1.

Manila
Golf
Club
vs.
IAC,
237
SCRA
207
2.Encyclopedia Britanica vs. NLRC, 264 SCRA 4 [1996]
3.Carungcong
vs.
Sunlife,
283
SCRA
319
4.Ramos
vs
CA,
380
SCRA
467
5.Sonza vs. ABS-CBN, G.R. No. 138051, June 10, 2004
6.Lazaro vs. Social Security Commission 435 SCRA 472
[2004]
7.Phil. Global Communications v. De Vera, 459 SCRA 260
[2005]
8.ABS-CBN vs. Nazareno, G.R. No. 164156, Sept. 26, 2006
9.Francisco
vs.
NLRC,
500
SCRA
690
[2006]
10.Nogales et. al., vs. Capitol Medical Center et al., G.R. No.
142625, December 19, 2006
1.

MANILA GOLF
petitioner,

&

vs.
INTERMEDIATE APPELLATE
LLAMAR, respondents.

COUNTRY
COURT

CLUB,
and

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).

INC.,

FERMIN

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 MedArbiter Orlando S. Rojo who was thereafter upheld by Director
Carmelo S. Noriel, denying the Club's motion for
reconsideration; 1

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

(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

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:

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

(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-M10-504-78) 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

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.

(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

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 nonexistence, of employer-employee relationship between them.

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:

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

(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;

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:

(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.

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

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 employeremployee 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 employeremployee 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

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 forumshopping 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.

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.

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.

SO ORDERED.
2. [G.R. No. 87098. November 4, 1996]
ENCYCLOPAEDIA BRITANNICA (PHILIPPINES),
INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER TEODORICO L.
DOGELIO and BENJAMIN LIMJOCO, respondents.
DECISION
TORRES, JR., J.:
Encyclopaedia Britannica (Philippines), Inc. filed this petition
for certiorari to annul and set aside the resolution of the
National Labor Relations Commission, Third Division, in NLRC
Case No. RB IV-5158-76, dated December 28, 1988, the
dispositive portion of which reads:
WHEREFORE, in view of all the foregoing, the decision dated
December 7, 1982 of then Labor Arbiter Teodorico L. Dogelio is
hereby AFFIRMED, and the instant appeal is hereby
DISMISSED for lack of merit.
SO ORDERED.[1]
Private respondent Benjamin Limjoco was a Sales Division
Manager of petitioner Encyclopaedia Britannica and was in
charge of selling petitioners products through some sales
representatives. As
compensation,
private
respondent
received commissions from the products sold by his
agents. He was also allowed to use petitioners name,
goodwill and logo. It was, however, agreed upon that office
expenses would be deducted from private respondents
commissions. Petitioner would also be informed about
appointments, promotions, and transfers of employees in
private respondents district.
On June 14, 1974, private respondent Limjoco resigned from
office to pursue his private business. Then on October 30,
1975, he filed a complaint against petitioner Encyclopaedia
Britannica with the Department of Labor and Employment,
claiming for non-payment of separation pay and other benefits,
and also illegal deduction from his sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant
Benjamin Limjoco (Limjoco, for brevity) was not its employee
but an independent dealer authorized to promote and sell its
products and in return, received commissions therefrom.
Limjoco did not have any salary and his income from the
petitioner company was dependent on the volume of sales
accomplished. He also had his own separate office, financed
the business expenses, and maintained his own
workforce. The salaries of his secretary, utility man, and sales
representatives were chargeable to his commissions. Thus,
petitioner argued that it had no control and supervision over
the complainant as to the manner and means he conducted his
business operations. The latter did not even report to the office
of the petitioner and did not observe fixed office hours.
Consequently, there was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was hired by
the petitioner in July 1970, was assigned in the sales
department, and was earning an average of P4,000.00 monthly
as his sales commission. He was under the supervision of the
petitioners officials who issued to him and his other personnel,
memoranda, guidelines on company policies, instructions and
other orders. He was, however, dismissed by the petitioner
when the Laurel-Langley Agreement expired. As a result
thereof, Limjoco asserts that in accordance with the
established company practice and the provisions of the
collective bargaining agreement, he was entitled to termination
pay equivalent to one month salary, the unpaid benefits
(Christmas bonus, midyear bonus, clothing allowance, vacation
leave, and sick leave), and the amounts illegally deducted from
his commissions which were then used for the payments of
office supplies, office space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a
decision ruled that Limjoco was an employee of the petitioner
company. Petitioner had control over Limjoco since the latter
was required to make periodic reports of his sales activities to
the company. All transactions were subject to the final
approval of the petitioner, an evidence that petitioner company
had active control on the sales activities. There was therefore,
an employer-employee relationship and necessarily, Limjoco

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
Court, review of which is sought,
being hereby declared that the
Llamar, is not an employee of

the Intermediate Appellant

is reversed and set aside, it
private respondent, Fermin
petitioner Manila Golf and

was entitled to his claims. The decision also ordered petitioner

company to pay the following:
1. To pay complainant his separation pay in the total
amount of P16,000.00;
2.
To pay complainant his unpaid Christmas bonus for
three years or the amount of P12,000.00;
3.
To pay complainant his unpaid mid-year bonus
equivalent to one-half month pay or the total amount
of P6,000.00;
4.
To pay complainant his accrued vacation leave
equivalent to 15 days per year of service, or the total amount
of P6,000.00;
5.
To pay complainant his unpaid clothing allowance in the
total amount of P600.00; and
6.
To pay complainant his accrued sick leave equivalent to
15 days per year of service or the total amount of P6,000.00.[2]
On appeal, the Third Division of the National Labor Relations
Commission affirmed the assailed decision. The Commission
opined that there was no evidence supporting the allegation
that Limjoco was an independent contractor or dealer. The
petitioner still exercised control over Limjoco through its
memoranda and guidelines and even prohibitions on the sale
of products other than those authorized by it. In short, the
petitioner company dictated how and where to sell its products.
Aside from that fact, Limjoco passed the costs to the petitioner
chargeable against his future commissions. Such practice
proved that he was not an independent dealer or contractor for
it is required by law that an independent contractor should
have substantial capital or investment.
Dissatisfied with the outcome of the case, petitioner
Encyclopaedia Britannica now comes to us in this petition
for certiorari and injunction with prayer for preliminary
injunction. On April 3, 1989, this Court issued a temporary
restraining order enjoining the enforcement of the decision
dated December 7, 1982.
The following are the arguments raised by the petitioner:
I
The respondent NLRC gravely abused its discretion in holding
that appellants contention that appellee was an independent
contractor is not supported by evidence on record.
II
Respondent NLRC committed grave abuse of discretion in not
passing upon the validity of the pronouncement of the
respondent Labor Arbiter granting private respondents claim
for payment of Christmas bonus, Mid-year bonus, clothing
allowance and the money equivalent of accrued and unused
vacation and sick leave.
The NLRC ruled that there existed an employer-employee
relationship and petitioner failed to disprove this finding. We do
not agree.
In determining the existence of an employer-employee
relationship the following elements must be present: 1)
selection and engagement of the employee; 2) payment of
wages; 3) power of dismissal; and 4) the power to control the
employees conduct. Of the above, control of employees
conduct is commonly regarded as the most crucial and
determinative indicator of the presence or absence of an
employer-employee relationship.[3] Under the control test, an
employer-employee relationship exists where the person for
whom the services are performed reserves the right to control
not only the end to be achieved, but also the manner and
means to be used in reaching that end.[4]
The fact that petitioner issued memoranda to private
respondents and to other division sales managers did not
prove that petitioner had actual control over them. The
different memoranda were merely guidelines on company
policies which the sales managers follow and impose on their
respective agents. It should be noted that in petitioners
business of selling encyclopedias and books, the marketing of
these products was done through dealership agreements. The
sales operations were primarily conducted by independent
authorized agents who did not receive regular compensations
but only commissions based on the sales of the
products. These independent agents hired their own sales
representatives, financed their own office expenses, and
maintained their own staff. Thus, there was a need for the
petitioner to issue memoranda to private respondent so that
the latter would be apprised of the company policies and
procedures. Nevertheless, private respondent Limjoco and the

other agents were free to conduct and promote their sales

operations. The periodic reports to the petitioner by the agents
were but necessary to update the company of the latters
performance and business income.
Private respondent was not an employee of the petitioner
company. While it was true that the petitioner had fixed the
prices of the products for reason of uniformity and private
respondent could not alter them, the latter, nevertheless, had
free rein in the means and methods for conducting the
marketing operations. He selected his own personnel and the
only reason why he had to notify the petitioner about such
appointments was for purpose of deducting the employees
salaries from his commissions. This he admitted in his
testimonies, thus:
Q. Yes, in other words you were on what is known as P&L
basis or profit and loss basis?
A. That is right.
Q. If for an instance, just example your sales representative in
any period did not produce any sales, you would not get any
money from Britannica, would you?
A. No, sir.
Q. In fact, Britannica by doing the accounting for you as
division manager was merely making it easy for you to
concentrate all your effort in selling and you dont worry about
accounting, isnt that so?
A. Yes, sir.
Q. In fact whenever you hire a secretary or trainer you merely
hire that person and notify Britannica so that Encyclopaedia
Britannica will give the salaries and deduct it from your
earnings, isnt that so?
A. In certain cases I just hired people previously employed by
Encyclopaedia Britannica.
x
x
x
Q. In this Exhibit 2 you were informing Encyclopaedia
Britannica that you have hired a certain person and you were
telling Britannica how her salary was going to be taken cared
of, is it not?
A. Yes, sir.
Q. You said here, please be informed that we have appointed
Miss Luz Villan as division trainer effective May 1, 1971
at P550.00 per month her salary will be chargeable to the
Katipunan and Bayanihan Districts, signed by yourself. What
is the Katipunan and Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired
this person and you should charge her salary to me, is that
right?
A. Yes, sir.[5]
Private respondent was merely an agent or an independent
dealer of the petitioner. He was free to conduct his work and he
was free to engage in other means of livelihood. At the time he
was connected with the petitioner company, private respondent
was also a director and later the president of the Farmers
Rural Bank. Had he been an employee of the company, he
could not be employed elsewhere and he would be required to
devote full time for petitioner. If private respondent was indeed
an employee, it was rather unusual for him to wait for more
than a year from his separation from work before he decided to
file his claims. Significantly, when Limjoco tendered his
resignation to petitioner on June 14, 1974, he stated, thus:
"Re: Resignation
I am resigning as manager of the EB Capitol Division effective
16 June 1974.
This decision was brought about by conflict with other interests
which lately have increasingly required my personal attention. I
feel that in fairness to the company and to the people under my
supervision I should relinquish the position to someone who
can devote full-time to the Division.
I wish to thank you for all the encouragement and assistance
you have extended to me and to my group during my long
association with Britannica.
Evidently, Limjoco was aware of conflict with other interests
which xxx have increasingly required my personal attention (p.
118, Records). At the very least, it would indicate that
petitioner has no effective control over the personal activities of
Limjoco, who as admitted by the latter had other conflict of
interest requiring his personal attention.
In ascertaining whether the relationship is that of employeremployee or one of independent contractor, each case must be

determined by its own facts and all features of the relationship

are to be considered.[6] The records of the case at bar showed
that there was no such employer-employee relationship.
As stated earlier, 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.[7] In fine, there is
nothing in the records to show or would indicate that
complainant was under the control of the petitioner in respect
of the means and methods[8] in the performance of
complainants work.
Consequently, private respondent is not entitled to the benefits
prayed for.
In view of the foregoing premises, the petition is hereby
GRANTED, and the decision of the NLRC is hereby
REVERSED AND SET ASIDE.
SO ORDERED.

because the Company's Vice President for Far East Asia,

respondent Lance Kemp, had been receiving reports of
anomalies in relation thereto from unit managers and
agents. 6 These special fund availments are governed by the
following portion of the Agreement of January 1, 1986 under
the sub-head, "New Business Manager's Expenses," viz:
Sun Life agrees to reimburse the New Business Manager for
actual reasonable expenses properly incurred in performing his
duties as New Business Manager provided such expenses are
within the guidelines issued by Sun Life from time to time and
are incurred for the purposes of gaining or producing income
and that they are accounted for in the manner established by
Sun Life and made known to the New Business Manager.
Such reimbursement by Sun Life of said expenses will be
made only upon the submission by the New Business Manager
of a statement in form and content acceptable to Sun Life
detailing said expenses with attached receipts.
It also appears that Ms. Sibayan drew up a report (Summary of
Availments) 7 after having examined and analyzed the pertinent
records, and interviewed the unit managers and agents
mentioned in the receipts presented by Carungcong to support
her claims for reimbursement of expenses for 1987, 1988 and
1989. Thereafter, on January 4, 1990, and again on January
10, 1990, Carungcong was confronted with and asked to
explain the discrepancies set out in Sibayan's report. On
January 11, 1990, she was given a letter signed by "Merton V.
Deveza, CLU, Director, Marketing," which advised of the
termination of her relationship with Sun Life, viz.: 8
In our meeting with you yesterday we presented the charge of
fraudulent reimbursement of the Branch Special Fund against
you. Accordingly, you admitted having committed said act.
For dishonesty, disloyalty and breach of your Agent's
Agreement and New Business Manager's Agreement with Sun
Life of Canada dated June 10, 1974 and January 1, 1986,
respectively, the Management has decided to terminate you as
Agent and New Business Manager of Sun Life of Canada
effective immediately.
Carungcong promptly instituted proceedings for vindication in
the Arbitration Branch of the National Labor Relations
Commission January 16, 1990. There she succeeded in
obtaining a favorable judgment. 9 Labor Arbiter Ernesto S.
Dinopol found that there existed an employer-employee
relationship between her and Sun Life; ruled that she had been
illegally dismissed, thus entitled to reinstatement without loss
of seniority rights and other benefits; and ordered Sun Life, and
its co-respondents Lance Kemp and Merton Deveza, 10 jointly
and severally to pay her P12,475,973.25 as "back
commissions,"
P8,000,000.00
as
moral
damages,
P2,000,000.00 as exemplary damages, and P2,047,597.32 as
attorney's fees a total of P22,523,570.57. 11
On appeal, the National Labor Relations Commission reversed
the Arbiter's judgment. It affirmed that no employment
relationship existed between Carungcong and Sun Life.
Nevertheless, it awarded to her P2,696,252.00 as "lost
average commission" on the ground that during the appeal,
she had neither been restored to work nor reinstated in
payroll. 12 However, the NLRC later eliminated this monetary
award in a second decision promulgated on October 28, 1994
on the basis of a motion for reconsideration of Sun Life and its
co-respondents. The NLRC declared itself without competence
to make such an award absent an employment relationship
between the parties. 13
Opting not to file a motion for reconsideration of the
Commission's judgment, 14 Carungcong forthwith initiated the
special civil action of certiorari at bar (after obtaining an
extension of time to do so), in which she seeks invalidation of
the Commission's decision of October 28, 1994, and
consequent restoration of the Labor Arbiter's awards.
Carungcong claims that although she was not, as "new
business manager," required either to account for her time or
perform her duties in a fixed manner, she was nonetheless an
employee subject to the control and supervision of Sun Life like
any other managerial employee. She brands as ludicrous the
accusation leveled against her, of having defrauded Sun Life of
the sum of P6,000.00, since her annual income at that time
was in excess of P3,000,000.00. 15 She contends that the
accusation was a mere fabrication of her Unit Managers, Jorge
Chua and Corazon de Mesa, who were promoted to Branch
Managers after termination of her employment, 16 and that she

3. G.R. No. 118086 December 15, 1997

SUSAN
G.
CARUNGCONG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SUN LIFE
ASSURANCE CO. OF CANADA, LANCE KEMP and
MERTON DEVEZA, respondents.
NARVASA, C.J.:
Susan Carungcong began her career in the insurance industry
in 1974 as an agent of Sun Life Assurance Company of
Canada (hereinafter Sun Life). She signed an "Agent's
Agreement" with Sun Life on September 10, 1974 (retroactive
to June, 1974), 1 in virtue of which she was designated the
latter's "agent to solicit applications for . . (its) insurance and
annuity policies." The contract set out in detail the terms and
conditions particularly those concerning the commissions
payable to her under which her relationship with the
company would be governed. This contract was superseded
some five years later when she signed two (2) new
agreements, both dated July 1, 1979.
The first, denominated "Career Agent's (or Unit Manager's)
Agreement," dealt with such matters as the agent's
commissions, his obligations, limitations on his authority, and
termination of the agreement by death, or by written notice
"with or without cause." It declared that the "Agent shall be an
independent contractor and none of the terms of . . (the)
Agreement shall be construed as creating an employeremployee relationship." 2
The second was titled, "MANAGER'S Supplementary
Agreement." Making explicit reference to the first (Agent's [the
Unit Manager's] Agreement) "which became effective on the
1st day of July, 1979." said second contract explicitly
described as a "further agreement" contained provisions
regarding remuneration (overriding commissions in accordance
with a fixed schedule), limitation of authority, and termination of
the agreement inter alia by written notice "without cause." 3
Subsequently, Carungcong and Sun Life executed another
Agreement "made and effective as of January 1, 1986"
by which the former was named New Business Manager with
the function generally "to manage a New Business Office
established by the . . (latter), . . to obtain applications for life
insurance policies and other products offered by or distributed
through Sun Life and to perform such other duties in
connection therewith as Sun Life may require from time to
time." 4 The Agreement governed such matters as the New
Business Manager's duties; limitations on authority;
compensation; expenses; termination of relation, by among
others, notice in writing with or without cause. Like the "Career
Agent's (or Unit Manager's) Agreement" first signed by
Carungcong, 5 this latest Agreement stressed that the "New
Business Manager in performance of his duties defined herein,
shall be considered an independent contractor and not . . an
employee of Sun Life," and that "(u)nder no circumstance shall
the New Business Manager and/or his employees be
considered employees of Sun Life."
Now, it appears that sometime in November, 1989. Ms. Eleizer
Sibayan, Manager of Sun Life's Internal Audit Department,
commenced an inquiry into the special fund availments of
Carungcong and other New Business Managers; this, allegedly

actually had no hand in the preparation of the vouchers

involved in the imputed anomaly, this task being entrusted to
the branch office secretary, Lilet Ginete, selected and hired by
Sun Life.
She also contends that in dismissing her, Sun Life failed to
observe procedural due process. She was not furnished with
copies of the audit report of her supposedly fraudulent use of
her special fund availments, and was never afforded an
opportunity to be heard by Sun Life officials prior to termination
of her employment. 17 She assails the decisions of the NLRC as
tainted with bias and grave abuse of discretion, particularly in
ignoring the "deluge of evidence" adduced before the labor
arbiter.
On the other hand, Sun Life and its co-respondents argue that
the challenged decisions were in fact precisely based on
Carungcong's so-called "deluge of evidence," and thus cannot
in any sense be deemed "capricious, whimsical, arbitrary or
despotic." 18 They invoke the familiar rule that the findings of
fact of administrative agencies are accorded respect, if not
indeed finality, by this Court. The assert that jurisprudence and
Carungcong's admissions before the Labor Arbiter negate the
existence of an employment relationship; that in truth
Carungcong was duly informed of the charge of fraud and
dishonesty, a charge supported by adequate proof; and that
therefore the cancellation of the business relationship between
them and Carungcong was valid and legal, effected with due
process and for just cause.
The facts involved in this case are laid bare in considerable
detail, and the issues identified and extensively discussed by
the parties, in their pleadings, namely: respondents' Comment
dated May 4, 1995; 19 petitioner's Reply thereto dated
September 11, 1995; 20 respondents' Rejoinder of October 31,
1995; 21 their Manifestation dated November 2, 1995,
submitting copies of their exhibits in the proceedings a
quo; 22 Comment on the petition of the Office of the Solicitor
General, dated November 22, 1995 23 in which it makes
common cause with Carungcong; petitioner's Sur-Rejoinder
dated December 11, 1995; 24 her Counter-Manifestation of
December 11, 1995, submitting copies of her own exhibits in
the proceedings below; 25 respondents' Reply (dated January 8,
1996) to the Comment of the Solicitor General's Office; 26 the
Addendum to Respondents' Comment, dated July 15,
1997; 27 and
petitioner's
"Reply
to
Private Respondents' 'Addendum' filed without leave of court,
with Motion to Expunge . . ," dated July 30, 1997. 28
The record does indeed disclose what Carungcong calls a
"deluge of evidence" submitted by the parties before the Labor
Arbiter. Carungcong submitted two (2) affidavits of hers
(Exhibits A and B) in lieu of her direct examination, and
numerous documents marked as Exhibits C to Z, inclusive, and
from AA to ZZ, and again from AAA to EEE and EEE-1 (to FFF
and FFF-7). 29 Sun Life and its co-respondents in turn
submitted more than thirty-eight (38) exhibits, including the
affidavits of five witnesses. 30 Facts are thereby established
which the Court cannot ignore.
As already mentioned, as Sun Life's New Business Manager,
Carungcong had the prerogative under her contract to claim
reimbursement "for actual reasonable expenses properly
incurred in performing . . (her) duties . . ." Reimbursement was
to be made by Sun Life "only upon . . (her) submission . . of a
statement in form and content acceptable to Sun Life detailing
said expenses with attached receipts." Availing of this
prerogative, Carungcong presented several statements of
reimbursable expenses (appending the corresponding
receipts), on the strength of which she duly received full
reimbursement from Sun Life. These statements included
claims for reimbursement for:
1) more than P30,000.00, representing the cost of prizes or
awards ostensibly advanced by Susan Carungcong; and
2) several sums of money, representing the cost of food and
drinks shouldered by Carungcong for dinner or snacks in
various restaurants and on different dates to which she had
supposedly invited agents of Sun Life, namely: Jorge Chua,
Unit Manager, Prosperity Unit; Corazon de Mesa, Dynamic
Unit: Robert Tan, Royal Unit; NNBO; Lucila L. Natividad,
Samaritan Unit; Cristina J, Gloton, NNBO; Cynthia Suan;
Zenaida B. Lim; Maynard Granados.
The record reveals the fraudulent character of these claims,
that is to say, the unclean hands with which Carungcong has

come to court. Her claims are categorically belied by no less

than the eight (8) insurance managers and agents specifically
named by her in her supporting documents, about whose
impartially or credibility the Court has been cited to no
persuasive cause for doubt or misgiving. Jorge Chua 31 and
Corazon de Mesa 32 deposed that as regards the special fund
raised by Carungcong for prizes, awards, and outings, they
had in fact contributed thereto but the latter had made it appear
that she had raised and disbursed the entire fund by herself,
and although she later obtained reimbursement therefor in the
sum of more than P30,000.00, she never returned to them
what they had contributed.
Chua and de Mesa also denied Carungcong's claim that she
had treated them to food and drinks on December 7, 1987
at Kimpura (the bill amounting to P570.90), at Jade Garden on
January 20, 1988 (the bill being P734.16), or at Flavors &
Spices on November 5, 1988 (the bill coming to
P420.66). 33 De Mesa also affirmed that contrary to
Carungcong's claim, she had not been treated by the latter at
the Kamayan (the chit being in the sum of P1,099.71) or
atTropical Hut (the bill P378.50). 34
Robert Tan belied Carungcong's claim that she had paid for
their food or drinks at the Emerald Garden (the bill presented
being in the sum of P742.33) or at Sugarhouse (the bill being
P220.02). 35
Lucila L. Natividad also belied Carungcong's assertion that she
had treated her at the Flavours and Spices (the bill being
P834.48). 36
So, too, Cristina J. Gloton gave the lie to Carungcong's claim
that
she
had treated her at the Hotel Intercontinental (the bill on one
occasion being P559.98). 37
Cynthia Suan denied having been entertained by Carungcong
at the Manila Peninsula (the bill supposedly being in the sum of
P359.75). 38
Zenaida B. Lim confirmed her earlier denial that Carungcong
had paid for their snacks at Bing-Bing's (the bill being
P182.40). 39
Maynard Granados denied, among other things, that he was
treated
to
dinner
by
Carungcong
at
the Hotel
Intercontinental on March 29, 1988 (the bill being supposedly
P437.95). 40
The record thus appears to establish adequate cause for Sun
Life to terminate its relationship with Susan Carungcong. Her
attention was drawn to the perfidious nature of her claims for
reimbursement; she was accorded an opportunity to explain
the same; she refused to do so.
Prescinding therefrom, the contracts she had willingly and
knowingly signed with Sun Life 41 repeatedly and clearly
provided that said agreements were terminable by either party
by written notice with or without cause. Her "Career Agent's (or
Unit Manager's) Agreement" inter alia provided for termination
of the agreement by death, or by written notice "with or without
cause," 42 Her "MANAGER'S Supplementary Agreement."
effective July 1, 1979, contained provisions regarding
termination of the agreement inter alia by written notice
"without cause." 43 A subsequent agreement by which she was
named Manager for New Business, dated January 1, 1986,
similarly provided for termination of relation, by among others,
notice in writing with or without cause.
Noteworthy is that this last agreement of January 1, 1986
emphasized, like the "Career Agent's (or Unit Manager's)
Agreement" first signed by her, 44 that in the performance of her
duties defined herein. Carungcong would be considered an
independent contractor and not . . an employee of Sun Life,"
and that "(u)nder no circumstance shall the New Business
Manager and/or his employees be considered employees of
Sun Life."
It is germane to advert to the fact, which should by now be
apparent, that Carungcong was not your ordinary run-of-themill employee, nor even your average managerial employee or
supervisor. Her stated annual income from her occupation is
impressive by any standards: "in excess of P3,000,000.00,"
exclusive of overriding commissions. 45 Certainly, she may not
be likened to an ordinary person applying for employment, or
an ordinary employee striving to keep his job, under the moral
dominance of the hiring entity or individual. By no means may
Carungcong be considered as dealing, or having dealt, with
Sun Life from an inferior position, as a disadvantaged, morally-

dominated person. She must be deemed as having transacted

with Sun Life's executives on more or less equal terms.
These considerations impel concurrence with the conclusions
of the challenged decision and resolution of respondent
Commission which considered Carungcong as an independent
contractor, not an employee of Sun Life. It is significant that
this issue of the precise status of Carungcong as an
independent contractor, evidently deemed decisive by
respondent Commission, was discussed by it at some length
not once, but twice, first in its Decision of July 29, 1994, and
then in its second Decision of October 28, 1994 resolving the
separate motions for reconsideration of the parties.
In the Decision of July 29, 1994, the Commission said: 46
A thorough review of the facts and evidence adduced on
record compels us to rule in the negative (on "the question of
whether or not complainant Carungcong is a regular employee
of respondents"). Complainant, to our considered view is not,
contrary to the findings erroneously made in the challenged
decision below, a regular employee of respondents but an
independent contractor.
Her contracts/agreements since she started as insurance
agent, then as unit manager and finally as business/branch
manager expressly say so. Besides, it cannot be gainsaid that
complainant was never aware of her status as such, for
indicated in the very face of her latest contract is the fact that
she was accorded all the chances she needed to seek
professional and legal advice relative thereto before she
signed the said contract.
Indeed, as adverted to by herein respondents, the
contracts/agreements entered into by the parties herein are the
laws between the said parties.
Moreover, it is true that complainant Carungcong's duties and
functions derived from her then existing agreements/contracts
were made subject to rules and regulations issued by
respondent company, and for that matter, have likewise been
made subject of certain limitations imposed by said respondent
company. Nonetheless, these are not sufficient to accord the
effect of establishing employer-employee relationship absent in
this case. This is so because the insurance business is not just
any other ordinary business. It is one that is imbued with public
interest hence, it must be governed buy the rules and
regulations of the state. The controls adverted to by
complainant are latent in the kind of business she is into and
are mainly aimed at promoting the results the parties so desire
and do not necessarily create any employer-employee
relationships, where the employers' controls have to interfere in
the methods and means by which the employee would like to
employ to arrive at the desired results.
This is not without any jurisprudential support as earlier pointed
out by herein respondent. The Supreme Court in the case of
Insular Life Assurance Co., Ltd. versus National Labor
Relations Commission and Melencio Basiao (179 SCRA 459)
emphatically discoursed in this wise:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control to fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it. The distinction acquires particular relevance in the case of
an enterprise affected with public interest and is on that
account subject to regulation by the State with respect, not
only to the relations between insurer and insured but also to
the internal affairs of the Insurance company. Rules and
regulations governing the conduct of the business are provided
for in the Insurance Code and enforced by the Insurance
Commissioner. It is therefore usual and expected for an
insurance company to promulgate a set of rules to guide its
commission agents in selling its policies that they may not run
afoul of the law and what it requires or prohibits. (Emphasis
supplied.)
Complainant having admitted that she was free to work as she
pleases, at the place and time she felt convenient for her to do
so is not unlike Melencio Basiao in the aforequoted case
(supra) where in spite of the controls imposed by respondents,
she suffered no interference whatsoever in relation to the
manner and methodology she used for her to achieve her

desired results, this is clear from her testimony given in this

wise:
"A. Yes, and as I said as a branch manager, we have no
specific time to stay in the office because its either if I am not
in the office, I am monitoring my agents in the field or a unit
manager I trained them in the field or recruit." (pp. 28-29, TSN,
31 May 1991, Emphasis supplied.)
For that matter, complainant Carungcong was never paid a
fixed wage or salary but was mainly paid by commissions,
depending
on
the
level
and
volume
of
her
performance/production, the number of trained agents, when
taken in and assigned to her, being responsible for her added
income as she gets a certain percentage from the said agents'
production as part of her commission.
In the second judgment of October 28, 1994, 47 respondent
Commission stressed the following points:
Arrayed against complainant's arguments that she was
respondent's employee are her own admissions during the trial
on the merits. Said differently, her admissions completely
diluted the supposed potency or her theory that an employeremployee relationship existed. Complainant admitted that her
renumerations were based on her levels of production (TSN,
June 27, 1991, page 72 et seq.). She admitted she could solicit
insurance anywhere or at any time she deemed convenient
(TSN, May 31, 1991, page 33 et seq.). She never accounted
for her working time (TSN, May 20, 1991, page 66 et seq.) or
that daily working hours" were never applicable to her situation
(TSN, May 20, 1991, page 75). She gave unequivocal
testimony that she performed her duties as a New Business
Manager, i.e., monitoring, training, recruitment and sales, at
her own time and convenience, at however she deemed
convenient, and with whomsoever she chose (TSN, May 31,
1991, page 35 et seq., TSN, May 20, 1991 page 72, et seq.;
TSN, May 31, 1991, page 321 et seq.; TSN, May 31, 1991,
page 84 et seq.). We cannot help but agree with respondents'
submission that, plainly, complainant alone judged the
elements of time, place and means in the performance of her
duties and responsibilities.
Complainant's "theory of the case" appears to be limited to
pointing out that respondent company issued rules and
regulations to which she should conform. However, no showing
has
been
made
that
such
rules
and
regulations effectively and actually controlled or restricted her
choice of methods in performing her duties as New Business
Manager. Without such proof, there can be no plausible reason
to believe that her contractual declaration that she was an
independent contractor has been qualified.
Thus, we see no reason to deviate from our original conclusion
that complainant was never respondents' employee.
Complainant's motion for reconsideration is, therefore, denied.
Of course, Carungcong disagrees with these dispositions.
Quite possibly, others may share her opinion, and insist that
there was error in either the appreciation of the evidence or the
choice of law or jurisprudence applied by the Commission. But
such errors of judgment as might be ascribed to the
Commission's reasoned conclusions may not be accorded so
egregious a cast as to be fairly considered to constitute grave
abuse of discretion meriting correction by the extraordinary writ
of certiorari.
It should be apparent that no whimsicality, capriciousness, or
want of logic or foundation may rationally be imputed to NLRC
in its marshaling and analysis of the evidence, its identification
of the issues, in its assessment of the arguments thereon, and
its conclusions on the basis thereof. It is simply not possible in
the premises to opine that grave abuse of discretion was
attendant on its challenged decisions.
WHEREFORE, the petition is DISMISSED, with costs against
petitioner.
SO ORDERED.
4. 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.

RESOLUTION
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-inlaw, 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-OFTHE-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 ViceChair 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 preoperative 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 preoperative 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
auscultated14 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.

10

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-inlaw, 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

11

consequences of professional treatment were not as such as

would ordinarily have followed if due care had been
exercised."29Considering 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 Captainof-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 necessary39 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 x42
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.

12

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 Code45 since there exists an employeremployee 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 x46
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 homebased 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

13

President and Gen. Manager[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN
before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABSCBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan
(ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the
ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly
talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new
account with the same bank where ABS-CBN deposited
SONZAs talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor
Arbiter[5] denied the motion to dismiss and directed the parties
to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim
that he was an employee of respondent company until April 15,
1996 and that he was not paid certain claims, it is sufficient
enough as to confer jurisdiction over the instant case in this
Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a
matter to be resolved only after and as a result of a
hearing. Thus, the respondents plea of lack of employeremployee relationship may be pleaded only as a matter of
defense. It behooves upon it the duty to prove that there really
is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for
resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents
Position Paper with Motion to Expunge Respondents Annex 4
and Annex 5 from the Records. Annexes 4 and 5 are affidavits
of ABS-CBNs witnesses Soccoro Vidanes and Rolando V.
Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to
treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July
1997 dismissing the complaint for lack of jurisdiction.[6] The
pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty,
touched on the true nature of the contract of a talent, it stands
to reason that a talent as above-described cannot be
considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by
respondent by reason of his peculiar skills and talent as a
TV host and a radio broadcaster. Unlike an ordinary
employee, he was free to perform the services he
undertook to render in accordance with his own style. The
benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally
given to employees. For one, complainant Sonzas monthly
talent fees amount to a staggering P317,000. Moreover, his
engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight (8) hours
of work per day as he worked only for such number of hours as
may be necessary.
The fact that per the May 1994 Agreement complainant was
accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed
arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put
by the respondent, All these benefits are merely talent fees
and other contractual benefits and should not be deemed as
salaries, wages and/or other remuneration accorded to an
employee, notwithstanding the nomenclature appended to
these benefits. Apropos to this is the rule that the term or
nomenclature given to a stipulated benefit is not controlling, but
the intent of the parties to the Agreement conferring such
benefit.

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.
5. [G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing
the 26 March 1999 Decision[2] of the Court of Appeals in CAG.R. SP No. 49190 dismissing the petition filed by Jose Y.
Sonza (SONZA). The Court of Appeals affirmed the findings
of the National Labor Relations Commission (NLRC), which
affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation
(ABS-CBN) signed an Agreement (Agreement) with the Mel
and Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate
officers while MJMDC was represented by SONZA, as
President and General Manager, and Carmela Tiangco
(TIANGCO), as EVP and Treasurer. Referred to in the
Agreement as AGENT, MJMDC agreed to provide SONZAs
services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would
render to ABS-CBN, as follows:
a.
Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays;
b.
Co-host for Mel & Jay television program, 5:30 to 7:00
p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent
fee of P310,000 for the first year and P317,000 for the second
and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs
President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated
May 1994 entered into by your goodself on behalf of ABS-CBN
with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view
of recent events concerning his programs and career. We
consider these acts of the station violative of the Agreement
and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our
instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA

14

The fact that complainant was made subject to

respondents Rules and Regulations, likewise, does not
detract from the absence of employer-employee
relationship. As held by the Supreme Court, The line should
be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employeremployee relationship unlike the second, which address both
the result and the means to achieve it. (Insular Life Assurance
Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the
NLRC rendered a Decision affirming the Labor Arbiters
decision. SONZA filed a motion for reconsideration, which the
NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for
certiorari before the Court of Appeals assailing the decision
and resolution of the NLRC. On 26 March 1999, the Court of
Appeals rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no
employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRCs decision, the appellate court
quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC
entered into the contract merely as an agent of complainant
Sonza, the principal. By all indication and as the law puts it,
the act of the agent is the act of the principal itself. This fact is
made particularly true in this case, as admittedly MJMDC is a
management company devoted exclusively to managing the
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues
between complainant Sonza and MJMDC, and not between
ABS-CBN and MJMDC. This is clear from the provisions of the
May 1994 Agreement which specifically referred to MJMDC as
the AGENT. As a matter of fact, when complainant herein
unilaterally rescinded said May 1994 Agreement, it was
MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABSCBN reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the
May 1994 Agreement, which is the latest Agreement executed
between ABS-CBN and Mr. Sonza, that MJMDC figured in the
said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere laboronly contractor of ABS-CBN such that there exist[s] employeremployee relationship between the latter and Mr. Sonza. On
the contrary, We find it indubitable, that MJMDC is an agent,
not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant
controversy indeed belongs to the regular courts, the same
being in the nature of an action for alleged breach of
contractual obligation on the part of respondent-appellee. As
squarely apparent from complainant-appellants Position
Paper, his claims for compensation for services, 13 th month
pay, signing bonus and travel allowance against respondentappellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for
proceeds under Stock Purchase Agreement are based on the
latter. A portion of the Position Paper of complainant-appellant
bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN,
the latter contractually bound itself to pay complainant a
signing bonus consisting of shares of stockswith FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13 th month pay
based on an amount not lower than the amount he was
receiving prior to effectivity of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant

is entitled to a commutable travel benefit amounting to at least
One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own
recognition of the fact that his contractual relations with ABSCBN are founded on the New Civil Code, rather than the Labor
Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of
rescission of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring to unpaid
employee benefits, he is waiving and renouncing recovery of
the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to such recovery of the other
benefits under said Agreement. (Annex 3 of the respondent
ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the
May 1994 Agreement and/or the Stock Purchase Agreement
by respondent-appellee that complainant-appellant filed his
complaint. Complainant-appellants claims being anchored on
the alleged breach of contract on the part of respondentappellee, the same can be resolved by reference to civil law
and not to labor law. Consequently, they are within the realm
of civil law and, thus, lie with the regular courts. As held in the
case of Dai-Chi Electronics Manufacturing vs. Villarama, 238
SCRA 267, 21 November 1994, an action for breach of
contractual obligation is intrinsically a civil dispute.
[9]
(Emphasis supplied)
The Court of Appeals ruled that the existence of an employeremployee relationship between SONZA and ABS-CBN is a
factual question that is within the jurisdiction of the NLRC to
resolve.[10] A special civil action for certiorari extends only to
issues of want or excess of jurisdiction of the NLRC.[11] Such
action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the
NLRCs conclusion.[12] The Court of Appeals added that it could
not re-examine the parties evidence and substitute the factual
findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA
contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
THE NLRCS DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE
RELATIONSHIP
EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT
OF
CONTROLLING
LAW,
JURISPRUDENCE
AND
EVIDENCE TO SUPPORT SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the
decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiters dismissal of the case for lack
of jurisdiction.
The present controversy is one of first impression. Although
Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship
between a television and radio station and one of its
talents. There is no case law stating that a radio and
television program host is an employee of the broadcast
station.
The instant case involves big names in the broadcast industry,
namely Jose Jay Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and
radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over
the case because he was an employee of ABS-CBN. On the
other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a
question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also
finality when supported by substantial evidence.[15] Substantial
evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.[16] A party
cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment

15

for that of the tribunal in determining where the weight of

evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employeremployee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the
employee on the means and methods by which the work is
accomplished.[18] The last element, the so-called control test,
is the most important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television
and radio programs because of SONZAs peculiar skills, talent
and celebrity status. SONZA contends that the discretion
used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar
experience and qualification as complainant belies
respondents claim of independent contractorship.
Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such
unique skills, talent and celebrity status, ABS-CBN would not
have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA
does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test
being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABSCBN. SONZA also points out that ABS-CBN granted him
benefits and privileges which he would not have enjoyed if he
were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result
of negotiations that led to the Agreement. If SONZA were ABSCBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and
13th month pay[20] which the law automatically incorporates into
every employer-employee contract.[21] Whatever benefits
SONZA enjoyed arose from contract and not because of an
employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because
of SONZAs unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting
alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to
MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such
mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party
may terminate their relationship. SONZA failed to show that
ABS-CBN could terminate his services on grounds other than
breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay
SONZAs talent fees as long as AGENT and Jay Sonza shall
faithfully and completely perform each condition of this
Agreement.[24] Even if it suffered severe business losses, ABSCBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZAs talent fees during the life of the

Agreement. This circumstance indicates an independent

contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting
his programs, ABS-CBN still paid him his talent fees. Plainly,
ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life
of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his
rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that if it were
true that complainant was really an employee, he would merely
resign, instead. SONZA did actually resign from ABS-CBN but
he also, as president of MJMDC, rescinded the
Agreement. SONZAs letter clearly bears this out.[26] However,
the manner by which SONZA terminated his relationship with
ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his
status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and
television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vlez v. Corporacin De Puerto
Rico Para La Difusin Pblica (WIPR)[27] that a television
program host is an independent contractor. We quote the
following findings of the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x
In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing,
and modeling; taught with the drama department at the
University of Puerto Rico; and acted in several theater and
television productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and
instrumentalities
necessary
for
her
to
perform. Specifically, she provided, or obtained sponsors to
provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty
disputes that this factor favors independent contractor status
because WIPR provided the equipment necessary to tape the
show. Albertys argument is misplaced. The equipment
necessary for Alberty to conduct her job as host of Desde Mi
Pueblo related to her appearance on the show. Others
provided equipment for filming and producing the show, but
these were not the primary tools that Alberty used to perform
her particular function. If we accepted this argument,
independent contractors could never work on collaborative
projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to
filming Desde Mi Pueblo. Albertys contracts with WIPR
specifically provided that WIPR hired her professional services
as Hostess for the Program Desde Mi Pueblo. There is no
evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that
SONZA is not an employee but an independent
contractor. The control test is the most important test our
courts apply in distinguishing an employee from an
independent contractor.[29] This test is based on the extent of
control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the
worker is deemed an employee. The converse holds true as
well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over
the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged
SONZAs services specifically to co-host the Mel & Jay
programs. ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs
control. SONZA did not have to render eight hours of work per
day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-

16

production staff meetings.[31]ABS-CBN could not dictate the

contents of SONZAs script. However, the Agreement
prohibited SONZA from criticizing in his shows ABS-CBN or its
interests.[32] The clear implication is that SONZA had a free
hand on what to say or discuss in his shows provided he did
not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual
performance that produced the finished product of SONZAs
work.[33] ABS-CBN did not instruct SONZA how to perform his
job. ABS-CBN merely reserved the right to modify the program
format and airtime schedule for more effective
programming.[34] ABS-CBNs sole concern was the quality of
the shows and their standing in the ratings. Clearly, ABS-CBN
did not exercise control over the means and methods of
performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his
shows proves ABS-CBNs power over the means and methods
of the performance of his work. Although ABS-CBN did have
the option not to broadcast SONZAs show, ABS-CBN was still
obligated to pay SONZAs talent fees. Thus, even if ABS-CBN
was completely dissatisfied with the means and methods of
SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to
broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show,
burdened as it was by the obligation to continue paying in full
SONZAs talent fees, did not amount to control over the means
and methods of the performance of SONZAs work. ABS-CBN
could not terminate or discipline SONZA even if the means and
methods of performance of his work - how he delivered his
lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only
to the result of SONZAs work, whether to broadcast the final
product or not. In either case, ABS-CBN must still pay
SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit
Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved
the right to delete objectionable features in their shows. Since
the management did not have control over the manner of
performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over
his work by supplying all equipment and crew. No doubt,
ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities
SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary
for his appearance. [38] Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did
not supervise and control his work. ABS-CBNs sole concern
was for SONZA to display his talent during the airing of the
programs.[39]
A radio broadcast specialist who works under minimal
supervision is an independent contractor.[40] SONZAs work as
television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs
employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates
ABS-CBNs control not only [over] his manner of work but also
the quality of his work.
The Agreement stipulates that SONZA shall abide with the
rules and standards of performance covering talents[41] of
ABS-CBN. The Agreement does not require SONZA to comply
with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on
SONZA under the Agreement refers to the Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas
(KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics.[42] The KBP code applies to
broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio

and television stations. Clearly, the rules and standards of

performance referred to in the Agreement are those applicable
to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the former.
[43]
In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules
are merely guidelines towards the achievement of the
mutually desired result, which are top-rating television and
radio programs that comply with standards of the industry. We
have ruled that:
Further, not every form of control that a party reserves to
himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of
this case fall squarely with the case of Insular Life Assurance
Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it.[44]
The Vaughan case also held that one could still be an
independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The
hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the
Agreement is the most extreme form of control which ABSCBN exercised over him.
This argument is futile. Being an exclusive talent does not by
itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted
practice in the entertainment industry.[46] This practice is not
designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial
amounts of money, time and effort in building up its talents as
well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate
period of time.[47] Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of
MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not
an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1)
the labor-only contractor; (2) the employee who is ostensibly
under the employ of the labor-only contractor; and (3) the
principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the
principal. The law makes the principal responsible to the
employees of the labor-only contractor as if the principal itself
directly hired or employed the employees.[48] These
circumstances are not present in this case.
There are essentially only two parties involved under the
Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZAs agent. The Agreement expressly states that
MJMDC acted as the AGENT of SONZA. The records do not
show that MJMDC acted as ABS-CBNs agent. MJMDC, which
stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA
and TIANGCO. The President and General Manager of
MJMDC is SONZA himself. It is absurd to hold that MJMDC,
which is owned, controlled, headed and managed by SONZA,
acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That
would make MJMDC the agent of both ABS-CBN and SONZA.

17

As SONZA admits, MJMDC is a management company

devoted exclusively to managing the careers of SONZA and
his broadcast partner, TIANGCO. MJMDC is not engaged in
any other business, not even job contracting. MJMDC does
not have any other function apart from acting as agent of
SONZA or TIANGCO to promote their careers in the broadcast
and television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then
Minister of Labor Blas Ople on 8 January 1979 finally settled
the status of workers in the broadcast industry. Under this
policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which
does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines
SONZAs status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to
the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when
the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits
of Socorro Vidanes and Rolando Cruz without giving his
counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent to
attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses,
he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the
discretion whether to conduct a formal (trial-type) hearing after
the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims
and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be
accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing.
Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or
hearing. At this stage, he may, at his discretion and for the
purpose of making such determination, ask clarificatory
questions to further elicit facts or information, including but not
limited to the subpoena of relevant documentary evidence, if
any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the
position papers and the supporting documents without a formal
trial.[51] The holding of a formal hearing or trial is something that
the parties cannot demand as a matter of right.[52] If the Labor
Arbiter is confident that he can rely on the documents before
him, he cannot be faulted for not conducting a formal trial,
unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the
rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the
broadcast and entertainment industries to treat talents like
SONZA as independent contractors. SONZA argues that if
such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution[53] arises only if there is an employer-employee
relationship under labor laws. Not every performance of
services for a fee creates an employer-employee
relationship. To hold that every person who renders services
to another for a fee is an employee - to give meaning to the
security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the
freedom to offer their services as independent

contractors. The right to life and livelihood guarantees this

freedom to contract as independent contractors. The right of
labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent,
of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his
services without any one controlling the means and methods
by which he performs his art or craft. This Court will not
interpret the right of labor to security of tenure to compel artists
and talents to render their services only as employees. If radio
and television program hosts can render their services only as
employees, the station owners and managers can dictate to
the radio and television hosts what they say in their
shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to
Republic Act No. 7716,[55] as amended by Republic Act No.
8241,[56] treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to
the 10% value-added tax (VAT) on services they
render. Exempted from the VAT are those under an employeremployee relationship.[57] This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees,
13th month pay, separation pay, service incentive leave, signing
bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZAs claims are all
based on the May 1994 Agreement and stock option plan,
and not on the Labor Code. Clearly, the present case does
not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement.
In effect, SONZAs cause of action is for breach of contract
which is intrinsically a civil dispute cognizable by the regular
courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision
of the Court of Appeals dated 26 March 1999 in CA-G.R. SP
No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
6.

ANGELITO L. LAZARO,
G.R. No.
138254
Proprietor of Royal Star
Marketing,
Present:
Petitioner,
PUNO,
Chairman,
- versus AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO,
SOCIAL SECURITY COMMISSION,
Members.
ROSALINA LAUDATO, SOCIAL
SECURITY SYSTEM and THE
HONORABLE COURT OF
APPEALS,
Respondents.
Promulgated:
July 30, 2004
x-------------------------------------x
DECISION
TINGA, J.:
Before us is a Petition for Review under Rule 45, assailing
the Decision[1] of the Court of Appeals Fifteenth Division[2] in
CA-G.R. Sp. No. 40956, promulgated on 20 November 1998,
which affirmed two rulings of the Social Security Commission
(SSC) dated 8 November 1995 and 24 April 1996.
Private respondent Rosalina M. Laudato (Laudato) filed
a petition before the SSC for social security coverage and
remittance of unpaid monthly social security contributions

18

against her three (3) employers. Among the respondents was

herein petitioner Angelito L. Lazaro (Lazaro), proprietor of
Royal Star Marketing (Royal Star), which is engaged in the
business of selling home appliances.[3] Laudato alleged that
despite her employment as sales supervisor of the sales
agents for Royal Star from April of 1979 to March of 1986,
Lazaro had failed during the said period, to report her to the
SSC for compulsory coverage or remit Laudatos social
security contributions.[4]

findings of lower courts or agencies whose function is to

resolve factual matters.[16]
Lazaros arguments may be dispensed with by applying
precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an
employer-employee relationship. In Grepalife v. Judico,[17] the
Court upheld the existence of an employer-employee
relationship between the insurance company and its agents,
despite the fact that the compensation that the agents on
commission received was not paid by the company but by the
investor or the person insured.[18]
The relevant factor
remains, as stated earlier, 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.[19]

Lazaro denied that Laudato was a sales supervisor of

Royal Star, averring instead that she was a mere sales agent
whom he paid purely on commission basis. Lazaro also
maintained that Laudato was not subjected to
definite hours and conditions of work. As such, Laudato could
not be deemed an employee of Royal Star.[5]
After the parties submitted their respective position
papers, the SSC promulgated a Resolution[6] dated 8
November 1995 ruling in favor of Laudato.[7] Applying the
control test, it held that Laudato was an employee of Royal
Star, and ordered Royal Star to pay the unremitted social
security contributions of Laudato in the amount of Five
Thousand Seven Pesos and Thirty Five Centavos (P5,007.35),
together with the penalties totaling Twenty Two Thousand Two
Hundred Eighteen Pesos and Fifty Four Centavos
(P22,218.54). In addition, Royal Star was made liable to pay
damages to the SSC in the amount of Fifteen Thousand Six
Hundred Eighty Pesos and Seven Centavos (P15,680.07) for
not reporting Laudato for social security coverage, pursuant to
Section 24 of the Social Security Law.[8]

Neither does it follow that a person who does not observe

normal hours of work cannot be deemed an employee. In
Cosmopolitan Funeral Homes, Inc. v. Maalat,[20] the employer
similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a supervisor
on commission basis who did not observe normal hours of
work. This Court declared that there was an employeremployee relationship, noting that [the] supervisor, although
compensated on commission basis, [is] exempt from the
observance of normal hours of work for his compensation is
measured by the number of sales he makes.[21]
It should also be emphasized that the SSC, also as
upheld by the Court of Appeals, found that Laudato was a
sales supervisor and not a mere agent.[22] As such, Laudato
oversaw and supervised the sales agents of the company, and
thus was subject to the control of management as to how she
implements its policies and its end results. We are disinclined
to reverse this finding, in the absence of countervailing
evidence from Lazaro and also in light of the fact that
Laudatos calling cards from Royal Star indicate that she is
indeed a sales supervisor.

After Lazaros Motion for Reconsideration before the SSC

was denied,[9] Lazaro filed a Petition for Review with the Court
of Appeals. Lazaro reiterated that Laudato was merely a sales
agent who was paid purely on commission basis, not included
in the company payroll, and who neither observed regular
working hours nor accomplished time cards.
In its assailed Decision, the Court of Appeals noted that
Lazaros arguments were a reprise of those already presented
before the SSC.[10] Moreover, Lazaro had not come forward
with particulars and specifics in his petition to show that the
Commissions ruling is not supported by substantial evidence.
[11] Thus, the appellate court affirmed the finding that Laudato
was an employee of Royal Star, and hence entitled to
coverage under the Social Security Law.

The finding of the SSC that Laudato was an employee

Royal Star is supported by substantial

of

evidence. The SSC examined the cash vouchers issued by

Royal Star to Laudato,[23] calling cards of Royal Star
denominating Laudato as a Sales Supervisor of the company,
[24] and Certificates of Appreciation issued by Royal Star to
Laudato in recognition of her unselfish and loyal efforts in
promoting the company.[25] On the other hand, Lazaro has
failed to present any convincing contrary evidence, relying
instead on his bare assertions. The Court of Appeals correctly
ruled that petitioner has not sufficiently shown that the SSCs
ruling was not supported by substantial evidence.

Before this Court, Lazaro again insists that Laudato was

not qualified for social security coverage, as she was not an
employee of Royal Star, her income dependent on a
generation of sales and based on commissions.[12] It is
argued that Royal Star had no control over Laudatos activities,
and that under the so-called control test, Laudato could not
be deemed an employee.[13]

A piece of documentary evidence appreciated by the SSC is

Memorandum dated 3 May 1980 of Teresita Lazaro, General
Manager of Royal Star, directing that no commissions were to
be given on all main office sales from walk-in customers and
enjoining salesmen and sales supervisors to observe this new
policy.[26] The Memorandum evinces the fact that, contrary to
Lazaros claim, Royal Star exercised control over its sales
supervisors or agents such as Laudato as to the means and
methods through which these personnel performed their work.

It is an accepted doctrine that for the purposes of coverage

under the Social Security Act, the determination of employeremployee relationship warrants the application of the 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 done, but also as to the means and methods by which the
same is accomplished.[14] The SSC, as sustained by the
Court of Appeals, applying the control test found that Laudato
was an employee of Royal Star. We find no reversible error.

Finally, Lazaro invokes our ruling in the 1987 case of Social

Security System v. Court of Appeals[27] that a person who
works for another at his own pleasure, subject to definite hours
or conditions of work, and is compensated according to the
result of his effort is not an employee.[28] The citation is odd
for Lazaro to rely upon, considering that in the cited case, the
Court affirmed the employee-employer relationship between a
sales agent and the cigarette firm whose products he sold.[29]
Perhaps Lazaro meant instead to cite our 1969 ruling in the
similarly-titled case of Social Security System v. Court of
Appeals,[30] also cited in the later eponymous ruling, whose
disposition is more in accord with Lazaros argument.

Lazaros arguments are nothing more but a mere

reiteration of arguments unsuccessfully posed before two
bodies: the SSC and the Court of Appeals. They likewise put
to issue factual questions already passed upon twice below,
rather than questions of law appropriate for review under a
Rule 45 petition. The determination of an employer-employee
relationship depends heavily on the particular factual
circumstances attending the professional interaction of the
parties. The Court is not a trier of facts[15] and accords great
weight to the factual

Yet, the circumstances in the 1969 case are very different from
those at bar. Ruling on the question whether jockeys were

19

considered employees of the Manila Jockey Club, the Court

noted that the jockeys were actually subjected to the control of
the racing steward, whose authority in turn was defined by the
Games and Amusements Board.[31] Moreover, the jockeys
choice as to which horse to mount was subject to mutual
agreement between the horse owner and the jockey, and
beyond the control of the race club.[32] In the case at bar,
there is no showing that Royal Star was similarly precluded
from exerting control or interference over the manner by which
Laudato performed her duties. On the contrary, substantial
evidence as found by the SSC and the Court of Appeals have
established the element of control determinative of an
employer-employee relationship. We affirm without hesitation.

(NLRC), alleging that that he had been actually employed by

Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was
designated as a company physician on retainer basis for
reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he
did not give much attention to the designation as anyway he
worked on a full-time basis and was paid a basic monthly
salary plus fringe benefits, like any other regular employees of
Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C.
Reyes came out with a decision[7] dismissing De Veras
complaint for lack of merit, on the rationale that as a retained
physician under a valid contract mutually agreed upon by the
parties, De Vera was an independent contractor and that he
was not dismissed but rather his contract with [PHILCOM]
ended when said contract was not renewed after December
31, 1996.
On De Veras appeal to the NLRC, the latter, in a
decision[8] dated 23 October 2000, reversed (the word used is
modified) that of the Labor Arbiter, on a finding that De Vera
is Philcoms regular employee and accordingly directed the
company to reinstate him to his former position without loss of
seniority rights and privileges and with full backwages from the
date of his dismissal until actual reinstatement. We quote the
dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that
respondent is ordered to reinstate complainant to his former
position without loss of seniority rights and privileges with full
backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:
a)
Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00
x
39.33
mos.
P1,750,185.00
b)
13th Month Pay:
1/12 of P1,750,185.00
145,848.75
c)
Travelling allowance:
P1,000.00 x 39.33 mos.
39,330.00
GRAND TOTAL
P1,935,363.75
The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by the
NLRC in its order of 27 February 2001,[9] Philcom then went to
the Court of Appeals on a petition for certiorari, thereat
docketed as CA-G.R. SP No. 65178, imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on the
part of the NLRC when it reversed the findings of the labor
arbiter and awarded thirteenth month pay and traveling
allowance to De Vera even as such award had no basis in fact
and in law.
On 12 September 2002, the Court of Appeals rendered a
decision,[10] modifying that of the NLRC by deleting the award
of traveling allowance, and ordering payment of separation pay
to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of
public respondent, dated 23 October 2000, is MODIFIED. The
award of traveling allowance is deleted as the same is hereby
DELETED. Instead of reinstatement, private respondent shall
be paid separation pay computed at one (1) month salary for
every year of service computed from the time private
respondent commenced his employment in 1981 up to the
actual payment of the backwages and separation pay. The
awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was
denied by the appellate court in its resolution of 13 February
2003.[11]
Hence, Philcoms present recourse on its main submission
that THE COURT OF APPEALS ERRED IN SUSTAINING THE
DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION AND RENDERING THE QUESTIONED
DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB

WHEREFORE, the Petition is DENIED and the assailed

Decision of the Court of Appeals dated 20 November 1998 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
7. [G.R. No. 157214. June 7, 2005]
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,
vs. RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review
on certiorari from the 12 September 2002 Decision [1] and the
13 February 2003 Resolution[2] of the Court of Appeals in CAG.R. SP No. 65178, upholding the finding of illegal dismissal
by the National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is
a corporation engaged in the business of communication
services and allied activities, while respondent Ricardo De
Vera is a physician by profession whom petitioner enlisted to
attend to the medical needs of its employees. At the crux of
the controversy is Dr. De Veras status vis a vis petitioner when
the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15
May 1981,[3] offered his services to the petitioner, therein
proposing his plan of works required of a practitioner in
industrial medicine, to include the following:
1.
Application of preventive medicine including periodic
check-up of employees;
2.
Holding of clinic hours in the morning and afternoon for a
total of five (5) hours daily for consultation services to
employees;
3.
Management and treatment of employees that may
necessitate hospitalization including emergency cases and
accidents;
4.
Conduct pre-employment physical check-up of
prospective employees with no additional medical fee;
5.
Conduct home visits whenever necessary;
6.
Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
referred which are medical in nature.
The parties agreed and formalized respondents proposal in a
document
denominated
as RETAINERSHIP
CONTRACT[4] which will be for a period of one year subject to
renewal, it being made clear therein that respondent will cover
the retainership the Company previously had with Dr. K.
Eulau and that respondents retainer fee will be at P4,000.00
a month. Said contract was renewed yearly.[5] The retainership
arrangement went on from 1981 to 1994 with changes in the
retainers fee. However, for the years 1995 and 1996, renewal
of the contract was only made verbally.
The turning point in the parties relationship surfaced in
December 1996 when Philcom, thru a letter[6] bearing on the
subject boldly written as TERMINATION RETAINERSHIP
CONTRACT, informed De Vera of its decision to discontinue
the latters retainers contract with the Company effective at
the close of business hours of December 31, 1996 because
management has decided that it would be more practical to
provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal
dismissal before the National Labor Relations Commission

20

CONTRACTING AGREEMENTS FROM THE EMPLOYEREMPLOYEE RELATIONSHIP.

We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may
be reviewed by this Court in decisions rendered by the Court of
Appeals. There are instances, however, where the Court
departs from this rule and reviews findings of fact so that
substantial justice may be served. The exceptional instances
are where:
xxx xxx xxx (1) the conclusion is a finding grounded entirely
on speculation, surmise and conjecture; (2) the inference made
is manifestly mistaken; (3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts; (5)
the findings of fact are conflicting; (6) the Court of Appeals
went beyond the issues of the case and its findings are
contrary to the admissions of both appellant and appellees; (7)
the findings of fact of the Court of Appeals are contrary to
those of the trial court; (8) said findings of facts are conclusions
without citation of specific evidence on which they are based;
(9) the facts set forth in the petition as well as in the petitioners
main and reply briefs are not disputed by the respondents; and
(10) the findings of fact of the Court of Appeals are premised
on the supposed absence of evidence and contradicted by the
evidence on record.[12]
As we see it, the parties respective submissions revolve on the
primordial issue of whether an employer-employee relationship
exists between petitioner and respondent, the existence of
which is, in itself, a question of fact [13] well within the province
of the NLRC. Nonetheless, given the reality that the NLRCs
findings are at odds with those of the labor arbiter, the Court,
consistent with its ruling in Jimenez vs. National Labor
Relations Commission,[14] is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing
on record.
In a long line of decisions,[15] the Court, in determining the
existence of an employer-employee relationship, has invariably
adhered to the four-fold test, to wit: [1] the selection and
engagement of the employee; [2] the payment of wages; [3]
the power of dismissal; and [4] the power to control the
employees conduct, or the so-called control test, considered
to be the most important element.
Applying the four-fold test to this case, we initially find that it
was respondent himself who sets the parameters of what his
duties would be in offering his services to petitioner. This is
borne by no less than his 15 May 1981 letter[16] which, in full,
reads:
May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company
physician with your corporation if you deemed it necessary. I
have the necessary qualifications, training and experience
required by such position and I am confident that I can serve
the best interests of your employees, medically.
My plan of works and targets shall cover the duties and
responsibilities required of a practitioner in industrial medicine
which includes the following:
1. Application of preventive medicine including periodic
check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a
total of five (5) hours daily for consultation services to
employees;
3. Management and treatment of employees that may
necessitate hospitalization including emergency cases and
accidents;
4. Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters
referred which are medical in nature.
On the subject of compensation for the services that I propose
to render to the corporation, you may state an offer based on

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

21

respondent need not remit anything to the SSS in favor of the

complainant.[18]
Clearly, the elements of an employer-employee relationship
are wanting in this case. We may add that the records are
replete with evidence showing that respondent had to bill
petitioner for his monthly professional fees. [19] It simply runs
against the grain of common experience to imagine that an
ordinary employee has yet to bill his employer to receive his
salary.
We note, too, that the power to terminate the parties
relationship was mutually vested on both. Either may
terminate the arrangement at will, with or without cause.[20]
Finally, remarkably absent from the parties arrangement is
the element of control, whereby 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.[21]
Here, petitioner had no control over the means and methods
by which respondent went about performing his work at the
company premises. He could even embark in the private
practice of his profession, not to mention the fact that
respondents work hours and the additional compensation
therefor were negotiated upon by the parties.[22] In fine, the
parties themselves practically agreed on every terms and
conditions of respondents engagement, which thereby
negates the element of control in their relationship. For sure,
respondent has never cited even a single instance when
petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record,
both the NLRC and the Court of Appeals ruled that respondent
is petitioners regular employee at the time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondents written
retainer contract was renewed annually from 1981 to 1994
and the alleged renewal for 1995 and 1996, when it was
allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
The
provisions
of
written
agreement
to
the
contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed
to be regular where the employee has been engaged to
perform in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one (1) year of
service, whether such is continuous or broken, shall be
considered a regular with respect to the activity in which
he is employed and his employment shall continue while such
activity exists.
Parenthetically, the position of company physician, in the case
of petitioner, is usually necessary and desirable because the
need for medical attention of employees cannot be foreseen,
hence, it is necessary to have a physician at hand. In fact, the
importance and desirability of a physician in a company
premises is recognized by Art. 157 of the Labor Code, which
requires the presence of a physician depending on the number
of employees and in the case at bench, in petitioners case, as
found by public respondent, petitioner employs more than 500
employees.
Going back to Art. 280 of the Labor Code, it was made therein
clear that the provisions of a written agreement to the contrary
notwithstanding or the existence of a mere oral agreement, if
the employee is engaged in the usual business or trade of the
employer, more so, that he rendered service for at least one
year,
such
employee
shall
be
considered
as
a regular employee. Private respondent herein has been with
petitioner since 1981 and his employment was not for a
specific project or undertaking, the period of which was predetermined and neither the work or service of private
respondent seasonal. (Emphasis by the CA itself).
We disagree to the foregoing ratiocination.
The appellate courts premise that regular employees are
those who perform activities which are desirable and
necessary for the business of the employer is not

determinative in this case. For, we take it that any agreement

may provide that one party shall render services for and in
behalf of another, no matter how necessary for the latters
business, even without being hired as an employee. This
set-up is precisely true in the case of an independent
contractorship as well as in an agency agreement. Indeed,
Article 280 of the Labor Code, quoted by the appellate court, is
not the yardstick for determining the existence of an
employment relationship. As it is, the provision merely
distinguishes between two (2) kinds of employees, i.e., regular
and casual. It does not apply where, as here, the very
existence of an employment relationship is in dispute.[23]
Buttressing his contention that he is a regular employee of
petitioner, respondent invokes Article 157 of the Labor Code,
and argues that he satisfies all the requirements thereunder.
The provision relied upon reads:
ART. 157. Emergency medical and dental services. It shall
be the duty of every employer to furnish his employees in any
locality with free medical and dental attendance and facilities
consisting of:
(a)
The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more than two
hundred (200) except when the employer does not maintain
hazardous workplaces, in which case the services of a
graduate first-aider shall be provided for the protection of the
workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations the
services that shall be required where the number of employees
does not exceed fifty (50) and shall determine by appropriate
order hazardous workplaces for purposes of this Article;
(b)
The services of a full-time registered nurse, a part-time
physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not more
than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time
registered nurse as well as a dental clinic, and an infirmary or
emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees
exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage
the services of a physician or dentist who cannot stay in the
premises of the establishment for at least two (2) hours, in the
case of those engaged on part-time basis, and not less than
eight (8) hours in the case of those employed on full-time
basis. Where the undertaking is nonhazardous in nature, the
physician and dentist may be engaged on retained basis,
subject to such regulations as the Secretary of Labor may
prescribe to insure immediate availability of medical and dental
treatment and attendance in case of emergency.
Had only respondent read carefully the very statutory provision
invoked by him, he would have noticed that in non-hazardous
workplaces, the employer may engage the services of a
physician on retained basis. As correctly observed by the
petitioner, while it is true that the provision requires employers
to engage the services of medical practitioners in certain
establishments depending on the number of their employees,
nothing is there in the law which says that medical practitioners
so engaged be actually hired as employees,[24] adding that the
law, as written, only requires the employer to retain, not
employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2) hours.[25]
Respondent takes no issue on the fact that petitioners
business of telecommunications is not hazardous in nature. As
such, what applies here is the last paragraph of Article 157
which, to stress, provides that the employer may engage the
services of a physician and dentist on retained basis, subject
to such regulations as the Secretary of Labor may prescribe.
The successive retainership agreements of the parties
definitely hue to the very statutory provision relied upon by
respondent.
Deeply embedded in our jurisprudence is the rule that courts
may not construe a statute that is free from doubt. Where the
law is clear and unambiguous, it must be taken to mean
exactly what it says, and courts have no choice but to see to it
that the mandate is obeyed.[26] As it is, Article 157 of the Labor
Code clearly and unequivocally allows employers in nonhazardous establishments to engage on retained basis the
service of a dentist or physician. Nowhere does the law provide
that the physician or dentist so engaged thereby becomes a

22

regular employee. The very phrase that they may be engaged

on retained basis, revolts against the idea that this
engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently
engaged the services of respondent on a retainer basis, as
shown by their various retainership contracts, so can
petitioner put an end, with or without cause, to their
retainership agreement as therein provided.[27]
We note, however, that even as the contracts entered into by
the parties invariably provide for a 60-day notice requirement
prior to termination, the same was not complied with by
petitioner when it terminated on 17 December 1996 the
verbally-renewed retainership agreement, effective at the close
of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by
both parties,[28] that execution of the NLRC decision had
already been made at the NLRC despite the pendency of the
present recourse. For sure, accounts of petitioner had already
been garnished and released to respondent despite the
previous Status Quo Order[29] issued by this Court. To all
intents and purposes, therefore, the 60-day notice requirement
has become moot and academic if not waived by the
respondent himself.
WHEREFORE, the petition is GRANTED and the challenged
decision of the Court of Appeals REVERSED and SET ASIDE.
The 21 December 1998 decision of the labor arbiter is
REINSTATED.
No pronouncement as to costs.
SO ORDERED.
8.

G.R. No. 164156

d) Facilitate, prepare and arrange airtime schedule for public

service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant
Station Manager Dante J. Luzon, and News Manager Leo
Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rankand-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from
December 11, 1996 to December 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining
unit, respondents were not included to the CBA.6

September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, and JOSEPHINE LERASAN, respondents.

On July 20, 2000, petitioner, through Dante Luzon, issued a

Memorandum informing the PAs that effective August 1, 2000,
they would be assigned to non-drama programs, and that the
DYAB studio operations would be handled by the studio
technician. Thus, their revised schedule and other assignments
would be as follows:

Before us is a petition for review on certiorari of the Decision1

of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the
Resolution denying the motion for reconsideration thereof. The
CA affirmed the Decision2 and Resolution3 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V000762-2001 (RAB Case No. VII-10-1661-2001) which
likewise affirmed, with modification, the decision of the Labor
Arbiter declaring the respondents Marlyn Nazareno, Merlou
Gerzon, Jennifer Deiparine and Josephine Lerasan as regular
employees.

Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00

The Antecedents
4:30 P.M. 12:00 MN Jennifer Deiparine
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is
engaged in the broadcasting business and owns a network of
television and radio stations, whose operations revolve around
the broadcast, transmission, and relay of telecommunication
signals. It sells and deals in or otherwise utilizes the airtime it
generates from its radio and television operations. It has a
franchise as a broadcasting company, and was likewise issued
a license and authority to operate by the National
Telecommunications Commission.

Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV
News Department reporting directly to Leo Lastimosa.

Petitioner employed respondents Nazareno, Gerzon,

Deiparine, and Lerasan as production assistants (PAs) on
different dates. They were assigned at the news and public
affairs, for various radio programs in the Cebu Broadcasting
Station, with a monthly compensation of P4,000. They were
issued ABS-CBN employees identification cards and were
required to work for a minimum of eight hours a day, including
Sundays and holidays. They were made to perform the
following tasks and duties:

On October 12, 2000, respondents filed a Complaint for

Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive
Pay, Sick Leave Pay, and 13th Month Pay with Damages
against the petitioner before the NLRC. The Labor Arbiter
directed the parties to submit their respective position papers.
Upon respondents failure to file their position papers within the
reglementary period, Labor Arbiter Jose G. Gutierrez issued an
Order dated April 30, 2001, dismissing the complaint without
prejudice for lack of interest to pursue the case. Respondents
received a copy of the Order on May 16, 2001.7 Instead of refiling their complaint with the NLRC within 10 days from May
16, 2001, they filed, on June 11, 2001, an Earnest Motion to
Refile Complaint with Motion to Admit Position Paper and
Motion to Submit Case For Resolution.8 The Labor Arbiter
granted this motion in an Order dated June 18, 2001, and
forthwith admitted the position paper of the complainants.
Respondents made the following allegations:

a) Prepare, arrange airing of commercial broadcasting based

on the daily operations log and digicart of respondent ABSCBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled
news reporting and lead-in or incoming reports;

23

Respondents insisted that they belonged to a "work pool" from

which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct
supervision and control regardless of nomenclature. They
prayed that judgment be rendered in their favor, thus:

1. Complainants were engaged by respondent ABS-CBN as

regular and full-time employees for a continuous period of
more than five (5) years with a monthly salary rate of Four
Thousand (P4,000.00) pesos beginning 1995 up until the filing
of this complaint on November 20, 2000.

WHEREFORE, premises considered, this Honorable Arbiter is

most respectfully prayed, to issue an order compelling
defendants to pay complainants the following:

Machine copies of complainants ABS-CBN Employees

Identification Card and salary vouchers are hereto attached as
follows, thus:

1. One Hundred Thousand Pesos (P100,000.00) each

I. Jennifer Deiparine:
and by way of moral damages;
Exhibit "A" - ABS-CBN Employees Identification Card
2. Minimum wage differential;
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
3. Thirteenth month pay differential;
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
4. Unpaid service incentive leave benefits;
Exhibit "B-2"
5. Sick leave;
Date employed: September 15, 1995
6. Holiday pay;
Length of service: 5 years & nine (9) months
7. Premium pay;
II. Merlou Gerzon - ABS-CBN Employees Identification Card
8. Overtime pay;
Exhibit "C"
9. Night shift differential.
Exhibit "D"
Complainants further pray of this Arbiter to declare them
regular and permanent employees of respondent ABS-CBN as
a condition precedent for their admission into the existing union
and collective bargaining unit of respondent company where
they may as such acquire or otherwise perform their
obligations thereto or enjoy the benefits due therefrom.

Exhibit "D-1" &

Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995

Complainants pray for such other reliefs as are just and

equitable under the premises.10

Length of service: 5 years & 10 months

IV. Joy Sanchez Lerasan

For its part, petitioner alleged in its position paper that the
respondents were PAs who basically assist in the conduct of a
particular program ran by an anchor or talent. Among their
duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources;
generally, they perform leg work for the anchors during a
program or a particular production. They are considered in the
industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by
the station for a particular or specific program broadcasted by
the radio station. Petitioner asserted that as PAs, the
complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to
determine the programs to which they shall later be called on
to assist. The program assignments of complainants were as
follows:

Exhibit "F" - ABS-CBN Employees Identification Card

a. Complainant Nazareno assists in the programs:

Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

1) Nagbagang Balita (early morning edition)

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

2) Infor Hayupan

Exhibit "F-3"

3) Arangkada (morning edition)

Exhibit "F-4" - Certification dated July 6, 2000

4) Nagbagang Balita (mid-day edition)

Acknowledging regular status of

b. Complainant Deiparine assists in the programs:

Complainant Joy Sanchez Lerasan

1) Unzanith

Signed by ABS-CBN Administrative

2) Serbisyo de Arevalo

Officer May Kima Hife

3) Arangkada (evening edition)

Date employed: April 15, 1998

4) Balitang K (local version)

Length of service: 3 yrs. and one (1) month9

5) Abante Subu

III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employees Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month

24

6) Pangutana Lang

IV - Josephine Sanchez Lerazan 12,025.00

c. Complainant Gerzon assists in the program:

_________

1) On Mondays and Tuesdays:

P48,100.00

(a) Unzanith
(b) Serbisyo de Arevalo

plus ten (10%) percent Attorneys Fees or a TOTAL aggregate

amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED
TEN (P52,910.00).

(c) Arangkada (evening edition)

Respondent Veneranda C. Sy is absolved from any liability.

(d) Balitang K (local version)

SO ORDERED.13

(e) Abante Sugbu

However, the Labor Arbiter did not award money benefits as

provided in the CBA on his belief that he had no jurisdiction to
interpret and apply the agreement, as the same was within the
jurisdiction of the Voluntary Arbitrator as provided in Article 261
of the Labor Code.

(f) Pangutana Lang

2) On Thursdays
Nagbagang Balita

Respondents counsel received a copy of the decision on

August 29, 2001. Respondent Nazareno received her copy on
August 27, 2001, while the other respondents received theirs
on September 8, 2001. Respondents signed and filed their
Appeal Memorandum on September 18, 2001.

3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan

(d) Nagbagang Balita (mid-day edition)

For its part, petitioner filed a motion for reconsideration, which

the Labor Arbiter denied and considered as an appeal,
conformably with Section 5, Rule V, of the NLRC Rules of
Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.

4) On Sundays:

In its appeal, petitioner alleged the following:

(a) Siesta Serenata

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

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

(c) Arangkada (morning edition)

(b) Sunday Chismisan

(c) Timbangan sa Hustisya

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

its Constitutional right to due process of law;

(d) Sayri ang Lungsod

3. That the Labor Arbiter erred in denying respondents Motion
for Reconsideration on an interlocutory order on the ground
that the same is a prohibited pleading;

(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents
occasionally "sideline" for other programs they produce, such
as drama talents in other productions. As program employees,
a PAs engagement is coterminous with the completion of the
program, and may be extended/renewed provided that the
program is on-going; a PA may also be assigned to new
programs upon the cancellation of one program and the
commencement of another. As such program employees, their
compensation is computed on a program basis, a fixed amount
for performance services irrespective of the time consumed. At
any rate, petitioner claimed, as the payroll will show,
respondents were paid all salaries and benefits due them
under the law.12

4. That the Labor Arbiter erred when he ruled that the

complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the
complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that
complainants are entitled to attorneys fees.14
On November 14, 2002, the NLRC rendered judgment
modifying the decision of the Labor Arbiter. The fallo of the
decision reads:

Petitioner also alleged that the Labor Arbiter had no jurisdiction

to involve the CBA and interpret the same, especially since
respondents were not covered by the bargaining unit.

WHEREFORE, premises considered, the decision of Labor

Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE
and VACATED and a new one is entered ORDERING
respondent ABS-CBN Broadcasting Corporation, as follows:

On July 30, 2001, the Labor Arbiter rendered judgment in favor

of the respondents, and declared that they were regular
employees of petitioner; as such, they were awarded monetary
benefits. The fallo of the decision reads:

1. To pay complainants of their wage differentials and other

benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One
Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:

WHEREFORE, the foregoing premises considered, judgment

is hereby rendered declaring the complainants regular
employees of the respondent ABS-CBN Broadcasting
Corporation and directing the same respondent to pay
complainants as follows:

a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49

I - Merlou A. Gerzon P12,025.00

c. Nazareno, Marlyn - 716,113.49
II - Marlyn Nazareno 12,025.00
d. Lerazan, Josephine Sanchez - 413,607.75
III - Jennifer Deiparine 12,025.00
Total - P 2,561,948.22

25

CBA is a necessary consequence of the NLRC ruling that

respondents, as PAs, are regular employees.

2. To deliver to the complainants Two Hundred Thirty-Three

(233) sacks of rice as of 30 September 2002 representing their
rice subsidy in the CBA, broken down as follows:

Finding no merit in petitioners motion for reconsideration, the

CA denied the same in a Resolution17 dated June 16, 2004.

a. Deiparine, Jennifer - 60 Sacks

Petitioner thus filed the instant petition for review on certiorari
and raises the following assignments of error:

b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks

1. THE HONORABLE COURT OF APPEALS ACTED

WITHOUT JURISDICTION AND GRAVELY ERRED IN
UPHOLDING
THE
NATIONAL
LABOR
RELATIONS
COMMISSION NOTWITHSTANDING THE PATENT NULLITY
OF THE LATTERS DECISION AND RESOLUTION.

d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after
30 September 2002.

2. THE HONORABLE COURT OF APPEALS GRAVELY

ERRED IN AFFIRMING THE RULING OF THE NLRC
FINDING RESPONDENTS REGULAR EMPLOYEES.

SO ORDERED.15
3. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN AFFIRMING THE RULING OF THE NLRC
AWARDING CBA BENEFITS TO RESPONDENTS.18

The NLRC declared that the Labor Arbiter acted conformably

with the Labor Code when it granted respondents motion to
refile the complaint and admit their position paper. Although
respondents were not parties to the CBA between petitioner
and the ABS-CBN Rank-and-File Employees Union, the NLRC
nevertheless granted and computed respondents monetary
benefits based on the 1999 CBA, which was effective until
September 2002. The NLRC also ruled that the Labor Arbiter
had jurisdiction over the complaint of respondents because
they acted in their individual capacities and not as members of
the union. Their claim for monetary benefits was within the
context of Article 217(6) of the Labor Code. The validity of
respondents claim does not depend upon the interpretation of
the CBA.

Considering that the assignments of error are interrelated, the

Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable
and serious error of law when it affirmed the rulings of the
NLRC, and entertained respondents appeal from the decision
of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect the same.
Petitioner likewise maintains that the 10-day period to appeal
must be reckoned from receipt of a partys counsel, not from
the time the party learns of the decision, that is, notice to
counsel is notice to party and not the other way around. Finally,
petitioner argues that the reopening of a complaint which the
Labor Arbiter has dismissed without prejudice is a clear
violation of Section 1, Rule V of the NLRC Rules; such order of
dismissal had already attained finality and can no longer be set
aside.

The NLRC ruled that respondents were entitled to the benefits

under the CBA because they were regular employees who
contributed to the profits of petitioner through their labor. The
NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC
denied.

Respondents, on the other hand, allege that their late appeal is

a non-issue because it was petitioners own timely appeal that
empowered the NLRC to reopen the case. They assert that
although the appeal was filed 10 days late, it may still be given
due course in the interest of substantial justice as an exception
to the general rule that the negligence of a counsel binds the
client. On the issue of the late filing of their position paper, they
maintain that this is not a ground to strike it out from the
records or dismiss the complaint.

Petitioner thus filed a petition for certiorari under Rule 65 of the

Rules of Court before the CA, raising both procedural and
substantive issues, as follows: (a) whether the NLRC acted
without jurisdiction in admitting the appeal of respondents; (b)
whether the NLRC committed palpable error in scrutinizing the
reopening and revival of the complaint of respondents with the
Labor Arbiter upon due notice despite the lapse of 10 days
from their receipt of the July 30, 2001 Order of the Labor
Arbiter; (c) whether respondents were regular employees; (d)
whether the NLRC acted without jurisdiction in entertaining and
resolving the claim of the respondents under the CBA instead
of referring the same to the Voluntary Arbitrators as provided in
the CBA; and (e) whether the NLRC acted with grave abuse of
discretion when it awarded monetary benefits to respondents
under the CBA although they are not members of the
appropriate bargaining unit.

We find no merit in the petition.

We agree with petitioners contention that the perfection of an
appeal within the statutory or reglementary period is not only
mandatory, but also jurisdictional; failure to do so renders the
assailed decision final and executory and deprives the
appellate court or body of the legal authority to alter the final
judgment, much less entertain the appeal. However, this Court
has time and again ruled that in exceptional cases, a belated
appeal may be given due course if greater injustice may occur
if an appeal is not given due course than if the reglementary
period to appeal were strictly followed.19 The Court resorted to
this extraordinary measure even at the expense of sacrificing
order and efficiency if only to serve the greater principles of
substantial justice and equity.20

On February 10, 2004, the CA rendered judgment dismissing

the petition. It held that the perfection of an appeal shall be
upon the expiration of the last day to appeal by all parties,
should there be several parties to a case. Since respondents
received their copies of the decision on September 8, 2001
(except respondent Nazareno who received her copy of the
decision on August 27, 2001), they had until September 18,
2001 within which to file their Appeal Memorandum. Moreover,
the CA declared that respondents failure to submit their
position paper on time is not a ground to strike out the paper
from the records, much less dismiss a complaint.

In the case at bar, the NLRC did not commit a grave abuse of
its discretion in giving Article 22321 of the Labor Code a liberal
application to prevent the miscarriage of justice. Technicality
should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties.22
We have held in a catena of cases that technical rules are not
binding in labor cases and are not to be applied strictly if the
result would be detrimental to the workingman.23

Anent the substantive issues, the appellate court stated that

respondents are not mere project employees, but regular
employees who perform tasks necessary and desirable in the
usual trade and business of petitioner and not just its project
employees. Moreover, the CA added, the award of benefits
accorded to rank-and-file employees under the 1996-1999

Admittedly, respondents failed to perfect their appeal from the

decision of the Labor Arbiter within the reglementary period
therefor. However, petitioner perfected its appeal within the

26

period, and since petitioner had filed a timely appeal, the

NLRC acquired jurisdiction over the case to give due course to
its appeal and render the decision of November 14, 2002.
Case law is that the party who failed to appeal from the
decision of the Labor Arbiter to the NLRC can still participate in
a separate appeal timely filed by the adverse party as the
situation is considered to be of greater benefit to both
parties.24

without regard to technicalities of law or procedure, all in the

interest of due process."
The admission by the Labor Arbiter of the complainants
Position Paper and Supplemental Manifestation which were
belatedly filed just only shows that he acted within his
discretion as he is enjoined by law to use every reasonable
means to ascertain the facts in each case speedily and
objectively, without regard to technicalities of law or procedure,
all in the interest of due process. Indeed, the failure to submit a
position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the
case of the complainant. (University of Immaculate Conception
vs. UIC Teaching and Non-Teaching Personnel Employees,
G.R. No. 144702, July 31, 2001).

We find no merit in petitioners contention that the Labor Arbiter

abused his discretion when he admitted respondents position
paper which had been belatedly filed. It bears stressing that
the Labor Arbiter is mandated by law to use every reasonable
means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the
interest of due process.25 Indeed, as stressed by the appellate
court, respondents failure to submit a position paper on time is
not a ground for striking out the paper from the records, much
less for dismissing a complaint.26 Likewise, there is simply no
truth to petitioners assertion that it was denied due process
when the Labor Arbiter admitted respondents position paper
without requiring it to file a comment before admitting said
position paper. The essence of due process in administrative
proceedings is simply an opportunity to explain ones side or
an opportunity to seek reconsideration of the action or ruling
complained of. Obviously, there is nothing in the records that
would suggest that petitioner had absolute lack of opportunity
to be heard.27 Petitioner had the right to file a motion for
reconsideration of the Labor Arbiters admission of
respondents position paper, and even file a Reply thereto. In
fact, petitioner filed its position paper on April 2, 2001. It must
be stressed that Article 280 of the Labor Code was encoded in
our statute books to hinder the circumvention by unscrupulous
employers of the employees right to security of tenure by
indiscriminately and absolutely ruling out all written and oral
agreements inharmonious with the concept of regular
employment defined therein.28

"In admitting the respondents position paper albeit late, the

Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain
the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due
process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the
opportunity to submit position paper. In fact, the respondents
had filed their position paper on 2 April 2001. What is material
in the compliance of due process is the fact that the parties are
given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are
given the opportunities to submit position papers". (Laurence
vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional
right to due process of law.29
We reject, as barren of factual basis, petitioners contention
that respondents are considered as its talents, hence, not
regular employees of the broadcasting company. Petitioners
claim that the functions performed by the respondents are not
at all necessary, desirable, or even vital to its trade or business
is belied by the evidence on record.

We quote with approval the following pronouncement of the

NLRC:
The complainants, on the other hand, contend that
respondents assailed the Labor Arbiters order dated 18 June
2001 as violative of the NLRC Rules of Procedure and as such
is violative of their right to procedural due process. That while
suggesting that an Order be instead issued by the Labor
Arbiter for complainants to refile this case, respondents
impliedly submit that there is not any substantial damage or
prejudice upon the refiling, even so, respondents suggestion
acknowledges complainants right to prosecute this case, albeit
with the burden of repeating the same procedure, thus,
entailing additional time, efforts, litigation cost and precious
time for the Arbiter to repeat the same process twice.
Respondents suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.

Case law is that this Court has always accorded respect and
finality to the findings of fact of the CA, particularly if they
coincide with those of the Labor Arbiter and the National Labor
Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular
or project employees or independent contractors is essentially
factual in nature; nonetheless, the Court is constrained to
resolve it due to its tremendous effects to the legions of
production assistants working in the Philippine broadcasting
industry.
We agree with respondents contention that where a person
has rendered at least one year of service, regardless of the
nature of the activity performed, or where the work is
continuous or intermittent, the employment is considered
regular as long as the activity exists, the reason being that a
customary appointment is not indispensable before one may
be formally declared as having attained regular status. Article
280 of the Labor Code provides:

Although the Labor Arbiter in his Order dated 18 June 2001

which revived and re-opened the dismissed case without
prejudice beyond the ten (10) day reglementary period had
inadvertently failed to follow Section 16, Rule V, Rules
Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case
dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise,
his only remedy shall be to re-file the case in the arbitration
branch of origin."

ART. 280. REGULAR AND CASUAL EMPLOYMENT.The

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

the same is not a serious flaw that had prejudiced the

respondents right to due process. The case can still be refiled
because it has not yet prescribed. Anyway, Article 221 of the
Labor Code provides:
"In any proceedings before the Commission or any of the
Labor Arbiters, the rules of evidence prevailing in courts of law
or equity shall not be controlling and it is the spirit and intention
of this Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and

In Universal Robina Corporation v. Catapang,31 the Court

reiterated the test in determining whether one is a regular
employee:

27

necessitates the succor of the State. What determines whether

a certain employment is regular or otherwise is not the will or
word of the employer, to which the worker oftentimes
acquiesces, much less the procedure of hiring the employee or
the manner of paying the salary or the actual time spent at
work. It is the character of the activities performed in relation to
the particular trade or business taking into account all the
circumstances, and in some cases the length of time of its
performance and its continued existence.36 It is obvious that
one year after they were employed by petitioner, respondents
became regular employees by operation of law.37

The primary standard, therefore, of determining regular

employment is the reasonable connection between the
particular activity performed by the employee in relation to the
usual trade or business of the employer. The test is whether
the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be
determined by considering the nature of work performed and
its relation to the scheme of the particular business or trade in
its entirety. Also, if the employee has been performing the job
for at least a year, even if the performance is not continuous
and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of
the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but
only with respect to such activity and while such activity
exists.32

Additionally, respondents cannot be considered as project or

program employees because no evidence was presented to
show that the duration and scope of the project were
determined or specified at the time of their engagement. Under
existing jurisprudence, project could refer to two
distinguishable types of activities. First, a project may refer to a
particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate,
and identifiable as such, from the other undertakings of the
company. Such job or undertaking begins and ends at
determined or determinable times. Second, the term project
may also refer to a particular job or undertaking that is not
within the regular business of the employer. Such a job or
undertaking must also be identifiably separate and distinct from
the ordinary or regular business operations of the employer.
The job or undertaking also begins and ends at determined or
determinable times.38

As elaborated by this Court in Magsalin v. National

Organization of Working Men:33
Even while the language of law might have been more
definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" workers security of tenure, however, can hardly be
doubted. In determining whether an employment should be
considered regular or non-regular, the applicable test is the
reasonable connection between the particular activity
performed by the employee in relation to the usual business or
trade of the employer. The standard, supplied by the law itself,
is whether the work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that can be
assessed by looking into the nature of the services rendered
and its relation to the general scheme under which the
business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from
the normal activities required in carrying on the particular
business or trade. But, although the work to be performed is
only for a specific project or seasonal, where a person thus
engaged has been performing the job for at least one year,
even if the performance is not continuous or is merely
intermittent, the law deems the repeated and continuing need
for its performance as being sufficient to indicate the necessity
or desirability of that activity to the business or trade of the
employer. The employment of such person is also then
deemed to be regular with respect to such activity and while
such activity exists.34

The principal test is whether or not the project employees were

assigned to carry out a specific project or undertaking, the
duration and scope of which were specified at the time the
employees were engaged for that project.39
In this case, it is undisputed that respondents had continuously
performed the same activities for an average of five years.
Their assigned tasks are necessary or desirable in the usual
business or trade of the petitioner. The persisting need for their
services is sufficient evidence of the necessity and
indispensability of such services to petitioners business or
trade.40 While length of time may not be a sole controlling test
for project employment, it can be a strong factor to determine
whether the employee was hired for a specific undertaking or
in fact tasked to perform functions which are vital, necessary
and indispensable to the usual trade or business of the
employer.41 We note further that petitioner did not report the
termination of respondents employment in the particular
"project" to the Department of Labor and Employment Regional
Office having jurisdiction over the workplace within 30 days
following the date of their separation from work, using the
prescribed
form
on
employees
termination/
dismissals/suspensions.42

Not considered regular employees are "project employees,"

the completion or termination of which is more or less
determinable at the time of employment, such as those
employed in connection with a particular construction project,
and "seasonal employees" whose employment by its nature is
only desirable for a limited period of time. Even then, any
employee who has rendered at least one year of service,
whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity
actually exists.

As gleaned from the records of this case, petitioner itself is not

certain how to categorize respondents. In its earlier pleadings,
petitioner classified respondents as program employees, and
in later pleadings, independent contractors. Program
employees, or project employees, are different from
independent contractors because in the case of the latter, no
employer-employee relationship exists.

It is of no moment that petitioner hired respondents as

"talents." The fact that respondents received pre-agreed "talent
fees" instead of salaries, that they did not observe the required
office hours, and that they were permitted to join other
productions during their free time are not conclusive of the
nature of their employment. Respondents cannot be
considered "talents" because they are not actors or actresses
or radio specialists or mere clerks or utility employees. They
are regular employees who perform several different duties
under the control and direction of ABS-CBN executives and
supervisors.

Petitioners reliance on the ruling of this Court in Sonza v. ABSCBN Broadcasting Corporation43 is misplaced. In that case,
the Court explained why Jose Sonza, a well-known television
and radio personality, was an independent contractor and not a
regular employee:
A. Selection and Engagement of Employee

Thus, there are two kinds of regular employees under the law:
(1) those engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer; and
(2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to
the activities in which they are employed.35

ABS-CBN engaged SONZAS services to co-host its television

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

The law overrides such conditions which are prejudicial to the

interest of the worker whose weak bargaining situation

28

Independent contractors often present themselves to possess

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

The presumption is that when the work done is an integral part

of the regular business of the employer and when the worker,
relative to the employer, does not furnish an independent
business or professional service, such work is a regular
employment of such employee and not an independent
contractor.45 The Court will peruse beyond any such
agreement to examine the facts that typify the parties actual
relationship.46
It follows then that respondents are entitled to the benefits
provided for in the existing CBA between petitioner and its
rank-and-file employees. As regular employees, respondents
are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47 We quote with
approval the ruling of the appellate court, that the reason why
production assistants were excluded from the CBA is precisely
because they were erroneously classified and treated as
project employees by petitioner:

In any event, the method of selecting and engaging SONZA

does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test
being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABSCBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he
were truly the subject of a valid job contract."

x x x The award in favor of private respondents of the benefits

accorded to rank-and-file employees of ABS-CBN under the
1996-1999 CBA is a necessary consequence of public
respondents ruling that private respondents as production
assistants of petitioner are regular employees. The monetary
award is not considered as claims involving the interpretation
or implementation of the collective bargaining agreement. The
reason why production assistants were excluded from the said
agreement is precisely because they were classified and
treated as project employees by petitioner.

All the talent fees and benefits paid to SONZA were the result
of negotiations that led to the Agreement. If SONZA were ABSCBNs employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th
month pay which the law automatically incorporates into every
employer-employee contract. Whatever benefits SONZA
enjoyed arose from contract and not because of an employeremployee relationship.

As earlier stated, it is not the will or word of the employer which

determines the nature of employment of an employee but the
nature of the activities performed by such employee in relation
to the particular business or trade of the employer. Considering
that We have clearly found that private respondents are regular
employees of petitioner, their exclusion from the said CBA on
the misplaced belief of the parties to the said agreement that
they are project employees, is therefore not proper. Finding
said private respondents as regular employees and not as
mere project employees, they must be accorded the benefits
due under the said Collective Bargaining Agreement.

SONZAs talent fees, amounting to P317,000 monthly in the

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

A collective bargaining agreement is a contract entered into by

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

The payment of talent fees directly to SONZA and not to

MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such
mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.44

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

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

In the case at bar, however, the employer-employee

relationship between petitioner and respondents has been
proven.
First. In the selection and engagement of respondents, no
peculiar or unique skill, talent or celebrity status was required
from them because they were merely hired through petitioners
personnel department just like any ordinary employee.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED

for lack of merit. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED.
Costs against petitioner.

Second. The so-called "talent fees" of respondents correspond

to wages given as a result of an employer-employee
relationship. Respondents did not have the power to bargain
for huge talent fees, a circumstance negating independent
contractual relationship.

SO ORDERED.
9.

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.

Third. Petitioner could always discharge respondents should it

find their work unsatisfactory, and respondents are highly
dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by
petitioner over respondents through its supervisors negates the
allegation that respondents are independent contractors.

DECISION
YNARES-SANTIAGO, J.:

29

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

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 NLRCNCR Case No. 30-10-0-489-01, finding that private
respondents were liable for constructive dismissal.

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.

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

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

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

The Labor Arbiter found that petitioner was illegally dismissed,

thus:

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

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:

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

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

(27,500 x 10 mos.)

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

b. Salary Differentials (01/2001 09/2001) 22,500.00

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

Corp. from 1996-2001 361,175.00

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

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.

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

SO ORDERED. 14
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.

On April 15, 2003, the NLRC affirmed with modification the

Decision of the Labor Arbiter, the dispositive portion of which
reads:

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

PREMISES CONSIDERED, the Decision of July 31, 2002 is

hereby MODIFIED as follows:

30

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;

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.

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;

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.

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.

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.

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.

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

SO ORDERED. 16
The appellate court denied petitioners
reconsideration, hence, the present recourse.

motion

for

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.

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.

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 employeremployee relationship.

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.

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.

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

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.

It is therefore apparent that petitioner is economically

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

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

In Domasig v. National Labor Relations Commission, 28 we

held that in a business establishment, an identification card is

31

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.

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.

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

WHEREFORE, the petition is GRANTED. The Decision and

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

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.

SO ORDERED.
10.
ROGELIO P. NOGALES,
for himself and on behalf of the minors,
ROGER ANTHONY,
ANGELICA, NANCY, and
MICHAEL CHRISTOPHER,
all surnamed NOGALES,
Petitioners,

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

G.R. No. 142625

- versus CAPITOL MEDICAL CENTER,

DR. OSCAR ESTRADA,
DR. ELY VILLAFLOR,
DR. ROSA UY,
DR. JOEL ENRIQUEZ,
DR. PERPETUA LACSON,
DR. NOE ESPINOLA, and
Promulgated:
NURSE J. DUMLAO,
Respondents.
December 19,
2006
x----------------------------------------------------------------------------------------x

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.

DECISION

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

CARPIO, J.:
The Case
This petition for review[1] assails the 6 February 1998
Decision[2] and 21 March 2000 Resolution[3] of the Court of
Appeals in CA-G.R. CV No. 45641. The Court of Appeals
affirmed in toto the 22 November 1993 Decision[4] of the
Regional Trial Court of Manila, Branch 33, finding Dr. Oscar
Estrada solely liable for damages for the death of his patient,
Corazon Nogales, while absolving the remaining respondents
of any liability. The Court of Appeals denied petitioners motion
for reconsideration.

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

The Facts
Pregnant with her fourth child, Corazon Nogales
(Corazon), who was then 37 years old, was under the

32

exclusive prenatal care of Dr. Oscar Estrada (Dr. Estrada)

beginning on her fourth month of pregnancy or as early as
December 1975. While Corazon was on her last trimester of
pregnancy, Dr. Estrada noted an increase in her blood
pressure and development of leg edema[5] indicating
preeclampsia,[6] which is a dangerous complication of
pregnancy.[7]

Due to the inclement weather then, Dr. Espinola, who

was fetched from his residence by an ambulance, arrived at
the CMC about an hour later or at 9:00 a.m. He examined the
patient and ordered some resuscitative measures to be
administered. Despite Dr. Espinolas efforts, Corazon died at
9:15 a.m. The cause of death was hemorrhage, post
partum.[14]

Around midnight of 25 May 1976, Corazon started to

experience mild labor pains prompting Corazon and Rogelio
Nogales (Spouses Nogales) to see Dr. Estrada at his home.
After examining Corazon, Dr. Estrada advised her immediate
admission to the Capitol Medical Center (CMC).

On 14 May 1980, petitioners filed a complaint for

damages[15] with the Regional Trial Court[16] of Manila
against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr.
Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for the
death of Corazon.
Petitioners mainly contended that
defendant physicians and CMC personnel were negligent in
the treatment and management of Corazons condition.
Petitioners charged CMC with negligence in the selection and
supervision of defendant physicians and hospital staff.

On 26 May 1976, Corazon was admitted at 2:30 a.m. at

the CMC after the staff nurse noted the written admission
request[8] of Dr. Estrada. Upon Corazons admission at the
CMC, Rogelio Nogales (Rogelio) executed and signed the
Consent on Admission and Agreement[9] and Admission
Agreement.[10] Corazon was then brought to the labor room
of the CMC.

For failing to file their answer to the complaint despite

service of summons, the trial court declared Dr. Estrada, Dr.
Enriquez, and Nurse Dumlao in default.[17] CMC, Dr. Villaflor,
Dr. Uy, Dr. Espinola, and Dr. Lacson filed their respective
answers denying and opposing the allegations in the
complaint. Subsequently, trial ensued.

Dr. Rosa Uy (Dr. Uy), who was then a resident

physician of CMC, conducted an internal examination of
Corazon. Dr. Uy then called up Dr. Estrada to notify him of her
findings.

After more than 11 years of trial, the trial court rendered

judgment on 22 November 1993 finding Dr. Estrada solely
liable for damages. The trial court ruled as follows:

Based on the Doctors Order Sheet,[11] around 3:00

a.m., Dr. Estrada ordered for 10 mg. of valium to be
administered immediately by intramuscular injection.
Dr.
Estrada later ordered the start of intravenous administration of
syntocinon admixed with dextrose, 5%, in lactated Ringers
solution, at the rate of eight to ten micro-drops per minute.

The victim was under his pre-natal care, apparently, his fault
began from his incorrect and inadequate management and
lack of treatment of the pre-eclamptic condition of his patient.
It is not disputed that he misapplied the forceps in causing the
delivery because it resulted in a large cervical tear which had
caused the profuse bleeding which he also failed to control
with the application of inadequate injection of magnesium
sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada even
failed to notice the erroneous administration by nurse Dumlao
of hemacel by way of side drip, instead of direct intravenous
injection, and his failure to consult a senior obstetrician at an
early stage of the problem.

According to the Nurses Observation Notes,[12] Dr. Joel

Enriquez (Dr. Enriquez), an anesthesiologist at CMC, was
notified at 4:15 a.m. of Corazons admission. Subsequently,
when asked if he needed the services of an anesthesiologist,
Dr. Estrada refused.
Despite Dr. Estradas refusal, Dr.
Enriquez stayed to observe Corazons condition.
At 6:00 a.m., Corazon was transferred to Delivery Room
No. 1 of the CMC. At 6:10 a.m., Corazons bag of water
ruptured spontaneously. At 6:12 a.m., Corazons cervix was
fully dilated. At 6:13 a.m., Corazon started to experience
convulsions.

On the part however of Dra. Ely Villaflor, Dra. Rosa Uy,

Dr. Joel Enriquez, Dr. Lacson, Dr. Espinola, nurse J. Dumlao
and CMC, the Court finds no legal justification to find them
civilly liable.

At 6:15 a.m., Dr. Estrada ordered the injection of ten

grams of magnesium sulfate. However, Dr. Ely Villaflor (Dr.
Villaflor), who was assisting Dr. Estrada, administered only 2.5
grams of magnesium sulfate.

On the part of Dra. Ely Villaflor, she was only taking

orders from Dr. Estrada, the principal physician of Corazon
Nogales. She can only make suggestions in the manner the
patient maybe treated but she cannot impose her will as to do
so would be to substitute her good judgment to that of Dr.
Estrada. If she failed to correctly diagnose the true cause of
the bleeding which in this case appears to be a cervical
laceration, it cannot be safely concluded by the Court that Dra.
Villaflor had the correct diagnosis and she failed to inform Dr.
Estrada. No evidence was introduced to show that indeed Dra.
Villaflor had discovered that there was laceration at the cervical
area of the patients internal organ.

At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied

low forceps to extract Corazons baby. In the process, a 1.0 x
2.5 cm. piece of cervical tissue was allegedly torn. The baby
came out in an apnic, cyanotic, weak and injured condition.
Consequently, the baby had to be intubated and resuscitated
by Dr. Enriquez and Dr. Payumo.
At 6:27 a.m., Corazon began to manifest moderate
vaginal bleeding which rapidly became profuse. Corazons
blood pressure dropped from 130/80 to 60/40 within five
minutes. There was continuous profuse vaginal bleeding. The
assisting nurse administered hemacel through a gauge 19
needle as a side drip to the ongoing intravenous injection of
dextrose.

On the part of nurse Dumlao, there is no showing that

when she administered the hemacel as a side drip, she did it
on her own. If the correct procedure was directly thru the
veins, it could only be because this was what was probably the
orders of Dr. Estrada.

At 7:45 a.m., Dr. Estrada ordered blood typing and cross

matching with bottled blood. It took approximately 30 minutes
for the CMC laboratory, headed by Dr. Perpetua Lacson (Dr.
Lacson), to comply with Dr. Estradas order and deliver the
blood.

While the evidence of the plaintiffs shows that Dr. Noe

Espinola, who was the Chief of the Department of Obstetrics
and Gynecology who attended to the patient Mrs. Nogales, it
was only at 9:00 a.m. That he was able to reach the hospital
because of typhoon Didang (Exhibit 2). While he was able to
give prescription in the manner Corazon Nogales may be
treated, the prescription was based on the information given to
him by phone and he acted on the basis of facts as presented
to him, believing in good faith that such is the correct remedy.
He was not with Dr. Estrada when the patient was brought to
the hospital at 2:30 oclock a.m. So, whatever errors that Dr.
Estrada committed on the patient before 9:00 oclock a.m. are

At 8:00 a.m., Dr. Noe Espinola (Dr. Espinola), head of

the Obstetrics-Gynecology Department of the CMC, was
apprised of Corazons condition by telephone. Upon being
informed that Corazon was bleeding profusely, Dr. Espinola
ordered immediate hysterectomy. Rogelio was made to sign a
Consent to Operation.[13]

33

certainly the errors of Dr. Estrada and cannot be the mistake of

Dr. Noe Espinola. His failure to come to the hospital on time
was due to fortuitous event.

respondents should be held equally liable for negligence.

Petitioners pointed out the extent of each respondents alleged
liability.

On the part of Dr. Joel Enriquez, while he was present

in the delivery room, it is not incumbent upon him to call the
attention of Dr. Estrada, Dra. Villaflor and also of Nurse
Dumlao on the alleged errors committed by them. Besides, as
anesthesiologist, he has no authority to control the actuations
of Dr. Estrada and Dra. Villaflor. For the Court to assume that
there were errors being committed in the presence of Dr.
Enriquez would be to dwell on conjectures and speculations.

On 6 February 1998, the Court of Appeals affirmed the

decision of the trial court.[19] Petitioners filed a motion for
reconsideration which the Court of Appeals denied in its
Resolution of 21 March 2000.[20]
Hence, this petition.
Meanwhile, petitioners filed a Manifestation dated 12
April 2002[21] stating that respondents Dr. Estrada, Dr.
Enriquez, Dr. Villaflor, and Nurse Dumlao need no longer be
notified of the petition because they are absolutely not involved
in the issue raised before the [Court], regarding the liability of
[CMC].[22] Petitioners stressed that the subject matter of this
petition is the liability of CMC for the negligence of Dr. Estrada.
[23]

On the civil liability of Dr. Perpetua Lacson, [s]he is a

hematologist and in-charge of the blood bank of the CMC. The
Court cannot accept the theory of the plaintiffs that there was
delay in delivering the blood needed by the patient. It was
testified, that in order that this blood will be made available, a
laboratory test has to be conducted to determine the type of
blood, cross matching and other matters consistent with
medical science so, the lapse of 30 minutes maybe considered
a reasonable time to do all of these things, and not a delay as
the plaintiffs would want the Court to believe.

The Court issued a Resolution dated 9 September

2002[24] dispensing with the requirement to submit the correct
and present addresses of respondents Dr. Estrada, Dr.
Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated
that with the filing of petitioners Manifestation, it should be
understood that they are claiming only against respondents
CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed their
respective comments. Petitioners are foregoing further claims
against respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and
Nurse Dumlao.

Admittedly, Dra. Rosa Uy is a resident physician of the

Capitol Medical Center. She was sued because of her alleged
failure to notice the incompetence and negligence of Dr.
Estrada. However, there is no evidence to support such
theory. No evidence was adduced to show that Dra. Rosa Uy
as a resident physician of Capitol Medical Center, had
knowledge of the mismanagement of the patient Corazon
Nogales, and that notwithstanding such knowledge, she
tolerated the same to happen.

The Court noted that Dr. Estrada did not appeal the
decision of the Court of Appeals affirming the decision of the
Regional Trial Court. Accordingly, the decision of the Court of
Appeals, affirming the trial courts judgment, is already final as
against Dr. Oscar Estrada.

In the pre-trial order, plaintiffs and CMC agreed that

defendant CMC did not have any hand or participation in the
selection or hiring of Dr. Estrada or his assistant Dra. Ely
Villaflor as attending physician[s] of the deceased. In other
words, the two (2) doctors were not employees of the hospital
and therefore the hospital did not have control over their
professional conduct. When Mrs. Nogales was brought to the
hospital, it was an emergency case and defendant CMC had
no choice but to admit her. Such being the case, there is
therefore no legal ground to apply the provisions of Article
2176 and 2180 of the New Civil Code referring to the vicarious
liability of an employer for the negligence of its employees. If
ever in this case there is fault or negligence in the treatment of
the deceased on the part of the attending physicians who were
employed by the family of the deceased, such civil liability
should be borne by the attending physicians under the
principle of respondeat superior.

Petitioners filed a motion for reconsideration[25] of the

Courts 9 September 2002 Resolution claiming that Dr.
Enriquez, Dr. Villaflor and Nurse Dumlao were notified of the
petition at their counsels last known addresses. Petitioners
reiterated their imputation of negligence on these respondents.
The Court denied petitioners Motion for Reconsideration in its
18 February 2004 Resolution.[26]
The Court of Appeals Ruling
In its Decision of 6 February 1998, the Court of Appeals
upheld the trial courts ruling. The Court of Appeals rejected
petitioners view that the doctrine in Darling v. Charleston
Community Memorial Hospital[27] applies to this case.
According to the Court of Appeals, the present case differs
from the Darling case since Dr. Estrada is an independent
contractor-physician whereas the Darling case involved a
physician and a nurse who were employees of the hospital.

WHEREFORE, premises considered, judgment is hereby

rendered finding defendant Dr. Estrada of Number 13 Pitimini
St. San Francisco del Monte, Quezon City civilly liable to pay
plaintiffs: 1) By way of actual damages in the amount of
P105,000.00; 2) By way of moral damages in the amount of
P700,000.00; 3) Attorneys fees in the amount of P100,000.00
and to pay the costs of suit.

Citing other American cases, the Court of Appeals further

held that the mere fact that a hospital permitted a physician to
practice medicine and use its facilities is not sufficient to render
the hospital liable for the physicians negligence.[28]
A
hospital is not responsible for the negligence of a physician
who is an independent contractor.[29]

For failure of the plaintiffs to adduce evidence to support

its [sic] allegations against the other defendants, the complaint
is hereby ordered dismissed. While the Court looks with
disfavor the filing of the present complaint against the other
defendants by the herein plaintiffs, as in a way it has caused
them personal inconvenience and slight damage on their name
and reputation, the Court cannot accepts [sic] however, the
theory of the remaining defendants that plaintiffs were
motivated in bad faith in the filing of this complaint. For this
reason defendants counterclaims are hereby ordered
dismissed.

The Court of Appeals found the cases of Davidson v.

Conole[30] and Campbell v. Emma Laing Stevens Hospital[31]
applicable to this case. Quoting Campbell, the Court of
Appeals stated that where there is no proof that defendant
physician was an employee of defendant hospital or that
defendant hospital had reason to know that any acts of
malpractice would take place, defendant hospital could not be
held liable for its failure to intervene in the relationship of
physician-patient between defendant physician and plaintiff.

SO ORDERED.[18]

On the liability of the other respondents, the Court of

Appeals applied the borrowed servant doctrine considering
that Dr. Estrada was an independent contractor who was
merely exercising hospital privileges. This doctrine provides
that once the surgeon enters the operating room and takes
charge of the proceedings, the acts or omissions of operating

Petitioners appealed the trial courts decision. Petitioners

claimed that
aside from Dr. Estrada, the remaining

34

room personnel, and any negligence associated with such acts

or omissions, are imputable to the surgeon.[32] While the
assisting physicians and nurses may be employed by the
hospital, or engaged by the patient, they normally become the
temporary servants or agents of the surgeon in charge while
the operation is in progress, and liability may be imposed upon
the surgeon for their negligent acts under the doctrine of
respondeat superior.[33]

In the present case, petitioners maintain that CMC, in

allowing Dr. Estrada to practice and admit patients at CMC,
should be liable for Dr. Estradas malpractice. Rogelio claims
that he knew Dr. Estrada as an accredited physician of CMC,
though he discovered later that Dr. Estrada was not a salaried
employee of the CMC.[35] Rogelio further claims that he was
dealing with CMC, whose primary concern was the treatment
and management of his wifes condition. Dr. Estrada just
happened to be the specific person he talked to representing
CMC.[36] Moreover, the fact that CMC made Rogelio sign a
Consent on Admission and Admission Agreement[37] and a
Consent to Operation printed on the letterhead of CMC
indicates that CMC considered Dr. Estrada as a member of its
medical staff.

The Court of Appeals concluded that since Rogelio engaged

Dr. Estrada as the attending physician of his wife, any liability
for malpractice must be Dr. Estradas sole responsibility.
While it found the amount of damages fair and reasonable, the
Court of Appeals held that no interest could be imposed on
unliquidated claims or damages.

On the other hand, CMC disclaims liability by asserting

that Dr. Estrada was a mere visiting physician and that it
admitted Corazon because her physical condition then was
classified an emergency obstetrics case.[38]

The Issue
Basically, the issue in this case is whether CMC is
vicariously liable for the negligence of Dr. Estrada. The
resolution of this issue rests, on the other hand, on the
ascertainment of the relationship between Dr. Estrada and
CMC. The Court also believes that a determination of the
extent of liability of the other respondents is inevitable to finally
and completely dispose of the present controversy.

CMC alleges that Dr. Estrada is an independent contractor for

whose actuations CMC would be a total stranger. CMC
maintains that it had no control or supervision over Dr. Estrada
in the exercise of his medical profession.
The Court had the occasion to determine the relationship
between a hospital and a consultant or visiting physician and
the liability of such hospital for that physicians negligence in
Ramos v. Court of Appeals,[39] to wit:

The Ruling of the Court

The petition is partly meritorious.

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. This is particularly true with respondent
hospital.

On the Liability of CMC

Dr. Estradas negligence in handling the treatment and
management of Corazons condition which ultimately resulted
in Corazons death is no longer in issue. Dr. Estrada did not
appeal the decision of the Court of Appeals which affirmed the
ruling of the trial court finding Dr. Estrada solely liable for
damages. Accordingly, the finding of the trial court on Dr.
Estradas negligence is already final.
Petitioners maintain that CMC is vicariously liable for Dr.
Estradas negligence based on Article 2180 in relation to Article
2176 of the Civil Code. These provisions pertinently state:

After a physician is accepted, either as a visiting or

attending consultant, he is normally required to attend clinicopathological 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.

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.
xxxx
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.
xxxx

In other words, private hospitals, hire, fire and exercise

real control over their attending and visiting consultant staff.
While consultants are not, technically employees, a point
which respondent hospital asserts in denying all responsibility
for the patients condition, 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.
This being the case, the question now arises as to whether or
not respondent hospital is solidarily liable with respondent
doctors for petitioners condition.

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.
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 preexisting contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.

Similarly, in the United States, a hospital which is the

employer, master, or principal of a physician employee,
servant, or agent, may be held liable for the physicians
negligence under the doctrine of respondeat superior.[34]

The basis for holding an employer solidarily responsible

for the negligence of its employee is found in Article 2180 of
the Civil Code which considers a person accountable not only

35

for his own acts but also for those of others based on the
formers responsibility under a relationship of patria potestas. x
x x[40] (Emphasis supplied)

The first factor focuses on the hospitals manifestations

and is sometimes described as an inquiry whether the hospital
acted in a manner which would lead a reasonable person to
conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital.[47] In this regard,
the hospital need not make express representations to the
patient that the treating physician is an employee of the
hospital; rather a representation may be general and implied.
[48]

While the Court in Ramos did not expound on the control test,
such test essentially determines whether an employment
relationship exists between a physician and a hospital based
on the exercise of control over the physician as to details.
Specifically, the employer (or the hospital) must have the right
to control both the means and the details of the process by
which the employee (or the physician) is to accomplish his
task.[41]

The doctrine of apparent authority is a species of the

doctrine of estoppel. Article 1431 of the Civil Code provides
that [t]hrough estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
Estoppel rests on this rule: Whenever a party has, by his own
declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such
declaration, act or omission, be permitted to falsify it.[49]

After a thorough examination of the voluminous records

of this case, the Court finds no single evidence pointing to
CMCs exercise of control over Dr. Estradas treatment and
management of Corazons condition. It is undisputed that
throughout Corazons pregnancy, she was under the exclusive
prenatal care of Dr. Estrada. At the time of Corazons
admission at CMC and during her delivery, it was Dr. Estrada,
assisted by Dr. Villaflor, who attended to Corazon. There was
no showing that CMC had a part in diagnosing Corazons
condition. While Dr. Estrada enjoyed staff privileges at CMC,
such fact alone did not make him an employee of CMC.[42]
CMC merely allowed Dr. Estrada to use its facilities[43] when
Corazon was about to give birth, which CMC considered an
emergency. Considering these circumstances, Dr. Estrada is
not an employee of CMC, but an independent contractor.
The question now is whether CMC is automatically
exempt from liability considering that Dr. Estrada is an
independent contractor-physician.

In the instant case, CMC impliedly held out Dr. Estrada

as a member of its medical staff. Through CMCs acts, CMC
clothed Dr. Estrada with apparent authority thereby leading the
Spouses Nogales to believe that Dr. Estrada was an employee
or agent of CMC. CMC cannot now repudiate such authority.
First, CMC granted staff privileges to Dr. Estrada. CMC
extended its medical staff and facilities to Dr. Estrada. Upon Dr.
Estradas request for Corazons admission, CMC, through its
personnel, readily accommodated Corazon and updated Dr.
Estrada of her condition.
Second, CMC made Rogelio sign consent forms printed
on CMC letterhead.
Prior to Corazons admission and
supposed hysterectomy, CMC asked Rogelio to sign release
forms, the contents of which reinforced Rogelios belief that Dr.
Estrada was a member of CMCs medical staff.[50] The
Consent on Admission and Agreement explicitly provides:

In general, a hospital is not liable for the negligence of an

independent contractor-physician. There is, however, an
exception to this principle. The hospital may be liable if the
physician is the ostensible agent of the hospital.[44] This
exception is also known as the doctrine of apparent
authority.[45] In Gilbert v. Sycamore Municipal Hospital,[46]
the Illinois Supreme Court explained the doctrine of apparent
authority in this wise:

KNOW ALL MEN BY THESE PRESENTS:

I, Rogelio Nogales, of legal age, a resident of 1974 M.
H.
Del
Pilar
St.,
Malate
Mla.,
being
the
father/mother/brother/sister/spouse/relative/
guardian/or
person in custody of Ma. Corazon, and representing his/her
family, of my own volition and free will, do consent and submit
said Ma. Corazon to Dr. Oscar Estrada (hereinafter referred to
as Physician) for cure, treatment, retreatment, or emergency
measures, that the Physician, personally or by and through the
Capitol Medical Center and/or its staff, may use, adapt, or
employ such means, forms or methods of cure, treatment,
retreatment, or emergency measures as he may see best and
most expedient; that Ma. Corazon and I will comply with any
and all rules, regulations, directions, and instructions of the
Physician, the Capitol Medical Center and/or its staff; and, that
I will not hold liable or responsible and hereby waive and
forever discharge and hold free the Physician, the Capitol
Medical Center and/or its staff, from any and all claims of
whatever kind of nature, arising from directly or indirectly, or by
reason of said cure, treatment, or retreatment, or emergency
measures or intervention of said physician, the Capitol Medical
Center and/or its staff.

[U]nder the doctrine of apparent authority a hospital can be

held vicariously liable for the negligent acts of a physician
providing care at the hospital, regardless of whether the
physician is an independent contractor, unless the patient
knows, or should have known, that the physician is an
independent contractor. The elements of the action have been
set out as follows:
For a hospital to be liable under the doctrine of apparent
authority, a plaintiff must show that: (1) the hospital, or its
agent, acted in a manner that would lead a reasonable person
to conclude that the individual who was alleged to be negligent
was an employee or agent of the hospital; (2) where the acts
of the agent create the appearance of authority, the plaintiff
must also prove that the hospital had knowledge of and
acquiesced in them; and (3) the plaintiff acted in reliance upon
the conduct of the hospital or its agent, consistent with ordinary
care and prudence.
The element of holding out on the part of the hospital
does not require an express representation by the hospital that
the person alleged to be negligent is an employee. Rather, the
element is satisfied if the hospital holds itself out as a provider
of emergency room care without informing the patient that the
care is provided by independent contractors.

x x x x[51] (Emphasis supplied)

While the Consent to Operation pertinently reads, thus:

The element of justifiable reliance on the part of the

plaintiff is satisfied if the plaintiff relies upon the hospital to
provide complete emergency room care, rather than upon a
specific physician.

I, ROGELIO NOGALES, x x x, of my own volition and

free will, do consent and submit said CORAZON NOGALES to
Hysterectomy, by the Surgical Staff and Anesthesiologists of
Capitol Medical Center and/or whatever succeeding
operations, treatment, or emergency measures as may be
necessary and most expedient; and, that I will not hold liable or
responsible and hereby waive and forever discharge and hold
free the Surgeon, his assistants, anesthesiologists, the Capitol
Medical Center and/or its staff, from any and all claims of
whatever kind of nature, arising from directly or indirectly, or by

The doctrine of apparent authority essentially involves

two factors to determine the liability of an independentcontractor physician.

36

reason of said operation or operations, treatment, or

emergency measures, or intervention of the Surgeon, his
assistants, anesthesiologists, the Capitol Medical Center
and/or its staff.[52] (Emphasis supplied)

Likewise unconvincing is CMCs argument that petitioners are

estopped from claiming damages based on the Consent on
Admission and Consent to Operation. Both release forms
consist of two parts. The first part gave CMC permission to
administer to Corazon any form of recognized medical
treatment which the CMC medical staff deemed advisable. The
second part of the documents, which may properly be
described as the releasing part, releases CMC and its
employees from any and all claims arising from or by reason
of the treatment and operation.

Without any indication in these consent forms that Dr. Estrada

was an independent contractor-physician, the Spouses
Nogales could not have known that Dr. Estrada was an
independent contractor. Significantly, no one from CMC
informed the Spouses Nogales that Dr. Estrada was an
independent contractor. On the contrary, Dr. Atencio, who was
then a member of CMC Board of Directors, testified that Dr.
Estrada was part of CMCs surgical staff.[53]

The documents do not expressly release CMC from liability for

injury to Corazon due to negligence during her treatment or
operation. Neither do the consent forms expressly exempt
CMC from liability for Corazons death due to negligence
during such treatment or operation. Such release forms, being
in the nature of contracts of adhesion, are construed strictly
against hospitals. Besides, a blanket release in favor of
hospitals from any and all claims, which includes claims due
to bad faith or gross negligence, would be contrary to public
policy and thus void.

Third, Dr. Estradas referral of Corazons profuse vaginal

bleeding to Dr. Espinola, who was then the Head of the
Obstetrics and Gynecology Department of CMC, gave the
impression that Dr. Estrada as a member of CMCs medical
staff was collaborating with other CMC-employed specialists in
treating Corazon.
The second factor focuses on the patients reliance. It is
sometimes characterized as an inquiry on whether the plaintiff
acted in reliance upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence.[54]

Even simple negligence is not subject to blanket release in

favor of establishments like hospitals but may only mitigate
liability depending on the circumstances.[58] When a person
needing urgent medical attention rushes to a hospital, he
cannot bargain on equal footing with the hospital on the terms
of admission and operation. Such a person is literally at the
mercy of the hospital. There can be no clearer example of a
contract of adhesion than one arising from such a dire
situation.
Thus, the release forms of CMC cannot relieve
CMC from liability for the negligent medical treatment of
Corazon.

The records show that the Spouses Nogales relied upon

a perceived employment relationship with CMC in accepting
Dr. Estradas services. Rogelio testified that he and his wife
specifically chose Dr. Estrada to handle Corazons delivery not
only because of their friends recommendation, but more
importantly because of Dr. Estradas connection with a
reputable hospital, the [CMC].[55] In other words, Dr.
Estradas relationship with CMC played a significant role in the
Spouses Nogales decision in accepting
Dr. Estradas
services as the obstetrician-gynecologist for Corazons
delivery. Moreover, as earlier stated, there is no showing that
before and during Corazons confinement at CMC, the
Spouses Nogales knew or should have known that Dr. Estrada
was not an employee of CMC.

On the Liability of the Other Respondents

Despite this Courts pronouncement in its 9 September
2002[59] Resolution that the filing of petitioners Manifestation
confined petitioners claim only against CMC, Dr. Espinola, Dr.
Lacson, and Dr. Uy, who have filed their comments, the Court
deems it proper to resolve the individual liability of the
remaining respondents to put an end finally to this more than
two-decade old controversy.

Further, the Spouses Nogales looked to CMC to provide

the best medical care and support services for Corazons
delivery. The Court notes that prior to Corazons fourth
pregnancy, she used to give birth inside a clinic. Considering
Corazons age then, the Spouses Nogales decided to have
their fourth child delivered at CMC, which Rogelio regarded
one of the best hospitals at the time.[56] This is precisely
because the Spouses Nogales feared that Corazon might
experience complications during her delivery which would be
better addressed and treated in a modern and big hospital
such as CMC. Moreover, Rogelios consent in Corazons
hysterectomy to be performed by a different physician, namely
Dr. Espinola, is a clear indication of Rogelios confidence in
CMCs surgical staff.

a) Dr. Ely Villaflor

Petitioners blame Dr. Ely Villaflor for failing to diagnose
the cause of Corazons bleeding and to suggest the correct
remedy to Dr. Estrada.[60] Petitioners assert that it was Dr.
Villaflors duty to correct the error of Nurse Dumlao in the
administration of hemacel.
The Court is not persuaded. Dr. Villaflor admitted
administering a lower dosage of magnesium sulfate. However,
this was after informing Dr. Estrada that Corazon was no
longer in convulsion and that her blood pressure went down to
a dangerous level.[61] At that moment, Dr. Estrada instructed
Dr. Villaflor to reduce the dosage of magnesium sulfate from 10
to 2.5 grams. Since petitioners did not dispute Dr. Villaflors
allegation, Dr. Villaflors defense remains uncontroverted. Dr.
Villaflors act of administering a lower dosage of magnesium
sulfate was not out of her own volition or was in contravention
of Dr. Estradas order.

CMCs defense that all it did was to extend to [Corazon]

its facilities is untenable. The Court cannot close its eyes to
the reality that hospitals, such as CMC, are in the business of
treatment. In this regard, the Court agrees with the observation
made by the Court of Appeals of North Carolina in Diggs v.
Novant Health, Inc.,[57] to wit:
The conception that the hospital does not undertake to treat
the patient, does not undertake to act through its doctors and
nurses, but undertakes instead simply to procure them to act
upon their own responsibility, no longer reflects the fact.
Present day hospitals, as their manner of operation plainly
demonstrates, do far more than furnish facilities for treatment.
They regularly employ on a salary basis a large staff of
physicians, nurses and internes [sic], as well as administrative
and manual workers, and they charge patients for medical care
and treatment, collecting for such services, if necessary, by
legal action. Certainly, the person who avails himself of
hospital facilities expects that the hospital will attempt to cure
him, not that its nurses or other employees will act on their own
responsibility. x x x (Emphasis supplied)

b) Dr. Rosa Uy
Dr. Rosa Uys alleged negligence consisted of her failure
(1) to call the attention of Dr. Estrada on the incorrect dosage
of magnesium sulfate administered by Dr. Villaflor; (2) to take
corrective measures; and (3) to correct Nurse Dumlaos wrong
method of hemacel administration.
The Court believes Dr. Uys claim that as a second year
resident physician then at CMC, she was merely authorized to
take the clinical history and physical examination of Corazon.
[62] However, that routine internal examination did not ipso
facto make Dr. Uy liable for the errors committed by Dr.
Estrada. Further, petitioners imputation of negligence rests on

37

their baseless assumption that Dr. Uy was present at the

delivery room. Nothing shows that Dr. Uy participated in
delivering Corazons baby. Further, it is unexpected from Dr.
Uy, a mere resident physician at that time, to call the attention
of a more experienced specialist, if ever she was present at the
delivery room.

On the Award of Interest on Damages

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

c) Dr. Joel Enriquez

WHEREFORE, the Court PARTLY GRANTS the petition.

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

Petitioners fault Dr. Joel Enriquez also for not calling the
attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao about
their errors.[63] Petitioners insist that Dr. Enriquez should
have taken, or at least suggested, corrective measures to
rectify such errors.
The Court is not convinced. Dr. Enriquez is an
anesthesiologist whose field of expertise is definitely not
obstetrics and gynecology. As such, Dr. Enriquez was not
expected to correct Dr. Estradas errors. Besides, there was
no evidence of Dr. Enriquezs knowledge of any error
committed by Dr. Estrada and his failure to act upon such
observation.

SO ORDERED.

d) Dr. Perpetua Lacson

Petitioners fault Dr. Perpetua Lacson for her purported
delay in the delivery of blood Corazon needed.[64] Petitioners
claim that Dr. Lacson was remiss in her duty of supervising the
blood bank staff.
As found by the trial court, there was no unreasonable
delay in the delivery of blood from the time of the request until
the transfusion to Corazon. Dr. Lacson competently explained
the procedure before blood could be given to the patient.[65]
Taking into account the bleeding time, clotting time and crossmatching, Dr. Lacson stated that it would take approximately
45-60 minutes before blood could be ready for transfusion.[66]
Further, no evidence exists that Dr. Lacson neglected her
duties as head of the blood bank.
e) Dr. Noe Espinola
Petitioners argue that Dr. Espinola should not have
ordered immediate hysterectomy without determining the
underlying cause of Corazons bleeding. Dr. Espinola should
have first considered the possibility of cervical injury, and
advised a thorough examination of the cervix, instead of
believing outright Dr. Estradas diagnosis that the cause of
bleeding was uterine atony.
Dr. Espinolas order to do hysterectomy which was based
on the information he received by phone is not negligence.
The Court agrees with the trial courts observation that Dr.
Espinola, upon hearing such information about Corazons
condition, believed in good faith that hysterectomy was the
correct remedy. At any rate, the hysterectomy did not push
through because upon Dr. Espinolas arrival, it was already too
late. At the time, Corazon was practically dead.
f) Nurse J. Dumlao
In Moore v. Guthrie Hospital Inc.,[67] the US Court of
Appeals, Fourth Circuit, held that to recover, a patient
complaining of injuries allegedly resulting when the nurse
negligently injected medicine to him intravenously instead of
intramuscularly had to show that (1) an intravenous injection
constituted a lack of reasonable and ordinary care; (2) the
nurse injected medicine intravenously; and (3) such injection
was the proximate cause of his injury.
In the present case, there is no evidence of Nurse
Dumlaos alleged failure to follow Dr. Estradas specific
instructions.
Even assuming Nurse Dumlao defied Dr.
Estradas order, there is no showing that side-drip
administration of hemacel proximately caused Corazons
death. No evidence linking Corazons death and the alleged
wrongful hemacel administration was introduced. Therefore,
there is no basis to hold Nurse Dumlao liable for negligence.

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