SECOND DIVISION

ALBERTO NAVARRO,
Petitioner,
G.R. No. 162583

- versus -

COCA-COLA BOTTLERS PHILS.,

Present:

QUISUMBING, J.,* Chairperson,

CARPIO,
CARPIO MORALES,**
TINGA, and
VELASCO, JR., JJ.

INC., MANUEL GARCIA and RUSTUM ALEJANDRINO,

Respondents.
Promulgated:

June 8, 2007
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DECISION
QUISUMBING, J.:
This is an appeal to reverse and set aside both the Decision[1] dated August
27, 2003 and the Resolution[2] dated March 8, 2004 of the Court of Appeals
in CA-G.R. SP No. 63379. The appellate court had reversed the Resolution[3]
of the National Labor Relations Commission (NLRC) and held that petitioner
Alberto Navarro was validly dismissed by the respondents.
The facts are undisputed.
Petitioner was an employee of the respondent Coca-Cola Bottlers Phils., Inc.
(Coca-Cola) for more than a decade. Specifically, he worked as a forklift
operator for Coca-Cola from November 1, 1987 to February 27, 1998.
The respondent company has an Employees Code of Disciplinary Rules and
Regulations, which includes Rule 002-85. Section 4(i) of the rule provided for
the penalty of DISCHARGE for a tenth AWOP[4]/AWOL,[5] whether
consecutive or not, following other AWOP/AWOLs within one calendar year.
On August 11, 1997, petitioner did not report to work because of heavy rains
which flooded the entire barangay where he resided. In a Memorandum dated
October 1, 1997, he was required to explain in writing within 24 hours why
no disciplinary action should be imposed on him for his tenth absence without
permission. In response, petitioner submitted a written explanation
accompanied by a Certification[6] from his Barangay Captain, stating that his
absence was due to heavy rains and subsequent flooding that hit his
barangay. Later, petitioner filed a Supplemental Written Explanation,[7] in
lieu of answers to a questionnaire provided by the company. Petitioner stated
that on August 11, 1997, his house was heavily flooded and that on the next
day, he immediately filed an application for leave of absence. Despite his
compliance and explanation, petitioner was dismissed on February 27, 1998
and given a notice of termination[8] which enumerated the dates of his
absences without permission.
Thereafter, petitioner filed a complaint for illegal dismissal with the Labor
Arbiter, which was dismissed for lack of merit.
On appeal, the NLRC reversed the Decision of the Labor Arbiter. The
dispositive portion of the NLRC Resolution reads:
WHEREFORE, premises considered, Complainants appeal is GRANTED. The
Labor Arbiters decision in the above-entitled case is hereby ANNULLED and
SET ASIDE. A new one is entered declaring that Complainant Navarros
dismissal from his employment is illegal.
Respondent Coca-Cola Bottlers Phils., Inc. is hereby ordered to immediately
reinstate Complainant Navarro to his former position without loss of seniority
rights and other privileges and to pay his full backwages, inclusive of
allowances, and his other benefits or their monetary equivalent computed
from the time he was illegally dismissed up to the time of his actual
reinstatement.
Respondent Coca-Cola Bottlers Phils., Inc. is likewise ordered to pay
Complainant Navarro attorneys fees equivalent to ten percent (10%) of his
total monetary award.
SO ORDERED.[9]
Respondent elevated the case to the Court of Appeals. The Court of Appeals
annulled the resolution of the NLRC. It ruled as follows:
WHEREFORE, premises considered, the Decision (sic) as well as the
Resolution of the National Labor Relations Commission is hereby SET ASIDE
and the Decision of the Labor Arbiter is reinstated with the MODIFICATION
that petitioner Coca-Cola Bottlers Phils., Inc. is ordered to pay private
respondent Alberto Navarro separation pay equivalent to one-half (1/2) month
salary for every year of service starting from November 1, 1987 until his
dismissal on February 27, 1998.
SO ORDERED.[10]
The appellate court also denied petitioners motion for reconsideration.
Hence the instant petition before us, raising the following issues:
-A-
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN
REVERSING AND SETTING ASIDE THE DECISION OF THE NLRC AND
REINSTATING, WITH MODIFICATION, THAT OF THE LABOR ARBITER
WHEN, OBVIOUSLY, THE RULING OF THE COMMISSION IS MORE IN
ACCORD WITH THE EVIDENCE AND SETTLED JURISPRUDENCE.
-B-
THE HONORABLE COURT OF APPEALS DID NOT HEED THE INJUNCTION
OF THIS HONORABLE COURT THAT: AS IS WELL-SETTLED, IF DOUBTS
EXIST BETWEEN THE EVIDENCE PRESENTED BY THE EMPLOYER AND
THE EMPLOYEE, THE SCALES OF JUSTICE MUST BE TILTED IN FAVOR OF
THE EMPLOYEE. SINCE IT IS A TIME-HONORED RULE THAT IN
CONTROVERSIES BETWEEN A LABORER AND HIS MASTER, DOUBTS
REASONABLY ARISING FROM THE EVIDENCE, OR IN THE
INTERPRETATION OF AGREEMENTS AND WRITINGS SHOULD BE
RESOLVED IN THE FORMERS FAVOR IN RENDERING THE DISPUTED
DECISION AND RESOLUTION.[11]
Raised also as the threshold issue in this petition is: WHETHER
PETITIONERS APPLICATION FOR LEAVE OF ABSENCE SHOULD HAVE
BEEN ALLOWED BY THE COMPANY.
Respondents contend that the application for leave was correctly denied, and
that petitioner violated the Employees Code of Disciplinary Rules and
Regulations when he incurred his tenth absence. Petitioner, on the other
hand, argues that his absence was excusable under the circumstances.
On this point, we are in agreement that petitioners application for leave
should have been approved by the company. His absence was due to a
fortuitous event outside of petitioners control.
In our view, petitioner had no wrongful, perverse or even negligent attitude,
intended to defy the order of his employer when he absented himself. He did
so because heavy rains flooded their residential area which was along the
railroad.[12] In his favor, the Barangay Captain certified that indeed there was
flooding in their place of residence.
A worker cannot be reasonably expected to anticipate times of sickness nor
emergency. Hence, to require prior notice of such times would be absurd. He
can only give proper notice after the occurrence of the event which is what
petitioner did in this case.
In earlier cases, we have expressed disapproval of dismissal of employees who
have absented themselves due to emergency circumstances. In Brew Master
International, Inc. v. National Federation of Labor Unions (NAFLU),[13] the
employees absence was precipitated by a grave family problem when his wife
unexpectedly deserted him and abandoned the family. Under said
circumstances, his absence was deemed justified. Similarly, in this case, the
reason for petitioners absence was not of his own doing much less to his
liking, thus we are of the view that he did not merit the extreme penalty of
dismissal from the service.
We reiterate that the State policy is to afford full protection to labor. When
conflicting interests of labor and capital are weighed on the scales of social
justice, the heavier influence of capital should be counterbalanced by the
compassion that the law accords the less privileged workingman.[14] Under
Article 279[15] of the Labor Code, an employee who is unjustly dismissed is
entitled to reinstatement, without loss of seniority rights and other privileges,
and to the payment of full backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from the time his
compensation was withheld from him.[16]
WHEREFORE, both the assailed Decision dated August 27, 2003 of the Court
of Appeals and its Resolution dated March 8, 2004 denying the motion for
reconsideration are REVERSED and SET ASIDE.
Respondent Coca-Cola Bottlers Phils., Inc. is hereby ORDERED:
(1) to immediately reinstate petitioner Navarro to his former position
without loss of seniority rights and other privileges;
(2) to pay his full backwages, inclusive of allowances, and his other
benefits or their monetary equivalent computed from the time he was illegally
dismissed up to the time of his actual reinstatement; and
(3) to pay petitioner Navarro attorneys fees equivalent to 10% of his total
monetary award.
Costs against respondents.
SO ORDERED.

FIRST DIVISION

G & M PHILIPPINES, INC., G.R. No. 162308

Petitioner,

Present:
PANGANIBAN, C.J., Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

ROMIL V. CUAMBOT,* Promulgated:

Respondent.
November 22, 2006
x--------------------------------------------------x
DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No.
64744, as well as the Resolution[2] dated February 20, 2004 denying the
motion for reconsideration thereof.
The antecedent facts are as follows:
On November 7, 1994, respondent Romil V. Cuambot applied for deployment
to Saudi Arabia as a car body builder with petitioner G & M Philippines, Inc.,
a duly licensed placement and recruitment agency. Respondents application
was duly processed and he later signed a two-year employment contract to
work at the Al Waha Workshop in Unaizah City, Gassim, Kingdom of Saudi
Arabia. He left the country on January 5, 1995. However, respondent did not
finish his contract and returned to the Philippines barely six months later, on
July 24, 1995. On July 26, 1995, he filed before the National Labor Relations
Commission (NLRC) a complaint for unpaid wages, withheld salaries, refund
of plane ticket and repatriation bond, later amended to include illegal
dismissal, claim for the unexpired portion of his employment contract, actual,
exemplary and moral damages, and attorneys fees. The complaint was
docketed as NLRC-NCR Case No. 00-07-05252-95.

Respondent narrated that he began working for Mohd Al Motairi,[3] the

President and General Manager of the Al Waha Workshop, on January 8,
1995. Along with his Filipino co-workers, he was subjected to inhuman and
unbearable working conditions, to wit:

1. [He] was required to work from 7:00 oclock in the morning to 10:00
oclock in the evening everyday, except Friday, or six (6) hours overtime work
daily from the usual eight (8) working hours per day.

2. [He] was never paid x x x his monthly basic salary of 1,200 [Riyals]
including his overtime pay for the six (6) hours overtime work he rendered
every working day during his work in Saudi Arabia except for the amount of
100 [Riyals] given every month for his meal allowance;

3. [He] was subjected to serious insult by respondent Muthiri everytime he

asked or demanded for his salary; and,

4. [S]ome of complainants letters that were sent by his family were not
given by respondent Muthiri and/or his staff x x x.[4]

When respondent asked Motairi for his salary, he was told that since a huge
sum had been paid to the agency for his recruitment and deployment, he
would only be paid after the said amount had already been recovered. He was
also told that his salary was only 800 Saudi Riyals (SAR) per month, in
contrast to the SAR1200 that was promised him under the contract. Motairi
warned that he would be sent home the next time he demanded for his salary.
Due to his familys incessant letters asking for financial support, however,
respondent mustered the courage to again demand for his salaries during the
second week of July 1996. True to his word, Motairi ordered him to pack up
and leave. He was able to purchase his plane ticket only through the
contributions of his fellow Filipinos. Motairi even accompanied him to the
airport when he bought his plane ticket. In the meantime, his wife had been
making inquiries about him.
To corroborate his claims, respondent submitted the following documents: an
undated letter[5] he had written addressed to the Philippine Labor Attach in
Riyadh, with Arabic translation;[6] his wifes letter[7] dated June 28, 1995
addressed to the Gulangco Monteverde Agency, Manila Head Office, asking
for a favor to help [her] husband to come home as early as possible; a fax
message[8] dated July 17, 1995 from a representative of the Land Bank of the
Philippines (LBP) to a
counterpart in Riyadh, asking for assistance to locate respondent;[9] and the

reply[10] from the Riyadh LBP representative requesting for contact numbers
to facilitate communication with respondent.

Respondent further claimed that his employers actuations violated Articles 83

and 103 of the Labor Code. While he was entitled to terminate his employment
in accordance with Article 285 (b) due to the treatment he received, he did not
exercise this right. He was nevertheless illegally dismissed by his employer
when he tried to collect the salaries due him. Respondent further claimed that
the reduction of his monthly salary from SAR1,200 to SAR800 and petitioners
failure to furnish him a copy of the employment contract before his departure
amounted to prohibited practices under Article 34 (i) and (k) of the Labor
Code.

Respondent prayed for the following relief:

WHEREFORE, premises considered, complainant most respectfully prays

unto this Honorable Office that the instant complaint be given due course and
that a decision be rendered in his favor and against
respondents G & M (Phils.), Inc., Alwaha (sic) Workshop and/or Muhamd (sic)
Muthiri, as follows:
(1) Ordering the respondents to pay, jointly and severally, complainant
the unpaid salaries and overtime pay in the amounts of P61,560.00 and
P66,484.80, respectively, including interests, until the same will be fully paid;

(2) Ordering the respondents to pay, jointly and severally, complainant[s]

salary for the unexpired portion of the contract in the amount of P184,680.00,
including interests, until the same will be fully paid;

(3) Ordering the respondents to pay, jointly and severally, complainant[s]

actual expenses which he incurred in applying for the job, including expenses
in leaving for the job, including expenses in leaving for Saudi Arabia and plane
ticket, as well as repatriation bond and incidental expenses in going home to
the Philippines in the amounts of P49,000.00 and P20,000.00, respectively,
including interests, until the same will be fully paid;

(4) Ordering the respondents to pay, jointly and severally, complainant

moral damages in the amount of P150,000.00 and exemplary damages in the
amount of P150,000.00, including interests, until the same will be fully paid;

(5) Ordering the respondents to pay, jointly and severally, complainant for
and as attorneys fees in the amount of P68,172.48 or the amount equivalent
to 10% of the total amount of the foregoing claims and damages that may be
awarded by the Honorable Office to the complainant.[11]

In its position paper, petitioner alleged that respondent was deployed for
overseas work as car body builder for its Principal Golden Wings Est. for
General Services and Recruitment in Saudi Arabia for an employment period
of 24 months, with a monthly salary of US$400.00.[12] It insisted that
respondent was religiously paid his salaries as they fell due. After working for
a little over seven months, respondent pleaded with his employer to be allowed
to return home since there were family problems he had to settle personally.
Respondent even submitted a resignation letter[13] dated July 23, 1995.

To support its claim that respondent had been paid his salaries as they fell
due, petitioner submitted in evidence copies of seven payslip[14]
authenticated by the Philippine Labor Attach in Riyadh, Saudi Arabia.
Petitioner asserted that since respondent only worked for a little over seven
months and did not finish his contract, he should pay the cost of the plane
ticket. It pointed out that according to the standard employment contract, the
employer would provide the employee with a free plane ticket for the flight
home only if the worker finishes his contract.

Respondent countered that his signatures in the purported payslips were

forged. He denied having received his salaries for the said period, except only
for the SAR100 as monthly allowance. He pointed out that the authentication
of the alleged pay slips and resignation letter before the labor attach in Riyadh
is immaterial, since the documents themselves were falsified.

Respondent further claimed that petitioner required him to pay a P10,000.00

placement fee and that he had to borrow P2,000.00 from a relative. He was
then told that the amount would be considered as an advance payment and
that the balance would be deducted from his salary. He was not, however,
given any receipt. He insisted that the employment contract which he signed
indicated that he was supposed to receive a monthly salary of SAR1,200 for
working eight hours a day, excluding overtime pay. He was repeatedly
promised to be furnished a copy of the contract and was later told that it
would be given to his wife, Minda. However, she was also given the run-
around and was told that the contract had already been given to her husband.

To counter the allegation of forgery, petitioner claimed that there was a great
possibility that respondent had changed his signature while abroad so that
he could file a complaint for illegal dismissal upon his return. The argument
that the stroke and handwriting on the payslip was written by one and the
same person is mere conjecture, as respondent could have requested
someone, i.e., the cashier, to prepare the resignation letter for him. While it is
the employer who fills up the pay slip, respondent could have asked another
employee to prepare the resignation letter, particularly if he (respondent) did
not know how to phrase it himself. Moreover, it could not be presumed that
the payslip and resignation letter were prepared by one and the same person,
as respondent is not a handwriting expert. Petitioner further pointed out that
respondent has different signatures, not only in the pleadings submitted
before the Labor Arbiter, but also in respondents personal documents.
On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of respondent
on the following ratiocination:

What convinced this Arbitration Branch about the unreliability of the

complainants signature in the payslip is the close semblance of the
handwritings in the payslips and the handwritings in the purported
handwritten resignation of the complainant. It unmistakably appears to this
Arbitration Branch that the payslips as well as the handwritten letter-
resignation were prepared by one and the same person. If it were true that the
handwritten letter-resignation was prepared by the complainant, it follows
that he also prepared the payslips because the handwritings in both
documents are exactly the same and identical. But [this] is quite unbelievable
that complainant himself as the payee prepared the payslips with the
corresponding entries therein in his own handwriting. Under the
circumstances, the only logical conclusion is that both the payslips and the
handwritten letter-resignation were prepared and signed by one and the same
person definitely not the complainant.

With the foregoing findings and conclusions, this Arbitration Branch is of the
well-considered view that complainant was not paid his salaries from January
5, 1995 up to July 23, 1995 and that he was unjustifiably dismissed from his
employment when he repeatedly demanded for his unpaid salaries.
Respondents are, therefore, liable to pay the complainant his salaries from
January 5, 1995 up to July 23, 1995 which amount to US$2,640.00 (US$400
x 6.6 mos). Further, respondents are also liable to the complainant for the
latters salaries for the unexpired portion of his contract up to the maximum
of three (3) months pursuant to Section 10 of RA 8042, which amount to
US$1,200.00. Respondents must also refund complainants plane fare for his
return flight. And finally, being compelled to litigate his claims, it is but just
and x x x that complainant must be awarded attorneys fees at the rate of ten
percent (10%) of the judgment award.

WHEREFORE, all the foregoing premises considered, judgment is hereby

rendered ordering the respondents to pay complainant the aggregate sum of
US$3,840.00 or its equivalent in Philippine Currency at the exchange rate
prevailing at the time of payment, and to refund complainants plane fare for
his return flight. Further, respondents are ordered to pay complainant
attorneys fees at the rate of Ten percent (10%) of the foregoing judgment
award.[15]

Petitioner appealed the Decision of the Labor Arbiter to the NLRC, alleging
that the Labor Arbiter, not being a handwriting expert, committed grave abuse
of discretion amounting to lack of jurisdiction in finding for respondent. In its
Decision[16] dated December 9, 1997, the NLRC upheld this contention and
remanded the case to the Arbitration Branch of origin for referral to the
government agency concerned for calligraphy examination of the questioned
documents.[17]
The case was then re-raffled to Labor Arbiter Enrico Angelo Portillo. On
September 11, 1998, the parties agreed to a resetting to enable petitioner to
secure the original copies of documents from its foreign principal. However,
on December 9, 1998, the parties agreed to submit the case for resolution
based on the pleadings and on the evidence on record.

This time, the complaint was dismissed for lack of merit. According to Labor
Arbiter Portillo, aside from respondents bare allegations, he failed to
substantiate his claim of poor working conditions and long hours of
employment. The fact that he executed a handwritten resignation letter is
enough evidence of the fact that he voluntarily resigned from work. Moreover,
respondent failed to submit any evidence to refute the pay slips duly signed
and authenticated by the labor attach in Saudi Arabia, inasmuch as their
probative value cannot be impugned by mere self-serving allegations. The
Labor Arbiter concluded that as between the oral allegations of workers that
they were not paid monetary benefits and the documentary evidence
presented by employer, the latter should prevail. [18]

Respondent appealed the decision before the NLRC, alleging that the Labor
Arbiter failed to consider the genuineness of the signature which appears in
the purported resignation letter dated July 23, 1995, as well as those that
appear in the seven pay slips. He insisted that these documents should have
been endorsed to the National Bureau of Investigation Questioned Documents
Division or the Philippine National Police Crime Laboratory for calligraphy
examination.

The NLRC dismissed the appeal for lack of merit in a Resolution[19] dated
December 27, 2000. It held that the questioned documents could not be
endorsed to the agency concerned since mere photocopies had been
submitted in evidence. The records also revealed that petitioner had
communicated to the foreign employer abroad, who sent the original copies,
but there was no response from respondent. It also stressed that during the
December 9, 1998 hearing, the parties agreed to submit the case for
resolution on the basis of the pleadings and the evidence on record; if
respondent had wanted to have the documents endorsed to the NBI or the
PNP, he should have insisted that the documents be examined by a
handwriting expert of the government. Thus, respondent was estopped from
assailing the Labor Arbiters ruling.

Unsatisfied, respondent elevated the matter to the CA via petition for

certiorari. He pointed out that he merely acceded to the submission of the
case for resolution due to the inordinate delays in the case. Moreover, the
questioned documents were within petitioners control, and it was petitioner
that repeatedly failed to produce the original copies.

The CA reversed the ruling of the NLRC. According to the appellate court, a
visual examination of the questioned signatures would instantly reveal
significant differences in the handwriting movement, stroke, and structure,
as well as the quality of lines of the signatures; Labor Arbiter Portillo
committed patent error in examining the signatures, and it is the decision of
Labor Arbiter De Vera which must be upheld. The CA also pointed out the
initial ruling of the NLRC (Second Division) dated December 9, 1997 which
set aside the earlier decision of Labor Arbiter De Vera included a special
directive to the Arbitration Branch of origin to endorse the questioned
documents for calligraphy examination. However, respondent Cuambot failed
to produce original copies of the documents; hence, Labor Arbiter Portillo
proceeded with the case and ruled in favor of petitioner G.M.Phils. The
dispositive portion of the CA ruling reads:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED.

Accordingly, the assailed Resolutions dated 27 December 2000 and 12
February 2001, respectively, of the NLRC Second Division are hereby SET
ASIDE and the Decision dated 20 February 1997 rendered by Labor Arbiter
Jose De Vera is hereby REINSTATED.[20]

Petitioner filed a motion for reconsideration, which the CA denied for lack of
merit in its Resolution[21] dated February 20, 2004.

Hence, the present petition, where petitioner claims that

THE COURT OF APPEALS GRAVELY ERRED ON A MATTER OF LAW IN

HOLDING THAT LABOR ARBITER ENRICO PORTILLO GRAVELY ABUSED
HIS DISCRETION WHEN HE HELD THAT THE SIGNATURES APPEARING ON
THE QUESTIONED DOCUMENTS ARE THOSE OF THE PETITIONER.[22]

Petitioner points out that most of the signatures which Labor Arbiter De Vera
used as standards for comparison with the signatures appearing on the
questioned documents were those in the pleadings filed by the respondent
long after the questioned documents had been supposedly signed by him. It
claims that respondent affixed his signatures on the pleadings in question
and intentionally made them different from his true signature so that he could
later on conveniently impugn their authenticity. Petitioner claims that had
Labor Arbiter De Vera taken pains in considering these circumstances, he
could have determined that respondent may have actually intentionally given
a different name and slightly changed his signature in his application, which
name and signature he used when he signed the questioned letter of
resignation and payslips, only to conveniently disown the same when he came
back to the country to file the present case.[23] Thus, according to petitioner,
the CA clearly committed a palpable error of law when it reversed the ruling
of the NLRC, which in turn affirmed Labor Arbiter Portillos decision.

For his part, respondent contends that petitioners arguments were already
raised in the pleadings filed before Labor Arbiter De Vera which had already
been passed upon squarely in the Labor Arbiters Decision of January 30,
1997.

The determinative issues in this case are essentially factual in nature - (a)
whether the signatures of respondent in the payslips are mere forgeries, and
(b) whether respondent executed the resignation letter. Generally, it is not our
function to review findings of fact. However, in case of a divergence in the
findings and conclusions of the NLRC on the one hand, and those of the Labor
Arbiter and the CA on the other, the Court may examine the evidence
presented by the parties to determine whether or not the employee was
illegally dismissed or voluntarily resigned from employment.[24] The instant
case thus falls within the exception.

We have carefully examined the evidence on record and find that the petition
must fail.

In its Decision[25] dated December 9, 1997, the NLRC had ordered the case
remanded to the Labor Arbiter precisely so that the questioned documents
purportedly signed/executed by respondent could be subjected to calligraphy
examination by experts. It is precisely where a judgment or ruling fails to
make findings of fact that the case may be remanded to the lower tribunal to
enable it to determine them.[26] However, instead of referring the questioned
documents to the NBI or the PNP as mandated by the Commissions ruling,
Labor Arbiter Portillo proceeded to rule in favor of petitioner, concluding that
respondents signatures were not forged, and as such, respondents separation
from employment was purely voluntary. In fine, then, the Labor Arbiter
gravely abused his discretion when he ruled in favor of petitioner without
abiding by the Commissions directive.

We note, however, that a remand of the case at this juncture would only result
in unnecessary delay, especially considering that this case has been pending
since 1995. Indeed, it is this Courts duty to settle, whenever possible, the
entire controversy in a single proceeding, leaving no root or branch to bear
the seeds of future litigation.[27] Hence, the case shall be fully resolved on its
merits.

We find that petitioners failure to submit the original copies of the pay slips
and the resignation letter raises doubts as to the veracity of its claim that they
were actually signed/penned by respondent. The failure of a party to produce
the original copy of the document which is in issue has been taken against
such party, and has even been considered as a mere bargaining chip, a
dilatory tactic so that such party would be granted the opportunity to adduce
controverting evidence.[28] In fact, petitioner did not even present in evidence
the original copy of the employment contract, much less a machine copy,
giving credence to respondents claim that he was not at all given a copy of the
employment contract after he signed it. What petitioner presented was a mere
photocopy of the OCW Info Sheet[29] issued by the Philippine Overseas
Employment Administration as well as the Personal Data Sheet[30] which
respondent filled up. It bears stressing that the original copies of all these
documents, including the employment contract, were in the possession of
petitioner, or, at the very least, petitioners principal.

Moreover, as correctly noted by the CA, the opinions of handwriting experts,

although helpful in the examination of forged documents because of the
technical procedure involved in the analysis, are not binding upon the
courts.[31] As such, resort to these experts is not mandatory or indispensable
to the examination or the comparison of handwriting. A finding of forgery does
not depend entirely on the testimonies of handwriting experts, because the
judge must conduct an independent examination of the questioned signature
in order to arrive at a reasonable conclusion as to its authenticity.[32] No less
than Section 22, Rule 132 of the Rules of Court explicitly authorizes the court,
by itself, to make a comparison of the disputed handwriting with writings
admitted or treated as genuine by the party against whom the evidence is
offered or proved to be genuine to the satisfaction of the judge. Indeed, the
authenticity of signatures is not a highly technical issue in the same sense
that questions concerning, e.g., quantum physics or topology, or molecular
biology, would constitute matters of a highly technical nature. The opinion of
a handwriting expert on the genuineness of a questioned signature is certainly
much less compelling upon a judge than an opinion rendered by a specialist
on a highly technical issue.[33]

Even a cursory perusal of the resignation letter[34] and the handwritten pay
slips will readily show that they were written by only one person. A mere
layman will immediately notice that the strokes and letters in the documents
are very similar, if not identical, to one another. It is also quite apparent from
a comparison of the signatures in the pay slips that they are inconsistent,
irregular, with uneven and faltering strokes.

We also find it unbelievable that after having waited for so long to be deployed
to Saudi Arabia and with the hopes of opportunity to earn a better living
within his reach, respondent would just suddenly decide to abandon his work
and go home due to family problems. At the very least, respondent could have
at least specified the reason or elaborated on the details of such an urgent
matter so as not to jeopardize future employment opportunities.

That respondent also filed the complaint immediately gives more credence to
his claim that he was illegally dismissed. He arrived in the Philippines on July
24, 1995, and immediately filed his complaint for illegal dismissal two days
later, on July 26, 1995.

We are not impervious of petitioners claim that respondent could have asked
another person to execute the resignation letter for him. However, petitioner
failed to present even an affidavit from a representative of its foreign principal
in order to support this allegation.

Indeed, the rule is that all doubts in the implementation and the
interpretation of the Labor Code shall be resolved in favor of labor,[35] in order
to give effect to the policy of the State to afford protection to labor, promote
full employment, ensure equal work opportunities regardless of sex, race or
creed, and regulate the relations between workers and employers, and to
assure the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work.[36] We reiterate
the following pronouncement in Nicario v. National Labor Relations
Commission:[37]

It is a well-settled doctrine, that if doubts exist between the evidence

presented by the employer and the employee, the scales of justice must be
tilted in favor of the latter. It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably arising from the
evidence, or in the interpretation of agreements and writing should be
resolved in the formers favor. The policy is to extend the doctrine to a greater
number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and
protection of labor.
Moreover, one who pleads payment has the burden of proving it. The reason
for the rule is that the pertinent personnel files, payrolls, records, remittances
and other similar documents which will show that overtime, differentials,
service incentive leave, and other claims of workers have been paid are not in
the possession of the worker but in the custody and absolute control of the
employer. Thus, the burden of showing with legal certainty that the obligation
has been discharged with payment falls on the debtor, in accordance with the
rule that one who pleads payment has the burden of proving it.[38] Only when
the debtor introduces evidence that the obligation has been extinguished does
the burden shift to the creditor, who is then under a duty of producing
evidence to show why payment does not extinguish the obligation.[39] In this
case, petitioner was unable to present ample evidence to prove its claim that
respondent had received all his salaries and benefits in full.
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED for lack of merit.
The Decision of the Court of Appeals in CA-G.R. SP No. 64744 is AFFIRMED.
Costs against the petitioners.

SO ORDERED.

FIRST DIVISION

ANGELINA FRANCISCO, G.R. No. 170087

Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks
to annul and set aside the Decision and Resolution of the Court of Appeals
dated October 29, 2004[1] and October 7, 2005,[2] respectively, in CA-G.R.
SP No. 78515 dismissing the complaint for constructive dismissal filed by
herein petitioner Angelina Francisco. The appellate court reversed and set
aside the Decision of the National Labor Relations Commission (NLRC) dated
April 15, 2003,[3] in NLRC NCR CA No. 032766-02 which affirmed with
modification the decision of the Labor Arbiter dated July 31, 2002,[4] in
NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were
liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation

stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the
company.[5]
Although she was designated as Corporate Secretary, she was not entrusted
with the corporate documents; neither did she attend any board meeting nor
required to do so. She never prepared any legal document and never
represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company.[6]

In 1996, petitioner was designated Acting Manager. The corporation also hired
Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner
was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings
with government agencies, especially with the Bureau of Internal Revenue
(BIR), Social Security System (SSS) and in the city government of Makati; and
to administer all other matters pertaining to the operation of Kasei Restaurant
which is owned and operated by Kasei Corporation.[7]

For five years, petitioner performed the duties of Acting Manager. As of

December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation.[8]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.

Petitioner alleged that she was required to sign a prepared resolution for her
replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of
all employees of Kasei Corporation and announced that nothing had changed
and that petitioner was still connected with Kasei Corporation as Technical
Assistant to Seiji Kamura and in charge of all BIR matters.[9]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month

beginning January up to September 2001 for a total reduction of P22,500.00
as of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did
not receive her salary from the company. She made repeated follow-ups with
the company cashier but she was advised that the company was not earning
well.[10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest
of the officers but she was informed that she is no longer connected with the
company.[11]
Since she was no longer paid her salary, petitioner did not report for work and
filed an action for constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei

Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as
Corporate Secretary. As technical consultant, petitioner performed her work
at her own discretion without control and supervision of Kasei Corporation.
Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to
time, the management would ask her opinion on matters relating to her
profession. Petitioner did not go through the usual procedure of selection of
employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner
from the corporation was her professional fee subject to the 10% expanded
withholding tax on professionals, and that she was not one of those reported
to the BIR or SSS as one of the companys employees.[12]

Petitioners designation as technical consultant depended solely upon the will

of management. As such, her consultancy may be terminated any time
considering that her services were only temporary in nature and dependent
on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private

respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding
tax which included petitioner. SSS records were also submitted showing that
petitioners latest employer was Seiji Corporation.[13]

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position
without loss of seniority rights and jointly and severally pay complainant her
money claims in accordance with the following computation:

a. Backwages 10/2001 07/2002 275,000.00

(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay

complainant separation pay with additional backwages that would accrue up
to actual payment of separation pay.

SO ORDERED.[14]

On April 15, 2003, the NLRC affirmed with modification the Decision of the
Labor Arbiter, the dispositive portion of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED

as follows:

1) Respondents are directed to pay complainant separation pay computed at

one month per year of service in addition to full backwages from October 2001
to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in
profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorneys fees shall be based on salary differential award
only;

4) The awards representing salary differentials, housing allowance, mid year

bonus and 13th month pay are AFFIRMED.

SO ORDERED.[15]

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the

National Labor Relations Commissions dated April 15, 2003 is hereby
REVERSED and SET ASIDE and a new one is hereby rendered dismissing the
complaint filed by private respondent against Kasei Corporation, et al. for
constructive dismissal.

SO ORDERED.[16]

The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.

The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent
Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National
Labor Relations Commission on one hand, and the Court of Appeals on the
other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial
evidence.[17]
We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has
been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test
where the person for whom the services are performed reserves a right to
control not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control, the existing
economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, can help in determining the existence of an
employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of
such a relationship where several positions have been held by the worker.
There are instances when, aside from the employers power to control the
employee with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving:

(1) the putative employers power to control the employee with respect to the
means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which

would take into consideration the totality of circumstances surrounding the
true nature of the relationship between the parties. This is especially
appropriate in this case where there is no written agreement or terms of
reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the
worker over the period of the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan
and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we held
that there is an employer-employee relationship when the person for whom
the services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the

existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls,
to give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of
the worker.

Thus, the determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity,[22] such as:
(1) the extent to which the services performed are an integral part of the
employers business; (2) the extent of the workers investment in equipment
and facilities; (3) the nature and degree of control exercised by the employer;
(4) the workers opportunity for profit and loss; (5) the amount of initiative,
skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship
between the worker and the employer; and (7) the degree of dependency of the
worker upon the employer for his continued employment in that line of
business.[23]

The proper standard of economic dependence is whether the worker is

dependent on the alleged employer for his continued employment in that line
of business.[24] In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal
Labor Standards Act is dependency.[25] By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes
of the Labor Code ought to be the economic dependence of the worker on his
employer.

By applying the control test, there is no doubt that petitioner is an employee

of Kasei Corporation because she was under the direct control and
supervision of Seiji Kamura, the corporations Technical Consultant. She
reported for work regularly and served in various capacities as Accountant,
Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering
accounting and tax services to the company and performing functions
necessary and desirable for the proper operation of the corporation such as
securing business permits and other licenses over an indefinite period of
engagement.
Under the broader economic reality test, the petitioner can likewise be said to
be an employee of respondent corporation because she had served the
company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from
August 1, 1999 to December 18, 2000.[26] When petitioner was designated
General Manager, respondent corporation made a report to the SSS signed by
Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy
of the SSS specimen signature card which was signed by the President of
Kasei Corporation and the inclusion of her name in the on-line inquiry system
of the SSS evinces the existence of an employer-employee relationship
between petitioner and respondent corporation.[27]

It is therefore apparent that petitioner is economically dependent on

respondent corporation for her continued employment in the latters line of
business.

In Domasig v. National Labor Relations Commission,[28] we held that in a

business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers covering
petitioners salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an
employee of private respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its

workers with the SSS is proof that the latter were the formers employees. The
coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of petitioners
job was as Kamuras direct assistant with the duty of acting as Liaison Officer
in representing the company to secure construction permits, license to
operate and other requirements imposed by government agencies. Petitioner
was never entrusted with corporate documents of the company, nor required
to attend the meeting of the corporation. She was never privy to the
preparation of any document for the corporation, although once in a while she
was required to sign prepared documentation for the company.[30]

The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself
from the records of the case.[31] Regardless of this fact, we are convinced that
the allegations in the first affidavit are sufficient to establish that petitioner is
an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one,
courts do not generally look with favor on any retraction or recanted
testimony, for it could have been secured by considerations other than to tell
the truth and would make solemn trials a mockery and place the investigation
of the truth at the mercy of unscrupulous witnesses.[32] A recantation does
not necessarily cancel an earlier declaration, but like any other testimony the
same is subject to the test of credibility and should be received with
caution.[33]

Based on the foregoing, there can be no other conclusion that petitioner is an

employee of respondent Kasei Corporation. She was selected and engaged by
the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main
job function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement.
Respondent corporation hired and engaged petitioner for compensation, with
the power to dismiss her for cause. More importantly, respondent corporation
had the power to control petitioner with the means and methods by which the
work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her

salary by P2,500 a month from January to September 2001. This amounts to
an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and
confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary resignation
resulting in cessation of work resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a demotion in
rank or a diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to an employee.[35] In Globe
Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee ceases
to work due to a demotion of rank or a diminution of pay, an unreasonable
situation arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer. Hence,
her severance from the company was not of her own making and therefore
amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply the
Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare
and reaffirming it as a primary social economic force in furtherance of social
justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the

Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the
National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, is REINSTATED. The case is REMANDED to the Labor Arbiter
for the recomputation of petitioner Angelina Franciscos 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.

SECOND DIVISION

G.R. No. 73887 December 21, 1989

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,

vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION,
respondents.

G.A. Fortun and Associates for petitioner.

Corsino B. Soco for private respondent.

PARAS J.:

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

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

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

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

Petitioner company moved to reconsider, which was denied, hence this

petition for review raising four legal issues to wit:

I. Whether the relationship between insurance agents and their principal,

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

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

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

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

Petitioner admits that on June 9, 1976, private respondent Judico entered

into an agreement of agency with petitioner Grepalife to become a debit agent
attached to the industrial life agency in Cebu City. Petitioner defines a debit
agent as "an insurance agent selling/servicing industrial life plans and policy
holders. Industrial life plans are those whose premiums are payable either
daily, weekly or monthly and which are collectible by the debit agents at the
home or any place designated by the policy holder" (p. 156, Rollo). Such
admission is in line with the findings of public respondent that as such debit
agent, private respondent Judico had definite work assignments including but
not limited to collection of premiums from policy holders and selling insurance
to prospective clients. Public respondent NLRC also found out that
complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks
regardless of production and later a certain percentage denominated as sales
reserve of his total collections but not lesser than P 200.00. Sometime in
September 1981, complainant was promoted to the position of Zone
Supervisor and was given additional (supervisor's) allowance fixed at P110.00
per week. During the third week of November 1981, he was reverted to his
former position as debit agent but, for unknown reasons, not paid so-called
weekly sales reserve of at least P 200.00. Finally on June 28, 1982,
complainant was dismissed by way of termination of his agency contract.

Petitioner assails the findings of the NLRC that private respondent is an

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

Said contentions of petitioner are strongly rejected by private respondent. He

maintains that he received a definite amount as his Wage known as "sales
reserve" the failure to maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P 200.00 regardless of production.
He was assigned a definite place in the office to work on when he is not in the
field; and in addition to canvassing and making regular reports, he was
burdened with the job of collection and to make regular weekly report thereto
for which an anemic performance would mean dismissal. He earned out of his
faithful and productive service, a promotion to Zone Supervisor with
additional supervisor's allowance, (a definite or fixed amount of P110.00) that
he was dismissed primarily because of anemic performance and not because
of the termination of the contract of agency substantiate the fact that he was
indeed an employee of the petitioner and not an insurance agent in the
ordinary meaning of the term.

That private respondent Judico was an agent of the petitioner is

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

Applying the aforementioned test to the case at bar, We can readily see that
the element of control by the petitioner on Judico was very much present. The
record shows that petitioner Judico received a definite minimum amount per
week as his wage known as "sales reserve" wherein the failure to maintain the
same would bring him back to a beginner's employment with a fixed weekly
wage of P 200.00 for thirteen weeks regardless of production. He was assigned
a definite place in the office to work on when he is not in the field; and in
addition to his canvassing work he was burdened with the job of collection.
In both cases he was required to make regular report to the company
regarding these duties, and for which an anemic performance would mean a
dismissal. Conversely faithful and productive service earned him a promotion
to Zone Supervisor with additional supervisor's allowance, a definite amount
of P110.00 aside from the regular P 200.00 weekly "allowance". Furthermore,
his contract of services with petitioner is not for a piece of work nor for a
definite period.

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

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

SO ORDERED.
EN BANC

GREGORIO V. TONGKO,
Petitioner,

- versus -

THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO

A. VERGEL DE DIOS,
Respondents.

G.R. No. 167622

Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.
Promulgated:

January 25, 2011

x-----------------------------------------------------------------------------------------x

RESOLUTION

BRION, J.:

We resolve petitioner Gregorio V. Tongkos bid, through his Motion for

Reconsideration,[1] to set aside our June 29, 2010 Resolution that reversed
our Decision of November 7, 2008.[2] With the reversal, the assailed June 29,
2010 Resolution effectively affirmed the Court of Appeals ruling[3] in CA-G.R.
SP No. 88253 that the petitioner was an insurance agent, not the employee,
of the respondent The Manufacturers Life Insurance Co. (Phils.), Inc.
(Manulife).
In his Motion for Reconsideration, petitioner reiterates the arguments he had
belabored in his petition and various other submissions. He argues that for
19 years, he performed administrative functions and exercised supervisory
authority over employees and agents of Manulife, in addition to his insurance
agent functions.[4] In these 19 years, he was designated as a Unit Manager,
a Branch Manager and a Regional Sales Manager, and now posits that he was
not only an insurance agent for Manulife but was its employee as well.

We find no basis or any error to merit the reconsideration of our June 29,
2010 Resolution.

A. Labor Law Control = Employment Relationship

Control over the performance of the task of one providing service both with
respect to the means and manner, and the results of the service is the primary
element in determining whether an employment relationship exists. We
resolve the petitioners Motion against his favor since he failed to show that
the control Manulife exercised over him was the control required to exist in
an employer-employee relationship; Manulifes control fell short of this norm
and carried only the characteristic of the relationship between an insurance
company and its agents, as defined by the Insurance Code and by the law of
agency under the Civil Code.

The petitioner asserts in his Motion that Manulifes labor law control over him
was demonstrated (1) when it set the objectives and sales targets regarding
production, recruitment and training programs; and (2) when it prescribed
the Code of Conduct for Agents and the Manulife Financial Code of Conduct
to govern his activities.[5] We find no merit in these contentions.

In our June 29, 2010 Resolution, we noted that there are built-in elements of
control specific to an insurance agency, which do not amount to the elements
of control that characterize an employment relationship governed by the Labor
Code. The Insurance Code provides definite parameters in the way an agent
negotiates for the sale of the companys insurance products, his collection
activities and his delivery of the insurance contract or policy.[6] In addition,
the Civil Code defines an agent as a person who binds himself to do something
in behalf of another, with the consent or authority of the latter.[7] Article 1887
of the Civil Code also provides that in the execution of the agency, the agent
shall act in accordance with the instructions of the principal.
All these, read without any clear understanding of fine legal distinctions,
appear to speak of control by the insurance company over its agents. They
are, however, controls aimed only at specific results in undertaking an
insurance agency, and are, in fact, parameters set by law in defining an
insurance agency and the attendant duties and responsibilities an insurance
agent must observe and undertake. They do not reach the level of control into
the means and manner of doing an assigned task that invariably characterizes
an employment relationship as defined by labor law. From this perspective,
the petitioners contentions cannot prevail.

To reiterate, guidelines indicative of labor law control do not merely relate to

the mutually desirable result intended by the contractual relationship; they
must have the nature of dictating the means and methods to be employed in
attaining the result.[8] Tested by this norm, Manulifes instructions regarding
the objectives and sales targets, in connection with the training and
engagement of other agents, are among the directives that the principal may
impose on the agent to achieve the assigned tasks. They are targeted results
that Manulife wishes to attain through its agents. Manulifes codes of conduct,
likewise, do not necessarily intrude into the insurance agents means and
manner of conducting their sales. Codes of conduct are norms or standards
of behavior rather than employer directives into how specific tasks are to be
done. These codes, as well as insurance industry rules and regulations, are
not per se indicative of labor law control under our jurisprudence.[9]

The duties[10] that the petitioner enumerated in his Motion are not supported
by evidence and, therefore, deserve scant consideration. Even assuming their
existence, however, they mostly pertain to the duties of an insurance agent
such as remitting insurance fees to Manulife, delivering policies to the
insured, and after-sale services. For agents leading other agents, these
include the task of overseeing other insurance agents, the recruitment of
other insurance agents engaged by Manulife as principal, and ensuring that
these other agents comply with the paperwork necessary in selling insurance.
That Manulife exercises the power to assign and remove agents under the
petitioners supervision is in keeping with its role as a principal in an agency
relationship; they are Manulife agents in the same manner that the petitioner
had all along been a Manulife agent.

The petitioner also questions Manulifes act of investing him with different
titles and positions in the course of their relationship, given the respondents
position that he simply functioned as an insurance agent.[11] He also
considers it an unjust and inequitable situation that he would be unrewarded
for the years he spent as a unit manager, a branch manager, and a regional
sales manager.[12]

Based on the evidence on record, the petitioners occupation was to sell

Manulifes insurance policies and products from 1977 until the termination of
the Career Agents Agreement (Agreement). The evidence also shows that
through the years, Manulife permitted him to exercise guiding authority over
other agents who operate under their own agency agreements with Manulife
and whose commissions he shared.[13] Under this scheme an arrangement
that pervades the insurance industry petitioner in effect became a lead agent
and his own commissions increased as they included his share in the
commissions of the other agents;[14] he also received greater reimbursements
for expenses and was allowed to use Manulifes facilities. His designation also
changed from unit manager to branch manager and then to regional sales
manager, to reflect the increase in the number of agents he recruited and
guided, as well as the increase in the area where these agents operated.

As our assailed Resolution concluded and as we now similarly conclude, these

arrangements, and the titles and positions the petitioner was invested with,
did not change his status from the insurance agent that he had always been
(as evidenced by the Agreement that governed his relationship with Manulife
from the start to its disagreeable end). The petitioner simply progressed from
his individual agency to being a lead agent who could use other agents in
selling insurance and share in the earnings of these other agents.

In sum, we find absolutely no evidence of labor law control, as extensively

discussed in our Resolution of June 29, 2010, granting Manulifes motion for
reconsideration. The Dissent, unfortunately, misses this point.

B. No Resulting Inequity

We also do not agree that our assailed Resolution has the effect of fostering
an inequitable or unjust situation. The records show that the petitioner was
very amply paid for his services as an insurance agent, who also shared in
the commissions of the other agents under his guidance. In 1997, his income
was P2,822,620; in 1998, P4,805,166.34; in 1999, P6,797,814.05; in 2001,
P6,214,737.11; and in 2002, P8,003,180.38. All these he earned as an
insurance agent, as he failed to ever prove that he earned these sums as an
employee. In technical terms, he could not have earned all these as an
employee because he failed to provide the substantial evidence required in
administrative cases to support the finding that he was a Manulife employee.
No inequity results under this legal situation; what would be unjust is an
award of backwages and separation pay amounts that are not due him
because he was never an employee.

The Dissents discussion on this aspect of the case begins with the wide
disparity in the status of the parties that Manulife is a big Canadian insurance
company while Tongko is but a single agent of Manulife. The Dissent then
went on to say that [i]f is but just, it is but right, that the Court interprets the
relationship between Tongko and Manulife as one of employment under labor
laws and to uphold his constitutionally protected right, as an employee, to
security of tenure and entitlement to monetary award should such right be
infringed.[15] We cannot simply invoke the magical formula by creating an
employment relationship even when there is none because of the unavoidable
and inherently weak position of an individual over a giant corporation.

The Dissent likewise alluded to an ambiguity in the true relationship of the

parties after Tongkos successive appointments. We already pointed out that
the legal significance of these appointments had not been sufficiently
explained and that it did not help that Tongko never bothered to present
evidence on this point. The Dissent recognized this but tried to excuse Tongko
from this failure in the subsequent discussion, as follows:

[o]ther evidence was adduced to show such duties and responsibilities. For
one, in his letter of November 6, 2001, respondent De Dios addressed
petitioner as sales manager. And as I wrote in my Dissent to the June 29,
2010 Resolution, it is difficult to imagine that Manulife did not issue
promotional appointments to petitioner as unit manager, branch manager,
and, eventually, regional sales manager. Sound management practice simply
requires an appointment for any upward personnel movement, particularly
when additional functions and the corresponding increase in compensation
are involved. Then, too, the adverted affidavits of the managers of Manulife as
to the duties and responsibilities of a unit manager, such as petitioner, point
to the conclusion that these managers were employees of Manulife, applying
the four-fold test.[16]

This Court (and all adjudicators for that matter) cannot and should not fill in
the evidentiary gaps in a partys case that the party failed to support; we
cannot and should not take the cudgels for any party. Tongko failed to support
his cause and we should simply view him and his case as they are; our duty
is to sit as a judge in the case that he and the respondent presented.

To support its arguments on equity, the Dissent uses the Constitution and
the Civil Code, using provisions and principles that are all motherhood
statements. The mandate of the Court, of course, is to decide cases based on
the facts and the law, and not to base its conclusions on fundamental
precepts that are far removed from the particular case presented before it.
When there is no room for their application, of capacity of principles, reliance
on the application of these fundamental principles is misplaced.

C. Earnings were Commissions

That his earnings were agents commissions arising from his work as an
insurance agent is a matter that the petitioner cannot deny, as these are the
declarations and representations he stated in his income tax returns through
the years. It would be doubly unjust, particularly to the government, if he
would be allowed at this late point to turn around and successfully claim that
he was merely an employee after he declared himself, through the years, as
an independent self-employed insurance agent with the privilege of deducting
business expenses. This aspect of the case alone considered together with the
probative value of income tax declarations and returns filed prior to the
present controversy should be enough to clinch the present case against the
petitioners favor.

D. The Dissents Solution:

Unwieldy and Legally Infirm

The Dissent proposes that Tongko should be considered as part employee (as
manager) and part insurance agent; hence, the original decision should be
modified to pertain only to the termination of his employment as a manager
and not as an insurance agent. Accordingly, the backwages component of the
original award to him should not include the insurance sales commissions.
This solution, according to the line taken by the Dissent then, was justified
on the view that this was made on a case-to-case basis.

Decisions of the Supreme Court, as the Civil Code provides, form part of the
law of the land. When the Court states that the determination of the existence
of an employment relationship should be on a case-to-case basis, this does
not mean that there will be as many laws on the issue as there are cases. In
the context of this case, the four-fold test is the established standard for
determining employer-employee relationship and the existence of these
elements, most notably control, is the basis upon which a conclusion on the
absence of employment relationship was anchored. This simply means that a
conclusion on whether employment relationship exists in a particular case
largely depends on the facts and, in no small measure, on the parties evidence
vis--vis the clearly defined jurisprudential standards. Given that the parties
control what and how the facts will be established in a particular case and/or
how a particular suit is to be litigated, deciding the issues on a case-to-case
basis becomes an imperative.

Another legal reality, a more important one, is that the duty of a court is to
say what the law is.[17] This is the same duty of the Supreme Court that
underlies the stare decisis principle. This is how the public, in general and
the insurance industry in particular, views the role of this Court and courts
in general in deciding cases. The lower courts and the bar, most specially,
look up to the rulings of this Court for guidance. Unless extremely
unavoidable, the Court must, as a matter of sound judicial policy, resist the
temptation of branding its ruling pro hac vice.

The compromise solution of declaring Tongko both an employee and an agent

is legally unrealistic, unwieldy and is, in fact, legally infirm, as it goes against
the above basic principles of judicial operation. Likewise, it does not and
cannot realistically solve the problem/issue in this case; it actually leaves
more questions than answers.

As already pointed out, there is no legal basis (be it statutory or

jurisprudential) for the part-employee/part-insurance agent status under an
essentially principal-agent contractual relation which the Dissent proposes to
accord to Tongko. If the Dissent intends to establish one, this is highly
objectionable for this would amount to judicial legislation. A legal
relationship, be it one of employment or one based on a contract other than
employment, exists as a matter of law pursuant to the facts, incidents and
legal consequences of the relationship; it cannot exist devoid of these legally
defined underlying facts and legal consequences unless the law itself creates
the relationship an act that is beyond the authority of this Court to do.

Additionally, the Dissents conclusion completely ignores an unavoidable legal

reality that the parties are bound by a contract of agency that clearly subsists
notwithstanding the successive designation of Tongko as a unit manager, a
branch manager and a regional sales manager. (As already explained in our
Resolution granting Manulifes motion for reconsideration, no evidence on
record exists to provide the Court with clues as to the precise impact of all
these designations on the contractual agency relationship.) The Dissent, it
must be pointed out, concludes that Tongkos employment as manager was
illegally terminated; thus, he should be accordingly afforded relief therefor.
But, can Tongko be given the remedies incidental to his dismissal as manager
separately from his status as an insurance agent? In other words, since the
respondents terminated all relationships with Tongko through the
termination letter, can we simply rule that his role as a manager was illegally
terminated without touching on the consequences of this ruling on his status
as an insurance agent? Expressed in these terms, the inseparability of his
contract as agent with any other relationship that springs therefrom can thus
be seen as an insurmountable legal obstacle.

The Dissents compromise approach would also sanction split jurisdiction. The
labor tribunals shall have jurisdiction over Tongkos employment as manager
while another entity shall decide the issues/cases arising from the agency
relationship. If the managerial employment is anchored on the agency, how
will the labor tribunals decide an issue that is inextricably linked with a
relationship that is outside the loop of their jurisdiction? As already
mentioned in the Resolution granting Manulifes reconsideration, the
DOMINANT relationship in this case is agency and no other.

E. The Dissents Cited Cases

The Dissent cites the cases of Great Pacific Life Assurance Corporation v.
National Labor Relations Commission[18] and Insular Life Assurance Co., Ltd.
v. National Labor Relations Commission[19] to support the allegation that
Manulife exercised control over the petitioner as an employer.

In considering these rulings, a reality that cannot but be recognized is that

cases turn and are decided on the basis of their own unique facts; the ruling
in one case cannot simply be bodily lifted and applied to another, particularly
when notable differences exist between the cited cases and the case under
consideration; their respective facts must be strictly examined to ensure that
the ruling in one applies to another. This is particularly true in a comparison
of the cited cases with the present case. Specifically, care should be taken in
reading the cited cases and applying their rulings to the present case as the
cited cases all dealt with the proper legal characterization of subsequent
management contracts that superseded the original agency contract between
the insurance company and the agent.

In Great Pacific Life, the Ruiz brothers were appointed to positions different
from their original positions as insurance agents, whose duties were clearly
defined in a subsequent contract. Similarly, in Insular, de los Reyes, a former
insurance agent, was appointed as acting unit manager based on a
subsequent contract. In both cases, the Court anchored its findings of labor
control on the stipulations of these subsequent contracts.

In contrast, the present case is remarkable for the absence of evidence of any
change in the nature of the petitioners employment with Manulife. As
previously stated above and in our assailed Resolution, the petitioner had
always been governed by the Agreement from the start until the end of his
relationship with Manulife. His agency status never changed except to the
extent of being a lead agent. Thus, the cited cases where changes in company-
agent relationship expressly changed and where the subsequent contracts
were the ones passed upon by the Court cannot be totally relied upon as
authoritative.

We cannot give credit as well to the petitioners claim of employment based on

the affidavits executed by other Manulife agents describing their duties,
because these same affidavits only affirm their status as independent agents,
not as employees. To quote these various claims:[20]

1.a. I have no fixed wages or salary since my services are compensated by way
of commissions based on the computed premiums paid in full on the policies
obtained thereat;

1.b. I have no fixed working hours and employ my own method in soliciting
insurance at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my
business of selling insurance;
xxxx

6. I have my own staff that handles day to day operations of my office;

7. My staff are my own employees and received salaries from me;

xxxx

9. My commission and incentives are all reported to the Bureau of Internal

Revenue (BIR) as income by a self-employed individual or professional with a
ten (10) percent creditable withholding tax. I also remit monthly for
professionals.

The petitioner cannot also rely on the letter written by respondent Renato
Vergel de Dios to prove that Manulife exercised control over him. As we
already explained in the assailed Resolution:

Even de Dios letter is not determinative of control as it indicates the least

amount of intrusion into Tongkos exercise of his role as manager in guiding
the sales agents. Strictly viewed, de Dios directives are merely operational
guidelines on how Tongko could align his operations with Manulifes re-
directed goal of being a big league player. The method is to expand coverage
through the use of more agents. This requirement for the recruitment of more
agents is not a means-and-method control as it relates, more than anything
else, and is directly relevant, to Manulifes objective of expanded business
operations through the use of a bigger sales force whose members are all on
a principal-agent relationship. An important point to note here is that Tongko
was not supervising regular full-time employees of Manulife engaged in the
running of the insurance business; Tongko was effectively guiding his corps
of sales agents, who are bound to Manulife through the same agreement that
he had with manulife, all the while sharing in these agents commissions
through his overrides.[21]

Lastly, in assailing the Agreement between him and Manulife, the petitioner
cites Paguio v. National Labor Relations Commission[22] on the claim that the
agreement that the parties signed did not conclusively indicate the legal
relationship between them.
The evidentiary situation in the present case, however, shows that despite the
petitioners insistence that the Agreement was no longer binding between him
and Manulife, no evidence was ever adduced to show that their relationship
changed so that Manulife at some point controlled the means and method of
the petitioners work. In fact, his evidence only further supports the conclusion
that he remained an independent insurance agent a status he admits, subject
only to the qualification that he is at the same time an employee. Thus, we
can only conclude that the Agreement governed his relations with Manulife.

Additionally, it is not lost on us that Paguio is a ruling based on a different

factual setting; it involves a publishing firm and an account executive, whose
repeated engagement was considered as an indication of employment. Our
ruling in the present case is specific to the insurance industry, where the law
permits an insurance company to exercise control over its agents within the
limits prescribed by law, and to engage independent agents for several
transactions and within an unlimited period of time without the relationship
amounting to employment. In light of these realities, the petitioners
arguments on his last argument must also fail.

The dissent also erroneously cites eight other cases Social Security System v.
Court of Appeals,[23] Cosmopolitan Funeral Homes, Inc. v. Maalat,[24] Algon
Engineering Construction Corporation v. National Labor Relations
Commission,[25] Equitable Banking Corporation v. National Labor Relations
Commission,[26] Lazaro v. Social Security Commission,[27] Dealco Farms,
Inc. v. National Labor Relations Commission,[28] South Davao Development
Company, Inc. v. Gamo,[29] and Abante, Jr. v. Lamadrid Bearing & Parts
Corporation.[30] The dissent cited these cases to support its allegation that
labor laws and jurisprudence should be applied in cases, to the exclusion of
other laws such as the Civil Code or the Insurance Code, even when the latter
are also applicable.

In Social Security System, Cosmopolitan Funeral Homes, Dealco Farms, and

South Davao Development, the issue that repeats itself is whether
complainants were employees or independent contractors; the legal
relationships involved are both labor law concepts and make no reference to
the Civil Code (or even the Insurance Code). The provisions cited in the
Dissent Articles 1458-1637 of the Civil Code[31] and Articles 1713-1720 of
the Civil Code [32] do not even appear in the decisions cited.

In Algon, the issue was whether the lease contract should dictate the legal
relationship between the parties, when there was proof of an employer-
employee relationship. In the cited case, the lease provisions on termination
were thus considered irrelevant because of a substantial evidence of an
employment relationship. The cited case lacks the complexity of the present
case; Civil Code provisions on lease do not prescribe that lessees exercise
control over their lessors in the way that the Insurance Code and the Civil
provide that insurance companies and principals exercised control over their
agents.

The issue in Equitable, on the other hand, is whether a lawyer-client

relationship or an employment relationship governs the legal relation between
parties. Again, this case is inapplicable as it does not illustrate the
predominance of labor laws and jurisprudence over other laws, in general,
and the Insurance Code and Civil Code, in particular. It merely weighed the
evidence in favor of an employment relationship over that of a lawyer-client
relationship. Similarly in Lazaro, the Court found ample proof of control
determinative of an employer-employee relationship. Both cases are not
applicable to the present case, which is attended by totally different factual
considerations as the petitioner had not offered any evidence of the companys
control in the means and manner of the performance of his work.

On the other hand, we find it strange that the dissent cites Abante as a
precedent, since the Court, in this case, held that an employee-employer
relationship is notably absent in this case as the complainant was a sales
agent. This case better supports the majoritys position that a sales agent, who
fails to show control in the concept of labor law, cannot be considered an
employee, even if the company exercised control in the concept of a sales
agent.[33]

It bears stressing that our ruling in this case is not about which law has
primacy over the other, but that we should be able to reconcile these laws. We
are merely saying that where the law makes it mandatory for a company to
exercise control over its agents, the complainant in an illegal dismissal case
cannot rely on these legally prescribed control devices as indicators of an
employer-employee relationship. As shown in our discussion, our
consideration of the Insurance Code and Civil Code provisions does not negate
the application of labor laws and jurisprudence; ultimately, we dismissed the
petition because of its failure to comply with the control test.

WHEREFORE, premises considered, we hereby DENY the Motion for

Reconsideration WITH FINALITY for lack of merit. No further pleadings shall
be entertained. Let entry of judgment proceed in due course.
SO ORDERED.

FIRST DIVISION
[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION,

respondent.
DECISION
CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing
the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the
findings of the National Labor Relations Commission (NLRC), which affirmed
the Labor Arbiters dismissal of the case for lack of jurisdiction.

The Facts

In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN)

signed an Agreement (Agreement) with the Mel and Jay Management and
Development Corporation (MJMDC). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco (TIANGCO), as EVP and Treasurer.
Referred to in the Agreement as AGENT, MJMDC agreed to provide SONZAs
services exclusively to ABS-CBN as talent for radio and television. The
Agreement listed the services SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000
for the first year and P317,000 for the second and third year of the Agreement.
ABS-CBN would pay the talent fees on the 10th and 25th days of the month.

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez

III, which reads:

Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered
into by your goodself on behalf of ABS-CBN with our company relative to our
talent JOSE Y. SONZA.

As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station
violative of the Agreement and the station as in breach thereof. In this
connection, we hereby serve notice of rescission of said Agreement at our
instance effective as of date.

Mr. Sonza informed us that he is waiving and renouncing recovery of the

remaining amount stipulated in paragraph 7 of the Agreement but reserves
the right to seek recovery of the other benefits under said Agreement.

Thank you for your attention.

Very truly yours,

(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan (ESOP).

On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no

employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.

Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through

his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996,
ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZAs talent fees and other payments due him under the
Agreement.

In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion
to dismiss and directed the parties to file their respective position papers. The
Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an
employee of respondent company until April 15, 1996 and that he was not
paid certain claims, it is sufficient enough as to confer jurisdiction over the
instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be
resolved only after and as a result of a hearing. Thus, the respondents plea of
lack of employer-employee relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that there really is no employer-
employee relationship between it and the complainant.

The Labor Arbiter then considered the case submitted for resolution. The
parties submitted their position papers on 24 February 1997.

On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with

Motion to Expunge Respondents Annex 4 and Annex 5 from the Records.
Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and
Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing
practice in the television and broadcast industry is to treat talents like SONZA
as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction.[6] The pertinent parts of the decision read
as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the
true nature of the contract of a talent, it stands to reason that a talent as
above-described cannot be considered as an employee by reason of the
peculiar circumstances surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of

his peculiar skills and talent as a TV host and a radio broadcaster. Unlike an
ordinary employee, he was free to perform the services he undertook to render
in accordance with his own style. The benefits conferred to complainant under
the May 1994 Agreement are certainly very much higher than those generally
given to employees. For one, complainant Sonzas monthly talent fees amount
to a staggering P317,000. Moreover, his engagement as a talent was covered
by a specific contract. Likewise, he was not bound to render eight (8) hours of
work per day as he worked only for such number of hours as may be
necessary.

The fact that per the May 1994 Agreement complainant was accorded some
benefits normally given to an employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent,
All these benefits are merely talent fees and other contractual benefits and
should not be deemed as salaries, wages and/or other remuneration accorded
to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to a
stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit.

The fact that complainant was made subject to respondents Rules and
Regulations, likewise, does not detract from the absence of employer-
employee relationship. As held by the Supreme Court, The line should be
drawn between rules that merely serve as guidelines towards the achievement
of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship unlike
the second, which address both the result and the means to achieve it.
(Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November
15, 1989).

x x x (Emphasis supplied)[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a

Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.

On 6 October 1998, SONZA filed a special civil action for certiorari before the
Court of Appeals assailing the decision and resolution of the NLRC. On 26
March 1999, the Court of Appeals rendered a Decision dismissing the case.[8]

Hence, this petition.

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee

relationship existed between SONZA and ABS-CBN. Adopting the NLRCs
decision, the appellate court quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into
the contract merely as an agent of complainant Sonza, the principal. By all
indication and as the law puts it, the act of the agent is the act of the principal
itself. This fact is made particularly true in this case, as admittedly MJMDC
is a management company devoted exclusively to managing the careers of Mr.
Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to
Motion to Dismiss)

Clearly, the relations of principal and agent only accrues between

complainant Sonza and MJMDC, and not between ABS-CBN and MJMDC.
This is clear from the provisions of the May 1994 Agreement which specifically
referred to MJMDC as the AGENT. As a matter of fact, when complainant
herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which
issued the notice of rescission in behalf of Mr. Sonza, who himself signed the
same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact
that historically, the parties to the said agreements are ABS-CBN and Mr.
Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured
in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of

ABS-CBN such that there exist[s] employer-employee relationship between
the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC
is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
expressly admitted by the latter and MJMDC in the May 1994 Agreement.

It may not be amiss to state that jurisdiction over the instant controversy
indeed belongs to the regular courts, the same being in the nature of an action
for alleged breach of contractual obligation on the part of respondent-appellee.
As squarely apparent from complainant-appellants Position Paper, his claims
for compensation for services, 13th month pay, signing bonus and travel
allowance against respondent-appellee are not based on the Labor Code but
rather on the provisions of the May 1994 Agreement, while his claims for
proceeds under Stock Purchase Agreement are based on the latter. A portion
of the Position Paper of complainant-appellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting of
shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).

Similarly, complainant is also entitled to be paid 13th month pay based on an

amount not lower than the amount he was receiving prior to effectivity of (the)
Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a

commutable travel benefit amounting to at least One Hundred Fifty Thousand
Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants 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-appellant served upon the latter a notice of rescission of
Agreement with the station, per his letter dated April 1, 1996, which asserted
that instead of referring to unpaid employee benefits, he is waiving and
renouncing recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to such recovery of the other benefits
under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to
Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994

Agreement and/or the Stock Purchase Agreement by respondent-appellee
that complainant-appellant filed his complaint. Complainant-appellants
claims being anchored on the alleged breach of contract on the part of
respondent-appellee, the same can be resolved by reference to civil law and
not to labor law. Consequently, they are within the realm of civil law and,
thus, lie with the regular courts. As held in the case of Dai-Chi Electronics
Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action
for breach of contractual obligation is intrinsically a civil dispute.[9]
(Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee

relationship between SONZA and ABS-CBN is a factual question that is within
the jurisdiction of the NLRC to resolve.[10] A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC.[11] Such
action cannot cover an inquiry into the correctness of the evaluation of the
evidence which served as basis of the NLRCs conclusion.[12] The Court of
Appeals added that it could not re-examine the parties evidence and
substitute the factual findings of the NLRC with its own.[13]

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS

DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.[14]
The Courts Ruling

We affirm the assailed decision.

No convincing reason exists to warrant a reversal of the decision of the Court

of Appeals affirming the NLRC ruling which upheld the Labor Arbiters
dismissal of the case for lack of jurisdiction.

The present controversy is one of first impression. Although Philippine labor

laws and jurisprudence define clearly the elements of an employer-employee
relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its talents.
There is no case law stating that a radio and television program host is an
employee of the broadcast station.

The instant case involves big names in the broadcast industry, namely Jose
Jay Sonza, a known television and radio personality, and ABS-CBN, one of
the biggest television and radio networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because
he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that
the Labor Arbiter has no jurisdiction because SONZA was an independent
contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact.

Appellate courts accord the factual findings of the Labor Arbiter and the NLRC
not only respect but also finality when supported by substantial evidence.[15]
Substantial evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.[16] A party cannot prove
the absence of substantial evidence by simply pointing out that there is
contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that the
elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the means
and methods by which the work is accomplished.[18] The last element, the
so-called control test, is the most important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio

programs because of SONZAs peculiar skills, talent and celebrity status.
SONZA contends that the discretion used by respondent in specifically
selecting and hiring complainant over other broadcasters of possibly similar
experience and qualification as complainant belies respondents claim of
independent contractorship.

Independent contractors often present themselves to possess unique skills,

expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If
SONZA did not possess such unique skills, talent and celebrity status, ABS-
CBN would not have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other employee.

In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the circumstances of
the relationship, with the control test being the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees
going to MJMDC. SONZA asserts that this mode of fee payment shows that
he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges which he would not have enjoyed if he
were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. If SONZA were ABS-CBNs employee, there would
be no need for the parties to stipulate on benefits such as SSS, Medicare, x x
x and 13th month pay[20] which the law automatically incorporates into every
employer-employee contract.[21] Whatever benefits SONZA enjoyed arose
from contract and not because of an employer-employee relationship.[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third
year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZAs unique skills, talent and celebrity status not possessed
by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services.
The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not
negate the status of SONZA as an independent contractor. The parties
expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent
fee accruing under the Agreement.

C. Power of Dismissal

For violation of any provision of the Agreement, either party may terminate
their relationship. SONZA failed to show that ABS-CBN could terminate his
services on grounds other than breach of contract, such as retrenchment to
prevent losses as provided under labor laws.[23]

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees
as long as AGENT and Jay Sonza shall faithfully and completely perform each
condition of this Agreement.[24] Even if it suffered severe business losses,
ABS-CBN could not retrench SONZA because ABS-CBN remained obligated
to pay SONZAs talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between SONZA and ABS-
CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs,
ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its
undertaking in the Agreement to continue paying SONZAs talent fees during
the remaining life of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.[25]

SONZA assails the Labor Arbiters interpretation of his rescission of the

Agreement as an admission that he is not an employee of ABS-CBN. The Labor
Arbiter stated that if it were true that complainant was really an employee, he
would merely resign, instead. SONZA did actually resign from ABS-CBN but
he also, as president of MJMDC, rescinded the Agreement. SONZAs letter
clearly bears this out.[26] However, the manner by which SONZA terminated
his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee
or independent contractor.

D. Power of Control

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 present case. The United States Court of Appeals, First
Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La
Difusin Pblica (WIPR)[27] that a television program host is an independent
contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First,

a television actress is a skilled position requiring talent and training not
available on-the-job. x x x In this regard, Alberty possesses a masters degree
in public communications and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the University of Puerto Rico;
and acted in several theater and television productions prior to her affiliation
with Desde Mi Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically, she provided, or
obtained sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty disputes that this
factor favors independent contractor status because WIPR provided the
equipment necessary to tape the show. Albertys argument is misplaced. The
equipment necessary for Alberty to conduct her job as host of Desde Mi Pueblo
related to her appearance on the show. Others provided equipment for filming
and producing the show, but these were not the primary tools that Alberty
used to perform her particular function. If we accepted this argument,
independent contractors could never work on collaborative projects because
other individuals often provide the equipment required for different aspects of
the collaboration. x x x

Third, WIPR could not assign Alberty work in addition to filming Desde Mi
Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired
her professional services as Hostess for the Program Desde Mi Pueblo. There
is no evidence that WIPR assigned Alberty tasks in addition to work related to
these tapings. x x x[28] (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an
independent contractor.[29] This test is based on the extent of control the
hirer exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse
holds true as well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.[30]

First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services

specifically to co-host the Mel & Jay programs. ABS-CBN did not assign any
other work to SONZA. To perform his work, SONZA only needed his skills and
talent. How SONZA delivered his lines, appeared on television, and sounded
on radio were outside ABS-CBNs control. SONZA did not have to render eight
hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.[31] ABS-CBN could not dictate the contents of SONZAs script.
However, the Agreement 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 not attack ABS-CBN
or its interests.

We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZAs work.[33] ABS-CBN did not instruct
SONZA how to perform his job. ABS-CBN merely reserved the right to modify
the program format and airtime schedule for more effective programming.[34]
ABS-CBNs sole concern was the quality of the shows and their standing in
the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZAs work.

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-
CBNs power over the means and methods of the performance of his work.
Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-
CBN was still obligated to pay SONZAs talent fees. Thus, even if ABS-CBN
was completely dissatisfied with the means and methods of SONZAs
performance of his work, or even with the quality or product of his work, ABS-
CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do
is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees
in full.[35]

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was

by the obligation to continue paying in full SONZAs talent fees, did not
amount to control over the means and methods of the performance of SONZAs
work. ABS-CBN could not terminate or discipline SONZA even if the means
and methods of performance of his work - how he delivered his lines and
appeared on television - did not meet ABS-CBNs approval. This proves that
ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay
SONZAs talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of

Appeals ruled that vaudeville performers were independent contractors
although the management reserved the right to delete objectionable features
in their shows. Since the management did not have control over the manner
of performance of the skills of the artists, it could only control the result of
the work by deleting objectionable features.[37]

SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the Mel & Jay programs.
However, the equipment, crew and airtime are not the tools and
instrumentalities SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA with the place of
work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs
sole concern was for SONZA to display his talent during the airing of the
programs.[39]
A radio broadcast specialist who works under minimal supervision is an
independent contractor.[40] SONZAs work as television and radio program
host required special skills and talent, which SONZA admittedly possesses.
The records do not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBNs employee because

ABS-CBN subjected him to its rules and standards of performance. SONZA
claims that this indicates ABS-CBNs control not only [over] his manner of
work but also the quality of his work.

The Agreement stipulates that SONZA shall abide with the rules and
standards of performance covering talents[41] of ABS-CBN. The Agreement
does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the Television and Radio
Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by the COMPANY (ABS-CBN) as its Code of Ethics.[42] The KBP code
applies to broadcasters, not to employees of radio and television stations.
Broadcasters are not necessarily employees of radio and television stations.
Clearly, the rules and standards of performance referred to in the Agreement
are those applicable to talents and not to employees of ABS-CBN.

In any event, not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former.[43] In this case, SONZA
failed to show that these rules controlled his performance. We find that these
general rules are merely guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio programs that comply
with standards of the industry. We have ruled that:

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

Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the
result and the means used to achieve it.[44]

The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of
the desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative.[45]

Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.

This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can
validly provide his services exclusively to the hiring party. In the broadcast
industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the

entertainment industry.[46] This practice is not designed to control the means
and methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial
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 is paid to talents who agree to work exclusively for a particular
radio or television station. In short, the huge talent fees partially compensates
for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC,

which contracted out his services to ABS-CBN. The Labor Arbiter ruled that
as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists
that MJMDC is a labor-only contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-
only contractor; and (3) the principal who is deemed the real employer. Under
this scheme, the labor-only contractor is the agent of the principal. The law
makes the principal responsible to the employees of the labor-only contractor
as if the principal itself directly hired or employed the employees.[48] These
circumstances are not present in this case.

There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The
Agreement expressly states that MJMDC acted as the AGENT of SONZA. The
records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which
stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by 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 Agreement with SONZA, who himself
is represented by MJMDC. That would make MJMDC the agent of both ABS-
CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to

managing the careers of SONZA and his broadcast partner, TIANGCO.
MJMDC is not engaged in any other business, not even job contracting.
MJMDC does not have any other function apart from acting as agent of
SONZA or TIANGCO to promote their careers in the broadcast and television
industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor
Blas Ople on 8 January 1979 finally settled the status of workers in the
broadcast industry. Under this policy, the types of employees in the broadcast
industry are the station and program employees.

Policy Instruction No. 40 is a mere executive issuance which does not have
the force and effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZAs status. A mere executive issuance
cannot exclude independent contractors from the class of service providers to
the broadcast industry. The classification of workers in the broadcast
industry into only two groups under Policy Instruction No. 40 is not binding
on this Court, especially when the classification has no basis either in law or
in fact.
Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro
Vidanes and Rolando Cruz without giving his counsel the opportunity to
cross-examine these witnesses. SONZA brands these witnesses as
incompetent to attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as misleading and
irrelevant.

While SONZA failed to cross-examine ABS-CBNs witnesses, he was never

prevented from denying or refuting the allegations in the affidavits. The Labor
Arbiter has the discretion whether to conduct a formal (trial-type) hearing
after the submission of the position papers of the parties, thus:

Section 3. Submission of Position Papers/Memorandum

xxx

These verified position papers shall cover only those claims and causes of
action raised in the complaint excluding those that may have been amicably
settled, and shall be accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the place of the latters
direct testimony. x x x

Section 4. Determination of Necessity of Hearing. Immediately after the

submission of the parties of their position papers/memorandum, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.[50]

The Labor Arbiter can decide a case based solely on the position papers and
the supporting documents without a formal trial.[51] The holding of a formal
hearing or trial is something that the parties cannot demand as a matter of
right.[52] If the Labor Arbiter is confident that he can rely on the documents
before him, he cannot be faulted for not conducting a formal trial, unless
under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in
nature. Subject to the requirements of due process, the technicalities of law
and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for violating
the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution[53]

arises only if there is an employer-employee relationship under labor laws.
Not every performance of services for a fee creates an employer-employee
relationship. To hold that every person who renders services to another for a
fee is an employee - to give meaning to the security of tenure clause - will lead
to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer
their services as independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent contractors. The right of
labor to security of tenure cannot operate to deprive an individual, possessed
with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by
which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to
the radio and television hosts what they say in their shows. This is not
conducive to 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 SONZAs 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 Employee Stock Option Plan. We agree with the
findings of the Labor Arbiter and the Court of Appeals that SONZAs claims
are all based on the May 1994 Agreement and stock option plan, and not on
the Labor Code. Clearly, the present case does not call for an application of
the Labor Code provisions but an interpretation and implementation of the
May 1994 Agreement. In effect, SONZAs cause of action is for breach of
contract which is intrinsically a civil dispute cognizable by the regular
courts.[58]

WHEREFORE, we DENY the petition. The assailed Decision of the Court of

Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs
against petitioner.

SO ORDERED.

SECOND DIVISION
THELMA DUMPIT-MURILLO,
Petitioner,

- versus -
G.R. No. 164652

Present:
QUISUMBING, J.,* Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE

JAVIER AND EDWARD TAN,
Respondents.

Promulgated:

June 8, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision[1] dated
January 30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its
Resolution[2] dated June 23, 2004 denying the motion for reconsideration.
The Court of Appeals had overturned the Resolution[3] dated August 30, 2000
of the National Labor Relations Commission (NLRC) ruling that petitioner was
illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805,[4] private
respondent Associated Broadcasting Company (ABC) hired petitioner Thelma
Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an early
evening news program. The contract was for a period of three months. It was
renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984
and NT99-5649.[5] In addition, petitioners services were engaged for the
program Live on Five. On September 30, 1999, after four years of repeated
renewals, petitioners talent contract expired. Two weeks after the expiration
of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President
for News and Public Affairs of ABC, informing the latter that she was still
interested in renewing her contract subject to a salary increase. Thereafter,
petitioner stopped reporting for work. On November 5, 1999, she wrote Mr.
Javier another letter,[6] which we quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a
marginal note what terms and conditions in response to my first letter dated
October 13, 1999. To date, or for more than fifteen (15) days since then, I have
not received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until
Monday, November 8, 1999, I will deem it as a constructive dismissal of my
services.
xxxx
A month later, petitioner sent a demand letter[7] to ABC, demanding: (a)
reinstatement to her former position; (b) payment of unpaid wages for services
rendered from September 1 to October 20, 1999 and full backwages; (c)
payment of 13th month pay, vacation/sick/service incentive leaves and other
monetary benefits due to a regular employee starting March 31, 1996. ABC
replied that a check covering petitioners talent fees for September 16 to
October 20, 1999 had been processed and prepared, but that the other claims
of petitioner had no basis in fact or in law.
On December 20, 1999, petitioner filed a complaint[8] against ABC, Mr. Javier
and Mr. Edward Tan, for illegal constructive dismissal, nonpayment of
salaries, overtime pay, premium pay, separation pay, holiday pay, service
incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR
Case No. 30-12-00985-99. She likewise demanded payment for moral,
exemplary and actual damages, as well as for attorneys fees.
The parties agreed to submit the case for resolution after settlement failed
during the mandatory conference/conciliation. On March 29, 2000, the Labor
Arbiter dismissed the complaint.[9]
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August
30, 2000. The NLRC held that an employer-employee relationship existed
between petitioner and ABC; that the subject talent contract was void; that
the petitioner was a regular employee illegally dismissed; and that she was
entitled to reinstatement and backwages or separation pay, aside from 13th
month pay and service incentive leave pay, moral and exemplary damages
and attorneys fees. It held as follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby
REVERSED/SET ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally dismissed complainant from her
regular work therein and thus, ordering them to reinstate her in her former
position without loss of seniority right[s] and other privileges and to pay her
full backwages, inclusive of allowances and other benefits, including 13th
month pay based on her said latest rate of P28,000.00/mo. from the date of
her illegal dismissal on 21 October 1999 up to finality hereof, or at
complainants option, to pay her separation pay of one (1) month pay per year
of service based on said latest monthly rate, reckoned from date of hire on 30
September 1995 until finality hereof;
2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days
pay per year and 13th month pay for the years 1999, 1998 and 1997 of
P19,236.00 and P84,000.00, respectively and her accrued salary from 16
September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12%
from date of judicial demand on 20 December 1999 until finality hereof;
3) to pay complainant moral damages of P500,000.00, exemplary damages
of P350,000.00 and 10% of the total of the adjudged monetary awards as
attorneys fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.[10]
After its motion for reconsideration was denied, ABC elevated the case to the
Court of Appeals in a petition for certiorari under Rule 65. The petition was
first dismissed for failure to attach particular documents,[11] but was
reinstated on grounds of the higher interest of justice.[12]
Thereafter, the appellate court ruled that the NLRC committed grave abuse of
discretion, and reversed the decision of the NLRC.[13] The appellate court
reasoned that petitioner should not be allowed to renege from the stipulations
she had voluntarily and knowingly executed by invoking the security of tenure
under the Labor Code. According to the appellate court, petitioner was a fixed-
term employee and not a regular employee within the ambit of Article 280[14]
of the Labor Code because her job, as anticipated and agreed upon, was only
for a specified time.[15]
Aggrieved, petitioner now comes to this Court on a petition for review, raising
issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE
HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE
NLRC FIRST DIVISION, ARE ANTI-REGULARIZATION DEVICES WHICH
MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;]

III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE
THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE
RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280
OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A
REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONERS RIGHT TO
DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED
IN THE COMPLAINT[.][16]
The issues for our disposition are: (1) whether or not this Court can review
the findings of the Court of Appeals; and (2) whether or not under Rule 45 of
the Rules of Court the Court of Appeals committed a reversible error in its
Decision.
On the first issue, private respondents contend that the issues raised in the
instant petition are mainly factual and that there is no showing that the said
issues have been resolved arbitrarily and without basis. They add that the
findings of the Court of Appeals are supported by overwhelming wealth of
evidence on record as well as prevailing jurisprudence on the matter.[17]
Petitioner however contends that this Court can review the findings of the
Court of Appeals, since the appellate court erred in deciding a question of
substance in a way which is not in accord with law or with applicable
decisions of this Court.[18]
We agree with petitioner. Decisions, final orders or resolutions of the Court of
Appeals in any case regardless of the nature of the action or proceeding
involved may be appealed to this Court through a petition for review. This
remedy is a continuation of the appellate process over the original case,[19]
and considering there is no congruence in the findings of the NLRC and the
Court of Appeals regarding the status of employment of petitioner, an
exception to the general rule that this Court is bound by the findings of facts
of the appellate court,[20] we can review such findings.
On the second issue, private respondents contend that the Court of Appeals
did not err when it upheld the validity of the talent contracts voluntarily
entered into by petitioner. It further stated that prevailing jurisprudence has
recognized and sustained the absence of employer-employee relationship
between a talent and the media entity which engaged the talents services on
a per talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting
Corporation.[21]
Petitioner avers however that an employer-employee relationship was created
when the private respondents started to merely renew the contracts
repeatedly fifteen times or for four consecutive years.[22]
Again, we agree with petitioner. The Court of Appeals committed reversible
error when it held that petitioner was a fixed-term employee. Petitioner was a
regular employee under contemplation of law. The practice of having fixed-
term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law. The assertion that a talent
contract exists does not necessarily prevent a regular employment status.[23]
Further, the Sonza case is not applicable. In Sonza, the television station did
not instruct Sonza how to perform his job. How Sonza delivered his lines,
appeared on television, and sounded on radio were outside the television
stations control. Sonza had a free hand on what to say or discuss in his shows
provided he did not attack the television station or its interests. Clearly, the
television station did not exercise control over the means and methods of the
performance of Sonzas work.[24] In the case at bar, ABC had control over the
performance of petitioners work. Noteworthy too, is the comparatively low
P28,000 monthly pay of petitioner[25] vis the P300,000 a month salary of
Sonza,[26] that all the more bolsters the conclusion that petitioner was not in
the same situation as Sonza.
The contract of employment of petitioner with ABC had the following
stipulations:
xxxx
1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time,
attention and best efforts in the performance of his/her duties and
responsibilities as Anchor/Program Host/Newscaster of the Program, in
accordance with the direction of ABC and/or its authorized representatives.

1.1. DUTIES AND RESPONSIBILITIES TALENT shall:

a. Render his/her services as a newscaster on the Program;

b. Be involved in news-gathering operations by conducting interviews on-
and off-the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research
or camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live
telecasts;
g. Be present promptly at the studios and/or other place of assignment
at the time designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized
representatives in the production and promotion of the Program; and
j. Perform such other functions as may be assigned to him/her from time
to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES
AND REGULATIONS TALENT agrees that he/she will promptly and faithfully
comply with the requests and instructions, as well as the program standards,
policies, rules and regulations of ABC, the KBP and the government or any of
its agencies and instrumentalities.[27]
xxxx
In Manila Water Company, Inc. v. Pena,[28] we said that the elements to
determine the existence of an employment relationship are: (a) the selection
and engagement of the employee, (b) the payment of wages, (c) the power of
dismissal, and (d) the employers power to control. The most important
element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to
accomplish it.[29]
The duties of petitioner as enumerated in her employment contract indicate
that ABC had control over the work of petitioner. Aside from control, ABC also
dictated the work assignments and payment of petitioners wages. ABC also
had power to dismiss her. All these being present, clearly, there existed an
employment relationship between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees,
namely: (1) those who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; and (2)
those who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed.[30] In other
words, regular status arises from either the nature of work of the employee or
the duration of his employment.[31] In Benares v. Pancho,[32] we very
succinctly said:
[T]he primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee vis--vis
the usual trade or business of the employer. This connection can be
determined by considering the nature of the work performed and its relation
to the scheme of the particular business or trade in its entirety. If the
employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and
while such activity exists.[33]
In our view, the requisites for regularity of employment have been met in the
instant case. Gleaned from the description of the scope of services
aforementioned, petitioners work was necessary or desirable in the usual
business or trade of the employer which includes, as a pre-condition for its
enfranchisement, its participation in the governments news and public
information dissemination. In addition, her work was continuous for a period
of four years. This repeated engagement under contract of hire is indicative of
the necessity and desirability of the petitioners work in private respondent
ABCs business.[34]
The contention of the appellate court that the contract was characterized by
a valid fixed-period employment is untenable. For such contract to be valid,
it should be shown that the fixed period was knowingly and voluntarily agreed
upon by the parties. There should have been no force, duress or improper
pressure brought to bear upon the employee; neither should there be any
other circumstance that vitiates the employees consent.[35] It should
satisfactorily appear that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance being exercised by the
employer over the employee.[36] Moreover, fixed-term employment will not be
considered valid where, from the circumstances, it is apparent that periods
have been imposed to preclude acquisition of tenurial security by the
employee.[37]
In the case at bar, it does not appear that the employer and employee dealt
with each other on equal terms. Understandably, the petitioner could not
object to the terms of her employment contract because she did not want to
lose the job that she loved and the workplace that she had grown accustomed
to,[38] which is exactly what happened when she finally manifested her
intention to negotiate. Being one of the numerous newscasters/broadcasters
of ABC and desiring to keep her job as a broadcasting practitioner, petitioner
was left with no choice but to affix her signature of conformity on each renewal
of her contract as already prepared by private respondents; otherwise, private
respondents would have simply refused to renew her contract. Patently, the
petitioner occupied a position of weakness vis--vis the employer. Moreover,
private respondents practice of repeatedly extending petitioners 3-month
contract for four years is a circumvention of the acquisition of regular status.
Hence, there was no valid fixed-term employment between petitioner and
private respondents.
While this Court has recognized the validity of fixed-term employment
contracts in a number of cases, it has consistently emphasized that when the
circumstances of a case show that the periods were imposed to block the
acquisition of security of tenure, they should be struck down for being
contrary to law, morals, good customs, public order or public policy.[39]
As a regular employee, petitioner is entitled to security of tenure and can be
dismissed only for just cause and after due compliance with procedural due
process. Since private respondents did not observe due process in
constructively dismissing the petitioner, we hold that there was an illegal
dismissal.
WHEREFORE, the challenged Decision dated January 30, 2004 and
Resolution dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No.
63125, which held that the petitioner was a fixed-term employee, are
REVERSED and SET ASIDE. The NLRC decision is AFFIRMED.
Costs against private respondents.
SO ORDERED.

SECOND DIVISION

G.R. No. 204944-45 December 3, 2014

FUJI TELEVISION NETWORK, INC., Petitioner,

vs.
ARLENE S. ESPIRITU, Respondent.

DECISION

LEONEN, J.:

It is the burden of the employer to prove that a person whose services it pays
for is an independent contractor rather than a regular employee with or
without a fixed term. That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the last resort. At
the very least, a competent public health authority must certify that the
disease cannot be cured within six ( 6) months, even with appropriate
treatment.

We decide this petition for review1 on certiorari filed by Fuji Television

Network, Inc., seeking the reversal of the Court of Appeals’ Decision2 dated
June 25, 2012, affirming with modification the decision3 of the National Labor
Relations Commission.

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network,

Inc. ("Fuji") asa news correspondent/producer4 "tasked to report Philippine
news to Fuji through its Manila Bureau field office."5 Arlene’s employment
contract initially provided for a term of one (1) year but was successively
renewed on a yearly basis with salary adjustment upon every renewal.6
Sometime in January 2009, Arlenewas diagnosed with lung cancer.7 She
informed Fuji about her condition. In turn, the Chief of News Agency of Fuji,
Yoshiki Aoki, informed Arlene "that the company will have a problem renewing
her contract"8 since it would be difficult for her to perform her job.9 She
"insisted that she was still fit to work as certified by her attending
physician."10

After several verbal and written communications,11 Arlene and Fuji signed a
non-renewal contract on May 5, 2009 where it was stipulated that her
contract would no longer be renewed after its expiration on May 31, 2009.
The contract also provided that the parties release each other from liabilities
and responsibilities under the employment contract.12

In consideration of the non-renewal contract, Arlene "acknowledged receipt of

the total amount of US$18,050.00 representing her monthly salary from
March 2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay."13 However, Arlene affixed her signature on the nonrenewal contract
with the initials "U.P." for "under protest."14

On May 6, 2009, the day after Arlene signed the non-renewal contract, she
filed a complaint for illegal dismissal and attorney’s fees with the National
Capital Region Arbitration Branch of the National Labor Relations
Commission. She alleged that she was forced to sign the nonrenewal contract
when Fuji came to know of her illness and that Fuji withheld her salaries and
other benefits for March and April 2009 when she refused to sign.15
Arlene claimed that she was left with no other recourse but to sign the non-
renewal contract, and it was only upon signing that she was given her salaries
and bonuses, in addition to separation pay equivalent to four (4) years.16

In the decision17 dated September 10, 2009, Labor Arbiter Corazon C.

Borbolla dismissed Arlene’s complaint.18 Citing Sonza v. ABS-CBN19 and
applying the four-fold test, the Labor Arbiter held that Arlene was not Fuji’s
employee but an independent contractor.20

Arlene appealed before the National Labor Relations Commission. In its

decision dated March 5, 2010, the National Labor Relations Commission
reversed the Labor Arbiter’s decision.21 It held that Arlene was a regular
employee with respect to the activities for which she was employed since she
continuously rendered services that were deemednecessary and desirable to
Fuji’s business.22 The National Labor Relations Commission ordered Fuji to
pay Arlene backwages, computed from the date of her illegal dismissal.23 The
dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered GRANTING

the instant appeal. The Decision of the Labor Arbiter dated 19 September
2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering
respondents-appellees to pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of this Decision.

SO ORDERED.24

Arlene and Fuji filed separat emotions for reconsideration.25 Both motions
were denied by the National Labor Relations Commission for lack of merit in
the resolution dated April 26, 2010.26 From the decision of the National Labor
Relations Commission, both parties filed separate petitions for certiorari27
before the Court of Appeals. The Court of Appeals consolidated the petitions
and considered the following issues for resolution:

1) Whether or not Espirituis a regular employee or a fixed-term contractual

employee;

2) Whether or not Espiritu was illegally dismissed; and

3) Whether or not Espirituis entitled to damages and attorney’s fees.28

In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss of seniority rights, and
pay her backwages, 13th-month pay, mid-year and year-end bonuses, sick
leave and vacation leave with pay until reinstated, moral damages, exemplary
damages, attorney’sfees, and legal interest of 12% per annum of the total
monetary awards.29 The Court of Appeals ruled that:

WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc.
and Yoshiki Aoki is DENIED and the petition of Arlene S. Espiritu is
GRANTED. Accordingly, the Decision dated March 5, 2010 of the National
Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-
09 and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED
with MODIFICATIONS, as follows:

Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene

S. Espiritu to her position as News Producer without loss of seniority rights
and privileges and to pay her the following:

1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009
(the date of dismissal), until reinstated;

2. 13th Month Pay at the rate of $1,900.00 per annum from the date of
dismissal, until reinstated;

3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year
from the date of dismissal, until reinstated;

4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per
year from the date of dismissal, until reinstated;

5. Sick leave of 30 days with pay or $1,900.00 per year from the date of
dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from
date of dismissal, until reinstated.

7. The amount of ₱100,000.00 as moral damages;

8. The amount of ₱50,000.00 as exemplary damages;

9. Attorney’s fees equivalent to 10% of the total monetary awards herein

stated; and

10. Legal interest of twelve percent (12%) per annum of the total monetary
awards computed from May 5, 2009, until their full satisfaction.

The Labor Arbiter is hereby DIRECTED to make another recomputation of the

above monetary awards consistent with the above directives.

SO ORDERED.30

In arriving at the decision, the Court of Appeals held that Arlene was a regular
employee because she was engaged to perform work that was necessary or
desirable in the business of Fuji,31 and the successive renewals of her fixed-
term contract resulted in regular employment.32

According to the Court of Appeals, Sonzadoes not apply in order to establish

that Arlene was an independent contractor because she was not contracted
on account of any peculiar ability, special talent, or skill.33 The fact that
everything used by Arlene in her work was owned by Fuji negated the idea of
job contracting.34

The Court of Appeals also held that Arlene was illegally dismissed because
Fuji failed to comply with the requirements of substantive and procedural due
process necessary for her dismissal since she was a regular employee.35
The Court of Appeals found that Arlene did not sign the non-renewal contract
voluntarily and that the contract was a mere subterfuge by Fuji to secure its
position that it was her choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her employment.36

Fuji filed a motion for reconsideration that was denied in the resolution37
dated December 7, 2012 for failure to raise new matters.38

Aggrieved, Fuji filed this petition for review and argued that the Court of
Appeals erred in affirming with modification the National Labor Relations
Commission’s decision, holding that Arlene was a regular employee and that
she was illegally dismissed. Fuji also questioned the award of monetary
claims, benefits, and damages.39

Fuji points out that Arlene was hired as a stringer, and it informed her that
she would remain one.40 She was hired as an independent contractor as
defined in Sonza.41 Fuji had no control over her work.42 The employment
contracts were executed and renewed annually upon Arlene’s insistence to
which Fuji relented because she had skills that distinguished her from
ordinary employees.43 Arlene and Fuji dealt on equal terms when they
negotiated and entered into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew her fixed-term contract as
evidenced by her e-mail correspondences with Yoshiki Aoki.45 In fact, the
signing of the non-renewal contract was not necessary to terminate her
employment since "such employment terminated upon expiration of her
contract."46 Finally, Fuji had dealt with Arlene in good faith, thus, she should
not have been awarded damages.47

Fuji alleges that it did not need a permanent reporter since the news reported
by Arlene could easily be secured from other entities or from the internet.48
Fuji "never controlled the manner by which she performed her functions."49
It was Arlene who insisted that Fuji execute yearly fixed-term contracts so
that she could negotiate for annual increases in her pay.50

Fuji points out that Arlene reported for work for only five (5) days in February
2009, three (3) days in March 2009, and one (1) day in April 2009.51 Despite
the provision in her employment contract that sick leaves in excess of 30 days
shall not be paid, Fuji paid Arlene her entire salary for the months of March,
April, and May; four(4) months of separation pay; and a bonus for two and a
half months for a total of US$18,050.00.52 Despite having received the
amount of US$18,050.00, Arlene still filed a case for illegal dismissal.53

Fuji further argues that the circumstances would show that Arlene was not
illegally dismissed. The decision tonot renew her contract was mutually
agreed upon by the parties as indicated in Arlene’s e-mail54 dated March 11,
2009 where she consented to the non-renewal of her contract but refused to
sign anything.55 Aoki informed Arlene in an e-mail56 dated March 12, 2009
that she did not need to sign a resignation letter and that Fuji would pay
Arlene’s salary and bonus until May 2009 as well as separation pay.57

Arlene sent an e-mail dated March 18, 2009 with her version of the non-
renewal agreement that she agreed to sign this time.58 This attached version
contained a provision that Fuji shall re-hire her if she was still interested to
work for Fuji.59 For Fuji, Arlene’s e-mail showed that she had the power to
bargain.60

Fuji then posits that the Court of Appeals erred when it held that the elements
of an employer-employee relationship are present, particularly that of
control;61 that Arlene’s separation from employment upon the expiration of
her contract constitutes illegal dismissal;62 that Arlene is entitled to
reinstatement;63 and that Fuji is liable to Arlene for damages and attorney’s
fees.64

This petition for review on certiorari under Rule 45 was filed on February 8,
2013.65 On February 27, 2013, Arlene filed a manifestation66 stating that
this court may not take jurisdiction over the case since Fuji failed to authorize
Corazon E. Acerden to sign the verification.67 Fuji filed a comment on the
manifestation68 on March 9, 2013.

Based on the arguments of the parties, there are procedural and substantive
issues for resolution:

I. Whether the petition for review should be dismissed as Corazon E. Acerden,

the signatory of the verification and certification of non forum shopping of the
petition, had no authority to sign the verification and certification on behalf
of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of
discretion was committed by the National Labor Relations Commission when
it ruled that Arlene was a regular employee, not an independent contractor,
and that she was illegally dismissed; and

III. Whether the Court of Appeals properly modified the National Labor
Relations Commission’s decision by awarding reinstatement, damages, and
attorney’s fees.

The petition should be dismissed.

Validity of the verification and certification against forum shopping

In its comment on Arlene’s manifestation, Fuji alleges that Corazon was

authorized to sign the verification and certification of non-forum shopping
because Mr. Shuji Yano was empowered under the secretary’s certificate to
delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping.69

On the other hand, Arlene points outthat the authority given to Mr. Shuji
Yano and Mr. Jin Eto in the secretary’s certificate is only for the petition for
certiorari before the Court of Appeals.70 Fuji did not attach any board
resolution authorizing Corazon orany other person tofile a petition for review
on certiorari with this court.71 Shuji Yano and Jin Eto could not re-delegate
the power thatwas delegated to them.72 In addition, the special power of
attorney executed by Shuji Yano in favor of Corazon indicated that she was
empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji.73

The Rules of Court requires the

submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the
requirement of verification, while Section 5 of the same rule provides the
requirement of certification against forum shopping. These sections state:

SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law
or rule, pleadings need not be under oath, verified or accompanied by
affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and
that the allegations therein are true and correct of his knowledge and belief.

A pleading required to be verifiedwhich containsa verification based on

"information and belief," or upon "knowledge, information and belief," or lacks
a proper verification, shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping.— The plaintiff or principal party

shall certify under oath in the complaint orother initiatory pleading asserting
a claim for relief or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or
quasi-judicial agency and, to the best of his knowledge, no such other action
or claim is pending therein; (b) if there is such other pending action or claim,
a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court
wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by

mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise
provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall
constitute indirect contempt ofcourt, without prejudice to the corresponding
administrative and criminalactions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct
contempt, as well as a cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should "contain a
sworn certification against forum shopping as provided in the last paragraph
of section 2, Rule 42." Section 5 of the same rule provides that failure to
comply with any requirement in Section 4 is sufficient ground to dismiss the
petition.

Effects of non-compliance

Uy v. Landbank75 discussed the effect of non-compliance with regard to

verification and stated that:

[t]he requirement regarding verification of a pleading is formal, not

jurisdictional. Such requirement is simply a condition affecting the form of
pleading, the non-compliance of which does not necessarily render the
pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not
the product of the imagination or a matter of speculation, and that the
pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with
the rules may be dispensed with inorder that the ends of justice may thereby
be served.76 (Citations omitted)

Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and

differentiated its effect from non-compliance with the requirement of
certification against forum shopping:

On the other hand, the lack of certification against forum shopping is

generally not curable by the submission thereof after the filing of the petition.
Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the
failure of the petitioner tosubmit the required documents that should
accompany the petition, including the certification against forum shopping,
shall be sufficient ground for the dismissal thereof. The same rule applies to
certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation.78 (Emphasis
supplied) Effects of substantial compliance with the requirement of
verification and certification against forum shopping
Although the general rule is that failure to attach a verification and
certification against forum shopping isa ground for dismissal, there are cases
where this court allowed substantial compliance.

In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required

certification one day after filing his electoral protest.80 This court considered
the subsequent filing as substantial compliance since the purpose of filing the
certification is to curtail forum shopping.81

In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the
verification and certification against forum shopping but failed to attach the
board resolution indicating her authority to sign.83 In a motion for
reconsideration, LDP Marketing attached the secretary’s certificate quoting
the board resolution that authorized Dela Peña.84 Citing Shipside, this court
deemed the belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do was to attach
proof of Dela Peña’s authority to sign.85 Havtor Management Phils., Inc. v.
National Labor Relations Commission86 and General Milling Corporation v.
National Labor Relations Commission87 involved petitions that were
dismissed for failure to attach any document showing that the signatory on
the verification and certification against forum-shopping was authorized.88
In both cases, the secretary’s certificate was attached to the motion for
reconsideration.89 This court considered the subsequent submission of proof
indicating authority to sign as substantial compliance.90 Altres v. Empleo91
summarized the rules on verification and certification against forum shopping
in this manner:

For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the
requirement on, or submission of defective, verification and certification
against forum shopping:

1) A distinction must be made between non-compliance with the requirement

on or submission of defective verification, and noncompliance with the
requirement on or submission of defective certification against forum
shopping.

2) As to verification, non-compliance therewith or a defect therein does not

necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances
are such that strict compliance with the Rule may be dispensed with in order
that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has

ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have
been made in good faith or are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a

defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on
the ground of "substantial compliance" or presence of "special circumstances
or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs
or petitioners in a case; otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable circumstances, however,
as when all the plaintiffs or petitioners share a common interest and invoke
a common cause of action or defense, the signature of only one of them inthe
certification against forum shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the

party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special Power
of Attorney designating his counsel of record to sign on his behalf.92

There was substantial compliance

by Fuji Television Network, Inc.

Being a corporation, Fuji exercises its power to sue and be sued through its
board of directors or duly authorized officers and agents. Thus, the physical
act of signing the verification and certification against forum shopping can
only be done by natural persons duly authorized either by the corporate by-
laws or a board resolution.93

In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s
certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for
and on behalf of Fuji.95 The secretary’s certificate was duly authenticated96
by Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise
attached to the petition is the special power of attorney executed by Shuji
Yano, authorizing Corazon to sign on his behalf.97 The verification and
certification against forum shopping was signed by Corazon.98

Arlene filed the manifestation dated February 27, 2013, arguing that the
petition for review should be dismissed because Corazon was not duly
authorized to sign the verification and certification against forum shopping.

Fuji filed a comment on Arlene’s manifestation, stating that Corazon was

properly authorized to sign. On the basis of the secretary’s certificate, Shuji
Yano was empowered to delegate his authority.

Quoting the board resolution dated May 13, 2010, the secretary's certificate
states:

(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals,
against Philippines’ National Labor Relations Commission ("NLRC") and
Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB
No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and participate in any other subsequent proceeding that
may necessarily arise therefrom, including but not limited to the filing of
appeals in the appropriate venue;

(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to verify and execute the certification against nonforum shopping
which may be necessary or required to be attached to any pleading to [sic]
submitted to the Court of Appeals; and the authority to so verify and certify
for the Corporation in favor of the said persons shall subsist and remain
effective until the termination of the said case;

....

(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to represent and appear on behalf the [sic] Corporation in all
stages of the [sic] this case and in any other proceeding that may necessarily
arise thereform [sic], and to act in the Corporation’s name, place and stead to
determine, propose, agree, decide, do, and perform any and all of the
following:

1. The possibility of amicable settlement or of submission to alternative mode

of dispute resolution;

2. The simplification of the issue;

3. The necessity or desirability of amendments to the pleadings;

4. The possibility of obtaining stipulation or admission of facts and

documents; and

5. Such other matters as may aid in the prompt disposition of the action.99
(Emphasis in the original; Italics omitted)

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon
E. Acerden and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special
power of attorney states:

That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-
4-8 Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the representative
of Fuji TV, INc., [sic] (evidenced by the attached Secretary’s Certificate) one of
the respondents in NLRC-NCR Case No. 05-06811-00 entitled "Arlene S.
Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and subsequently
docketed before the Court of Appeals asC.A. G.R. S.P. No. 114867
(Consolidated with SP No. 114889) do hereby make, constitute and appoint
Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true and lawful
attorneys-infact for me and my name, place and stead to act and represent
me in the above-mentioned case, with special power to make admission/s and
stipulations and/or to make and submit as well as to accept and approve
compromise proposals upon such terms and conditions and under such
covenants as my attorney-in-fact may deem fit, and to engage the services of
Villa Judan and Cruz Law Officesas the legal counsel to represent the
Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign,
execute and deliver such papers ordocuments as may be necessary in
furtherance of the power thus granted, particularly to sign and execute the
verification and certification of non-forum shopping needed to be filed.101
(Emphasis in the original)

In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano

could further delegate his authority because the board resolution empowered
him to "act in the Corporation’s name, place and stead to determine, propose,
agree, decided [sic], do and perform any and all of the following: . . . such
other matters as may aid in the prompt disposition of the action."103 To
clarify, Fuji attached a verification and certification against forum shopping,
but Arlene questions Corazon’s authority to sign. Arlene argues that the
secretary’s certificate empowered Shuji Yano to file a petition for certiorari
before the Court of Appeals, and not a petition for review before this court,
and that since Shuji Yano’s authority was delegated to him, he could not
further delegate such power. Moreover, Corazon was representing Shuji Yano
in his personal capacity, and not in his capacity as representative of Fuji.

A review of the board resolution quoted in the secretary’s certificate shows

that Fuji shall "file a Petition for Certiorari with the Court of Appeals"104 and
"participate in any other subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of appeals in the appropriate
venue,"105 and that Shuji Yano and Jin Eto are authorized to represent Fuji
"in any other proceeding that may necessarily arise thereform [sic]."106 As
pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to "act in
the Corporation’s name, place and stead to determine, propose, agree, decide,
do, and perform anyand all of the following: . . . 5. Such other matters as may
aid in the prompt disposition of the action."107

Considering that the subsequent proceeding that may arise from the petition
for certiorari with the Court of Appeals is the filing of a petition for review with
this court, Fuji substantially complied with the procedural requirement.

On the issue of whether Shuji Yano validly delegated his authority to Corazon,
Article 1892 of the Civil Code of the Philippines states:

ART. 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and
the person appointed was notoriously incompetent or insolvent. All acts of the
substitute appointed against the prohibition of the principal shall be void.

The secretary’s certificate does not state that Shuji Yano is prohibited from
appointing a substitute. In fact, heis empowered to do acts that will aid in the
resolution of this case.

This court has recognized that there are instances when officials or employees
of a corporation can sign the verification and certification against forum
shopping without a board resolution. In Cagayan Valley Drug Corporation v.
CIR,108 it was held that:

In sum, we have held that the following officials or employees of the company
can sign the verification and certification without need of a board resolution:
(1) the Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General Manager, (4)
Personnel Officer, and (5) an Employment Specialist in a labor case.

While the above cases109 do not provide a complete listing of authorized

signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to case
basis. The rationale applied in the foregoing cases is to justify the authority
of corporate officers or representatives of the corporation to sign the
verification or certificate against forum shopping, being ‘in a position to verify
the truthfulness and correctness of the allegations in the petition.’110

Corazon’s affidavit111 states that she is the "office manager and resident
interpreter of the Manila Bureau of Fuji Television Network, Inc."112 and that
she has "held the position for the last twenty-three years."113

As the office manager for 23 years,Corazon can be considered as having

knowledge of all matters in Fuji’s Manila Bureau Office and is in a position to
verify "the truthfulness and the correctness of the allegations in the
Petition."114
Thus, Fuji substantially complied with the requirements of verification and
certification against forum shopping.

Before resolving the substantive issues in this case, this court will discuss the
procedural parameters of a Rule 45 petition for review in labor cases.

II

Procedural parameters of petitions for review in labor cases

Article 223 of the Labor Code115 does not provide any mode of appeal for
decisions of the National Labor Relations Commission. It merely states that
"[t]he decision of the Commission shall be final and executory after ten (10)
calendar days from receipt thereof by the parties." Being final, it is no longer
appealable. However, the finality of the National Labor Relations
Commission’s decisions does not mean that there is no more recourse for the
parties.

In St. Martin Funeral Home v. National Labor Relations Commission,116 this

court cited several cases117 and rejected the notion that this court had no
jurisdiction to review decisions of the National Labor Relations Commission.
It stated that this court had the power to review the acts of the National Labor
Relations Commission to see if it kept within its jurisdiction in deciding cases
and alsoas a form of check and balance.118 This court then clarified that
judicial review of National Labor Relations Commission decisions shall be by
way of a petition for certiorari under Rule 65. Citing the doctrine of hierarchy
of courts, it further ruled that such petitions shall be filed before the Court of
Appeals. From the Court of Appeals, an aggrieved party may file a petition for
review on certiorari under Rule 45.

A petition for certiorari under Rule 65 is an original action where the issue is
limited to grave abuse of discretion. As an original action, it cannot be
considered as a continuation of the proceedings of the labor tribunals.

On the other hand, a petition for review on certiorari under Rule 45 is a mode
of appeal where the issue is limited to questions of law. In labor cases, a Rule
45 petition is limited toreviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of discretion and deciding
other jurisdictional errors of the National Labor Relations Commission.119

In Odango v. National Labor Relations Commission,120 this court explained

that a petition for certiorari is an extraordinary remedy that is "available only
and restrictively in truly exceptional cases"121 and that its sole office "is the
correction of errors of jurisdiction including commission of grave abuse of
discretion amounting to lack or excess of jurisdiction."122 A petition for
certiorari does not include a review of findings of fact since the findings of the
National Labor Relations Commission are accorded finality.123 In cases
where the aggrieved party assails the National Labor Relations Commission’s
findings, he or she must be able to show that the Commission "acted
capriciously and whimsically or in total disregard of evidence material to the
controversy."124

When a decision of the Court of Appeals under a Rule 65 petition is brought

to this court by way of a petition for review under Rule 45, only questions of
law may be decided upon. As held in Meralco Industrial v. National Labor
Relations Commission:125

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction
of this Court ina petition for review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of law, not of fact, unless the
factual findings complained of are completely devoid of support from the
evidence on record, or the assailed judgment is based on a gross
misapprehension of facts. Besides, factual findings of quasi-judicial agencies
like the NLRC, when affirmed by the Court of Appeals, are conclusive upon
the parties and binding on this Court.126

Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive

on the parameters of judicial review under Rule 45:

As a rule, only questions of law may be raised in a Rule 45 petition. In one

case, we discussed the particular parameters of a Rule 45 appeal from the
CA’s Rule 65 decision on a labor case, as follows:

In a Rule 45 review, we consider the correctness of the assailed CA decision,

in contrast with the review for jurisdictional error that we undertake under
Rule 65. Furthermore, Rule 45 limits us to the review of questions of law
raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari
it ruled upon was presented to it; we have to examine the CA decision from
the prism of whether it correctly determined the presence or absence of grave
abuse of discretion in the NLRC decision before it, not on the basis of whether
the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review
on appeal, of the NLRC decision challenged before it.129 (Emphasis in the
original)

Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.

Aicaraz130 discussed that in petitions for review under Rule 45, "the Court
simply determines whether the legal correctness of the CA’s finding that the
NLRC ruling . . . had basis in fact and in Iaw."131 In this kind of petition, the
proper question to be raised is, "Did the CA correctly determine whether the
NLRC committed grave abuse of discretion in ruling on the case?"132

Justice Brion’s dissenting opinion also laid down the following guidelines:

If the NLRC ruling has basis in the evidence and the applicable law and
jurisprudence, then no grave abuse of discretion exists and the CA should so
declare and, accordingly, dismiss the petition. If grave abuse of discretion
exists, then the CA must grant the petition and nullify the NLRC ruling,
entering at the same time the ruling that isjustified under the evidence and
the governing law, rules and jurisprudence. In our Rule 45 review, this Court
must denythe petition if it finds that the CA correctly acted.133 (Emphasis in
the original)

These parameters shall be used in resolving the substantive issues in this

petition.

III

Determination of employment status; burden of proof

In this case, there is no question thatArlene rendered services to Fuji.

However, Fuji alleges that Arlene was an independent contractor, while Arlene
alleges that she was a regular employee. To resolve this issue, we ascertain
whether an employer-employee relationship existed between Fuji and Arlene.

This court has often used the four-fold test to determine the existence of an
employer-employee relationship. Under the four-fold test, the "control test" is
the most important.134 As to how the elements in the four-fold test are
proven, this court has discussed that:

[t]here is no hard and fast rule designed to establish the aforesaid elements.
Any competent and relevant evidence to prove the relationship may be
admitted. Identification cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls, organization charts,
and personnel lists, serve as evidence of employee status.135

If the facts of this case vis-à-vis the four-fold test show that an employer-
employee relationship existed, we then determine the status of Arlene’s
employment, i.e., whether she was a regular employee. Relative to this, we
shall analyze Arlene’s fixed-term contract and determine whether it supports
her argument that she was a regular employee, or the argument of Fuji that
she was an independent contractor. We shall scrutinize whether the nature
of Arlene’s work was necessary and desirable to Fuji’s business or whether
Fuji only needed the output of her work. If the circumstances show that
Arlene’s work was necessary and desirable to Fuji, then she is presumed to
be a regular employee. The burden of proving that she was an independent
contractor lies with Fuji.

In labor cases, the quantum of proof required is substantial evidence.136

"Substantial evidence" has been defined as "such amount of relevant evidence
which a reasonable mind might accept as adequate to justify a
conclusion."137

If Arlene was a regular employee, we then determine whether she was illegally
dismissed. In complaints for illegal dismissal, the burden of proof is on the
employee to prove the fact of dismissal.138 Once the employee establishes the
fact of dismissal, supported by substantial evidence, the burden of proof shifts
tothe employer to show that there was a just or authorized cause for the
dismissal and that due process was observed.139

IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee

Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-
CBN and relying on the following facts: (1) she was hired because of her skills;
(2) her salary was US$1,900.00, which is higher than the normal rate; (3) she
had the power to bargain with her employer; and (4) her contract was for a
fixed term. According to Fuji, the Court of Appeals erred when it ruled that
Arlene was forcedto sign the non-renewal agreement, considering that she
sent an email with another version of the non-renewal agreement.140
Further, she is not entitled tomoral damages and attorney’s fees because she
acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits.141 Arlene argues
that she was a regular employee because Fuji had control and supervision
over her work. The news events that she covered were all based on the
instructions of Fuji.142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work was necessary
and desirable.143 In addition, Fuji’s payment of separation pay equivalent to
one (1) month’s pay per year of service indicates that she was a regular
employee.144 To further support her argument that she was not an
independent contractor, she states that Fuji owns the laptop computer and
mini-camera that she used for work.145 Arlene also argues that Sonza is not
applicable because she was a plain reporter for Fuji, unlike Jay Sonza who
was a news anchor, talk show host, and who enjoyed a celebrity status.146
On her illness, Arlene points outthat it was not a ground for her dismissal
because her attending physician certified that she was fit to work.147

Arlene admits that she signed the non-renewal agreement with quitclaim, not
because she agreed to itsterms, but because she was not in a position to reject
the non-renewal agreement. Further, she badly needed the salary withheld
for her sustenance and medication.148 She posits that her acceptance of
separation pay does not bar filing of a complaint for illegal dismissal.149

Article 280 of the Labor Code provides that:

Art. 280. Regular and casual employment.The provisions of written agreement

to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of
the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the

preceding paragraph; Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which heis
employed and his employment shall continue while such activity exist.

This provision classifies employees into regular, project, seasonal, and casual.
It further classifies regular employees into two kinds: (1) those "engaged to
perform activities which are usually necessary or desirable in the usual
business or trade of the employer"; and (2) casual employees who have
"rendered at least one year of service, whether such service is continuous or
broken."

Another classification of employees, i.e., employees with fixed-term contracts,

was recognized in Brent School, Inc. v. Zamora150 where this court discussed
that:

Logically, the decisive determinant in the term employment should not be the
activities that the employee is called upon to perform, but the day certain
agreed upon by the parties for the commencement and termination of their
employment relationship, a day certainbeing understood to be "that which
must necessarily come, although it may not be known when."151 (Emphasis
in the original)

This court further discussed that there are employment contracts where "a
fixed term is an essential and natural appurtenance"152 such as overseas
employment contracts and officers in educational institutions.153

Distinctions among fixed-term

employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term
contracts laid down in Brentin the following manner:

Cognizant of the possibility of abuse in the utilization of fixed term

employment contracts, we emphasized in Brentthat where from the
circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down
as contrary to public policy or morals. We thus laid down indications or
criteria under which "term employment" cannot be said to be in circumvention
of the law on security of tenure, namely:

1) The fixed period of employment was knowingly and voluntarily agreed upon
by the parties without any force, duress, or improper pressure being brought
to bear upon the employee and absent any other circumstances vitiating his
consent; or

2) It satisfactorily appears that the employer and the employee dealt with each
other on more or less equal terms with no moral dominance exercised by the
former or the latter.

These indications, which must be read together, make the Brent doctrine
applicable only in a few special cases wherein the employer and employee are
on more or less in equal footing in entering into the contract. The reason for
this is evident: whena prospective employee, on account of special skills or
market forces, is in a position to make demands upon the prospective
employer, such prospective employee needs less protection than the ordinary
worker. Lesser limitations on the parties’ freedom of contract are thus
required for the protection of the employee.155 (Citations omitted)

For as long as the guidelines laid down in Brentare satisfied, this court will
recognize the validity of the fixed-term contract.

In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm
employment of petitioners because from the time they were hired, they were
informed that their engagement was for a specific period. This court stated
that:
[s]imply put, petitioners were notregular employees. While their employment
as mixers, packers and machine operators was necessary and desirable in the
usual business ofrespondent company, they were employed temporarily only,
during periods when there was heightened demand for production.
Consequently, there could have been no illegal dismissal when their services
were terminated on expiration of their contracts. There was even no need for
notice of termination because they knew exactly when their contracts would
end. Contracts of employment for a fixed period terminate on their own at the
end of such period.

Contracts of employment for a fixed period are not unlawful. What is

objectionable is the practice of some scrupulous employers who try to
circumvent the law protecting workers from the capricious termination of
employment.157 (Citation omitted)

Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract

of employment. Caparoso and Quindipan were hired as delivery men for three
(3) months. At the end of the third month, they were hired on a monthly basis.
In total, they were hired for five (5) months. They filed a complaint for illegal
dismissal.159 This court ruled that there was no evidence indicating that they
were pressured into signing the fixed-term contracts. There was likewise no
proof that their employer was engaged in hiring workers for five (5) months
onlyto prevent regularization. In the absence of these facts, the fixed-term
contracts were upheld as valid.160 On the other hand, an independent
contractor is defined as:

. . . one who carries on a distinct and independent business and undertakes

to perform the job, work, or service on its own account and under one’s own
responsibility according to one’s own manner and method, free from the
control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.161

In view of the "distinct and independent business" of independent contractors,

no employer-employee relationship exists between independent contractors
and their principals. Independent contractors are recognized under Article
106 of the Labor Code:

Art. 106. Contractor or subcontractor. Whenever an employer enters into a

contract with another person for the performance of the former’s work, the
employees of the contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

....

The Secretary of Labor and Employment may, by appropriate regulations,

restrict or prohibit the contracting-out of labor to protect the rights of workers
established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting
as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention of any provision of this
Code.

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if
the latterwere directly employed by him.

In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:

Section 3. . . .

....

(c) . . . an arrangement whereby a principal agrees to put out or farm out with
a contractor the performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of whether such job,
work or service is to be performed or completed within oroutside the premises
of the principal.
This department order also states that there is a trilateral relationship in
legitimate job contracting and subcontracting arrangements among the
principal, contractor, and employees of the contractor. There is no employer-
employee relationship between the contractor and principal who engages the
contractor’s services, but there is an employer-employee relationship between
the contractor and workers hired to accomplish the work for the principal.162

Jurisprudence has recognized another kind of independent contractor:

individuals with unique skills and talents that set them apart from ordinary
employees. There is no trilateral relationship in this case because the
independent contractor himself or herself performs the work for the principal.
In other words, the relationship is bilateral.

In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the

Philippine Daily Inquirer. This court ruled that she was an independent
contractor because of her "talent, skill, experience, and her unique viewpoint
as a feminist advocate."164 In addition, the Philippine Daily Inquirer did not
have the power of control over Orozco, and she worked at her own
pleasure.165

Semblante v. Court of Appeals166 involved a masiador167 and a

sentenciador.168 This court ruled that "petitioners performed their functions
as masiadorand sentenciador free from the direction and control of
respondents"169 and that the masiador and sentenciador "relied mainly on
their ‘expertise that is characteristic of the cockfight gambling.’"170 Hence,
no employer-employee relationship existed.

Bernarte v. Philippine Basketball Association171 involved a basketball

referee. This court ruled that "a referee is an independent contractor, whose
special skills and independent judgment are required specifically for such
position and cannot possibly be controlled by the hiring party."172

In these cases, the workers were found to be independent contractors because

of their unique skills and talents and the lack of control over the means and
methods in the performance of their work.

In other words, there are different kinds of independent contractors: those

engaged in legitimate job contracting and those who have unique skills and
talents that set them apart from ordinary employees.
Since no employer-employee relationship exists between independent
contractors and their principals, their contracts are governed by the Civil
Code provisions on contracts and other applicable laws.173

A contract is defined as "a meeting of minds between two persons whereby

one binds himself, with respect to the other, to give something or to render
some service."174 Parties are free to stipulate on terms and conditions in
contracts as long as these "are not contrary to law, morals, good customs,
public order, or public policy."175 This presupposes that the parties to a
contract are on equal footing. Theycan bargain on terms and conditions until
they are able to reach an agreement.

On the other hand, contracts of employment are different and have a higher
level of regulation because they are impressed with public interest. Article
XIII, Section 3 of the 1987 Constitution provides full protection to labor:

ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS

....

LABOR

Section 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective

bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.

The State shall promote the principle of shared responsibility between

workers and employers and the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce their mutual compliance
therewith to foster industrial peace.

The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to
expansion and growth.

Apart from the constitutional guarantee of protection to labor, Article 1700 of

the Civil Code states:

ART. 1700. The relations between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts
must yield to the common good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.

In contracts of employment, the employer and the employee are not on equal
footing. Thus, it is subject to regulatory review by the labor tribunals and
courts of law. The law serves to equalize the unequal. The labor force is a
special class that is constitutionally protected because of the inequality
between capital and labor.176 This presupposes that the labor force is weak.
However, the level of protection to labor should vary from case to case;
otherwise, the state might appear to be too paternalistic in affording
protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in
Brent applies in cases where it appears that the employer and employee are
on equal footing.177 This recognizes the fact that not all workers are weak.
To reiterate the discussion in GMA Network v. Pabriga:

The reason for this is evident: when a prospective employee, on account of

special skills or market forces, is in a position to make demands upon the
prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties’ freedom of contract are
thus required for the protection of the employee.178

The level of protection to labor mustbe determined on the basis of the nature
of the work, qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said
to be on equal footing witha grocery bagger with a high school diploma.
Employees who qualify for jobs requiring special qualifications such as
"[having] a Master’s degree" or "[having] passed the licensure exam" are
different from employees who qualify for jobs that require "[being a] high
school graduate; withpleasing personality." In these situations, it is clear that
those with special qualifications can bargain with the employer on equal
footing. Thus, the level of protection afforded to these employees should be
different.

Fuji’s argument that Arlene was an independent contractor under a fixed-

term contract is contradictory. Employees under fixed-term contracts cannot
be independent contractors because in fixed-term contracts, an employer-
employee relationship exists. The test in this kind of contract is not the
necessity and desirability of the employee’s activities, "but the day certain
agreed upon by the parties for the commencement and termination of the
employment relationship."179 For regular employees, the necessity and
desirability of their work in the usual course of the employer’s business are
the determining factors. On the other hand, independent contractors do not
have employer-employee relationships with their principals. Hence, before the
status of employment can be determined, the existence of an employer-
employee relationship must be established.

The four-fold test180 can be used in determining whether an

employeremployee relationship exists. The elements of the four-fold test are
the following: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power of control,
which is the most important element.181

The "power of control" was explained by this court in Corporal, Sr. v. National
Labor Relations Commission:182

The power to control refers to the existence of the power and not necessarily
to the actual exercise thereof, nor is it essential for the employer to actually
supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power.183 (Citation omitted)

Orozco v. Court of Appeals further elucidated the meaning of "power of

control" and stated the following:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the
result and the means used to achieve it. . . .184 (Citation omitted)

In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the

"power of control" was defined as "[the] right to control not only the end to be
achieved but also the means to be used in reaching such end."186

Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v.
Court of Appeals187 in determining whether Arlene was an independent
contractor or a regular employee.

In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both
cases involved newscasters and anchors. However, Sonza was held to be an
independent contractor, while Dumpit-Murillo was held to be a regular
employee.

Comparison of the Sonza and

Dumpit-Murillo cases using
the four-fold test

Sonza was engaged by ABS-CBN in view of his "unique skills, talent and
celebrity status not possessed by ordinary employees."188 His work was for
radio and television programs.189 On the other hand, Dumpit-Murillo was
hired by ABC as a newscaster and co-anchor.190 Sonza’s talent fee amounted
to ₱317,000.00 per month, which this court found to be a substantial amount
that indicatedhe was an independent contractor rather than a regular
employee.191 Meanwhile, Dumpit-Murillo’s monthly salary was ₱28,000.00,
a very low amount compared to what Sonza received.192

Sonza was unable to prove that ABS-CBN could terminate his services apart
from breach of contract. There was no indication that he could be terminated
based on just or authorized causes under the Labor Code. In addition, ABS-
CBN continued to pay his talent fee under their agreement, even though his
programs were no longer broadcasted.193 Dumpit-Murillo was found to have
beenillegally dismissed by her employer when they did not renew her contract
on her fourth year with ABC.194

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered
his lines, how he appeared on television, or how he sounded on radio.195 All
that Sonza needed was his talent.196 Further, "ABS-CBN could not terminate
or discipline SONZA even if the means and methods of performance of his
work . . . did not meet ABS-CBN’s approval."197 In Dumpit-Murillo, the duties
and responsibilities enumerated in her contract was a clear indication that
ABC had control over her work.198

Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo
and affirmed the ruling of the National Labor Relations Commission finding
that Arlene was a regular employee. Arlene was hired by Fuji as a news
producer, but there was no showing that she was hired because of unique
skills that would distinguish her from ordinary employees. Neither was there
any showing that she had a celebrity status. Her monthly salary amounting
to US$1,900.00 appears tobe a substantial sum, especially if compared to her
salary whenshe was still connected with GMA.199 Indeed, wages may indicate
whether oneis an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages
should not be the conclusive factor in determining whether one is an employee
or an independent contractor.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract.200 Her contract also indicated that Fuji
had control over her work because she was required to work for eight (8) hours
from Monday to Friday, although on flexible time.201 Sonza was not required
to work for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both
on-air and off-air tasks.

On the power to control, Arlene alleged that Fuji gave her instructions on what
to report.202 Even the mode of transportation in carrying out her functions
was controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of
place of work, the train, bus, or public transport shall be used for the trip. If
the Employee uses the private car during the work and there is an accident
the Employer shall not be responsible for the damage, which may be caused
to the Employee.203

Thus, the Court of Appeals did not err when it upheld the findings of the
National Labor Relations Commission that Arlene was not an independent
contractor.

Having established that an employer-employee relationship existed between

Fuji and Arlene, the next questions for resolution are the following: Did the
Court of Appeals correctly affirm the National Labor Relations Commission
that Arlene had become a regular employee? Was the nature of Arlene’s work
necessary and desirable for Fuji’s usual course of business?

Arlene was a regular employee

with a fixed-term contract

The test for determining regular employment is whether there is a reasonable

connection between the employee’s activities and the usual business of the
employer. Article 280 provides that the nature of work must be "necessary or
desirable in the usual business or trade of the employer" as the test for
determining regular employment. As stated in ABS-CBN Broadcasting
Corporation v. Nazareno:204

In determining whether an employment should be considered regular or non-

regular, the applicable test is the reasonable connection between the
particular activity performed by the employee in relation to the usual business
or trade of the employer. The standard, supplied by the law itself, is whether
the work undertaken is necessary or desirable in the usual business or trade
of the employer, a fact that can be assessed by looking into the nature of the
services rendered and its relation to the general scheme under which the
business or trade is pursued in the usual course. It is distinguished from a
specific undertaking that is divorced from the normal activities required
incarrying on the particular business or trade.205
However, there may be a situation where an employee’s work is necessary but
is not always desirable inthe usual course of business of the employer. In this
situation, there is no regular employment.

In San Miguel Corporation v. National Labor Relations Commission,206

Francisco de Guzman was hired to repair furnaces at San Miguel
Corporation’s Manila glass plant. He had a separate contract for every furnace
that he repaired. He filed a complaint for illegal dismissal three (3) years after
the end of his last contract.207 In ruling that de Guzman did not attain the
status of a regular employee, this court explained:

Note that the plant where private respondent was employed for only seven
months is engaged in the manufacture of glass, an integral component of the
packaging and manufacturing business of petitioner. The process of
manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said
furnaces repaired since said activity is not regularly performed. Said furnaces
are to be repaired or overhauled only in case of need and after being used
continuously for a varying period of five (5) to ten (10) years. In 1990, one of
the furnaces of petitioner required repair and upgrading. This was an
undertaking distinct and separate from petitioner's business of
manufacturing glass. For this purpose, petitioner must hire workers to
undertake the said repair and upgrading. . . .

....

Clearly, private respondent was hired for a specific project that was not within
the regular business of the corporation. For petitioner is not engaged in the
business of repairing furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity therefor arose only
when a particular furnace reached the end of its life or operating cycle. Or, as
in the second undertaking, when a particular furnace required an emergency
repair. In other words, the undertakings where private respondent was hired
primarily as helper/bricklayer have specified goals and purposes which are
fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual,
ordinary or regular business operations of petitioner, which is glass
manufacturing. These undertakings, the duration and scope of which had
been determined and made known to private respondent at the time of his
employment, clearly indicated the nature of his employment as a project
employee.208
Fuji is engaged in the business of broadcasting,209 including news
programming.210 It is based in Japan211 and has overseas offices to cover
international news.212

Based on the record, Fuji’s Manila Bureau Office is a small unit213 and has
a few employees.214 As such, Arlene had to do all activities related to news
gathering. Although Fuji insists that Arlene was a stringer, it alleges that her
designation was "News Talent/Reporter/Producer."215

A news producer "plans and supervises newscast . . . [and] work[s] with

reporters in the field planning and gathering information. . . ."216 Arlene’s
tasks included "[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting
interviewing subjects in front of a video camera,"217 "the timely submission
of news and current events reports pertaining to the Philippines[,] and
traveling [sic] to [Fuji’s] regional office in Thailand."218 She also had to report
for work in Fuji’s office in Manila from Mondays to Fridays, eight (8) hours
per day.219 She had no equipment and had to use the facilities of Fuji to
accomplish her tasks.

The Court of Appeals affirmed the finding of the National Labor Relations
Commission that the successive renewals of Arlene’s contract indicated the
necessity and desirability of her work in the usual course of Fuji’s business.
Because of this, Arlene had become a regular employee with the right to
security of tenure.220 The Court of Appeals ruled that:

Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its
Manila Bureau. She was hired for the primary purpose of news gathering and
reporting to the television network’s headquarters. Espiritu was not
contracted on account of any peculiar ability or special talent and skill that
she may possess which the network desires to make use of. Parenthetically,
ifit were true that Espiritu is an independent contractor, as claimed by Fuji,
the factthat everything that she uses to perform her job is owned by the
company including the laptop computer and mini camera discounts the idea
of job contracting.221

Moreover, the Court of Appeals explained that Fuji’s argument that no

employer-employee relationship existed in view of the fixed-term contract does
not persuade because fixed-term contracts of employment are strictly
construed.222 Further, the pieces of equipment Arlene used were all owned
by Fuji, showing that she was a regular employee and not an independent
contractor.223

The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term

contracts that were successively renewed for four (4) years.224 This court
held that "[t]his repeated engagement under contract of hire is indicative of
the necessity and desirability of the petitioner’s work in private respondent
ABC’s business."225

With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the
Court of Appeals cited Philips Semiconductors, Inc. v. Fadriquela226 and held
that where an employee’s contract "had been continuously extended or
renewed to the same position, with the same duties and remained in the
employ without any interruption,"227 then such employee is a regular
employee. The continuous renewal is a scheme to prevent regularization. On
this basis, the Court of Appeals ruled in favor of Arlene.

As stated in Price, et al. v. Innodata Corp., et al.:228

The employment status of a person is defined and prescribed by law and not
by what the parties say it should be. Equally important to consider is that a
contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are not at
liberty to insulate themselves and their relationships from the impact of labor
laws and regulations by simply contracting with each other.229 (Citations
omitted)

Arlene’s contract indicating a fixed term did not automatically mean that she
could never be a regular employee. This is precisely what Article 280 seeks to
avoid. The ruling in Brent remains as the exception rather than the general
rule.

Further, an employee can be a regular employee with a fixed-term contract.

The law does not preclude the possibility that a regular employee may opt to
have a fixed-term contract for valid reasons. This was recognized in Brent: For
as long as it was the employee who requested, or bargained, that the contract
have a "definite date of termination," or that the fixed-term contract be freely
entered into by the employer and the employee, then the validity of the fixed-
term contract will be upheld.230

Whether the Court of Appeals correctly affirmed

the National Labor Relations Commission’s finding of illegal dismissal

Fuji argues that the Court of Appeals erred when it held that Arlene was
illegally dismissed, in view of the non-renewal contract voluntarily executed
by the parties. Fuji also argues that Arlene’s contract merely expired; hence,
she was not illegally dismissed.231

Arlene alleges that she had no choice but to sign the non-renewal contract
because Fuji withheldher salary and benefits.

With regard to this issue, the Court of Appeals held:

We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely

expired and that she voluntarily agreed not to renew the same. Even a cursory
perusal of the subject Non-Renewal Contract readily shows that the same was
signed by Espiritu under protest. What is apparent is that the Non-Renewal
Contract was crafted merely as a subterfuge to secure Fuji’s position that it
was Espiritu’s choice not to renew her contract.232

As a regular employee, Arlene was entitled to security of tenure and could be

dismissed only for just or authorized causes and after the observance of due
process.

The right to security of tenureis guaranteed under Article XIII, Section 3 of

the 1987 Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS

....
LABOR

....

It shall guarantee the rights of all workers to self-organization, collective

bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.

Article 279 of the Labor Code also provides for the right to security of tenure
and states the following:

Art. 279. Security of tenure.In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause of when
authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.

Thus, on the right to security of tenure, no employee shall be dismissed,

unless there are just orauthorized causes and only after compliance with
procedural and substantive due process is conducted.

Even probationary employees are entitled to the right to security of tenure.

This was explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233

Within the limited legal six-month probationary period, probationary

employees are still entitled to security of tenure. It is expressly provided in the
afore-quoted Article 281 that a probationary employee may be terminated only
on two grounds: (a) for just cause, or (b) when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement.234 (Citation omitted)
The expiration of Arlene’s contract does not negate the finding of illegal
dismissal by Fuji. The manner by which Fuji informed Arlene that her
contract would no longer be renewed is tantamount to constructive dismissal.
To make matters worse, Arlene was asked to sign a letter of resignation
prepared by Fuji.235 The existence of a fixed-term contract should not mean
that there can be no illegal dismissal. Due process must still be observed in
the pre-termination of fixed-term contracts of employment.

In addition, the Court of Appeals and the National Labor Relations

Commission found that Arlene was dismissed because of her health condition.
In the non-renewal agreement executed by Fuji and Arlene, it is stated that:

WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents

her from continuing to effectively perform her functions under the said
Contract such as the timely submission of news and current events reports
pertaining to the Philippines and travelling [sic] to the FIRST PARTY’s regional
office in Thailand.236 (Emphasis supplied)

Disease as a ground for termination is recognized under Article 284 of the

Labor Code:

Art. 284. Disease as ground for termination. An employer may terminate the
services of an employee who has been found to be suffering from any disease
and whose continued employment is prohibited by law or is prejudicial to his
health as well as to the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month salary or to one-half (1/2)
month salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor
Code provides:

Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from
a disease and his continued employment is prohibited by law or prejudicial to
his healthor to the health of his coemployees, the employer shall not terminate
his employment unless there is a certification by a competent public health
authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment.
If the disease or ailment can be cured within the period, the employer shall
not terminate the employee but shall ask the employee to take a leave. The
employer shall reinstate such employee to his former position immediately
upon the restoration of his normal health.

For dismissal under Article 284 to bevalid, two requirements must be

complied with: (1) the employee’s disease cannot be cured within six (6)
months and his "continued employment is prohibited by law or prejudicial to
his health as well as to the health of his co-employees"; and (2) certification
issued by a competent public health authority that even with proper medical
treatment, the disease cannot be cured within six (6) months.237 The burden
of proving compliance with these requisites is on the employer.238
Noncompliance leads to the conclusion that the dismissal was illegal.239

There is no evidence showing that Arlene was accorded due process. After
informing her employer of her lung cancer, she was not given the chance to
present medical certificates. Fuji immediately concluded that Arlene could no
longer perform her duties because of chemotherapy. It did not ask her how
her condition would affect her work. Neither did it suggest for her to take a
leave, even though she was entitled to sick leaves. Worse, it did not present
any certificate from a competent public health authority. What Fuji did was
to inform her thather contract would no longer be renewed, and when she did
not agree, her salary was withheld. Thus, the Court of Appeals correctly
upheld the finding of the National Labor Relations Commission that for failure
of Fuji to comply with due process, Arlene was illegally dismissed.240

VI

Whether the Court of Appeals properly modified

the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees

The National Labor Relations Commission awarded separation pay in lieu of

reinstatement, on the ground that the filing of the complaint for illegal
dismissal may have seriously strained relations between the parties.
Backwages were also awarded, to be computed from date of dismissal until
the finality of the National Labor Relations Commission’s decision. However,
only backwages were included in the dispositive portion because the National
Labor Relations Commission recognized that Arlene had received separation
pay in the amount of US$7,600.00. The Court of Appeals affirmed the National
Labor Relations Commission’s decision but modified it by awarding moral and
exemplary damages and attorney’s fees, and all other benefits Arlene was
entitled to under her contract with Fuji. The Court of Appeals also ordered
reinstatement, reasoning that the grounds when separation pay was awarded
in lieu of reinstatement were not proven.241

Article 279 of the Labor Code provides:

Art. 279. Security of tenure. In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. (Emphasis supplied)

The Court of Appeals’ modification of the National Labor Relations

Commission’s decision was proper because the law itself provides that illegally
dismissed employees are entitled to reinstatement, backwages including
allowances, and all other benefits.

On reinstatement, the National Labor Relations Commission ordered payment

of separation pay in lieu of reinstatement, reasoning "that the filing of the
instant suit may have seriously abraded the relationship of the parties so as
to render reinstatement impractical."242 The Court of Appeals reversed this
and ordered reinstatement on the ground that separation pay in lieu of
reinstatement is allowed only in several instances such as (1) when the
employer has ceased operations; (2) when the employee’s position is no longer
available; (3) strained relations; and (4) a substantial period has lapsed from
date of filing to date of finality.243

On this matter, Quijano v. Mercury Drug Corp.244 is instructive:

Well-entrenched is the rule that an illegally dismissed employee is entitled to

reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of
"strained relations" should be strictly applied so as not to deprive an illegally
dismissed employee of his right to reinstatement. Every labor dispute almost
always results in "strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can
never be reinstated.245 (Citations omitted)

The Court of Appeals reasoned that strained relations are a question of fact
that must be supported by evidence.246 No evidence was presented by Fuji
to prove that reinstatement was no longer feasible. Fuji did not allege that it
ceased operations or that Arlene’s position was no longer available. Nothing
in the records shows that Arlene’s reinstatement would cause an atmosphere
of antagonism in the workplace. Arlene filed her complaint in 2009. Five (5)
years are not yet a substantial period247 to bar reinstatement.

On the award of damages, Fuji argues that Arlene is notentitled to the award
of damages and attorney’s fees because the non-renewal agreement contained
a quitclaim, which Arlene signed. Quitclaims in labor cases do not bar illegally
dismissed employees from filing labor complaints and money claim. As
explained by Arlene, she signed the non-renewal agreement out of necessity.
In Land and Housing Development Corporation v. Esquillo,248 this court
explained: We have heretofore explained that the reason why quitclaims are
commonly frowned upon as contrary to public policy, and why they are held
to be ineffective to bar claims for the full measure of the workers’ legal rights,
is the fact that the employer and the employee obviously do not stand on the
same footing. The employer drove the employee to the wall. The latter must
have to get holdof money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice.249

With regard to the Court of Appeals’ award of moral and exemplary damages
and attorney’s fees, this court has recognized in several cases that moral
damages are awarded "when the dismissal is attended by bad faith or fraud
or constitutes an act oppressive to labor, or is done in a manner contrary to
good morals, good customs or public policy."250 On the other hand,
exemplary damages may be awarded when the dismissal was effected "in a
wanton, oppressive or malevolent manner."251

The Court of Appeals and National Labor Relations Commission found that
after Arlene had informed Fuji of her cancer, she was informed that there
would be problems in renewing her contract on account of her condition. This
information caused Arlene mental anguish, serious anxiety, and wounded
feelings that can be gleaned from the tenor of her email dated March 11, 2009.
A portion of her email reads:

I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick

and very weak, you suddenly came to deliver to me the NEWS that you will
no longer renew my contract.1awp++i1 I knew this will come but I never
thought that you will be so ‘heartless’ and insensitive to deliver that news just
a month after I informed you that I am sick. I was asking for patience and
understanding and your response was not to RENEW my contract.252

Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected
in an oppressive approach withher salary and other benefits being withheld
until May 5, 2009, when she had no other choice but to sign the non-renewal
contract. Thus, there was legal basis for the Court of Appeals to modify the
National Labor Relations Commission’s decision.

However, Arlene receivedher salary for May 2009.253 Considering that the
date of her illegal dismissal was May 5, 2009,254 this amount may be
subtracted from the total monetary award. With regard to the award of
attorney’s fees, Article 111 of the Labor Code states that "[i]n cases of unlawful
withholding of wages, the culpable party may be assessed attorney’s fees
equivalent to ten percent of the amount of wages recovered." Likewise, this
court has recognized that "in actions for recovery of wages or where an
employee was forced to litigate and, thus, incur expenses to protect his rights
and interest, the award of attorney’s fees is legallyand morally justifiable."255
Due to her illegal dismissal, Arlene was forced to litigate.

In the dispositive portion of its decision, the Court of Appeals awarded legal
interest at the rate of 12% per annum.256 In view of this court’s ruling in
Nacar v. Gallery Frames,257 the legal interest shall be reducd to a rate of 6%
per annum from July 1, 2013 until full satisfaction.

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision

dated June 25, 2012 is AFFIRMED with the modification that backwages shall
be computed from June 2009. Legal interest shall be computed at the rate of
6% per annum of the total monetary award from date of finality of this decision
until full satisfaction.
SO ORDERED.

FIRST DIVISION

OSCAR VILLAMARIA, JR. G.R. No. 165881

Petitioner,
Present:

PANGANIBAN, C.J.,
Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ.
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

COURT OF APPEALS and Promulgated:

JERRY V. BUSTAMANTE,
Respondents. April 19, 2006

x-----------------------------------------------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised
Rules of Court assailing the Decision[1] and Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution[3] of the
National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which
in turn affirmed the Decision[4] of the Labor Arbiter dismissing the complaint
filed by respondent Jerry V. Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole
proprietorship engaged in assembling passenger jeepneys with a public utility
franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria
stopped assembling jeepneys and retained only nine, four of which he
operated by employing drivers on a boundary basis. One of those drivers was
respondent Bustamante who drove the jeepney with Plate No. PVU-660.
Bustamante remitted P450.00 a day to Villamaria as boundary and kept the
residue of his daily earnings as compensation for driving the vehicle. In
August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante
under the boundary-hulog scheme, where Bustamante would remit to
Villarama P550.00 a day for a period of four years; Bustamante would then
become the owner of the vehicle and continue to drive the same under
Villamarias franchise. It was also agreed that Bustamante would make a
downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled Kasunduan ng

Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog[5] over the
passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C
and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay
the boundary-hulog for three days, Villamaria Motors would hold on to the
vehicle until Bustamante paid his arrears, including a penalty of P50.00 a
day; in case Bustamante failed to remit the daily boundary-hulog for a period
of one week, the Kasunduan would cease to have legal effect and Bustamante
would have to return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle
without prior authority from Villamaria Motors. Thus, Bustamante was
authorized to operate the vehicle to transport passengers only and not for
other purposes. He was also required to display an identification card in front
of the windshield of the vehicle; in case of failure to do so, any fine that may
be imposed by government authorities would be charged against his account.
Bustamante further obliged himself to pay for the cost of replacing any parts
of the vehicle that would be lost or damaged due to his negligence. In case the
vehicle sustained serious damage, Bustamante was obliged to notify
Villamaria Motors before commencing repairs. Bustamante was not allowed
to wear slippers, short pants or undershirts while driving. He was required to
be polite and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more days and was
required to attend any meetings which may be called from time to time. Aside
from the boundary-hulog, Bustamante was also obliged to pay for the annual
registration fees of the vehicle and the premium for the vehicles
comprehensive insurance. Bustamante promised to strictly comply with the
rules and regulations imposed by Villamaria for the upkeep and maintenance
of the jeepney.

Bustamante continued driving the jeepney under the supervision and control
of Villamaria. As agreed upon, he made daily remittances of P550.00 in
payment of the purchase price of the vehicle. Bustamante failed to pay for the
annual registration fees of the vehicle, but Villamaria allowed him to continue
driving the jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement
with Villamaria Motors failed to pay their respective boundary-hulog. This
prompted Villamaria to serve a Paalala,[6] reminding them that under the
Kasunduan, failure to pay the daily boundary-hulog for one week, would
mean their respective jeepneys would be returned to him without any
complaints. He warned the drivers that the Kasunduan would henceforth be
strictly enforced and urged them to comply with their obligation to avoid
litigation.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante
and barred the latter from driving the vehicle.

On August 15, 2000, Bustamante filed a Complaint[7] for Illegal Dismissal

against Villamaria and his wife Teresita. In his Position Paper,[8] Bustamante
alleged that he was employed by Villamaria in July 1996 under the boundary
system, where he was required to remit P450.00 a day. After one year of
continuously working for them, the spouses Villamaria presented the
Kasunduan for his signature, with the assurance that he (Bustamante) would
own the jeepney by March 2001 after paying P550.00 in daily installments
and that he would thereafter continue driving the vehicle along the same route
under the same franchise. He further narrated that in July 2000, he informed
the Villamaria spouses that the surplus engine of the jeepney needed to be
replaced, and was assured that it would be done. However, he was later
arrested and his drivers license was confiscated because apparently, the
replacement engine that was installed was taken from a stolen vehicle. Due
to negotiations with the apprehending authorities, the jeepney was not
impounded. The Villamaria spouses took the jeepney from him on July 24,
2000, and he was no longer allowed to drive the vehicle since then unless he
paid them P70,000.00.

Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that

judgment be rendered ordering the respondents, jointly and severally, the
following:

1. Reinstate complainant to his former position without loss of seniority rights

and execute a Deed of Sale in favor of the complainant relative to the PUJ with
Plate No. PVU-660;

2. Ordering the respondents to pay backwages in the amount of P400.00 a

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

3. Ordering respondents to return the amount of P10,000.00 and

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

4. Ordering the respondents to refund the amount of One Hundred (P100.00)

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

5. To pay moral and exemplary damages of not less than P200,000.00;

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

Other just and equitable reliefs under the premises are also being prayed
for.[9]
In their Position Paper,[10] the spouses Villamaria admitted the existence of
the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00
downpayment and the vehicles annual registration fees. They further alleged
that Bustamante eventually failed to remit the requisite boundary-hulog of
P550.00 a day, which prompted them to issue the Paalaala. Instead of
complying with his obligations, Bustamante stopped making his remittances
despite his daily trips and even brought the jeepney to the province without
permission. Worse, the jeepney figured in an accident and its license plate
was confiscated; Bustamante even abandoned the vehicle in a gasoline station
in Sucat, Paraaque City for two weeks. When the security guard at the
gasoline station requested that the vehicle be retrieved and Teresita Villamaria
asked Bustamante for the keys, Bustamante told her: Di kunin ninyo. When
the vehicle was finally retrieved, the tires were worn, the alternator was gone,
and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC[11] and

Canlubang Security Agency Corporation v. NLRC,[12] the spouses Villamaria
argued that Bustamante was not illegally dismissed since the Kasunduan
executed on August 7, 1997 transformed the employer-employee relationship
into that of vendor-vendee. Hence, the spouses concluded, there was no legal
basis to hold them liable for illegal dismissal. They prayed that the case be
dismissed for lack of jurisdiction and patent lack of merit.

In his Reply,[13] Bustamante claimed that Villamaria exercised control and

supervision over the conduct of his employment. He maintained that the
rulings of the Court in National Labor Union v. Dinglasan,[14] Magboo v.
Bernardo,[15] and Citizen's League of Free Workers v. Abbas[16] are germane
to the issue as they define the nature of the owner/operator-driver
relationship under the boundary system. He further reiterated that it was the
Villamaria spouses who presented the Kasunduan to him and that he
conformed thereto only upon their representation that he would own the
vehicle after four years. Moreover, it appeared that the Paalala was duly
received by him, as he, together with other drivers, was made to affix his
signature on a blank piece of paper purporting to be an attendance sheet.

On March 15, 2002, the Labor Arbiter rendered judgment[17] in favor of the
spouses Villamaria and ordered the complaint dismissed on the following
ratiocination:

Respondents presented the contract of Boundary-Hulog, as well as the

PAALALA, to prove their claim that complainant violated the terms of their
contract and afterwards abandoned the vehicle assigned to him. As against
the foregoing, [the] complaints (sic) mere allegations to the contrary cannot
prevail.

Not having been illegally dismissed, complainant is not entitled to damages

and attorney's fees.[18]

Bustamante appealed the decision to the NLRC,[19] insisting that the

Kasunduan did not extinguish the employer-employee relationship between
him and Villamaria. While he did not receive fixed wages, he kept only the
excess of the boundary-hulog which he was required to remit daily to
Villamaria under the agreement. Bustamante maintained that he remained
an employee because he was engaged to perform activities which were
necessary or desirable to Villamarias trade or business.
The NLRC rendered judgment[20] dismissing the appeal for lack of merit,
thus:

WHEREFORE, premises considered, complainant's appeal is hereby

DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly
on a jurisdictional issue, there being none over the subject matter of the
controversy.[21]

The NLRC ruled that under the Kasunduan, the juridical relationship between
Bustamante and Villamaria was that of vendor and vendee, hence, the Labor
Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for
Reconsideration, which the NLRC resolved to deny on May 30, 2003.[22]

Bustamante elevated the matter to the CA via Petition for Certiorari, alleging
that the NLRC erred

I
IN DISMISSING PETITIONERS APPEAL FOR REASON NOT STATED IN THE
LABOR ARBITERS DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;

II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT
DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED
BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY
A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR
LAWS.[23]

Bustamante insisted that despite the Kasunduan, the relationship between

him and Villamaria continued to be that of employer-employee and as such,
the Labor Arbiter had jurisdiction over his complaint. He further alleged that
it is common knowledge that operators of passenger jeepneys (including taxis)
pay their drivers not on a regular monthly basis but on commission or
boundary basis, or even the boundary-hulog system. Bustamante asserted
that he was dismissed from employment without any lawful or just cause and
without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of
their employer-employee relationship. He further pointed out that the
Dinglasan case pertains to the boundary system and not the boundary-hulog
system, hence inapplicable in the instant case. He argued that upon the
execution of the Kasunduan, the juridical tie between him and Bustamante
was transformed into a vendor-vendee relationship. Noting that he was
engaged in the manufacture and sale of jeepneys and not in the business of
transporting passengers for consideration, Villamaria contended that the
daily fees which Bustmante paid were actually periodic installments for the
the vehicle and were not the same fees as understood in the boundary system.
He added that the boundary-hulog plan was basically a scheme to help the
driver-buyer earn money and eventually pay for the unit in full, and for the
owner to profit not from the daily earnings of the driver-buyer but from the
purchase price of the unit sold. Villamaria further asserted that the
apparently restrictive conditions in the Kasunduan did not mean that the
means and method of driver-buyers conduct was controlled, but were mere
ways to preserve the vehicle for the benefit of both parties: Villamaria would
be able to collect the agreed purchase price, while Bustamante would be
assured that the vehicle would still be in good running condition even after
four years. Moreover, the right of vendor to impose certain conditions on the
buyer should be respected until full ownership of the property is vested on
the latter. Villamaria insisted that the parallel circumstances obtaining in
Singer Sewing Machine Company v. Drilon[24] has analogous application to
the instant issue.

In its Decision[25] dated August 30, 2004, the CA reversed and set aside the
NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions
of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE,
and judgment entered in favor of petitioner:

1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry

Bustamante separation pay computed from the time of his employment up to
the time of termination based on the prevailing minimum wage at the time of
termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner

Jerry Bustamante back wages computed from the time of his dismissal up to
March 2001 based on the prevailing minimum wage at the time of his
dismissal.

Without Costs.

SO ORDERED.[26]

The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamantes complaint. Under the Kasunduan, the relationship between him
and Villamaria was dual: that of vendor-vendee and employer-employee. The
CA ratiocinated that Villamarias exercise of control over Bustamantes
conduct in operating the jeepney is inconsistent with the formers claim that
he was not engaged in the transportation business. There was no evidence
that petitioner was allowed to let some other person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in
the Kasunduan, it did not mean that Villamaria could not exercise it. It
explained that the existence of an employment relationship did not depend on
how the worker was paid but on the presence or absence of control over the
means and method of the employees work. In this case, Villamarias directives
(to drive carefully, wear an identification card, don decent attire, park the
vehicle in his garage, and to inform him about provincial trips, etc.) was a
means to control the way in which Bustamante was to go about his work. In
view of Villamarias supervision and control as employer, the fact that the
boundary represented installment payments of the purchase price on the
jeepney did not remove the parties employer-employee relationship.
While the appellate court recognized that a weeks default in paying the
boundary-hulog constituted an additional cause for terminating Bustamantes
employment, it held that the latter was illegally dismissed. According to the
CA, assuming that Bustamante failed to make the required payments as
claimed by Villamaria, the latter nevertheless failed to take steps to recover
the unit and waited for Bustamante to abandon it. It also pointed out that
Villamaria neither submitted any police report to support his claim that the
vehicle figured in a mishap nor presented the affidavit of the gas station guard
to substantiate the claim that Bustamante abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on

September 17, 2004, a motion for reconsideration thereof. The CA denied the
motion in a Resolution[27] dated November 2, 2004, and Villamaria received
a copy thereof on November 8, 2004.

Villamaria, now petitioner, seeks relief from this Court via petition for review
on certiorari under Rule 65 of the Rules of Court, alleging that the CA
committed grave abuse of its discretion amounting to excess or lack of
jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He
claims that the CA erred in ruling that the juridical relationship between him
and respondent under the Kasunduan was a combination of employer-
employee and vendor-vendee relationships. The terms and conditions of the
Kasunduan clearly state that he and respondent Bustamante had entered
into a conditional deed of sale over the jeepney; as such, their employer-
employee relationship had been transformed into that of vendor-vendee.
Petitioner insists that he had the right to reserve his title on the jeepney until
after the purchase price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy
of petitioner was an appeal via a petition for review on certiorari under Rule
45 of the Rules of Court and not a special civil action of certiorari under Rule
65. He argues that petitioner failed to establish that the CA committed grave
abuse of its discretion amounting to excess or lack of jurisdiction in its
decision, as the said ruling is in accord with law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by

petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent insists that
his juridical relationship with petitioner is that of employer-employee because
he was engaged to perform activities which were necessary or desirable in the
usual business of petitioner, his employer.

In his Reply, petitioner avers that the Rules of Procedure should be liberally
construed in his favor; hence, it behooves the Court to resolve the merits of
his petition.

We agree with respondents contention that the remedy of petitioner from the
CA decision was to file a petition for review on certiorari under Rule 45 of the
Rules of Court and not the independent action of certiorari under Rule 65.
Petitioner had 15 days from receipt of the CA resolution denying his motion
for the reconsideration within which to file the petition under Rule 45.[28] But
instead of doing so, he filed a petition for certiorari under Rule 65 on
November 22, 2004, which did not, however, suspend the running of the 15-
day reglementary period; consequently, the CA decision became final and
executory upon the lapse of the reglementary period for appeal. Thus, on this
procedural lapse, the instant petition stands to be dismissed.[29]

It must be stressed that the recourse to a special civil action under Rule 65
of the Rules of Court is proscribed by the remedy of appeal under Rule 45. As
the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of
Appeals:[30]

We agree that the remedy of the aggrieved party from a decision or final
resolution of the CA is to file a petition for review on certiorari under Rule 45
of the Rules of Court, as amended, on questions of facts or issues of law within
fifteen days from notice of the said resolution. Otherwise, the decision of the
CA shall become final and executory. The remedy under Rule 45 of the Rules
of Court is a mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review is not a
matter of right but is a matter of judicial discretion. The aggrieved party may,
however, assail the decision of the CA via a petition for certiorari under Rule
65 of the Rules of Court within sixty days from notice of the decision of the
CA or its resolution denying the motion for reconsideration of the same. This
is based on the premise that in issuing the assailed decision and resolution,
the CA acted with grave abuse of discretion, amounting to excess or lack of
jurisdiction and there is no plain, speedy and adequate remedy in the ordinary
course of law. A remedy is considered plain, speedy and adequate if it will
promptly relieve the petitioner from the injurious effect of the judgment and
the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if appeal
is available, for the remedies of appeal and certiorari are mutually exclusive
and not alternative or successive. The aggrieved party is, likewise, barred from
filing a petition for certiorari if the remedy of appeal is lost through his
negligence. A petition for certiorari is an original action and does not interrupt
the course of the principal case unless a temporary restraining order or a writ
of preliminary injunction has been issued against the public respondent from
further proceeding. A petition for certiorari must be based on jurisdictional
grounds because, as long as the respondent court acted within its
jurisdiction, any error committed by it will amount to nothing more than an
error of judgment which may be corrected or reviewed only by appeal.[31]

However, we have also ruled that a petition for certiorari under Rule 65 may
be considered as filed under Rule 45, conformably with the principle that
rules of procedure are to be construed liberally, provided that the petition is
filed within the reglementary period under Section 2, Rule 45 of the Rules of
Court, and where valid and compelling circumstances warrant that the
petition be resolved on its merits.[32] In this case, the petition was filed within
the reglementary period and petitioner has raised an issue of substance:
whether the existence of a boundary-hulog agreement negates the employer-
employee relationship between the vendor and vendee, and, as a corollary,
whether the Labor Arbiter has jurisdiction over a complaint for illegal
dismissal in such case.
We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as
well as, which court or agency of the government has jurisdiction over the
same, are determined by the material allegations of the complaint in relation
to the law involved and the character of the reliefs prayed for, whether or not
the complainant/plaintiff is entitled to any or all of such reliefs.[33] A prayer
or demand for relief is not part of the petition of the cause of action; nor does
it enlarge the cause of action stated or change the legal effect of what is
alleged.[34] In determining which body has jurisdiction over a case, the better
policy is to consider not only the status or relationship of the parties but also
the nature of the action that is the subject of their controversy.[35]

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:

x x x (a) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wage, rates of pay, hours of work, and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee
relationship, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective

bargaining agreements, and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor
Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.

In the foregoing cases, an employer-employee relationship is an indispensable

jurisdictional requisite.[36] The jurisdiction of Labor Arbiters and the NLRC
under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be resolved by reference to
the Labor Code, other labor statutes or their collective bargaining
agreement.[37] Not every dispute between an employer and employee involves
matters that only the Labor Arbiter and the NLRC can resolve in the exercise
of their adjudicatory or quasi-judicial powers. Actions between employers and
employees where the employer-employee relationship is merely incidental is
within the exclusive original jurisdiction of the regular courts.[38] When the
principal relief is to be granted under labor legislation or a collective
bargaining agreement, the case falls within the exclusive jurisdiction of the
Labor Arbiter and the NLRC even though a claim for damages might be
asserted as an incident to such claim.[39]

We agree with the ruling of the CA that, under the boundary-hulog scheme
incorporated in the Kasunduan, a dual juridical relationship was created
between petitioner and respondent: that of employer-employee and vendor-
vendee. The Kasunduan did not extinguish the employer-employee
relationship of the parties extant before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan[40]
that the jeepney owner/operator-driver relationship under the boundary
system is that of employer-employee and not lessor-lessee. This doctrine was
affirmed, under similar factual settings, in Magboo v. Bernardo[41] and
Lantaco, Sr. v. Llamas,[42] and was analogously applied to govern the
relationships between auto-calesa owner/operator and driver,[43] bus
owner/operator and conductor,[44] and taxi owner/operator and driver.[45]

The boundary system is a scheme by an owner/operator engaged in

transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latters daily earnings are remitted to
the owner/operator less the excess of the boundary which represents the
drivers compensation. Under this system, the owner/operator exercises
control and supervision over the driver. It is unlike in lease of chattels where
the lessor loses complete control over the chattel leased but the lessee is still
ultimately responsible for the consequences of its use. The management of
the business is still in the hands of the owner/operator, who, being the holder
of the certificate of public convenience, must see to it that the driver follows
the route prescribed by the franchising and regulatory authority, and the
rules promulgated with regard to the business operations. The fact that the
driver does not receive fixed wages but only the excess of the boundary given
to the owner/operator is not sufficient to change the relationship between
them. Indubitably, the driver performs activities which are usually necessary
or desirable in the usual business or trade of the owner/operator.[46]

Under the Kasunduan, respondent was required to remit P550.00 daily to

petitioner, an amount which represented the boundary of petitioner as well
as respondents partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily
wage. Thus, the daily remittances also had a dual purpose: that of petitioners
boundary and respondents partial payment (hulog) for the vehicle. This dual
purpose was expressly stated in the Kasunduan. The well-settled rule is that
an obligation is not novated by an instrument that expressly recognizes the
old one, changes only the terms of payment, and adds other obligations not
incompatible with the old provisions or where the new contract merely
supplements the previous one. [47] The two obligations of the respondent to
remit to petitioner the boundary-hulog can stand together.

In resolving an issue based on contract, this Court must first examine the
contract itself, keeping in mind that when the terms of the agreement are clear
and leave no doubt as to the intention of the contracting parties, the literal
meaning of its stipulations shall prevail.[48] The intention of the contracting
parties should be ascertained by looking at the words used to project their
intention, that is, all the words, not just a particular word or two or more
words standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may
result from all of them taken jointly.[49] The parts and clauses must be
interpreted in relation to one another to give effect to the whole. The legal
effect of a contract is to be determined from the whole read together.[50]

Under the Kasunduan, petitioner retained supervision and control over the
conduct of the respondent as driver of the jeepney, thus:

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary

hulog ay ang mga sumusunod:

1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang

sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG

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

3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG

IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan,
kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG
PANIG.

5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng

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

6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa

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

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o

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

8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang

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

9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob

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

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon

ng pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at
nakasando lamang. Dapat ang nagmamaneho ay laging nasa maayos ang
kasuotan upang igalang ng mga pasahero.

11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver

ay magpapakita ng magandang asal sa mga pasaheros at hindi dapat
magsasalita ng masama kung sakali man may pasaherong pilosopo upang
maiwasan ang anumang kaguluhan na maaaring kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang

TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina
ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing
sasakyan hanggang matugunan ang lahat ng
responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang
multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA
MOTORS.

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng

BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.

14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro,

comprehensive insurance taon-taon at kahit anong uri ng aksidente habang
ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.

15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa

pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag
ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi sa
ikasusulong ng samahan.

16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga

patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na
panahon at hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA
MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa

pasahero upang hindi kainisan ng kapwa driver at maiwasan ang
pagkakasangkot sa anumang gulo.

18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan

lalo na sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin
mapanatili ang kalinisan nito.

19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng

dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam
muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang
suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-
unahan sa kaninumang sasakyan upang maiwasan ang aksidente.

21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa

VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa
kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang
maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA
MOTORS.

22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong
sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa.[51]

The parties expressly agreed that petitioner, as vendor, and respondent, as

vendee, entered into a contract to sell the jeepney on a daily installment basis
of P550.00 payable in four years and that petitioner would thereafter become
its owner. A contract is one of conditional sale, oftentimes referred to as
contract to sell, if the ownership or title over the
property sold is retained by the vendor, and is not passed to the vendee unless
and until there is full payment of the purchase price and/or upon faithful
compliance with the other terms and conditions that may lawfully be
stipulated.[52] Such payment or satisfaction of other preconditions, as the
case may be, is a positive suspensive condition, the failure of which is not a
breach of contract, casual or serious, but simply an event that would prevent
the obligation of the vendor to convey title from acquiring binding force.[53]
Stated differently, the efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a future and uncertain event
so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed.[54] The vendor may
extrajudicially terminate the operation of the contract, refuse conveyance, and
retain the sums or installments already received, where such rights are
expressly provided for.[55]

Under the boundary-hulog scheme, petitioner retained ownership of the

jeepney although its material possession was vested in respondent as its
driver. In case respondent failed to make his P550.00 daily installment
payment for a week, the agreement would be of no force and effect and
respondent would have to return the jeepney to petitioner; the employer-
employee relationship would likewise be terminated unless petitioner would
allow respondent to continue driving the jeepney on a boundary basis of
P550.00 daily despite the termination of their vendor-vendee relationship.

The juridical relationship of employer-employee between petitioner and

respondent was not negated by the foregoing stipulation in the Kasunduan,
considering that petitioner retained control of respondents conduct as driver
of the vehicle. As correctly ruled by the CA:

The exercise of control by private respondent over petitioners conduct in

operating the jeepney he was driving is inconsistent with private respondents
claim that he is, or was, not engaged in the transportation business; that,
even if petitioner was allowed to let some other person drive the unit, it was
not shown that he did so; that the existence of an employment relation is not
dependent on how the worker is paid but on the presence or absence of control
over the means and method of the work; that the amount earned in excess of
the boundary hulog is equivalent to wages; and that the fact that the power
of dismissal was not mentioned in the Kasunduan did not mean that private
respondent never exercised such power, or could not exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear
an identification card, or to don a decent attire, or to park the vehicle in
Villamaria Motors garage, or to inform Villamaria Motors about the fact that
the unit would be going out to the province for two days of more, or to drive
the unit carefully, etc. necessarily related to control over the means by which
the petitioner was to go about his work; that the ruling applicable here is not
Singer Sewing Machine but National Labor Union since the latter case
involved jeepney owners/operators and jeepney drivers, and that the fact that
the boundary here represented installment payment of the purchase price on
the jeepney did not withdraw the relationship from that of employer-employee,
in view of the overt presence of supervision and control by the employer.[56]

Neither is such juridical relationship negated by petitioners claim that the

terms and conditions in the Kasunduan relative to respondents behavior and
deportment as driver was for his and respondents benefit: to insure that
respondent would be able to pay the requisite daily installment of P550.00,
and that the vehicle would still be in good condition despite the lapse of four
years. What is primordial is that petitioner retained control over the conduct
of the respondent as driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise,
is entitled to exercise supervision and control over the respondent, by seeing
to it that the route provided in his franchise, and the rules and regulations of
the Land Transportation Regulatory Board are duly complied with. Moreover,
in a business establishment, an identification card is usually provided not
just as a security measure but to mainly identify the holder thereof as a bona
fide employee of the firm who issues it.[57]

As respondents employer, it was the burden of petitioner to prove that

respondents termination from employment was for a lawful or just cause, or,
at the very least, that respondent failed to make his daily remittances of
P550.00 as boundary. However, petitioner failed to do so. As correctly ruled
by the appellate court:

It is basic of course that termination of employment must be effected in

accordance with law. The just and authorized causes for termination of
employment are enumerated under Articles 282, 283 and 284 of the Labor
Code.

Parenthetically, given the peculiarity of the situation of the parties here, the
default in the remittance of the boundary hulog for one week or longer may
be considered an additional cause for termination of employment. The reason
is because the Kasunduan would be of no force and effect in the event that
the purchaser failed to remit the boundary hulog for one week. The
Kasunduan in this case pertinently stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng

BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG
na wala ng paghahabol pa.

Moreover, well-settled is the rule that, the employer has the burden of proving
that the dismissal of an employee is for a just cause. The failure of the
employer to discharge this burden means that the dismissal is not justified
and that the employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor
Arbiter, alleged that petitioner failed to pay the miscellaneous fee of
P10,000.00 and the yearly registration of the unit; that petitioner also stopped
remitting the boundary hulog, prompting him (private respondent) to issue a
Paalala, which petitioner however ignored; that petitioner even brought the
unit to his (petitioners) province without informing him (private respondent)
about it; and that petitioner eventually abandoned the vehicle at a gasoline
station after figuring in an accident. But private respondent failed to
substantiate these allegations with solid, sufficient proof. Notably, private
respondents allegation viz, that he retrieved the vehicle from the gas station,
where petitioner abandoned it, contradicted his statement in the Paalala that
he would enforce the provision (in the Kasunduan) to the effect that default
in the remittance of the boundary hulog for one week would result in the
forfeiture of the unit. The Paalala reads as follows:

Sa lahat ng mga kumukuha ng sasakyan

Sa pamamagitan ng BOUNDARY HULOG

Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan

particular na ang paragrapo 13 na nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong
ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng
paghahabol pa.

Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong

ipatutupad ang nasabing Kasunduan kayat aking pinaaalala sa inyong lahat
na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.

Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na

tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong
sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang
magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging
dahilan ng pagsampa ng kaso.

Sumasainyo

Attendance: 8/27/99
(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR.

If it were true that petitioner did not remit the boundary hulog for one week
or more, why did private respondent not forthwith take steps to recover the
unit, and why did he have to wait for petitioner to abandon it?

On another point, private respondent did not submit any police report to
support his claim that petitioner really figured in a vehicular mishap. Neither
did he present the affidavit of the guard from the gas station to substantiate
his claim that petitioner abandoned the unit there.[58]

Petitioners claim that he opted not to terminate the employment of respondent

because of magnanimity is negated by his (petitioners) own evidence that he
took the jeepney from the respondent only on July 24, 2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of

the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against
petitioner.

SO ORDERED.

SECOND DIVISION

G.R. No. 192084 September 14, 2011

JOSE MEL BERNARTE, Petitioner,

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

CARPIO, J.:

The Case

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

The Facts

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

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

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

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

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

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

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

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an

employee whose dismissal by respondents was illegal. Accordingly, the Labor
Arbiter ordered the reinstatement of petitioner and the payment of backwages,
moral and exemplary damages and attorney’s fees, to wit:

WHEREFORE, premises considered all respondents who are here found to

have illegally dismissed complainants are hereby ordered to (a) reinstate
complainants within thirty (30) days from the date of receipt of this decision
and to solidarily pay complainants:

JOSE MEL BERNARTE RENATO GUEVARRA

1. backwages from January 1, 2004 up to the finality of this Decision, which
to date is ₱536,250.00 ₱211,250.00
2. moral damages 100,000.00 50,000.00
3. exemplary damages 100,000.00 50,000.00
4. 10% attorney's fees 68,625.00 36,125.00
TOTAL ₱754,875.00 ₱397,375.00
or a total of ₱1,152,250.00

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

SO ORDERED.7

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

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor

Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.

SO ORDERED.9

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

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated

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

SO ORDERED.10

The Court of Appeals’ Ruling

The Court of Appeals found petitioner an independent contractor since

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

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

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

xxxx

Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s

conclusion that private respondents’ repeated hiring made them regular
employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of

respondents, which in turn determines whether petitioner was illegally
dismissed.

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

The Ruling of the Court

The petition is bereft of merit.

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

Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005

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

xxx

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

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

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

SEC. 10. Completeness of service. – Personal service is complete upon actual

delivery. Service by ordinary mail is complete upon the expiration of ten (10)
days after mailing, unless the court otherwise provides. Service by registered
mail is complete upon actual receipt by the addressee, or after five (5) days
from the date he received the first notice of the postmaster, whichever date is
earlier.
The rule on service by registered mail contemplates two situations: (1) actual
service the completeness of which is determined upon receipt by the
addressee of the registered mail; and (2) constructive service the completeness
of which is determined upon expiration of five days from the date the
addressee received the first notice of the postmaster.13

Insofar as constructive service is concerned, there must be conclusive proof

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

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

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

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

The existence of an employer-employee relationship is ultimately a question

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

To determine the existence of an employer-employee relationship, case law

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

In this case, PBA admits repeatedly engaging petitioner’s services, as shown

in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per
diem or allowances, as stipulated in the retainer contract. PBA can terminate
the retainer contract for petitioner’s violation of its terms and conditions.

However, respondents argue that the all-important element of control is

lacking in this case, making petitioner an independent contractor and not an
employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of

respondents since the latter exercise control over the performance of his work.
Petitioner cites the following stipulations in the retainer contract which
evidence control: (1) respondents classify or rate a referee; (2) respondents
require referees to attend all basketball games organized or authorized by the
PBA, at least one hour before the start of the first game of each day; (3)
respondents assign petitioner to officiate ballgames, or to act as alternate
referee or substitute; (4) referee agrees to observe and comply with all the
requirements of the PBA governing the conduct of the referees whether on or
off the court; (5) referee agrees (a) to keep himself in good physical, mental,
and emotional condition during the life of the contract; (b) to give always his
best effort and service, and loyalty to the PBA, and not to officiate as referee
in any basketball game outside of the PBA, without written prior consent of
the Commissioner; (c) always to conduct himself on and off the court
according to the highest standards of honesty or morality; and (6) imposition
of various sanctions for violation of the terms and conditions of the contract.

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

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the

relationship between a television and radio station and one of its talents, the
Court held that not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. The Court held:

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

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

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

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

Moreover, the following circumstances indicate that petitioner is an

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

In other words, unlike regular employees who ordinarily report for work eight
hours per day for five days a week, petitioner is required to report for work
only when PBA games are scheduled or three times a week at two hours per
game. In addition, there are no deductions for contributions to the Social
Security System, Philhealth or Pag-Ibig, which are the usual deductions from
employees’ salaries. These undisputed circumstances buttress the fact that
petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an

independent contractor, whose special skills and independent judgment are
required specifically for such position and cannot possibly be controlled by
the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District
Court of Illinois held that plaintiff, a soccer referee, is an independent
contractor, and not an employee of defendant which is the statutory body that
governs soccer in the United States. As such, plaintiff was not entitled to
protection by the Age Discrimination in Employment Act. The U.S. District
Court ruled:

Generally, "if an employer has the right to control and direct the work of an
individual, not only as to the result to be achieved, but also as to details by
which the result is achieved, an employer/employee relationship is likely to
exist." The Court must be careful to distinguish between "control[ling] the
conduct of another party contracting party by setting out in detail his
obligations" consistent with the freedom of contract, on the one hand, and
"the discretionary control an employer daily exercises over its employee’s
conduct" on the other.
Yonan asserts that the Federation "closely supervised" his performance at
each soccer game he officiated by giving him an assessor, discussing his
performance, and controlling what clothes he wore while on the field and
traveling. Putting aside that the Federation did not, for the most part, control
what clothes he wore, the Federation did not supervise Yonan, but rather
evaluated his performance after matches. That the Federation evaluated
Yonan as a referee does not mean that he was an employee. There is no
question that parties retaining independent contractors may judge the
performance of those contractors to determine if the contractual relationship
should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed
his games.1âwphi1 He had full discretion and authority, under the Laws of
the Game, to call the game as he saw fit. x x x In a similar vein, subjecting
Yonan to qualification standards and procedures like the Federation’s
registration and training requirements does not create an employer/employee
relationship. x x x

A position that requires special skills and independent judgment weights in

favor of independent contractor status. x x x Unskilled work, on the other
hand, suggests an employment relationship. x x x Here, it is undisputed that
soccer refereeing, especially at the professional and international level,
requires "a great deal of skill and natural ability." Yonan asserts that it was
the Federation’s training that made him a top referee, and that suggests he
was an employee. Though substantial training supports an employment
inference, that inference is dulled significantly or negated when the putative
employer’s activity is the result of a statutory requirement, not the employer’s
choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the

umpire was not an agent of the Tennessee Secondary School Athletic
Association (TSSAA), so the player’s vicarious liability claim against the
association should be dismissed. In finding that the umpire is an independent
contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all
baseball games played between TSSAA member schools. The TSSAA does not
supervise regular season games. It does not tell an official how to conduct the
game beyond the framework established by the rules. The TSSAA does not, in
the vernacular of the case law, control the means and method by which the
umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself
prove that petitioner is an employee of the former. For a hired party to be
considered an employee, the hiring party must have control over the means
and methods by which the hired party is to perform his work, which is absent
in this case. The continuous rehiring by PBA of petitioner simply signifies the
renewal of the contract between PBA and petitioner, and highlights the
satisfactory services rendered by petitioner warranting such contract renewal.
Conversely, if PBA decides to discontinue petitioner’s services at the end of
the term fixed in the contract, whether for unsatisfactory services, or violation
of the terms and conditions of the contract, or for whatever other reason, the
same merely results in the non-renewal of the contract, as in the present case.
The non-renewal of the contract between the parties does not constitute illegal
dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the
Court of Appeals.

SO ORDERED.

THIRD DIVISION

G.R. No. 189255 June 17, 2015

JESUS G. REYES, Petitioner,

vs.
GLAUCOMA RESEARCH FOUNDATION, INC., EYE REFERRAL CENTER and
MANUEL B. AGULTO, Respondents.

DECISION
PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to reverse and
set aside the Decision1 and Resolution2 of the Court of Appeals (CA), dated
April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SP No. 104261.
The assailed CA Decision annulled the Decision of the National Labor
Relations Commission (NLRC) in NLRC NCR Case No. 05-0441-05 and
reinstated the Decision of the Labor Arbiter (LA) in the same case, while the
CA Resolution denied petitioner's motion for reconsideration.

The instant petition arose from a complaint for illegal dismissal filed by
petitioner against respondents with the NLRC, National Capital Region,
Quezon City. Petitioner alleged that: on August 1, 2003, he was hired by
respondent corporation as administrator of the latter's Eye Referral Center
(ERC); he performed his duties as administrator and continuously received
his monthly salary of ₱20,000.00 until the end of January 2005; beginning
February 2005, respondent withheld petitioner's salary without notice but he
still continued to report for work; on April 11, 2005, petitioner wrote a letter
to respondent Manuel Agulto (Agulto), who is the Executive Director of
respondent corporation, informing the latter that he has not been receiving
his salaries since February 2005 as well as his 14th month pay for 2004;
petitioner did not receive any response from Agulto; on April 21, 2005,
petitioner was informed by the Assistant to the Executive Director as well as
the Assistant Administrative Officer, that he is no longer the Administrator of
the ERC; subsequently, petitioner’s office was padlocked and closed without
notice; he still continued to report for work but on April 29, 2005 he was no
longer allowed by the security guard on duty to enter the premises of the ERC.

On their part, respondents contended that: upon petitioner's representation

that he is an expert incorporate organizational structure and management
affairs, they engaged his services as a consultant or adviser in the formulation
of an updated organizational set-up and employees' manual which is
compatible with their present condition; based on his claim that there is a
need for an administrator for the ERC, he later designated himself as such on
a trial basis; there is no employer-employee relationship between them
because respondents had no control over petitioner in terms of working hours
as he reports for work at anytime of the day and leaves as he pleases;
respondents also had no control as to the manner in which he performs his
alleged duties as consultant; he became overbearing and his relationship with
the employees and officers of the company soured leading to the filing of three
complaints against him; petitioner was not dismissed as he was the one who
voluntarily severed his relations with respondents. On January 20, 2006, the
LA assigned to the case rendered a Decision3 dismissing petitioner's
complaint. The LA held, among others, that petitioner failed to establish that
the elements of an employer-employee relationship existed between him and
respondents because he was unable to show that he was, in fact, appointed
as administrator of the ERC and received salaries as such; he also failed to
deny that during his stint with respondents, he was, at the same time, a
consultant of various government agencies such as the Manila International
Airport Authority, Manila Intercontinental Port Authority, Anti-Terrorist Task
Force for Aviation and Air Transportation Sector; his actions were neither
supervised nor controlled by the management of the ERC; petitioner, likewise,
did not observe working hours by reporting for work and leaving therefrom as
he pleased; and, he was receiving allowances, not salaries, as a consultant.

On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC
declared petitioner as respondents' employee, that he was illegally dismissed
and ordered respondents to reinstate him to his former position without loss
of seniority rights and privileges with full backwages. The NLRC held that the
basis upon which the conclusion of the LA was drawn lacked support; that it
was incumbent for respondents to discharge the burden of proving that
petitioner's dismissal was for cause and effected after due process was
observed; and, that respondents failed to discharge this burden.4

Respondents filed a motion for reconsideration, but it was denied by the NLRC
in its Resolution5 dated May 30, 2008.

Respondents then filed a Petition for Certiorari6 with the CA.

In its assailed Decision, the CA annulled and set aside the judgment of the
NLRC and reinstated the Decision of the LA. The CA held that the LA was
correct in ruling that, under the control test and the economic reality test, no
employer-employee relationship existed between respondents and petitioner.

Petitioner filed a motion for reconsideration, but the CA denied it in its

Resolution dated August 25, 2009.

Hence, the present petition for review on certiorari based on the following
grounds:
I

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS

DISCRETION IN NOT DISMISSING RESPONDENTS' PETITION FOR
CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED A
VERIFICATION THATFAILS TO COMPLY WITH THE 2004 RULES ON
NOTARIAL PRACTICE.

II

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS

DISCRETION IN RULING THATNO EMPLOYER-EMPLOYEE RELATIONSHIP
EXISTS BETWEEN RESPONDENTS AND PETITIONER.7

As to the first ground, petitioner contends that respondents' petition for

certiorari filed with the CA should have been dismissed on the ground that it
was improperly verified because the jurat portion of the verification states only
the community tax certificate number of the affiant as evidence of her identity.
Petitioner argues that under the 2004 Rules on Notarial Practice, as amended
by a Resolution8 of this Court, dated February 19, 2008, a community tax
certificate is not among those considered as competent evidence of identity.

The Court does not agree.

This Court has already ruled that competent evidence of identity is not
required in cases where the affiant is personally known to the notary public.9

Thus, in Jandoquile v. Revilla, Jr.,10 this Court held that:

If the notary public knows the affiants personally, he need not require them
to show their valid identification cards.1âwphi1 This rule is supported by the
definition of a "jurat" under Section 6, Rule II of the 2004 Rules on Notarial
Practice. A "jurat" refers to an act in which an individual on a single occasion:
(a) appears in person before the notary public and presents an instrument or
document; (b) is personally known to the notary public or identified by the
notary public through competent evidence of identity; (c) signs the instrument
or document in the presence of the notary; and (d) takes an oath or affirmation
before the notary public as to such instrument or document.11

Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as
follows:

SEC. 2. Prohibitions –

(a) x x x

(b) A person shall not perform a notarial act if the person involved as signatory
to the instrument or document –

(1) is not in the notary's presence personally at the time of the notarization;
and

(2) is not personally known to the notary public or otherwise identified by the
notary public through competent evidence of identity as defined by these
Rules.

Moreover, Rule II, Section 6 of the same Rules states that:

SEC 6. Jurat. – "Jurat" refers to an act in which an individual on a single

occasion:

(a) appears in person before the notary public and presents an instrument or
document;

(b) is personally known to the notary public or identified by the notary public
through competent evidence of identity as defined by these Rules;

(c) signs the instrument or document in the presence of the notary; and
(d) takes an oath or affirmation before the notary public as to such instrument
or document.

In legal hermeneutics, "or" is a disjunctive that expresses an alternative or

gives a choice of one among two or more things.12 The word signifies
disassociation and independence of one thing from another thing in an
enumeration.13

Thus, as earlier stated, if the affiant is personally known to the notary public,
the latter need not require the former to show evidence of identity as required
under the 2004 Rules on Notarial Practice, as amended.

Applying the above rule to the instant case, it is undisputed that the attorney-
in-fact of respondents who executed the verification and certificate against
forum shopping, which was attached to respondents' petition filed with the
CA, is personally known to the notary public before whom the documents
were acknowledged. Both attorney-in-fact and the notary public hold office at
respondents' place of business and the latter is also the legal counsel of
respondents.

In any event, this Court's disquisition in the fairly recent case of Heirs of
Amada Zaulda v. Isaac Zaulda14 regarding the import of procedural rules vis-
à-vis the substantive rights of the parties, is instructive, to wit:

[G]ranting, arguendo, that there was non-compliance with the verification

requirement, the rule is that courts should not be so strict about procedural
lapses which do not really impair the proper administration of justice. After
all, the higher objective of procedural rule is to ensure that the substantive
rights of the parties are protected. Litigations should, as much as possible, be
decided on the merits and not on technicalities. Every party-litigant must be
afforded ample opportunity for the proper and just determination of his case,
free from the unacceptable plea of technicalities.

In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only

by a glitch in the evidence of the identity of the affiant, the Court was of the
considered view that, in the interest of justice, the minor defect can be
overlooked and should not defeat the petition.
The reduction in the number of pending cases is laudable, but if it would be
attained by precipitate, if not preposterous, application of technicalities,
justice would not be served. The law abhors technicalities that impede the
cause of justice. The court's primary duty is to render or dispense justice. "It
is a more prudent course of action for the court to excuse a technical lapse
and afford the parties a review of the case on appeal rather than dispose of
the case on technicality and cause a grave injustice to the parties, giving a
false impression of speedy disposal of cases while actually resulting in more
delay, if not miscarriage of justice."

What should guide judicial action is the principle that a party-litigant should
be given the fullest opportunity to establish the merits of his complaint or
defense rather than for him to lose life, liberty, honor, or property on
technicalities. The rules of procedure should be viewed as mere tools designed
to facilitate the attainment of justice. Their strict and rigid application, which
would result in technicalities that tend to frustrate rather than promote
substantial justice, must always be eschewed. At this juncture, the Court
reminds all members of the bench and bar of the admonition in the often-
cited case of Alonso v. Villamor:

Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality,

when it deserts its proper office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from courts. There
should be no vested rights in technicalities.15

Anent the second ground, petitioner insists that, based on evidence on record,
an employer-employee relationship exists between him and respondents.

The Court is not persuaded.

It is a basic rule of evidence that each party must prove his affirmative
allegation.16 If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not upon
the weakness of that of his opponent.17 The test for determining on whom
the burden of proof lies is found in the result of an inquiry as to which party
would be successful if no evidence of such matters were given.18 In an illegal
dismissal case, the onus probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause.19 However, before a case for
illegal dismissal can prosper, an employer-employee relationship must first
be established.20 Thus, in filing a complaint before the LA for illegal
dismissal, based on the premise that he was an employee of respondents, it
is incumbent upon petitioner to prove the employer-employee relationship by
substantial evidence.21

In regard to the above discussion, the issue of whether or not an employer-

employee relationship existed between petitioner and respondents is
essentially a question of fact.22 The factors that determine the issue include
who has the power to select the employee, who pays the employee’s wages,
who has the power to dismiss the employee, and who exercises control of the
methods and results by which the work of the employee is accomplished.23
Although no particular form of evidence is required to prove the existence of
the relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must
nonetheless rest on substantial evidence, which is that amount of relevant
evidence that a reasonable mind might accept as adequate to justify a
conclusion.24

Generally, the Court does not review factual questions, primarily because the
Court is not a trier of facts.25 However, where, like here, there is a conflict
between the factual findings of the LA and the CA, on one hand, and those of
the NLRC, on the other, it becomes proper for the Court, in the exercise of its
equity jurisdiction, to review and re-evaluate the factual issues and to look
into the records of the case and re-examine the questioned findings.26

Etched in an unending stream of cases are four standards in determining the

existence of an employer-employee relationship, namely: (a) the manner of
selection and engagement of the putative employee; (b) the mode of payment
of wages; (c) the presence or absence of power of dismissal; and, (d) the
presence or absence of control of the putative employee’s conduct. Most
determinative among these factors is the so-called "control test."27

Indeed, the power of the employer to control the work of the employee is
considered the most significant determinant of the existence of an employer-
employee relationship.28 This test is premised on whether the person for
whom the services are performed reserves the right to control both the end
achieved and the manner and means used to achieve that end.29

In the present case, petitioner contends that, as evidence of respondents'

supposed control over him, the organizational plans he has drawn were
subject to the approval of respondent corporation's Board of Trustees.
However, the Court agrees with the disquisition of the CA on this matter, to
wit:

[Respondents'] power to approve or reject the organizational plans drawn by

[petitioner] cannot be the control contemplated in the "control test." It is but
logical that one who commissions another to do a piece of work should have
the right to accept or reject the product. The important factor to consider in
the "control test" is still the element of control over how the work itself is done,
not just the end result thereof.

Well settled is the rule that where a person who works for another performs
his job more or less at his own pleasure, in the manner he sees fit, not subject
to definite hours or conditions of work, and is compensated according to the
result of his efforts and not the amount thereof, no employer-employee
relationship exists.30

What was glaring in the present case is the undisputed fact that petitioner
was never subject to definite working hours. He never denied that he goes to
work and leaves therefrom as he pleases.31 In fact, on December 1-31, 2004,
he went on leave without seeking approval from the officers of respondent
company. On the contrary, his letter32 simply informed respondents that he
will be away for a month and even advised them that they have the option of
appointing his replacement during his absence. This Court has held that there
is no employer-employee relationship where the supposed employee is not
subject to a set of rules and regulations governing the performance of his
duties under the agreement with the company and is not required to report
for work at any time, nor to devote his time exclusively to working for the
company.33

In this regard, this Court also agrees with the ruling of the CA that:

Aside from the control test, the Supreme Court has also used the economic
reality test in determining whether an employer-employee relationship exists
between the parties. Under this test, the economic realities prevailing within
the activity or between the parties are examined, taking into consideration the
totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate when, as in this case, there
is no written agreement or contract on which to base the relationship. In our
jurisdiction, the benchmark of economic reality in analyzing possible
employment relationships for purposes of applying the Labor Code ought to
be the economic dependence of the worker on his employer. In the instant
case, as shown by the resume of [petitioner], he concurrently held
consultancy positions with the Manila International Airport Authority (from
04 March 2001 to September 2003 and from 01 November 2004 up to the
present) and the Anti-Terrorist Task Force for Aviation and Air Transportation
Sector (from 16 April 2004 to 30 June 2004) during his stint with the Eye
Referral Center (from 01 August 2003 to 29 April 2005). Accordingly, it cannot
be said that the [petitioner] was wholly dependent on [respondent]
company.34

In bolstering his contention that there was an employer-employee

relationship, petitioner draws attention to the pay slips he supposedly
received from respondent corporation. However, he does not dispute the
findings of the CA that there are no deductions for SSS and withholding tax
from his compensation, which are the usual deductions from employees'
salaries. Thus, the alleged pay slips may not be treated as competent evidence
of petitioner's claim that he is respondents' employee.

In addition, the designation of the payments to petitioner as salaries, is not

determinative of the existence of an employer-employee relationship.35 Salary
is a general term defined as a remuneration for services given.36 Evidence of
this fact, in the instant case, was the cash voucher issued in favor of petitioner
where it was stated therein that the amount of ₱20,000.00 was given as
petitioner's allowance for the month of December 2004, although it appears
from the pay slip that the said amount was his salary for the same period.

Additional evidence of the fact that petitioner was hired as a consultant and
not as an employee of respondent corporation are affidavits to this effect
which were executed by Roy Oliveres37 and Aurea Luz Esteva,38 who are
Medical Records Custodian and Administrative Officer, respectively, of
respondent corporation. Petitioner insists in its objection of the use of these
affidavits on the ground that they are, essentially, hearsay. However, this
Court has ruled that although the affiants had not been presented to affirm
the contents of their affidavits and be cross-examined, their affidavits may be
given evidentiary value; the argument that such affidavits were hearsay was
not persuasive.39 Likewise, this Court ruled that it was not necessary for the
affiants to appear and testify and be cross-examined by counsel for the
adverse party.40 To require otherwise would be to negate the rationale and
purpose of the summary nature of the proceedings mandated by the Rules
and to make mandatory the application of the technical rules of evidence.41
These affidavits are corroborated by evidence, as discussed above, showing
that petitioner has no definite working hours and is not subject to the control
of respondents.

Lastly, the Court does not agree with petitioner's insistence that his being
hired as respondent corporation's administrator and his designation as such
in intra-company correspondence proves that he is an employee of the
corporation. The fact alone that petitioner was designated as an administrator
does not necessarily mean that he is an employee of respondents. Mere title
or designation in a corporation will not, by itself, determine the existence of
an employer-employee relationship.42 In this regard, even the identification
card which was issued to petitioner is not an adequate proof of petitioner's
claim that he is respondents' employee. In addition, petitioner’s designation
as an administrator neither disproves respondents' contention that he was
engaged only as a consultant.

As a final point, it bears to reiterate that while the Constitution is committed

to the policy of social justice and the protection of the working class, it should
not be supposed that every labor dispute will be automatically decided in favor
of labor.43 Management also has its rights which are entitled to respect and
enforcement in the interest of simple fair play.44 Out of its concern for the
less privileged in life, the Court has inclined, more often than not, toward the
worker and upheld his cause in his conflicts with the employer.45 Such
favoritism, however, has not blinded the Court to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine.46

WHEREFORE, the instant petition is DENIED. The Decision and Resolution

of the Court of Appeals, dated April 20, 2009 and August 25, 2009,
respectively, in CA-G.R. SP No. 104261, are AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 220978, July 05, 2016

CENTURY PROPERTIES, INC., Petitioner, v. EDWIN J. BABIANO AND EMMA
B. CONCEPCION, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated April
8, 2015 and the Resolution3 dated October 12, 2015 of the Court of Appeals
(CA) in CA-G.R. SP No. 132953, which affirmed, with modification the
Decision4 dated June 25, 2013 and the Resolution5 dated October 16, 2013
of the National Labor Relations Commission (NLRC) in NLRC LAC No. 05-
001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay
respondents Edwin J. Babiano (Babiano) and Emma B. Concepcion
(Concepcion; collectively, respondents) unpaid commissions in the amounts
of P889,932.42 and P591,953.05, respectively.

The Facts

On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was
eventually6 appointed as Vice President for Sales effective September 1, 2007.
As CPFs Vice President for Sales, Babiano was remunerated with, inter alia,
the following benefits: (a) monthly salary of P70,000.00; (b) allowance of
P50,000.00; and (c) 0.5% override commission for completed sales. His
employment contract7 also contained a "Confidentiality of Documents and
Non-Compete Clause"8 which, among others, barred him from disclosing
confidential information, and from working in any business enterprise that is
in direct competition with CPI "while [he is] employed and for a period of one
year from date of resignation or termination from [CPI]." Should Babiano
breach any of the terms thereof, his "forms of compensation, including
commissions and incentives will be forfeited."9

During the same period, Concepcion was initially hired as Sales Agent by CPI
and was eventually10 promoted as Project Director on September 1, 2007.11
As such, she signed an employment agreement, denominated as "Contract of
Agency for Project Director"12 which provided, among others, that she would
directly report to Babiano, and receive, a monthly subsidy of P60,000.00,
0.5% commission, and cash incentives.13 On March 31, 2008, Concepcion
executed a similar contract14 anew with CPI in which she would receive a
monthly subsidy of P50,000.00, 0.5% commission, and cash incentives as per
company policy. Notably, it was stipulated in both contracts that no employer-
employee relationship exists between Concepcion and CPI.15

After receiving reports that Babiano provided a competitor with information

regarding CPFs marketing strategies, spread false information regarding CPI
and its projects, recruited CPI's personnel to join the competitor, and for being
absent without official leave (AWOL) for five (5) days, CPI, through its
Executive Vice President for Marketing and Development, Jose Marco R.
Antonio (Antonio), sent Babiano a Notice to Explain16 on February 23, 2009
directing him to explain why he should not be charged with disloyalty, conflict
of interest, and breach of trust and confidence for his actuations.17

On February 25, 2009, Babiano tendered18 his resignation and revealed that
he had been accepted as Vice President of First Global BYO Development
Corporation (First Global), a competitor of CPI.19 On March 3, 2009, Babiano
was served a Notice of Termination20 for: (a) incurring AWOL; (b) violating the
"Confidentiality of Documents and Non-Compete Clause" when he joined a
competitor enterprise while still working for CPI and provided such competitor
enterprise information regarding CPFs marketing strategies; and (c) recruiting
CPI personnel to join a competitor.21

On the other hand, Concepcion resigned as CPFs Project Director through a

letter22 dated February 23, 2009, effective immediately.

On August 8, 2011, respondents filed a complaint23 for non-payment of

commissions and damages against CPI and Antonio before the NLRC,
docketed as NLRC Case No. NCR-08-12029-11, claiming that their repeated
demands for the payment and release of their commissions remained
unheeded.24

For its part, CPI maintained25cralawred that Babiano is merely its agent
tasked with selling its projects. Nonetheless, he was afforded due process in
the termination of his employment which was based on just causes.26 It also
claimed to have validly withheld Babiano's commissions, considering that
they were deemed forfeited for violating the "Confidentiality of Documents and
Non-Compete Clause."27 On Concepcion's money claims, CPI asserted that
the NLRC had no jurisdiction to hear the same because there was no
employer-employee relations between them, and thus, she should have
litigated the same in an ordinary civil action.28

The LA Ruling

In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's
favor and, accordingly, dismissed the complaint for lack of merit.30

The LA found that: (a) Babiano's acts of providing information on CPI's

marketing strategies to the competitor and spreading false information about
CPI and its projects are blatant violations of the "Confidentiality of Documents
and Non-Compete Clause" of his employment contract, thus, resulting in the
forfeiture of his unpaid commissions in accordance with the same clause;31
and (b) it had no jurisdiction over Concepcion's money claim as she was not
an employee but a mere agent of CPI, as clearly stipulated in her engagement
contract with the latter.32

Aggrieved, respondents appealed33 to the NLRC.

The NLRC Ruling

In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the LA
ruling, and entered a new one ordering CPI to pay Babiano and Concepcion
the amounts of P685,211.76 and P470,754.62, respectively, representing
their commissions from August 9, 2008 to August 8, 2011, as well as 10%
attorney's fees of the total monetary awards.35

While the NLRC initially concurred with the LA that Babiano's acts
constituted just cause which would warrant the termination of his
employment from CPI, it, however, ruled that the forfeiture of all earned
commissions of Babiano under the "Confidentiality of Documents and Non-
Compete Clause" is confiscatory and unreasonable and hence, contrary to law
and public policy.36 In this light, the NLRC held that CPI could not invoke
such clause to avoid the payment of Babiano's commissions since he had
already earned those monetary benefits and, thus, should have been released
to him. However, the NLRC limited the grant of the money claims in light of
Article 291 (now Article 306)37 of the Labor Code which provides for a
prescriptive period of three (3) years. Consequently, the NLRC awarded
unpaid commissions only from August 9, 2008 to August 8, 2011 — i.e.,
which was the date when the complaint was filed.38 Meanwhile, contrary to
the LA's finding, the NLRC ruled that Concepcion was CPI's employee,
considering that CPI: (a) repeatedly hired and promoted her since 2002; (b)
paid her wages despite referring to it as "subsidy"; and (c) exercised the power
of dismissal and control over her.39 Lastly, the NLRC granted respondents'
claim for attorney's fees since they were forced to litigate and incurred
expenses for the protection of their rights and interests.40

Respondents did not assail the NLRC findings. In contrast, only CPI moved
for reconsideration,41 which the NLRC denied in a Resolution42 dated
October 16, 2013. Aggrieved, CPI filed a petition for certiorari43 before the
CA.

The CA Ruling

In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with
modification increasing the award of unpaid commissions to Babiano and
Concepcion in the amounts of P889,932.42 and P591.953.05, respectively,
and imposing interest of six percent (6%) per annum on all monetary awards
from the finality of its decision until fully paid.45

The CA held that Babiano properly instituted his claim for unpaid
commissions before the labor tribunals as it is a money claim arising from an
employer-employee relationship with CPI. In this relation, the CA opined that
CPI cannot withhold such unpaid commissions on the ground of Babiano's
alleged breach of the "Confidentiality of Documents and Non-Compete Clause"
integrated in the latter's employment contract, considering that such clause
referred to acts done after the cessation of the employer-employee relationship
or to the "post-employment" relations of the parties. Thus, any such supposed
breach thereof is a civil law dispute that is best resolved by the regular courts
and not by labor tribunals.46

Similarly, the CA echoed the NLRC's finding that there exists an employer-
employee relationship between Concepcion and CPI, because the latter
exercised control over the performance of her duties as Project Director which
is indicative of an employer-employee relationship. Necessarily therefore, CPI
also exercised control over Concepcion's duties in recruiting, training, and
developing directors of sales because she was supervised by Babiano in the
performance of her functions. The CA likewise observed the presence of
critical factors which were indicative of an employer-employee relationship
with CPI, such as: (a) Concepcion's receipt of a monthly salary from CPI; and
(b) that she performed tasks besides selling CPI properties. To add, the title of
her contract which was referred to as "Contract of Agency for Project Director"
was not binding and conclusive, considering that the characterization of the
juridical relationship is essentially a matter of law that is for the courts to
determine, and not the parties thereof. Moreover, the totality of evidence
sustains a finding of employer-employee relationship between CPI and
Concepcion.47

Further, the CA held that despite the NLRC's proper application of the three
(3)-year prescriptive period under Article 291 of the Labor Code, it nonetheless
failed to include all of respondents' earned commissions during that time -
i.e., August 9, 2008 to August 8, 2011 - thus, necessitating the increase in
award of unpaid commissions in respondents' favor.48

Undaunted, CPI sought for reconsideration,49 which was, however, denied in

a Resolution50 dated October 12, 2015; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in
denying CPI's petition for certiorari, thereby holding it liable for the unpaid
commissions of respondents.

The Court's Ruling

The petition is partly meritorious.

I.

Article 1370 of the Civil Code provides that "[i]f the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control."51 In Norton Resources and
Development Corporation v. All Asia Bank Corporation,52 the Court had the
opportunity to thoroughly discuss the said rule as follows: The rule is that
where the language of a contract is plain and unambiguous, its meaning
should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that
language alone. Stated differently, where the language of a written contract is
clear and unambiguous, the contract must be taken to mean that which, on
its face, it purports to mean, unless some good reason can be assigned to
show that the words should be understood in a different sense. Courts cannot
make for the parties better or more equitable agreements than they
themselves have been satisfied to make, or rewrite contracts because they
operate harshly or inequitably as to one of the parties, or alter them for the
benefit of one party and to the detriment of the other, or by construction,
relieve one of the parties from the terms which he voluntarily consented to, or
impose on him those which he did not.53 (Emphases and underscoring
supplied)
Thus, in the interpretation of contracts, the Court must first determine
whether a provision or stipulation therein is ambiguous. Absent any
ambiguity, the provision on its face will be read as it is written and treated as
the binding law of the parties to the contract.54

In the case at bar, CPI primarily invoked the "Confidentiality of Documents

and Non-Compete Clause" found in Babiano's employment contract55 to
justify the forfeiture of his commissions, viz.:
Confidentiality of Documents and Non-Compete Clause

All records and documents of the company and all information pertaining to
its business or affairs or that of its affiliated companies are confidential and
no unauthorized disclosure or reproduction or the same will be made by you
any time during or after your employment.

And in order to ensure strict compliance herewith, you shall not work for
whatsoever capacity, either as an employee, agent or consultant with any
person whose business is in direct competition with the company while you
are employed and for a period of one year from date of resignation or
termination from the company.

In the event the undersigned breaches any term of this contract, the
undersigned agrees and acknowledges that damages may not be an adequate
remedy and that in addition to any other remedies available to the Company
at law or in equity, the Company is entitled to enforce its rights hereunder by
way of injunction, restraining order or other relief to enjoin any breach or
default of this contract.
The undersigned agrees to pay all costs, expenses and attorney's fees incurred
by the Company in connection with the enforcement of the obligations of the
undersigned. The undersigned also agrees to .pay the Company all profits,
revenues and income or benefits derived by or accruing to the undersigned
resulting from the undersigned's breach of the obligations hereunder. This
Agreement shall be binding upon the undersigned, all employees, agents,
officers, directors, shareholders, partners and representatives of the
undersigned and all heirs, successors and assigns of the foregoing.

Finally, if undersigned breaches any terms of this contract, forms of

compensation including commissions and incentives will be forfeited.56
(Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that
Babiano is barred to "work for whatsoever capacity x x x with any person
whose business is in direct competition with [CPI] while [he is] employed and
for a period of one year from date of [his] resignation or termination from the
company," it also expressly provided in no uncertain terms that should
Babiano "[breach] any term of [the employment contract], forms of
compensation including commissions and incentives will be forfeited." Here,
the contracting parties - namely Babiano on one side, and CPI as represented
by its COO-Vertical, John Victor R. Antonio, and Director for Planning and
Controls, Jose Carlo R. Antonio, on the other -indisputably wanted the said
clause to be effective even during the existence of the employer-employee
relationship between Babiano and CPI, thereby indicating their intention to
be bound by such clause by affixing their respective signatures to the
employment contract. More significantly, as CPFs Vice President for Sales,
Babiano held a highly sensitive and confidential managerial position as he
"was tasked, among others, to guarantee the achievement of agreed sales
targets for a project and to ensure that his team has a qualified and competent
manpower resources by conducting recruitment activities, training sessions,
sales rallies, motivational activities, and evaluation programs."57 Hence, to
allow Babiano to freely move to direct competitors during and soon after his
employment with CPI would make the latter's trade secrets vulnerable to
exposure, especially in a highly competitive marketing environment. As such,
it is only reasonable that CPI and Babiano agree on such stipulation in the
latter's employment contract in order to afford a fair and reasonable
protection to CPI.58 Indubitably, obligations arising from contracts, including
employment contracts, have the force of law between the contracting parties
and should be complied with in good faith.59 Corollary thereto, parties are
bound by the stipulations, clauses, terms, and conditions they have agreed
to, provided that these stipulations, clauses, terms, and conditions are not
contrary to law, morals, public order or public policy,60 as in this case.
Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-
Compete Clause" only to acts done after the cessation of the employer-
employee relationship or to the "post-employment" relations of the parties. As
clearly stipulated, the parties wanted to apply said clause during the
pendency of Babiano's employment, and CPI correctly invoked the same
before the labor tribunals to resist the former's claim for unpaid commissions
on account of his breach of the said clause while the employer-employee
relationship between them still subsisted. Hence, there is now a need to
determine whether or not Babiano breached said clause while employed by
CPI, which would then resolve the issue of his entitlement to his unpaid
commissions.

A judicious review of the records reveals that in his resignation letter61 dated
February 25, 2009, Babiano categorically admitted to CPI Chairman Jose
Antonio that on February 12, 2009, he sought employment from First Global,
and five (5) days later, was admitted thereto as vice president. From the
foregoing, it is evidently clear that when he sought and eventually accepted
the said position with First Global, he was still employed by CPI as he has not
formally resigned at that time. Irrefragably, this is a glaring violation of the
"Confidentiality of Documents and Non-Compete Clause" in his employment
contract with CPI, thus, justifying the forfeiture of his unpaid commissions.

II.

Anent the nature of Concepcion's engagement, based on case law, the

presence of the following elements evince the existence of an employer-
employee relationship: (a) the power to hire, i.e., the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee's conduct, or the so called
"control test." The control test is commonly regarded as the most important
indicator of the presence or absence of an employer-employee relationship.62
Under this test, an employer-employee relationship exists where the person
for whom the services are performed reserves the right to control not only the
end achieved, but also the manner and means to be used in reaching that
end.63

Guided by these parameters, the Court finds that Concepcion was an

employee of CPI considering that: (a) CPI continuously hired and promoted
Concepcion from October 2002 until her resignation on February 23, 2009,64
thus, showing that CPI exercised the power of selection and engagement over
her person and that she performed functions that were necessary and
desirable to the business of CPI; (b) the monthly "subsidy" and cash incentives
that Concepcion was receiving from CPI are actually remuneration in the
concept of wages as it was regularly given to her on a monthly basis without
any qualification, save for the "complete submission of documents on what is
a sale policy";65 (c) CPI had the power to discipline or even dismiss
Concepcion as her engagement contract with CPI expressly conferred upon
the latter "the right to discontinue [her] service anytime during the period of
engagement should [she] fail to meet the performance standards,"66 among
others, and that CPI actually exercised such power to dismiss when it
accepted and approved Concepcion's resignation letter; and most importantly,
(d) as aptly pointed out by the CA, CPI possessed the power of control over
Concepcion because in the performance of her duties as Project Director -
particularly in the conduct of recruitment activities, training sessions, and
skills development of Sales Directors - she did not exercise independent
discretion thereon, but was still subject to the direct supervision of CPI, acting
through Babiano.
Besides, while the employment agreement of Concepcion was denominated as
a "Contract of Agency for Project Director," it should be stressed that the
existence of employer-employee relations could not be negated by the mere
expedient of repudiating it in a contract. In the case of Insular Life Assurance
Co., Ltd. v. NLRC,68 it was ruled that one's employment status is defined and
prescribed by law, and not by what the parties say it should be, viz.:
It is axiomatic that the existence of an employer-employee relationship cannot
be negated by expressly repudiating it in the management contract and
providing therein that the "employee" is an independent contractor when the
terms of the agreement clearly show otherwise. For, the employment status of
a person is defined and prescribed by law and not by what the parties say it
should be. In determining the status of the management contract, the "four-
fold test" on employment earlier mentioned has to be applied.69 (Emphasis
and underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee
relationship between Concepcion and CPI, the labor tribunals correctly
assumed jurisdiction over her money claims.

III.

Finally, CPI contends that Concepcion's failure to assail the NLRC ruling
awarding her the amount of P470,754.62 representing unpaid commissions
rendered the same final and binding upon her. As such, the CA erred in
increasing her monetary award to P591,953.05.70
The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative
relief other than the one granted in the appealed decision. However,
jurisprudence admits an exception to the said rule, such as when strict
adherence thereto shall result in the impairment of the substantive rights of
the parties concerned. In Global Resource for Outsourced Workers, Inc. v.
Velasco:71
Indeed, a party who has failed to appeal from a judgment is deemed to have
acquiesced to it and can no longer obtain from the appellate court any
affirmative relief other than what was already granted under said judgment.
However, when strict adherence to such technical rule will impair a
substantive right, such as that of an illegally dismissed employee to monetary
compensation as provided by law, then equity dictates that the Court set aside
the rule to pave the way for a full and just adjudication of the case.72
(Emphasis and underscoring supplied)

In the present case, the CA aptly pointed out that the NLRC failed to account
for all the unpaid commissions due to Concepcion for the period of August 9,
2008 to August 8, 2011.73 Indeed, Concepcion's right to her earned
commissions is a substantive right which cannot be impaired by an erroneous
computation of what she really is entitled to. Hence, following the dictates of
equity and in order to arrive at a complete and just resolution of the case, and
avoid a piecemeal dispensation of justice over the same, the CA correctly
recomputed Concepcion's unpaid commissions, notwithstanding her failure
to seek a review of the NLRC's computation of the same.

In sum, the Court thus holds that the commissions of Babiano were properly
forfeited for violating the "Confidentiality of Documents and Non-Compete
Clause." On.the other hand, CPI remains liable for the unpaid commissions
of Concepcion in the sum of P591,953.05.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8,

2015 and the Resolution dated October 12, 2015 of the Court of Appeals (CA)
in CA-G.R. SP No. 132953 are hereby MODIFIED in that the commissions of
respondent Edwin J. Babiano are deemed FORFEITED. The rest of the CA
Decision stands.
SO ORDERED.

THIRD DIVISION

G.R. No. 192558 February 15, 2012

BITOY JAVIER (DANILO P. JAVIER), Petitioner,

vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.

DECISION

MENDOZA, J.:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the
March 18, 2010 Decision1 of the Court of Appeals (CA) and its June 7, 2010
Resolution,2 in CA-G.R. SP No. 109975, which reversed the May 28, 2009
Decision3 of the National Labor Relations Commission (NLRC) in the case
entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding that petitioner
Bitoy Javier (Javier) was illegally dismissed from employment and ordering
Fly Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of
reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment
of salaries and other labor standard benefits. He alleged that he was an
employee of Fly Ace since September 2007, performing various tasks at the
respondent’s warehouse such as cleaning and arranging the canned items
before their delivery to certain locations, except in instances when he would
be ordered to accompany the company’s delivery vehicles, as pahinante; that
he reported for work from Monday to Saturday from 7:00 o’clock in the
morning to 5:00 o’clock in the afternoon; that during his employment, he was
not issued an identification card and payslips by the company; that on May
6, 2008, he reported for work but he was no longer allowed to enter the
company premises by the security guard upon the instruction of Ruben Ong
(Mr. Ong), his superior;5 that after several minutes of begging to the guard to
allow him to enter, he saw Ong whom he approached and asked why he was
being barred from entering the premises; that Ong replied by saying,
"Tanungin mo anak mo;" 6 that he then went home and discussed the matter
with his family; that he discovered that Ong had been courting his daughter
Annalyn after the two met at a fiesta celebration in Malabon City; that
Annalyn tried to talk to Ong and convince him to spare her father from trouble
but he refused to accede; that thereafter, Javier was terminated from his
employment without notice; and that he was neither given the opportunity to
refute the cause/s of his dismissal from work.

To support his allegations, Javier presented an affidavit of one Bengie

Valenzuela who alleged that Javier was a stevedore or pahinante of Fly Ace
from September 2007 to January 2008. The said affidavit was subscribed
before the Labor Arbiter (LA).7

For its part, Fly Ace averred that it was engaged in the business of importation
and sales of groceries. Sometime in December 2007, Javier was contracted by
its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed rate of
₱ 300.00 per trip, which was later increased to ₱ 325.00 in January 2008. Mr.
Ong contracted Javier roughly 5 to 6 times only in a month whenever the
vehicle of its contracted hauler, Milmar Hauling Services, was not available.
On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying
that he was their employee, Fly Ace insisted that there was no illegal
dismissal.8 Fly Ace submitted a copy of its agreement with Milmar Hauling
Services and copies of acknowledgment receipts evidencing payment to Javier
for his contracted services bearing the words, "daily manpower (pakyaw/piece
rate pay)" and the latter’s signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on
the ground that Javier failed to present proof that he was a regular employee
of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the

Respondent nor any document showing that he received the benefits accorded
to regular employees of the Respondents. His contention that Respondent
failed to give him said ID and payslips implies that indeed he was not a regular
employee of Fly Ace considering that complainant was a helper and that
Respondent company has contracted a regular trucking for the delivery of its
products.

Respondent Fly Ace is not engaged in trucking business but in the

importation and sales of groceries. Since there is a regular hauler to deliver
its products, we give credence to Respondents’ claim that complainant was
contracted on "pakiao" basis.

As to the claim for underpayment of salaries, the payroll presented by the

Respondents showing salaries of workers on "pakiao" basis has evidentiary
weight because although the signature of the complainant appearing thereon
are not uniform, they appeared to be his true signature.

xxxx

Hence, as complainant received the rightful salary as shown by the above

described payrolls, Respondents are not liable for salary differentials. 9

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the
argument of Javier and immediately concluded that he was not a regular
employee simply because he failed to present proof. It was of the view that a
pakyaw-basis arrangement did not preclude the existence of employer-
employee relationship. "Payment by result x x x is a method of compensation
and does not define the essence of the relation. It is a mere method of
computing compensation, not a basis for determining the existence or
absence of an employer-employee relationship.10 " The NLRC further averred
that it did not follow that a worker was a job contractor and not an employee,
just because the work he was doing was not directly related to the employer’s
trade or business or the work may be considered as "extra" helper as in this
case; and that the relationship of an employer and an employee was
determined by law and the same would prevail whatever the parties may call
it. In this case, the NLRC held that substantial evidence was sufficient basis
for judgment on the existence of the employer-employee relationship. Javier
was a regular employee of Fly Ace because there was reasonable connection
between the particular activity performed by the employee (as a "pahinante")
in relation to the usual business or trade of the employer (importation, sales
and delivery of groceries). He may not be considered as an independent
contractor because he could not exercise any judgment in the delivery of
company products. He was only engaged as a "helper."

Finding Javier to be a regular employee, the NLRC ruled that he was entitled
to a security of tenure. For failing to present proof of a valid cause for his
termination, Fly Ace was found to be liable for illegal dismissal of Javier who
was likewise entitled to backwages and separation pay in lieu of
reinstatement. The NLRC thus ordered:

WHEREFORE, premises considered, complainant’s appeal is partially

GRANTED. The assailed Decision of the labor arbiter is VACATED and a new
one is hereby entered holding respondent FLY ACE CORPORATION guilty of
illegal dismissal and non-payment of 13th month pay. Consequently, it is
hereby ordered to pay complainant DANILO "Bitoy" JAVIER the following:

1. Backwages -₱ 45,770.83

2. Separation pay, in lieu of reinstatement - 8,450.00

3. Unpaid 13th month pay (proportionate) - 5,633.33

TOTAL -₱ 59,854.16

All other claims are dismissed for lack of merit.

SO ORDERED.11

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was
indeed a former employee of Fly Ace and reinstated the dismissal of Javier’s
complaint as ordered by the LA. The CA exercised its authority to make its
own factual determination anent the issue of the existence of an employer-
employee relationship between the parties. According to the CA:

xxx

In an illegal dismissal case the onus probandi rests on the employer to prove
that its dismissal was for a valid cause. However, before a case for illegal
dismissal can prosper, an employer-employee relationship must first be
established. x x x it is incumbent upon private respondent to prove the
employee-employer relationship by substantial evidence.

xxx

It is incumbent upon private respondent to prove, by substantial evidence,

that he is an employee of petitioners, but he failed to discharge his burden.
The non-issuance of a company-issued identification card to private
respondent supports petitioners’ contention that private respondent was not
its employee.12

The CA likewise added that Javier’s failure to present salary vouchers,

payslips, or other pieces of evidence to bolster his contention, pointed to the
inescapable conclusion that he was not an employee of Fly Ace. Further, it
found that Javier’s work was not necessary and desirable to the business or
trade of the company, as it was only when there were scheduled deliveries,
which a regular hauling service could not deliver, that Fly Ace would contract
the services of Javier as an extra helper. Lastly, the CA declared that the facts
alleged by Javier did not pass the "control test."

He contracted work outside the company premises; he was not required to

observe definite hours of work; he was not required to report daily; and he
was free to accept other work elsewhere as there was no exclusivity of his
contracted service to the company, the same being co-terminous with the trip
only.13 Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal could not
prosper.

The petitioners moved for reconsideration, but to no avail.

Hence, this appeal anchored on the following grounds:

I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING

THAT THE PETITIONER WAS NOT A REGULAR EMPLOYEE OF FLY ACE.

II.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING

THAT THE PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS.14

The petitioner contends that other than its bare allegations and self-serving
affidavits of the other employees, Fly Ace has nothing to substantiate its claim
that Javier was engaged on a pakyaw basis. Assuming that Javier was indeed
hired on a pakyaw basis, it does not preclude his regular employment with
the company. Even the acknowledgment receipts bearing his signature and
the confirming receipt of his salaries will not show the true nature of his
employment as they do not reflect the necessary details of the commissioned
task. Besides, Javier’s tasks as pahinante are related, necessary and desirable
to the line of business by Fly Ace which is engaged in the importation and
sale of grocery items. "On days when there were no scheduled deliveries, he
worked in petitioners’ warehouse, arranging and cleaning the stored cans for
delivery to clients."15 More importantly, Javier was subject to the control and
supervision of the company, as he was made to report to the office from
Monday to Saturday, from 7:00 o’clock in the morning until 5:00 o’clock in
the afternoon. The list of deliverable goods, together with the corresponding
clients and their respective purchases and addresses, would necessarily have
been prepared by Fly Ace. Clearly, he was subjected to compliance with
company rules and regulations as regards working hours, delivery schedule
and output, and his other duties in the warehouse.16

The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that
payment to a worker on a per trip basis is not significant because "this is
merely a method of computing compensation and not a basis for determining
the existence of employer-employee relationship." Javier likewise invokes the
rule that, "in controversies between a laborer and his master, x x x doubts
reasonably arising from the evidence should be resolved in the former’s
favour. The policy is reflected is no less than the Constitution, Labor Code
and Civil Code."18

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally

dismissed by the latter’s failure to observe substantive and procedural due
process. Since his dismissal was not based on any of the causes recognized
by law, and was implemented without notice, Javier is entitled to separation
pay and backwages.

In its Comment,19 Fly Ace insists that there was no substantial evidence to
prove employer-employee relationship. Having a service contract with Milmar
Hauling Services for the purpose of transporting and delivering company
products to customers, Fly Ace contracted Javier as an extra helper or
pahinante on a mere "per trip basis." Javier, who was actually a loiterer in the
area, only accompanied and assisted the company driver when Milmar could
not deliver or when the exigency of extra deliveries arises for roughly five to
six times a month. Before making a delivery, Fly Ace would turn over to the
driver and Javier the delivery vehicle with its loaded company products. With
the vehicle and products in their custody, the driver and Javier "would leave
the company premises using their own means, method, best judgment and
discretion on how to deliver, time to deliver, where and [when] to start, and
manner of delivering the products."20

Fly Ace dismisses Javier’s claims of employment as baseless assertions. Aside

from his bare allegations, he presented nothing to substantiate his status as
an employee. "It is a basic rule of evidence that each party must prove his
affirmative allegation. If he claims a right granted by law, he must prove his
claim by competent evidence, relying on the strength of his own evidence and
not upon the weakness of his opponent."21 Invoking the case of Lopez v.
Bodega City,22 Fly Ace insists that in an illegal dismissal case, the burden of
proof is upon the complainant who claims to be an employee. It is essential
that an employer-employee relationship be proved by substantial evidence.
Thus, it cites:

In an illegal dismissal case, the onus probandi rests on the employer to prove
that its dismissal of an employee was for a valid cause. However, before a case
for illegal dismissal can prosper, an employer-employee relationship must
first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an
employee of Fly Ace, "which are unfortunately not supported by proof,
documentary or otherwise."23 Javier simply assumed that he was an
employee of Fly Ace, absent any competent or relevant evidence to support it.
"He performed his contracted work outside the premises of the respondent;
he was not even required to report to work at regular hours; he was not made
to register his time in and time out every time he was contracted to work; he
was not subjected to any disciplinary sanction imposed to other employees
for company violations; he was not issued a company I.D.; he was not
accorded the same benefits given to other employees; he was not registered
with the Social Security System (SSS) as petitioner’s employee; and, he was
free to leave, accept and engage in other means of livelihood as there is no
exclusivity of his contracted services with the petitioner, his services being co-
terminus with the trip only. All these lead to the conclusion that petitioner is
not an employee of the respondents."24

Moreover, Fly Ace claims that it had "no right to control the result, means,
manner and methods by which Javier would perform his work or by which
the same is to be accomplished."25 In other words, Javier and the company
driver were given a free hand as to how they would perform their contracted
services and neither were they subjected to definite hours or condition of
work.

Fly Ace likewise claims that Javier’s function as a pahinante was not directly
related or necessary to its principal business of importation and sales of
groceries. Even without Javier, the business could operate its usual course
as it did not involve the business of inland transportation. Lastly, the
acknowledgment receipts bearing Javier’s signature and words "pakiao rate,"
referring to his earned salaries on a per trip basis, have evidentiary weight
that the LA correctly considered in arriving at the conclusion that Javier was
not an employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javier’s alleged illegal dismissal is anchored
on the existence of an employer-employee relationship between him and Fly
Ace. This is essentially a question of fact. Generally, the Court does not review
errors that raise factual questions. However, when there is conflict among the
factual findings of the antecedent deciding bodies like the LA, the NLRC and
the CA, "it is proper, in the exercise of Our equity jurisdiction, to review and
re-evaluate the factual issues and to look into the records of the case and re-
examine the questioned findings."26 In dealing with factual issues in labor
cases, "substantial evidence – that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion – is
sufficient."27

As the records bear out, the LA and the CA found Javier’s claim of employment
with Fly Ace as wanting and deficient. The Court is constrained to agree.
Although Section 10, Rule VII of the New Rules of Procedure of the NLRC28
allows a relaxation of the rules of procedure and evidence in labor cases, this
rule of liberality does not mean a complete dispensation of proof. Labor
officials are enjoined to use reasonable means to ascertain the facts speedily
and objectively with little regard to technicalities or formalities but nowhere
in the rules are they provided a license to completely discount evidence, or
the lack of it. The quantum of proof required, however, must still be satisfied.
Hence, "when confronted with conflicting versions on factual matters, it is for
them in the exercise of discretion to determine which party deserves credence
on the basis of evidence received, subject only to the requirement that their
decision must be supported by substantial evidence."29 Accordingly, the
petitioner needs to show by substantial evidence that he was indeed an
employee of the company against which he claims illegal dismissal.

Expectedly, opposing parties would stand poles apart and proffer allegations
as different as chalk and cheese. It is, therefore, incumbent upon the Court
to determine whether the party on whom the burden to prove lies was able to
hurdle the same. "No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any competent and
relevant evidence to prove the relationship may be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_179652_2
009.html - fnt31 Hence, while no particular form of evidence is required, a
finding that such relationship exists must still rest on some substantial
evidence. Moreover, the substantiality of the evidence depends on its
quantitative as well as its qualitative aspects."30 Although substantial
evidence is not a function of quantity but rather of quality, the x x x
circumstances of the instant case demand that something more should have
been proffered. Had there been other proofs of employment, such as x x x
inclusion in petitioner’s payroll, or a clear exercise of control, the Court would
have affirmed the finding of employer-employee relationship."31

In sum, the rule of thumb remains: the onus probandi falls on petitioner to
establish or substantiate such claim by the requisite quantum of evidence.32
"Whoever claims entitlement to the benefits provided by law should establish
his or her right thereto x x x."33 Sadly, Javier failed to adduce substantial
evidence as basis for the grant of relief.

In this case, the LA and the CA both concluded that Javier failed to establish
his employment with Fly Ace. By way of evidence on this point, all that Javier
presented were his self-serving statements purportedly showing his activities
as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality
requirement to support his claim. Hence, the Court sees no reason to depart
from the findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly
Ace, he was made to work in the company premises during weekdays
arranging and cleaning grocery items for delivery to clients, no other proof
was submitted to fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javier’s cause. In said
document, all Valenzuela attested to was that he would frequently see Javier
at the workplace where the latter was also hired as stevedore.34 Certainly, in
gauging the evidence presented by Javier, the Court cannot ignore the
inescapable conclusion that his mere presence at the workplace falls short in
proving employment therein. The supporting affidavit could have, to an
extent, bolstered Javier’s claim of being tasked to clean grocery items when
there were no scheduled delivery trips, but no information was offered in this
subject simply because the witness had no personal knowledge of Javier’s
employment status in the company. Verily, the Court cannot accept Javier’s
statements, hook, line and sinker.

The Court is of the considerable view that on Javier lies the burden to pass
the well-settled tests to determine the existence of an employer-employee
relationship, viz: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the
employee’s conduct. Of these elements, the most important criterion is
whether the employer controls or has reserved the right to control the
employee not only as to the result of the work but also as to the means and
methods by which the result is to be accomplished.35

In this case, Javier was not able to persuade the Court that the above
elements exist in his case.1avvphi1 He could not submit competent proof that
Fly Ace engaged his services as a regular employee; that Fly Ace paid his
wages as an employee, or that Fly Ace could dictate what his conduct should
be while at work. In other words, Javier’s allegations did not establish that
his relationship with Fly Ace had the attributes of an employer-employee
relationship on the basis of the above-mentioned four-fold test. Worse, Javier
was not able to refute Fly Ace’s assertion that it had an agreement with a
hauling company to undertake the delivery of its goods. It was also baffling to
realize that Javier did not dispute Fly Ace’s denial of his services’ exclusivity
to the company. In short, all that Javier laid down were bare allegations
without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a "per trip"
rate as a stevedore, albeit on a pakyaw basis. The Court cannot fail to note
that Fly Ace presented documentary proof that Javier was indeed paid on a
pakyaw basis per the acknowledgment receipts admitted as competent
evidence by the LA. Unfortunately for Javier, his mere denial of the signatures
affixed therein cannot automatically sway us to ignore the documents because
"forgery cannot be presumed and must be proved by clear, positive and
convincing evidence and the burden of proof lies on the party alleging
forgery."36

Considering the above findings, the Court does not see the necessity to resolve
the second issue presented.

One final note. The Court’s decision does not contradict the settled rule that
"payment by the piece is just a method of compensation and does not define
the essence of the relation."37 Payment on a piece-rate basis does not negate
regular employment. "The term ‘wage’ is broadly defined in Article 97 of the
Labor Code as remuneration or earnings, capable of being expressed in terms
of money whether fixed or ascertained on a time, task, piece or commission
basis. Payment by the piece is just a method of compensation and does not
define the essence of the relations. Nor does the fact that the petitioner is not
covered by the SSS affect the employer-employee relationship. However, in
determining whether the relationship is that of employer and employee or one
of an independent contractor, each case must be determined on its own facts
and all the features of the relationship are to be considered."38 Unfortunately
for Javier, the attendant facts and circumstances of the instant case do not
provide the Court with sufficient reason to uphold his claimed status as
employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor
dispute will be automatically decided in favor of labor. Management also has
its rights which are entitled to respect and enforcement in the interest of
simple fair play. Out of its concern for the less privileged in life, the Court has
inclined, more often than not, toward the worker and upheld his cause in his
conflicts with the employer. Such favoritism, however, has not blinded the
Court to the rule that justice is in every case for the deserving, to be dispensed
in the light of the established facts and the applicable law and doctrine.39

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the
Court of Appeals and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975,
are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 186621 March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO1 AGBAY,

Petitioners,
vs.
JESUS J. COMING, Respondent.

DECISION

VILLARAMA, JR., J.:

Before the Court is a petition for review on certiorari under Rule 45 to reverse
and set aside the Decision2 dated February 21, 2008 and Resolution3 dated
February 9, 2009 of the Court of Appeals (CA) in CA-GR. CEB-SP No. 02113.

Petitioner South East International Rattan, Inc. (SEIRI) is a domestic

corporation engaged in the business of manufacturing and exporting
furniture to various countries with principal place of business at Paknaan,
Mandaue City, while petitioner Estanislao Agbay, as per records, is the
President and General Manager of SEIRI.4
On November 3, 2003, respondent Jesus J. Coming filed a complaint5 for
illegal dismissal, underpayment of wages, non-payment of holiday pay, 13th
month pay and service incentive leave pay, with prayer for reinstatement,
back wages, damages and attorney’s fees.

Respondent alleged that he was hired by petitioners as Sizing Machine

Operator on March 17, 1984. His work schedule is from 8:00 a.m. to 5:00
p.m. Initially, his compensation was on "pakiao" basis but sometime in June
1984, it was fixed at ₱150.00 per day which was paid weekly. In 1990, without
any apparent reason, his employment was interrupted as he was told by
petitioners to resume work in two months time. Being an uneducated person,
respondent was persuaded by the management as well as his brother not to
complain, as otherwise petitioners might decide not to call him back for work.
Fearing such consequence, respondent accepted his fate. Nonetheless, after
two months he reported back to work upon order of management.6

Despite being an employee for many years with his work performance never
questioned by petitioners, respondent was dismissed on January 1, 2002
without lawful cause. He was told that he will be terminated because the
company is not doing well financially and that he would be called back to
work only if they need his services again. Respondent waited for almost a year
but petitioners did not call him back to work. When he finally filed the
complaint before the regional arbitration branch, his brother Vicente was
used by management to persuade him to withdraw the case.7

On their part, petitioners denied having hired respondent asserting that SEIRI
was incorporated only in 1986, and that respondent actually worked for
SEIRI’s furniture suppliers because when the company started in 1987 it was
engaged purely in buying and exporting furniture and its business operations
were suspended from the last quarter of 1989 to August 1992. They stressed
that respondent was not included in the list of employees submitted to the
Social Security System (SSS). Moreover, respondent’s brother, Vicente
Coming, executed an affidavit8 in support of petitioners’ position while Allan
Mayol and Faustino Apondar issued notarized certifications9 that respondent
worked for them instead.10

With the denial of petitioners that respondent was their employee, the latter
submitted an affidavit11 signed by five former co-workers stating that
respondent was one of the pioneer employees who worked in SEIRI for almost
twenty years.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon
ruled that respondent is a regular employee of SEIRI and that the termination
of his employment was illegal. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering

the respondent South East (Int’l.) Rattan, Inc. to pay complainant Jesus J.
Coming the following:

1. Separation pay ₱114,400.00

2. Backwages P 30,400.00
3. Wage differential P 15,015.00
4. 13th month pay P 5,958.00
5. Holiday pay P 4,000.00
6. Service incentive leave pay P 2,000.00
Total award
₱171,773.00
The other claims and the case against respondent Estanislao Agbay are
dismissed for lack of merit.

SO ORDERED.13

Petitioners appealed to the National Labor Relations Commission (NLRC)-

Cebu City where they submitted the following additional evidence: (1) copies
of SEIRI’s payrolls and individual pay records of employees;14 (2) affidavit15
of SEIRI’s Treasurer, Angelina Agbay; and (3) second affidavit16 of Vicente
Coming.

On July 28, 2005, the NLRC’s Fourth Division rendered its Decision,17 the
dispositive portion of which states:

WHEREFORE, premises considered, the decision of the Labor Arbiter is

hereby SET ASIDE and VACATED and a new one entered DISMISSING the
complaint.
SO ORDERED.18

The NLRC likewise denied respondent’s motion for reconsideration.19

Respondent elevated the case to the CA via a petition for certiorari under Rule
65.

By Decision dated February 21, 2008, the CA reversed the NLRC and ruled
that there existed an employer-employee relationship between petitioners and
respondent who was dismissed without just and valid cause.

The CA thus decreed:

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The

assailed Decision dated July 28, 2005 issued by the National Labor Relations
Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-000625-
2004 is REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated
April 30, 2004 is REINSTATED with MODIFICATION on the computation of
backwages which should be computed from the time of illegal termination
until the finality of this decision.

Further, the Labor Arbiter is directed to make the proper adjustment in the
computation of the award of separation pay as well as the monetary awards
of wage differential, 13th month pay, holiday pay and service incentive leave
pay.

SO ORDERED.20

Petitioners filed a motion for reconsideration but the CA denied it under

Resolution dated February 9, 2009.

Hence, this petition raising the following issues:

6.1

WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING

OF THE HONORABLE COURT OF APPEALS THAT THERE EXISTS
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONERS AND
RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF
THIS HONORABLE COURT.

6.2

WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY

APPRECIATED IN ACCORDANCE WITH APPLICABLE LAW AND
JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH PARTIES.

6.3

WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING

OF THE HONORABLE COURT OF APPEALS THAT PETITIONERS ARE LIABLE
FOR ILLEGAL DISMISSAL OF RESPONDENT IS IN ACCORD WITH
APPLICABLE LAW AND JURISPRUDENCE.

6.4

WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE

HONORABLE COURT OF APPEALS THAT THE BACKWAGES DUE THE
RESPONDENT SHOULD BE COMPUTED FROM THE TIME OF ILLEGAL
TERMINATION UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY
PREVAILING JURISPRUDENCE.21

Resolution of the first issue is paramount in view of petitioners’ denial of the

existence of employer-employee relationship.

The issue of whether or not an employer-employee relationship exists in a

given case is essentially a question of fact. As a rule, this Court is not a trier
of facts and this applies with greater force in labor cases.22 Only errors of law
are generally reviewed by this Court.23 This rule is not absolute, however,
and admits of exceptions. For one, the Court may look into factual issues in
labor cases when the factual findings of the Labor Arbiter, the NLRC, and the
CA are conflicting.24 Here, the findings of the NLRC differed from those of the
Labor Arbiter and the CA, which compels the Court’s exercise of its authority
to review and pass upon the evidence presented and to draw its own
conclusions therefrom.25

To ascertain the existence of an employer-employee relationship

jurisprudence has invariably adhered to the four-fold test, to wit: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employee’s conduct, or
the so-called "control test."26 In resolving the issue of whether such
relationship exists in a given case, substantial evidence – that amount of
relevant evidence which a reasonable mind might accept as adequate to justify
a conclusion – is sufficient. Although no particular form of evidence is
required to prove the existence of the relationship, and any competent and
relevant evidence to prove the relationship may be admitted, a finding that
the relationship exists must nonetheless rest on substantial evidence.27

In support of their claim that respondent was not their employee, petitioners
presented Employment Reports to the SSS from 1987 to 2002, the
Certifications issued by Mayol and Apondar, two affidavits of Vicente Coming,
payroll sheets (1999-2000), individual pay envelopes and employee earnings
records (1999-2000) and affidavit of Angelina Agbay (Treasurer and Human
Resources Officer). The payroll and pay records did not include the name of
respondent. The affidavit of Ms. Agbay stated that after SEIRI started its
business in 1986 purely on export trading, it ceased operations in 1989 as
evidenced by Certification dated January 18, 1994 from the Securities and
Exchange Commission (SEC); that when business resumed in 1992, SEIRI
undertook only a little of manufacturing; that the company never hired any
workers for varnishing and pole sizing because it bought the same from
various suppliers, including Faustino Apondar; respondent was never hired
by SEIRI; and while it is true that Mr. Estanislao Agbay is the company
President, he never dispensed the salaries of workers.28

In his first affidavit, Vicente Coming averred that:

6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was

working with Ben Mayol as round core maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This
is a rattan trader with business address near Cebu Rattan Factory on a
"Pakiao" basis.

8. However, Jesus and I did not stay long at Okay Okay Yard and instead we
joined Eleuterio Agbay in Labogon, Cebu in 1989. In 1991, we went back to
Okay Okay located near the residence of Atty. Vicente de la Serna in Mandaue
City. We were on a "pakiao" basis. We stayed put until 1993 when we resigned
and joined Dodoy Luna in Labogon, Mandaue City as classifier until 1995. In
1996[,] Jesus rested. It was only in 1997 that he worked back. He replaced
me, as a classifier in Rattan Traders owned by Allan Mayol. But then, towards
the end of the year, he left the factory and relaxed in our place of birth, in
Sogod, Cebu.

9. It was only towards the end of 1999 that Jesus was taken back by Allan
Mayol as sizing machine operator. However, the work was off and on basis.
Not regular in nature, he was harping a side line job with me knowing that I
am now working with Faustino Apondar that supplies rattan furniture’s [sic]
to South East (Int’l) Rattan, Inc. As a brother, I allowed Jesus to work with
me and collect the proceeds of his services as part of my collectibles from
Faustino Apondar since I was on a "pakiao" basis. He was working at his
pleasure. Which means, he works if he likes to? That will be until 10:00
o’clock in the evening.

x x x x29

The Certification dated January 20, 2004 of Allan Mayol reads:

This is to certify that I personally know Jesus Coming, the brother of Vicente
Coming. Jesus is a rattan factory worker and he was working with me as
rattan pole sizing/classifier of my business from 1997 up to part of 1998 when
he left my factory at will. I took him back towards the end of 1999, this time
as a sizing machine operator. In all these years, his services are not regular.
He works only if he likes to.30

Faustino Apondar likewise issued a Certification which states:

This is to certify that I am a maker/supplier of finished Rattan Furniture. As
such, I have several rattan furniture workers under me, one of whom is
Vicente Coming, the brother of Jesus Coming.

That sometime in 1999, Vicente pleaded to me for a side line job of his brother,
Jesus who was already connected with Allan Mayol. Having vouched for the
integrity of his brother and knowing that the job is temporary in character, I
allowed Jesus to work with his brother Vicente. However, the proceeds will be
collected together with his brother Vicente since it was the latter who was
working with me. He renders services to his brother work only after the
regular working hours but off and on basis.31

On the other hand, respondent submitted the affidavit executed by Eleoterio

Brigoli, Pedro Brigoli, Napoleon Coming, Efren Coming and Gil Coming who
all attested that respondent was their co-worker at SEIRI.

Their affidavit reads:

We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after
having been duly sworn to in accordance with law, depose and say:

That we are former employees of SOUTH EAST RATTAN which is owned by

Estan Eslao Agbay;

That we personally know JESUS COMING considering that we worked

together in one company SOUTH EAST RATTANT [sic];

That we together with JESUS COMING are all under the employ of ESTAN
ESLAO AGBAY considering that the latter is the one directly paying us and
holds the absolute control of all aspects of our employment;

That it is not true that JESUS COMING is under the employ of one person
other than ESTAN ESLAO AGBAY OF SOUTH EAST RATTAN;

That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN
and had been employed therein for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and
to deny any contrary allegation made by the company against his employment
with SOUTH EAST RATTAN.32

In his decision, Labor Arbiter Carreon found that respondent’s work as sizing
machine operator is usually necessary and desirable to the rattan furniture
business of petitioners and their failure to include respondent in the
employment report to SSS is not conclusive proof that respondent is not their
employee. As to the affidavit of Vicente Coming, Labor Arbiter Carreon did not
give weight to his statement that respondent is not petitioners’ employee but
that of one Faustino Apondar. Labor Arbiter Carreon was not convinced that
Faustino Apondar is an independent contractor who has a contractual
relationship with petitioners.

In reversing the Labor Arbiter, the NLRC reasoned as follows:

First complainant alleged that he worked continuously from March 17, 1984
up to January 21, 2002.1âwphi1 Records reveal however that South East
(Int’l.) Rattan, Inc. was incorporated only last July 18, 1986 (p. 55 records)[.]
Moreover, when they started to actually operate in 1987, the company was
engaged purely on "buying and exporting rattan furniture" hence no
manufacturing employees were hired. Furthermore, from the last quarter of
1989 up to August of 1992, the company suspended operations due to
economic reverses as per Certification issued by the Securities and Exchange
Commission (p. 56 records)[.]

Second, for all his insistence that he was a regular employee, complainant
failed to present a single payslip, voucher or a copy of a company payroll
showing that he rendered service during the period indicated therein. x x x

From the above established facts we are inclined to give weight and credence
to the Certifications of Allan Mayol and Faustino Apondar, both suppliers of
finished Rattan Furniture (pp. 442-43, records). It appears that complainant
first worked with Allan Mayol and later with Faustino Apondar upon the
proddings of his brother Vicente. Vicente’s affidavit as to complainant’s
employment history was more detailed and forthright. x x x

xxxx
In the case at bar, there is likewise substantial evidence to support our
findings that complainant was not an employee of respondents. Thus:

1. Complainant’s name does not appear in the list of employees reported to

the SSS.

2. His name does not also appear in the sample payrolls of respondents’
employees.

3. The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished

rattan products[,] that complainant had at one time or another worked with
them.

4. The Affidavit of Vicente Coming, complainant’s full brother[,] attesting that

complainant had never been an employee of respondent. The only connection
was that their employer Faustino Apondar supplies finished rattan products
to respondents.33

On the other hand, the CA gave more credence to the declarations of the five
former employees of petitioners that respondent was their co-worker in SEIRI.
One of said affiants is Vicente Coming’s own son, Gil Coming. Vicente averred
in his second affidavit that when he confronted his son, the latter explained
that he was merely told by their Pastor to sign the affidavit as it will put an
end to the controversy. Vicente insisted that his son did not know the contents
and implications of the document he signed. As to the absence of respondent’s
name in the payroll and SSS employment report, the CA observed that the
payrolls submitted were only from January 1, 1999 to December 29, 2000
and not the entire period of eighteen years when respondent claimed he
worked for SEIRI. It further noted that the names of the five affiants, whom
petitioners admitted to be their former employees, likewise do not appear in
the aforesaid documents. According to the CA, it is apparent that petitioners
maintained a separate payroll for certain employees or willfully retained a
portion of the payroll.

x x x As to the "control test", the following facts indubitably reveal that

respondents wielded control over the work performance of petitioner, to wit:
(1) they required him to work within the company premises; (2) they obliged
petitioner to report every day of the week and tasked him to usually perform
the same job; (3) they enforced the observance of definite hours of work from
8 o’clock in the morning to 5 o’clock in the afternoon; (4) the mode of payment
of petitioner’s salary was under their discretion, at first paying him on pakiao
basis and thereafter, on daily basis; (5) they implemented company rules and
regulations; (6) [Estanislao] Agbay directly paid petitioner’s salaries and
controlled all aspects of his employment and (7) petitioner rendered work
necessary and desirable in the business of the respondent company.34

We affirm the CA.

In Tan v. Lagrama,35 the Court held that the fact that a worker was not
reported as an employee to the SSS is not conclusive proof of the absence of
employer-employee relationship. Otherwise, an employer would be rewarded
for his failure or even neglect to perform his obligation.36

Nor does the fact that respondent’s name does not appear in the payrolls and
pay envelope records submitted by petitioners negate the existence of
employer-employee relationship. For a payroll to be utilized to disprove the
employment of a person, it must contain a true and complete list of the
employee.37 In this case, the exhibits offered by petitioners before the NLRC
consisting of copies of payrolls and pay earnings records are only for the years
1999 and 2000; they do not cover the entire 18-year period during which
respondent supposedly worked for SEIRI.

In their comment to the petition filed by respondent in the CA, petitioners

emphasized that in the certifications issued by Mayol and Apondar, it was
shown that respondent was employed and working for them in those years he
claimed to be working for SEIRI. However, a reading of the certification by
Mayol would show that while the latter claims to have respondent under his
employ in 1997, 1998 and 1999, respondent’s services were not regular and
that he works only if he wants to. Apondar’s certification likewise stated that
respondent worked for him since 1999 through his brother Vicente as
"sideline" but only after regular working hours and "off and on" basis. Even
assuming the truth of the foregoing statements, these do not foreclose
respondent’s regular or full-time employment with SEIRI. In effect, petitioners
suggest that respondent was employed by SEIRI’s suppliers, Mayol and
Apondar but no competent proof was presented as to the latter’s status as
independent contractors.
In the same comment, petitioners further admitted that the five affiants who
attested to respondent’s employment with SEIRI are its former workers whom
they describe as "disgruntled workers of SEIRI" with an axe to grind against
petitioners, and that their execution of affidavit in support of respondent’s
claim is "their very way of hitting back the management of SEIRI after
disciplinary measures were meted against them."38 This allegation though
was not substantiated by petitioners. Instead, after the CA rendered its
decision reversing the NLRC’s ruling, petitioners subsequently changed their
theory by denying the employment relationship with the five affiants in their
motion for reconsideration, thus:

x x x Since the five workers were occupying and working on a leased premises
of the private respondent, they were called workers of SEIRI (private
respondent). Such admission however, does not connote employment. For the
truth of the matter, all of the five employees of the supplier assigned at the
leased premises of the private respondent. Because of the recommendation of
the private respondent with regards to the disciplinary measures meted on
the five workers, they wanted to hit back against the private respondent. Their
motive to implicate private respondent was to vindicate. Definitely, they have
an axe to grind against the private respondent. Mention has to be made that
despite the dismissal of these five (5) witnesses from their service, none of
them ever went to the National Labor [Relations] Commission and invoked
their rights, if any, against their employer or at the very least against the
respondent. The reason is obvious, since they knew pretty well that they were
not employees of SEIRI but rather under the employ of Allan Mayol and
Faustino Apondar, working on a leased premise of respondent. x x x39

Petitioners’ admission that the five affiants were their former employees is
binding upon them. While they claim that respondent was the employee of
their suppliers Mayol and Apondar, they did not submit proof that the latter
were indeed independent contractors; clearly, petitioners failed to discharge
their burden of proving their own affirmative allegation.40 There is thus no
showing that the five former employees of SEIRI were motivated by malice,
bad faith or any ill-motive in executing their affidavit supporting the claims of
respondent.

In any controversy between a laborer and his master, doubts reasonably

arising from the evidence are resolved in favor of the laborer.41
As a regular employee, respondent enjoys the right to security of tenure under
Article 27942 of the Labor Code and may only be dismissed for a just43 or
authorized44 cause, otherwise the dismissal becomes illegal.

Respondent, whose employment was terminated without valid cause by

petitioners, is entitled to reinstatement without loss of seniority rights and
other privileges and to his full back wages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. Where reinstatement is no longer viable as an option, back
wages shall be computed from the time of the illegal termination up to the
finality of the decision. Separation pay equivalent to one month salary for
every year of service should likewise be awarded as an alternative in case
reinstatement in not possible.45

WHEREFORE, the petition for review on certiorari is DENIED. The Decision

dated February 21, 2008 and Resolution dated February 9, 2009 of the Court
of Appeals in CA-G.R. No. CEB-SP No. 02113 are hereby AFFIRMED and
UPHELD.

Petitioners to pay the costs of suit.

SO ORDERED.