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ë
ë ëë petitioner,

vs.
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respondents.

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@ e determination of t e proper forum is crucial because t e filing of t e petition or

complaint in t e wrong court or tribunal is fatal, even for a patently meritorious claim.
More specifically, labor arbiters and t e National Labor Relations Commission ave no
jurisdiction to entertain and rule on money claims w ere no employer-employee
relations is involved. @ us, any suc award rendered wit out jurisdiction is a nullity.

@ is petition for p


under Rule 65, Rules of Court seeks to annul t e Resolution 
of t e National Labor Relations Commission, promulgated September 27, 1991, in
NLRC-NCR Case No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual
Benefit Association, Inc.," affirming t e decision of t e labor arbiter w ic ordered
payment of t e amount of P319,796.00 as insurance commissions to private
respondent.

@  p 
p

@ e facts are simple. Private respondent Eutiquio Bustamante ad been an insurance

underwriter of petitioner AFP Mutual Benefit Association, Inc. since 1975. @ e Sales
Agent's Agreement between t em provided: 

B. Duties and Obligations:

1. During t e lifetime of t is Agreement, t e SALES AGEN@ (private respondent) s all

solicit exclusively for AFPMBAI (petitioner), and s all be bound by t e latter's policies,
memo circulars, rules and regulations w ic it may from time to time, revise, modify or
cancel to serve its business interests. 

2. @ e SALES AGEN@ s all confine is business activities for AFPMBAI w ile inside any
military camp, installation or residence of military personnel. He is free to solicit in t e
area for w ic e/s e is licensed and as aut oriied, provided owever, t at AFPMBAI
 may from time to time, assign im a specific area of responsibility and a production quota
on a case to case basis. 

xxx xxx xxx

C. Commission

1. @ e SALES AGEN@ s all be entitled to t e commission due for all premiums actually
due and received by AFPMBAI out of life insurance policies solicited and obtained by t e
SALES AGEN@ at t e rates set fort in t e applicant's commission sc edules ereto
attac ed.

xxx xxx xxx

D. General Provisions

1. @ ere s all be no employer-employee relations ip between t e parties, t e SALES

AGEN@ being ereby deemed an independent contractor.

As compensation, e received commissions based on t e following percentages of t e

premiums paid: ·

"30% of premium paid wit in t e first year;

10% of premium paid wit t e second year;
5% of t e premium paid during t e t ird year;
3% of t e premium paid during t e fourt year; and
1% of t e premium paid during t e fift year up to
t e tent year.

On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for
simultaneously selling insurance for anot er life insurance company in violation of said
agreement.

At t e time of is dismissal, private respondent was entitled to accrued commissions

equivalent to twenty four (24) mont s per t e Sales Agent Agreement and as stated in
t e account summary dated July 5, 1989, approved by Retired Brig. Gen. Rosalino
Alquiza, president of petitioner-company. Said summary s owed t at private
respondent ad a total commission receivable of P438,835.00, of w ic only
P78,039.89 ad been paid to im.

Private respondent wrote petitioner seeking t e release of is commissions for said 24

mont s. Petitioner, t roug Marketing Manager Juan Concepcion, replied t at e was
entitled to only P75,000.00 to P100,000.00. Hence, believing Concepcion's
computations, private respondent signed a quitclaim in favor of petitioner.

Sometime in October 1989, private respondent was informed t at is c eck was ready
for release. In collecting is c eck, e discovered from a document (account summary)
attac ed to said c eck t at is total commissions for t e 24 mont s actually amounted
to P354,796.09. Said document stated: o

6. @ e total receivable for Mr. Bustamante out of t e renewals and old business
generated since 1983 grosses P438,835.00 less is outstanding obligation in t e amount
of P78,039.89 as of June 30, 1989, total expected commission would amount to
P354,796.09. From t at figure at a 15% compromise settlement t is would mean
P53,219.41 due im to settle is claim.

Private respondent, owever, was paid only t e amount of P35,000.00.

On November 23, 1989, private respondent filed a complaint wit t e Office of t e

Insurance Commissioner praying for t e payment of t e correct amount of is
commission. Atty. German C. Alejandria, C ief of t e Public Assistance and Information
Division, Office of t e Insurance Commissioner, advised private respondent t at it was
t e Department of Labor and Employment t at ad jurisdiction over is complaint.

On February 26, 1990, private respondent filed is complaint wit t e Department of

Labor claiming: (1) commission for 2 years from termination of employment equivalent
to 30% of premiums remitted during employment; (2) P354,796.00 as commission
earned from renewals and old business generated since 1983; (3) P100,000.00 as
moral damages; and (4) P100,000.00 as exemplary damages.

After submission of position papers, Labor Arbiter Jose G. de Vera rendered is

decision, dated August 24, 1990, t e dispositive portion of w ic reads: [

HEREFORE, all t e foregoing premises being considered, judgment is ereby

rendered declaring t e dismissal of t e complainant as just and valid, and consequently,
is claim for separation pay is denied. On is money claim, t e respondent company is
ereby ordered to pay complainant t e sum of P319,796.00 plus attorney's fees in t e
amount of P31,976.60.

All ot er claims of t e complainant are dismissed for want of merit.

@ e labor arbiter relied on t e Sales Agent's Agreement proviso t at petitioner could

assign private respondent a specific area of responsibility and a production quota, and
read it as signalling t e existence of employer- employee relations ip between
petitioner and private respondent.

On appeal, t e Second Division D of t e respondent Commission affirmed t e decision

of t e Labor Arbiter. In t e assailed Resolution, respondent Commission found no
reason to disturb said ruling of t e labor arbiter and
ruled: 

HEREFORE, in view of t e foregoing considerations, t e subject appeal s ould be as it

is ereby, denied and t e decision appealed from affirmed

SO ORDERED.
Hence, t is petition.

@  

Petitioner contends t at respondent Commission committed grave abuse of discretion in

ruling t at t e labor arbiter ad jurisdiction over t is case. At t e eart of t e
controversy is t e issue of w et er t ere existed an employer-employee relations ip
between petitioner and private respondent.

Petitioner argues t at, despite provisions B(1) and (2) of t e Sales Agent's Agreement,
t ere is no employer-employee relations ip between private respondent and itself.
Hence, respondent commission gravely abused its discretion w en it eld t at t e labor
arbiter ad jurisdiction over t e case.

@ 
 

@ e petition is meritorious.


 @ 



ell-settled is t e doctrine t at t e existence of an employer-employee relations ip is

ultimately a question of fact and t at t e findings t ereon by t e labor arbiter and t e
National Labor Relations Commission s all be accorded not only respect but even
finality è  
    p .  @ e determinative factor in suc
finality is t e presence of substantial evidence to support said finding, ot erwise, suc
factual findings cannot bind t is Court.

Respondent Commission concurred wit t e labor arbiter's findings t at: 

x x x @ e complainant's job as sales insurance agent is usually necessary and desirable

in t e usual business of t e respondent company. Under t e Sales Agents Agreement,
t e complainant was required to solicit exclusively for t e respondent company, and e
was bound by t e company policies, memo circulars, rules and regulations w ic were
issued from time to time. By suc requirement to follow strictly management policies,
orders, circulars, rules and regulations, it only s ows t at t e respondent ad control or
reserved t e rig t to control t e complainant's work as solicitor. Complainant was not an
independent contractor as e did not carry on an independent business ot er t an t at of
t e company's . . .

@o t is, respondent Commission added t at t e Sales Agent's Agreement specifically

provided t at petitioner may assign private respondent a specific area of responsibility
and a production quota. From t ere, it concluded t at apparently t ere is t at exercise
of control by t e employer w ic is t e most important element in determining
employer- employee relations ip. 

e old, owever, t at respondent Commission misappreciated t e facts of t e case.

@ime and again, t e Court as applied t e "four-fold" test in determining t e existence
of employer-employee relations ip. @ is test considers t e following elements: (1) t e
power to ire; (2) t e payment of wages; (3) t e power to dismiss; and (4) t e power to
control, t e last being t e most important element. 

@ e difficulty lies in correctly assessing if certain factors or elements properly indicate

t e presence of control. Anent t e issue of exclusivity in t e case at bar, t e fact t at
private respondent was required to solicit business exclusively for petitioner could
ardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81

and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by t e
Insurance Commissioner, insurance agents are barred from serving more t an one
insurance company, in order to protect t e public and to enable insurance companies to
exercise exclusive supervision over t eir agents in t eir solicitation work. @ us, t e
exclusivity restriction clearly springs from a regulation issued by t e Insurance
Commission, and not from an intention by petitioner to establis control over t e met od
and manner by w ic private respondent s all accomplis is work. @ is feature is not
meant to c ange t e nature of t e relations ip between t e parties, nor does it
necessarily imbue suc relations ip wit t e quality of control envisioned by t e law.

So too, t e fact t at private respondent was bound by company policies,

memo/circulars, rules and regulations issued from time to time is also not indicative of
control. In its Reply to Complainant's Position Paper, · petitioner alleges t at t e
policies, memo/circulars, and rules and regulations referred to in provision B(1) of t e
Sales Agent's Agreement are only t ose pertaining to payment of agents'
accountabilities, availment by sales agents of cas advances for sorties, circulars on
incentives and awards to be given based on production, and ot er matters concerning
t e selling of insurance, in accordance wit t e rules promulgated by t e Insurance
Commission. According to t e petitioner, insurance solicitors are never affected or
covered by t e rules and regulations concerning  conduct and penalties for
violations t ereof, work standards, performance appraisals, merit increases,
promotions, absenteeism/attendance, leaves of absence, management-union matters,
employee benefits and t e like. Since private respondent failed to rebut t ese
allegations, t e same are deemed admitted, or at least proven, t ereby leaving not ing
to support t e respondent Commission's conclusion t at t e foregoing elements
signified an employment relations ip between t e parties.

In regard to t e territorial assignments given to sales agents, t is too cannot be eld as

indicative of t e exercise of control over an employee. First of all, t e place of work in
t e business of soliciting insurance does not figure prominently in t e equation. And
more significantly, private respondent failed to rebut petitioner's allegation t at it ad
never issued im any territorial assignment at all. Obviously, t is Court cannot draw t e
same inference from t is feature as did t e respondent Commission.

@o restate, t e significant factor in determining t e relations ip of t e parties is t e

presence or absence of supervisory aut ority to control t e met od and t e details of
performance of t e service being rendered, and t e degree to w ic t e principal may
intervene to exercise suc control. @ e presence of suc power of control is indicative
of an employment relations ip, w ile absence t ereof is indicative of independent
contractors ip. In ot er words, t e test to determine t e existence of independent
contractors ip is w et er one claiming to be an independent contractor as contracted
to do t e work according to is own met ods and wit out being subject to t e control of
t e employer except only as to t e result of t e work. oSuc is exactly t e nature of t e
relations ip between petitioner and private respondent.

Furt er, not every form of control t at a party reserves to imself over t e conduct of t e
ot er party in relation to t e services being rendered may be accorded t e effect of
establis ing an employer-employee relations ip. @ e facts of t is case fall squarely wit
t e case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we eld t at:

Logically, t e line s ould be drawn between rules t at merely serve as guidelines

towards t e ac ievement of t e mutually desired result wit out dictating t e means or
met ods to be employed in attaining it, and t ose t at control or fix t e met odology and
bind or restrict t e party ired to t e use of suc means. @ e first, w ic aim only to
promote t e result, create no employer-employee relations ip unlike t e second, w ic
address bot t e result and t e means used to ac ieve it. @ e distinction acquires
particular relevance in t e case of an enterprise affected wit public interest, as is t e
business of insurance, and is on t at account subject to regulation by t e State wit
respect, not only to t e relations between insurer and insured but also to t e internal
affairs of t e insurance company. Rules and regulations governing t e conduct of t e
business are provided for in t e Insurance Code and enforced by t e Insurance
Commissioner. It is, t erefore, usual and expected for an insurande company to
promulgate a set of rules to guide its commission agents in selling its policies t at t ey
may not run afoul of t e law and w at it requires or pro ibits. . . . None of t ese really
invades t e agent's contractual prerogative to adopt is own selling met ods or to sell
insurance at is own time and convenience, ence cannot justifiably be said to establis
an employer-employee relations ip between im and t e company. [

Private respondent's contention t at e was petitioner's employee is belied by t e fact

t at e was free to sell insurance at any time as e was not subject to definite ours or
conditions of work and in turn was compensated according to t e result of is efforts. By
t e nature of t e business of soliciting insurance, agents are normally left free to devise
ways and means of persuading people to take out insurance. @ ere is no pro ibition, as
contended by petitioner, for private respondent to work for as long as e does not
violate t e Insurance Code. As petitioner explains:

(Private respondent) was free to solicit life insurance anyw ere e wanted and e ad
free and unfettered time to pursue is business. He did not ave to punc in and punc
out t e bundy clock as e was not required to report to t e (petitioner's) office regularly.
He was not covered by any employee policies or regulations and not subject to t e
disciplinary action of management on t e basis of t e Employee Code of Conduct. He
could go out and sell insurance at is own c osen time. He was entirely left to is own
c oices of areas or territories, wit no definite, muc less supervised, time sc edule.

(Private respondent) ad complete control over is occupation and (petitioner) did not
exercise any rig t of Control and Supervision over is performance except as to t e
payment of commission t e amount of w ic entirely depends on t e sole efforts of
(private respondent). He was free to engage in ot er occupation or practice ot er
profession for as long as e did not commit any violation of t e et ical standards
D
prescribed in t e Sales Agent's Agreement. 
Alt oug petitioner could ave, t eoretically, disapproved any of private respondent's
transactions, w at could be disapproved was only t e result of t e work, and not t e
means by w ic it was accomplis ed.

@ e "control" w ic t e above factors indicate did not sum up to t e power to control

private respondent's conduct in and mode of soliciting insurance. On t e contrary, t ey
clearly indicate t at t e juridical element of control ad been absent in t is situation.
@ us, t e Court is constrained to rule t at no employment relations ip ad ever existed
between t e parties.

Ô p  
 p  






Under t e contract invoked, private respondent ad never been petitioner's employee,

but only its commission agent. As an independent contractor, is claim for unpaid
commission s ould ave been litigated in an ordinary civil action. 

@ e jurisdiction of labor arbiters and respondent Commission is set fort in Article 217
of t e Labor Code.  @ e unifying element running t roug paragrap s (1) ² (6) of said
provision is t e consistent reference to cases or disputes 
 
p p
è  
  
 . Prior to its amendment by Batas Pambansa
Blg. 227 on June 1, 1982, t is point was clear as t e article included "all ot er cases
arising from employer-employee relation unless expressly excluded by t is Code." 
it out t is critical element of employment relations ip, t e labor arbiter and
respondent Commission can never acquire jurisdiction over a dispute. As in t e case at
bar. It was serious error on t e part of t e labor arbiter to ave assumed jurisdiction and
adjudicated t e claim. Likewise, t e respondent Commission's affirmance t ereof.

Suc lack of jurisdiction of a court or tribunal may be raised at any stage of t e

proceedings, even on appeal. @ e doctrine of estoppel cannot be properly invoked by
respondent Commission to cure t is fatal defect as it cannot confer jurisdiction upon a
tribunal t at to begin wit , was bereft of jurisdiction over a cause of action.  Moreover,
in t e proceedings below, petitioner consistently c allenged t e jurisdiction of t e labor
arbiter  and respondent Commission. 

It remains a basic fact in law t at t e c oice of t e proper forum is crucial as t e

decision of a court or tribunal wit out jurisdiction is a total nullity. · A void judgment for
want of jurisdiction is no judgment at all. It cannot be t e source of any rig t nor t e
creator of any obligation. All acts performed pursuant to it and all claims emanating from
it ave no legal effect. Hence, it can never become final. ". . . (I)t may be said to be a
lawless t ing w ic can be treated as an outlaw and slain at sig t, or ignored w erever
and w enever it ex ibits its ead." o

@ e way t ings stand, it becomes unnecessary to consider t e merits of private

respondent's claim for unpaid commission. Be t at as it may, t is ruling is wit out
prejudice to private respondent's rig t to file a suit for collection of unpaid commissions
against petitioner wit t e proper forum and wit in t e proper period.

HEREFORE, t e petition is ereby GRAN@ED, and t e assailed Resolution is ereby

SE@ ASIDE.

SO ORDERED.


 !! " 
! #  

pp ! pp
!



1 , pp. 48-54.

2 , p. 176.

3 , p. 98.

4 , p. 111.

5 , pp. 48-49.

6 Commissioner Rustico L. Diokno,  , wit Presiding Commissioners Edna Bonto-

Perez and Commissioner Domingo H. Zapanta.

7 , p. 53.

8 Nort Davao Mining Corporation vs. National Labor Relations Commission, 254 SCRA
721, 731, Marc 13, 1996; Great Pacific Life Assurance Corporation vs. National Labor
Relations Commission, 187 SCRA 694, 699, July 23, 1990; Loadstar S ipping Co., Inc.
vs. Gallo, 229 SCRA 654, 660, February 4, 1994; Inter-Orient Maritime Enterprises, Inc.
vs. National Labor Relations Commission, 235 SCRA 268, 277, August 11, 1994.

9 , pp. 49-50.

10 , p. 51.

11 Insular Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459, 464, November 15, 1989;
R one-Poulenc Agroc emicals P ilippines, Inc. vs. NLRC, 217 SCRA 249, 255, January
19, 1993; and Villuga vs. NLRC, 225 SCRA 537, 546, August 23, 1993.

12 Memorandum Circular No. 2-81 on Licensing Of Insurance Agents, Variable Contract

Agents, Insurance Brokers and Reinsurance Brokers provides:

xxx xxx xxx

2. LICENSING REQUIREMEN@S, LIMI@A@IONS

xxx xxx xxx

 2.5. No person s all be licensed to act as an insurance
agent or general agent of more t an one life insurance
company, and/ or as a general agent of more t an one
non-life insurance company, and/or as insurance agent
of more t an t ree ot er non-life insurance companies. .
. ."

13 , p. 36.

14 Investment Planning Corp. of t e P il. vs. Social Security System, 21 SCRA 924, 931,
November 18, 1967.

15 Ô 
., p. 465.

16 Petitioner's Position Paper, , p. 32.

17 Insular Life Assurance Co., Ltd. vs. NLRC,  
, p. 467; Manliguez vs. Court of
Appeals, 232 SCRA 427, 431, May 20, 1994; and Hawaiian-P ilippine Company vs.
Gulmatico, 238 SCRA 181, 187, November 16, 1994.

18 Art. 217. 
 p


  . ² (a) Except as

ot erwise provided under t is Code t e Labor Arbiters s all ave original and exclusive
jurisdiction to ear and decide, . . ., t e following cases involving all workers, w et er
agricultural or non-agricultural:

1. Unfair labor practice cases;

2. @ermination disputes;;

3. If accompanied wit a claim for reinstatement, t ose

cases t at workers may file involving wages, rates of
pay, ours of work and ot er terms and conditions of
employment;

4. Claims for actual, moral, exemplary and ot er forms of

damages arising from t e employer-employee relations;

5. Cases arising from any violation of Article 264 of t is

Code, including questions involving t e legality of strikes
and lockouts; and

6. Except claims for Employees Compensation, Social

Security, Medicare and maternity benefits, all ot er
claims, arising from employer-employee relations,
including t ose of persons in domestic or ouse old
service, involving an amount exceeding five t ousand
pesos (P5,000.00) regardless of w et er accompanied
wit a claim for reinstatement.

xxx xxx xxx

19 San Miguel Corporation vs. National Labor Relations Commission, 161 SCRA 719,
724-725, May 31, 1988.
 20 Sout est Asian Fis eries Development Center-Agriculture Department vs. National
Labor Relations Commission, 206 SCRA 283, 288, February 14, 1992; and Calimlim vs.
Ramirez, 118 SCRA 399, 406, November 19, 1982.

21 Petitioner's Position Paper, , pp. 29-33.

22 Petitioner's Appeal Memorandum, , pp. 40-46.

23 P ilippine Singapore Ports Corporation vs. National Labor Relations Commission, 218
SCRA 77, 83, January 29, 1993.

24 Leonor vs. Court of Appeals, et al., G.R. No. 112597, April 2, 1996, pp. 17-18.

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