types of taking that can be identified. property law that existed when the owner acquired the land
A "possessory" taking occurs when the government confiscates make the use prohibitable.85 When the owner of real property
or physically occupies property. A "regulatory" taking occurs has been called upon to sacrifice all economically beneficial
when the government's regulation leaves no reasonable uses in the name of the common good, that is, to leave his
economically viable use of the property.80 property economically idle, he has suffered a taking.86

In the landmark case of Pennsylvania Coal v. Mahon,81 it was A regulation which denies all economically beneficial or
held that a taking also could be found if government productive use of land will require compensation under the
regulation of the use of property went "too far." When takings clause. Where a regulation places limitations on land
regulation reaches a certain magnitude, in most if not in all that fall short of eliminating all economically beneficial use, a
cases there must be an exercise of eminent domain and taking nonetheless may have occurred, depending on a
compensation to support the act. While property may be complex of factors including the regulation's economic effect
regulated to a certain extent, if regulation goes too far it will be on the landowner, the extent to which the regulation interferes
recognized as a taking.82 with reasonable investment-backed expectations and the
character of government action. These inquiries are informed
No formula or rule can be devised to answer the questions of by the purpose of the takings clause which is to prevent the
what is too far and when regulation becomes a taking. government from forcing some people alone to bear public
burdens which, in all fairness and justice, should be borne by The second option instructs the owners to abandon their
the public as a whole.87 property and build another one outside the Ermita-Malate
area. In every sense, it qualifies as a taking without just
A restriction on use of property may also constitute a "taking" compensation with an additional burden imposed on the
if not reasonably necessary to the effectuation of a substantial owner to build another establishment solely from his coffers.
public purpose or if it has an unduly harsh impact on the The proffered solution does not put an end to the "problem," it
distinct investment-backed expectations of the owner.88 merely relocates it. Not only is this impractical, it is
unreasonable, onerous and oppressive. The conversion into
The Ordinance gives the owners and operators of the allowed enterprises is just as ridiculous. How may the
"prohibited" establishments three (3) months from its approval respondent convert a motel into a restaurant or a coffee shop,
within which to "wind up business operations or to transfer to art gallery or music lounge without essentially destroying its
any place outside of the Ermita-Malate area or convert said property? This is a taking of private property without due
businesses to other kinds of business allowable within the process of law, nay, even without compensation.
area." The directive to "wind up business operations" amounts
to a closure of the establishment, a permanent deprivation of The penalty of closure likewise constitutes unlawful taking
property, and is practically confiscatory. Unless the owner that should be compensated by the government. The burden
converts his establishment to accommodate an "allowed" on the owner to convert or transfer his business, otherwise it
business, the structure which housed the previous business will be closed permanently after a subsequent violation should
will be left empty and gathering dust. Suppose he transfers it be borne by the public as this end benefits them as a whole.
to another area, he will likewise leave the entire establishment
idle. Consideration must be given to the substantial amount of Petitioners cannot take refuge in classifying the measure as a
money invested to build the edifices which the owner zoning ordinance. A zoning ordinance, although a valid
reasonably expects to be returned within a period of time. It is exercise of police power, which limits a "wholesome" property
apparent that the Ordinance leaves no reasonable economically to a use which can not reasonably be made of it constitutes the
viable use of property in a manner that interferes with taking of such property without just compensation. Private
reasonable expectations for use. property which is not noxious nor intended for noxious
purposes may not, by zoning, be destroyed without
The second and third options¾ to transfer to any place compensation. Such principle finds no support in the
outside of the Ermita-Malate area or to convert into allowed principles of justice as we know them. The police powers of
businesses¾are confiscatory as well. The penalty of local government units which have always received broad and
permanent closure in cases of subsequent violations found in liberal interpretation cannot be stretched to cover this
Section 4 of the Ordinance is also equivalent to a "taking" of particular taking.
private property.
Distinction should be made between destruction from
necessity and eminent domain. It needs restating that the
property taken in the exercise of police power is destroyed on any sidewalk and there conduct themselves in a manner
because it is noxious or intended for a noxious purpose while annoying to persons passing by." The ordinance was nullified
the property taken under the power of eminent domain is as it imposed no standard at all "because one may never know
intended for a public use or purpose and is therefore in advance what 'annoys some people but does not annoy
"wholesome."89 If it be of public benefit that a "wholesome" others.' "
property remain unused or relegated to a particular purpose,
then certainly the public should bear the cost of reasonable Similarly, the Ordinance does not specify the standards to
compensation for the condemnation of private property for ascertain which establishments "tend to disturb the
public use.90 community," "annoy the inhabitants," and "adversely affect the
social and moral welfare of the community." The cited case
Further, the Ordinance fails to set up any standard to guide or supports the nullification of the Ordinance for lack of
limit the petitioners' actions. It in no way controls or guides comprehensible standards to guide the law enforcers in
the discretion vested in them. It provides no definition of the carrying out its provisions.
establishments covered by it and it fails to set forth the
conditions when the establishments come within its ambit of Petitioners cannot therefore order the closure of the
prohibition. The Ordinance confers upon the mayor arbitrary enumerated establishments without infringing the due process
and unrestricted power to close down establishments. clause. These lawful establishments may be regulated, but not
Ordinances such as this, which make possible abuses in its prevented from carrying on their business. This is a sweeping
execution, depending upon no conditions or qualifications exercise of police power that is a result of a lack of imagination
whatsoever other than the unregulated arbitrary will of the on the part of the City Council and which amounts to an
city authorities as the touchstone by which its validity is to be interference into personal and private rights which the Court
tested, are unreasonable and invalid. The Ordinance should will not countenance. In this regard, we take a resolute stand
have established a rule by which its impartial enforcement to uphold the constitutional guarantee of the right to liberty
could be secured.91 and property.

Ordinances placing restrictions upon the lawful use of Worthy of note is an example derived from the U.S. of a
property must, in order to be valid and constitutional, specify reasonable regulation which is a far cry from the ill-
the rules and conditions to be observed and conduct to avoid; considered Ordinance enacted by the City Council.
and must not admit of the exercise, or of an opportunity for
the exercise, of unbridled discretion by the law enforcers in In FW/PBS, INC. v. Dallas,95 the city of Dallas adopted a
carrying out its provisions.92 comprehensive ordinance regulating "sexually oriented
businesses," which are defined to include adult arcades,
Thus, in Coates v. City of Cincinnati,93 as cited in People v. bookstores, video stores, cabarets, motels, and theaters as well
Nazario,94 the U.S. Supreme Court struck down an ordinance as escort agencies, nude model studio and sexual encounter
that had made it illegal for "three or more persons to assemble centers. Among other things, the ordinance required that such
businesses be licensed. A group of motel owners were among case however is not a regulatory measure but is an exercise of
the three groups of businesses that filed separate suits an assumed power to prohibit.97
challenging the ordinance. The motel owners asserted that the
city violated the due process clause by failing to produce The foregoing premises show that the Ordinance is an
adequate support for its supposition that renting room for unwarranted and unlawful curtailment of property and
fewer than ten (10) hours resulted in increased crime and other personal rights of citizens. For being unreasonable and an
secondary effects. They likewise argued than the ten (10)-hour undue restraint of trade, it cannot, even under the guise of
limitation on the rental of motel rooms placed an exercising police power, be upheld as valid.
unconstitutional burden on the right to freedom of association.
Anent the first contention, the U.S. Supreme Court held that B. The Ordinance violates Equal
the reasonableness of the legislative judgment combined with Protection Clause
a study which the city considered, was adequate to support
the city's determination that motels permitting room rentals Equal protection requires that all persons or things similarly
for fewer than ten (10 ) hours should be included within the situated should be treated alike, both as to rights conferred
licensing scheme. As regards the second point, the Court held and responsibilities imposed. Similar subjects, in other words,
that limiting motel room rentals to ten (10) hours will have no should not be treated differently, so as to give undue favor to
discernible effect on personal bonds as those bonds that are some and unjustly discriminate against others.98 The guarantee
formed from the use of a motel room for fewer than ten (10) means that no person or class of persons shall be denied the
hours are not those that have played a critical role in the same protection of laws which is enjoyed by other persons or
culture and traditions of the nation by cultivating and other classes in like circumstances.99 The "equal protection of
transmitting shared ideals and beliefs. the laws is a pledge of the protection of equal laws."100 It limits
governmental discrimination. The equal protection clause
The ordinance challenged in the above-cited case merely extends to artificial persons but only insofar as their property
regulated the targeted businesses. It imposed reasonable is concerned.101
restrictions; hence, its validity was upheld.
The Court has explained the scope of the equal protection
The case of Ermita Malate Hotel and Motel Operators Association, clause in this wise:
Inc. v. City Mayor of Manila,96 it needs pointing out, is also
different from this case in that what was involved therein was … What does it signify? To quote from J.M. Tuason &
a measure which regulated the mode in which motels may Co. v. Land Tenure Administration: "The ideal
conduct business in order to put an end to practices which situation is for the law's benefits to be available to all,
could encourage vice and immorality. Necessarily, there was that none be placed outside the sphere of its coverage.
no valid objection on due process or equal protection grounds Only thus could chance and favor be excluded and the
as the ordinance did not prohibit motels. The Ordinance in this affairs of men governed by that serene and impartial
uniformity, which is of the very essence of the idea of
 law." There is recognition, however, in the opinion that as an indispensable requisite, not be arbitrary. To be valid, it
what in fact exists "cannot approximate the ideal. Nor must conform to the following requirements:
is the law susceptible to the reproach that it does not
take into account the realities of the situation. The 1) It must be based on substantial distinctions.
constitutional guarantee then is not to be given a
meaning that disregards what is, what does in fact 2) It must be germane to the purposes of the law.
exist. To assure that the general welfare be promoted,
which is the end of law, a regulatory measure may cut 3) It must not be limited to existing conditions only.
into the rights to liberty and property. Those adversely
affected may under such circumstances invoke the 4) It must apply equally to all members of the class.104
equal protection clause only if they can show that the
governmental act assailed, far from being inspired by In the Court's view, there are no substantial distinctions
the attainment of the common weal was prompted by between motels, inns, pension houses, hotels, lodging houses
the spirit of hostility, or at the very least, or other similar establishments. By definition, all are
discrimination that finds no support in reason." commercial establishments providing lodging and usually
Classification is thus not ruled out, it being sufficient to meals and other services for the public. No reason exists for
quote from the Tuason decision anew "that the laws prohibiting motels and inns but not pension houses, hotels,
operate equally and uniformly on all persons under lodging houses or other similar establishments. The
similar circumstances or that all persons must be classification in the instant case is invalid as similar subjects
treated in the same manner, the conditions not being are not similarly treated, both as to rights conferred and
different, both in the privileges conferred and the obligations imposed. It is arbitrary as it does not rest on
liabilities imposed. Favoritism and undue preference substantial distinctions bearing a just and fair relation to the
cannot be allowed. For the principle is that equal purpose of the Ordinance.
protection and security shall be given to every person
under circumstances which, if not identical, are The Court likewise cannot see the logic for prohibiting the
analogous. If law be looked upon in terms of burden or business and operation of motels in the Ermita-Malate area but
charges, those that fall within a class should be treated not outside of this area. A noxious establishment does not
in the same fashion, whatever restrictions cast on some become any less noxious if located outside the area.
in the group equally binding on the rest.102
The standard "where women are used as tools for
Legislative bodies are allowed to classify the subjects of entertainment" is also discriminatory as prostitution¾one of
legislation. If the classification is reasonable, the law may
the hinted ills the Ordinance aims to banish¾is not a
operate only on some and not all of the people without
profession exclusive to women. Both men and women have an
violating the equal protection clause.103 The classification must,
equal propensity to engage in prostitution. It is not any less
grave a sin when men engage in it. And why would the (4) Regulate activities relative to the use of land,
assumption that there is an ongoing immoral activity apply buildings and structures within the city in order to
only when women are employed and be inapposite when men promote the general welfare and for said purpose shall:
are in harness? This discrimination based on gender violates
equal protection as it is not substantially related to important . . .
government objectives.105 Thus, the discrimination is invalid.
(iv) Regulate the establishment, operation and
Failing the test of constitutionality, the Ordinance likewise maintenance of cafes, restaurants, beerhouses, hotels,
failed to pass the test of consistency with prevailing laws. motels, inns, pension houses, lodging houses, and
other similar establishments, including tourist guides
C. The Ordinance is repugnant and transports . . . .
to general laws; it is ultra vires
While its power to regulate the establishment, operation and
The Ordinance is in contravention of the Code as the latter maintenance of any entertainment or amusement facilities,
merely empowers local government units to regulate, and not and to prohibit certain forms of amusement or entertainment
prohibit, the establishments enumerated in Section 1 thereof. is provided under Section 458 (a) 4 (vii) of the Code, which
reads as follows:
The power of the City Council to regulate by ordinances the
establishment, operation, and maintenance of motels, hotels Section 458. Powers, Duties, Functions and
and other similar establishments is found in Section 458 (a) 4 Compensation. (a) The sangguniang panlungsod, as
(iv), which provides that: the legislative body of the city, shall enact ordinances,
approve resolutions and appropriate funds for the
Section 458. Powers, Duties, Functions and general welfare of the city and its inhabitants pursuant
Compensation. (a) The sangguniang panlungsod, as to Section 16 of this Code and in the proper exercise of
the legislative body of the city, shall enact ordinances, the corporate powers of the city as provided for under
approve resolutions and appropriate funds for the Section 22 of this Code, and shall:
general welfare of the city and its inhabitants pursuant
to Section 16 of this Code and in the proper exercise of . . .
the corporate powers of the city as provided for under
Section 22 of this Code, and shall: (4) Regulate activities relative to the use of land,
buildings and structures within the city in order to
. . . promote the general welfare and for said purpose shall:

. . .
 (vii) Regulate the establishment, operation, and And in People v. Esguerra,108 wherein the Court nullified an
maintenance of any entertainment or ordinance of the Municipality of Tacloban which prohibited
amusement facilities, including theatrical the selling, giving and dispensing of liquor ratiocinating that
performances, circuses, billiard pools, public the municipality is empowered only to regulate the same and
dancing schools, public dance halls, sauna not prohibit. The Court therein declared that:
baths, massage parlors, and other places for
entertainment or amusement; regulate such (A)s a general rule when a municipal corporation is
other events or activities for amusement or specifically given authority or power to regulate or to
entertainment, particularly those which tend to license and regulate the liquor traffic, power to prohibit
disturb the community or annoy the is impliedly withheld.109
inhabitants, or require the suspension or
suppression of the same; or, prohibit certain These doctrines still hold contrary to petitioners'
forms of amusement or entertainment in order assertion110 that they were modified by the Code vesting upon
to protect the social and moral welfare of the City Councils prohibitory powers.
community.
Similarly, the City Council exercises regulatory powers over
Clearly, with respect to cafes, restaurants, beerhouses, hotels, public dancing schools, public dance halls, sauna baths,
motels, inns, pension houses, lodging houses, and other massage parlors, and other places for entertainment or
similar establishments, the only power of the City Council to amusement as found in the first clause of Section 458 (a) 4 (vii).
legislate relative thereto is to regulate them to promote the Its powers to regulate, suppress and suspend "such other
general welfare. The Code still withholds from cities the events or activities for amusement or entertainment,
power to suppress and prohibit altogether the establishment, particularly those which tend to disturb the community or
operation and maintenance of such establishments. It is well to annoy the inhabitants" and to "prohibit certain forms of
recall the rulings of the Court in Kwong Sing v. City of amusement or entertainment in order to protect the social and
Manila106 that: moral welfare of the community" are stated in the second and
third clauses, respectively of the same Section. The several
The word "regulate," as used in subsection (l), section powers of the City Council as provided in Section 458 (a) 4
2444 of the Administrative Code, means and includes (vii) of the Code, it is pertinent to emphasize, are separated by
the power to control, to govern, and to restrain; but semi-colons (;), the use of which indicates that the clauses in
"regulate" should not be construed as synonymous which these powers are set forth are independent of each other
with "suppress" or "prohibit." Consequently, under the albeit closely related to justify being put together in a single
power to regulate laundries, the municipal authorities enumeration or paragraph.111 These powers, therefore, should
could make proper police regulations as to the mode in not be confused, commingled or consolidated as to create a
which the employment or business shall be conglomerated and unified power of regulation, suppression
exercised.107 and prohibition.112
The Congress unequivocably specified the establishments and The powers conferred upon a municipal council in the
forms of amusement or entertainment subject to regulation general welfare clause, or section 2238 of the Revised
among which are beerhouses, hotels, motels, inns, pension Administrative Code, refers to matters not covered by
houses, lodging houses, and other similar establishments the other provisions of the same Code, and therefore it
(Section 458 (a) 4 (iv)), public dancing schools, public dance can not be applied to intoxicating liquors, for the
halls, sauna baths, massage parlors, and other places for power to regulate the selling, giving away and
entertainment or amusement (Section 458 (a) 4 (vii)). This dispensing thereof is granted specifically by section
enumeration therefore cannot be included as among "other 2242 (g) to municipal councils. To hold that, under the
events or activities for amusement or entertainment, general power granted by section 2238, a municipal
particularly those which tend to disturb the community or council may enact the ordinance in question,
annoy the inhabitants" or "certain forms of amusement or notwithstanding the provision of section 2242 (g),
entertainment" which the City Council may suspend, suppress would be to make the latter superfluous and nugatory,
or prohibit. because the power to prohibit, includes the power to
regulate, the selling, giving away and dispensing of
The rule is that the City Council has only such powers as are intoxicating liquors.
expressly granted to it and those which are necessarily implied
or incidental to the exercise thereof. By reason of its limited On the second point, it suffices to say that the Code being a
powers and the nature thereof, said powers are to be later expression of the legislative will must necessarily prevail
construed strictissimi juris and any doubt or ambiguity arising and override the earlier law, the Revised Charter of
out of the terms used in granting said powers must be Manila. Legis posteriores priores contrarias abrogant, or later
construed against the City Council.113 Moreover, it is a general statute repeals prior ones which are repugnant thereto. As
rule in statutory construction that the express mention of one between two laws on the same subject matter, which are
person, thing, or consequence is tantamount to an express irreconcilably inconsistent, that which is passed later prevails,
exclusion of all others. Expressio unius est exclusio alterium. This since it is the latest expression of legislative will.116 If there is
maxim is based upon the rules of logic and the natural an inconsistency or repugnance between two statutes, both
workings of human mind. It is particularly applicable in the relating to the same subject matter, which cannot be removed
construction of such statutes as create new rights or remedies, by any fair and reasonable method of interpretation, it is the
impose penalties or punishments, or otherwise come under latest expression of the legislative will which must prevail and
the rule of strict construction.114 override the earlier.117

The argument that the City Council is empowered to enact Implied repeals are those which take place when a
the Ordinance by virtue of the general welfare clause of the subsequently enacted law contains provisions contrary to
Code and of Art. 3, Sec. 18 (kk) of the Revised Charter of those of an existing law but no provisions expressly repealing
Manila is likewise without merit. On the first point, the ruling them. Such repeals have been divided into two general classes:
of the Court in People v. Esguerra,115 is instructive. It held that: those which occur where an act is so inconsistent or
irreconcilable with an existing prior act that only one of the Section 458. Powers, Duties, Functions and
two can remain in force and those which occur when an act Compensation. (a) The sangguniang panlungsod, as
covers the whole subject of an earlier act and is intended to be the legislative body of the city, shall enact ordinances,
a substitute therefor. The validity of such a repeal is sustained approve resolutions and appropriate funds for the
on the ground that the latest expression of the legislative will general welfare of the city and its inhabitants pursuant
should prevail.118 to Section 16 of this Code and in the proper exercise of
the corporate powers of the city as provided for under
In addition, Section 534(f) of the Code states that "All general Section 22 of this Code, and shall:
and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts (1) Approve ordinances and pass resolutions necessary
thereof which are inconsistent with any of the provisions of for an efficient and effective city government, and in
this Code are hereby repealed or modified accordingly." Thus, this connection, shall:
submitting to petitioners' interpretation that the Revised
Charter of Manila empowers the City Council to prohibit . . .
motels, that portion of the Charter stating such must be
considered repealed by the Code as it is at variance with the (v) Enact ordinances intended to prevent, suppress and
latter's provisions granting the City Council mere regulatory impose appropriate penalties for habitual drunkenness
powers. in public places, vagrancy, mendicancy, prostitution,
establishment and maintenance of houses of ill
It is well to point out that petitioners also cannot seek cover repute, gambling and other prohibited games of
under the general welfare clause authorizing the abatement of chance, fraudulent devices and ways to obtain money
nuisances without judicial proceedings. That tenet applies to a or property, drug addiction, maintenance of drug dens,
nuisance per se, or one which affects the immediate safety of drug pushing, juvenile delinquency, the printing,
persons and property and may be summarily abated under the distribution or exhibition of obscene or pornographic
undefined law of necessity. It can not be said that motels are materials or publications, and such other activities
injurious to the rights of property, health or comfort of the inimical to the welfare and morals of the inhabitants of
community. It is a legitimate business. If it be a nuisance per the city;
accidens it may be so proven in a hearing conducted for that
purpose. A motel is not per se a nuisance warranting its . . .
summary abatement without judicial intervention.119
If it were the intention of Congress to confer upon the City
Notably, the City Council was conferred powers to prevent Council the power to prohibit the establishments enumerated
and prohibit certain activities and establishments in another in Section 1 of the Ordinance, it would have so declared in
section of the Code which is reproduced as follows: uncertain terms by adding them to the list of the matters it
may prohibit under the above-quoted Section.
The Ordinance now vainly attempts to lump these by MTDC, the statute had already converted the residential
establishments with houses of ill-repute and expand the City Ermita-Malate area into a commercial area. The decree
Council's powers in the second and third clauses of Section allowed the establishment and operation of all kinds of
458 (a) 4 (vii) of the Code in an effort to overreach its commercial establishments except warehouse or open storage
prohibitory powers. It is evident that these establishments depot, dump or yard, motor repair shop, gasoline service
may only be regulated in their establishment, operation and station, light industry with any machinery or funeral
maintenance. establishment. The rule is that for an ordinance to be valid and
to have force and effect, it must not only be within the powers
It is important to distinguish the punishable activities from the of the council to enact but the same must not be in conflict
establishments themselves. That these establishments are with or repugnant to the general law.121 As succinctly
recognized legitimate enterprises can be gleaned from another illustrated in Solicitor General v. Metropolitan Manila
Section of the Code. Section 131 under the Title on Local Authority:122
Government Taxation expressly mentioned proprietors or
operators of massage clinics, sauna, Turkish and Swedish The requirement that the enactment must not violate
baths, hotels, motels and lodging houses as among the existing law explains itself. Local political subdivisions
"contractors" defined in paragraph (h) thereof. The same are able to legislate only by virtue of a valid delegation
Section also defined "amusement" as a "pleasurable diversion of legislative power from the national legislature
and entertainment," "synonymous to relaxation, avocation, (except only that the power to create their own sources
pastime or fun;" and "amusement places" to include "theaters, of revenue and to levy taxes is conferred by the
cinemas, concert halls, circuses and other places of amusement Constitution itself). They are mere agents vested with
where one seeks admission to entertain oneself by seeing or what is called the power of subordinate legislation. As
viewing the show or performances." Thus, it can be inferred delegates of the Congress, the local government units
that the Code considers these establishments as legitimate cannot contravene but must obey at all times the will of
enterprises and activities. It is well to recall the maxim their principal. In the case before us, the enactment in
reddendo singula singulis which means that words in different question, which are merely local in origin cannot
parts of a statute must be referred to their appropriate prevail against the decree, which has the force and
connection, giving to each in its place, its proper force and effect of a statute.123
effect, and, if possible, rendering none of them useless or
superfluous, even if strict grammatical construction demands Petitioners contend that the Ordinance enjoys the presumption
otherwise. Likewise, where words under consideration appear of validity. While this may be the rule, it has already been held
in different sections or are widely dispersed throughout an act that although the presumption is always in favor of the
the same principle applies.120 validity or reasonableness of the ordinance, such presumption
must nevertheless be set aside when the invalidity or
Not only does the Ordinance contravene the Code, it likewise unreasonableness appears on the face of the ordinance itself or
runs counter to the provisions of P.D. 499. As correctly argued is established by proper evidence. The exercise of police power
by the local government is valid unless it contravenes the SO ORDERED.
fundamental law of the land, or an act of the legislature, or
unless it is against public policy or is unreasonable,
oppressive, partial, discriminating or in derogation of a
common right.124

Conclusion

All considered, the Ordinance invades fundamental personal

and property rights and impairs personal privileges. It is
constitutionally infirm. The Ordinance contravenes statutes; it
is discriminatory and unreasonable in its operation; it is not
sufficiently detailed and explicit that abuses may attend the
enforcement of its sanctions. And not to be forgotten, the City
Council under the Code had no power to enact
the Ordinance and is therefore ultra vires, null and void.

Concededly, the challenged Ordinance was enacted with the

best of motives and shares the concern of the public for the
cleansing of the Ermita-Malate area of its social sins. Police
power legislation of such character deserves the full
endorsement of the judiciary ¾we reiterate our support for it.
But inspite of its virtuous aims, the enactment of
the Ordinance has no statutory or constitutional authority to
stand on. Local legislative bodies, in this case, the City
Council, cannot prohibit the operation of the enumerated
establishments under Section 1 thereof or order their transfer
or conversion without infringing the constitutional guarantees
of due process and equal protection of laws ¾not even under
the guise of police power.

WHEREFORE, the Petition is hereby DENIED and the decision

of the Regional Trial Court declaring the Ordinancevoid is
AFFIRMED. Costs against petitioners.
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & Simbol was employed by the company on October 27, 1993.
SEBASTIAN CHUA, Petitioners, He met Alma Dayrit, also an employee of the company, whom
vs. he married on June 27, 1998. Prior to the marriage, Ongsitco
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA advised the couple that should they decide to get married, one
E. ESTRELLA, Respondents. of them should resign pursuant to a company policy
promulgated in 1995,2 viz.:
DECISION
1. New applicants will not be allowed to be hired if in
PUNO, J.: case he/she has [a] relative, up to [the] 3rd degree of
relationship, already employed by the company.
We are called to decide an issue of first impression: whether
the policy of the employer banning spouses from working in 2. In case of two of our employees (both singles [sic],
the same company violates the rights of the employee under one male and another female) developed a friendly
the Constitution and the Labor Code or is a valid exercise of relationship during the course of their employment
management prerogative. and then decided to get married, one of them should
resign to preserve the policy stated above.3
At bar is a Petition for Review on Certiorari of the Decision of
the Court of Appeals dated August 3, 2004 in CA-G.R. SP No. Simbol resigned on June 20, 1998 pursuant to the company
73477 reversing the decision of the National Labor Relations policy.4
Commission (NLRC) which affirmed the ruling of the Labor
Arbiter. Comia was hired by the company on February 5, 1997. She met
Howard Comia, a co-employee, whom she married on June 1,
Petitioner Star Paper Corporation (the company) is a 2000. Ongsitco likewise reminded them that pursuant to
corporation engaged in trading – principally of paper company policy, one must resign should they decide to get
products. Josephine Ongsitco is its Manager of the Personnel married. Comia resigned on June 30, 2000.5
and Administration Department while Sebastian Chua is its
Managing Director. Estrella was hired on July 29, 1994. She met Luisito Zuñiga
(Zuñiga), also a co-worker. Petitioners stated that Zuñiga, a
The evidence for the petitioners show that respondents married man, got Estrella pregnant. The company allegedly
Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and could have terminated her services due to immorality but she
Lorna E. Estrella (Estrella) were all regular employees of the opted to resign on December 21, 1999.6
company.1
The respondents each signed a Release and Confirmation
Agreement. They stated therein that they have no money and
property accountabilities in the company and that they release On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario
the latter of any claim or demand of whatever nature.7 dismissed the complaint for lack of merit, viz.:

Respondents offer a different version of their dismissal. [T]his company policy was decreed pursuant to what the
Simbol and Comia allege that they did not resign voluntarily; respondent corporation perceived as management
they were compelled to resign in view of an illegal company prerogative. This management prerogative is quite broad and
policy. As to respondent Estrella, she alleges that she had a encompassing for it covers hiring, work assignment, working
relationship with co-worker Zuñiga who misrepresented method, time, place and manner of work, tools to be used,
himself as a married but separated man. After he got her processes to be followed, supervision of workers, working
pregnant, she discovered that he was not separated. Thus, she regulations, transfer of employees, work supervision, lay-off
severed her relationship with him to avoid dismissal due to of workers and the discipline, dismissal and recall of workers.
the company policy. On November 30, 1999, she met an Except as provided for or limited by special law, an employer
accident and was advised by the doctor at the Orthopedic is free to regulate, according to his own discretion and
Hospital to recuperate for twenty-one (21) days. She returned judgment all the aspects of employment.9 (Citations omitted.)
to work on December 21, 1999 but she found out that her name
was on-hold at the gate. She was denied entry. She was On appeal to the NLRC, the Commission affirmed the decision
directed to proceed to the personnel office where one of the of the Labor Arbiter on January 11, 2002. 10
staff handed her a memorandum. The memorandum stated
that she was being dismissed for immoral conduct. She Respondents filed a Motion for Reconsideration but was
refused to sign the memorandum because she was on leave for denied by the NLRC in a Resolution11 dated August 8, 2002.
twenty-one (21) days and has not been given a chance to They appealed to respondent court via Petition for Certiorari.
explain. The management asked her to write an explanation.
However, after submission of the explanation, she was In its assailed Decision dated August 3, 2004, the Court of
nonetheless dismissed by the company. Due to her urgent Appeals reversed the NLRC decision, viz.:
need for money, she later submitted a letter of resignation in
exchange for her thirteenth month pay.8 WHEREFORE, premises considered, the May 31, 2002
(sic)12 Decision of the National Labor Relations Commission is
Respondents later filed a complaint for unfair labor practice, hereby REVERSED and SET ASIDE and a new one is entered
constructive dismissal, separation pay and attorney’s fees. as follows:
They averred that the aforementioned company policy is
illegal and contravenes Article 136 of the Labor Code. They (1) Declaring illegal, the petitioners’ dismissal from
also contended that they were dismissed due to their union employment and ordering private respondents to
membership. reinstate petitioners to their former positions without
 loss of seniority rights with full backwages from the It shall guarantee the rights of all workers to self-organization,
time of their dismissal until actual reinstatement; and collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law.
(2) Ordering private respondents to pay petitioners They shall be entitled to security of tenure, humane conditions
attorney’s fees amounting to 10% of the award and the of work, and a living wage. They shall also participate in
cost of this suit.13 policy and decision-making processes affecting their rights
and benefits as may be provided by law.
On appeal to this Court, petitioners contend that the Court of
Appeals erred in holding that: The State shall promote the principle of shared responsibility
between workers and employers, recognizing the right of
1. x x x the subject 1995 policy/regulation is violative labor to its just share in the fruits of production and the right
of the constitutional rights towards marriage and the of enterprises to reasonable returns on investments, and to
family of employees and of Article 136 of the Labor expansion and growth.
Code; and
The Civil Code likewise protects labor with the following
2. x x x respondents’ resignations were far from provisions:
voluntary.14
Art. 1700. The relation between capital and labor are not
We affirm. merely contractual. They are so impressed with public interest
that labor contracts must yield to the common good.
The 1987 Constitution15 states our policy towards the Therefore, such contracts are subject to the special laws on
protection of labor under the following provisions, viz.: labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and
Article II, Section 18. The State affirms labor as a primary similar subjects.
social economic force. It shall protect the rights of workers and
promote their welfare. Art. 1702. In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent
xxx living for the laborer.

Article XIII, Sec. 3. The State shall afford full protection to The Labor Code is the most comprehensive piece of legislation
labor, local and overseas, organized and unorganized, and protecting labor. The case at bar involves Article 136 of the
promote full employment and equality of employment Labor Code which provides:
opportunities for all.
Art. 136. It shall be unlawful for an employer to require as a spouses from working in the same company (no-spouse
condition of employment or continuation of employment that employment policies), and those banning all immediate
a woman employee shall not get married, or to stipulate family members, including spouses, from working in the same
expressly or tacitly that upon getting married a woman company (anti-nepotism employment policies).18
employee shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or otherwise Unlike in our jurisdiction where there is no express
prejudice a woman employee merely by reason of her prohibition on marital discrimination,19 there are twenty state
marriage. statutes20 in the United States prohibiting marital
discrimination. Some state courts21 have been confronted with
Respondents submit that their dismissal violates the above the issue of whether no-spouse policies violate their laws
provision. Petitioners allege that its policy "may appear to be prohibiting both marital status and sex discrimination.
contrary to Article 136 of the Labor Code" but it assumes a
new meaning if read together with the first paragraph of the In challenging the anti-nepotism employment policies in the
rule. The rule does not require the woman employee to resign. United States, complainants utilize two theories of
The employee spouses have the right to choose who between employment discrimination: the disparate treatment and
them should resign. Further, they are free to marry persons the disparate impact. Under the disparate treatment analysis,
other than co-employees. Hence, it is not the marital status of the plaintiff must prove that an employment policy is
the employee, per se, that is being discriminated. It is only discriminatory on its face. No-spouse employment policies
intended to carry out its no-employment-for-relatives-within- requiring an employee of a particular sex to either quit,
the-third-degree-policy which is within the ambit of the transfer, or be fired are facially discriminatory. For example,
prerogatives of management.16 an employment policy prohibiting the employer from hiring
wives of male employees, but not husbands of female
It is true that the policy of petitioners prohibiting close employees, is discriminatory on its face.22
relatives from working in the same company takes the nature
of an anti-nepotism employment policy. Companies adopt On the other hand, to establish disparate impact, the
these policies to prevent the hiring of unqualified persons complainants must prove that a facially neutral policy has a
based on their status as a relative, rather than upon their disproportionate effect on a particular class. For example,
ability.17 These policies focus upon the potential employment although most employment policies do not expressly indicate
problems arising from the perception of favoritism exhibited which spouse will be required to transfer or leave the
towards relatives. company, the policy often disproportionately affects one sex.23

With more women entering the workforce, employers are also The state courts’ rulings on the issue depend on their
enacting employment policies specifically prohibiting spouses interpretation of the scope of marital status discrimination
from working for the same company. We note that two types within the meaning of their respective civil rights acts. Though
of employment policies involve spouses: policies banning only they agree that the term "marital status" encompasses
discrimination based on a person's status as either married, distinction based on marital status and there is no better
single, divorced, or widowed, they are divided on whether the available or acceptable policy which would better accomplish
term has a broader meaning. Thus, their decisions vary.24 the business purpose, an employer may not discriminate
against an employee based on the identity of the employee’s
The courts narrowly25 interpreting marital status to refer only spouse.31 This is known as the bona fide occupational
to a person's status as married, single, divorced, or widowed qualification exception.
reason that if the legislature intended a broader definition it
would have either chosen different language or specified its We note that since the finding of a bona fide occupational
intent. They hold that the relevant inquiry is if one is married qualification justifies an employer’s no-spouse rule, the
rather than to whom one is married. They construe marital exception is interpreted strictly and narrowly by these state
status discrimination to include only whether a person is courts. There must be a compelling business necessity for
single, married, divorced, or widowed and not the "identity, which no alternative exists other than the discriminatory
occupation, and place of employment of one's spouse." These practice.32 To justify a bona fide occupational qualification, the
courts have upheld the questioned policies and ruled that they employer must prove two factors: (1) that the employment
did not violate the marital status discrimination provision of qualification is reasonably related to the essential operation of
their respective state statutes. the job involved; and, (2) that there is a factual basis for
believing that all or substantially all persons meeting the
The courts that have broadly26 construed the term "marital qualification would be unable to properly perform the duties
status" rule that it encompassed the identity, occupation and of the job.33
employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of The concept of a bona fide occupational qualification is not
the state statute. They reason that the no-spouse employment foreign in our jurisdiction. We employ the standard
policy violate the marital status provision because it arbitrarily of reasonableness of the company policy which is parallel to
discriminates against all spouses of present employees the bona fide occupational qualification requirement. In the
without regard to the actual effect on the individual's recent case of Duncan Association of Detailman-PTGWO
qualifications or work performance.27 These courts also find and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we
the no-spouse employment policy invalid for failure of the passed on the validity of the policy of a pharmaceutical
employer to present any evidence of business necessity other company prohibiting its employees from marrying employees
than the general perception that spouses in the same of any competitor company. We held that Glaxo has a right to
workplace might adversely affect the business.28 They hold guard its trade secrets, manufacturing formulas, marketing
that the absence of such a bona fide occupational strategies and other confidential programs and information
qualification29 invalidates a rule denying employment to one from competitors. We considered the prohibition against
spouse due to the current employment of the other spouse in personal or marital relationships with employees of
the same office.30 Thus, they rule that unless the employer can competitor companies upon Glaxo’s
prove that the reasonable demands of the business require a employees reasonable under the circumstances because
relationships of that nature might compromise the interests of We do not find a reasonable business necessity in the case at
Glaxo. In laying down the assailed company policy, we bar.
recognized that Glaxo only aims to protect its interests against
the possibility that a competitor company will gain access to Petitioners’ sole contention that "the company did not just
its secrets and procedures.35 want to have two (2) or more of its employees related between
the third degree by affinity and/or consanguinity"38 is lame.
The requirement that a company policy must That the second paragraph was meant to give teeth to the first
be reasonable under the circumstances to qualify as a valid paragraph of the questioned rule39 is evidently not the valid
exercise of management prerogative was also at issue in the reasonable business necessity required by the law.
1997 case of Philippine Telegraph and Telephone Company
v. NLRC.36 In said case, the employee was dismissed in It is significant to note that in the case at bar, respondents were
violation of petitioner’s policy of disqualifying from work any hired after they were found fit for the job, but were asked to
woman worker who contracts marriage. We held that the resign when they married a co-employee. Petitioners failed to
company policy violates the right against discrimination show how the marriage of Simbol, then a Sheeting Machine
afforded all women workers under Article 136 of the Labor Operator, to Alma Dayrit, then an employee of the Repacking
Code, but established a permissible exception, viz.: Section, could be detrimental to its business operations.
Neither did petitioners explain how this detriment will
[A] requirement that a woman employee must remain happen in the case of Wilfreda Comia, then a Production
unmarried could be justified as a "bona fide occupational Helper in the Selecting Department, who married Howard
qualification," or BFOQ, where the particular requirements of Comia, then a helper in the cutter-machine. The policy is
the job would justify the same, but not on the ground of a premised on the mere fear that employees married to each
general principle, such as the desirability of spreading work in other will be less efficient. If we uphold the questioned rule
the workplace. A requirement of that nature would be valid without valid justification, the employer can create policies
provided it reflects an inherent quality reasonably based on an unproven presumption of a perceived danger at
necessary for satisfactory job performance.37(Emphases the expense of an employee’s right to security of tenure.
supplied.)
Petitioners contend that their policy will apply only when one
The cases of Duncan and PT&T instruct us that the employee marries a co-employee, but they are free to marry
requirement of reasonableness must be clearly established to persons other than co-employees. The questioned policy may
uphold the questioned employment policy. The employer has not facially violate Article 136 of the Labor Code but it creates
the burden to prove the existence of a reasonable business a disproportionate effect and under the disparate impact
necessity. The burden was successfully discharged in Duncan theory, the only way it could pass judicial scrutiny is a
but not in PT&T. showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of petitioners to prove a
legitimate business concern in imposing the questioned policy
cannot prejudice the employee’s right to be free from arbitrary At first, she did not want to sign the termination papers but
discrimination based upon stereotypes of married persons she was forced to tender her resignation letter in exchange for
working together in one company.40 her thirteenth month pay.

Lastly, the absence of a statute expressly prohibiting marital The contention of petitioners that Estrella was pressured to
discrimination in our jurisdiction cannot benefit the resign because she got impregnated by a married man and she
petitioners. The protection given to labor in our jurisdiction is could not stand being looked upon or talked about as
vast and extensive that we cannot prudently draw inferences immoral43 is incredulous. If she really wanted to avoid
from the legislature’s silence41 that married persons are not embarrassment and humiliation, she would not have gone
protected under our Constitution and declare valid a policy back to work at all. Nor would she have filed a suit for illegal
based on a prejudice or stereotype. Thus, for failure of dismissal and pleaded for reinstatement. We have held that in
petitioners to present undisputed proof of a reasonable voluntary resignation, the employee is compelled by personal
business necessity, we rule that the questioned policy is an reason(s) to dissociate himself from employment. It is done
invalid exercise of management prerogative. Corollarily, the with the intention of relinquishing an office, accompanied by
issue as to whether respondents Simbol and Comia resigned the act of abandonment. 44 Thus, it is illogical for Estrella to
voluntarily has become moot and academic. resign and then file a complaint for illegal dismissal. Given the
lack of sufficient evidence on the part of petitioners that the
As to respondent Estrella, the Labor Arbiter and the NLRC resignation was voluntary, Estrella’s dismissal is declared
based their ruling on the singular fact that her resignation illegal.
letter was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent IN VIEW WHEREOF, the Decision of the Court of Appeals in
court failed to categorically rule whether Estrella voluntarily CA-G.R. SP No. 73477 dated August 3, 2004
resigned but ordered that she be reinstated along with Simbol is AFFIRMED.1avvphil.net
and Comia.
SO ORDERED.
Estrella claims that she was pressured to submit a resignation
letter because she was in dire need of money. We examined
the records of the case and find Estrella’s contention to be
more in accord with the evidence. While findings of fact by
administrative tribunals like the NLRC are generally given not
only respect but, at times, finality, this rule admits of
exceptions,42 as in the case at bar.

Estrella avers that she went back to work on December 21,

1999 but was dismissed due to her alleged immoral conduct.
DEL MONTE PHILIPPINES, INC., Petitioner, In view of the said alleged absences without permission, on
vs. September 17, 1994, a notice of hearing was sent to respondent
LOLITA VELASCO, Respondent. notifying her of the charges filed against her for violating the
Absence Without Official Leave rule: that is for excessive
DECISION absence without permission on August 15-18, 29-31 and
September 1-10, 1994. The hearing was set on September 23,
AUSTRIA-MARTINEZ, J.: 1994.

Before this Court is a Petition for Certiorari under Rule 45 Respondent having failed to appear on September 23, 1994
seeking to reverse and set aside the Decision1 dated July 23, hearing, another notice of hearing was sent to her resetting the
2001 of the Court of Appeals (CA) in CA-G.R. SP No. 56571 investigation on September 30, 1994. It was again reset to
which affirmed the Decision dated May 27, 1999 of the October 5, 1994.
National Labor Relations Commission (NLRC); and the CA
Resolution2 dated May 7, 2002 which denied the petitioner's On January 10, 1995, after hearing, the petitioner terminated
Motion for Reconsideration. the services of respondent effective January 16, 1994 due to
excessive absences without permission.
The facts of the case, as stated by the CA, are as follows:
Feeling aggrieved, respondent filed a case for illegal dismissal
Lolita M. Velasco (respondent) started working with Del against petitioner asserting that her dismissal was illegal
Monte Philippines (petitioner) on October 21, 1976 as a because she was on the family way suffering from urinary
seasonal employee and was regularized on May 1, 1977. Her tract infection, a pregnancy-borne, at the time she committed
latest assignment was as Field Laborer. the alleged absences. She explained that for her absence from
work on August 15, 16, 17 & 18, 1994 she had sent an
On June 16, 1987, respondent was warned in writing due to application for leave to her supervisor, Prima Ybañez.
her absences. On May 4, 1991, respondent, thru a letter, was Thereafter, she went to the company hospital for check-up and
again warned in writing by petitioner about her absences was advised accordingly to rest in quarters for four (4) days or
without permission and a forfeiture of her vacation leave on August 27 to 30, 1994. Still not feeling well, she failed to
entitlement for the year 1990-1991 was imposed against her. work on September 1, 1994 and was again advised two days of
rest in quarters on September 2-3, 1994. Unable to recover, she
On September 14, 1992, another warning letter was sent to went to see an outside doctor, Dr. Marilyn Casino, and the
respondent regarding her absences without permission during latter ordered her to rest for another five (5) consecutive days,
the year 1991-1992. Her vacation entitlement for the said or from September 5 to 9, 1994. She declared she did not file
employment year affected was consequently forfeited. the adequate leave of absence because a medical certificate
was already sufficient per company policy. On September 10,
1994 she failed to report to work but sent an application for
leave of absence to her supervisor, Prima Ybañez, which was already serve as reference in resolving the absences on August
not anymore accepted.3 15 to 18; that the petitioner further admitted that the
respondent was under "RIQ advice" on September 2-3, 1994
On April 13, 1998, the Labor Arbiter dismissed the Complaint and yet insisted in including these dates among respondent’s
for lack of merit. The Labor Arbiter held that the respondent 16 purported unexplained absences; that it is sufficient notice
was an incorrigible absentee; that she failed to file leaves of for the petitioner, "a plain laborer" with "unsophisticated
absence; that her absences in 1986 and 1987 were without judgment," to send word to her employer through a co-worker
permission; that the petitioner gave the respondent several on August 15 to 16, 1994 that she was frequently vomiting;
chances to reform herself; and that the respondent did not that the sheer distance between respondent’s home and her
justify her failure to appear during the scheduled hearings and workplace made it difficult to send formal notice; that
failed to explain her absences. respondent even sent her child of tender age to inform her
supervisor about her absence on September 5, 1994 due to
Respondent appealed to the NLRC. On May 29, 1999, the stomach ache, but her child failed to approach the officer
NLRC issued its Resolution, the dispositive portion of which because her child felt ashamed, if not mortified; that
reads: respondent’s narration that she had to bear pains during her
absences on September 21 to 27, 1994 is credible; that she
WHEREFORE, foregoing considered, the instant decision is dared not venture through the roads for fear of forest creatures
hereby VACATED and a new one entered declaring the or predators; that the petitioner is guilty of unlawfully
dismissal of complainant as ILLEGAL. In consonance with discharging respondent on account of her pregnancy under
Art. 279 of the Labor [Code], her reinstatement with full Article 137(2) of the Labor Code; and, that petitioner’s
backwages from the date of her termination from employment reference to the previous absenteeism of respondent is
to her actual reinstatement is necessarily decreed.4 misplaced because the latter had already been penalized
therefor.
The NLRC held that, under the company rules, the employee
may make a subsequent justification of her absenteeism, which Petitioner’s Motion for Reconsideration was denied on
she was able to do in the instant case; that while it is not September 30, 1999.
disputed that the respondent incurred absences exceeding six
(6) days within one employment year – a ground for dismissal The petitioner then appealed to the CA. On July 23, 2001, the
under the company rules – the petitioner actually admitted the CA promulgated its Decision the dispositive portion of which
fact that the respondent had been pregnant, hence, negating states:
petitioner’s assertion that the respondent failed to give any
explanation of her absences; that the records bear the VIEWED IN THE LIGHT OF ALL THE FOREGOING, the
admission of petitioner’s officer of the receipt of the hospital instant petition is DISMISSED, the Resolutions, dated May 27,
record showing the cause of her absences ("RIQ advice" or 1999 and September 30, 1999 of the National Labor Relations
"rest-in-quarters") for August 19-20, 1994 which, in turn, could
Commission in NLRC CA No. M-003926-98, are hereby II.
AFFIRMED in toto.
THE COURT OF APPEALS SERIOUSLY ERRED IN NOT
SO ORDERED.5 CONSIDERING THAT RESPONDENT’S LATEST STRING OF
ABSENCES INCURRED WITHOUT ANY PRIOR
In affirming the NLRC, the CA held that absences due to a PERMISSION, AND AS ABOVE SHOWN, WITHOUT ANY
justified cause cannot be a ground for dismissal; that it is VALID JUSTIFICATION, TAKEN TOGETHER WITH HER
undisputed that the respondent was pregnant at the time she DAMAGING awop history, established her gross and habitual
incurred the absences in question; that the certification issued neGlect of duties, a just and valid ground for dismissal.
by a private doctor duly established this fact; that it was no
less than petitioner’s company doctor who advised the III.
respondent to have rest-in-quarters for four days on account of
a pregnancy- related sickness; that it had been duly The court of appeals seriously erred in holding that
established that respondent filed leaves of absence though the respondent’s dismissal was in violation of article 137
last had been refused by the company supervisor; that the (prohibiting an employer to discharge an employee on account
dismissal of an employee due to prolonged absence with leave of her pregnancy).
by reason of illness duly established by the presentation of a
medical certificate is not justified; that it is undisputed that IV.
respondent’s sickness was pregnancy-related; that under
Article 137(2) of the Labor Code, the petitioner committed a The court of appeals seriously erred in awarding full
prohibited act in discharging a woman on account of her backwages in favor of respondent notwithstanding petitioner’s
pregnancy. evident good faith.6

On May 7, 2002, the CA denied petitioner’s Motion for The essential question is whether the employment of
Reconsideration. respondent had been validly terminated on the ground of
excessive absences without permission. Corollary to this is the
Hence, the instant Petition raising the following issues: question of whether the petitioner discharged the respondent
on account of pregnancy, a prohibited act.
I.
The petitioner posits the following arguments: (a) The
The court of appeals seriously erred In considering evidence proffered by the respondent, to wit: (1) the Discharge
respondent’s Excessive aWOPs as justified Simply on account Summary indicating that she had been admitted to the Phillips
of her pregnancy. Memorial Hospital on August 23, 1994 and discharged on
August 26, 1994, and that she had been advised to "rest in
quarters" for four days from August 27, 1994 to August 30, First. The Filflex Industrial and Manufacturing Co. case is not
1994, and (2) the Medical Certificate issued by Dr. Marilyn M. applicable, principally because the nature and gravity of the
Casino stating that respondent had sought consultation on illness involved in that case – chronic asthmatic bronchitis –
September 4, 2002 because of spasm in the left iliac region, and are different from the conditions that are present in the instant
was advised to rest for five days (from September 4, 1994 up to case, which is pregnancy and its related illnesses.
September 8, 1994), due to urinary tract infection, all in all
establish respondent’s sickness only from August 23, 1994 up The Court takes judicial notice of the fact that the condition of
to August 30, 1994 and from September 4, 1994 up to asthmatic bronchitis may be intermittent, in contrast to
September 8, 1994. In other words, respondent was absent pregnancy which is a continuing condition accompanied by
without permission on several other days which were not various symptoms and related illnesses. Hence, as to the
supported by any other proof of illness, specifically, on former, if the medical certificate or other proof proffered by
August 15, 16, 17, 18, 31, 1994 and September 1, 2, 3, 9, and 10, the worker fails to correspond with the dates of absence, then
1994, and, hence, she is guilty of ten unjustified absences; (b) it can be reasonably concluded that, absent any other proof,
Per Filflex Industrial and Manufacturing Co. v. National Labor such absences are unjustified. This is the ruling in Filflex
Relations Commission (Filflex),7 if the medical certificate fails which cannot be applied in a straight-hand fashion in cases of
to refer to the specific period of the employee’s absence, then pregnancy which is a long-term condition accompanied by an
such absences, attributable to chronic asthmatic bronchitis, are assortment of related illnesses.
not supported by competent proof and, hence, they are
unjustified. By parity of reasoning, in the absence of evidence In this case, by the measure of substantial evidence, what is
indicating any pregnancy-borne illness outside the period controlling is the finding of the NLRC and the CA that
stated in respondent’s medical certificate, such illness ought respondent was pregnant and suffered from related ailments.
not to be considered as an acceptable excuse for respondent’s It would be unreasonable to isolate such condition strictly to
excessive absences without leave; (c) Respondent’s latest string the dates stated in the Medical Certificate or the Discharge
of absences, taken together with her long history of Summary. It can be safely assumed that the absences that are
absenteeism without permission, established her gross and not covered by, but which nonetheless approximate, the dates
habitual neglect of duties, as established by jurisprudence; (d) stated in the Discharge Summary and Medical Certificate, are
The respondent was dismissed not by reason of her pregnancy due to the continuing condition of pregnancy and related
but on account of her gross and habitual neglect of duties. In illnesses, and, hence, are justified absences.
other words, her pregnancy had no bearing on the decision to
terminate her employment; and, (e) Her state of pregnancy per As the CA and the NLRC correctly noted, it is not disputed
se could not excuse her from filing prior notice for her absence. that respondent was pregnant and that she was suffering from
urinary tract infection, and that her absences were due to such
Petitioner’s arguments are without merit. facts. The petitioner admits these facts in its Petition for
Review.8 And, as the CA aptly held, it was no less than the
company doctor who advised the respondent to have "rest-in-
quarters" for four days on account of a pregnancy-related said proceedings. For respondent to isolate the absences of
sickness.9 complainant in August and mid-September, 1994 from the
absences she incurred later in said month without
On this note, this Court upholds and adopts the finding of the submitting any evidence that these were due to causes not in
NLRC, thus: manner associated with her [ ] condition renders its
justification of complainant’s dismissal clearly not
In this jurisdiction tardiness and absenteeism, like convincing under the circumstances.
abandonment, are recognized forms of neglect of duties, the
existence of which justify the dismissal of the erring employee. Despite contrary declaration, the records bear the admission
Respondent’s rule penalizing with discharge any employee of respondent’s P/A North Supervisor, PB Ybanez, of her
who has incurred six (6) or more absences without permission receipt of the hospital record showing complainant’s RIQ
or subsequent justification is admittedly within the purview of advice for August 19-20, 1994 which could already serve as
the foregoing standard. respondent’s reference in resolving the latter’s absences on
August 15 to 18, 1994. Respondent further admitted
However, while it is not disputed that complainant incurred complainant was under RIQ advice on September 2-3, 1994,
absences exceeding six (6) days as she actually failed to report yet, insisted in including these dates among her 16
for work from August 15-18, 23-26, 29-31, September 1-3, 5-10, purported unexplained absences justifying termination of
12-17, 21-24, 26-30, and October 1-3, 1994, her being pregnant her employment.10 (emphasis supplied)
at the time these absences were incurred is not questioned
and is even admitted by respondent. It thus puzzles us why Petitioner’s contention that the cause for the dismissal was
respondent asserts complainant failed to explain satisfactorily gross and habitual neglect unrelated to her state of pregnancy
her absences on August 15-18, 29-31, September 1-3 and 5-10, is unpersuasive.
1994, yet reconsidered the rest of her absences for being
covered with "rest-in-quarters" (RIQ) advice from its hospital The Court agrees with the CA in concluding that respondent’s
personnel when this advice was unquestionably issued in sickness was pregnancy-related and, therefore, the petitioner
consideration of the physiological and emotional changes cannot terminate respondent’s services because in doing so,
complainant, a conceiving mother, naturally petitioner will, in effect, be violating the Labor Code which
developed. Medical and health reports abundantly disclose prohibits an employer to discharge an employee on account of
that during the first trimester of pregnancy, expectant the latter’s pregnancy.11
mothers are plagued with morning sickness, frequent
urination, vomiting and fatigue all of which complainant Article 137 of the Labor Code provides:
was similarly plagued with. Union official IBB Lesna’s
observation on complainant being [sic] apparently not Art. 137. Prohibited acts. – It shall be unlawful for any
feeling well during the investigation conducted by employer:
respondent on October 5, 1994 even remains in the records of
 (1) To deny any woman employee the benefits account to justify the dismissal, is tenuous considering the
provided for in this Chapter or to discharge any particular circumstances obtaining in the present case.
woman employed by him for the purpose of Petitioner puts much emphasis on respondent’s "long history"
preventing her from enjoying any of the benefits of unauthorized absences committed several years
provided under this Code; beforehand. However, petitioner cannot use these previous
infractions to lay down a pattern of absenteeism or habitual
(2) To discharge such woman on account of her disregard of company rules to justify the dismissal of
pregnancy, while on leave or in confinement due to respondent. The undeniable fact is that during her complained
her pregnancy; or absences in 1994, respondent was pregnant and suffered
related illnesses. Again, it must be stressed that respondent’s
(3) To discharge or refuse the admission of such discharge by reason of absences caused by her pregnancy is
woman upon returning to her work for fear that she covered by the prohibition under the Labor Code. Since her
may again be pregnant. (Emphasis supplied) last string of absences is justifiable and had been subsequently
explained, the petitioner had no legal basis in considering
Second. The petitioner stresses that many women go through these absences together with her prior infractions as gross and
pregnancy and yet manage to submit prior notices to their habitual neglect.
employer, especially if "there is no evidence on record
indicating a condition of such gravity as to preclude efforts at The Court is convinced that the petitioner terminated the
notifying petitioner of her absence from work in series."12 But services of respondent on account of her pregnancy which
it must be emphasized that under petitioner’s company rules, justified her absences and, thus, committed a prohibited act
absences may be subsequently justified.13 The Court finds no rendering the dismissal illegal.
cogent reason to disturb the findings of the NLRC and the CA
that the respondent was able to subsequently justify her In fine, the Court finds no cogent reason to disturb the
absences in accordance with company rules and policy; that findings of the CA and the NLRC.
the respondent was pregnant at the time she incurred the
absences; that this fact of pregnancy and its related illnesses WHEREFORE, the petition is DENIED for lack of merit. The
had been duly proven through substantial evidence; that the Decision dated July 23, 2001 and the Resolution dated May 7,
respondent attempted to file leaves of absence but the 2002 of the Court of Appeals are AFFIRMED.
petitioner’s supervisor refused to receive them; that she could
not have filed prior leaves due to her continuing condition; No pronouncement as to costs.
and that the petitioner, in the last analysis, dismissed the
respondent on account of her pregnancy, a prohibited act. SO ORDERED.

Third. Petitioner’s reliance on the jurisprudential rule that the

totality of the infractions of an employee may be taken into
ARMANDO G. YRASUEGUI, petitioners, from 147 to 166 pounds, the ideal weight being 166 pounds, as
vs. mandated by the Cabin and Crew Administration Manual1 of
PHILIPPINE AIRLINES, INC., respondents. PAL.

DECISION The weight problem of petitioner dates back to 1984. Back

then, PAL advised him to go on an extended vacation leave
REYES, R.T., J.: from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the company’s
THIS case portrays the peculiar story of an international flight weight standards, prompting another leave without pay from
steward who was dismissed because of his failure to adhere to March 5, 1985 to November 1985.
the weight standards of the airline company.
After meeting the required weight, petitioner was allowed to
He is now before this Court via a petition for review on return to work. But petitioner’s weight problem recurred. He
certiorari claiming that he was illegally dismissed. To buttress again went on leave without pay from October 17, 1988 to
his stance, he argues that (1) his dismissal does not fall under February 1989.
282(e) of the Labor Code; (2) continuing adherence to the
weight standards of the company is not a bona fide On April 26, 1989, petitioner weighed 209 pounds, 43 pounds
occupational qualification; and (3) he was discriminated over his ideal weight. In line with company policy, he was
against because other overweight employees were promoted removed from flight duty effective May 6, 1989 to July 3, 1989.
instead of being disciplined. He was formally requested to trim down to his ideal weight
and report for weight checks on several dates. He was also
After a meticulous consideration of all arguments pro and con, told that he may avail of the services of the company physician
We uphold the legality of dismissal. Separation pay, however, should he wish to do so. He was advised that his case will be
should be awarded in favor of the employee as an act of social evaluated on July 3, 1989.2
justice or based on equity. This is so because his dismissal is
not for serious misconduct. Neither is it reflective of his moral On February 25, 1989, petitioner underwent weight check. It
character. was discovered that he gained, instead of losing, weight. He
was overweight at 215 pounds, which is 49 pounds beyond the
The Facts limit. Consequently, his off-duty status was retained.

Petitioner Armando G. Yrasuegui was a former international On October 17, 1989, PAL Line Administrator Gloria Dizon
flight steward of Philippine Airlines, Inc. (PAL). He stands five personally visited petitioner at his residence to check on the
feet and eight inches (5’8") with a large body frame. The progress of his effort to lose weight. Petitioner weighed 217
proper weight for a man of his height and body structure is pounds, gaining 2 pounds from his previous weight. After the
visit, petitioner made a commitment3 to reduce weight in a
letter addressed to Cabin Crew Group Manager Augusto Again, petitioner failed to report for weight checks, although
Barrios. The letter, in full, reads: he was seen submitting his passport for processing at the PAL
Staff Service Division.
Dear Sir:
On April 17, 1990, petitioner was formally warned that a
I would like to guaranty my commitment towards a weight repeated refusal to report for weight check would be dealt
loss from 217 pounds to 200 pounds from today until 31 Dec. with accordingly. He was given another set of weight check
1989. dates.6 Again, petitioner ignored the directive and did not
report for weight checks. On June 26, 1990, petitioner was
From thereon, I promise to continue reducing at a reasonable required to explain his refusal to undergo weight checks.7
percentage until such time that my ideal weight is achieved.
When petitioner tipped the scale on July 30, 1990, he weighed
Likewise, I promise to personally report to your office at the at 212 pounds. Clearly, he was still way over his ideal weight
designated time schedule you will set for my weight check. of 166 pounds.

Respectfully Yours, From then on, nothing was heard from petitioner until he
followed up his case requesting for leniency on the latter part
F/S Armando Yrasuegui4 of 1992. He weighed at 219 pounds on August 20, 1992 and 205
pounds on November 5, 1992.
Despite the lapse of a ninety-day period given him to reach his
ideal weight, petitioner remained overweight. On January 3, On November 13, 1992, PAL finally served petitioner a Notice
1990, he was informed of the PAL decision for him to remain of Administrative Charge for violation of company standards
grounded until such time that he satisfactorily complies with on weight requirements. He was given ten (10) days from
the weight standards. Again, he was directed to report every receipt of the charge within which to file his answer and
two weeks for weight checks. submit controverting evidence.8

Petitioner failed to report for weight checks. Despite that, he On December 7, 1992, petitioner submitted his
was given one more month to comply with the weight Answer.9 Notably, he did not deny being overweight. What he
requirement. As usual, he was asked to report for weight claimed, instead, is that his violation, if any, had already been
check on different dates. He was reminded that his grounding condoned by PAL since "no action has been taken by the
would continue pending satisfactory compliance with the company" regarding his case "since 1988." He also claimed that
weight standards.5 PAL discriminated against him because "the company has not
been fair in treating the cabin crew members who are similarly
situated."
On December 8, 1992, a clarificatory hearing was held where The Labor Arbiter held that the weight standards of PAL are
petitioner manifested that he was undergoing a weight reasonable in view of the nature of the job of
reduction program to lose at least two (2) pounds per week so petitioner.15 However, the weight standards need not be
as to attain his ideal weight.10 complied with under pain of dismissal since his weight did
not hamper the performance of his duties.16 Assuming that it
On June 15, 1993, petitioner was formally informed by PAL did, petitioner could be transferred to other positions where
that due to his inability to attain his ideal weight, "and his weight would not be a negative factor.17 Notably, other
considering the utmost leniency" extended to him "which overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr.
spanned a period covering a total of almost five (5) years," his Barrios, were promoted instead of being disciplined.18
services were considered terminated "effective immediately."11
Both parties appealed to the National Labor Relations
His motion for reconsideration having been Commission (NLRC).19
denied,12 petitioner filed a complaint for illegal dismissal
against PAL. On October 8, 1999, the Labor Arbiter issued a writ of
execution directing the reinstatement of petitioner without loss
Labor Arbiter, NLRC and CA Dispositions of seniority rights and other benefits.20

On November 18, 1998, Labor Arbiter Valentin C. Reyes On February 1, 2000, the Labor Arbiter denied21 the Motion to
ruled13 that petitioner was illegally dismissed. The dispositive Quash Writ of Execution22 of PAL.
part of the Arbiter ruling runs as follows:
On March 6, 2000, PAL appealed the denial of its motion to
WHEREFORE, in view of the foregoing, judgment is hereby quash to the NLRC.23
rendered, declaring the complainant’s dismissal illegal, and
ordering the respondent to reinstate him to his former position On June 23, 2000, the NLRC rendered judgment24 in the
or substantially equivalent one, and to pay him: following tenor:

a. Backwages of Php10,500.00 per month from his dismissal on WHEREFORE, premises considered[,] the Decision of the
June 15, 1993 until reinstated, which for purposes of appeal is Arbiter dated 18 November 1998 as modified by our findings
hereby set from June 15, 1993 up to August 15, 1998 at herein, is hereby AFFIRMED and that part of the dispositive
₱651,000.00; portion of said decision concerning complainant’s entitlement
to backwages shall be deemed to refer to complainant’s
b. Attorney’s fees of five percent (5%) of the total award. entitlement to his full backwages, inclusive of allowances and
to his other benefits or their monetary equivalent instead of
SO ORDERED.14 simply backwages, from date of dismissal until his actual
reinstatement or finality hereof. Respondent is enjoined to VOID and is hereby SET ASIDE. The private respondent’s
manifests (sic) its choice of the form of the reinstatement of complaint is hereby DISMISSED. No costs.
complainant, whether physical or through payroll within ten
(10) days from notice failing which, the same shall be deemed SO ORDERED.32
as complainant’s reinstatement through payroll and execution
in case of non-payment shall accordingly be issued by the The CA opined that there was grave abuse of discretion on the
Arbiter. Both appeals of respondent thus, are DISMISSED for part of the NLRC because it "looked at wrong and irrelevant
utter lack of merit.25 considerations"33 in evaluating the evidence of the parties.
Contrary to the NLRC ruling, the weight standards of PAL are
According to the NLRC, "obesity, or the tendency to gain meant to be a continuing qualification for an employee’s
weight uncontrollably regardless of the amount of food intake, position.34 The failure to adhere to the weight standards is
is a disease in itself."26 As a consequence, there can be no an analogous cause for the dismissal of an employee under
intentional defiance or serious misconduct by petitioner to the Article 282(e) of the Labor Code in relation to Article 282(a). It
lawful order of PAL for him to lose weight.27 is not willful disobedience as the NLRC seemed to
suggest.35 Said the CA, "the element of willfulness that the
Like the Labor Arbiter, the NLRC found the weight standards NLRC decision cites is an irrelevant consideration in arriving
of PAL to be reasonable. However, it found as unnecessary the at a conclusion on whether the dismissal is legally proper."36 In
Labor Arbiter holding that petitioner was not remiss in the other words, "the relevant question to ask is not one of
performance of his duties as flight steward despite being willfulness but one of reasonableness of the standard and
overweight. According to the NLRC, the Labor Arbiter should whether or not the employee qualifies or continues to qualify
have limited himself to the issue of whether the failure of under this standard."37
petitioner to attain his ideal weight constituted willful
defiance of the weight standards of PAL.28 Just like the Labor Arbiter and the NLRC, the CA held that the
weight standards of PAL are reasonable.38 Thus, petitioner
PAL moved for reconsideration to no avail.29 Thus, PAL was legally dismissed because he repeatedly failed to meet the
elevated the matter to the Court of Appeals (CA) via a petition prescribed weight standards.39 It is obvious that the issue of
for certiorari under Rule 65 of the 1997 Rules of Civil discrimination was only invoked by petitioner for purposes of
Procedure.30 escaping the result of his dismissal for being overweight.40

By Decision dated August 31, 2004, the CA reversed31 the On May 10, 2005, the CA denied petitioner’s motion for
NLRC: reconsideration.41 Elaborating on its earlier ruling, the CA held
that the weight standards of PAL are a bona fide occupational
WHEREFORE, premises considered, we hereby GRANT the qualification which, in case of violation, "justifies an
petition. The assailed NLRC decision is declared NULL and employee’s separation from the service."42
 Issues FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR
BEING MOOT AND ACADEMIC.43 (Underscoring supplied)
In this Rule 45 petition for review, the following issues are
posed for resolution: Our Ruling

I. I. The obesity of petitioner is a ground for dismissal under

Article 282(e) 44 of the Labor Code.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONER’S OBESITY CAN A reading of the weight standards of PAL would lead to no
BE A GROUND FOR DISMISSAL UNDER PARAGRAPH (e) other conclusion than that they constitute a continuing
OF ARTICLE 282 OF THE LABOR CODE OF THE qualification of an employee in order to keep the job. Tersely
PHILIPPINES; put, an employee may be dismissed the moment he is unable
to comply with his ideal weight as prescribed by the weight
II. standards. The dismissal of the employee would thus fall
under Article 282(e) of the Labor Code. As explained by the
WHETHER OR NOT THE COURT OF APPEALS GRAVELY CA:
ERRED IN HOLDING THAT PETITIONER’S DISMISSAL
FOR OBESITY CAN BE PREDICATED ON THE "BONA FIDE x x x [T]he standards violated in this case were not mere
OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE"; "orders" of the employer; they were the "prescribed weights"
that a cabin crew must maintain in order to qualify for and
III. keep his or her position in the company. In other words, they
were standards that establish continuing qualifications for an
WHETHER OR NOT THE COURT OF APPEALS GRAVELY employee’s position. In this sense, the failure to maintain these
ERRED IN HOLDING THAT PETITIONER WAS NOT standards does not fall under Article 282(a) whose express
UNDULY DISCRIMINATED AGAINST WHEN HE WAS terms require the element of willfulness in order to be a
DISMISSED WHILE OTHER OVERWEIGHT CABIN ground for dismissal. The failure to meet the
ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR employer’s qualifying standards is in fact a ground that does
PROMOTED; not squarely fall under grounds (a) to (d) and is therefore one
that falls under Article 282(e) – the "other causes analogous to
IV. the foregoing."

WHETHER OR NOT THE COURT OF APPEALS GRAVELY By its nature, these "qualifying standards" are norms that
ERRED WHEN IT BRUSHED ASIDE PETITIONER’S CLAIMS apply prior to and after an employee is hired. They
apply prior to employment because these are the standards a
job applicant must initially meet in order to be hired. They
apply after hiring because an employee must continue to meet bar. First, Nadura was not decided under the Labor Code. The
these standards while on the job in order to keep his job. law applied in that case was Republic Act (RA) No.
Under this perspective, a violation is not one of the faults for 1787. Second, the issue of flight safety is absent in Nadura,
which an employee can be dismissed pursuant to pars. (a) to thus, the rationale there cannot apply here. Third, in Nadura,
(d) of Article 282; the employee can be dismissed simply the employee who was a miner, was laid off from work
because he no longer "qualifies" for his job irrespective of because of illness, i.e., asthma. Here, petitioner was dismissed
whether or not the failure to qualify was willful or intentional. for his failure to meet the weight standards of PAL. He was
x x x45 not dismissed due to illness. Fourth, the issue in Nadura is
whether or not the dismissed employee is entitled to
Petitioner, though, advances a very interesting argument. He separation pay and damages. Here, the issue centers on the
claims that obesity is a "physical abnormality and/or propriety of the dismissal of petitioner for his failure to meet
illness."46 Relying on Nadura v. Benguet Consolidated, Inc.,47 he the weight standards of PAL. Fifth, in Nadura, the employee
says his dismissal is illegal: was not accorded due process. Here, petitioner was accorded
utmost leniency. He was given more than four (4) years to
Conscious of the fact that Nadura’s case cannot be made to fall comply with the weight standards of PAL.
squarely within the specific causes enumerated in
subparagraphs 1(a) to (e), Benguet invokes the provisions of In the case at bar, the evidence on record militates against
subparagraph 1(f) and says that Nadura’s illness – occasional petitioner’s claims that obesity is a disease. That he was able to
attacks of asthma – is a cause analogous to them. reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude,
Even a cursory reading of the legal provision under determination, and self-discipline. Indeed, during the
consideration is sufficient to convince anyone that, as the trial clarificatory hearing on December 8, 1992, petitioner himself
court said, "illness cannot be included as an analogous cause claimed that "[t]he issue is could I bring my weight down to
by any stretch of imagination." ideal weight which is 172, then the answer is yes. I can do it
now."49
It is clear that, except the just cause mentioned in sub-
paragraph 1(a), all the others expressly enumerated in the law True, petitioner claims that reducing weight is costing him "a
are due to the voluntary and/or willful act of the employee. lot of expenses."50 However, petitioner has only himself to
How Nadura’s illness could be considered as "analogous" to blame. He could have easily availed the assistance of the
any of them is beyond our understanding, there being no company physician, per the advice of PAL.51 He chose to
claim or pretense that the same was contracted through his ignore the suggestion. In fact, he repeatedly failed to report
own voluntary act.48 when required to undergo weight checks, without offering a
valid explanation. Thus, his fluctuating weight indicates
The reliance on Nadura is off-tangent. The factual milieu absence of willpower rather than an illness.
in Nadura is substantially different from the case at
Petitioner cites Bonnie Cook v. State of Rhode Island, Department from a given impairment," thus "mutability only precludes
of Mental Health, Retardation and Hospitals,52decided by the those conditions that an individual can easily and quickly
United States Court of Appeals (First Circuit). In that case, reverse by behavioral alteration."
Cook worked from 1978 to 1980 and from 1981 to 1986 as an
institutional attendant for the mentally retarded at the Ladd Unlike Cook, however, petitioner is not morbidly obese. In the
Center that was being operated by respondent. She twice words of the District Court for the District of Rhode Island,
resigned voluntarily with an unblemished record. Even Cook was sometime before 1978 "at least one hundred pounds
respondent admitted that her performance met the Center’s more than what is considered appropriate of her height."
legitimate expectations. In 1988, Cook re-applied for a similar According to the Circuit Judge, Cook weighed "over 320
position. At that time, "she stood 5’2" tall and weighed over pounds" in 1988. Clearly, that is not the case here. At his
320 pounds." Respondent claimed that the morbid obesity of heaviest, petitioner was only less than 50 pounds over his
plaintiff compromised her ability to evacuate patients in case ideal weight.
of emergency and it also put her at greater risk of serious
diseases. In fine, We hold that the obesity of petitioner, when placed in
the context of his work as flight attendant, becomes an
Cook contended that the action of respondent amounted to analogous cause under Article 282(e) of the Labor Code that
discrimination on the basis of a handicap. This was in direct justifies his dismissal from the service. His obesity may not be
violation of Section 504(a) of the Rehabilitation Act of unintended, but is nonetheless voluntary. As the CA correctly
1973,53 which incorporates the remedies contained in Title VI puts it, "[v]oluntariness basically means that the just cause is
of the Civil Rights Act of 1964. Respondent claimed, however, solely attributable to the employee without any external force
that morbid obesity could never constitute a handicap within influencing or controlling his actions. This element runs
the purview of the Rehabilitation Act. Among others, obesity through all just causes under Article 282, whether they be in
is a mutable condition, thus plaintiff could simply lose weight the nature of a wrongful action or omission. Gross and
and rid herself of concomitant disability. habitual neglect, a recognized just cause, is considered
voluntary although it lacks the element of intent found in
The appellate Court disagreed and held that morbid obesity is Article 282(a), (c), and (d)."54
a disability under the Rehabilitation Act and that respondent
discriminated against Cook based on "perceived" disability. II. The dismissal of petitioner can be predicated on the bona
The evidence included expert testimony that morbid obesity is fide occupational qualification defense.
a physiological disorder. It involves a dysfunction of both the
metabolic system and the neurological appetite – suppressing Employment in particular jobs may not be limited to persons
signal system, which is capable of causing adverse effects of a particular sex, religion, or national origin unless the
within the musculoskeletal, respiratory, and cardiovascular employer can show that sex, religion, or national origin is an
systems. Notably, the Court stated that "mutability is relevant actual qualification for performing the job. The qualification is
only in determining the substantiality of the limitation flowing called a bona fide occupational qualification (BFOQ).55 In the
United States, there are a few federal and many state job In short, the test of reasonableness of the company policy is
discrimination laws that contain an exception allowing an used because it is parallel to BFOQ.68 BFOQ is valid "provided
employer to engage in an otherwise unlawful form of it reflects an inherent quality reasonably necessary for
prohibited discrimination when the action is based on a BFOQ satisfactory job performance."69
necessary to the normal operation of a business or enterprise.56
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome
Petitioner contends that BFOQ is a statutory defense. It does Philippines, Inc.,70 the Court did not hesitate to pass upon the
not exist if there is no statute providing for it.57 Further, there validity of a company policy which prohibits its employees
is no existing BFOQ statute that could justify his dismissal.58 from marrying employees of a rival company. It was held that
the company policy is reasonable considering that its purpose
Both arguments must fail. is the protection of the interests of the company against
possible competitor infiltration on its trade secrets and
First, the Constitution,59 the Labor Code,60 and RA No. procedures.
727761 or the Magna Carta for Disabled Persons62 contain
provisions similar to BFOQ. Verily, there is no merit to the argument that BFOQ cannot be
applied if it has no supporting statute. Too, the Labor
Second, in British Columbia Public Service Employee Commission Arbiter,71 NLRC,72 and CA73 are one in holding that the weight
(BSPSERC) v. The British Columbia Government and Service standards of PAL are reasonable. A common carrier, from the
Employee’s Union (BCGSEU),63 the Supreme Court of Canada nature of its business and for reasons of public policy, is
adopted the so-called "Meiorin Test" in determining whether bound to observe extraordinary diligence for the safety of the
an employment policy is justified. Under this test, (1) the passengers it transports.74 It is bound to carry its passengers
employer must show that it adopted the standard for a safely as far as human care and foresight can provide, using
purpose rationally connected to the performance of the the utmost diligence of very cautious persons, with due regard
job;64 (2) the employer must establish that the standard is for all the circumstances.75
reasonably necessary65 to the accomplishment of that work-
related purpose; and (3) the employer must establish that the The law leaves no room for mistake or oversight on the part of
standard is reasonably necessary in order to accomplish the a common carrier. Thus, it is only logical to hold that the
legitimate work-related purpose. Similarly, in Star Paper weight standards of PAL show its effort to comply with the
Corporation v. Simbol,66 this Court held that in order to justify a exacting obligations imposed upon it by law by virtue of being
BFOQ, the employer must prove that (1) the employment a common carrier.
qualification is reasonably related to the essential operation of
the job involved; and (2) that there is factual basis for believing The business of PAL is air transportation. As such, it has
that all or substantially all persons meeting the qualification committed itself to safely transport its passengers. In order to
would be unable to properly perform the duties of the job.67 achieve this, it must necessarily rely on its employees, most
particularly the cabin flight deck crew who are on board the
aircraft. The weight standards of PAL should be viewed as The rationale in Western Air Lines v. Criswell76 relied upon by
imposing strict norms of discipline upon its employees. petitioner cannot apply to his case. What was involved there
were two (2) airline pilots who were denied reassignment as
In other words, the primary objective of PAL in the imposition flight engineers upon reaching the age of 60, and a flight
of the weight standards for cabin crew is flight safety. It engineer who was forced to retire at age 60. They sued the
cannot be gainsaid that cabin attendants must maintain agility airline company, alleging that the age-60 retirement for flight
at all times in order to inspire passenger confidence on their engineers violated the Age Discrimination in Employment Act
ability to care for the passengers when something goes wrong. of 1967. Age-based BFOQ and being overweight are not the
It is not farfetched to say that airline companies, just like all same. The case of overweight cabin attendants is another
common carriers, thrive due to public confidence on their matter. Given the cramped cabin space and narrow aisles and
safety records. People, especially the riding public, expect no emergency exit doors of the airplane, any overweight cabin
less than that airline companies transport their passengers to attendant would certainly have difficulty navigating the
their respective destinations safely and soundly. A lesser cramped cabin area.
performance is unacceptable.
In short, there is no need to individually evaluate their ability
The task of a cabin crew or flight attendant is not limited to to perform their task. That an obese cabin attendant occupies
serving meals or attending to the whims and caprices of the more space than a slim one is an unquestionable fact which
passengers. The most important activity of the cabin crew is to courts can judicially recognize without introduction of
care for the safety of passengers and the evacuation of the evidence.77 It would also be absurd to require airline
aircraft when an emergency occurs. Passenger safety goes to companies to reconfigure the aircraft in order to widen the
the core of the job of a cabin attendant. Truly, airlines need aisles and exit doors just to accommodate overweight cabin
cabin attendants who have the necessary strength to open attendants like petitioner.
emergency doors, the agility to attend to passengers in
cramped working conditions, and the stamina to withstand The biggest problem with an overweight cabin attendant is the
grueling flight schedules. possibility of impeding passengers from evacuating the
aircraft, should the occasion call for it. The job of a cabin
On board an aircraft, the body weight and size of a cabin attendant during emergencies is to speedily get the passengers
attendant are important factors to consider in case of out of the aircraft safely. Being overweight necessarily
emergency. Aircrafts have constricted cabin space, and narrow impedes mobility. Indeed, in an emergency situation, seconds
aisles and exit doors. Thus, the arguments of respondent that are what cabin attendants are dealing with, not minutes. Three
"[w]hether the airline’s flight attendants are overweight or not lost seconds can translate into three lost lives. Evacuation
has no direct relation to its mission of transporting passengers might slow down just because a wide-bodied cabin attendant
to their destination"; and that the weight standards "has is blocking the narrow aisles. These possibilities are not
nothing to do with airworthiness of respondent’s airlines," remote.
must fail.
Petitioner is also in estoppel. He does not dispute that the support the finding of discriminatory treatment. Petitioner
weight standards of PAL were made known to him prior to cannot establish discrimination by simply naming the
his employment. He is presumed to know the weight limit that supposed cabin attendants who are allegedly similarly
he must maintain at all times.78 In fact, never did he question situated with him. Substantial proof must be shown as to how
the authority of PAL when he was repeatedly asked to trim and why they are similarly situated and the differential
down his weight. Bona fides exigit ut quod convenit fiat. Good treatment petitioner got from PAL despite the similarity of his
faith demands that what is agreed upon shall be done. Kung situation with other employees.
ang tao ay tapat kanyang tutuparin ang napagkasunduan.
Indeed, except for pointing out the names of the supposed
Too, the weight standards of PAL provide for separate weight overweight cabin attendants, petitioner miserably failed to
limitations based on height and body frame for both male and indicate their respective ideal weights; weights over their ideal
female cabin attendants. A progressive discipline is imposed weights; the periods they were allowed to fly despite their
to allow non-compliant cabin attendants sufficient being overweight; the particular flights assigned to them; the
opportunity to meet the weight standards. Thus, the clear-cut discriminating treatment they got from PAL; and other
rules obviate any possibility for the commission of abuse or relevant data that could have adequately established a case of
arbitrary action on the part of PAL. discriminatory treatment by PAL. In the words of the CA,
"PAL really had no substantial case of discrimination to
III. Petitioner failed to substantiate his claim that he was meet."82
discriminated against by PAL.
We are not unmindful that findings of facts of administrative
Petitioner next claims that PAL is using passenger safety as a agencies, like the Labor Arbiter and the NLRC, are accorded
convenient excuse to discriminate against him.79 We are respect, even finality.83 The reason is simple: administrative
constrained, however, to hold otherwise. We agree with the agencies are experts in matters within their specific and
CA that "[t]he element of discrimination came into play in this specialized jurisdiction.84 But the principle is not a hard and
case as a secondary position for the private respondent in fast rule. It only applies if the findings of facts are duly
order to escape the consequence of dismissal that being supported by substantial evidence. If it can be shown that
overweight entailed. It is a confession-and-avoidance position administrative bodies grossly misappreciated evidence of such
that impliedly admitted the cause of dismissal, including the nature so as to compel a conclusion to the contrary, their
reasonableness of the applicable standard and the private findings of facts must necessarily be reversed. Factual findings
respondent’s failure to comply."80It is a basic rule in evidence of administrative agencies do not have infallibility and must
that each party must prove his affirmative allegation.81 be set aside when they fail the test of arbitrariness.85

Since the burden of evidence lies with the party who asserts an Here, the Labor Arbiter and the NLRC inexplicably
affirmative allegation, petitioner has to prove his allegation misappreciated evidence. We thus annul their findings.
with particularity. There is nothing on the records which could
To make his claim more believable, petitioner invokes the The law is very clear. Although an award or order of
equal protection clause guaranty86 of the Constitution. reinstatement is self-executory and does not require a writ of
However, in the absence of governmental interference, the execution,93 the option to exercise actual reinstatement or
liberties guaranteed by the Constitution cannot be payroll reinstatement belongs to the employer. It does not
invoked.87 Put differently, the Bill of Rights is not meant to be belong to the employee, to the labor tribunals, or even to the
invoked against acts of private individuals.88 Indeed, the courts.
United States Supreme Court, in interpreting the Fourteenth
Amendment,89 which is the source of our equal protection Contrary to the allegation of petitioner that PAL "did
guarantee, is consistent in saying that the equal protection everything under the sun" to frustrate his "immediate return to
erects no shield against private conduct, however his previous position,"94 there is evidence that PAL opted to
discriminatory or wrongful.90 Private actions, no matter how physically reinstate him to a substantially equivalent position
egregious, cannot violate the equal protection guarantee.91 in accordance with the order of the Labor Arbiter.95 In fact,
petitioner duly received the return to work notice on February
IV. The claims of petitioner for reinstatement and wages are 23, 2001, as shown by his signature.96
moot.
Petitioner cannot take refuge in the pronouncements of the
As his last contention, petitioner avers that his claims for Court in a case97 that "[t]he unjustified refusal of the employer
reinstatement and wages have not been mooted. He is entitled to reinstate the dismissed employee entitles him to payment of
to reinstatement and his full backwages, "from the time he was his salaries effective from the time the employer failed to
illegally dismissed" up to the time that the NLRC was reversed reinstate him despite the issuance of a writ of execution"98 and
by the CA.92 ""even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer
At this point, Article 223 of the Labor Code finds relevance: to reinstate and pay the wages of the employee during the
period of appeal until reversal by the higher court."99 He failed
In any event, the decision of the Labor Arbiter reinstating a to prove that he complied with the return to work order of
dismissed or separated employee, insofar as the reinstatement PAL. Neither does it appear on record that he actually
aspect is concerned, shall immediately be executory, even rendered services for PAL from the moment he was dismissed,
pending appeal. The employee shall either be admitted back to in order to insist on the payment of his full backwages.
work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, In insisting that he be reinstated to his actual position despite
merely reinstated in the payroll. The posting of a bond by the being overweight, petitioner in effect wants to render the
employer shall not stay the execution for reinstatement issues in the present case moot. He asks PAL to comply with
provided herein. the impossible. Time and again, the Court ruled that the law
does not exact compliance with the impossible.100
V. Petitioner is entitled to separation pay. SO ORDERED.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to

separation pay. This may be deduced from the language of
Article 279 of the Labor Code that "[a]n employee who
is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from
him up to the time of his actual reinstatement." Luckily for
petitioner, this is not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed

employee as an act "social justice,"101 or based on "equity."102 In
both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) does not reflect on the moral
character of the employee.103

Here, We grant petitioner separation pay equivalent to one-

half (1/2) month’s pay for every year of service.104 It should
include regular allowances which he might have been
receiving.105 We are not blind to the fact that he was not
dismissed for any serious misconduct or to any act which
would reflect on his moral character. We also recognize that
his employment with PAL lasted for more or less a decade.

WHEREFORE, the appealed Decision of the Court of Appeals

is AFFIRMED but MODIFIED in that petitioner Armando G.
Yrasuegui is entitled to separation pay in an amount
equivalent to one-half (1/2) month’s pay for every year of
service, which should include his regular allowances.