Republic of the Philippines

Supreme Court
Manila
EN BANC
[G.R. No. L-8967. May 31, 1956.]
ANASTACIO VIAA, Petitioner, vs. ALEJO AL-LAGADAN and FILOMENA PIGA, Respondents.

D E C I S I O N
CONCEPCION, J.:
Petitioner Anastacio Viaa owned the fishing sailboat Magkapatid, which, in the night of September 3,
1948, sunk in the waters between the province of Bataan and the island of Corregidor, as a consequence
of a collision with the USS TINGLES, a vessel of the U.S. Navy. Inasmuch as Alejandro Al-Lagadan, a
member of the crew of the Magkapatid, disappeared with the craft, his parents, Respondent Alejo Al-
Lagadan and Filomena Piga, filed the corresponding claim for compensation under Act No. 3428. After
appropriate proceedings, a Referee of the Workmens Compensation Commission rendered a decision,
dated February 23, 1953:chanroblesvirtuallawlibrary
1. Ordering Mr. Anastacio Viaa to pay the above-named claimants through the Workmens
Compensation Commission, Manila, the sum of P1,560 in lump sum with interest at 6 per cent from
September 3, 1948 until fully paid; chan roblesvirtualawlibraryand.
To pay the sum of P16 to the Workmens Compensation Commission as costs.
Said decision was, on petition for review filed by Viaa, affirmed by the Workmens Compensation
Commissioner, on or about October 22, 1954, with additional fee of P5.00. Said Commissioner, having
subsequently denied a reconsideration of this action, Viaa has brought the matter to us, for review by
certiorari, upon the ground that this case does not fall within the purview of Act No. 3428, because the
gross income of his business for the year 1947 was allegedly less than P10,000, and because Alejandro
Al-Lagadan was, at the time of his death, his (Petitioners) industrial partner, not his employee.
The first ground is untenable, Petitioner not having invoked it before the rendition of the Referees
decision on February 23, 1953. The objection to the application of Act No. 3428, upon said ground, was
made for the first time when Petitioner sought a review of said decision by the Workmens
Compensation Commissioner. The non- applicability of said Act to employers whose gross income does
not reach P20,000 is, however, a matter of defense, which cannot be availed of unless pleaded in the
employers answer to the claim for compensation filed by the employee or his heirs. Petitioner herein
having failed to do so, said defense may not now be entertained (Rolan vs. Perez, 63 Phil., 80, 85-86).
As regards the second ground, Petitioner maintains, contrary to the finding of the Referee and said
Commissioner, that the deceased was his industrial partner, not employee. In this connection, it is
alleged in paragraph (6) of the petition:chanroblesvirtuallawlibrary
That the practice observed then and now in engaging the services of crewmen of sailboats plying
between Mindoro and Manila is on a partnership basis, to wit:chanroblesvirtuallawlibrary that the owner of the vessel, on one
hand receives one-half of the earnings of the sailboat after deducting the expenses for the maintenance
of the crew, the other half is divided pro rata among the members of the crew, the patron or captain
receiving four parts, the piloto or next in command three parts, the wheelsman or timonel 1 1/2 parts
and the rest of the members of the crew one part each, as per Annex B hereof.
It appears that, before rendering his aforementioned decision, the Referee requested Mr. Manuel O.
Morente, an attorney of the Workmens Compensation Commission, to look into and inquire and
determine the method of and the basis of engaging the services of crewmen for sailboats (batel) of
twenty (20) tons or more plying between Manila and Mariveles and moored along Manila North
Harbor, and that, thereafter, said Atty. Morente reported:chanroblesvirtuallawlibrary
The basis of engaging the services of crewmen of a batel is determined in accordance with the contract
executed between the owner and the patron. The contract commonly followed is on a share basis after
deducting all the expenses incurred on the voyage. One half goes to the owner of the batel and the
other half goes to the patron and the members of the crew and divided among themselves on a share
basis also in accordance with their agreement with the patron getting the lions share. The hiring of the
crew is done by the patron himself. Usually, when a patron enters into a contract with the owner of the
batel, he has a crew ready with him. (Italics supplied.)
In sustaining the Referees finding to the effect that the deceased was an employee of Viaa, the
Workmens Compensation Commissioner said:chanroblesvirtuallawlibrary
The trial referee found that there was an employer-employee relation between theRespondent and the
deceased, Alejandro Al-Lagadan, and the share which the deceased received at the end of each trip was
in the nature of wages which is defined under section 39 of the Compensation Act. This is so because
such share could be reckoned in terms of money. In other words, there existed the relation of employer
and employee between the Respondentand Alejandro Al-Lagadan at the time of the latters death.
We believe that the trial referee did not err in finding the deceased an employee of theRespondent. We
cite the following cases which illustrate the point at issue:chanroblesvirtuallawlibrary
The officers and crews of whaling and other fishing vessels who are to receive certain proportions of
produce of the voyage in lieu of wages; chan roblesvirtualawlibrary(Rice vs. Austin, 17 Mass. 206; chan roblesvirtualawlibrary2Y & C. 61); chan roblesvirtualawlibraryCaptains of
merchant ships who, instead of wages, receive shares in the profits of the adventure; chan roblesvirtualawlibrary(4 Maule & C.
240); chan roblesvirtualawlibraryor who take vessels under an agreement to pay certain charges and receive a share of the
earnings; chan roblesvirtualawlibrary(Tagard vs. Loring, 16 Mass. 336, 8 Am. Dec. 140; chan roblesvirtualawlibraryWinsor vs. Cutts, 7 Greenl. Me. 261)
have generally been held not to be partners with the Respondent, and the like. Running a steamboat on
shares does not make the owners partners in respect to the vessel (The Daniel Koine, 35 Fed. 785); chan roblesvirtualawlibraryso
of an agreement between two parties to farm on shares; chan roblesvirtualawlibrary(Hooloway vs. Brinkley, 42 Ga. 226); chan roblesvirtualawlibraryA
seaman who is to receive pay in proportion to the amount of fish caught is not a partner; chan roblesvirtualawlibrary(Holdren vs.
French, 68 Me. 241); chan roblesvirtualawlibrarysharing profits in lieu of wages is not a partnership. There is no true
contribution; chan roblesvirtualawlibrary(Crawford vs. Austin, 34 Md. 49; chan roblesvirtualawlibrary Whitehill vs. Shickle, 43 Mo. 538; chan roblesvirtualawlibrarySankey vs. Iron
Works, 44 Ga. 228.) (Italics supplied.)
In other words, in the opinion of the Referee, as well as of said Commissioner, the mere fact that
Alejandros share in the understanding could be reckoned in terms of money, sufficed to characterize
him as an employee of Viaa. We do not share this view. Neither can we accept, however, Petitioners
theory to the effect that the deceased was his partner, not an employee, simply because he (the
deceased) shared in the profits, not in the losses. In determining the existence of employer-employee
relationship, the following elements are generally considered, namely:chanroblesvirtuallawlibrary (1) the selection and
engagement of the employee; chan robl esvirtualawlibrary(2) the payment of wages; chan roblesvirtualawlibrary(3) the power of dismissal; chan roblesvirtualawlibraryand (4) the
power to control the employees conduct although the latter is the most important element (35 Am.
Jur. 445). Assuming that the share received by the deceased could partake of the nature of wages on
which we need not, and do not, express our view and that the second element, therefore, exists in
the case at bar, the record does not contain any specific data regarding the third and fourth elements.
With respect to the first element, the facts before us are insufficient to warrant a reasonable conclusion,
one way or the other. On the one hand, Atty. Morente said, in his aforementioned report, that the
contract commonly followed is on a share basis cralaw The hiring of a crew is done by the patron himself.
Usually, when a patron enters into a contract with the owner of the batel, he has a crew ready with
him. This statement suggests that the members of the crew are chosen by the patron, seemingly, upon
his sole responsibility and authority. It is noteworthy, however, that said report referred to a practice
commonly and usually observed in a given place. The record is silent on whether such practice had
been followed in the case under consideration. More important still, the language used in said report
may be construed as intimating, not only that the patron selects and engages the crew, but, also, that
the members thereof are subject to his control and may be dismissed by him. To put it differently, the
literal import of said report is open to the conclusion that the crew has a contractual relation, not with
the owner of the vessel, but with the patron, and that the latter, not the former, is either their employer
or their partner.
Upon the other hand, the very allegations of the petition show otherwise, for Petitionerexplicitly averred
therein that the deceased Alejandro Al-Lagadan was his industrial partner. This implies that a contract
of partnership existed between them and that, accordingly, if the crew was selected and engaged by the
patron, the latter did so merely as agent or representative of Petitioner herein. Again,
if Petitioner were a partner of the crew members, then neither the former nor the patron could control
or dismiss the latter.
In the interest of justice and equity, and considering that a decision on the merits of the issue before us
may establish an important precedent, it would be better to remand the case to the Workmens
Compensation Commission for further evidence and findings on the following questions:chanroblesvirtuallawlibrary (1) who
selected the crew of the Magkapatid and engaged their services; chan roblesvirtualawlibrary(2) if selected and engaged by the
patron, did the latter act in his own name and for his own account, or on behalf and for the account of
Viaa; chan roblesvirtualawlibrary(3) could Viaa have refused to accept any of the crew members chosen and engaged by the
patron; chan roblesvirtualawlibrary(4) did Petitioner have authority to determine the time when, the place where and/or the
manner or conditions in or under which the crew would work; chan roblesvirtualawlibraryand (5) who could dismiss its members.
Wherefore, let the case be remanded to the Workmens Compensation Commission, for further
proceedings in conformity with this decision, without special pronouncement as to costs. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Reyes, J.B.L., and Endencia, JJ.,
concur.




























Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-19124 November 18, 1967

INVESTMENT PLANNING CORPORATION OF THE PHILIPPINES, petitioner-appellant,
vs.
SOCIAL SECURITY SYSTEM, respondent-appellee.

MAKALINTAL, J.:

Petitioner is a domestic corporation engaged in business management and the sale of securities. It has
two classes of agents who sell its investment plans: (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.

On August 27, 1960 petitioner, through counsel, applied to respondent Social Security Commission for
exemption of its so-called registered representatives from the compulsory coverage of the Social
Security Act. The application was denied in a letter signed by the Secretary to the Commission on
January 16, 1961. A motion to reconsider was filed and also denied, after hearing, by the Commission
itself in its resolution dated September 8, 1961. The matter was thereafter elevated to this Court for
review.

The issue submitted for decision here is whether petitioner's registered representatives are employees
within the meaning of the Social Security Act (R.A. No. 1161 as amended). Section 8 (d) thereof defines
the term "employee" for purposes of the Act as "any person who performs services for an
'employer' in which either or both mental and physical efforts are used and who receives compensation
for such services, where there is, employer-employee relationship." (As amended by Sec.4, R.A. No.
2658). These representatives are in reality commission agents. The uncontradicted testimony of
petitioner's lone witness, who was its assistant sales director, is that these agents are recruited and
trained by him particularly for the job of selling "'Filipinos Mutual Fund" shares, made to undergo a test
after such training and, if successful, are given license to practice by the Securities and Exchange
Commission. They then execute an agreement with petitioner with respect to the sale of FMF shares to
the general public. Among the features of said agreement which respondent Commission considered
pertinent to the issue are: (a) an agent is paid compensation for services in the form of commission; (b)
in the event of death or resignation he or his legal representative shall be paid the balance of the
commission corresponding to him; (c) he is subject to a set of rules and regulations governing the
performance of his duties under the agreement; (d) he is required to put up a performance bond; and
(e) his services may be terminated for certain causes. At the same time the Commission found from the
evidence and so stated in its resolution that the agents "are not required to report (for work) at any
time; they do not have to devote their time exclusively to or work solely for petitioner; 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 record 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." The record also reveals that the commission earned by an agent on his sales is directly deducted
by him from the amount he receives from the investor and turns over to the company the amount
invested after such deduction is made. The majority of the agents are regularly employed elsewhere
either in the government or in private enterprises.

Of the three requirements under Section 8 (d) of the Social Security Act it is admitted that the first is
present in respect of the agents whose status is in question. They exert both mental and physical efforts
in the performance of their services. The compensation they receive, however, is not necessarily for
those efforts but rather for the results thereof, that is, for actual sales that they make. This point is
relevant in the determination of whether or not the third requisite is also present, namely, the existence
of employer-employee relationship. Petitioner points out that in effect such compensation is paid not by
it but by the investor, as shown by the basis on which the amount of the commission is fixed and the
manner in which it is collected.

Petitioner submits that its commission agents, engaged under the terms and conditions already
enumerated, are not employees but independent contractors, as defined in Article 1713 of the Civil
Code, which provides:

Art. 1713. By the contract for a piece of work the contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation. The contractor may either
employ only his labor or skill, or also furnish the material.

We are convinced from the facts that the work of petitioner's agents or registered representatives more
nearly approximates that of an independent contractor than that of an employee. The latter is paid for
the labor he performs, that is, for the acts of which such labor consists; the former is paid for the result
thereof. This Court has recognized the distinction in Chartered Bank, et al. vs. Constantino, 56 Phil. 717,
where it said:

On this point, the distinguished commentator Manresa in referring to Article 1588 of the (Spanish) Civil
Code has the following to say. . . .

The code does not begin by giving a general idea of the subject matter, but by fixing its two
distinguishing characteristics.

But such an idea was not absolutely necessary because the difference between the lease of work by
contract or for a fixed price and the lease of services of hired servants or laborers is sufficiently clear. In
the latter, the direct object of the contract is the lessor's labor; the acts in which such labor consists,
performed for the benefit of the lessee, are taken into account immediately. In work done by contract
or for a fixed price, the lessor's labor is indeed an important, a most important factor; but it is not the
direct object of the contract, nor is it immediately taken into account. The object which the parties
consider, which they bear in mind in order to determine the cause of the contract, and upon which they
really give their consent, is not the labor but its result, the complete and finished work, the aggregate of
the lessor's acts embodied in something material, which is the useful object of the contract. . . .
(Manresa Commentarios al Codigo Civil, Vol. X, ed., pp. 774-775.)

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans
would not necessarily be entitled to compensation therefor. His right to compensation depends upon
and is measured by the tangible results he produces.

The specific question of when there is "employer-employee relationship" for purposes of the Social
Security Act has not yet been settled in this jurisdiction by any decision of this Court. But in other
connections wherein the term is used the test that has been generally applied is the so-called control
test, that is, whether the "employer" controls or has reserved the right to control the "employee" not
only as to the result of the work to be done but also as to the means and methods by which the same is
to be accomplished.

Thus in Philippine Manufacturing Company vs. Geronimo, et al., L-6968, November 29, 1954, involving
the Workmen's Compensation Act, we read:

. . . Garcia, a painting contractor, had a contract undertaken to paint a water tank belonging to the
Company "in accordance with specifications and price stipulated," and with "the actual supervision of
the work (being) taken care of by" himself. Clearly, this made Garcia an independent contractor, for
while the company prescribed what should be done, the doing of it and the supervision thereof was left
entirely to him, all of which meant that he was free to do the job according to his own method without
being subject to the control of the company except as to the result.

Cruz, et al. vs. The Manila Hotel Company, L-9110, April 30, 1957, presented the issue of who were to be
considered employees of the defendant firm for purposes of separation gratuity. LVN Pictures, Inc. vs.
Phil. Musicians Guild, et al., L-12582, January 28, 1961, involved the status of certain musicians for
purposes of determining the appropriate bargaining representative of the employees. In both instances
the "control" test was followed. (See also Mansal vs. P.P. Gocheco Lumber Co., L-8017, April 30, 1955;
and Viana vs. Allagadan, et al., L-8967, May 31, 1956.)

In the United States, the Federal Social Security Act of 1935 set forth no definition of the term
'employee' other than that it 'includes an officer of a corporation.' Under that Act the U.S. Supreme
Court adopted for a time and in several cases the so-called 'economic-reality' test instead of the 'control'
test. (U.S. vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs. Birmingham, Ibid, 1947, both decided in
June 1947). In the Bartels case the Court said:

In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67 SCt 1463, supra, we held that the
relationship of employer-employee, which determines the liability for employment taxes under the
Social Security Act was not to be determined solely by the idea of control which an alleged employer
may or could exercise over the details of the service rendered to his business by the worker or workers.
Obviously control is characteristically associated with the employer-employee relationship, but in the
application of social legislation employees are those who as a matter of economic reality are dependent
upon the business to which they render service. In Silk, we pointed out that permanency of the relation,
the skill required, the investment in the facilities for work and opportunities for profit or less from the
activities were also factors that should enter into judicial determination as to the coverage of the Social
Security Act. It is the total situation that controls. The standards are as important in the entertainment
field as we have just said, in Silk, that they were in that of distribution and transportation. (91 Law, Ed.
1947, 1953;)

However, the 'economic-reality' test was subsequently abandoned as not reflective of the intention of
Congress in the enactment of the original Security Act of 1935. The change was accomplished by means
of an amendatory Act passed in 1948, which was construed and applied in later cases. In Benson vs.
Social Security Board, 172 F. 2d. 682, the U.S. Supreme Court said:

After the decision by the Supreme Court in the Silk case, the Treasury Department revamped its
Regulation, 12 Fed. Reg. 7966, using the test set out in the Silk case for determining the existence of an
employer-employee relationship. Apparently this was not the concept of such a relationship that
Congress had in mind in the passage of such remedial acts as the one involved here because thereafter
on June 14, 1948, Congress enacted Public Law 642, 42 U.S C.A. Sec. 1301 (a) (6). Section 1101(a) (6) of
the Social Security Act was amended to read as follows:

The term "employee" includes an officer of a corporation, but such term does not include (1) any
individual who, under the usual common-law rules applicable in determining the employer-employee
relationship, has the status of an independent contractor or (2) any individual (except an officer of a
corporation) who is not an employee under such common law rules.

While it is not necessary to explore the full effect of this enactment in the determination of the
existence of employer-employee relationships arising in the future, we think it can fairly be said that the
intent of Congress was to say that in determining in a given case whether under the Social Security Act
such a relationship exists, the common-law elements of such a relationship, as recognized and applied
by the courts generally at the time of the passage of the Act, were the standard to be used . . . .

The common-law principles expressly adopted by the United States Congress are summarized in Corpus
Juris Secundum as follows:

Under the common-law principles as to tests of the independent contractor relationship, discussed in
Master and Servant, and applicable in determining coverage under the Social Security Act and related
taxing provisions, the significant factor in determining the relationship of the parties is the presence or
absence of a supervisory power to control the method and detail of performance of the service, and the
degree to which the principal may intervene to exercise such control, the presence of such power of
control being indicative of an employment relationship and the absence of such power being indicative
of the relationship of independent contractor. In other words, the test of existence of the relationship of
independent contractor, which relationship is not taxable under the Social Security Act and related
provisions, is whether the one who is claimed to be an independent contractor has contracted to do the
work according to his own methods and without being subject to the control of the employer except as
to the result of the work. (81 C.J.S. Sec. 5, pp. 24-25); See also Millard's Inc. vs. United States, 46 F. Supp.
385; Schmidt vs. Ewing, 108 F. Supp. 505; Ramblin vs. Ewing, 106 F. Supp. 268.

In the case last cited (Rambin v. Ewing) the question presented was whether the plaintiff there, who was
a sales representative of a cosmetics firm working on a commission basis, was to be considered an
employee. Said the Court:

Plaintiff's only remuneration was her commission of 40%, plus $5 extra for every $250 of sales. Plaintiff
was not guaranteed any minimum compensation and she was not allowed a drawing account or
advance of any kind against unearned commissions. Plaintiff paid all of her traveling expenses and she
even had to pay the postage for sending orders to Avon.

The only office which Avon maintained in Shreveport was an office for the city manager. Plaintiff worked
from her own home and she was never furnished any leads. The relationship between plaintiff and Avon
was terminable at will . . .

xxx xxx xxx

. . . A long line of decisions holds that commission sales representatives are not employees within the
coverage of the Social Security Act. The underlying circumstances of the relationship between the sales
representatives and company often vary widely from case to case, but commission sales representatives
have uniformly been held to be outside the Social Security Act.

Considering the similarity between the definition of "employee" in the Federal Social Security Act (U.S.)
as amended and its definitions in our own Social Security Act, and considering further that the local
statute is admittedly patterned after that of the United States, the decisions of American courts on the
matter before us may well be accorded persuasive force. The logic of the situation indeed dictates that
where the element of control is absent; where a person who works for another does so more or less at
his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated
according to the result of his efforts and not the amount thereof, we should not find that the
relationship of employer and employee exists.

We have examined the contract form between petitioner and its registered representatives and found
nothing therein which would indicate that the latter are under the control of the former in respect of
the means and methods they employ in the performance of their work. The fact that for certain
specified causes the relationship may be terminated (e.g., failure to meet the annual quota of sales,
inability to make any sales production during a six-month period, conduct detrimental to petitioner,
etc.) does not mean that such control exists, for the causes of termination thus specified have no
relation to the means and methods of work that are ordinarily required of or imposed upon employees.

In view of the foregoing considerations, the resolution of respondent Social Security Commission subject
of this appeal is reversed and set aside, without pronouncement as to costs.

Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., took no part part.


















FIRST DIVISION
[G.R. No. 100388. December 14, 2000]
SOCIAL SECURITY SYSTEM, petitioner, vs. THE COURT OF APPEALS and CONCHITA
AYALDE, respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
In a petition before the Social Security Commission, Margarita Tana, widow of the late
Ignacio Tana, Sr., alleged that her husband was, before his demise, an employee of Conchita
Ayalde as a farmhand in the two (2) sugarcane plantations she owned (known as Hda. No. Audit
B-70 located in Pontevedra, La Carlota City) and leased from the University of the Philippines
(known as Hda. Audit B-15-M situated in La Granja, La Carlota City). She further alleged that
Tana worked continuously six (6) days a week, four (4) weeks a month, and for twelve (12)
months every year between January 1961 to April 1979. For his labor, Tana allegedly received a
regular salary according to the minimum wage prevailing at the time. She further alleged that
throughout the given period, social security contributions, as well as medicare and employees
compensation premiums were deducted from Tanas wages. It was only after his death that
Margarita discovered that Tana was never reported for coverage, nor were his
contributions/premiums remitted to the Social Security System (SSS). Consequently, she was
deprived of the burial grant and pension benefits accruing to the heirs of Tana had he been
reported for coverage.
Hence, she prayed that the Commission issue an order directing:
1. respondents Conchita Ayalde and Antero Maghari as her administrator to pay the
premium contributions of the deceased Ignacio Tana, Sr. and report his name for
SSS coverage; and
2. the SSS to grant petitioner Margarita Tana the funeral and pension benefits due
her.
[1]

The SSS, in a petition-in-intervention, revealed that neither Hda. B-70 nor respondents
Ayalde and Maghari were registered members-employers of the SSS, and consequently, Ignacio
Tana, Sr. was never registered as a member-employee. Likewise, SSS records reflected that
there was no way of verifying whether the alleged premium contributions were remitted since
the respondents were not registered members-employers. Being the agency charged with the
implementation and enforcement of the provisions of the Social Security Law, as amended, the
SSS asked the Commissions leave to intervene in the case.
[2]

In his answer, respondent Antero Maghari raised the defense that he was a mere employee
who was hired as an overseer of Hda. B-70 sometime during crop years 1964-65 to 1971-72,
and as such, his job was limited to those defined for him by the employer which never involved
matters relating to the SSS. Hence, he prayed that the case against him be dismissed for lack of
cause of action.
[3]

For her part, respondent Ayalde belied the allegation that Ignacio Tana, Sr. was her
employee, admitting only that he was hired intermittently as an independent contractor to
plow, harrow, or burrow Hda. No. Audit B-15-M. Tana used his own carabao and other
implements, and he followed his own schedule of work hours. Ayalde further alleged that she
never exercised control over the manner by which Tana performed his work as an independent
contractor. Moreover, Ayalde averred that way back in 1971, the University of the Philippines
had already terminated the lease over Hda. B-15-M and she had since surrendered possession
thereof to the University of the Philippines. Consequently, Ignacio Tana, Sr. was no longer hired
to work thereon starting in crop year 1971-72, while he was never contracted to work in Hda.
No. Audit B-70. She also prayed for the dismissal of the case considering that Ignacio Tana, Sr.
was never her employee.
[4]

After hearing both parties, the Social Security Commission issued a Resolution on January
28, 1988, the dispositive portion of which reads:
After a careful evaluation of the testimonies of the petitioner and her witnesses, as well as the
testimony of the respondent together with her documentary evidences, this Commission finds
that the late Ignacio Tana was employed by respondent Conchita Ayalde from January 1961 to
March 1979. The testimony of the petitioner which was corroborated by Agaton Libawas and
Aurelio Tana, co-workers of the deceased Ignacio Tana, sufficienty established the latters
employment with the respondent.
As regards respondent Antero Maghari, he is absolved from liability because he is a mere
employee of Conchita Ayalde.
PREMISES CONSIDERED, this Commission finds and so holds that the late Ignacio Tana had been
employed continuously from January 1961 to March 1979 in Hda. B-70 and Hda. B-15-M which
are owned and leased, respectively, by respondent Conchita (Concepcion) Ayalde with a salary
based on the Minimum Wage prevailing during his employment.
Not having reported the petitioners husband for coverage with the SSS, respondent Conchita
(Concepcion) Ayalde is, therefore, liable for the payment of damages equivalent to the death
benefits in the amount of P7,067.40 plus the amount of P750.00 representing funeral benefit or
a total of P7,817.40.
Further, the SSS is ordered to pay to the petitioner her accrued pension covering the period
after the 5-year guaranteed period corresponding to the employers liability.
SO ORDERED.
[5]

Respondent Ayalde filed a motion for reconsideration
[6]
which the Commission denied for
lack of merit in an Order dated November 3, 1988.
[7]

Not satisfied with the Commissions ruling, Ayalde appealed to the Court of Appeals,
docketed as CA-G.R. SP No. 16427, raising the following assignment of errors:
I

The Social Security Commission erred in not finding that there is sufficient evidence to show
that:
(a) The deceased Ignacio Tana, Sr. never worked in the farmland of respondent-appellant
situated in Pontevedra, La Carlota City, otherwise known as Hacienda No. Audit B-70,
(Pontevedra B-70 Farm for short), in any capacity, whether as a daily or monthly laborer or as
independent contractor;
(b) During the time that respondent-appellant was leasing a portion of the land of the
University of the Philippines, otherwise known as Hacienda Audit No. B-15-M, (La Granja B-15
Farm for short), the deceased Ignacio Tana, Sr. was hired thereat on a pakyaw basis, or as an
independent contractor, performing the services of an arador (Plower), for which he was
proficient, using his own carabao and farming implements on his own time and discretion
within the period demanded by the nature of the job contracted.
II

The Social Security Commission erred in holding that there is no evidence whatsoever to show
that respondent-appellant was no longer leasing La Granja B-15 Farm.
III

The Social Security Commission erred in not holding that the deceased Ignacio Tana, having
been hired as an independent contractor on pakyaw basis, did not fall within the coverage of
the Social Security Law.
[8]

The Court of Appeals rendered judgment in favor of respondent-appellant Conchita Ayalde
and dismissed the claim of petitioner Margarita Tan.
The SSS, as intervenor-appellee, filed a Motion for Reconsideration, which was denied on
the ground that the arguments advanced are mere reiterations of issues and arguments
already considered and passed upon in the decision in question which are utterly insufficient to
justify a modification or reversal of said decision.
[9]

Hence, this petition for review on certiorari on the following assigned errors:
1) The Court of Appeals was in error in ruling that an employee working under the
pakyaw system is considered under the law to be an independent contractor.
2) The Court of Appeals was in error in not giving due consideration to the
fundamental tenet that doubts in the interpretation and implementation of labor
and social welfare laws should be resolved in favor of labor.
3) The Court of Appeals was in error in disregarding the settled rule that the factual
findings of administrative bodies on matters within their competence shall not be
disturbed by the courts.
4) The Court of Appeals was in error in ruling that even granting arguendo that Ignacio
Tana was employed by Conchita Ayalde, such employment did not entitle him to
compulsory coverage since he was not paid any regular daily wage or basic pay and
he did not work for an uninterrupted period of at least six months in a year in
accordance with Section 8(j) (1) of the SS Law.
The pivotal issue to be resolved in this petition is whether or not an agricultural laborer
who was hired on pakyaw basis can be considered an employee entitled to compulsory
coverage and corresponding benefits under the Social Security Law.
Petitioner, Social Security System (or SSS), argues that the deceased Ignacio Tana, Sr., who
was hired by Conchita Ayalde on pakyaw basis to perform specific tasks in her sugarcane
plantations, should be considered an employee; and as such, his heirs are entitled to pension
and burial benefits.
The Court of Appeals, however, ruled otherwise, reversing the ruling of the Social Security
Commission and declaring that the late Ignacio Tana, Sr. was an independent contractor, and in
the absence of an employer-employee relationship between Tana and Ayalde, the latter cannot
be compelled to pay to his heirs the burial and pension benefits under the SS Law.
At the outset, we reiterate the well-settled doctrine that the existence of an employer-
employee relationship is ultimately a question of fact.
[10]
And while it is the general rule that
factual issues are not within the province of the Supreme Court, said rule is not without
exception. In cases, such as this one, where there are conflicting and contradictory findings of
fact, this Court has not hesitated to scrutinize the records to determine the facts for
itself.
[11]
Our disquisition of the facts shall be our guide as to whose findings are supported by
substantial evidence.
The mandatory coverage under the SSS Law (Republic Act No. 1161, as amended by PD
1202 and PD 1636) is premised on the existence of an employer-employee relationship, and
Section 8(d) defines an employee as any person who performs services for an employer in
which either or both mental and physical efforts are used and who receives compensation for
such services where there is an employer-employee relationship. The essential 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 power of control with regard to
the means and methods by which the work is to be accomplished, with the power of control
being the most determinative factor.
[12]

There is no question that Tana was selected and his services engaged by either Ayalde
herself, or by Antero Maghari, her overseer. Corollarily, they also held the prerogative of
dismissing or terminating Tanas employment. The dispute is in the question of payment of
wages. Claimant Margarita Tana and her corroborating witnesses testified that her husband
was paid daily wages per quincena as well as on pakyaw basis. Ayalde, on the other hand,
insists that Tana was paid solely on pakyaw basis. To support her claim, she presented
payrolls covering the period January of 1974 to January of 1976;
[13]
and November of 1978 to
May of 1979.
[14]

A careful perusal of the records readily show that the exhibits offered are not complete,
and are but a mere sampling of payrolls. While the names of the supposed laborers appear
therein, their signatures are nowhere to be found. And while they cover the years 1975, 1976
and portions of 1978 and 1979, they do not cover the 18-year period during which Tana was
supposed to have worked in Ayaldes plantations. Also an admitted fact is that these exhibits
only cover Hda. B70, Ayalde having averred that all her records and payrolls for the other
plantation (Hda. B-15-M) were either destroyed or lost.
[15]

To our mind, these documents are not only sadly lacking, they are also unworthy of
credence. The fact that Tanas name does not appear in the payrolls for the years 1975, 1976
and part of 1978 and 1979, is no proof that he did not work in Hda. B70 in the years 1961 to
1974, and the rest of 1978 and 1979. The veracity of the alleged documents as payrolls are
doubtful considering that the laborers named therein never affixed their signatures to show
that they actually received the amounts indicated corresponding to their names. Moreover, no
record was shown pertaining to Hda. B-15-M, where Tana was supposed to have worked. Even
Ayalde admitted that she hired Tana as arador and sometimes as laborer during milling in
Hda. B-15-M.
[16]
In light of her incomplete documentary evidence, Ayaldes denial that Tana was
her employee in Hda. B-70 or Hda. B-15-M must fail.
In contrast to Ayaldes evidence, or lack thereof, is Margarita Tanas positive testimony,
corroborated by two (2) other witnesses. On the matter of wages, they testified as follows:
Margarita Tana:
Q. During the employment of your late husband, was he paid any wages?
A. Yes, he was paid.
Q. What was the manner of payment of his salary, was it on pakyaw or daily basis?
A. Daily basis.
Q. How many times did he receive his salary in a months time?
A. 2 times.
Q. You mean, payday in Hda. B-70 is every 15 days?
A. Yes, sir.
x x x x x x x x x
ATTY. GALVAN:
To prove that it is material to the main question because if ever the hacienda maintains
complete payrolls of their employees, then the burden of proof lies in the petitioner..
HEARING OFFICER:
Let the witness answer, if she knows.
WITNESS:
There was no payroll, only pad paper.
ATTY. GALVAN: (continuing)
Q. Were the names of workers of the hacienda all listed in that pad paper every payday?
A. Yes, we just sign on pad paper because we have no payroll to be signed.
x x x x x x x x x
Q. What do you understand by payroll?
A. Payroll is the list where the whole laborers are listed and receive their salaries.
Q. And how did that differ from the pad paper which you said you signed?
A. There is a difference.
Q. What is the difference?
A. In the payroll, at the end there is a column for signature but in the pad paper, we only
sign directly.
Q. Did it contain the amount that you receive?
A. Yes, sir.
Q. And the date corresponding to the payroll pad?
A. I am not sure but it only enumerates our names and then we were given our salaries.
Q. Now, did you have a copy of that?
ATTY. GALVAN:
Objection, Your Honor, it is not the petitioner who had a copy, it is usually the owner
because the preparation of the payrolls is done by the employer who..
ATTY. UNGCO:
That is why Im asking ..
HEARING OFFICER:
Let the witness answer. Objection overruled.
WITNESS:
I dont have.
x x x x x x x x x
Q. When you are receiving daily wage of P4.00 how much was your quincenal together
with your husband?
A. The highest salary I received for my own was P30.00 in one quincena.
Q. What about the salary of your husband, how much?
A. The same.
Q. Was this P30.00 per quincena later on increased?
A. There was an increase because formerly it was P4.00 now it is P8.00.
Q. In 1979 how much was your husbands salary per quincena?
A. In one quincena my husband receives P60.00 while I only receive P30.00.
[17]

AGATON LIBAWAS:
Q. During your employment, do you sign payrolls everytime you draw your salary?
A. We sign on intermediate pad.
Q. You mean, the practice of the hacienda is to have the names of the laborers receiving
that salaries listed on that intermediate pad?
A. Yes, sir.
[18]

AURELIO TANA:
Q. By the way, how many times did you receive your salaries in a month?
A. We receive our wages twice a month that is, every 15 days.
Q. Did you sign payrolls everytime you received your salaries?
A. In the pad paper as substitute payroll.
Q. Do you know if all the workers of the hacienda were listed in that payrolls?
A. Yes, sir.
Q. Who was in charge in giving your salaries?
A. Antero Maghari.
[19]

These witnesses did not waver in their assertion that while Tana was hired by Ayalde as an
arador on pakyaw basis, he was also paid a daily wage which Ayaldes overseer disbursed
every fifteen (15) days. It is also undisputed that they were made to acknowledge receipt of
their wages by signing on sheets of ruled paper, which are different from those presented by
Ayalde as documentary evidence. In fine, we find that the testimonies of Margarita Tana,
Agaton Libawas and Aurelio Tana prevail over the incomplete and inconsistent documentary
evidence of Ayalde.
In the parallel case of Opulencia Ice Plant and Storage v. NLRC, the petitioners argued that
since Manuel P. Esitas name does not appear in the payrolls of the company it necessarily
means that he was not an employee. This Court held:
Petitioners further argue that complainant miserably failed to present any documentary
evidence to prove his employment. There was no timesheet, pay slip and/or payroll/cash
voucher to speak of. Absence of these material documents are necessarily fatal to
complainants cause.
We do not agree. No particular form of evidence is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. For, if only documentary evidence would be required to show
that relationship, no scheming employer would ever be brought before the bar of justice, as no
employer would wish to come out with any trace of the illegality he has authored considering
that it should take much weightier proof to invalidate a written instrument. Thus, as in this
case where the employer-employee relationship between petitioners and Esita was sufficiently
proved by testimonial evidence, the absence of time sheet, time record or payroll has become
inconsequential.
[20]
(Underscoring ours)
Clearly, then, the testimonial evidence of the claimant and her witnesses constitute
positive and credible evidence of the existence of an employer-employee relationship between
Tana and Ayalde. As the employer, the latter is duty-bound to keep faithful and complete
records of her business affairs, not the least of which would be the salaries of the workers. And
yet, the documents presented have been selective, few and incomplete in substance and
content. Consequently, Ayalde has failed to convince us that, indeed, Tana was not her
employee.
The argument is raised that Tana is an independenent contractor because he was hired and
paid wages on pakyaw basis. We find this assertion to be specious for several reasons.
First, while Tana was sometimes hired as an arador or plower for intermittent periods, he
was hired to do other tasks in Ayaldes plantations. Ayalde herself admitted as much, although
she minimized the extent of Tanas labors. On the other hand, the claimant and her witnesses
were direct and firm in their testimonies, to wit:
MARGARITA TANA:
Q. Was your late husbands work continuous or not?
A. His work was continuous except on Sundays.
Q. Mrs. Witness, in January 1961, how many days in a week did your late husband work?
A. 4 weeks in January 1961.
Q. And how many months for that year did he work?
A. 12 months.
Q. Is this working pattern of your husband, considering that you testified that he worked
continuously, the same all throughout his employment from 1961 to 1978?
A. Yes, he worked continuously from 1961 to 1978 for 6 days a week, 4 weeks a month and
12 months each year.
Q. Mrs. Witness, how many months did your husband work in 1979 considering that he
died in 1979?
A. 3 months.
Q. What was the nature of the work of your late husband from 1961 until his death in
1979?
A. Cutting canes, hauling canes with the use of canecarts, plowing, hauling fertilizers,
weeding and stubble cleaning.
x x x x x x x x x
Q. Now, the other co-workers of yours, you said they were Agaton Libawas, Narciso
Dueas, Juan Dueas, and Aurelio Tana, what were their jobs?
A. Hauling canes by the use of bull carts and cutting canes. Their works are the same with
that of my husbands.
Q. But you mentioned among the duties of your husband as arador meaning plowing
the fields?
A. Yes, he was also plowing because that is one of his duties.
[21]

AGATON LIBAWAS:
Q. How about petitioner Margarita Tana and the late Ignacio Tana, were they regular
workers, or extra workers?
A. They were regular workers.
Q. In your case, Mr. Witness, considering that according to you, you are only a relief
worker, please inform the Commission how many months each year from 1961 to 1984
did you work in Hda. B-70 and Hda. B-15M with Conchita Ayalde?
A. During milling season, I worked 2 months, during cultivation if they are short of plowers
then they would call me to work for at least 3 months as a plower.
Q. So, all in all, each year, from 1961 to 1984 your average working months in Hda. B-70
and B-15M are 5 months each year?
A. Yes, sir.
Q. Mr. Witness, to prove that you have worked there, will you please inform at least 5
laborers of Hda. B-70 and B-15M of Conchita Ayalde?
A. Juan Dueas, Narciso Dueas, Aurelio Tana, Ignacio and Margarita Tana.
x x x x x x x x x
Q. Will you please inform the Commission if the deceased Ignacio Tana which is according
to you, was a regular worker of the 2 haciendas, if how many months did he work during
lifetime from 1961 until he died in 1979?
A. His work was continuous.
Q. And by continuous you mean he worked straight 12 months each year except in 1979?
A. He worked only for 10 months because the 2 months are already preparation for
cultivation.
x x x x x x x x x
Q. And according to you, in a years time, you worked only for at least 5 months in Hda. B-
70 and B-15M, is that correct?
A. Yes.
Q. And during this time that you are working in your riceland you will agree with me that
you do not know whether the laborers of this Hda. B-70 and Had B-15M are really
working because you are devoting your time in your riceland, is that correct?
A. I knew because the place of their work is just near my house, it is along the way.
Q. How about when the canes are already tall, can you actually see the workers in Hda. B-
70 and B-15M when you are busy at your riceland?
A. Yes, because they have to pass in my house.
Q. Is there no other passage in that hacienda except that road in front of your house?
A. Yes.
Q. Are you sure about that?
A. Yes, I am sure.
[22]

AURELIO TANA:
Q. Do you know what is the work of the petitioner during the time when you were
together working in the field?
A. We were working together, like cutting and loading canes, hoeing, weeding, applying
fertilizers, digging canals and plowing.
Q. During your employment in the said hacienda where were you residing?
A. There inside the hacienda.
Q. What about the petitioner?
A. The same.
Q. How far is your house from the house of the petitioner?
A. About 20 arms-length.
Q. How far is Hda. B-70 from Hda. B-15.
A. It is very near it is divided by the road.
Q. What road are you referring to?
A. Highway road from Barangay Buenavista to La Granja.
Q. During your employment will you please inform the Commission the frequency of work
of the late Ignacio Tana?
A. 4 weeks a month, 6 days a week, 12 months a year.
Q. Why is it that you are in a position to inform the Commission about the period of
employment of Ignacio Tana?
A. Because we were together working.
[23]

It is indubitable, therefore, that Tana worked continuously for Ayalde, not only as arador
on pakyaw basis, but as a regular farmhand, doing backbreaking jobs for Ayaldes
business. There is no shred of evidence to show that Tana was only a seasonal worker, much
less a migrant worker. All witnesses, including Ayalde herself, testified that Tana and his family
resided in the plantation. If he was a mere pakyaw worker or independent contractor, then
there would be no reason for Ayalde to allow them to live inside her property for free. The only
logical explanation is that he was working for most part of the year exclusively for Ayalde, in
return for which the latter gratuitously allowed Tana and his family to reside in her property.
The Court of Appeals, in finding for Ayalde, relied on the claimants and her witnesses
admission that her husband was hired as an arador on pakyaw basis, but it failed to
appreciate the rest of their testimonies. Just because he was, for short periods of time, hired
on pakyaw basis does not necessarily mean that he was not employed to do other tasks for
the remainder of the year. Even Ayalde admitted that Tana did other jobs when he was not
hired to plow. Consequently, the conclusion culled from their testimonies to the effect that
Tana was mainly and solely an arador was at best a selective appreciation of portions of the
entire evidence. It was the Social Security Commission that took into consideration all the
documentary and testimonial evidence on record.
Secondly, Ayalde made much ado of her claim that Tana could not be her employee
because she exercised no control over his work hours and method of performing his task as
arador. It is also an admitted fact that Tana, Jr. used his own carabao and tools. Thus, she
contends that, applying the control test, Tana was not an employee but an independent
contractor.
A closer scrutiny of the records, however, reveals that while Ayalde herself may not have
directly imposed on Tana the manner and methods to follow in performing his tasks, she did
exercise control through her overseer.
Be that as it may, the power of control refers merely to the existence of the power. It is
not essential for the employer to actually supervise the performance of duties of the employee;
it is sufficient that the former has a right to wield the power.
[24]
Certainly, Ayalde, on her own or
through her overseer, wielded the power to hire or dismiss, to check on the work, be it in
progress or quality, of the laborers. As the owner/lessee of the plantations, she possessed the
power to control everyone working therein and everything taking place therein.
Jurisprudence provides other equally important considerations which support the
conclusion that Tana was not an independent contractor. First, Tana cannot be said to be
engaged in a distinct occupation or business. His carabao and plow may be useful in his
livelihood, but he is not independently engaged in the business of farming or plowing. Second,
he had been working exclusively for Ayalde for eighteen (18) years prior to his demise. Third,
there is no dispute that Ayalde was in the business of growing sugarcane in the two plantations
for commercial purposes. There is also no question that plowing or preparing the soil for
planting is a major part of the regular business of Ayalde.
Under the circumstances, the relationship between Ayalde and Tana has more of the
attributes of employer-employee than that of an independent contractor hired to perform a
specific project. In the case of Dy Keh Beng v. International Labor,
[25]
we cited our long-standing
ruling in Sunripe Coconut Products Co. v. Court of Industrial Relations, to wit:
When a worker possesses some attributes of an employee and others of an independent
contractor, which make him fall within an intermediate area, he may be classified under the
category of an employee when the economic facts of the relations make it more nearly one of
employment than one of independent business enterprise with respect to the ends sought to
be accomplished. (Underscoring Ours)
[26]

We find the above-quoted ruling to be applicable in the case of Tana. There is
preponderance of evidence to support the conclusion that he was an employee rather than an
independent contractor.
The Court of Appeals also erred when it ruled, on the alternative, that if ever Tana was an
employee, he was still ineligible for compulsory coverage because he was not paid any regular
daily wage and he did not work for an uninterrupted period of at least six months in a year in
accordance with Section 8(j) (I) of the Social Security Law. There is substantial testimonial
evidence to prove that Tana was paid a daily wage, and he worked continuously for most part
of the year, even while he was also occasionally called on to plow the soil on a pakyaw
basis. As a farm laborer who has worked exclusively for Ayalde for eighteen (18) years, Tana
should be entitled to compulsory coverage under the Social Security Law, whether his service
was continuous or broken.
Margarita Tana alleged that SSS premiums were deducted from Tanas salary, testifying,
thus:
Q. Were there deductions from the salaries of your husband while he was employed with
the respondent from 1961 to 1979?
A. Yes, there were deductions but I do not know because they were the ones deducting it.
Q. Why do you know that his salaries were deducted for SSS premiums?
A. Because Antero Maghari asked me and my husband to sign SSS papers and he told us
that they will take care of everything.
Q. How much were the deductions every payday?
A. I do not know how much because our daily wage was only P4.00.
[27]

Agaton Libawas, also testified:
Q. Mr. Witness, in your 15-day wages do you notice any deductions from it?
A. There were deductions and we were informed that it was for SSS.
Q. Mr. Witness, since when were there deductions from your salaries?
A. Since 1961.
Q. Up to when?
A. Up to 1979.
Q. Mr. Witness, are you a member of the SSS?
A. No.
Q. How about petitioner, if you know?
A. No, also.
Q. What happened to the deductions did you not ask your employer?
A. We asked but we were answered that we were being remitted for our SSS.
Q. Did you not verify?
A. No, because I just relied on their statement.
[28]

Ayalde failed to counter these positive assertions. Even on the assumption that there were
no deductions, the fact remains that Tana was and should have been covered under the Social
Security Law. The circumstances of his employment place him outside the ambit of the
exception provided in Section 8(j) of Republic Act No. 1611, as amended by Section 4 of R.A.
2658.
WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in C.A.-G.R.
SP No. 16427 and the Resolution dated June 14, 1991 are hereby REVERSED and SET
ASIDE. The Resolution of the Social Security Commission in SSC Case No. 8851 is REINSTATED.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.



[1]
Petition before SSC Case No. 8851; Original Record, p. 1.
[2]
Petition-in-Intervention, Case No. 8851; Original Record, pp. 9-12.
[3]
Answer of Antero Maghari, Case No. 8851; Original Record, p. 25.
[4]
Answer of Conchita Ayalde, Case No. 8851; Original Record, pp. 26-29.
[5]
Resolution of SSC; Original Record, pp. 134-135.
[6]
Motion for Reconsideration; Original Record, pp. 153-167.
[7]
Order of SSC; Original Record, pp. 175-178.
[8]
CA Decision promulgated March 14, 1991; Rollo, pp. 34-35.
[9]
CA Resolution promulgated June 14, 1991; Rollo, p. 39.
[10]
Great Pacific Life Assurance Corp. v. NLRC, 187 SCRA 694 (1990); Santos v. NLRC, 293 SCRA
113 (1998).
[11]
Arambulo v. CA, 293 SCRA 567 (1998); Jison v. CA, 286 SCRA 495 (1998).
[12]
Filipinas Broadcasting Network, Inc. v. NLRC, 287 SCRA 348 (1998); Cabalan Pastulan Negrito
Labor Association v. NLRC, 241 SCRA 643 (1995).
[13]
Exhibits 4, 4-A to 4-L, 5; 5-A to 5-J; 7, 7-A to 7-C (Exhibits for Ayalde).
[14]
Exhibits 8; 9; 9-A; 9-B; 10; 10-A to 10-F (Exhibits for Ayalde).
[15]
Deposition of Ayalde, January 28, 1986, p. 44 (Exhibits for Ayalde).
[16]
Deposition of Ayalde, January 28, 1986, p. 45.
[17]
T.S.N., Margarita Tana, June 13, 1985, pp. 9,11-12, 17.
[18]
T.S.N., Agaton Libawas, June 13, 1985, p. 25.
[19]
T.S.N., Aurelio Tana, September 30, 1985, pp. 37-38.
[20]
Opulencia Ice Plant and Storage v. NLRC, 228 SCRA 473 (1993).
[21]
T.S.N., Margarita Tana, June 13, 1985, pp. 8-9; 13.
[22]
T.S.N., Agaton Libawas, June 13, 1985, pp. 24; 26; 30-31.
[23]
T.S.N., Aurelio Tana, September 30, 1985, pp. 37-38.
[24]
MAM Realty Devt. Corp. v. NLRC, 244 SCRA 797 (1995).
[25]
90 SCRA 161 (1979).
[26]
83 Phil. 518, 523, L-2009, April 30, 1949.
[27]
T.S.N., Margarita Tana, June 13, 1985, p. 17.
[28]
T.S.N., Agaton Libawas, September 30, 1985. p. 39.








Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-32245 May 25, 1979
DY KEH BENG, petitioner,
vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.
A. M Sikat for petitioner.
D. A. Hernandez for respondents.

DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations
dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970
affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the
unfair labor practice acts alleged and order him to
reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from
their respective dates of dismissal until fully reinstated without loss to their right of
seniority and of such other rights already acquired by them and/or allowed by law.
1

Now, Dy Keh Beng assigns the following errors
2
as having been committed by the Court of Industrial
Relations:
I
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA
WERE EMPLOYEES OF PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA
WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY
COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION
BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR
PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.
V
RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR
FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS
UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF
SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No.
875,
3
by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for
their union activities. After preliminary investigation was conducted, a case was filed in the Court of
Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two
of its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and
that Solano was not his employee because the latter came to the establishment only when there was
work which he did on pakiaw basis, each piece of work being done under a separate contract.
Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of
the labor union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the
Court of Industrial Relations. An employee-employer relationship was found to have existed between Dy
Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece
basis.
4
The issue therefore centered on whether there existed an employee employer relation between
petitioner Dy Keh Beng and the respondents Solano and Tudla .
According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano
and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955,
5
respectively, and
that except in the event of illness, their work with the establishment was continuous although their
services were compensated on piece basis. Evidence likewise showed that at times the establishment
had eight (8) workers and never less than five (5); including the complainants, and that complainants
used to receive ?5.00 a day. sometimes less.
6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:
(1) Solano never stayed long enought at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
(3) order given him by Dy;
(4) When there were no orders needing his services there was nothing for him to do;
(5) When orders came to the shop that his regular workers could not fill it was then that
Dy went to his address in Caloocan and fetched him for these orders; and
(6) Solano's work with Dy's establishment was not continuous. ,
7

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not
employees under Republic Act 875, where an employee
8
is referred to as
shall include any employee and shag not be limited to the employee of a particular
employer unless the Act explicitly states otherwise and shall include any individual
whose work has ceased as a consequence of, or in connection with any current labor
dispute or because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.
while an employer
9

includes any person acting in the interest of an employer, directly or indirectly but shall
not include any labor organization (otherwise than when acting as an employer) or
anyone acting in the capacity of officer or agent of such labor organization.
Petitioner really anchors his contention of the non-existence of employee-employer relationship on the
control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-
13130, October 31, 1959, where the Court ruled that:
The test ... of the existence of employee and employer relationship is whether there is
an understanding between the parties that one is to render personal services to or for
the benefit of the other and recognition by them of the right of one to order and control
the other in the performance of the work and to direct the manner and method of its
performance.
Petitioner contends that the private respondents "did not meet the control test in the fight of the ...
definition of the terms employer and employee, because there was no evidence to show that petitioner
had the right to direct the manner and method of respondent's work.
10
Moreover, it is argued that
petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the
establishment only when there was work.
While this Court upholds the control test
11
under which an employer-employee relationship exists
"where the person for whom the services are performed reserves a right to control not only the end to
be achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's
arguments as stated above. It should be borne in mind that the control test calls merely for the
existence of the right to control the manner of doing the work, not the actual exercise of the
right.
12
Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is
"engaged in the manufacture of baskets known as kaing,
13
it is natural to expect that those working
under Dy would have to observe, among others, Dy's requirements of size and quality of thekaing. Some
control would necessarily be exercised by Dy as the making of the kaing would be subject to Dy's
specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be
inferred that the proprietor Dy could easily exercise control on the men he employed.
As to the contention that Solano was not an employee because he worked on piece basis, this Court
agrees with the Hearing Examiner that
circumstances must be construed to determine indeed if payment by the piece is just a
method of compensation and does not define the essence of the relation. Units of time
... and units of work are in establishments like respondent (sic) just yardsticks whereby
to determine rate of compensation, to be applied whenever agreed upon. We cannot
construe payment by the piece where work is done in such an establishment so as to
put the worker completely at liberty to turn him out and take in another at pleasure.
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras
who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518,
523), opined that
judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as
generally practiced in our country, is, in fact, a labor contract -between employers and
employees, between capitalists and laborers.
Insofar as the other assignments of errors are concerned, there is no showing that the Court of
Industrial Relations abused its discretion when it concluded that the findings of fact made by the
Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that
in unfair labor practice cases, the factual findings of the Court of Industrial Relations are conclusive on
the Supreme Court, if supported by substantial evidence. This provision has been put into effect in a
long line of decisions where the Supreme Court did not reverse the findings of fact of the Court of
Industrial Relations when they were supported by substantial evidence.
14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the
complainants were dismissed,
15
and that the decision being appealed ordered the payment of
backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting
to apply in this connection the formula for backwages worked out by Justice Claudio Teehankee in
"cases not terminated sooner."
16
The formula cans for fixing the award of backwages without
qualification and deduction to three years, "subject to deduction where there are mitigating
circumstances in favor of the employer but subject to increase by way of exemplary damages where
there are aggravating circumstances.
17
Considering there are no such circumstances in this case, there is
no reason why the Court should not apply the abovementioned formula in this instance.
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to
an award of backwages for three years without qualification and deduction at the respective rates of
compensation the employees concerned were receiving at the time of dismissal. The execution of this
award is entrusted to the National Labor Relations Commission. Costs against petitioner.
SO ORDERED.
Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur.
Fernandez, J., took no part.

#Footnotes
1 Rollo, p. 48.
2 petitioner's Brief, pp. 1-2.
3 Republic Act 875, as amended, Section 4. Unfair Labor Practices.
a) It will be unfair labor practice for an employer:
(1) To interfere with, restrain or coerce employees in the exercise of their rights
guaranteed in section three;
xxx xxx xxx
(4) To discriminate in regard to hire or tenure of employment or any term or condition
of employment to encourage or discourage membership in any labor organization; ...
4 Rollo, p. 32.
5 Id., p. 23.
6 Id.
7 Rollo, Annex A, p. 22.
8 Section 2(d), Republic Act 875, As Amended, otherwise known as the Industrial Peace
Act.
9 Id., Section 2(c).
10 Petitioner's Brief, pp. 5-7.
11 LVN Pictures v. Philippine Musicians Guild, et. al., 110 Phil.
12 Feati University v. Bautista, et al., L-21500, December 27 1966, 18 SCRA 1966,
13 Rollo, p. 46.
14 Among them are: Philippine Newspapers' Guild v. Evening News, Inc., 86 Phil 303;
GPTC Employees Union v. Court of Industrial Relations, et. all 102 Phil 538; Community
Sawmill Company v. Court of Industrial Relations and Community Effort Labor Union, L-
24347, March 27, 1979; Gonzalo, Puyat & Sorts, Inc. v. Labayo, 62 SCRA 488; De Leon, et
al., v. Pampanga Development Co., Inc., L-26844, September 30, 1969, 29 SCRA 628;
Castillo, et al., v. Court of Industrial Relations, L-26124, May 29, 1971, 39 SCRA 75.
15 Rollo, p. 36.
16 Mercury Drug Co., et al. v. Court of Industrial Relations, L-23357, April 30, 1974, 56
SCRA 694, 712.
17 Id.





Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
D E C I S I O N
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, isREINSTATED. 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.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice


Footnotes
1
Rollo, pp. 9-22. Penned by Associate Justice Eloy R. Bello, Jr. and concurred in by Associate Justices
Regalado E. Maambong and Lucenito N. Tagle.
2
Id. at 24-25.
3
Id. at 193-198. Penned by Presiding Commissioner Lourdes C. Javier and concurred in by Commissioner
Tito F. Genilo.
4
Id. at 164-173. Penned by Labor Arbiter Eduardo J. Carpio.
5
Id. at 89.
6
Id. at 89-90.
7
Id. at 90.
8
Id.
9
Id. at 91.
10
Id.
11
Id. at 91-92.
12
Id. at 92-93.
13
Id. at 94.
14
Id. at 172-173.
15
Id. at 197-198.
16
Id. at 100.
17
Abante, Jr. v. Lamadrid Bearing & Parts Corporation, G.R. No. 159890, May 28, 2004, 430 SCRA 368,
379.
18
G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA 171, 179-180, citing Visayan Stevedore Transportation
Company v. Court of Industrial Relations, 125 Phil. 817, 820 (1967).
19
99 Phil. 408 (1956).
20
G.R. No. 152459, June 15, 2006.
21
Supra note 18.
22
Rutherford Food Corporation v. McComb, 331 U.S. 722, 727 (1947); 91 L.Ed. 1772, 1777 (1946).
23
See Brock v. Lauritzen, 624 F.Supp. 966 (E.D. Wisc. 1985); Real v. Driscoll Strawberry Associates, Inc.,
603 F.2d 748 (9th Cir. 1979); Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6
L.Ed.2d 100 (1961); Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947).
24
Halferty v. Pulse Drug Company, 821 F.2d 261 (5th Cir. 1987).
25
Weisel v. Singapore Joint Venture, Inc., 602 F.2d. 1185 (5th Cir. 1979).
26
Rollo, pp. 305-321.
27
Id. at 264-265.
28
330 Phil. 518, 524 (1996).
29
G.R. No. 66890, April 15, 1988, 160 SCRA 568, 571.
30
Rollo, pp. 120-121.
31
Id. at 57.
32
People v. Joya, G.R. No. 79090, October 1, 1993, 227 SCRA 9, 26-27.
33
People v. Davatos, G.R. No. 93322, February 4, 1994, 229 SCRA 647, 651.
34
Globe-Mackay Cable and Radio Corporation v. National Labor Relations Commission, G.R. No. 82511,
March 3, 1992, 206 SCRA 701, 711-712.
35
Leonardo v. National Labor Relations Commission, 389 Phil. 118, 126 (2000).
36
438 Phil. 756 (2002).



SECOND DIVISION
[G.R. No. 119268. February 23, 2000]
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES,
JOEL ORDENIZA and AMADO CENTENO,petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
(NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.), respondents.
D E C I S I O N
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 [Rollo, pp. 16-22.] of public respondent
promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92, and its resolution2 [Id. at 23.] dated
December 13, 1994 which denied petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation
engaged in the operation of "Goodman Taxi." Petitioners used to drive private respondents taxicabs
every other day on a 24-hour work schedule under the boundary system. Under this arrangement, the
petitioners earned an average of P400.00 daily. Nevertheless, private respondent admittedly regularly
deducts from petitioners daily earnings the amount of P30.00 supposedly for the washing of the taxi
units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect their
rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their
taxicabs when they reported for work on August 6, 1991, and on succeeding days. Petitioners suspected
that they were singled out because they were the leaders and active members of the proposed union.
Aggrieved, petitioners filed with the labor arbiter a complaint against private respondent for unfair labor
practice, illegal dismissal and illegal deduction of washing fees. In a decision3 [Id. at 25-32.] dated
August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set
aside the judgment of the labor arbiter. The labor tribunal declared that petitioners are employees of
private respondent, and, as such, their dismissal must be for just cause and after due process. It
disposed of the case as follows:
"WHEREFORE, in view of all the foregoing considerations, the decision of the Labor
Arbiter appealed from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is
directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato,
Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de los
Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel
Ordeniza, to their former positions without loss of seniority and other privileges
appertaining thereto; to pay the complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the amount paid as washing charges;
and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED."4 [Id. at 41.]
Private respondents first motion for reconsideration was denied. Remaining hopeful, private
respondent filed another motion for reconsideration. This time, public respondent, in its decision5 [Id. at
16-22.] dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled that it
lacks jurisdiction over the case as petitioners and private respondent have no employer-employee
relationship. It held that the relationship of the parties is leasehold which is covered by the Civil Code
rather than the Labor Code, and disposed of the case as follows:
"VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is
hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are
hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise SET
ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of jurisdiction.
No costs.
SO ORDERED."6 [Id. at 21.]
Expectedly, petitioners sought reconsideration of the labor tribunals latest decision which was denied.
Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or
with grave abuse of discretion in rendering the assailed decision, arguing that:
"I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENTS SECOND MOTION FOR
RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC
RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS
ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO
MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT
PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY."7[Id. at
3.]
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in
the jurisprudence of procedure. It means such capricious and whimsical exercise of judgment by the
tribunal exercising judicial or quasi-judicial power as to amount to lack of power.8 [Arroyo vs. De
Venecia, 277 SCRA 268, 294 (1997).] In labor cases, this Court has declared in several instances that
disregarding rules it is bound to observe constitutes grave abuse of discretion on the part of labor
tribunal.
In Garcia vs. NLRC,9 [264 SCRA 261, 267 (1996).] private respondent therein, after receiving a copy of
the labor arbiters decision, wrote the labor arbiter who rendered the decision and expressed dismay
over the judgment. Neither notice of appeal was filed nor cash or surety bond was posted by private
respondent. Nevertheless, the labor tribunal took cognizance of the letter from private respondent and
treated said letter as private respondents appeal. In a certiorari action before this Court, we ruled that
the labor tribunal acted with grave abuse of discretion in treating a mere letter from private respondent
as private respondents appeal in clear violation of the rules on appeal prescribed under Section 3(a),
Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 [263 SCRA 638, 657 (1996).] we held that the labor arbiter
committed grave abuse of discretion when he failed to resolve immediately by written order a motion to
dismiss on the ground of lack of jurisdiction and the supplemental motion to dismiss as mandated by
Section 15 of Rule V of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 [261 SCRA 573, 583-584 (1996).] we held that the NLRC
gravely abused its discretion by allowing and deciding an appeal without an appeal bond having been
filed as required under Article 223 of the Labor Code.
In Maebo vs. NLRC,12 [229 SCRA 240, 248 (1994).] we declared that the labor arbiter gravely abused its
discretion in disregarding the rule governing position papers. In this case, the parties have already filed
their position papers and even agreed to consider the case submitted for decision, yet the labor arbiter
still admitted a supplemental position paper and memorandum, and by taking into consideration, as
basis for his decision, the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,13 [219 SCRA 561, 566 (1993).] we held that public respondent gravely abused its
discretion in treating the motion to set aside judgment and writ of execution as a petition for relief of
judgment. In doing so, public respondent had, without sufficient basis, extended the reglementary
period for filing petition for relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking
reconsideration of public respondents decision dated April 28, 1994, which public respondent denied.
With this motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or
mistakes it may have committed before resort to courts of justice can be had.14 [Biogenerics Marketing
and Research Corp. vs. NLRC, 122725, September 8, 1999, p. 6.] Thus, when private respondent filed a
second motion for reconsideration, public respondent should have forthwith denied it in accordance
with Rule 7, Section 14 of its New Rules of Procedure which allows only one motion for reconsideration
from the same party, thus:
"SEC. 14. Motions for Reconsideration. --- Motions for reconsideration of any order,
resolution or decision of the Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under oath and filed within ten
(10) calendar days from receipt of the order, resolution or decision with proof of service
that a copy of the same has been furnished within the reglementary period the adverse
party and provided further, that only one such motion from the same party shall be
entertained." [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist the
parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons,
delays cannot be countenanced in the resolution of labor disputes. The dispute may involve no less than
the livelihood of an employee and that of his loved ones who are dependent upon him for food, shelter,
clothing, medicine, and education. It may as well involve the survival of a business or an
industry.15 [Maebo vs. NLRC, 229 SCRA 240, 248 (1994).]
As correctly pointed out by petitioner, the second motion for reconsideration filed by private
respondent is indubitably a prohibited pleading16 [Rollo, p. 8.] which should have not been entertained
at all. Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of
justice",17 [Id. at 17.] especially when its disposition of a legal controversy ran afoul with a clear and
long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly,
disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error or
mistake. In our view, public respondent gravely abused its discretion in taking cognizance and granting
private respondents second motion for reconsideration as it wrecks the orderly procedure in seeking
reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of
the public respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with the
applicable decisions of this Court. The labor tribunal reasoned out as follows:
"On the issue of whether or not employer-employee relationship exists, admitted is the
fact that complainants are taxi drivers purely on the boundary system. Under this
system the driver takes out his unit and pays the owner/operator a fee commonly called
boundary for the use of the unit. Now, in the determination the existence of employer-
employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al.
(G.R. No. 73199, 26 October 1988) has applied the following four-fold test: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power of control the employees conduct.
Among the four (4) requisites, the Supreme Court stresses that control is deemed the
most important that the other requisites may even be disregarded. Under the control
test, an employer-employee relationship exists if the employer has reserved the right
to control the employee not only as to the result of the work done but also as to the
means and methods by which the same is to be accomplished. Otherwise, no such
relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the
respondent does not pay the drivers, the complainants herein, their wages. Instead, the
drivers pay a certain fee for the use of the vehicle. On the matter of control, the drivers,
once they are out plying their trade, are free to choose whatever manner they conduct
their trade and are beyond the physical control of the owner/operator; they themselves
determine the amount of revenue they would want to earn in a days driving; and, more
significantly aside from the fact that they pay for the gasoline they consume, they
likewise shoulder the cost of repairs on damages sustained by the vehicles they are
driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a
leasehold or one that is covered by a charter agreement under the Civil Code rather
than the Labor Code."18 [Rollo, pp. 18-20.]
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 [National Labor Union vs. Dinglasan, 98 Phil. 649, 652
(1956); Magboo vs. Bernardo, 7 SCRA 952, 954 (1963); Lantaco, Sr. vs. Llamas, 108 SCRA 502, 514
(1981).] we ruled that the relationship between jeepney owners/operators on one hand and jeepney
drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee.
We explained that in the lease of chattels, the lessor loses complete control over the chattel leased
although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the
damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former
exercise supervision and control over the latter. The management of the business is in the owners
hands. The owner as holder of the certificate of public convenience must see to it that the driver follows
the route prescribed by the franchising authority and the rules promulgated as regards its operation.
Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called
"boundary" they pay to the owner/operator is not sufficient to withdraw the relationship between them
from that of employer and employee. We have applied by analogy the abovestated doctrine to the
relationships between bus owner/operator and bus conductor,20 [Doce vs. Workmens Compensation
Commission, 104 Phil. 946, 948 (1958).] auto-calesa owner/operator and driver,21 [Citizens League of
Freeworkers vs. Abbas, 18 SCRA 71, 73 (1966).] and recently between taxi owners/operators and taxi
drivers.22 [Martinez vs. NLRC, 272 SCRA 793, 800 (1997).] Hence, petitioners are undoubtedly
employees of private respondent because as taxi drivers they perform activities which are usually
necessary or desirable in the usual business or trade of their employer.
As consistently held by this Court, 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. The requirement of notice and hearing is set-out in Article 277 (b) of the said
Code. Hence, petitioners, being employees of private respondent, can be dismissed only for just and
authorized cause, and after affording them notice and hearing prior to termination. In the instant case,
private respondent had no valid cause to terminate the employment of petitioners. Neither were there
two (2) written notices sent by private respondent informing each of the petitioners that they had been
dismissed from work. These lack of valid cause and failure on the part of private respondent to comply
with the twin-notice requirement underscored the illegality surrounding petitioners dismissal.
Under the law, 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.23 [Article 279, Labor Code.] It must be
emphasized, though, that recent judicial pronouncements24 [Bustamante vs. NLRC, 265 SCRA 61, 69-70
(1996); Highway Copra Traders vs. NLRC, 293 SCRA 350, 356 (1998); Jardine Davies Inc. vs. NLRC, GR-
76272, July 28, 1999, p. 8; Pepsi-Cola Products Philippines Inc. vs. NLRC, GR-121324, September 30,
1999, p. 9.] distinguish between employees illegally dismissed prior to the effectivity of Republic Act No.
6715 on March 21, 1989, and those whose illegal dismissals were effected after such date. Thus,
employees illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years
without deduction or qualification, while those illegally dismissed after that date are granted full
backwages inclusive of allowances and other benefits or their monetary equivalent from the time their
actual compensation was withheld from them up to the time of their actual reinstatement. The
legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly that, i.e.,
without deducting from backwages the earnings derived elsewhere by the concerned employee during
the period of his illegal dismissal. Considering that petitioners were terminated from work on August 1,
1991, they are entitled to full backwages on the basis of their last daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of the
taxi units, we view the same as not illegal in the context of the law. We note that after a tour of duty, it
is incumbent upon the driver to restore the unit he has driven to the same clean condition when he took
it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by
fair play.25 [Five J Taxi vs. NLRC, 235 SCRA 556, 562 (1994).] Hence, the drivers are not entitled to
reimbursement of washing charges.
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated
October 28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its
RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to MODIFICATION. Private
respondent is directed to reinstate petitioners to their positions held at the time of the complained
dismissal. Private respondent is likewise ordered to pay petitioners their full backwages, to be computed
from the date of dismissal until their actual reinstatement. However, the order of public respondent that
petitioners be reimbursed the amount paid as washing charges is deleted. Costs against private
respondents.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Buena, J., on official leave.





















FIRST DIVISION
[G.R. No. L-7945. March 23, 1956.]
NATIONAL LABOR UNION, Petitioner, vs. BENEDICTO DINGLASAN, Respondent.

D E C I S I O N
PADILLA, J.:
The Petitioner seeks a review and the setting aside of a resolution in banc of the Court of Industrial
Relations adopted on 23 June 1954 which held that there exists no employer-employee relationship
between the Respondent and the driver complainants represented by the Petitioner and for that reason
the Court of Industrial Relations dismissed the complaint filed by the acting prosecutor of the Court. The
resolution in banc complained of reversed an order of an Associate Judge of the Court which declared
that there was such relationship of employer-employee between the Respondent and the complainants
represented by thePetitioner. The last mentioned order of 16 February 1954 was just interlocutory but it
was set aside by the resolution of 23 June 1954. The National Labor Union in representation of the
complainants appealed from said resolution dismissing its complaint charging the Respondentwith the
commission of unfair labor practices.
In the resolution complained of there are no findings of facts. It merely states that
cralaw the Court, in banc, finds that the said motion for reconsideration is well-taken and, therefore, it hereby
reconsider the order of February 16, 1954, and thereby declares that there is no employer- employee
relation between Respondent, Benedicto Dinglasan, and the driver-complainants in his case. As a
consequence, the motion to dismiss the complaint dated October 31, 1953, filed by the Acting
Prosecutor of the Court, is hereby granted. (Annex D.)
This resolution was adopted upon a motion for reconsideration of the previous order of 16 February
1954. As there are no findings of fact in the resolution those set forth in the previous order must have
been relied upon by the Court. They are as follows:chanroblesvirtuallawlibrary
(a) Respondent Dinglasan is the owner and operator of TPU jeepneys plying between Espaa-Quiapo-
Pier and vice versa.
(b) Petitioners are drivers who had verbal contracts with Respondent for the use of the latters jeepneys
upon payment of P7.50 for 10 hours use, otherwise known as the boundary system.
(c) Said drivers did not receive salaries or wages from Mr. Dinglasan; chan roblesvirtualawlibrarytheir days earnings being the
excess over the P7.50 that they paid for the use of the jeepneys. In the event that they did not earn
more, Respondent did not have to pay them anything;

(d) Mr. Dinglasans supervision over the drivers consisted in inspection of the jeepneys that they took
out when they passed his gasoline station for water, checking the route prescribed by the Public Service
Commission, or whether any driver was driving recklessly and washing and changing the tires of
jeepneys. (Annex C.)
The main question to determine is whether there exists a relationship of employer-employee between
the drivers of the jeeps and the owner thereof. The findings contained in the first order are not disputed
by both parties except the last to which the Respondent took exception. But in the resolution setting
aside the order of 16 February 1954 the Court of Industrial Relations in banc did not state that such
finding is not supported by evidence. It merely declares that there is no employer-employee relation
between Respondent, Benedicto Dinglasan, and the driver-complainants in this case. If the findings to
which theRespondent took exception is unsupported by the evidence, a pronouncement to that effect
would have been made by the Court in banc. In the absence of such pronouncement we are not at
liberty to ignore or disregard said finding. The findings of the Court of Industrial Relations with respect
to question of fact, if supported by substantial evidence on the record shall be conclusive. 1 Taking into
consideration the findings of fact made by the Court of Industrial Relations we find it difficult to uphold
the conclusion of the Court set forth in its resolution of 23 June 1954. The drivers did not invest a single
centavo in the business and theRespondent is the exclusive owner of the jeeps. The management of the
business is in theRespondents hands. For even if the drivers of the jeeps take material possession of the
jeeps, still the Respondent as owner thereof and holder of a certificate of public convenience is entitled
to exercise, as he does and under the law he must, supervision over the drivers by seeing to it that they
follow the route prescribed by the Public Service Commission and the rules and regulations promulgated
by it as regards their operation. And when they pass by the gasoline station of the Respondent checking
by his employees on the water tank, oil and tire pressure is done. The only features that would make the
relationship of lessor and lessee between the Respondent and the drivers, members of the union, as
contended by theRespondent, are the fact that he does not pay them any fixed wage but their
compensation is the excess of the total amount of fares earned or collected by them over and above the
amount of P7.50 which they agreed to pay to the Respondent, the owner of the jeeps, and the fact that
the gasoline burned by the jeeps is for the account of the drivers. These two features are not, however,
sufficient to withdraw the relationship between them from that of employer-employee, because the
estimated earnings for fares must be over and above the amount they agreed to pay to
the Respondent for a ten-hour shift or ten-hour a day operation of the jeeps. Not having any interest in
the business because they did not invest anything in the acquisition of the jeeps and did not participate
in the management thereof, their service as drivers of the jeeps being their only contribution to the
business, the relationship of lessor and lessee cannot be sustained. 1 In the lease of chattels the lessor
loses complete control over the chattel leased although the lessee cannot make bad use thereof, for he
would be responsible for damages to the lessor should he do so. In this case there is a supervision and a
sort of control that the owner of the jeeps exercises over the drivers. It is an attempt by ingenious
scheme to withdraw the relationship between the owner of the jeeps and the drivers thereof from the
operation of the labor laws enacted to promote industrial peace.
As to the point that the National Labor Union is not the real party in interest to bring the complaint,
suffice it to say that representative includes a legitimate labor organization or any officer or agent of
such organization, whether or not employed by the employer or employees whom he represents. 2
And whenever it is charged by an offended party or his representative that any person has engaged or is
engaging in any unfair labor practice, the Court of Industrial Relations must investigate such charge. 3
Therefore, the objection to the institution of the charge for unfair labor practice by the National Labor
Union is not well taken.
The order of 23 June 1904 is reversed and set aside and the case remanded to the Court of Industrial
Relations for such further proceedings as may be required by law, with costs against the Respondent.
Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L. and Endencia, JJ.,
concur.

Endnotes:chanroblesvirtuallawl ibrary
1. Section 6, Republic Act No. 875.
1. In the matter of the Park Floral Company, etc., 19 NLRB 403; chan roblesvirtualawlibraryRadley et al. vs. Commonwealth, 161
SW (2d) 417; chan roblesvirtualawlibraryJones vs. Goodson et al., 121 Fed. Rep. (2d) 176; chan roblesvirtualawlibraryMitchel vs. Gibbson et al., 172 Fed.
Rep. (2d) 970.
2. Section 6, Republic Act No. 875.
3. Section 5 (b), Republic Act No. 875.





















Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR
FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO
DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.

FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl
fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and
if so, whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several
fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises which is
primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur. Petitioners
rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma
patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master
fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing,
petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of
private respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of
the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip,
otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief
engineer and master fisherman received a minimum income of P350.00 per week while the assistant
engineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 per
week.
1

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman,
president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for
investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private
respondent. Petitioners denied the charge claiming that the same was a countermove to their having
formed a labor union and becoming members of Defender of Industrial Agricultural Labor Organizations
and General Workers Union (DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners, and no
criminal charges were formally filed against them. Notwithstanding, private respondent refused to allow
petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-
payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the then
Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City,
Albay, docketed as Cases Nos. 1449-83 to 1456-83.
2
They uniformly contended that they were
arbitrarily dismissed without being given ample time to look for a new job.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman,
submitted its position paper denying the employer-employee relationship between private respondent
and petitioners on the theory that private respondent and petitioners were engaged in a joint venture.
3

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

On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde
rendered a joint decision
5
dismissing all the complaints of petitioners on a finding that a "joint fishing
venture" and not one of employer-employee relationship existed between private respondent and
petitioners.
From the adverse decision against them, petitioners appealed to the National Labor Relations
Commission.
On May 30, 1985, the National Labor Relations Commission promulgated its resolution
6
affirming the
decision of the labor arbiter that a "joint fishing venture" relationship existed between private
respondent and petitioners.
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent
and petitioners is a joint venture arrangement and not an employer-employee relationship. To stress
that there is an employer-employee relationship between them and private respondent, petitioners
invite attention to the following: that they were directly hired by private respondent through its general
manager, Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except for
Laurente Bautu, they had been employed by private respondent from 8 to 15 years in various capacities;
that private respondent, through its operations manager, supervised and controlled the conduct of their
fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing vessel,
the volume or number of tubes of the fish-catch the time to return to the fishing port, which were
communicated to the patron/pilot by radio (single side band); that they were not allowed to join other
outfits even the other vessels owned by private respondent without the permission of the operations
manager; that they were compensated on percentage commission basis of the gross sales of the fish-
catch which were delivered to them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and
that they have to follow company policies, rules and regulations imposed on them by private
respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private
respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or
abused its discretion when it added facts not contained in the records when it stated that the pilot-crew
members do not receive compensation from the boat-owners except their share in the catch produced
by their own efforts; that public respondent ignored the evidence of petitioners that private respondent
controlled the fishing operations; that public respondent did not take into account established
jurisprudence that the relationship between the fishing boat operators and their crew is one of direct
employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is
now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar
days from receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine
Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public
respondent that a "joint fishing venture" exists between private respondent and petitioners rests on the
resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing
Enterprises vs. SSS), exempting De Guzman Fishing Enterprises, private respondent herein, from
compulsory coverage of the SSS on the ground that there is no employer-employee relations between
the boat-owner and the fishermen-crew members following the doctrine laid down in Pajarillo vs. SSS,
17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is
no employer-employee relationship between the boat-owner and the pilot and crew members when the
boat-owner supplies the boat and equipment while the pilot and crew members contribute the
corresponding labor and the parties get specific shares in the catch for their respective contribution to
the venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the case
at bar, did not control the conduct of the fishing operations and the pilot and crew members shared in
the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits
rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this
Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of
the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this
Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep, the idea being that
its power be exercised according to justice and equity and substantial merits of the controversy."
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged
in trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or more
7
in the
open sea performing their job to earn a living to support their families, convince Us to adopt a more
liberal attitude in applying to petitioners the 10-calendar day rule in the filing of appeals with the NLRC
from the decision of the labor arbiter.
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on
July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who
received the decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the
circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the
pendency of the case understandably have to earn a living by seeking employment elsewhere, impress
upon Us that in the ordinary course of events, the information as to the adverse decision against them
would not reach them within such time frame as would allow them to faithfully abide by the 10-calendar
day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer
provide equitable justification to conclude that there is substantial compliance with the ten-calendar
day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after
receipt of the decision, their appeal with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee relationship, the
elements that are generally considered are the following (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and methods by which the work is to be
accomplished.
8
The employment relation arises from contract of hire, express or implied.
9
In the
absence of hiring, no actual employer-employee relation could exist.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-control
test
10
where the person for whom the services are performed reserves a right to control not only the
end to be achieved but also the means to be used in reaching such end. The test calls merely for the
existence of the right to control the manner of doing the work, not the actual exercise of the right.
11

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a
"joint fishing venture" existed between private respondent and petitioners is not applicable in the
instant case. There is neither light of control nor actual exercise of such right on the part of the boat-
owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of
the boat-owners as regards their employment; that they go out to sea not upon directions of the boat-
owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners
do not in any way control the crew-members with whom the former have no relationship whatsoever;
that they simply join every trip for which the pilots allow them, without any reference to the owners of
the vessel; and that they only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The
conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the
patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's
operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the prerogative of private respondent.
12
While performing
the fishing operations, petitioners received instructions via a single-side band radio from private
respondent's operations manager who called the patron/pilot in the morning. They are told to report
their activities, their position, and the number of tubes of fish-catch in one day.
13
Clearly thus, the
conduct of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B
Sandyman II who is responsible for disseminating the instructions to the crew members.
The conclusion of public respondent that there had been no change in the situation of the parties since
1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in
Case No. 708 exempting it from compulsory coverage of the SSS law is not supported by evidence on
record. It was erroneous for public respondent to apply the factual situation of the parties in the 1968
case to the instant case in the light of the changes in the conditions of employment agreed upon by the
private respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew members
are under no obligation to remain in the outfit for any definite period as one can be the crew member of
an outfit for one day and be the member of the crew of another vessel the next day, the herein
petitioners, on the other hand, were directly hired by private respondent, through its general manager,
Arsenio de Guzman, and its operations manager, Conrado de Guzman and have been under the employ
of private respondent for a period of 8-15 years in various capacities, except for Laurente Bautu who
was hired on August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on September 29,
1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968
until he was promoted as chief engineer of the fishing vessel; Jose Parma was employed on September
29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred
as a master fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on
August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless the
hiring of petitioners to perform work which is necessary or desirable in the usual business or trade of
private respondent for a period of 8-15 years since 1968 qualify them as regular employees within the
meaning of Article 281 of the Labor Code as they were indeed engaged to perform activities usually
necessary or desirable in the usual fishing business or occupation of private respondent.
14

Aside from performing activities usually necessary and desirable in the business of private respondent, it
must be noted that petitioners received compensation on a percentage commission based on the gross
sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the
crude oil consumed during the fishing trip, otherwise only 10% of the proceeds of the sale. Such
compensation falls within the scope and meaning of the term "wage" as defined under Article 97(f) of
the Labor Code, thus:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services rendered or to be rendered,
and included the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the
employee. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners get
paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his
crew members in accordance with their own understanding
15
is not supported by recorded evidence.
Except that such claim appears as an allegation in private respondent's position paper, there is nothing
in the records showing such a sharing scheme as preferred by private respondent.
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their
fish-catch at midsea without the knowledge and consent of private respondent, petitioners were
unjustifiably not allowed to board the fishing vessel on September 11, 1983 to resume their activities
without giving them the opportunity to air their side on the accusation against them unmistakably
reveals the disciplinary power exercised by private respondent over them and the corresponding
sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of
petitioners from their employment was characterized by undue haste when less extreme measures
consistent with the requirements of due process should have been first exhausted. In that sense, the
dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes
generally a parity of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed
16
and where each party exercises equal
lights in the conduct of the business.
17
It would be inconsistent with the principle of parity of standing
between the joint co-venturers as regards the conduct of business, if private respondent would
outrightly exclude petitioners from the conduct of the business without first resorting to other measures
consistent with the nature of a joint venture undertaking, Instead of arbitrary unilateral action, private
respondent should have discussed with an open mind the advantages and disadvantages of petitioners'
action with its joint co-venturers if indeed there is a "joint fishing venture" between the parties. But this
was not done in the instant case. Petitioners were arbitrarily dismissed notwithstanding that no criminal
complaints were filed against them. The lame excuse of private respondent that the non-filing of the
criminal complaints against petitioners was for humanitarian reasons will not help its cause either.
We have examined the jurisprudence on the matter and find the same to be supportive of petitioners'
stand. InNegre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were
recruited by one master fisherman locally known as "maestro" in charge of recruiting others to
complete the crew members are considered employees, not industrial partners, of the boat-owners. In
an earlier case of Abong vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong,
owner of the fishing boat, claimed that he was not the employer of the fishermen crew members
because of an alleged partnership agreement between him, as financier, and Simplicio Panganiban, as
his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the
WCC that there existed an employer-employee relationship between the boat-owner and the fishermen
crew members not only because they worked for and in the interest of the business of the boat-owner
but also because they were subject to the control, supervision and dismissal of the boat-owner, thru its
agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew
members were paid in kind, or by "pakiao basis" still that fact did not alter the character of their
relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159
(1982), we held that the employer-employee relationship between the crew members and the owners
of the fishing vessels engaged in deep sea fishing is merely suspended during the time the vessels are
drydocked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip.
The said ruling is premised on the principle that all these activities i.e., drydock, repairs, loading of
necessary provisions, form part of the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the
National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private
respondent is ordered to reinstate petitioners to their former positions or any equivalent positions with
3-year backwages and other monetary benefits under the law. No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.

Footnotes
1 p. 3, Joint Decision, Labor Arbiter, p. 40, Rollo.
2 pp. 1-8, Records.
3 pp. 28-30, Ibid.
4 pp. 54-101, Ibid.
5 Annex "D" Petition, pp. 40-46, Rollo.
6 pp. 61-65, Rollo.
7 p. 23, T.S.N., p. 78, Records.
8 Hydro-Resources Contractor Corporation vs. Labor Arbiter Pagalilauan G.R. No. 62909,
April 18, 1989; Tabas, et al. vs. California Mfg. Co. et. al., G.R. No. 80680, January 26,
1989; Continental Marble Corporation vs. NLRC, 161 SCRA 151; Bautista vs. Inciong, 158
SCRA 665; Broadway Motors, Inc. vs. NLRC, 156 SCRA 522; Besa vs. Trajano, 146 SCRA
501; Rosario Brothers, Inc. vs. Ople, 131 SCRA 72; Shipside Inc. vs. NLRC, 118 SCRA 99;
Mafinco Trading Corporation vs. Ople, 70 SCRA 139.
9 Yu Chuck vs. Kong Li Po, 46 Phil. 608 (1924).
10 LVN Pictures, Inc. vs. Philippine Musicians Guild, l SCRA 132, 173
(1961), citing Alabama Highway Express, Co. vs. Local, 612, 108 S. 2d. 350.
11 Dy Keh Beng vs. International Labor and Marine Union of the Philippines, 90 SCRA
161 (1979).
12 pp. 7-8, T.S.N., pp. 61-62, Records.
13 p. 7. T.S.N., p. 61, Records.
14 Ochoco vs. NLRC., 120 SCRA 774 (1983); Mansol vs. P.P. Gocheco Lumber Co., 96 Phil.
941 (1955).
15 p. 2, Private Respondent's Position Paper, p. 22, Records; p. 2, Memorandum for
Private Respondent, p. 131, Rollo.
16 Sevilla vs. Court of Appeals, 160 SCRA 171 (1988), citing Bautista Treatise on
Philippine Partnership Law, p. 34.
17 Ibid. p. 37.






















Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 87416 April 8, 1991

CECILIO S. DE VILLA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES, HONORABLE JOB B. MADAYAG,
and ROBERTO Z. LORAYES, respondents.

San Jose Enriquez, Lacas Santos & Borje for petitioner.

Eduardo R. Robles for private respondent.

PARAS, J.:p

This petition for review on certiorari seeks to reverse and set aside the decision * of the Court of
Appeals promulgated on February 1, 1989 in CA-G.R. SP No. 16071 entitled "Cecilio S. de Villa vs. Judge
Job B. Madayag, etc. and Roberto Z. Lorayes," dismissing the petition for certiorari filed therein.

The factual backdrop of this case, as found by the Court of Appeals, is as follows:

On October 5, 1987, petitioner Cecilio S. de Villa was charged before the Regional Trial Court of the
National Capital Judicial Region (Makati, Branch 145) with violation of Batas Pambansa Bilang 22,
allegedly committed as follows:

That on or about the 3rd day of April 1987, in the municipality of Makati, Metro Manila, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused, did, then and there willfully,
unlawfully and feloniously make or draw and issue to ROBERTO Z. LORAYEZ, to apply on account or for
value a Depositors Trust Company Check No. 3371 antedated March 31, 1987, payable to herein
complainant in the total amount of U.S. $2,500.00 equivalent to P50,000.00, said accused well knowing
that at the time of issue he had no sufficient funds in or credit with drawee bank for payment of such
check in full upon its presentment which check when presented to the drawee bank within ninety (90)
days from the date thereof was subsequently dishonored for the reason "INSUFFICIENT FUNDS" and
despite receipt of notice of such dishonor said accused failed to pay said ROBERTO Z. LORAYEZ the
amount of P50,000.00 of said check or to make arrangement for full payment of the same within five (5)
banking days after receiving said notice.

After arraignment and after private respondent had testified on direct examination, petitioner moved to
dismiss the Information on the following grounds: (a) Respondent court has no jurisdiction over the
offense charged; and (b) That no offense was committed since the check involved was payable in dollars,
hence, the obligation created is null and void pursuant to Republic Act No. 529 (An Act to Assure
Uniform Value of Philippine Coin and Currency).

On July 19, 1988, respondent court issued its first questioned orders stating:

Accused's motion to dismiss dated July 5, 1988, is denied for lack of merit.

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided they are either drawn and issued
in the Philippines though payable outside thereof, or made payable and dishonored in the Philippines
though drawn and issued outside thereof, are within the coverage of said law. The law likewise applied
to checks drawn against current accounts in foreign currency.

Petitioner moved for reconsideration but his motion was subsequently denied by respondent court in its
order dated September 6, 1988, and which reads:

Accused's motion for reconsideration, dated August 9, 1988, which was opposed by the prosecution, is
denied for lack of merit.

The Bouncing Checks Law is applicable to checks drawn against current accounts in foreign currency
(Proceedings of the Batasang Pambansa, February 7, 1979, p. 1376, cited in Makati RTC Judge (now
Manila City Fiscal) Jesus F. Guerrero's The Ramifications of the Law on Bouncing Checks, p. 5). (Rollo,
Annex "A", Decision, pp. 20-22).

A petition for certiorari seeking to declare the nullity of the aforequoted orders dated July 19, 1988 and
September 6, 1988 was filed by the petitioner in the Court of Appeals wherein he contended:

(a) That since the questioned check was drawn against the dollar account of petitioner with a
foreign bank, respondent court has no jurisdiction over the same or with accounts outside the territorial
jurisdiction of the Philippines and that Batas Pambansa Bilang 22 could have not contemplated
extending its coverage over dollar accounts;

(b) That assuming that the subject check was issued in connection with a private transaction
between petitioner and private respondent, the payment could not be legally paid in dollars as it would
violate Republic Act No. 529; and

(c) That the obligation arising from the issuance of the questioned check is null and void and is not
enforceable with the Philippines either in a civil or criminal suit. Upon such premises, petitioner
concludes that the dishonor of the questioned check cannot be said to have violated the provisions of
Batas Pambansa Bilang 22. (Rollo, Annex "A", Decision, p. 22).

On February 1, 1989, the Court of Appeals rendered a decision, the decretal portion of which reads:

WHEREFORE, the petition is hereby dismissed. Costs against petitioner.

SO ORDERED. (Rollo, Annex "A", Decision, p. 5)

A motion for reconsideration of the said decision was filed by the petitioner on February 7, 1989 (Rollo,
Petition, p. 6) but the same was denied by the Court of Appeals in its resolution dated March 3, 1989
(Rollo, Annex "B", p. 26).

Hence, this petition.

In its resolution dated November 13, 1989, the Second Division of this Court gave due course to the
petition and required the parties to submit simultaneously their respective memoranda (Rollo,
Resolution, p. 81).

The sole issue in this case is whether or not the Regional Trial Court of Makati has jurisdiction over the
case in question.

The petition is without merit.

Jurisdiction is the power with which courts are invested for administering justice, that is, for hearing and
deciding cases (Velunta vs. Philippine Constabulary, 157 SCRA 147 [1988]).

Jurisdiction in general, is either over the nature of the action, over the subject matter, over the person
of the defendant, or over the issues framed in the pleadings (Balais vs. Balais, 159 SCRA 37 [1988]).

Jurisdiction over the subject matter is determined by the statute in force at the time of commencement
of the action (De la Cruz vs. Moya, 160 SCRA 538 [1988]).

The trial court's jurisdiction over the case, subject of this review, can not be questioned.

Sections 10 and 15(a), Rule 110 of the Rules of Court specifically provide that:

Sec. 10. Place of the commission of the offense. The complaint or information is sufficient if it can be
understood therefrom that the offense was committed or some of the essential ingredients thereof
occured at some place within the jurisdiction of the court, unless the particular place wherein it was
committed constitutes an essential element of the offense or is necessary for identifying the offense
charged.

Sec. 15. Place where action is to be instituted. (a) Subject to existing laws, in all criminal prosecutions
the action shall be instituted and tried in the court of the municipality or territory where the offense was
committed or any of the essential ingredients thereof took place.

In the case of People vs. Hon. Manzanilla (156 SCRA 279 [1987] cited in the case of Lim vs. Rodrigo, 167
SCRA 487 [1988]), the Supreme Court ruled "that jurisdiction or venue is determined by the allegations
in the information."

The information under consideration specifically alleged that the offense was committed in Makati,
Metro Manila and therefore, the same is controlling and sufficient to vest jurisdiction upon the Regional
Trial Court of Makati. The Court acquires jurisdiction over the case and over the person of the accused
upon the filing of a complaint or information in court which initiates a criminal action (Republic vs.
Sunga, 162 SCRA 191 [1988]).

Moreover, it has been held in the case of Que v. People of the Philippines (154 SCRA 160 [1987] cited in
the case of People vs. Grospe, 157 SCRA 154 [1988]) that "the determinative factor (in determining
venue) is the place of the issuance of the check."

On the matter of venue for violation of Batas Pambansa Bilang 22, the Ministry of Justice, citing the case
of People vs. Yabut (76 SCRA 624 [1977], laid down the following guidelines in Memorandum Circular
No. 4 dated December 15, 1981, the pertinent portion of which reads:

(1) Venue of the offense lies at the place where the check was executed and delivered; (2) the place
where the check was written, signed or dated does not necessarily fix the place where it was executed,
as what is of decisive importance is the delivery thereof which is the final act essential to its
consummation as an obligation; . . . (Res. No. 377, s. 1980, Filtex Mfg. Corp. vs. Manuel Chua, October
28, 1980)." (See The Law on Bouncing Checks Analyzed by Judge Jesus F. Guerrero, Philippine Law
Gazette, Vol. 7. Nos. 11 & 12, October-December, 1983, p. 14).

It is undisputed that the check in question was executed and delivered by the petitioner to herein
private respondent at Makati, Metro Manila.

However, petitioner argues that the check in question was drawn against the dollar account of
petitioner with a foreign bank, and is therefore, not covered by the Bouncing Checks Law (B.P. Blg. 22).

But it will be noted that the law does not distinguish the currency involved in the case. As the trial court
correctly ruled in its order dated July 5, 1988:

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided they are either drawn and issued
in the Philippines though payable outside thereof . . . are within the coverage of said law.

It is a cardinal principle in statutory construction that where the law does not distinguish courts should
not distinguish. Parenthetically, the rule is that where the law does not make any exception, courts may
not except something unless compelling reasons exist to justify it (Phil. British Assurance Co., Inc. vs. IAC,
150 SCRA 520 [1987]).

More importantly, it is well established that courts may avail themselves of the actual proceedings of
the legislative body to assist in determining the construction of a statute of doubtful meaning (Palanca
vs. City of Manila, 41 Phil. 125 [1920]). Thus, where there is doubts as to what a provision of a statute
means, the meaning put to the provision during the legislative deliberation or discussion on the bill may
be adopted (Arenas vs. City of San Carlos, 82 SCRA 318 [1978]).

The records of the Batasan, Vol. III, unmistakably show that the intention of the lawmakers is to apply
the law to whatever currency may be the subject thereof. The discussion on the floor of the then
Batasang Pambansa fully sustains this view, as follows:

xxx xxx xxx

THE SPEAKER. The Gentleman from Basilan is recognized.

MR. TUPAY. Parliamentary inquiry, Mr. Speaker.

THE SPEAKER. The Gentleman may proceed.

MR. TUPAY. Mr. Speaker, it has been mentioned by one of the Gentlemen who interpellated that
any check may be involved, like U.S. dollar checks, etc. We are talking about checks in our country.
There are U.S. dollar checks, checks, in our currency, and many others.

THE SPEAKER. The Sponsor may answer that inquiry.

MR. MENDOZA. The bill refers to any check, Mr. Speaker, and this check may be a check in whatever
currency. This would not even be limited to U.S. dollar checks. The check may be in French francs or
Japanese yen or deutschunorhs. (sic.) If drawn, then this bill will apply.

MR TUPAY. So it include U.S. dollar checks.

MR. MENDOZA. Yes, Mr. Speaker.

xxx xxx xxx

(p. 1376, Records of the Batasan, Volume III; Emphasis supplied).

PREMISES CONSIDERED, the petition is DISMISSED for lack of merit.

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



Footnotes

* Penned by Associate Justice Jose A. R. Melo and concurred in by Associate Justices Manuel C.
Herrera and Jorge S. Imperial.

























Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 124354 April 11, 2002
ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians of the minors,
ROMMEL RAMOS, ROY RODERICK RAMOS, and RON RAYMOND RAMOS, petitioners,
vs.
COURT OF APPEALS, DE LOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and DR. PERFECTA
GUTIERREZ, respondents.
R E S O L U T I O N
KAPUNAN, J.:
Private respondents De Los Santos Medical Center, Dr. Orlino Hosaka and Dr. Perfecta Gutierrez move
for a reconsideration of the Decision, dated December 29, 1999, of this Court holding them civilly liable
for petitioner Erlinda Ramos comatose condition after she delivered herself to them for their
professional care and management.
For better understanding of the issues raised in private respondents respective motions, we will briefly
restate the facts of the case as follows:
Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical help, was advised to
undergo an operation for the removal of a stone in her gall bladder (cholecystectomy). She was referred
to Dr. Hosaka, a surgeon, who agreed to perform the operation on her. The operation was scheduled for
June 17, 1985 at 9:00 in the morning at private respondent De Los Santos Medical Center (DLSMC). Since
neither petitioner Erlinda nor her husband, petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka
recommended to them the services of Dr. Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation. By 7:30 in the
morning of the following day, petitioner Erlinda was already being prepared for operation. Upon the
request of petitioner Erlinda, her sister-in-law, Herminda Cruz, who was then Dean of the College of
Nursing at the Capitol Medical Center, was allowed to accompany her inside the operating room.
At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in touch with
him by phone. Thereafter, Dr. Gutierrez informed Cruz that the operation might be delayed due to the
late arrival of Dr. Hosaka. In the meantime, the patient, petitioner Erlinda said to Cruz, "Mindy, inip na
inip na ako, ikuha mo ako ng ibang Doctor."
By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio already wanted to pull
out his wife from the operating room. He met Dr. Garcia, who remarked that he was also tired of waiting
for Dr. Hosaka. Dr. Hosaka finally arrived at the hospital at around 12:10 in the afternoon, or more than
three (3) hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas arrival. While she held the
hand of Erlinda, Cruz saw Dr. Gutierrez trying to intubate the patient. Cruz heard Dr. Gutierrez utter:
"ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." Cruz noticed a bluish
discoloration of Erlindas nailbeds on her left hand. She (Cruz) then heard Dr. Hosaka instruct someone
to call Dr. Calderon, another anesthesiologist. When he arrived, Dr. Calderon attempted to intubate the
patient. The nailbeds of the patient remained bluish, thus, she was placed in a trendelenburg position
a position where the head of the patient is placed in a position lower than her feet. At this point, Cruz
went out of the operating room to express her concern to petitioner Rogelio that Erlindas operation
was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was still in trendelenburg
position. At almost 3:00 in the afternoon, she saw Erlinda being wheeled to the Intensive Care Unit
(ICU). The doctors explained to petitioner Rogelio that his wife had bronchospasm. Erlinda stayed in the
ICU for a month. She was released from the hospital only four months later or on November 15, 1985.
Since the ill-fated operation, Erlinda remained in comatose condition until she died on August 3, 1999.
1

Petitioners filed with the Regional Trial Court of Quezon City a civil case for damages against private
respondents. After due trial, the court a quo rendered judgment in favor of petitioners. Essentially, the
trial court found that private respondents were negligent in the performance of their duties to Erlinda.
On appeal by private respondents, the Court of Appeals reversed the trial courts decision and directed
petitioners to pay their "unpaid medical bills" to private respondents.
Petitioners filed with this Court a petition for review on certiorari. The private respondents were then
required to submit their respective comments thereon. On December 29, 1999, this Court promulgated
the decision which private respondents now seek to be reconsidered. The dispositive portion of said
Decision states:
WHEREFORE, the decision and resolution of the appellate court appealed from are hereby
modified so as to award in favor of petitioners, and solidarily against private respondents the
following: 1) P1,352,000.00 as actual damages computed as of the date of promulgation of this
decision plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda Ramos
expires or miraculously survives; 2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as
temperate damages; 4) P100,000.00 each exemplary damages and attorneys fees; and 5) the
costs of the suit.
2

In his Motion for Reconsideration, private respondent Dr. Hosaka submits the following as grounds
therefor:
I
THE HONORABLE SUPREME COURT COMMITTED REVERSIBLE ERROR WHEN IT HELD RESPONDENT DR.
HOSAKA LIABLE ON THE BASIS OF THE "CAPTAIN-OF-THE-SHIP" DOCTRINE.
II
THE HONORABLE SUPREME COURT ERRED IN HOLDING RESPONDENT DR. HOSAKA LIABLE DESPITE THE
FACT THAT NO NEGLIGENCE CAN BE ATTRIBUTABLE TO HIM.
III
ASSUMING WITHOUT ADMITTING THAT RESPONDENT DR. HOSAKA IS LIABLE, THE HONORABLE
SUPREME COURT ERRED IN AWARDING DAMAGES THAT WERE CLEARLY EXCESSIVE AND WITHOUT
LEGAL BASIS.
3

Private respondent Dr. Gutierrez, for her part, avers that:
A. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY OVERLOOKED THE FACT
THAT THE COURT OF APPEALS DECISION DATED 29 MAY 1995 HAD ALREADY BECOME FINAL
AND EXECUTORY AS OF 25 JUNE 1995, THEREBY DEPRIVING THIS HONORABLE COURT OF
JURISDICTION OVER THE INSTANT PETITION;
B. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY OVERLOOKED SEVERAL
MATERIAL FACTUAL CIRCUMSTANCES WHICH, IF PROPERLY CONSIDERED, WOULD INDUBITABLY
LEAD TO NO OTHER CONCLUSION BUT THAT PRIVATE RESPONDENT DOCTORS WERE NOT
GUILTY OF ANY NEGLIGENCE IN RESPECT OF THE INSTANT CASE;
B.1 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS SUFFICIENTLY DISCHARGED THE
BURDEN OF EVIDENCE BY SUBSTANTIAL PROOF OF HER COMPLIANCE WITH THE
STANDARDS OF DUE CARE EXPECTED IN HER RESPECTIVE FIELD OF MEDICAL
SPECIALIZATION.
B.2 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS SUFFICIENTLY DISCHARGED THE
BURDEN OF EVIDENCE BY SUBSTANTIAL PROOF OF HER HAVING SUCCESSFULLY
INTUBATED PATIENT ERLINDA RAMOS
C. THE SUPREME COURT MAY HAVE INADVERTENTLY PLACED TOO MUCH RELIANCE ON THE
TESTIMONY OF PETITIONERS WITNESS HERMINDA CRUZ, DESPITE THE EXISTENCE OF SEVERAL
FACTUAL CIRCUMSTANCES WHICH RENDERS DOUBT ON HER CREDIBILITY
D. THE SUPREME COURT MAY HAVE INADVERTENTLY DISREGARDED THE EXPERT TESTIMONY OF
DR. JAMORA AND DRA. CALDERON
E. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY AWARDED DAMAGES TO
PETITIONERS DESPITE THE FACT THAT THERE WAS NO NEGLIGENCE ON THE PART OF
RESPONDENT DOCTOR.
4

Private respondent De Los Santos Medical Center likewise moves for reconsideration on the following
grounds:
I
THE HONORABLE COURT ERRED IN GIVING DUE COURSE TO THE INSTANT PETITION AS THE DECISION OF
THE HONORABLE COURT OF APPEALS HAD ALREADY BECOME FINAL AND EXECUTORY
II
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT AN EMPLOYER-EMPLOYEE [RELATIONSHIP]
EXISTS BETWEEN RESPONDENT DE LOS SANTOS MEDICAL CENTER AND DRS. ORLINO HOSAKA AND
PERFECTA GUTIERREZ
III
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT RESPONDENT DE LOS SANTOS MEDICAL
CENTER IS SOLIDARILY LIABLE WITH RESPONDENT DOCTORS
IV
THE HONORABLE SUPREME COURT ERRED IN INCREASING THE AWARD OF DAMAGES IN FAVOR OF
PETITIONERS.
5

In the Resolution of February 21, 2000, this Court denied the motions for reconsideration of private
respondents Drs. Hosaka and Gutierrez. They then filed their respective second motions for
reconsideration. The Philippine College of Surgeons filed its Petition-in-Intervention contending in the
main that this Court erred in holding private respondent Dr. Hosaka liable under the captain of the ship
doctrine. According to the intervenor, said doctrine had long been abandoned in the United States in
recognition of the developments in modern medical and hospital practice.
6
The Court noted these
pleadings in the Resolution of July 17, 2000.
7

On March 19, 2001, the Court heard the oral arguments of the parties, including the intervenor. Also
present during the hearing were the amicii curiae: Dr. Felipe A. Estrella, Jr., Consultant of the Philippine
Charity Sweepstakes, former Director of the Philippine General Hospital and former Secretary of Health;
Dr. Iluminada T. Camagay, President of the Philippine Society of Anesthesiologists, Inc. and Professor
and Vice-Chair for Research, Department of Anesthesiology, College of Medicine-Philippine General
Hospital, University of the Philippines; and Dr. Lydia M. Egay, Professor and Vice-Chair for Academics,
Department of Anesthesiology, College of Medicine-Philippine General Hospital, University of the
Philippines.
The Court enumerated the issues to be resolved in this case as follows:
1. WHETHER OR NOT DR. ORLINO HOSAKA (SURGEON) IS LIABLE FOR NEGLIGENCE;
2. WHETHER OR NOT DR. PERFECTA GUTIERREZ (ANESTHESIOLOGIST) IS LIABLE FOR
NEGLIGENCE; AND
3. WHETHER OR NOT THE HOSPITAL (DELOS SANTOS MEDICAL CENTER) IS LIABLE FOR ANY ACT
OF NEGLIGENCE COMMITTED BY THEIR VISITING CONSULTANT SURGEON AND
ANESTHESIOLOGIST.
8

We shall first resolve the issue pertaining to private respondent Dr. Gutierrez. She maintains that the
Court erred in finding her negligent and in holding that it was the faulty intubation which was the
proximate cause of Erlindas comatose condition. The following objective facts allegedly negate a finding
of negligence on her part: 1) That the outcome of the procedure was a comatose patient and not a dead
one; 2) That the patient had a cardiac arrest; and 3) That the patient was revived from that cardiac
arrest.
9
In effect, Dr. Gutierrez insists that, contrary to the finding of this Court, the intubation she
performed on Erlinda was successful.
Unfortunately, Dr. Gutierrez claim of lack of negligence on her part is belied by the records of the case.
It has been sufficiently established that she failed to exercise the standards of care in the administration
of anesthesia on a patient. Dr. Egay enlightened the Court on what these standards are:
x x x What are the standards of care that an anesthesiologist should do before we administer
anesthesia? The initial step is the preparation of the patient for surgery and this is a pre-
operative evaluation because the anesthesiologist is responsible for determining the medical
status of the patient, developing the anesthesia plan and acquainting the patient or the
responsible adult particularly if we are referring with the patient or to adult patient who may
not have, who may have some mental handicaps of the proposed plans. We do pre-operative
evaluation because this provides for an opportunity for us to establish identification and
personal acquaintance with the patient. It also makes us have an opportunity to alleviate
anxiety, explain techniques and risks to the patient, given the patient the choice and
establishing consent to proceed with the plan. And lastly, once this has been agreed upon by all
parties concerned the ordering of pre-operative medications. And following this line at the end
of the evaluation we usually come up on writing, documentation is very important as far as
when we train an anesthesiologist we always emphasize this because we need records for our
protection, well, records. And it entails having brief summary of patient history and physical
findings pertinent to anesthesia, plan, organize as a problem list, the plan anesthesia technique,
the plan post operative, pain management if appropriate, special issues for this particular
patient. There are needs for special care after surgery and if it so it must be written down there
and a request must be made known to proper authorities that such and such care is necessary.
And the request for medical evaluation if there is an indication. When we ask for a cardio-
pulmonary clearance it is not in fact to tell them if this patient is going to be fit for anesthesia,
the decision to give anesthesia rests on the anesthesiologist. What we ask them is actually to
give us the functional capacity of certain systems which maybe affected by the anesthetic agent
or the technique that we are going to use. But the burden of responsibility in terms of selection
of agent and how to administer it rest on the anesthesiologist.
10

The conduct of a preanesthetic/preoperative evaluation prior to an operation, whether elective or
emergency, cannot be dispensed with.
11
Such evaluation is necessary for the formulation of a plan of
anesthesia care suited to the needs of the patient concerned.
Pre-evaluation for anesthesia involves taking the patients medical history, reviewing his current drug
therapy, conducting physical examination, interpreting laboratory data, and determining the
appropriate prescription of preoperative medications as necessary to the conduct of anesthesia.
12

Physical examination of the patient entails not only evaluating the patients central nervous system,
cardiovascular system and lungs but also the upper airway. Examination of the upper airway would in
turn include an analysis of the patients cervical spine mobility, temporomandibular mobility, prominent
central incisors, deceased or artificial teeth, ability to visualize uvula and the thyromental distance.
13

Nonetheless, Dr. Gutierrez omitted to perform a thorough preoperative evaluation on Erlinda. As she
herself admitted, she saw Erlinda for the first time on the day of the operation itself, one hour before
the scheduled operation. She auscultated
14
the patients heart and lungs and checked the latters blood
pressure to determine if Erlinda was indeed fit for operation.
15
However, she did not proceed to
examine the patients airway. Had she been able to check petitioner Erlindas airway prior to the
operation, Dr. Gutierrez would most probably not have experienced difficulty in intubating the former,
and thus the resultant injury could have been avoided. As we have stated in our Decision:
In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first time on
the day of the operation itself, on 17 June 1985. Before this date, no prior consultations with, or
pre-operative evaluation of Erlinda was done by her. Until the day of the operation, respondent
Dra. Gutierrez was unaware of the physiological make-up and needs of Erlinda. She was likewise
not properly informed of the possible difficulties she would face during the administration of
anesthesia to Erlinda. Respondent Dra. Gutierrez act of seeing her patient for the first time only
an hour before the scheduled operative procedure was, therefore, an act of exceptional
negligence and professional irresponsibility. The measures cautioning prudence and vigilance in
dealing with human lives lie at the core of the physicians centuries-old Hippocratic Oath. Her
failure to follow this medical procedure is, therefore, a clear indicia of her negligence.
16

Further, there is no cogent reason for the Court to reverse its finding that it was the faulty intubation on
Erlinda that caused her comatose condition. There is no question that Erlinda became comatose after
Dr. Gutierrez performed a medical procedure on her. Even the counsel of Dr. Gutierrez admitted to this
fact during the oral arguments:
CHIEF JUSTICE:
Mr. Counsel, you started your argument saying that this involves a comatose patient?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
How do you mean by that, a comatose, a comatose after any other acts were done by
Dr. Gutierrez or comatose before any act was done by her?
ATTY. GANA:
No, we meant comatose as a final outcome of the procedure.
CHIEF JUSTICE:
Meaning to say, the patient became comatose after some intervention, professional
acts have been done by Dr. Gutierrez?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
In other words, the comatose status was a consequence of some acts performed by D.
Gutierrez?
ATTY. GANA:
It was a consequence of the well, (interrupted)
CHIEF JUSTICE:
An acts performed by her, is that not correct?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
Thank you.
17

What is left to be determined therefore is whether Erlindas hapless condition was due to any fault or
negligence on the part of Dr. Gutierrez while she (Erlinda) was under the latters care. Dr. Gutierrez
maintains that the bronchospasm and cardiac arrest resulting in the patients comatose condition was
brought about by the anaphylactic reaction of the patient to Thiopental Sodium (pentothal).
18
In the
Decision, we explained why we found Dr. Gutierrez theory unacceptable. In the first place, Dr. Eduardo
Jamora, the witness who was presented to support her (Dr. Gutierrez) theory, was a pulmonologist.
Thus, he could not be considered an authority on anesthesia practice and procedure and their
complications.
19

Secondly, there was no evidence on record to support the theory that Erlinda developed an allergic
reaction to pentothal. Dr. Camagay enlightened the Court as to the manifestations of an allergic reaction
in this wise:
DR. CAMAGAY:
All right, let us qualify an allergic reaction. In medical terminology an allergic reaction is
something which is not usual response and it is further qualified by the release of a
hormone called histamine and histamine has an effect on all the organs of the body
generally release because the substance that entered the body reacts with the
particular cell, the mass cell, and the mass cell secretes this histamine. In a way it is
some form of response to take away that which is not mine, which is not part of the
body. So, histamine has multiple effects on the body. So, one of the effects as you will
see you will have redness, if you have an allergy you will have tearing of the eyes, you
will have swelling, very crucial swelling sometimes of the larynges which is your voice
box main airway, that swelling may be enough to obstruct the entry of air to the trachea
and you could also have contraction, constriction of the smaller airways beyond the
trachea, you see you have the trachea this way, we brought some visual aids but
unfortunately we do not have a projector. And then you have the smaller airways, the
bronchi and then eventually into the mass of the lungs you have the bronchus. The
difference is that these tubes have also in their walls muscles and this particular kind of
muscles is smooth muscle so, when histamine is released they close up like this and that
phenomenon is known as bronco spasm. However, the effects of histamine also on
blood vessels are different. They dilate blood vessel open up and the patient or whoever
has this histamine release has hypertension or low blood pressure to a point that the
patient may have decrease blood supply to the brain and may collapse so, you may have
people who have this.
20

These symptoms of an allergic reaction were not shown to have been extant in Erlindas case. As we
held in our Decision, "no evidence of stridor, skin reactions, or wheezing some of the more common
accompanying signs of an allergic reaction appears on record. No laboratory data were ever presented
to the court."
21

Dr. Gutierrez, however, insists that she successfully intubated Erlinda as evidenced by the fact that she
was revived after suffering from cardiac arrest. Dr. Gutierrez faults the Court for giving credence to the
testimony of Cruz on the matter of the administration of anesthesia when she (Cruz), being a nurse, was
allegedly not qualified to testify thereon. Rather, Dr. Gutierrez invites the Courts attention to her
synopsis on what transpired during Erlindas intubation:
12:15 p.m. Patient was inducted with sodium pentothal 2.5% (250 mg) given by slow IV. 02 was
started by mask. After pentothal injection this was followed by IV injection of Norcuron 4mg.
After 2 minutes 02 was given by positive pressure for about one minute. Intubation with
endotracheal tube 7.5 m in diameter was done with slight difficulty (short neck & slightly
prominent upper teeth) chest was examined for breath sounds & checked if equal on both sides.
The tube was then anchored to the mouth by plaster & cuff inflated. Ethrane 2% with 02 4 liters
was given. Blood pressure was checked 120/80 & heart rate regular and normal 90/min.
12:25 p.m. After 10 minutes patient was cyanotic. Ethrane was discontinued & 02 given alone.
Cyanosis disappeared. Blood pressure and heart beats stable.
12:30 p.m. Cyanosis again reappeared this time with sibilant and sonorous rales all over the
chest. D_5%_H20 & 1 ampule of aminophyline by fast drip was started. Still the cyanosis was
persistent. Patient was connected to a cardiac monitor. Another ampule of of [sic] aminophyline
was given and solu cortef was given.
12:40 p.m. There was cardiac arrest. Extra cardiac massage and intercardiac injection of
adrenalin was given & heart beat reappeared in less than one minute. Sodium bicarbonate &
another dose of solu cortef was given by IV. Cyanosis slowly disappeared & 02 continuously
given & assisted positive pressure. Laboratory exams done (see results in chart).
Patient was transferred to ICU for further management.
22

From the foregoing, it can be allegedly seen that there was no withdrawal (extubation) of the tube. And
the fact that the cyanosis allegedly disappeared after pure oxygen was supplied through the tube
proved that it was properly placed.
The Court has reservations on giving evidentiary weight to the entries purportedly contained in Dr.
Gutierrez synopsis. It is significant to note that the said record prepared by Dr. Gutierrez was made only
after Erlinda was taken out of the operating room. The standard practice in anesthesia is that every
single act that the anesthesiologist performs must be recorded. In Dr. Gutierrez case, she could not
account for at least ten (10) minutes of what happened during the administration of anesthesia on
Erlinda. The following exchange between Dr. Estrella, one of the amicii curiae, and Dr. Gutierrez is
instructive:
DR. ESTRELLA
Q You mentioned that there were two (2) attempts in the intubation period?
DR. GUTIERREZ
Yes.
Q There were two attempts. In the first attempt was the tube inserted or was the
laryngoscope only inserted, which was inserted?
A All the laryngoscope.
Q All the laryngoscope. But if I remember right somewhere in the re-direct, a certain
lawyer, you were asked that you did a first attempt and the question was did you withdraw
the tube? And you said you never withdrew the tube, is that right?
A Yes.
Q Yes. And so if you never withdrew the tube then there was no, there was no insertion of
the tube during that first attempt. Now, the other thing that we have to settle here is when
cyanosis occurred, is it recorded in the anesthesia record when the cyanosis, in your recording
when did the cyanosis occur?
A (sic)
Q Is it a standard practice of anesthesia that whatever you do during that period or from
the time of induction to the time that you probably get the patient out of the operating room
that every single action that you do is so recorded in your anesthesia record?
A I was not able to record everything I did not have time anymore because I did that after
the, when the patient was about to leave the operating room. When there was second cyanosis
already that was the (interrupted)
Q When was the first cyanosis?
A The first cyanosis when I was (interrupted)
Q What time, more or less?
A I think it was 12:15 or 12:16.
Q Well, if the record will show you started induction at 12:15?
A Yes, Your Honor.
Q And the first medication you gave was what?
A The first medication, no, first the patient was oxygenated for around one to two minutes.
Q Yes, so, that is about 12:13?
A Yes, and then, I asked the resident physician to start giving the pentothal very slowly and
that was around one minute.
Q So, that is about 12:13 no, 12:15, 12:17?
A Yes, and then, after one minute another oxygenation was given and after (interrupted)
Q 12:18?
A Yes, and then after giving the oxygen we start the menorcure which is a relaxant. After
that relaxant (interrupted)
Q After that relaxant, how long do you wait before you do any manipulation?
A Usually you wait for two minutes or three minutes.
Q So, if our estimate of the time is accurate we are now more or less 12:19, is that right?
A Maybe.
Q 12:19. And at that time, what would have been done to this patient?
A After that time you examine the, if there is relaxation of the jaw which you push it
downwards and when I saw that the patient was relax because that monorcure is a relaxant, you
cannot intubate the patient or insert the laryngoscope if it is not keeping him relax. So, my first
attempt when I put the laryngoscope on I saw the trachea was deeply interiorly. So, what I did
ask "mahirap ata ito ah." So, I removed the laryngoscope and oxygenated again the patient.
Q So, more or less you attempted to do an intubation after the first attempt as you claimed
that it was only the laryngoscope that was inserted.
A Yes.
Q And in the second attempt you inserted the laryngoscope and now possible intubation?
A Yes.
Q And at that point, you made a remark, what remark did you make?
A I said "mahirap ata ito" when the first attempt I did not see the trachea right away. That
was when I (interrupted)
Q That was the first attempt?
A Yes.
Q What about the second attempt?
A On the second attempt I was able to intubate right away within two to three seconds.
Q At what point, for purposes of discussion without accepting it, at what point did you
make the comment "na mahirap ata to intubate, mali ata ang pinasukan"
A I did not say "mali ata ang pinasukan" I never said that.
Q Well, just for the information of the group here the remarks I am making is based on the
documents that were forwarded to me by the Supreme Court. That is why for purposes of
discussion I am trying to clarify this for the sake of enlightenment. So, at what point did you ever
make that comment?
A Which one, sir?
Q The "mahirap intubate ito" assuming that you (interrupted)
A Iyon lang, that is what I only said "mahirap intubate (interrupted)
Q At what point?
A When the first attempt when I inserted the laryngoscope for the first time.
Q So, when you claim that at the first attempt you inserted the laryngoscope, right?
A Yes.
Q But in one of the recordings somewhere at the, somewhere in the transcript of records
that when the lawyer of the other party try to inquire from you during the first attempt that was
the time when "mayroon ba kayong hinugot sa tube, I do not remember the page now, but it
seems to me it is there. So, that it was on the second attempt that (interrupted)
A I was able to intubate.
Q And this is more or less about what time 12:21?
A Maybe, I cannot remember the time, Sir.
Q Okay, assuming that this was done at 12:21 and looking at the anesthesia records from
12:20 to 12:30 there was no recording of the vital signs. And can we presume that at this stage
there was already some problems in handling the patient?
A Not yet.
Q But why are there no recordings in the anesthesia record?
A I did not have time.
Q Ah, you did not have time, why did you not have time?
A Because it was so fast, I really (at this juncture the witness is laughing)
Q No, I am just asking. Remember I am not here not to pin point on anybody I am here just
to more or less clarify certainty more ore less on the record.
A Yes, Sir.
Q And so it seems that there were no recording during that span of ten (10) minutes. From
12:20 to 12:30, and going over your narration, it seems to me that the cyanosis appeared ten
(10) minutes after induction, is that right?
A Yes.
Q And that is after induction 12:15 that is 12:25 that was the first cyanosis?
A Yes.
Q And that the 12:25 is after the 12:20?
A We cannot (interrupted)
Q Huwag ho kayong makuwan, we are just trying to enlighten, I am just going over the
record ano,kung mali ito kuwan eh di ano. So, ganoon po ano, that it seems to me that there is
no recording from 12:20 to 12:30, so, I am just wondering why there were no recordings during
the period and then of course the second cyanosis, after the first cyanosis. I think that was the
time Dr. Hosaka came in?
A No, the first cyanosis (interrupted).
23

We cannot thus give full credence to Dr. Gutierrez synopsis in light of her admission that it does not
fully reflect the events that transpired during the administration of anesthesia on Erlinda. As pointed out
by Dr. Estrella, there was a ten-minute gap in Dr. Gutierrez synopsis, i.e., the vital signs of Erlinda were
not recorded during that time. The absence of these data is particularly significant because, as found by
the trial court, it was the absence of oxygen supply for four (4) to five (5) minutes that caused Erlindas
comatose condition.
On the other hand, the Court has no reason to disbelieve the testimony of Cruz. As we stated in the
Decision, she is competent to testify on matters which she is capable of observing such as, the
statements and acts of the physician and surgeon, external appearances and manifest conditions which
are observable by any one.
24
Cruz, Erlindas sister-in-law, was with her inside the operating room.
Moreover, being a nurse and Dean of the Capitol Medical Center School of Nursing at that, she is not
entirely ignorant of anesthetic procedure. Cruz narrated that she heard Dr. Gutierrez remark, "Ang hirap
ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." She observed that the nailbeds of
Erlinda became bluish and thereafter Erlinda was placed in trendelenburg position.
25
Cruz further
averred that she noticed that the abdomen of Erlinda became distended.
26

The cyanosis (bluish discoloration of the skin or mucous membranes caused by lack of oxygen or
abnormal hemoglobin in the blood) and enlargement of the stomach of Erlinda indicate that the
endotracheal tube was improperly inserted into the esophagus instead of the trachea. Consequently,
oxygen was delivered not to the lungs but to the gastrointestinal tract. This conclusion is supported by
the fact that Erlinda was placed in trendelenburg position. This indicates that there was a decrease of
blood supply to the patients brain. The brain was thus temporarily deprived of oxygen supply causing
Erlinda to go into coma.
The injury incurred by petitioner Erlinda does not normally happen absent any negligence in the
administration of anesthesia and in the use of an endotracheal tube. As was noted in our Decision, the
instruments used in the administration of anesthesia, including the endotracheal tube, were all under
the exclusive control of private respondents Dr. Gutierrez and Dr. Hosaka.
27
In Voss vs. Bridwell,
28
which
involved a patient who suffered brain damage due to the wrongful administration of anesthesia, and
even before the scheduled mastoid operation could be performed, the Kansas Supreme Court applied
the doctrine of res ipsa loquitur, reasoning that the injury to the patient therein was one which does not
ordinarily take place in the absence of negligence in the administration of an anesthetic, and in the use
and employment of an endotracheal tube. The court went on to say that "[o]rdinarily a person being put
under anesthesia is not rendered decerebrate as a consequence of administering such anesthesia in the
absence of negligence. Upon these facts and under these circumstances, a layman would be able to say,
as a matter of common knowledge and observation, that the consequences of professional treatment
were not as such as would ordinarily have followed if due care had been exercised."
29
Considering the
application of the doctrine of res ipsa loquitur, the testimony of Cruz was properly given credence in the
case at bar.
For his part, Dr. Hosaka mainly contends that the Court erred in finding him negligent as a surgeon by
applying the Captain-of-the-Ship doctrine.
30
Dr. Hosaka argues that the trend in United States
jurisprudence has been to reject said doctrine in light of the developments in medical practice. He points
out that anesthesiology and surgery are two distinct and specialized fields in medicine and as a surgeon,
he is not deemed to have control over the acts of Dr. Gutierrez. As anesthesiologist, Dr. Gutierrez is a
specialist in her field and has acquired skills and knowledge in the course of her training which Dr.
Hosaka, as a surgeon, does not possess.
31
He states further that current American jurisprudence on the
matter recognizes that the trend towards specialization in medicine has created situations where
surgeons do not always have the right to control all personnel within the operating room,
32
especially a
fellow specialist.
33

Dr. Hosaka cites the case of Thomas v. Raleigh General Hospital,
34
which involved a suit filed by a patient
who lost his voice due to the wrongful insertion of the endotracheal tube preparatory to the
administration of anesthesia in connection with the laparotomy to be conducted on him. The patient
sued both the anesthesiologist and the surgeon for the injury suffered by him. The Supreme Court of
Appeals of West Virginia held that the surgeon could not be held liable for the loss of the patients voice,
considering that the surgeon did not have a hand in the intubation of the patient. The court rejected the
application of the "Captain-of-the-Ship Doctrine," citing the fact that the field of medicine has become
specialized such that surgeons can no longer be deemed as having control over the other personnel in
the operating room. It held that "[a]n assignment of liability based on actual control more realistically
reflects the actual relationship which exists in a modern operating room."
35
Hence, only the
anesthesiologist who inserted the endotracheal tube into the patients throat was held liable for the
injury suffered by the latter.
This contention fails to persuade.
That there is a trend in American jurisprudence to do away with the Captain-of-the-Ship doctrine does
not mean that this Court will ipso facto follow said trend. Due regard for the peculiar factual
circumstances obtaining in this case justify the application of the Captain-of-the-Ship doctrine. From the
facts on record it can be logically inferred that Dr. Hosaka exercised a certain degree of, at the very least,
supervision over the procedure then being performed on Erlinda.
First, it was Dr. Hosaka who recommended to petitioners the services of Dr. Gutierrez. In effect, he
represented to petitioners that Dr. Gutierrez possessed the necessary competence and skills. Drs.
Hosaka and Gutierrez had worked together since 1977. Whenever Dr. Hosaka performed a surgery, he
would always engage the services of Dr. Gutierrez to administer the anesthesia on his patient.
36

Second, Dr. Hosaka himself admitted that he was the attending physician of Erlinda. Thus, when Erlinda
showed signs of cyanosis, it was Dr. Hosaka who gave instructions to call for another anesthesiologist
and cardiologist to help resuscitate Erlinda.
37

Third, it is conceded that in performing their responsibilities to the patient, Drs. Hosaka and Gutierrez
worked as a team. Their work cannot be placed in separate watertight compartments because their
duties intersect with each other.
38

While the professional services of Dr. Hosaka and Dr. Gutierrez were secured primarily for their
performance of acts within their respective fields of expertise for the treatment of petitioner Erlinda,
and that one does not exercise control over the other, they were certainly not completely independent
of each other so as to absolve one from the negligent acts of the other physician.
That they were working as a medical team is evident from the fact that Dr. Hosaka was keeping an eye
on the intubation of the patient by Dr. Gutierrez, and while doing so, he observed that the patients nails
had become dusky and had to call Dr. Gutierrezs attention thereto. The Court also notes that the
counsel for Dr. Hosaka admitted that in practice, the anesthesiologist would also have to observe the
surgeons acts during the surgical process and calls the attention of the surgeon whenever necessary
39
in
the course of the treatment. The duties of Dr. Hosaka and those of Dr. Gutierrez in the treatment of
petitioner Erlinda are therefore not as clear-cut as respondents claim them to be. On the contrary, it is
quite apparent that they have a common responsibility to treat the patient, which responsibility
necessitates that they call each others attention to the condition of the patient while the other
physician is performing the necessary medical procedures.
It is equally important to point out that Dr. Hosaka was remiss in his duty of attending to petitioner
Erlinda promptly, for he arrived more than three (3) hours late for the scheduled operation.
The cholecystectomy was set for June 17, 1985 at 9:00 a.m., but he arrived at DLSMC only at around
12:10 p.m. In reckless disregard for his patients well being, Dr. Hosaka scheduled two procedures on the
same day, just thirty minutes apart from each other, at different hospitals. Thus, when the first
procedure (protoscopy) at the Sta. Teresita Hospital did not proceed on time, Erlinda was kept in a state
of uncertainty at the DLSMC.
The unreasonable delay in petitioner Erlindas scheduled operation subjected her to continued
starvation and consequently, to the risk of acidosis,
40
or the condition of decreased alkalinity of the
blood and tissues, marked by sickly sweet breath, headache, nausea and vomiting, and visual
disturbances.
41
The long period that Dr. Hosaka made Erlinda wait for him certainly aggravated the
anxiety that she must have been feeling at the time. It could be safely said that her anxiety adversely
affected the administration of anesthesia on her. As explained by Dr. Camagay, the patients anxiety
usually causes the outpouring of adrenaline which in turn results in high blood pressure or disturbances
in the heart rhythm:
DR. CAMAGAY:
x x x Pre-operative medication has three main functions: One is to alleviate anxiety.
Second is to dry up the secretions and Third is to relieve pain. Now, it is very important
to alleviate anxiety because anxiety is associated with the outpouring of certain
substances formed in the body called adrenalin. When a patient is anxious there is an
outpouring of adrenalin which would have adverse effect on the patient. One of it is
high blood pressure, the other is that he opens himself to disturbances in the heart
rhythm, which would have adverse implications. So, we would like to alleviate patients
anxiety mainly because he will not be in control of his body there could be adverse
results to surgery and he will be opened up; a knife is going to open up his body. x x x
42

Dr. Hosaka cannot now claim that he was entirely blameless of what happened to Erlinda. His conduct
clearly constituted a breach of his professional duties to Erlinda:
CHIEF JUSTICE:
Two other points. The first, Doctor, you were talking about anxiety, would you consider
a patient's stay on the operating table for three hours sufficient enough to aggravate or
magnify his or her anxiety?
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
In other words, I understand that in this particular case that was the case, three hours
waiting and the patient was already on the operating table (interrupted)
DR. CAMAGAY:
Yes.
CHIEF JUSTICE:
Would you therefore conclude that the surgeon contributed to the aggravation of the
anxiety of the patient?
DR. CAMAGAY:
That this operation did not take place as scheduled is already a source of anxiety and
most operating tables are very narrow and that patients are usually at risk of falling on
the floor so there are restraints that are placed on them and they are never, never left
alone in the operating room by themselves specially if they are already pre-medicated
because they may not be aware of some of their movement that they make which
would contribute to their injury.
CHIEF JUSTICE:
In other words due diligence would require a surgeon to come on time?
DR. CAMAGAY:
I think it is not even due diligence it is courtesy.
CHIEF JUSTICE:
Courtesy.
DR. CAMAGAY:
And care.
CHIEF JUSTICE:
Duty as a matter of fact?
DR. CAMAGAY:
Yes, Your Honor.
43

Dr. Hosaka's irresponsible conduct of arriving very late for the scheduled operation of petitioner Erlinda
is violative, not only of his duty as a physician "to serve the interest of his patients with the greatest
solicitude, giving them always his best talent and skill,"
44
but also of Article 19 of the Civil Code which
requires a person, in the performance of his duties, to act with justice and give everyone his due.
Anent private respondent DLSMCs liability for the resulting injury to petitioner Erlinda, we held that
respondent hospital is solidarily liable with respondent doctors therefor under Article 2180 of the Civil
Code
45
since there exists an employer-employee relationship between private respondent DLSMC and
Drs. Gutierrez and Hosaka:
In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting "consultant" staff. While "consultants" are not, technically employees, x x x the control
exercised, the hiring and the right to terminate consultants all fulfill the important hallmarks of
an employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. x x x
46

DLSMC however contends that applying the four-fold test in determining whether such a relationship
exists between it and the respondent doctors, the inescapable conclusion is that DLSMC cannot be
considered an employer of the respondent doctors.
It has been consistently held that in determining whether an employer-employee relationship exists
between the parties, the following elements must be present: (1) selection and engagement of services;
(2) payment of wages; (3) the power to hire and fire; and (4) the power to control not only the end to be
achieved, but the means to be used in reaching such an end.
47

DLSMC maintains that first, a hospital does not hire or engage the services of a consultant, but rather,
accredits the latter and grants him or her the privilege of maintaining a clinic and/or admitting patients
in the hospital upon a showing by the consultant that he or she possesses the necessary qualifications,
such as accreditation by the appropriate board (diplomate), evidence of fellowship and
references.
48
Second, it is not the hospital but the patient who pays the consultants fee for services
rendered by the latter.
49
Third, a hospital does not dismiss a consultant; instead, the latter may lose his
or her accreditation or privileges granted by the hospital.
50
Lastly, DLSMC argues that when a doctor
refers a patient for admission in a hospital, it is the doctor who prescribes the treatment to be given to
said patient. The hospitals obligation is limited to providing the patient with the preferred room
accommodation, the nutritional diet and medications prescribed by the doctor, the equipment and
facilities necessary for the treatment of the patient, as well as the services of the hospital staff who
perform the ministerial tasks of ensuring that the doctors orders are carried out strictly.
51

After a careful consideration of the arguments raised by DLSMC, the Court finds that respondent
hospitals position on this issue is meritorious. There is no employer-employee relationship between
DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC solidarily liable for the injury suffered
by petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of a physician to membership in DLSMCs
medical staff as active or visiting consultant is first decided upon by the Credentials Committee thereof,
which is composed of the heads of the various specialty departments such as the Department of
Obstetrics and Gynecology, Pediatrics, Surgery with the department head of the particular specialty
applied for as chairman. The Credentials Committee then recommends to DLSMC's Medical Director or
Hospital Administrator the acceptance or rejection of the applicant physician, and said director or
administrator validates the committee's recommendation.
52
Similarly, in cases where a disciplinary
action is lodged against a consultant, the same is initiated by the department to whom the consultant
concerned belongs and filed with the Ethics Committee consisting of the department specialty heads.
The medical director/hospital administrator merely acts as ex-officio member of said committee.
Neither is there any showing that it is DLSMC which pays any of its consultants for medical services
rendered by the latter to their respective patients. Moreover, the contract between the consultant in
respondent hospital and his patient is separate and distinct from the contract between respondent
hospital and said patient. The first has for its object the rendition of medical services by the consultant
to the patient, while the second concerns the provision by the hospital of facilities and services by its
staff such as nurses and laboratory personnel necessary for the proper treatment of the patient.
Further, no evidence was adduced to show that the injury suffered by petitioner Erlinda was due to a
failure on the part of respondent DLSMC to provide for hospital facilities and staff necessary for her
treatment.
For these reasons, we reverse the finding of liability on the part of DLSMC for the injury suffered by
petitioner Erlinda.
Finally, the Court also deems it necessary to modify the award of damages to petitioners in view of the
supervening event of petitioner Erlindas death. In the assailed Decision, the Court awarded actual
damages of One Million Three Hundred Fifty Two Thousand Pesos (P1,352,000.00) to cover the
expenses for petitioner Erlindas treatment and care from the date of promulgation of the Decision up
to the time the patient expires or survives.
53
In addition thereto, the Court awarded temperate damages
of One Million Five Hundred Thousand Pesos (P1,500,000.00) in view of the chronic and continuing
nature of petitioner Erlindas injury and the certainty of further pecuniary loss by petitioners as a result
of said injury, the amount of which, however, could not be made with certainty at the time of the
promulgation of the decision. The Court justified such award in this manner:
Our rules on actual or compensatory damages generally assume that at the time of litigation,
the injury suffered as a consequence of an act of negligence has been completed and that the
cost can be liquidated. However, these provisions neglect to take into account those situations,
as in this case, where the resulting injury might be continuing and possible future complications
directly arising from the injury, while certain to occur, are difficult to predict.
In these cases, the amount of damages which should be awarded, if they are to adequately and
correctly respond to the injury caused, should be one which compensates for pecuniary loss
incurred and proved, up to the time of trial; and one which would meet pecuniary loss certain to
be suffered but which could not, from the nature of the case, be made with certainty. In other
words, temperate damages can and should be awarded on top of actual or compensatory
damages in instances where the injury is chronic and continuing. And because of the unique
nature of such cases, no incompatibility arises when both actual and temperate damages are
provided for. The reason is that these damages cover two distinct phases.
As it would not be equitableand certainly not in the best interests of the administration of
justicefor the victim in such cases to constantly come before the courts and invoke their aid in
seeking adjustments to the compensatory damages previously awardedtemperate damages
are appropriate. The amount given as temperate damages, though to a certain extent
speculative, should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care for a
comatose patient who has remained in that condition for over a decade. Having premised our
award for compensatory damages on the amount provided by petitioners at the onset of
litigation, it would be now much more in step with the interests of justice if the value awarded
for temperate damages would allow petitioners to provide optimal care for their loved one in a
facility which generally specializes in such care. They should not be compelled by dire
circumstances to provide substandard care at home without the aid of professionals, for
anything less would be grossly inadequate. Under the circumstances, an award of P1,500,000.00
in temperate damages would therefore be reasonable.
54

However, subsequent to the promulgation of the Decision, the Court was informed by petitioner Rogelio
that petitioner Erlinda died on August 3, 1999.
55
In view of this supervening event, the award of
temperate damages in addition to the actual or compensatory damages would no longer be justified
since the actual damages awarded in the Decision are sufficient to cover the medical expenses incurred
by petitioners for the patient. Hence, only the amounts representing actual, moral and exemplary
damages, attorneys fees and costs of suit should be awarded to petitioners.
WHEREFORE, the assailed Decision is hereby modified as follows:
(1) Private respondent De Los Santos Medical Center is hereby absolved from liability arising from the
injury suffered by petitioner Erlinda Ramos on June 17, 1985;
(2) Private respondents Dr. Orlino Hosaka and Dr. Perfecta Gutierrez are hereby declared to be solidarily
liable for the injury suffered by petitioner Erlinda on June 17, 1985 and are ordered to pay petitioners
(a) P1,352,000.00 as actual damages;
(b) P2,000,000.00 as moral damages;
(c) P100,000.00 as exemplary damages;
(d) P100,000.00 as attorneys fees; and
(e) the costs of the suit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Ynares-Santiago, JJ., concur.


Footnotes
1
See Decision, pp. 2-5.
2
Rollo, p. 217.
3
Id., at 226.
4
Id., at 252-253.
5
Id., at 469.
6
Id., at 440.
7
Id., at 454-455.
8
Resolution, dated March 19, 2001, pp. 1-2; Rollo, pp. 543-544.
9
TSN, March 19, 2001, p. 51.
10
Id., at 182-184.
11
Memorandum of Amicus Curiae Dr. Iluminada M. Camagay, Rollo, p. 620
12
Decision, p. 28, Id., at 197, citing Stoelting and Miller, Basics of Anesthesia, p. 103 (1994); Memorandum of Dr. Camagay, Id., at
616.
13
Decision, Id.
14
To "auscultate" means to listen to the sounds arising within organs as an aid to diagnosis and treatment, the examination being
made either by use of the stethoscope or by direct application of the ear to the body. (Websters Third New International Dictionary,
p. 145 [1976]).
15
Decision, p. 29, Rollo, p. 198; see also Motion for Reconsideration of Dr. Gutierrez, Id., at 266.
16
Id., at 28-29; Id., at 197-198.
17
TSN, March 19, 2001, pp. 77-78.
18
Motion for Reconsideration, p. 54; Rollo, p. 305.
19
Decision, p. 31; Id. at 200.
20
TSN, March 19, 2001, pp. 211-212.
21
Decision, p. 34, Rollo, p. 203.
22
Second Motion for Reconsideration, pp. 6-7; Id., at 421-422.
23
TSN, March 19, 2001, pp. 136-144.
24
Decision, p. 25 citing Stockholm v. Hall, 65 P. 348 (1937); Rollo, p.194.
25
Id., at 23-24; Rollo, pp. 192-193.
26
Id., at 4.
27
Decision, p. 20; Id., at 189.
28
364 P2d 955 (1961).
29
Id., at 971.
30
The Captain-of-the-Ship Doctrine was discussed in McConnell v. Williams (65 A 2d 243 [1949]), where the Supreme Court of
Pennsylvania stated that under this doctrine, a surgeon is likened to a captain of the ship, in that it is his duty to control everything
going on in the operating room.
31
Motion for Reconsideration of Dr. Hosaka, Rollo, p. 231.
32
Id., at. 229.
33
Id., at 231, citing i, 358 SE 2d 222 (1987).
34
Supra.
35
Id., at 225.
36
TSN, March 19, 2001, pp. 11-12.
37
Id., at 7.
38
The following exchange between Justice Puno and Dr. Hosakas counsel is instructive:
JUSTICE REYNATO S. PUNO:
Counsel.
RET. JUSTICE HOFILEA:
Yes, Your Honor.
JUSTICE REYNATO S. PUNO:
Well, your thesis is that Dr. Hosaka did not have complete control of the anesthesiologist in this case and
therefore whatever is the negligent act of the anesthesiologist cannot be attributed to Dr. Hosaka, is that a
correct appreciation of your thesis?
RET. JUSTICE HOFILEA:
Yes, Your Honor.
JUSTICE REYNATO S. PUNO:
But would you agree that even if Dr. Hosaka did not have that complete control nevertheless he had a degree of
supervision over the anesthesiologist?
RET. JUSTICE HOFILEA:
If Your Honor please, I think that neither the evidence in this case nor the developments in the field of medicine, the
usual practice in these days, would lead to that conclusion that he had a degree of supervision over the anesthesiologist.
JUSTICE REYNATO S. PUNO:
You are saying that the surgeon is completely independent of the anesthesiologist in the discharge of their respective
functions and vice versa?
RET. JUSTICE HOFILEA:
Yes, Your Honor.
JUSTICE REYNATO S. PUNO:
But the record of the case will show that it was Dr. Hosaka who got the services of Dr. Gutierrez, isnt it?
RET. JUSTICE HOFILEA:
Yes, Your Honor, when he was given the authority to secure, I understand.
JUSTICE REYNATO S. PUNO:
And in fact the patient here did not know of any anesthesiologist that is why, she gave the authority to Dr. Hosaka to get
the anesthesiologist who will assist him?
RET. JUSTICE HOFILEA:
That is correct, Your Honor.
JUSTICE REYNATO S. PUNO:
Now, in the course of the proceedings in the hospital the records would show that it was Dr. Hosaka who observed the
dusky nails of the patient?
RET. JUSTICE HOFILEA:
Yes, Your Honor.
JUSTICE REYNATO S. PUNO:
At a certain juncture and this means that cyanosis was setting in, lack of oxygen on the part of the patient?
RET. JUSTICE HOFILEA:
Yes, Your Honor.
JUSTICE REYNATO S. PUNO:
Now, if the two, Dra. Gutierrez and Dr. Hosaka, are completely independent of each other, why is it that Dr. Hosaka has
to call the attention of Dra. Gutierrez on this development about this cyanosis of the patient?
RET. JUSTICE HOFILEA:
In the first place, Your Honor, I was informed that according to Dr. Hosaka in his testimony, he said that it is his habit to
take a look at the hands of the patient while they are undergoing anesthesia and when he noticed the duskiness of the
nailbeds he informed Dr. Gutierrez about it. But he left her entirely free to do whatever steps she would like to take, as in
this case, I understand that she stopped the administration [of the anesthesia and (interrupted)
JUSTICE REYNATO S. PUNO:
Yes, but that does show that the surgeon, Dr. Hosaka should not be completely indifferent to what is happening to the
patient while in the hands of the anesthesiologist, isnt it?
RET. JUSTICE HOFILEA:
In a sense, Your Honor, yes, they coordinate in that sense, Your Honor, but not, I would not say that one is under the
control of the other.
JUSTICE REYNATO S. PUNO:
Yes, not under the control, now, you used the word "coordinate", so you are now conceding that there is that degree of
supervision on the part of the surgeon over the anesthesiologist, as a matter of defining that degree of supervision, they
are not completely independent of each other?
RET. JUSTICE HOFILEA:
Your Honor, I would not use the word supervision but working together, perhaps is a better term.
JUSTICE REYNATO S. PUNO:
Working together.
RET. JUSTICE HOFILEA:
Yes, Your Honor.
JUSTICE REYNATO S. PUNO:
Which means that somehow their duties intersect with each other?
RET. JUSTICE HOFILEA:
As I said before (interrupted)
JUSTICE REYNATO S. PUNO:
There is an area where both of them have to work together in order that the life of the patient would be protected?
RET. JUSTICE HOFILEA:
Yes, Your Honor. As I said before if on the other hand it is the anesthesiologist who notices because he monitors the
condition of the patient during the surgery and he calls the attention of the surgeon also.
JUSTICE REYNATO S. PUNO:
And in accord with the concept of teamwork, is it not true also that it was Dr. Hosaka who called for a second
anesthesiologist?
RET. JUSTICE HOFILEA:
Your Honor, that is not so, Your Honor, I was told that the second anesthesiologist was just nearby and it is their habit to
look in some operations taking place. In this particular case the second anesthesiologist was passing by and she noticed
that there was some kind of a, not really a commotion but some kind of, increased activity and so she decided to take a
look.
JUSTICE REYNATO S. PUNO:
Who gave the order for Dra. Calderon to help in the intubation of the patient?
RET. JUSTICE HOFILEA:
I understand, Your Honor that she did it voluntarily, she just happened to pass by.
JUSTICE REYNATO S. PUNO:
And Dr. Hosaka did not object?
RET. JUSTICE HOFILEA:
No, Your Honor, because his position is that this is outside of his expertise, Dr. Calderon is also an anesthesiologist so, he
just left them alone.
JUSTICE REYNATO S. PUNO:
How long have Dr. Hosaka and Dr. Gutierrez worked together as a team?
RET. JUSTICE HOFILEA:
They started their association way back in 1977, Your Honor, at the time of this incident about eight years, Your Honor.
JUSTICE REYNATO S. PUNO:
Would you know how the relationship of Dr. Hosaka and Dr. Gutierrez is defined by any kind of agreement, oral or
written, or is it defined by the standard practice of the profession?
RET. JUSTICE HOFILEA:
I would say it would be in accordance of the standard practice of the profession, Your Honor. There is no particular
agreement between them.
JUSTICE REYNATO S. PUNO:
What do you say is the standard practice, how would the practice vary from case to case?
RET. JUSTICE HOFILEA:
I believe, Your Honor, that the, in the first place if the patient would have his own anesthesiologist, would prefer his own
anesthesiologist, he can retain the services of another anesthesiologist but of his own but if he does not know of anybody
and he asks the surgeon to provide one, then this surgeon can recommend. But I would like to emphasize, Your Honor,
that the relationship is between the patient and the anesthesiologist. It is not that the anesthesiologist is the employee of
the surgeon.
JUSTICE REYNATO S. PUNO:
But is there an agreement, expressed or implied, between the two (2), to the effect that, you know the anesthesiologist
could say to the surgeon that you have no business interfering with my work as anesthesiologist. Is that how the
relationship is defined?
RET. JUSTICE HOFILEA:
Once the start the (interrupted)
JUSTICE REYNATO S. PUNO:
Right from the very beginning?
RET. JUSTICE HOFILEA:
I believe Your Honor that on the matter of retaining the services of the anesthesiologist in the sense that the surgeon
reposes confidence on the ability of the anesthesiologist, he hires him if he is authorized, he hires him on behalf of the
patient if he is authorized to do that but once they are already performing their own task, then there should be no
interference.
JUSTICE REYNATO S. PUNO:
But the work of the two cannot be separated in watertight compartments, do you agree?
RET. JUSTICE HOFILEA:
I agree, Your Honor (TSN, March 19, 2001, pp. 14-23).
39
Id., at 19.
40
Memorandum of Amicus Curiae Dr. Iluminada Camagay, Rollo, p. 616.
41
Websters Third New International Dictionary, p. 17 (1976).
42
TSN, March 19, 2001, pp. 196.
43
Id., at 205-206.
44
Batiquin vs. Court of Appeals, 258 SCRA 334, 346 (1996); Carillo vs. People, 229 SCRA 386, 396 (1994).
45
Article 2180 states:
The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of
persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor
children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in
their company.
The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their
employees in the service of the branches in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in any business or industry.
46
Decision, p. 40; Rollo, p. 209.
47
Traders Royal Bank vs. National Labor Relations Commission, 321 SCRA 467 (1999).
48
Motion for Reconsideration of DLSMC, p. 10; Rollo, p. 477.
49
Ibid.
50
Id., at 478.
51
Id., at 480.
52
TSN, March 19, 2001, pp. 113-116.
53
Decision, p. 48, Rollo, p. 217.
54
Id., at 43-45; Id., at 212-214.
55
See letter dated November 4, 2000 of petitioner Rogelio E. Ramos addressed to Mr. Justice Santiago M. Kapunan, Id., at 489.







































Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 126297 January 31, 2007
PROFESSIONAL SERVICES, INC., Petitioner,
vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 126467 January 31, 2007
NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA AGANA
ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.
x- - - - - - - - - - - - - - - - - - - -- - - - x
G.R. No. 127590 January 31, 2007
MIGUEL AMPIL, Petitioner,
vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Hospitals, having undertaken one of mankinds most important and delicate endeavors, must assume
the grave responsibility of pursuing it with appropriate care. The care and service dispensed through this
high trust, however technical, complex and esoteric its character may be, must meet standards of
responsibility commensurate with the undertaking to preserve and protect the health, and indeed, the
very lives of those placed in the hospitals keeping.
1

Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals
Decision
2
dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming with
modification the Decision
3
dated March 17, 1993 of the Regional Trial Court (RTC), Branch 96, Quezon
City in Civil Case No. Q-43322 and nullifying its Order dated September 21, 1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City
Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series of medical
examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering from
"cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff
4
of the Medical City Hospital, performed an
anterior resection surgery on Natividad. He found that the malignancy in her sigmoid area had spread
on her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the
consent of Natividads husband, Enrique Agana, to permit Dr. Juan Fuentes, respondent in G.R. No.
126467, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and
closed the incision.
However, the operation appeared to be flawed. In the corresponding Record of Operation dated April
11, 1984, the attending nurses entered these remarks:
"sponge count lacking 2
"announced to surgeon searched (sic) done but to no avail continue for closure."
On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills, including the
doctors fees, amounted to P60,000.00.
After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both
Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of the
surgery. Dr. Ampil then recommended that she consult an oncologist to examine the cancerous nodes
which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further
treatment. After four months of consultations and laboratory examinations, Natividad was told she was
free of cancer. Hence, she was advised to return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks
thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being informed about
it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of gauze measuring
1.5 inches in width. He then assured her that the pains would soon vanish.
Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting Natividad to seek
treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez detected the
presence of another foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width
which badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organs
which forced stool to excrete through the vagina. Another surgical operation was needed to remedy the
damage. Thus, in October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a
complaint for damages against the Professional Services, Inc. (PSI), owner of the Medical City Hospital,
Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-43322. They alleged that the latter are liable for
negligence for leaving two pieces of gauze inside Natividads body and malpractice for concealing their
acts of negligence.
Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an
administrative complaint for gross negligence and malpractice against Dr. Ampil and Dr. Fuentes,
docketed as Administrative Case No. 1690. The PRC Board of Medicine heard the case only with respect
to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was then in the United States.
On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly substituted
by her above-named children (the Aganas).
On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr.
Fuentes liable for negligence and malpractice, the decretal part of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants PROFESSIONAL
SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN FUENTES to pay to the plaintiffs, jointly and severally,
except in respect of the award for exemplary damages and the interest thereon which are the liabilities
of defendants Dr. Ampil and Dr. Fuentes only, as follows:
1. As actual damages, the following amounts:
a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate of
P21.60-US$1.00, as reimbursement of actual expenses incurred in the United States of
America;
b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;
c. The total sum of P45,802.50, representing the cost of hospitalization at Polymedic
Hospital, medical fees, and cost of the saline solution;
2. As moral damages, the sum of P2,000,000.00;
3. As exemplary damages, the sum of P300,000.00;
4. As attorneys fees, the sum of P250,000.00;
5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of the
complaint until full payment; and
6. Costs of suit.
SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals, docketed as CA-
G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its
Decision, which was granted in an Order dated May 11, 1993. Thereafter, the sheriff levied upon certain
properties of Dr. Ampil and sold them for P451,275.00 and delivered the amount to the Aganas.
Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr. Fuentes to
indefinitely suspend any further execution of the RTC Decision. However, not long thereafter, the
Aganas again filed a motion for an alias writ of execution against the properties of PSI and Dr. Fuentes.
On September 21, 1993, the RTC granted the motion and issued the corresponding writ, prompting Dr.
Fuentes to file with the Court of Appeals a petition for certiorari and prohibition, with prayer for
preliminary injunction, docketed as CA-G.R. SP No. 32198. During its pendency, the Court of Appeals
issued a Resolution
5
dated October 29, 1993 granting Dr. Fuentes prayer for injunctive relief.
On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision
6
in Administrative
Case No. 1690 dismissing the case against Dr. Fuentes. The Board held that the prosecution failed to
show that Dr. Fuentes was the one who left the two pieces of gauze inside Natividads body; and that he
concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R. CV No.
42062 and CA-G.R. SP No. 32198, thus:
WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan Fuentes is
hereby DISMISSED, and with the pronouncement that defendant-appellant Dr. Miguel Ampil is liable to
reimburse defendant-appellant Professional Services, Inc., whatever amount the latter will pay or had
paid to the plaintiffs-appellees, the decision appealed from is hereby AFFIRMED and the instant appeal
DISMISSED.
Concomitant with the above, the petition for certiorari and prohibition filed by herein defendant-
appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby GRANTED and the challenged order of the
respondent judge dated September 21, 1993, as well as the alias writ of execution issued pursuant
thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the petitioner in connection with the
writ of preliminary injunction issued by this Court on November 29, 1993 is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.
SO ORDERED.
Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution
7
dated December 19,
1996.
Hence, the instant consolidated petitions.
In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1) it is
estopped from raising the defense that Dr. Ampil is not its employee; (2) it is solidarily liable with Dr.
Ampil; and (3) it is not entitled to its counterclaim against the Aganas. PSI contends that Dr. Ampil is not
its employee, but a mere consultant or independent contractor. As such, he alone should answer for his
negligence.
In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr. Fuentes is
not guilty of negligence or medical malpractice, invoking the doctrine of res ipsa loquitur. They contend
that the pieces of gauze are prima facie proofs that the operating surgeons have been negligent.
Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable for
negligence and malpractice sans evidence that he left the two pieces of gauze in Natividads vagina. He
pointed to other probable causes, such as: (1) it was Dr. Fuentes who used gauzes in performing the
hysterectomy; (2) the attending nurses failure to properly count the gauzes used during surgery; and (3)
the medical intervention of the American doctors who examined Natividad in the United States of
America.
For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding Dr.
Ampil liable for negligence and malpractice; second, whether the Court of Appeals erred in absolving Dr.
Fuentes of any liability; and third, whether PSI may be held solidarily liable for the negligence of Dr.
Ampil.
I - G.R. No. 127590
Whether the Court of Appeals Erred in Holding Dr. Ampil
Liable for Negligence and Malpractice.
Dr. Ampil, in an attempt to absolve himself, gears the Courts attention to other possible causes of
Natividads detriment. He argues that the Court should not discount either of the following possibilities:
first, Dr. Fuentes left the gauzes in Natividads body after performing hysterectomy; second, the
attending nurses erred in counting the gauzes; and third, the American doctors were the ones who
placed the gauzes in Natividads body.
Dr. Ampils arguments are purely conjectural and without basis. Records show that he did not present
any evidence to prove that the American doctors were the ones who put or left the gauzes in Natividads
body. Neither did he submit evidence to rebut the correctness of the record of operation, particularly
the number of gauzes used. As to the alleged negligence of Dr. Fuentes, we are mindful that Dr. Ampil
examined his (Dr. Fuentes) work and found it in order.
The glaring truth is that all the major circumstances, taken together, as specified by the Court of
Appeals, directly point to Dr. Ampil as the negligent party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding of the
patient during the surgical operation.
Second, immediately after the operation, the nurses who assisted in the surgery noted in their
report that the sponge count (was) lacking 2; that such anomaly was announced to surgeon
and that a search was done but to no avail prompting Dr. Ampil to continue for closure x x x.
Third, after the operation, two (2) gauzes were extracted from the same spot of the body of
Mrs. Agana where the surgery was performed.
An operation requiring the placing of sponges in the incision is not complete until the sponges are
properly removed, and it is settled that the leaving of sponges or other foreign substances in the wound
after the incision has been closed is at least prima facie negligence by the operating surgeon.
8
To put it
simply, such act is considered so inconsistent with due care as to raise an inference of negligence. There
are even legions of authorities to the effect that such act is negligence per se.
9

Of course, the Court is not blind to the reality that there are times when danger to a patients life
precludes a surgeon from further searching missing sponges or foreign objects left in the body. But this
does not leave him free from any obligation. Even if it has been shown that a surgeon was required by
the urgent necessities of the case to leave a sponge in his patients abdomen, because of the dangers
attendant upon delay, still, it is his legal duty to so inform his patient within a reasonable time thereafter
by advising her of what he had been compelled to do. This is in order that she might seek relief from the
effects of the foreign object left in her body as her condition might permit. The ruling in Smith v.
Zeagler
10
is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when a physician or surgeon fails to
remove a sponge he has placed in his patients body that should be removed as part of the operation, he
thereby leaves his operation uncompleted and creates a new condition which imposes upon him the
legal duty of calling the new condition to his patients attention, and endeavoring with the means he has
at hand to minimize and avoid untoward results likely to ensue therefrom.
Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even misled
her that the pain she was experiencing was the ordinary consequence of her operation. Had he been
more candid, Natividad could have taken the immediate and appropriate medical remedy to remove the
gauzes from her body. To our mind, what was initially an act of negligence by Dr. Ampil has ripened into
a deliberate wrongful act of deceiving his patient.
This is a clear case of medical malpractice or more appropriately, medical negligence. To successfully
pursue this kind of case, a patient must only prove that a health care provider either failed to do
something which a reasonably prudent health care provider would have done, or that he did something
that a reasonably prudent provider would not have done; and that failure or action caused injury to the
patient.
11
Simply put, the elements are duty, breach, injury and proximate causation. Dr, Ampil, as the
lead surgeon, had the duty to remove all foreign objects, such as gauzes, from Natividads body before
closure of the incision. When he failed to do so, it was his duty to inform Natividad about it. Dr. Ampil
breached both duties. Such breach caused injury to Natividad, necessitating her further examination by
American doctors and another surgery. That Dr. Ampils negligence is the proximate cause
12
of
Natividads injury could be traced from his act of closing the incision despite the information given by
the attending nurses that two pieces of gauze were still missing. That they were later on extracted from
Natividads vagina established the causal link between Dr. Ampils negligence and the injury. And what
further aggravated such injury was his deliberate concealment of the missing gauzes from the
knowledge of Natividad and her family.
II - G.R. No. 126467
Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the ground that it
is contrary to the doctrine of res ipsa loquitur. According to them, the fact that the two pieces of gauze
were left inside Natividads body is a prima facie evidence of Dr. Fuentes negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the occurrence
of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption
of negligence, or make out a plaintiffs prima facie case, and present a question of fact for defendant to
meet with an explanation.
13
Stated differently, where the thing which caused the injury, without the
fault of the injured, is under the exclusive control of the defendant and the injury is such that it should
not have occurred if he, having such control used proper care, it affords reasonable evidence, in the
absence of explanation that the injury arose from the defendants want of care, and the burden of proof
is shifted to him to establish that he has observed due care and diligence.
14

From the foregoing statements of the rule, the requisites for the applicability of the doctrine of res ipsa
loquitur are: (1) the occurrence of an injury; (2) the thing which caused the injury was under the control
and management of the defendant; (3) the occurrence was such that in the ordinary course of things,
would not have happened if those who had control or management used proper care; and (4) the
absence of explanation by the defendant. Of the foregoing requisites, the most instrumental is the
"control and management of the thing which caused the injury."
15

We find the element of "control and management of the thing which caused the injury" to be wanting.
Hence, the doctrine of res ipsa loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He
requested the assistance of Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil) found that
the malignancy in her sigmoid area had spread to her left ovary. Dr. Fuentes performed the surgery and
thereafter reported and showed his work to Dr. Ampil. The latter examined it and finding everything to
be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then resumed operating on
Natividad. He was about to finish the procedure when the attending nurses informed him that two
pieces of gauze were missing. A "diligent search" was conducted, but the misplaced gauzes were not
found. Dr. Ampil then directed that the incision be closed. During this entire period, Dr. Fuentes was no
longer in the operating room and had, in fact, left the hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of the
surgery room and all personnel connected with the operation. Their duty is to obey his orders.
16
As
stated before, Dr. Ampil was the lead surgeon. In other words, he was the "Captain of the Ship." That he
discharged such role is evident from his following conduct: (1) calling Dr. Fuentes to perform a
hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes
permission to leave; and (4) ordering the closure of the incision. To our mind, it was this act of ordering
the closure of the incision notwithstanding that two pieces of gauze remained unaccounted for, that
caused injury to Natividads body. Clearly, the control and management of the thing which caused the
injury was in the hands of Dr. Ampil, not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create or
constitute an independent or separate ground of liability, being a mere evidentiary rule.
17
In other
words, mere invocation and application of the doctrine does not dispense with the requirement of proof
of negligence. Here, the negligence was proven to have been committed by Dr. Ampil and not by Dr.
Fuentes.
III - G.R. No. 126297
Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of hospitals and the resulting
theories concerning their liability for the negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable institutions, providing medical
services to the lowest classes of society, without regard for a patients ability to pay.
18
Those who could
afford medical treatment were usually treated at home by their doctors.
19
However, the days of house
calls and philanthropic health care are over. The modern health care industry continues to distance itself
from its charitable past and has experienced a significant conversion from a not-for-profit health care to
for-profit hospital businesses. Consequently, significant changes in health law have accompanied the
business-related changes in the hospital industry. One important legal change is an increase in hospital
liability for medical malpractice. Many courts now allow claims for hospital vicarious liability under the
theories of respondeat superior, apparent authority, ostensible authority, or agency by estoppel.
20

In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil Code,
which reads:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
A derivative of this provision is Article 2180, the rule governing vicarious liability under the doctrine of
respondeat superior, thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.
x x x x x x
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks even though the former are not engaged in any business or
industry.
x x x x x x
The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.
A prominent civilist commented that professionals engaged by an employer, such as physicians, dentists,
and pharmacists, are not "employees" under this article because the manner in which they perform
their work is not within the control of the latter (employer). In other words, professionals are considered
personally liable for the fault or negligence they commit in the discharge of their duties, and their
employer cannot be held liable for such fault or negligence. In the context of the present case, "a
hospital cannot be held liable for the fault or negligence of a physician or surgeon in the treatment or
operation of patients."
21

The foregoing view is grounded on the traditional notion that the professional status and the very
nature of the physicians calling preclude him from being classed as an agent or employee of a hospital,
whenever he acts in a professional capacity.
22
It has been said that medical practice strictly involves
highly developed and specialized knowledge,
23
such that physicians are generally free to exercise their
own skill and judgment in rendering medical services sans interference.
24
Hence, when a doctor
practices medicine in a hospital setting, the hospital and its employees are deemed to subserve him in
his ministrations to the patient and his actions are of his own responsibility.
25

The case of Schloendorff v. Society of New York Hospital
26
was then considered an authority for this
view. The "Schloendorff doctrine" regards a physician, even if employed by a hospital, as an
independent contractor because of the skill he exercises and the lack of control exerted over his work.
Under this doctrine, hospitals are exempt from the application of the respondeat superior principle for
fault or negligence committed by physicians in the discharge of their profession.
However, the efficacy of the foregoing doctrine has weakened with the significant developments in
medical care. Courts came to realize that modern hospitals are increasingly taking active role in
supplying and regulating medical care to patients. No longer were a hospitals functions limited to
furnishing room, food, facilities for treatment and operation, and attendants for its patients. Thus, in
Bing v. Thunig,
27
the New York Court of Appeals deviated from the Schloendorff doctrine, noting that
modern hospitals actually do far more than provide facilities for treatment. Rather, they regularly
employ, on a salaried basis, a large staff of physicians, interns, nurses, administrative and manual
workers. They charge patients for medical care and treatment, even collecting for such services through
legal action, if necessary. The court then concluded that there is no reason to exempt hospitals from the
universal rule of respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians is rendered
inconsequential in view of our categorical pronouncement in Ramos v. Court of Appeals
28
that for
purposes of apportioning responsibility in medical negligence cases, an employer-employee relationship
in effect exists between hospitals and their attending and visiting physicians. This Court held:
"We now discuss the responsibility of the hospital in this particular incident. The unique practice (among
private hospitals) of filling up specialist staff with attending and visiting "consultants," who are allegedly
not hospital employees, presents problems in apportioning responsibility for negligence in medical
malpractice cases. However, the difficulty is more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the
conduct of their work within the hospital premises. Doctors who apply for consultant slots, visiting or
attending, are required to submit proof of completion of residency, their educational qualifications,
generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in
most cases, and references. These requirements are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital who either accept or reject the
application. x x x.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to
attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks and responsibilities, for the privilege
of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients into the
hospital. In addition to these, the physicians performance as a specialist is generally evaluated by a peer
review committee on the basis of mortality and morbidity statistics, and feedback from patients, nurses,
interns and residents. A consultant remiss in his duties, or a consultant who regularly falls short of the
minimum standards acceptable to the hospital or its peer review committee, is normally politely
terminated.
In other words, private hospitals, hire, fire and exercise real control over their attending and visiting
consultant staff. While consultants are not, technically employees, x x x, the control exercised, the
hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-
employee relationship, with the exception of the payment of wages. In assessing whether such a
relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we
rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and visiting physicians. "
But the Ramos pronouncement is not our only basis in sustaining PSIs liability. Its liability is also
anchored upon the agency principle of apparent authority or agency by estoppel and the doctrine of
corporate negligence which have gained acceptance in the determination of a hospitals liability for
negligent acts of health professionals. The present case serves as a perfect platform to test the
applicability of these doctrines, thus, enriching our jurisprudence.
Apparent authority, or what is sometimes referred to as the "holding
out" theory, or doctrine of ostensible agency or agency by estoppel,
29
has its origin from the law of
agency. It imposes liability, not as the result of the reality of a contractual relationship, but rather
because of the actions of a principal or an employer in somehow misleading the public into believing
that the relationship or the authority exists.
30
The concept is essentially one of estoppel and has been
explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority which he knowingly permits
the agent to assume, or which he holds the agent out to the public as possessing. The question in every
case is whether the principal has by his voluntary act placed the agent in such a situation that a person
of ordinary prudence, conversant with business usages and the nature of the particular business, is
justified in presuming that such agent has authority to perform the particular act in question.
31

The applicability of apparent authority in the field of hospital liability was upheld long time ago in Irving
v. Doctor Hospital of Lake Worth, Inc.
32
There, it was explicitly stated that "there does not appear to be
any rational basis for excluding the concept of apparent authority from the field of hospital liability."
Thus, in cases where it can be shown that a hospital, by its actions, has held out a particular physician as
its agent and/or employee and that a patient has accepted treatment from that physician in the
reasonable belief that it is being rendered in behalf of the hospital, then the hospital will be liable for
the physicians negligence.
Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the Civil
Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of
action, or his failure to repudiate the agency, knowing that another person is acting on his behalf
without authority.
In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and specializations
of the physicians associated or accredited by it, including those of Dr. Ampil and Dr. Fuentes. We concur
with the Court of Appeals conclusion that it "is now estopped from passing all the blame to the
physicians whose names it proudly paraded in the public directory leading the public to believe that it
vouched for their skill and competence." Indeed, PSIs act is tantamount to holding out to the public that
Medical City Hospital, through its accredited physicians, offers quality health care services. By
accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their qualifications, the hospital created
the impression that they were its agents, authorized to perform medical or surgical services for its
patients. As expected, these patients, Natividad being one of them, accepted the services on the
reasonable belief that such were being rendered by the hospital or its employees, agents, or servants.
The trial court correctly pointed out:
x x x regardless of the education and status in life of the patient, he ought not be burdened with the
defense of absence of employer-employee relationship between the hospital and the independent
physician whose name and competence are certainly certified to the general public by the hospitals act
of listing him and his specialty in its lobby directory, as in the case herein. The high costs of todays
medical and health care should at least exact on the hospital greater, if not broader, legal responsibility
for the conduct of treatment and surgery within its facility by its accredited physician or surgeon,
regardless of whether he is independent or employed."
33

The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are capable of
acting only through other individuals, such as physicians. If these accredited physicians do their job well,
the hospital succeeds in its mission of offering quality medical services and thus profits financially.
Logically, where negligence mars the quality of its services, the hospital should not be allowed to escape
liability for the acts of its ostensible agents.
We now proceed to the doctrine of corporate negligence or corporate responsibility.
One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that PSI as
owner, operator and manager of Medical City Hospital, "did not perform the necessary supervision nor
exercise diligent efforts in the supervision of Drs. Ampil and Fuentes and its nursing staff, resident
doctors, and medical interns who assisted Drs. Ampil and Fuentes in the performance of their duties as
surgeons."
34
Premised on the doctrine of corporate negligence, the trial court held that PSI is directly
liable for such breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial answer to the problem of
allocating hospitals liability for the negligent acts of health practitioners, absent facts to support the
application of respondeat superior or apparent authority. Its formulation proceeds from the judiciarys
acknowledgment that in these modern times, the duty of providing quality medical service is no longer
the sole prerogative and responsibility of the physician. The modern hospitals have changed structure.
Hospitals now tend to organize a highly professional medical staff whose competence and performance
need to be monitored by the hospitals commensurate with their inherent responsibility to provide
quality medical care.
35

The doctrine has its genesis in Darling v. Charleston Community Hospital.
36
There, the Supreme Court of
Illinois held that "the jury could have found a hospital negligent, inter alia, in failing to have a sufficient
number of trained nurses attending the patient; failing to require a consultation with or examination by
members of the hospital staff; and failing to review the treatment rendered to the patient." On the basis
of Darling, other jurisdictions held that a hospitals corporate negligence extends to permitting a
physician known to be incompetent to practice at the hospital.
37
With the passage of time, more duties
were expected from hospitals, among them: (1) the use of reasonable care in the maintenance of safe
and adequate facilities and equipment; (2) the selection and retention of competent physicians; (3) the
overseeing or supervision of all persons who practice medicine within its walls; and (4) the formulation,
adoption and enforcement of adequate rules and policies that ensure quality care for its
patients.
38
Thus, in Tucson Medical Center, Inc. v. Misevich,
39
it was held that a hospital, following the
doctrine of corporate responsibility, has the duty to see that it meets the standards of responsibilities
for the care of patients. Such duty includes the proper supervision of the members of its medical staff.
And in Bost v. Riley,
40
the court concluded that a patient who enters a hospital does so with the
reasonable expectation that it will attempt to cure him. The hospital accordingly has the duty to make a
reasonable effort to monitor and oversee the treatment prescribed and administered by the physicians
practicing in its premises.
In the present case, it was duly established that PSI operates the Medical City Hospital for the purpose
and under the concept of providing comprehensive medical services to the public. Accordingly, it has the
duty to exercise reasonable care to protect from harm all patients admitted into its facility for medical
treatment. Unfortunately, PSI failed to perform such duty. The findings of the trial court are convincing,
thus:
x x x PSIs liability is traceable to its failure to conduct an investigation of the matter reported in the nota
bene of the count nurse. Such failure established PSIs part in the dark conspiracy of silence and
concealment about the gauzes. Ethical considerations, if not also legal, dictated the holding of an
immediate inquiry into the events, if not for the benefit of the patient to whom the duty is primarily
owed, then in the interest of arriving at the truth. The Court cannot accept that the medical and the
healing professions, through their members like defendant surgeons, and their institutions like PSIs
hospital facility, can callously turn their backs on and disregard even a mere probability of mistake or
negligence by refusing or failing to investigate a report of such seriousness as the one in Natividads
case.
It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of the
Medical City Hospitals staff, composed of resident doctors, nurses, and interns. As such, it is reasonable
to conclude that PSI, as the operator of the hospital, has actual or constructive knowledge of the
procedures carried out, particularly the report of the attending nurses that the two pieces of gauze were
missing. In Fridena v. Evans,
41
it was held that a corporation is bound by the knowledge acquired by or
notice given to its agents or officers within the scope of their authority and in reference to a matter to
which their authority extends. This means that the knowledge of any of the staff of Medical City Hospital
constitutes knowledge of PSI. Now, the failure of PSI, despite the attending nurses report, to investigate
and inform Natividad regarding the missing gauzes amounts to callous negligence. Not only did PSI
breach its duties to oversee or supervise all persons who practice medicine within its walls, it also failed
to take an active step in fixing the negligence committed. This renders PSI, not only vicariously liable for
the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own
negligence under Article 2176. In Fridena, the Supreme Court of Arizona held:
x x x In recent years, however, the duty of care owed to the patient by the hospital has expanded. The
emerging trend is to hold the hospital responsible where the hospital has failed to monitor and review
medical services being provided within its walls. See Kahn Hospital Malpractice Prevention, 27 De Paul .
Rev. 23 (1977).
Among the cases indicative of the emerging trend is Purcell v. Zimbelman, 18 Ariz. App. 75,500 P. 2d
335 (1972). In Purcell, the hospital argued that it could not be held liable for the malpractice of a
medical practitioner because he was an independent contractor within the hospital. The Court of
Appeals pointed out that the hospital had created a professional staff whose competence and
performance was to be monitored and reviewed by the governing body of the hospital, and the court
held that a hospital would be negligent where it had knowledge or reason to believe that a doctor using
the facilities was employing a method of treatment or care which fell below the recognized standard of
care.
Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain
inherent responsibilities regarding the quality of medical care furnished to patients within its walls and it
must meet the standards of responsibility commensurate with this undertaking. Beeck v. Tucson
General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has confirmed the rulings of the
Court of Appeals that a hospital has the duty of supervising the competence of the doctors on its staff. x
x x.
x x x x x x
In the amended complaint, the plaintiffs did plead that the operation was performed at the hospital
with its knowledge, aid, and assistance, and that the negligence of the defendants was the proximate
cause of the patients injuries. We find that such general allegations of negligence, along with the
evidence produced at the trial of this case, are sufficient to support the hospitals liability based on the
theory of negligent supervision."
Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be
emphasized that PSI, apart from a general denial of its responsibility, failed to adduce evidence showing
that it exercised the diligence of a good father of a family in the accreditation and supervision of the
latter. In neglecting to offer such proof, PSI failed to discharge its burden under the last paragraph of
Article 2180 cited earlier, and, therefore, must be adjudged solidarily liable with Dr. Ampil. Moreover, as
we have discussed, PSI is also directly liable to the Aganas.
One final word. Once a physician undertakes the treatment and care of a patient, the law imposes on
him certain obligations. In order to escape liability, he must possess that reasonable degree of learning,
skill and experience required by his profession. At the same time, he must apply reasonable care and
diligence in the exercise of his skill and the application of his knowledge, and exert his best judgment.
WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of Appeals in
CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
RENATO C. CORONA
Associate Justice
ADOLFO S. AZCUNA
Asscociate Justice
(No Part)
CANCIO C. GARCIA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice


Footnotes
*
No part. Ponente of the assailed Decision in the Court of Appeals.
1
Beeck v. Tucson General Hospital, 500 P. 2d 1153 (1972), citing Darling v. Charleston Community
Memorial Hospital, 33 Ill. 2d 326, 211 N.E. 2d 253.
2
Penned by Associate Justice Cancio C. Garcia (now a member of the Supreme Court) and concurred in by
Associate Justices Eugenio S. Labitoria and Artemio G. Tuquero (both retired), Rollo, G.R. Nos. 126297, pp.
36-51; 126467, pp. 27-42; 127590, pp. 23-38.
3
Penned by Judge Lucas P. Bersamin (now Justice of the Court of Appeals), Rollo, G.R. No. 126647, pp.
69-83.
4
The medical staff was composed of physicians, both residents and interns, as well as nurses.
5
The dispositive portion reads:
"WHEREFORE, let a writ of preliminary injunction be issued upon petitioners posting of bond in the
amount of P20,000.00, ENJOINING public respondents from implementing the questioned order
dated September 21, 1993 and from further taking any action in Civil Case No. Q-43322 entitled
Natividad G. Agana, et al., plaintiffs, versus Professional Services, Inc., et al., defendants pending
resolution of the instant petition.
SO ORDERED." See Rollo, G.R. No. 126297, p. 42.
6
Rollo of G.R. No. 126467, pp. 84-89.
7
Rollo of G.R. No. 127590, p. 40.
8
Rule v. Cheeseman, 317 P. 2d 472 (1957), citing Russel v. Newman, 116 Kan. 268 P. 752; Bernsden v.
Johnson, 174 Kan. 230, 255 P. 2d 1033.
9
Smith v. Zeagler, 157 So. 328 Fla. (1934), citing Ruth v. Johnson, (C.C.A.) 172 F. 191; Reeves v. Lutz,
179 Mo. App. 61, 162 S.W. 280; Rayburn v. Day, 126 Or. 135,268 P. 1002, 59 A.L.R. 1062; Wynne v.
Harvey, 96 Wash. 379, 165 P. 67; Harris v. Fall (C.C.A.) 177 F. 79, 27 L.R.A. (N.S.) 1174; Moore v. Ivey,
(Tex. Civ. App.) 264 S.W. 283; 21 R.C. L. 388.
10
157 So. 328 Fla. (1934)
11
Garcia-Rueda v. Pascasio, G.R. No. 118141, September 5, 1997, 278 SCRA 769.
12
In the leading case of Vda. de Bataclan v. Medina, (102 Phil. 181 [1957]), this Court laid down the
following definition of proximate cause in this jurisdiction as follows:
[T]hat cause, which, in natural and continuous sequence unbroken by any efficient intervening
cause, produces the injury and without which the result would not have occurred. And more
comprehensively, the proximate cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with the immediate predecessor, the final event in
the chain immediately effecting the injury as a natural and probable result of the cause which first
acted, under which circumstances that the person responsible for the first event should, as an
ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his
act or default that an injury to some person might probably result therefrom.
13
Ramos v. Court of Appeals, G.R. No. 124354, December 29, 1999, 321 SCRA 584.
14
Africa v. Caltex (Phils.) Inc., 123 Phil. 280 (1966).
15
Ranos v. Court of Appeals, supra. In Ramos, the phrase used is "control of the instrumentality which
caused the damage," citing St. Johns Hospital and School of Nursing v. Chapman, 434 P2d 160 (1967).
16
Rural Educational Assn v. Bush, 42 Tenn. App. 34, 298 S.W. 2d 761 (1956).
17
Ramos v. Court of Appeals, supra at footnote 13.
18
Levin, Hospital Vicarious Liability for Negligence by Independent Contractor Physicians: A New Rule for
New Times, October 17, 2005.
19
Id.
20
Id.
21
Tolentino, The Civil Code of the Philippines, Volume V, 1992 Ed., p. 616.
22
Arkansas M.R. Co. v. Pearson, 98 Ark. 442, 153 SW 595 (1911); Runyan v. Goodrum, 147 Ark. 281, 228
SW 397, 13 ALR 1403 (1921); Rosane v. Senger, 112 Colo. 363, 149 P. 2d 372 (superseded by statute on
other grounds); Moon v. Mercy Hosp., 150 Col. 430, 373 P. 2d 944 (1962); Austin v. Litvak, 682 P. 2d 41, 50
ALR 4th 225 (1984); Western Ins. Co. v. Brochner, 682 P. 2d 1213 (1983); Rodriguez v. Denver, 702 P. 2d
1349 (1984).
23
Arkansas M.R. Co. v. Pearson, id.; Nieto v. State, 952 P. 2d 834 (1997). But see Beeck v. Tucson
General Hosp., 18 Ariz. App. 165, 500 P. 2d 1153 (1972); Paintsville Hosp. Co., 683 SW 2d 255 (1985);
Kelley v. Rossi, 395 Mass. 659, 481 NE 2d 1340 (1985) which held that a physicians professional status
does not prevent him or her from being a servant or agent of the hospital.
24
Fridena v. Evans, 127 Ariz. 516, 522 P. 2d 463 (1980).
25
Kitto v. Gilbert, 39 Colo App 374, 570 P. 2d 544 (1977).
26
211 N.Y. 125, 105 N.E. 92, 52 L.R.A., N.S., 505 (1914). The court in Schloendorff opined that a hospital
does not act through physicians but merely procures them to act on their own initiative and responsibility.
For subsequent application of the doctrine, see for instance, Hendrickson v. Hodkin, 250 App. Div 649, 294
NYS 982, revd on other grounds, 276 NY 252, 11 NE 2d 899 (1937); Necolayff v. Genesee Hosp., 270 App.
Div. 648, 61 NYS 2d 832, affd 296 NY 936, 73 NE2d 117 (1946); Davie v. Lenox Hill Hosp., Inc., 81 NYS 2d
583 (1948); Roth v. Beth El Hosp., Inc., 279 App. Div 917, 110 NYS 2d 583 (1952); Rufino v. US, 126 F.
Supp. 132 (1954); Mrachek v. Sunshine Biscuit, Inc., 308 NY 116, 123 N.E. 2d 801 (1954).
27
2 NY 2d 656, 163 NYS 2d 3, 143 N.E. 2d 3 (1957).
28
Supra at footnote 13.
29
Blacks Law Dictionary (6th Ed. 1990) 1100. The terms "ostensible agency," "agency by estoppel,"
"apparent authority," and "holding out" tend to be used interchangeably by the courts to refer to this theory of
liability. See for instance, Baker v. Werner, 654 P2d 263 (1982) and Adamski v. Tacoma Gen. Hosp., 20
Wash App. 98, 579 P2d 970 (1978). Agency by estoppel is defined as "one created by operation of law and
established by proof of such acts of the principal as reasonably lead third persons to the conclusion of its
existence. Arises where principal by negligence in failing to supervise agents affairs, allows agent to
exercise powers not granted to him, thus justifying others in believing the agent possesses requisite
authority." Blacks, supra, p. 62. An ostensible agency is "an implied or presumptive agency which exists
where one, either intentionally or from want of ordinary care, induces another to believe that a third person is
his agent, though he never in fact, employed him. It is, strictly speaking, no agency at all, but is in reality
based entirely upon estoppel." Apparent authority refers to "the power to affect the legal relations of another
person by transactions with third persons, professedly as agent for the other, arising from and in accordance
with the others manifestations to such third persons." Supra, p. 96.
30
Irving v. Doctors Hospital of Lake Worth, Inc., 415 So. 2d 55 (1982), quoting Arthur v. St. Peters Hospital,
169 N.J. 575, 405 A. 2d 443 (1979).
31
Id., citing Hudson v. C., Loan Assn., Inc. v. Horowytz, 116 N.J.L. 605, 608, 186 A 437 (Sup. Ct. 1936).
32
Supra.
33
RTC Decision, p. 9, Rollo of G.R. No. 126467, p. 127.
34
RTC Decision, p. 2, Rollo of G.R. No. 126467, p. 120.
35
Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P2d 335 (1972).
36
Supra at footnote 1.
37
Corleto v. Hospital, 138 N.J. Super. 302, 350 A. 2d 534 (Super. Ct. Law Div.1975); Purcell v. Zimbelman,
18 Ariz. App. 75,500 P. 2d 335 (1972); Hospital Authority v. Joiner, 229 Ga. 140,189 S.E. 2d 412 (1972).
38
Welsh v. Bulger, 548 Pa. 504, 698 A.2d 581 (1997).
39
115 Ariz. 34, 545 P2d 958 (1976).
40
262 S.E. 2d 391, cert denied 300 NC 194, 269 S.E. 2d 621 (1980).
41
127 Ariz. 516, 622 P. 2d 463 (1980).

















Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.

NARVASA, C.J.:
The question before the Court here is whether or not persons rendering caddying services for members
of golf clubs and their guests in said clubs' courses or premises are the employees of such clubs and
therefore within the compulsory coverage of the Social Security System (SSS).
That question appears to have been involved, either directly or peripherally, in three separate
proceedings, all initiated by or on behalf of herein private respondent and his fellow caddies. That which
gave rise to the present petition for review was originally filed with the Social Security Commission
(SSC) via petition of seventeen (17) persons who styled themselves "Caddies of Manila Golf and Country
Club-PTCCEA" for coverage and availment of benefits under the Social Security Act as amended,
"PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees
Association," with which the petitioners claimed to be affiliated. The petition, docketed as SSC Case No.
5443, alleged in essence that although the petitioners were employees of the Manila Golf and Country
Club, a domestic corporation, the latter had not registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same question were filed or were
pending; these were:
(1) a certification election case filed with the Labor Relations Division of the Ministry of
Labor by the PTCCEA on behalf of the same caddies of the Manila Golf and Country Club,
the case being titled "Philippine Technical, Clerical, Commercial Association vs. Manila
Golf and Country Club" and docketed as Case No. R4-LRDX-M-10-504-78; it appears to
have been resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo
who was thereafter upheld by Director Carmelo S. Noriel, denying the Club's motion for
reconsideration;
1

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

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition,
alleging in substance that the petitioners, caddies by occupation, were allowed into the Club premises to
render services as such to the individual members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the petitioners were not subject to the direction
and control of the Club as regards the manner in which they performed their work; and hence, they
were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for
social security coverage, avowedly coming to realize that indeed there was no employment relationship
between them and the Club. The case continued, and was eventually adjudicated by the SSC after
protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The
Commission dismissed the petition for lack of merit,
3
ruling:
. . . that the caddy's fees were paid by the golf players themselves and not by
respondent club. For instance, petitioner Raymundo Jomok averred that for their
services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by a player who will in turn
hand over to management the other portion of the stub known as Caddy Ticket (Exh.
"1") so that by this arrangement management will know how much a caddy will be paid
(TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin Llamar admitted that caddy
works on his own in accordance with the rules and regulations (TSN, p. 24, February 26,
1980) but petitioner Jomok could not state any policy of respondent that directs the
manner of caddying (TSN, pp. 76-77, July 23, 1980). While respondent club promulgates
rules and regulations on the assignment, deportment and conduct of caddies (Exh. "C")
the same are designed to impose personal discipline among the caddies but not to
direct or conduct their actual work. In fact, a golf player is at liberty to choose a caddy of
his preference regardless of the respondent club's group rotation system and has the
discretion on whether or not to pay a caddy. As testified to by petitioner Llamar that
their income depends on the number of players engaging their services and liberality of
the latter (TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion
that the caddies are never their employees in the absence of two elements, namely, (1)
payment of wages and (2) control or supervision over them. In this connection, our
Supreme Court ruled that in the determination of the existence of an employer-
employee relationship, the "control test" shall be considered decisive (Philippine
Manufacturing Co. vs. Geronimo and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco
Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358,
LVN Pictures Inc. vs. Phil. Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment
Planning Corporation Phil. vs. SSS 21 SCRA 925).
Records show the respondent club had reported for SS coverage Graciano Awit and
Daniel Quijano, as bat unloader and helper, respectively, including their ground men,
house and administrative personnel, a situation indicative of the latter's concern with
the rights and welfare of its employees under the SS law, as amended. The unrebutted
testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely
intended to identify the holders as accredited caddies of the club and privilege(d) to ply
their trade or occupation within its premises which could be withdrawn anytime for loss
of confidence. This gives us a reasonable ground to state that the defense posture of
respondent that petitioners were never its employees is well taken.
4

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

The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by the Labor Relations
Division of National Capital Regional Office in the certification election case (R-4-LRD-M-
10-504-78) supra, on the precise issue of the existence of employer-employee
relationship between the respondent club and the appellants, it being contended that
said issue was "a function of the proper labor office"; and
(2) adjudicating that self same issue a manner contrary to the ruling of the Director of
the Bureau of Labor Relations, which "has not only become final but (has been)
executed or (become) res adjudicata."
7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least
importance. Nor, it would appear, did it find any greater merit in the second alleged error. Although said
Court reserved the appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold
and Country Club, ordering that he be reported as such for social security coverage and paid any
corresponding benefits,
8
it conspicuously ignored the issue of res adjudicata raised in said second
assignment. Instead, it drew basis for the reversal from this Court's ruling in Investment Planning
Corporation of the Philippines vs. Social Security System,supra
9
and declared that upon the evidence,
the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-
called "control test," establishment in the case i.e., "whether the employer controls or has reserved
the right to control the employee not only as to the result of the work to be done but also as to the
means and methods by which the same is to be accomplished," the Club's control over the caddies
encompassing:
(a) the promulgation of no less than twenty-four (24) rules and regulations just about
every aspect of the conduct that the caddy must observe, or avoid, when serving as
such, any violation of any which could subject him to disciplinary action, which may
include suspending or cutting off his access to the club premises;
(b) the devising and enforcement of a group rotation system whereby a caddy is
assigned a number which designates his turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the
players, not by the Club, that they observed no definite working hours and earned no fixed income. It
quoted with approval from an American decision
10
to the effect that: "whether the club paid the
caddies and afterward collected in the first instance, the caddies were still employees of the club." This,
no matter that the case which produced this ruling had a slightly different factual cast, apparently
having involved a claim for workmen's compensation made by a caddy who, about to leave the premises
of the club where he worked, was hit and injured by an automobile then negotiating the club's private
driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed
out, is now among the mainways of the private respondent's defenses to the petition for review.
Considered in the perspective of the incidents just recounted, it illustrates as well as anything can, why
the practice of forum-shopping justly merits censure and punitive sanction. Because the same question
of employer-employee relationship has been dragged into three different fora, willy-nilly and in quick
succession, it has birthed controversy as to which of the resulting adjudications must now be recognized
as decisive. On the one hand, there is the certification case [R4-LRDX-M-10-504-78), where the decision
of the Med-Arbiter found for the existence of employer-employee relationship between the parties, was
affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never
thereafter appealed according to the private respondent; on the other, the compulsory arbitration case
(NCR Case No. AB-4-1771-79), instituted by or for the same respondent at about the same time, which
was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed by the NLRC itself
on the ground that there existed no such relationship between the Club and the private respondent.
And, as if matters were not already complicated enough, the same respondent, with the support and
assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for
compulsory social security coverage with the Social Security Commission (SSC Case No. 5443), with the
result already mentioned.
Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the
certification case had never become final, being in fact the subject of three pending and unresolved
motions for reconsideration, as well as of a later motion for early resolution.
11
Unfortunately, none of
these motions is incorporated or reproduced in the record before the Court. And, for his part, the
private respondent contends, not only that said decision had been appealed to and been affirmed by
the Director of the BLR, but that a certification election had in fact been held, which resulted in the
PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country
Club with respect to wages, hours of work, terms of employment, etc.
12
Whatever the truth about these
opposing contentions, which the record before the Court does not adequately disclose, the more
controlling consideration would seem to be that, however, final it may become, the decision in a
certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to
the existence, or non-existence, of employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following
essential requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order
must be on the merits; (3) the court rendering the same must have jurisdiction over the subject matter
and the parties; and (4) there must be between the two cases identity of parties, identity of subject
matter and identity of cause of action.
13

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

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

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of
the conflicting ruling just adverted to should be accorded primacy, given the fact that it was he who
actively sought them simultaneously, as it were, from separate fora, and even if the graver sanctions
more lately imposed by the Court for forum-shopping may not be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata;
on contrary, it acted correctly in doing so.
Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and
employee between petitioner and private respondent is, however, another matter. The Court does not
agree that said facts necessarily or logically point to such a relationship, and to the exclusion of any form
of arrangements, other than of employment, that would make the respondent's services available to the
members and guest of the petitioner.
As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress,
language, etc. covered by the petitioner's regulations, does not, in the mind of the Court, so
circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of
choice whatsoever in the manner of carrying out their services. In the very nature of things, caddies
must submit to some supervision of their conduct while enjoying the privilege of pursuing their
occupation within the premises and grounds of whatever club they do their work in. For all that is made
to appear, they work for the club to which they attach themselves on sufference but, on the other hand,
also without having to observe any working hours, free to leave anytime they please, to stay away for as
long they like. It is not pretended that if found remiss in the observance of said rules, any discipline may
be meted them beyond barring them from the premises which, it may be supposed, the Club may do in
any case even absent any breach of the rules, and without violating any right to work on their part. All
these considerations clash frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the
caddies as still another indication of the latter's status as employees. It seems to the Court, however,
that the intendment of such fact is to the contrary, showing that the Club has not the measure of
control over the incidents of the caddies' work and compensation that an employer would possess.
The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer
control than an assurance that the work is fairly distributed, a caddy who is absent when his turn
number is called simply losing his turn to serve and being assigned instead the last number for the
day.
17

By and large, there appears nothing in the record to refute the petitioner's claim that:
(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required
to exercise his occupation in the premises of petitioner. He may work with any other
golf club or he may seek employment a caddy or otherwise with any entity or individual
without restriction by petitioner. . . .
. . . In the final analysis, petitioner has no was of compelling the presence of the caddies
as they are not required to render a definite number of hours of work on a single day.
Even the group rotation of caddies is not absolute because a player is at liberty to
choose a caddy of his preference regardless of the caddy's order in the rotation.
It can happen that a caddy who has rendered services to a player on one day may still
find sufficient time to work elsewhere. Under such circumstances, he may then leave
the premises of petitioner and go to such other place of work that he wishes (sic). Or a
caddy who is on call for a particular day may deliberately absent himself if he has more
profitable caddying, or another, engagement in some other place. These are things
beyond petitioner's control and for which it imposes no direct sanctions on the caddies.
. . .
18

WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed
and set aside, it being hereby declared that the private respondent, Fermin Llamar, is not an employee
of petitioner Manila Golf and Country Club and that petitioner is under no obligation to report him for
compulsory coverage to the Social Security System. No pronouncement as to costs.
SO ORDERED.
Regalado and Mendoza, JJ., concur.
Padilla, J., is on leave.
Puno, J., took no part.

#Footnotes
1 Rollo, pp. 215-216.
2 NCR Case No. AB-4-1771-79, Rollo, pp. 143-151.
3 In a unanimous resolution dated May 20, 1981 written by Chairman Adrian E.
Cristobal.
4 Rollo, pp. 87-90.
5 as AC-G.R. SP No. 13648.
6 Rollo, p. 52.
7 Id., at pp. 52-53.
8 Decision promulgated June 20, 1983, rendered by the First Special Cases
Division, Rollo, pp. 48-58.
9 21 SCRA 925, 929; footnote 2.
10 Indian Hill Club vs. Industrial Commission, et al., 140 NE 871, 872, 309 III. 271; Rollo,
pp. 55-56.
11 Brief for Petitioner, p. 32; Rollo, p. 19.
12 Brief for Private Respondent, pp. 2-4; Rollo, p. 216.
13 Valencia vs. RTC of Quezon City, Br. 90. 184 SCRA 80, 90-91, citing Yusingco, et al., vs.
Ong Hing Lian, 42 SCRA 589, and Daeng vs. IAC, et al., 154 SCRA 159.
14 Black's Law Dictionary, 5th edition, p. 40.
15 LVN Pictures, Ic., vs. Phil. Musicians Guild and CIR, 110 Phil. 725, citing N.L.R.B. vs.
Botany Worsted Mills, 319 U.S. 751, 87 L. ed. 1705, and Southern S.S. Co. vs. N.L.R.B.
316 U.S. 31, 86 L. ed. 1246, and N.L.R.B. vs. A. J. Tower Co., 66 Sup. Ct. 1911; also
Rothenberg on Labor Relations, p. 514.
16 Brief for Petitioner, pp. 32-36; Rollo, p. 202.
17 Petition for Review, p. 4; Rollo, p. 18
18 Id., Rollo, pp. 18-19.
















































Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 96169 September 24, 1991
EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD-NCR, TRADE UNION CONGRESS OF THE PHILIPPINES, respondents.
Sycip Salazar, Hernandez & Gatmaitan for petitioner.
Gilbert P. Lorenzo for private respondent.

SARMIENTO, J.:p
The petition is given due course and the various pleadings submitted being sufficient to aid the Court in
the proper resolution of the basic issues raised in this case, we decide it without further ado.
The Employers Confederation of the Philippines (ECOP) is questioning the validity of Wage Order No.
NCR-01-A dated October 23, 1990 of the Regional Tripartite Wages and Productivity Board, National
Capital Region, promulgated pursuant to the authority of Republic Act No. 6727, "AN ACT TO
RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE MECHANISM AND PROPER
STANDARDS THEREFORE, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES
120, 121, 122, 123, 124, 126, AND 127 INTO, PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE
INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES," was
approved by the President on June 9, 1989. Aside from providing new wage rates,
1
the "Wage
Rationalization Act" also provides, among other things, for various Regional Tripartite Wages and
Productivity Boards in charge of prescribing minimum wage rates for all workers in the various
regions
2
and for a National Wages and Productivity Commission to review, among other functions, wage
levels determined by the boards.
3

On October 15, 1990, the Regional Board of the National Capital Region issued Wage Order No. NCR-01,
increasing the minimum wage by P17.00 daily in the National Capital Region.
4
The Trade Union Congress
of the Philippines (TUCP) moved for reconsideration; so did the Personnel Management Association of
the Philippines (PMAP).
5
ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending Wage Order No. NCR-01, as
follows:
Section 1. Upon the effectivity of this Wage Order, all workers and employees in the
private sector in the National Capital Region already receiving wages above the
statutory minimum wage rates up to one hundred and twenty-five pesos (P125.00) per
day shall also receive an increase of seventeen pesos (P17.00) per day.
ECOP appealed to the National Wages and Productivity Commission. On November 6, 1990, the
Commission promulgated an Order, dismissing the appeal for lack of merit. On November 14, 1990, the
Commission denied reconsideration.
The Orders of the Commission (as well as Wage Order No. NCR-01-A) are the subject of this petition, in
which. ECOP assails the board's grant of an "across-the-board" wage increase to workers already being
paid more than existing minimum wage rates (up to P125. 00 a day) as an alleged excess of authority,
and alleges that under the Republic Act No. 6727, the boards may only prescribe "minimum wages," not
determine "salary ceilings." ECOP likewise claims that Republic Act No. 6727 is meant to promote
collective bargaining as the primary mode of settling wages, and in its opinion, the boards can not
preempt collective bargaining agreements by establishing ceilings. ECOP prays for the nullification of
Wage Order No. NCR 01-A and for the "reinstatement" of Wage Order No. NCR-01.
The Court directed the Solicitor General to comment on behalf of the Government, and in the Solicitor
General's opinion, the Board, in prescribing an across-the-board hike did not, in reality, "grant additional
or other benefits to workers and employees, such as the extension of wage increases to employees and
workers already receiving more than minimum wages ..."
6
but rather, fixed minimum wages according
to the "salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative function, and Republic Act No. 6727 delegated to the
regional boards no more "than the power to grant minimum wage adjustments"
7
and "in the absence of
clear statutory authority,"
8
the boards may no more than adjust "floor wages."
9

The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended to correct "wage
distortions" and the salary-ceiling method (of determining wages) is meant, precisely, to rectify wage
distortions.
10

The Court is inclined to agree with the Government. In the National Wages and Productivity
Commission's Order of November 6, 1990, the Commission noted that the determination of wages has
generally involved two methods, the "floor-wage" method and the "salary-ceiling" method. We quote:
Historically, legislation involving the adjustment of the minimum wage made use of two
methods. The first method involves the fixing of determinate amount that would be
added to the prevailing statutory minimum wage. The other involves "the salary-ceiling
method" whereby the wage adjustment is applied to employees receiving a certain
denominated salary ceiling. The first method was adopted in the earlier wage orders,
while the latter method was used in R.A. Nos. 6640 and 6727. Prior to this, the salary-
ceiling method was also used in no less than eleven issuances mandating the grant of
cost-of-living allowances (P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage Order
Nos. 1, 2, 3, 5 and 6). The shift from the first method to the second method was brought
about by labor disputes arising from wage distortions, a consequence of the
implementation of the said wage orders. Apparently, the wage order provisions that
wage distortions shall be resolved through the grievance procedure was perceived by
legislators as ineffective in checking industrial unrest resulting from wage order
implementations. With the establishment of the second method as a practice in
minimum wage fixing, wage distortion disputes were minimized.
11

As the Commission noted, the increasing trend is toward the second mode, the salary-cap method,
which has reduced disputes arising from wage distortions (brought about, apparently, by the floor-wage
method). Of course, disputes are appropriate subjects of collective bargaining and grievance
procedures, but as the Commission observed and as we are ourselves agreed, bargaining has helped
very little in correcting wage distortions. Precisely, Republic Act No. 6727 was intended to rationalize
wages, first, by providing for full-time boards to police wages round-the-clock, and second, by giving the
boards enough powers to achieve this objective. The Court is of the opinion that Congress meant the
boards to be creative in resolving the annual question of wages without labor and management
knocking on the legislature's door at every turn. The Court's opinion is that if Republic No. 6727
intended the boards alone to set floor wages, the Act would have no need for a board but an accountant
to keep track of the latest consumer price index, or better, would have Congress done it as the need
arises, as the legislature, prior to the Act, has done so for years. The fact of the matter is that the Act
sought a "thinking" group of men and women bound by statutory standards. We quote:
ART. 124. Standards / Criteria for Minimum Wage Fixing. The regional minimum
wages to be established by the Regional Board shall be as nearly adequate as is
economically feasible to maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees within the framework of the
national economic and social development program. In the determination of such
regional minimum wages, the Regional Board shall, among other relevant factors,
consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of emphasis employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic
and social development.
12

The Court is not convinced that the Regional Board of the National Capital Region, in decreeing an
across-the-board hike, performed an unlawful act of legislation. It is true that wage-fixing, like rate
constitutes an act Congress;
13
it is also true, however, that Congress may delegate the power to fix
rates
14
provided that, as in all delegations cases, Congress leaves sufficient standards. As this Court has
indicated, it is impressed that the above-quoted standards are sufficient, and in the light of the floor-
wage method's failure, the Court believes that the Commission correctly upheld the Regional Board of
the National Capital Region.
Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get the
Government out of the industry" and leave labor and management alone in deciding wages. The Court
does not think that the law intended to deregulate the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to protect the rights of workers and promote their
welfare;
15
(2) the Constitution also makes it a duty of the State "to intervene when the common goal so
demands" in regulating property and property relations;
16
(3) the Charter urges Congress to give priority
to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate
the use of property;
17
(4) the Charter recognizes the "just share of labor in the fruits of
production;"
18
(5) under the Labor Code, the State shall regulate the relations between labor and
management;
19
(6) under Republic Act No. 6727 itself, the State is interested in seeing that workers
receive fair and equitable wages;
20
and (7) the Constitution is primarily a document of social justice, and
although it has recognized the importance of the private sector,
21
it has not embraced fully the concept
of laissez faire
22
or otherwise, relied on pure market forces to govern the economy; We can not give to
the Act a meaning or intent that will conflict with these basic principles.
It is the Court's thinking, reached after the Court's own study of the Act, that the Act is meant to
rationalize wages, that is, by having permanent boards to decide wages rather than leaving wage
determination to Congress year after year and law after law. The Court is not of course saying that the
Act is an effort of Congress to pass the buck, or worse, to abdicate its duty, but simply, to leave the
question of wages to the expertise of experts. As Justice Cruz observed, "[w]ith the proliferation of
specialized activities and their attendant peculiar problems, the national legislature has found it more
necessary to entrust to administrative agencies the power of subordinate legislation' as it is caned."
23

The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece, or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services rendered or to be rendered
and includes the fair and reasonably value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not include any profit to the employer or to
any person affiliated with the employer.
24

The concept of "minimum wage" is, however, a different thing, and certainly, it means more than setting
a floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum wages" underlies the effort
of the State, as Republic Act No. 6727 expresses it, "to promote productivity-improvement and gain-
sharing measures to ensure a decent standard of living for the workers and their families; to guarantee
the rights of labor to its just share in the fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth,"
25
and as the Constitution expresses it, to affirm "labor as a primary
social economic force."
26
As the Court indicated, the statute would have no need for a board if the
question were simply "how much". The State is concerned, in addition, that wages are not distributed
unevenly, and more important, that social justice is subserved.
It is another question, to be sure, had Congress created "roving" boards, and were that the case, a
problem of undue delegation would have ensued; but as we said, we do not see a Board (National
Capital Region) "running riot" here, and Wage Order No. NCR-01-A as an excess of authority.
It is also another question whether the salary-cap method utilized by the Board may serve the purposes
of Republic Act No. 6727 in future cases and whether that method is after all, a lasting policy of the
Board; however, it is a question on which we may only speculate at the moment. At the moment, we
find it to be reasonable policy (apparently, it has since been Government policy); and if in the future it
would be perceptibly unfair to management, we will take it up then.
WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.
IT IS SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.
Paras, J., took no part.

Footnotes
1 Rep. Act No. 6727, sec. 4(a)
2 Supra, art. 3
3 Supra.
4 Wage Order No. NCR-01 (RTWPB) (DOLE), October 15, 1990; the Order exempts, of
course, domestics and other household servants.
5 Wage Order No. NCR-01-A (RTWPB) (DOLE), October 23, 1990.
6 Id., 76.
7 Id., 91.
8 Id.
9 Id.
10 Id., 122.
11 Id., 27.
12 Rep. Act No. 6727, supra.
13 Shreveport Rate Case, 234, U.S. 342 (1914). But see Philippine Communications
Satellite Corporation v. Alcuaz, G.R. 84818, December 18, 1989, 180 SCRA 218, on when
rate-fixing is quasi-judicial for purposes of determining compliance with due process.
14 Supra.
15 CONST., art. II, 18.
16 Supra, art, XII, sec. 6.
17 Supra, art, XIII, sec. 1.
18 Supra, sec. 3.
19 Pres. Decree No. 442, art 3.
20 Rep. Act No. 6727, supra.
21 e.g., CONST., art. II, sec. 20.
22 Philippine Association of Service Exporters v. Drilon, G.R. No. 81958, June 30, 1988,
163 SCRA 386.
23 CRUZ, PHILIPPINE POLITICAL LAW 96 (1987).
24 Pres. Decree No. 442, art. 97(f).
25 Rep. Act No. 6727, supra, sec. 1.
26 CONST., art. II, sec. 18, supra.