CASE NUMBER 2:

G.R. No. 64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.

NARVASA, C.J.:
The question before the Court here is whether or not persons rendering
caddying services for members of golf clubs and their guests in said clubs'
courses or premises are the employees of such clubs and therefore within the
compulsory coverage of the Social Security System (SSS).
That question appears to have been involved, either directly or peripherally, in
three separate proceedings, all initiated by or on behalf of herein private
respondent and his fellow caddies. That which gave rise to the present petition
for review was originally filed with the Social Security Commission
(SSC) via petition of seventeen (17) persons who styled themselves "Caddies
of Manila Golf and Country Club-PTCCEA" for coverage and availment of
benefits under the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical,
Commercial Employees Association," with which the petitioners claimed to be
affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence
that although the petitioners were employees of the Manila Golf and Country
Club, a domestic corporation, the latter had not registered them as such with
the SSS.

At about the same time, two other proceedings bearing on the same question
were filed or were pending; these were:
(1) a certification election case filed with the Labor Relations
Division of the Ministry of Labor by the PTCCEA on behalf of the
same caddies of the Manila Golf and Country Club, the case being
titled "Philippine Technical, Clerical, Commercial Association vs.
Manila Golf and Country Club" and docketed as Case No. R4LRDX-M-10-504-78; it appears to have been resolved in favor of
the petitioners therein by Med-Arbiter Orlando S. Rojo who was
thereafter upheld by Director Carmelo S. Noriel, denying the Club's
motion for reconsideration; 1
(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the
same labor organization, titled "Philippine Technical, Clerical, Commercial Employees Association
(PTCCEA), Fermin Lamar and Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel
Celdran, Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor Arbiter Cornelio
T. Linsangan, a decision later affirmed on appeal by the National Labor Relations Commission on the
ground that there was no employer-employee relationship between the petitioning caddies and the
2
respondent Club.

In the case before the SSC, the respondent Club filed answer praying for the
dismissal of the petition, alleging in substance that the petitioners, caddies by
occupation, were allowed into the Club premises to render services as such to
the individual members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the petitioners were
not subject to the direction and control of the Club as regards the manner in
which they performed their work; and hence, they were not the Club's
employees.
Subsequently, all but two of the seventeen petitioners of their own accord
withdrew their claim for social security coverage, avowedly coming to realize
that indeed there was no employment relationship between them and the
Club. The case continued, and was eventually adjudicated by the SSC after
protracted proceedings only as regards the two holdouts, Fermin Llamar and
Raymundo Jomok. The Commission dismissed the petition for lack of
merit, 3 ruling:

. . . that the caddy's fees were paid by the golf players themselves
and not by respondent club. For instance, petitioner Raymundo
Jomok averred that for their services as caddies a caddy's Claim
Stub (Exh. "1-A") is issued by a player who will in turn hand over to
management the other portion of the stub known as Caddy Ticket
(Exh. "1") so that by this arrangement management will know how
much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise,
petitioner Fermin Llamar admitted that caddy works on his own in
accordance with the rules and regulations (TSN, p. 24, February
26, 1980) but petitioner Jomok could not state any policy of
respondent that directs the manner of caddying (TSN, pp. 76-77,
July 23, 1980). While respondent club promulgates rules and
regulations on the assignment, deportment and conduct of caddies
(Exh. "C") the same are designed to impose personal discipline
among the caddies but not to direct or conduct their actual work. In
fact, a golf player is at liberty to choose a caddy of his preference
regardless of the respondent club's group rotation system and has
the discretion on whether or not to pay a caddy. As testified to by
petitioner Llamar that their income depends on the number of
players engaging their services and liberality of the latter (TSN, pp.
10-11, Feb. 26, 1980). This lends credence to respondent's
assertion that the caddies are never their employees in the
absence of two elements, namely, (1) payment of wages and (2)
control or supervision over them. In this connection, our Supreme
Court ruled that in the determination of the existence of an
employer-employee relationship, the "control test" shall be
considered decisive (Philippine Manufacturing Co. vs. Geronimo
and Garcia, 96 Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96
Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila
Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil. Musicians
Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being
made also to Investment Planning Corporation Phil. vs. SSS 21
SCRA 925).

Records show the respondent club had reported for SS coverage

Graciano Awit and Daniel Quijano, as bat unloader and helper,
respectively, including their ground men, house and administrative
personnel, a situation indicative of the latter's concern with the
rights and welfare of its employees under the SS law, as amended.
The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the
ID cards issued to the caddies merely intended to identify the
holders as accredited caddies of the club and privilege(d) to ply
their trade or occupation within its premises which could be
withdrawn anytime for loss of confidence. This gives us a
reasonable ground to state that the defense posture of respondent
that petitioners were never its employees is well taken. 4
From this Resolution appeal was taken to the Intermediate appellate Court by
the union representing Llamar and Jomok. After the appeal was docketed 5 and
some months before decision thereon was reached and promulgated, Raymundo Jomok's appeal was dismissed at
6
his instance, leaving Fermin Llamar the lone appellant.

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the
Labor Relations Division of National Capital Regional Office in the
certification election case (R-4-LRD-M-10-504-78) supra, on the
precise issue of the existence of employer-employee relationship
between the respondent club and the appellants, it being
contended that said issue was "a function of the proper labor
office"; and
(2) adjudicating that self same issue a manner contrary to the ruling
of the Director of the Bureau of Labor Relations, which "has not
only become final but (has been) executed or (become) res
adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first assigned error,
dismissing it as of the least importance. Nor, it would appear, did it find any
greater merit in the second alleged error. Although said Court reserved the
appealed SSC decision and declared Fermin Llamar an employee of the

Manila Gold and Country Club, ordering that he be reported as such for social
security coverage and paid any corresponding benefits, 8 it conspicuously ignored the
issue of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's
9
ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra and declared that
upon the evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the
so-called "control test," establishment in the case i.e., "whether the employer controls or has reserved the right to
control the employee not only as to the result of the work to be done but also as to the means and methods by which
the same is to be accomplished," the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and

regulations just about every aspect of the conduct that the caddy
must observe, or avoid, when serving as such, any violation of any
which could subject him to disciplinary action, which may include
suspending or cutting off his access to the club premises;
(b) the devising and enforcement of a group rotation system
whereby a caddy is assigned a number which designates his turn
to serve a player;
(c) the club's "suggesting" the rate of fees payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact that the
caddies were paid by the players, not by the Club, that they observed no
definite working hours and earned no fixed income. It quoted with approval
from an American decision 10 to the effect that: "whether the club paid the caddies and afterward
collected in the first instance, the caddies were still employees of the club." This, no matter that the case which
produced this ruling had a slightly different factual cast, apparently having involved a claim for workmen's
compensation made by a caddy who, about to leave the premises of the club where he worked, was hit and injured by
an automobile then negotiating the club's private driveway.

That same issue of res adjudicata, ignored by the IAC beyond bare mention
thereof, as already pointed out, is now among the mainways of the private
respondent's defenses to the petition for review. Considered in the perspective
of the incidents just recounted, it illustrates as well as anything can, why the
practice of forum-shopping justly merits censure and punitive sanction.
Because the same question of employer-employee relationship has been
dragged into three different fora, willy-nilly and in quick succession, it has
birthed controversy as to which of the resulting adjudications must now be
recognized as decisive. On the one hand, there is the certification case [R4-

LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the

existence of employer-employee relationship between the parties, was
affirmed by Director Carmelo S. Noriel, who ordered a certification election
held, a disposition never thereafter appealed according to the private
respondent; on the other, the compulsory arbitration case (NCR Case No. AB4-1771-79), instituted by or for the same respondent at about the same time,
which was dismissed for lack of merit by the Labor Arbiter, which was
afterwards affirmed by the NLRC itself on the ground that there existed no
such relationship between the Club and the private respondent. And, as if
matters were not already complicated enough, the same respondent, with the
support and assistance of the PTCCEA, saw fit, also contemporaneously, to
initiate still a third proceeding for compulsory social security coverage with the
Social Security Commission (SSC Case No. 5443), with the result already
mentioned.
Before this Court, the petitioner Club now contends that the decision of the
Med-Arbiter in the certification case had never become final, being in fact the
subject of three pending and unresolved motions for reconsideration, as well
as of a later motion for early resolution. 11 Unfortunately, none of these motions is incorporated or
reproduced in the record before the Court. And, for his part, the private respondent contends, not only that said
decision had been appealed to and been affirmed by the Director of the BLR, but that a certification election had in
fact been held, which resulted in the PTCCEA being recognized as the sole bargaining agent of the caddies of the
12
Manila Golf and Country Club with respect to wages, hours of work, terms of employment, etc.
Whatever the truth
about these opposing contentions, which the record before the Court does not adequately disclose, the more
controlling consideration would seem to be that, however, final it may become, the decision in a certification case, by
the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence,
or non-existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by prior
judgment, to apply, the following essential requisites must concur: (1) there
must be a final judgment or order; (2) said judgment or order must be on the
merits; (3) the court rendering the same must have jurisdiction over the
subject matter and the parties; and (4) there must be between the two cases
identity of parties, identity of subject matter and identity of cause of action. 13
Clearly implicit in these requisites is that the action or proceedings in which is
issued the "prior Judgment" that would operate in bar of a subsequent action
between the same parties for the same cause, be adversarial, or contentious,

"one having opposing parties; (is) contested, as distinguished from an ex

parte hearing or proceeding. . . . of which the party seeking relief has given
legal notice to the other party and afforded the latter an opportunity to contest
it" 14 and a certification case is not such a proceeding, as this Court already ruled:
A certification proceedings is not a "litigation" in the sense in which
the term is commonly understood, but mere investigation of a nonadversary, fact-finding character, in which the investigating agency
plays the part of a disinterested investigator seeking merely to
ascertain the desires of the employees as to the matter of their
representation. The court enjoys a wide discretion in determining
the procedure necessary to insure the fair and free choice of
bargaining representatives by the employees. 15
Indeed, if any ruling or judgment can be said to operate as res adjudicata on
the contested issue of employer-employee relationship between present
petitioner and the private respondent, it would logically be that rendered in the
compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner
having asserted, without dispute from the private respondent, that said issue
was there squarely raised and litigated, resulting in a ruling of the Arbitration
Branch (of the same Ministry of Labor) that such relationship did not exist, and
which ruling was thereafter affirmed by the National Labor Relations
Commission in an appeal taken by said respondent. 16
In any case, this Court is not inclined to allow private respondent the benefit of
any doubt as to which of the conflicting ruling just adverted to should be
accorded primacy, given the fact that it was he who actively sought them
simultaneously, as it were, from separate fora, and even if the graver
sanctions more lately imposed by the Court for forum-shopping may not be
applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private respondent's
invocation of res adjudicata; on contrary, it acted correctly in doing so.
Said Courts holding that upon the facts, there exists (or existed) a relationship
of employer and employee between petitioner and private respondent is,

however, another matter. The Court does not agree that said facts necessarily
or logically point to such a relationship, and to the exclusion of any form of
arrangements, other than of employment, that would make the respondent's
services available to the members and guest of the petitioner.
As long as it is, the list made in the appealed decision detailing the various
matters of conduct, dress, language, etc. covered by the petitioner's
regulations, does not, in the mind of the Court, so circumscribe the actions or
judgment of the caddies concerned as to leave them little or no freedom of
choice whatsoever in the manner of carrying out their services. In the very
nature of things, caddies must submit to some supervision of their conduct
while enjoying the privilege of pursuing their occupation within the premises
and grounds of whatever club they do their work in. For all that is made to
appear, they work for the club to which they attach themselves on sufference
but, on the other hand, also without having to observe any working hours, free
to leave anytime they please, to stay away for as long they like. It is not
pretended that if found remiss in the observance of said rules, any discipline
may be meted them beyond barring them from the premises which, it may be
supposed, the Club may do in any case even absent any breach of the rules,
and without violating any right to work on their part. All these considerations
clash frontally with the concept of employment.
The IAC would point to the fact that the Club suggests the rate of fees payable
by the players to the caddies as still another indication of the latter's status as
employees. It seems to the Court, however, that the intendment of such fact is
to the contrary, showing that the Club has not the measure of control over the
incidents of the caddies' work and compensation that an employer would
possess.
The Court agrees with petitioner that the group rotation system so-called, is
less a measure of employer control than an assurance that the work is fairly
distributed, a caddy who is absent when his turn number is called simply
losing his turn to serve and being assigned instead the last number for the
day. 17

By and large, there appears nothing in the record to refute the petitioner's
claim that:
(Petitioner) has no means of compelling the presence of a caddy. A
caddy is not required to exercise his occupation in the premises of
petitioner. He may work with any other golf club or he may seek
employment a caddy or otherwise with any entity or individual
without restriction by petitioner. . . .
. . . In the final analysis, petitioner has no was of compelling the
presence of the caddies as they are not required to render a
definite number of hours of work on a single day. Even the group
rotation of caddies is not absolute because a player is at liberty to
choose a caddy of his preference regardless of the caddy's order in
the rotation.
It can happen that a caddy who has rendered services to a player
on one day may still find sufficient time to work elsewhere. Under
such circumstances, he may then leave the premises of petitioner
and go to such other place of work that he wishes (sic). Or a caddy
who is on call for a particular day may deliberately absent himself if
he has more profitable caddying, or another, engagement in some
other place. These are things beyond petitioner's control and for
which it imposes no direct sanctions on the caddies. . . . 18
WHEREFORE, the Decision of the Intermediate Appellant Court, review of
which is sought, is reversed and set aside, it being hereby declared that the
private respondent, Fermin Llamar, is not an employee of petitioner Manila
Golf and Country Club and that petitioner is under no obligation to report him
for compulsory coverage to the Social Security System. No pronouncement as
to costs.
SO ORDERED.

[Syllabus]

SECOND DIVISION

[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 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 forcertiorari 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.

xxx
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 atP550.00 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 employer-employee 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.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

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 employer-employee 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
5
with or without cause. Like the "Career Agent's (or Unit Manager's) Agreement" first signed by Carungcong, 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 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
8
Life, viz.:
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
10
its co-respondents Lance Kemp and Merton Deveza, 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
11
attorney's fees a total of P22,523,570.57.

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
13
award absent an employment relationship between the parties.

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
16

and Corazon de Mesa, who were promoted to Branch Managers after termination of her employment,
and that she
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
20

21

September 11, 1995;

respondents' Rejoinder of October 31, 1995; their Manifestation dated November 2, 1995,
22
submitting copies of their exhibits in the proceedings a quo; Comment on the petition of the Office of the Solicitor
23
General, dated November 22, 1995 in which it makes common cause with Carungcong; petitioner's Sur24
Rejoinder dated December 11, 1995; her Counter-Manifestation of December 11, 1995, submitting copies of her
25
own exhibits in the proceedings below;
respondents' Reply (dated January 8, 1996) to the Comment of the Solicitor
26

27

General's Office; the Addendum to Respondents' Comment, dated July 15, 1997; and petitioner's "Reply to
28
Private Respondents' 'Addendum' filed without leave of court, with Motion to Expunge . . ," dated July 30, 1997.

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 FFF7). 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
34
chit being in the sum of P1,099.71) or atTropical Hut (the bill P378.50).

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

42

the agreement by death, or by written notice "with or without cause,"

Her "MANAGER'S Supplementary
Agreement." effective July 1, 1979, contained provisions regarding termination of the agreement inter alia by written
43
notice "without cause." 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-the-mill 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 employer-employee 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.
Romero, Melo, Francisco and Panganiban, JJ., concur.

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-in-law, Herminda Cruz, who was then Dean of the College of
Nursing at the Capitol Medical Center, was allowed to accompany her inside
the operating room.

At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez
tried to get in touch with him by phone. Thereafter, Dr. Gutierrez informed
Cruz that the operation might be delayed due to the late arrival of Dr. Hosaka.
In the meantime, the patient, petitioner Erlinda said to Cruz, "Mindy, inip na
inip na ako, ikuha mo ako ng ibang Doctor."
By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner
Rogelio already wanted to pull out his wife from the operating room. He met
Dr. Garcia, who remarked that he was also tired of waiting for Dr. Hosaka. Dr.
Hosaka finally arrived at the hospital at around 12:10 in the afternoon, or more
than three (3) hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas
arrival. While she held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to
intubate the patient. Cruz heard Dr. Gutierrez utter: "ang hirap ma-intubate
nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." Cruz noticed a bluish
discoloration of Erlindas nailbeds on her left hand. She (Cruz) then heard Dr.
Hosaka instruct someone to call Dr. Calderon, another anesthesiologist. When
he arrived, Dr. Calderon attempted to intubate the patient. The nailbeds of the
patient remained bluish, thus, she was placed in a trendelenburg position a
position where the head of the patient is placed in a position lower than her
feet. At this point, Cruz went out of the operating room to express her concern
to petitioner Rogelio that Erlindas operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was
still in trendelenburg position. At almost 3:00 in the afternoon, she saw Erlinda
being wheeled to the Intensive Care Unit (ICU). The doctors explained to
petitioner Rogelio that his wife had bronchospasm. Erlinda stayed in the ICU
for a month. She was released from the hospital only four months later or on
November 15, 1985. Since the ill-fated operation, Erlinda remained in
comatose condition until she died on August 3, 1999.1
Petitioners filed with the Regional Trial Court of Quezon City a civil case for
damages against private respondents. After due trial, the court a quo rendered
judgment in favor of petitioners. Essentially, the trial court found that private
respondents were negligent in the performance of their duties to Erlinda. On

appeal by private respondents, the Court of Appeals reversed the trial courts
decision and directed petitioners to pay their "unpaid medical bills" to private
respondents.
Petitioners filed with this Court a petition for review on certiorari. The private
respondents were then required to submit their respective comments thereon.
On December 29, 1999, this Court promulgated the decision which private
respondents now seek to be reconsidered. The dispositive portion of said
Decision states:
WHEREFORE, the decision and resolution of the appellate court
appealed from are hereby modified so as to award in favor of petitioners,
and solidarily against private respondents the following: 1)
P1,352,000.00 as actual damages computed as of the date of
promulgation of this decision plus a monthly payment of P8,000.00 up to
the time that petitioner Erlinda Ramos expires or miraculously survives;
2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as temperate
damages; 4) P100,000.00 each exemplary damages and attorneys fees;
and 5) the costs of the suit.2
In his Motion for Reconsideration, private respondent Dr. Hosaka submits the
following as grounds therefor:
I
THE HONORABLE SUPREME COURT COMMITTED REVERSIBLE ERROR
WHEN IT HELD RESPONDENT DR. HOSAKA LIABLE ON THE BASIS OF
THE "CAPTAIN-OF-THE-SHIP" DOCTRINE.
II
THE HONORABLE SUPREME COURT ERRED IN HOLDING RESPONDENT
DR. HOSAKA LIABLE DESPITE THE FACT THAT NO NEGLIGENCE CAN
BE ATTRIBUTABLE TO HIM.
III

ASSUMING WITHOUT ADMITTING THAT RESPONDENT DR. HOSAKA IS

LIABLE, THE HONORABLE SUPREME COURT ERRED IN AWARDING
DAMAGES THAT WERE CLEARLY EXCESSIVE AND WITHOUT LEGAL
BASIS.3
Private respondent Dr. Gutierrez, for her part, avers that:
A. THE HONORABLE SUPREME COURT MAY HAVE
INADVERTENTLY OVERLOOKED THE FACT THAT THE COURT OF
APPEALS DECISION DATED 29 MAY 1995 HAD ALREADY BECOME
FINAL AND EXECUTORY AS OF 25 JUNE 1995, THEREBY
DEPRIVING THIS HONORABLE COURT OF JURISDICTION OVER
THE INSTANT PETITION;
B. THE HONORABLE SUPREME COURT MAY HAVE
INADVERTENTLY OVERLOOKED SEVERAL MATERIAL FACTUAL
CIRCUMSTANCES WHICH, IF PROPERLY CONSIDERED, WOULD
INDUBITABLY LEAD TO NO OTHER CONCLUSION BUT THAT
PRIVATE RESPONDENT DOCTORS WERE NOT GUILTY OF ANY
NEGLIGENCE IN RESPECT OF THE INSTANT CASE;
B.1 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS
SUFFICIENTLY DISCHARGED THE BURDEN OF EVIDENCE BY
SUBSTANTIAL PROOF OF HER COMPLIANCE WITH THE
STANDARDS OF DUE CARE EXPECTED IN HER RESPECTIVE
FIELD OF MEDICAL SPECIALIZATION.
B.2 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS
SUFFICIENTLY DISCHARGED THE BURDEN OF EVIDENCE BY
SUBSTANTIAL PROOF OF HER HAVING SUCCESSFULLY
INTUBATED PATIENT ERLINDA RAMOS
C. THE SUPREME COURT MAY HAVE INADVERTENTLY PLACED
TOO MUCH RELIANCE ON THE TESTIMONY OF PETITIONERS
WITNESS HERMINDA CRUZ, DESPITE THE EXISTENCE OF
SEVERAL FACTUAL CIRCUMSTANCES WHICH RENDERS DOUBT
ON HER CREDIBILITY

D. THE SUPREME COURT MAY HAVE INADVERTENTLY

DISREGARDED THE EXPERT TESTIMONY OF DR. JAMORA AND
DRA. CALDERON
E. THE HONORABLE SUPREME COURT MAY HAVE
INADVERTENTLY AWARDED DAMAGES TO PETITIONERS DESPITE
THE FACT THAT THERE WAS NO NEGLIGENCE ON THE PART OF
RESPONDENT DOCTOR.4
Private respondent De Los Santos Medical Center likewise moves for
reconsideration on the following grounds:
I
THE HONORABLE COURT ERRED IN GIVING DUE COURSE TO THE
INSTANT PETITION AS THE DECISION OF THE HONORABLE COURT OF
APPEALS HAD ALREADY BECOME FINAL AND EXECUTORY
II
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT AN
EMPLOYER-EMPLOYEE [RELATIONSHIP] EXISTS BETWEEN
RESPONDENT DE LOS SANTOS MEDICAL CENTER AND DRS. ORLINO
HOSAKA AND PERFECTA GUTIERREZ
III
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT
RESPONDENT DE LOS SANTOS MEDICAL CENTER IS SOLIDARILY
LIABLE WITH RESPONDENT DOCTORS
IV
THE HONORABLE SUPREME COURT ERRED IN INCREASING THE
AWARD OF DAMAGES IN FAVOR OF PETITIONERS.5

In the Resolution of February 21, 2000, this Court denied the motions for
reconsideration of private respondents Drs. Hosaka and Gutierrez. They then
filed their respective second motions for reconsideration. The Philippine
College of Surgeons filed its Petition-in-Intervention contending in the main
that this Court erred in holding private respondent Dr. Hosaka liable under the
captain of the ship doctrine. According to the intervenor, said doctrine had
long been abandoned in the United States in recognition of the developments
in modern medical and hospital practice.6 The Court noted these pleadings in
the Resolution of July 17, 2000.7
On March 19, 2001, the Court heard the oral arguments of the parties,
including the intervenor. Also present during the hearing were the amicii
curiae: Dr. Felipe A. Estrella, Jr., Consultant of the Philippine Charity
Sweepstakes, former Director of the Philippine General Hospital and former
Secretary of Health; Dr. Iluminada T. Camagay, President of the Philippine
Society of Anesthesiologists, Inc. and Professor and Vice-Chair for Research,
Department of Anesthesiology, College of Medicine-Philippine General
Hospital, University of the Philippines; and Dr. Lydia M. Egay, Professor and
Vice-Chair for Academics, Department of Anesthesiology, College of
Medicine-Philippine General Hospital, University of the Philippines.
The Court enumerated the issues to be resolved in this case as follows:
1. WHETHER OR NOT DR. ORLINO HOSAKA (SURGEON) IS LIABLE
FOR NEGLIGENCE;
2. WHETHER OR NOT DR. PERFECTA GUTIERREZ
(ANESTHESIOLOGIST) IS LIABLE FOR NEGLIGENCE; AND
3. WHETHER OR NOT THE HOSPITAL (DELOS SANTOS MEDICAL
CENTER) IS LIABLE FOR ANY ACT OF NEGLIGENCE COMMITTED
BY THEIR VISITING CONSULTANT SURGEON AND
ANESTHESIOLOGIST.8
We shall first resolve the issue pertaining to private respondent Dr. Gutierrez.
She maintains that the Court erred in finding her negligent and in holding that
it was the faulty intubation which was the proximate cause of Erlindas

comatose condition. The following objective facts allegedly negate a finding of

negligence on her part: 1) That the outcome of the procedure was a comatose
patient and not a dead one; 2) That the patient had a cardiac arrest; and 3)
That the patient was revived from that cardiac arrest.9 In effect, Dr. Gutierrez
insists that, contrary to the finding of this Court, the intubation she performed
on Erlinda was successful.
Unfortunately, Dr. Gutierrez claim of lack of negligence on her part is belied
by the records of the case. It has been sufficiently established that she failed
to exercise the standards of care in the administration of anesthesia on a
patient. Dr. Egay enlightened the Court on what these standards are:
x x x What are the standards of care that an anesthesiologist should do
before we administer anesthesia? The initial step is the preparation of
the patient for surgery and this is a pre-operative evaluation because the
anesthesiologist is responsible for determining the medical status of the
patient, developing the anesthesia plan and acquainting the patient or
the responsible adult particularly if we are referring with the patient or to
adult patient who may not have, who may have some mental handicaps
of the proposed plans. We do pre-operative evaluation because this
provides for an opportunity for us to establish identification and personal
acquaintance with the patient. It also makes us have an opportunity to
alleviate anxiety, explain techniques and risks to the patient, given the
patient the choice and establishing consent to proceed with the plan.
And lastly, once this has been agreed upon by all parties concerned the
ordering of pre-operative medications. And following this line at the end
of the evaluation we usually come up on writing, documentation is very
important as far as when we train an anesthesiologist we always
emphasize this because we need records for our protection, well,
records. And it entails having brief summary of patient history and
physical findings pertinent to anesthesia, plan, organize as a problem
list, the plan anesthesia technique, the plan post operative, pain
management if appropriate, special issues for this particular patient.
There are needs for special care after surgery and if it so it must be
written down there and a request must be made known to proper
authorities that such and such care is necessary. And the request for

medical evaluation if there is an indication. When we ask for a cardiopulmonary 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?

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?

The first cyanosis when I was (interrupted)

What time, more or less?

I think it was 12:15 or 12:16.

Well, if the record will show you started induction at 12:15?

Yes, Your Honor.

And the first medication you gave was what?

A
The first medication, no, first the patient was oxygenated for
around one to two minutes.
Q

Yes, so, that is about 12:13?

A
Yes, and then, I asked the resident physician to start giving the
pentothal very slowly and that was around one minute.
Q

So, that is about 12:13 no, 12:15, 12:17?

A
Yes, and then, after one minute another oxygenation was given
and after (interrupted)
Q

12:18?

A
Yes, and then after giving the oxygen we start the menorcure
which is a relaxant. After that relaxant (interrupted)
Q
After that relaxant, how long do you wait before you do any
manipulation?
A

Usually you wait for two minutes or three minutes.

Q
So, if our estimate of the time is accurate we are now more or
less 12:19, is that right?
A

Maybe.

Q
12:19. And at that time, what would have been done to this
patient?
A
After that time you examine the, if there is relaxation of the jaw
which you push it downwards and when I saw that the patient was relax
because that monorcure is a relaxant, you cannot intubate the patient or
insert the laryngoscope if it is not keeping him relax. So, my first attempt
when I put the laryngoscope on I saw the trachea was deeply interiorly.

So, what I did ask "mahirap ata ito ah." So, I removed the laryngoscope
and oxygenated again the patient.
Q
So, more or less you attempted to do an intubation after the first
attempt as you claimed that it was only the laryngoscope that was
inserted.
A

Yes.

Q
And in the second attempt you inserted the laryngoscope and
now possible intubation?
A

Yes.

Q
And at that point, you made a remark, what remark did you
make?
A
I said "mahirap ata ito" when the first attempt I did not see the
trachea right away. That was when I (interrupted)
Q

That was the first attempt?

Yes.

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?

The "mahirap intubate ito" assuming that you (interrupted)

Iyon lang, that is what I only said "mahirap intubate (interrupted)

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.

And this is more or less about what time 12:21?

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.

But why are there no recordings in the anesthesia record?

I did not have time.

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.

And that the 12:25 is after the 12:20?

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?

No, the first cyanosis (interrupted).23

We cannot thus give full credence to Dr. Gutierrez synopsis in light of her
admission that it does not fully reflect the events that transpired during the
administration of anesthesia on Erlinda. As pointed out by Dr. Estrella, there
was a ten-minute gap in Dr. Gutierrez synopsis, i.e., the vital signs of Erlinda
were not recorded during that time. The absence of these data is particularly
significant because, as found by the trial court, it was the absence of oxygen
supply for four (4) to five (5) minutes that caused Erlindas comatose
condition.
On the other hand, the Court has no reason to disbelieve the testimony of
Cruz. As we stated in the Decision, she is competent to testify on matters
which she is capable of observing such as, the statements and acts of the
physician and surgeon, external appearances and manifest conditions which
are observable by any one.24 Cruz, Erlindas sister-in-law, was with her inside
the operating room. Moreover, being a nurse and Dean of the Capitol Medical
Center School of Nursing at that, she is not entirely ignorant of anesthetic
procedure. Cruz narrated that she heard Dr. Gutierrez remark, "Ang hirap maintubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." She
observed that the nailbeds of Erlinda became bluish and thereafter Erlinda
was placed in trendelenburg position.25 Cruz further averred that she noticed
that the abdomen of Erlinda became distended.26
The cyanosis (bluish discoloration of the skin or mucous membranes caused
by lack of oxygen or abnormal hemoglobin in the blood) and enlargement of
the stomach of Erlinda indicate that the endotracheal tube was improperly
inserted into the esophagus instead of the trachea. Consequently, oxygen was
delivered not to the lungs but to the gastrointestinal tract. This conclusion is
supported by the fact that Erlinda was placed in trendelenburg position. This
indicates that there was a decrease of blood supply to the patients brain. The
brain was thus temporarily deprived of oxygen supply causing Erlinda to go
into coma.
The injury incurred by petitioner Erlinda does not normally happen absent any
negligence in the administration of anesthesia and in the use of an

endotracheal tube. As was noted in our Decision, the instruments used in the
administration of anesthesia, including the endotracheal tube, were all under
the exclusive control of private respondents Dr. Gutierrez and Dr.
Hosaka.27 In Voss vs. Bridwell,28 which involved a patient who suffered brain
damage due to the wrongful administration of anesthesia, and even before the
scheduled mastoid operation could be performed, the Kansas Supreme Court
applied the doctrine of res ipsa loquitur, reasoning that the injury to the patient
therein was one which does not ordinarily take place in the absence of
negligence in the administration of an anesthetic, and in the use and
employment of an endotracheal tube. The court went on to say that
"[o]rdinarily a person being put under anesthesia is not rendered decerebrate
as a consequence of administering such anesthesia in the absence of
negligence. Upon these facts and under these circumstances, a layman would
be able to say, as a matter of common knowledge and observation, that the
consequences of professional treatment were not as such as would ordinarily
have followed if due care had been exercised." 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 Captain-of-the-Ship doctrine.30 Dr.
Hosaka argues that the trend in United States jurisprudence has been to reject
said doctrine in light of the developments in medical practice. He points out
that anesthesiology and surgery are two distinct and specialized fields in
medicine and as a surgeon, he is not deemed to have control over the acts of
Dr. Gutierrez. As anesthesiologist, Dr. Gutierrez is a specialist in her field and
has acquired skills and knowledge in the course of her training which Dr.
Hosaka, as a surgeon, does not possess.31 He states further that current
American jurisprudence on the matter recognizes that the trend towards
specialization in medicine has created situations where surgeons do not
always have the right to control all personnel within the operating
room,32 especially a fellow specialist.33
Dr. Hosaka cites the case of Thomas v. Raleigh General Hospital,34 which
involved a suit filed by a patient who lost his voice due to the wrongful
insertion of the endotracheal tube preparatory to the administration of

anesthesia in connection with the laparotomy to be conducted on him. The

patient sued both the anesthesiologist and the surgeon for the injury suffered
by him. The Supreme Court of Appeals of West Virginia held that the surgeon
could not be held liable for the loss of the patients voice, considering that the
surgeon did not have a hand in the intubation of the patient. The court rejected
the application of the "Captain-of-the-Ship Doctrine," citing the fact that the
field of medicine has become specialized such that surgeons can no longer be
deemed as having control over the other personnel in the operating room. It
held that "[a]n assignment of liability based on actual control more realistically
reflects the actual relationship which exists in a modern operating
room."35 Hence, only the anesthesiologist who inserted the endotracheal tube
into the patients throat was held liable for the injury suffered by the latter.
This contention fails to persuade.
That there is a trend in American jurisprudence to do away with the Captainof-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.
CHIEF JUSTICE:

Courtesy.
DR. CAMAGAY:
And care.
CHIEF JUSTICE:
Duty as a matter of fact?
DR. CAMAGAY:
Yes, Your Honor.43
Dr. Hosaka's irresponsible conduct of arriving very late for the scheduled
operation of petitioner Erlinda is violative, not only of his duty as a physician
"to serve the interest of his patients with the greatest solicitude, giving them
always his best talent and skill,"44 but also of Article 19 of the Civil Code which
requires a person, in the performance of his duties, to act with justice and give
everyone his due.
Anent private respondent DLSMCs liability for the resulting injury to petitioner
Erlinda, we held that respondent hospital is solidarily liable with respondent
doctors therefor under Article 2180 of the Civil Code 45 since there exists an
employer-employee relationship between private respondent DLSMC and Drs.
Gutierrez and Hosaka:
In other words, private hospitals, hire, fire and exercise real control over
their attending and visiting "consultant" staff. While "consultants" are not,
technically employees, x x x the control exercised, the hiring and the
right to terminate consultants all fulfill the important hallmarks of an
employer-employee relationship, with the exception of the payment of
wages. In assessing whether such a relationship in fact exists, the
control test is determining. x x 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 employeremployee relationship exists between the parties, the following elements must
be present: (1) selection and engagement of services; (2) payment of wages;
(3) the power to hire and fire; and (4) the power to control not only the end to
be achieved, but the means to be used in reaching such an end. 47
DLSMC maintains that first, a hospital does not hire or engage the services of
a consultant, but rather, accredits the latter and grants him or her the privilege
of maintaining a clinic and/or admitting patients in the hospital upon a showing
by the consultant that he or she possesses the necessary qualifications, such
as accreditation by the appropriate board (diplomate), evidence of fellowship
and references.48 Second, it is not the hospital but the patient who pays the
consultants fee for services rendered by the latter.49 Third, a hospital does not
dismiss a consultant; instead, the latter may lose his or her accreditation or
privileges granted by the hospital.50 Lastly, DLSMC argues that when a doctor
refers a patient for admission in a hospital, it is the doctor who prescribes the
treatment to be given to said patient. The hospitals obligation is limited to
providing the patient with the preferred room accommodation, the nutritional
diet and medications prescribed by the doctor, the equipment and facilities
necessary for the treatment of the patient, as well as the services of the
hospital staff who perform the ministerial tasks of ensuring that the doctors
orders are carried out strictly.51
After a careful consideration of the arguments raised by DLSMC, the Court
finds that respondent hospitals position on this issue is meritorious. There is
no employer-employee relationship between DLSMC and Drs. Gutierrez and
Hosaka which would hold DLSMC solidarily liable for the injury suffered by
petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of a physician to
membership in DLSMCs medical staff as active or visiting consultant is first
decided upon by the Credentials Committee thereof, which is composed of the
heads of the various specialty departments such as the Department of

Obstetrics and Gynecology, Pediatrics, Surgery with the department head of

the particular specialty applied for as chairman. The Credentials Committee
then recommends to DLSMC's Medical Director or Hospital Administrator the
acceptance or rejection of the applicant physician, and said director or
administrator validates the committee's recommendation.52 Similarly, in cases
where a disciplinary action is lodged against a consultant, the same is initiated
by the department to whom the consultant concerned belongs and filed with
the Ethics Committee consisting of the department specialty heads. The
medical director/hospital administrator merely acts as ex-officio member of
said committee.
Neither is there any showing that it is DLSMC which pays any of its
consultants for medical services rendered by the latter to their respective
patients. Moreover, the contract between the consultant in respondent hospital
and his patient is separate and distinct from the contract between respondent
hospital and said patient. The first has for its object the rendition of medical
services by the consultant to the patient, while the second concerns the
provision by the hospital of facilities and services by its staff such as nurses
and laboratory personnel necessary for the proper treatment of the patient.
Further, no evidence was adduced to show that the injury suffered by
petitioner Erlinda was due to a failure on the part of respondent DLSMC to
provide for hospital facilities and staff necessary for her treatment.
For these reasons, we reverse the finding of liability on the part of DLSMC for
the injury suffered by petitioner Erlinda.
Finally, the Court also deems it necessary to modify the award of damages to
petitioners in view of the supervening event of petitioner Erlindas death. In the
assailed Decision, the Court awarded actual damages of One Million Three
Hundred Fifty Two Thousand Pesos (P1,352,000.00) to cover the expenses
for petitioner Erlindas treatment and care from the date of promulgation of the
Decision up to the time the patient expires or survives.53 In addition thereto,
the Court awarded temperate damages of One Million Five Hundred
Thousand Pesos (P1,500,000.00) in view of the chronic and continuing nature
of petitioner Erlindas injury and the certainty of further pecuniary loss by

petitioners as a result of said injury, the amount of which, however, could not
be made with certainty at the time of the promulgation of the decision. The
Court justified such award in this manner:
Our rules on actual or compensatory damages generally assume that at
the time of litigation, the injury suffered as a consequence of an act of
negligence has been completed and that the cost can be liquidated.
However, these provisions neglect to take into account those situations,
as in this case, where the resulting injury might be continuing and
possible future complications directly arising from the injury, while certain
to occur, are difficult to predict.
In these cases, the amount of damages which should be awarded, if they
are to adequately and correctly respond to the injury caused, should be
one which compensates for pecuniary loss incurred and proved, up to
the time of trial; and one which would meet pecuniary loss certain to be
suffered but which could not, from the nature of the case, be made with
certainty. In other words, temperate damages can and should be
awarded on top of actual or compensatory damages in instances where
the injury is chronic and continuing. And because of the unique nature of
such cases, no incompatibility arises when both actual and temperate
damages are provided for. The reason is that these damages cover two
distinct phases.
As it would not be equitableand certainly not in the best interests of the
administration of justicefor the victim in such cases to constantly come
before the courts and invoke their aid in seeking adjustments to the
compensatory damages previously awardedtemperate damages are
appropriate. The amount given as temperate damages, though to a
certain extent speculative, should take into account the cost of proper
care.
In the instant case, petitioners were able to provide only home-based
nursing care for a comatose patient who has remained in that condition
for over a decade. Having premised our award for compensatory
damages on the amount provided by petitioners at the onset of litigation,

it would be now much more in step with the interests of justice if the
value awarded for temperate damages would allow petitioners to provide
optimal care for their loved one in a facility which generally specializes in
such care. They should not be compelled by dire circumstances to
provide substandard care at home without the aid of professionals, for
anything less would be grossly inadequate. Under the circumstances, an
award of P1,500,000.00 in temperate damages would therefore be
reasonable.54
However, subsequent to the promulgation of the Decision, the Court was
informed by petitioner Rogelio that petitioner Erlinda died on August 3,
1999.55 In view of this supervening event, the award of temperate damages in
addition to the actual or compensatory damages would no longer be justified
since the actual damages awarded in the Decision are sufficient to cover the
medical expenses incurred by petitioners for the patient. Hence, only the
amounts representing actual, moral and exemplary damages, attorneys fees
and costs of suit should be awarded to petitioners.
WHEREFORE, the assailed Decision is hereby modified as follows:
(1) Private respondent De Los Santos Medical Center is hereby absolved from
liability arising from the injury suffered by petitioner Erlinda Ramos on June
17, 1985;
(2) Private respondents Dr. Orlino Hosaka and Dr. Perfecta Gutierrez are
hereby declared to be solidarily liable for the injury suffered by petitioner
Erlinda on June 17, 1985 and are ordered to pay petitioners
(a) P1,352,000.00 as actual damages;
(b) P2,000,000.00 as moral damages;
(c) P100,000.00 as exemplary damages;
(d) P100,000.00 as attorneys fees; and
(e) the costs of the suit.

SO ORDERED.

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 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 dismissing
the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed
the findings of the National Labor Relations Commission ("NLRC"), which
affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN")
signed an Agreement ("Agreement") with the Mel and Jay Management and
Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President
and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and
Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to
provide SONZAs services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to ABSCBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3
ABS-CBN agreed to pay for SONZAs services a monthly talent fee
of P310,000 for the first year and P317,000 for the second and third year of

the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days
of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio
Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994
entered into by your goodself on behalf of ABS-CBN with our company
relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent
events concerning his programs and career. We consider these acts of
the station violative of the Agreement and the station as in breach
thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to seek recovery of the other benefits under said
Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan
("ESOP").

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

employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees
through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July
1996, ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZAs talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to
dismiss and directed the parties to file their respective position papers. The
Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was
an employee of respondent company until April 15, 1996 and that he
was not paid certain claims, it is sufficient enough as to confer
jurisdiction over the instant case in this Office. And as to whether or not
such claim would entitle complainant to recover upon the causes of
action asserted is a matter to be resolved only after and as a result of a
hearing. Thus, the respondents plea of lack of employer-employee
relationship may be pleaded only as a matter of defense. It behooves
upon it the duty to prove that there really is no employer-employee
relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The
parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with
Motion to Expunge Respondents Annex 4 and Annex 5 from the Records.
Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and
Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing
practice in the television and broadcast industry is to treat talents like SONZA
as independent contractors.

The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction.6 The pertinent parts of the decision read as
follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the
"true nature of the contract of a talent," it stands to reason that a "talent"
as above-described cannot be considered as an employee by reason of
the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by
reason of his peculiar skills and talent as a TV host and a radio
broadcaster. Unlike an ordinary employee, he was free to perform
the services he undertook to render in accordance with his own
style. The benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to
a staggering P317,000. Moreover, his engagement as a talent was
covered by a specific contract. Likewise, he was not bound to render
eight (8) hours of work per day as he worked only for such number of
hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded
some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employeremployee relationship. As correctly put by the respondent, "All these
benefits are merely talent fees and other contractual benefits and should
not be deemed as salaries, wages and/or other remuneration accorded
to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given
to a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit."

The fact that complainant was made subject to respondents Rules

and Regulations, likewise, does not detract from the absence of
employer-employee relationship. As held by the Supreme Court, "The
line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating
the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which
address both the result and the means to achieve it." (Insular Life
Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a
Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the
Court of Appeals assailing the decision and resolution of the NLRC. On 26
March 1999, the Court of Appeals rendered a Decision dismissing the case. 8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs
decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered
into the contract merely as an agent of complainant Sonza, the principal.
By all indication and as the law puts it, the act of the agent is the act of
the principal itself. This fact is made particularly true in this case, as
admittedly MJMDC is a management company devoted exclusively to

managing the careers of Mr. Sonza and his broadcast partner, Mrs.
Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between
complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement
which specifically referred to MJMDC as the AGENT. As a matter of
fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in
behalf of Mr. Sonza, who himself signed the same in his capacity as
President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal
the fact that historically, the parties to the said agreements are ABS-CBN
and Mr. Sonza. And it is only in the May 1994 Agreement, which is the
latest Agreement executed between ABS-CBN and Mr. Sonza, that
MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only
contractor of ABS-CBN such that there exist[s] employer-employee
relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy
indeed belongs to the regular courts, the same being in the nature of an
action for alleged breach of contractual obligation on the part of
respondent-appellee. As squarely apparent from complainant-appellants
Position Paper, his claims for compensation for services, 13th month
pay, signing bonus and travel allowance against respondent-appellee
are not based on the Labor Code but rather on the provisions of the May
1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of
complainant-appellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the

latter contractually bound itself to pay complainant a signing bonus
consisting of shares of stockswith FIVE HUNDRED THOUSAND
PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay
based on an amount not lower than the amount he was receiving
prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is
entitled to a commutable travel benefit amounting to at least One
Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition
of the fact that his contractual relations with ABS-CBN are founded on
the New Civil Code, rather than the Labor Code, that instead of merely
resigning from ABS-CBN, complainant-appellant served upon the latter a
notice of rescission of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring to unpaid
employee benefits, he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but
reserves the right to such recovery of the other benefits under said
Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss
dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May
1994 Agreement and/or the Stock Purchase Agreement by respondentappellee that complainant-appellant filed his complaint. Complainantappellants claims being anchored on the alleged breach of contract on
the part of respondent-appellee, the same can be resolved by reference
to civil law and not to labor law. Consequently, they are within the realm
of civil law and, thus, lie with the regular courts. As held in the case of
Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute.9 (Emphasis supplied)

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

relationship between SONZA and ABS-CBN is a factual question that is within
the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari
extends only to issues of want or excess of jurisdiction of the NLRC. 11 Such
action cannot cover an inquiry into the correctness of the evaluation of the
evidence which served as basis of the NLRCs conclusion.12 The Court of
Appeals added that it could not re-examine the parties evidence and
substitute the factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
NLRCS DECISION AND REFUSING TO FIND THAT AN EMPLOYEREMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABSCBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A
FINDING.14
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court
of Appeals affirming the NLRC ruling which upheld the Labor Arbiters
dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor
laws and jurisprudence define clearly the elements of an employer-employee
relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its "talents."
There is no case law stating that a radio and television program host is an
employee of the broadcast station.

The instant case involves big names in the broadcast industry, namely Jose
"Jay" Sonza, a known television and radio personality, and ABS-CBN, one of
the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because
he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that
the Labor Arbiter has no jurisdiction because SONZA was an independent
contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact.
Appellate courts accord the factual findings of the Labor Arbiter and the NLRC
not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.16 A party
cannot prove the absence of substantial evidence by simply pointing out that
there is contrary evidence on record, direct or circumstantial. The Court does
not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee
relationship are present in this case. Case law has consistently held that the
elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the means
and methods by which the work is accomplished.18 The last element, the socalled "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, ABSCBN would not have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the circumstances of
the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees
going to MJMDC. SONZA asserts that this mode of fee payment shows that
he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges "which he would not have enjoyed if he
were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. If SONZA were ABS-CBNs employee, there would
be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x
x and 13th month pay"20 which the law automatically incorporates into every
employer-employee contract.21 Whatever benefits SONZA enjoyed arose from
contract and not because of an employer-employee relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third
year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZAs unique skills, talent and celebrity status not possessed
by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his
services. The power to bargain talent fees way above the salary scales of

ordinary employees is a circumstance indicative, but not conclusive, of an

independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not
negate the status of SONZA as an independent contractor. The parties
expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent
fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate
their relationship. SONZA failed to show that ABS-CBN could terminate his
services on grounds other than breach of contract, such as retrenchment to
prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent
fees as long as "AGENT and Jay Sonza shall faithfully and completely perform
each condition of this Agreement."24 Even if it suffered severe business losses,
ABS-CBN could not retrench SONZA because ABS-CBN remained obligated
to pay SONZAs talent fees during the life of the Agreement. This
circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs,
ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its
undertaking in the Agreement to continue paying SONZAs talent fees during
the remaining life of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.25
SONZA assails the Labor Arbiters interpretation of his rescission of the
Agreement as an admission that he is not an employee of ABS-CBN. The
Labor Arbiter stated that "if it were true that complainant was really an
employee, he would merely resign, instead." SONZA did actually resign from
ABS-CBN but he also, as president of MJMDC, rescinded the Agreement.
SONZAs letter clearly bears this out.26 However, the manner by which
SONZA terminated his relationship with ABS-CBN is immaterial. Whether

SONZA rescinded the Agreement or resigned from work does not determine
his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program
host is an employee or an independent contractor, we refer to foreign case law
in analyzing the present case. The United States Court of Appeals, First
Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para
La Difusin Pblica ("WIPR")27 that a television program host is an
independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position requiring
talent and training not available on-the-job. x x x In this regard,
Alberty possesses a masters degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the
drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities"
necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty disputes
that this factor favors independent contractor status because WIPR
provided the "equipment necessary to tape the show." Albertys
argument is misplaced. The equipment necessary for Alberty to conduct
her job as host of "Desde Mi Pueblo" related to her appearance on the
show. Others provided equipment for filming and producing the show,
but these were not the primary tools that Alberty used to perform her
particular function. If we accepted this argument, independent
contractors could never work on collaborative projects because other
individuals often provide the equipment required for different aspects of
the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming
"Desde Mi Pueblo." Albertys contracts with WIPR specifically provided

that WIPR hired her "professional services as Hostess for the Program
Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty
tasks in addition to work related to these tapings. x x x28 (Emphasis
supplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control the hirer
exercises, the more likely the worker is deemed an employee. The converse
holds true as well the less control the hirer exercises, the more likely the
worker is considered an independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services
specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign any
other work to SONZA. To perform his work, SONZA only needed his skills and
talent. How SONZA delivered his lines, appeared on television, and sounded
on radio were outside ABS-CBNs control. SONZA did not have to render eight
hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.31 ABS-CBN could not dictate the contents of SONZAs script.
However, the Agreement prohibited SONZA from criticizing in his shows ABSCBN 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 ABSCBN 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.38Even though ABS-CBN provided SONZA with the place of work

and the necessary equipment, SONZA was still an independent contractor
since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the
programs.39
A radio broadcast specialist who works under minimal supervision is an
independent contractor.40 SONZAs work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because
ABS-CBN subjected him to its rules and standards of performance. SONZA
claims that this indicates ABS-CBNs control "not only [over] his manner of
work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and
standards of performance "covering talents"41 of ABS-CBN. The Agreement
does not require SONZA to comply with the rules and standards of
performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the "Television and Radio
Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has
been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The
KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former.43 In this case, SONZA
failed to show that these rules controlled his performance. We find that these
general rules are merely guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio programs that comply
with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the
conduct of the other party in relation to the services being rendered may be
accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd.
vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the
second, which address both the result and the means used to achieve
it.44
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the
desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative. 45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the
most extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can
validly provide his services exclusively to the hiring party. In the broadcast
industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.46 This practice is not designed to control the means
and methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial amounts
of money, time and effort "in building up its talents as well as the programs
they appear in and thus expects that said talents remain exclusive with the
station for a commensurate period of time."47 Normally, a much higher fee is
paid to talents who agree to work exclusively for a particular radio or television

station. In short, the huge talent fees partially compensates for exclusivity, as
in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC,
which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as
a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists
that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only"
contractor; (2) the employee who is ostensibly under the employ of the "laboronly" contractor; and (3) the principal who is deemed the real employer. Under
this scheme, the "labor-only" contractor is the agent of the principal. The
law makes the principal responsible to the employees of the "labor-only
contractor" as if the principal itself directly hired or employed the
employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The
Agreement expressly states that MJMDC acted as the "AGENT" of SONZA.
The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC,
which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President
and General Manager of MJMDC is SONZA himself. It is absurd to hold that
MJMDC, which is owned, controlled, headed and managed by SONZA, acted
as agent of ABS-CBN in entering into the Agreement with SONZA, who
himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and his broadcast
partner, TIANGCO. MJMDC is not engaged in any other business, not even
job contracting. MJMDC does not have any other function apart from acting as
agent of SONZA or TIANGCO to promote their careers in the broadcast and
television industry.49

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor
Blas Ople on 8 January 1979 finally settled the status of workers in the
broadcast industry. Under this policy, the types of employees in the broadcast
industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have
the force and effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZAs status. A mere executive issuance
cannot exclude independent contractors from the class of service providers to
the broadcast industry. The classification of workers in the broadcast industry
into only two groups under Policy Instruction No. 40 is not binding on this
Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro
Vidanes and Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these
witnesses as incompetent to attest on the prevailing practice in the radio and
television industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never
prevented from denying or refuting the allegations in the affidavits. The Labor
Arbiter has the discretion whether to conduct a formal (trial-type) hearing after
the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes
of action raised in the complaint excluding those that may have been
amicably settled, and shall be accompanied by all supporting documents

including the affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the
submission of the parties of their position papers/memorandum, the
Labor Arbiter shall motu propio determine whether there is need for a
formal trial or hearing. At this stage, he may, at his discretion and for the
purpose of making such determination, ask clarificatory questions to
further elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any party or
witness.50
The Labor Arbiter can decide a case based solely on the position papers and
the supporting documents without a formal trial.51 The holding of a formal
hearing or trial is something that the parties cannot demand as a matter of
right.52 If the Labor Arbiter is confident that he can rely on the documents
before him, he cannot be faulted for not conducting a formal trial, unless under
the particular circumstances of the case, the documents alone are insufficient.
The proceedings before a Labor Arbiter are non-litigious in nature. Subject to
the requirements of due process, the technicalities of law and the rules
obtaining in the courts of law do not strictly apply in proceedings before a
Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for violating
the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution53 arises only if there is an employer-employee relationship under
labor laws. Not every performance of services for a fee creates an employeremployee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results.

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

May 1994 Agreement. In effect, SONZAs cause of action is for breach of

contract which is intrinsically a civil dispute cognizable by the regular courts. 58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of
Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs
against petitioner.
SO ORDERED.
Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

SECOND DIVISION
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 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]
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 thatLaudato 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 aResolution[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]
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.
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]

It is an accepted doctrine that for the purposes of coverage under the

Social Security Act, the determination of employer-employee 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.

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

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]
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 employeremployee 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 employer-employee 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.
The

finding

of

the

SSC

that

employee of Royal Star is supported bysubstantial

Laudato

was

an

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.
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.

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

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.
DANTE O. TINGA
Associate Justice

WE CONCUR:
REYNATO S. PUNO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in

consultation before the case was assigned to the writer of the opinion of the
Courts Division

REYNATO S. PUNO
Associate Justice

Chairman, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division

Chairmans Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court.

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 and the 13 February 2003 Resolution of the Court of
Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the
National Labor Relations Commission against petitioner.
[1]

[2]

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, offered
his services to the petitioner, therein proposing his plan of works required of a
practitioner in industrial medicine, to include the following:
[3]

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 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. 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.
[4]

[5]

The turning point in the parties relationship surfaced in December 1996 when
Philcom, thru a letter 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.
[6]

On 22 January 1997, De Vera filed a complaint for illegal dismissal before the
National Labor Relations Commission (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 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.
[7]

On De Veras appeal to the NLRC, the latter, in a decision 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:
[8]

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, 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.
[9]

On 12 September 2002, the Court of Appeals rendered a decision, 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:
[10]

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 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 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, is constrained to look deeper into the attendant circumstances
obtaining in this case, as appearing on record.
[13]

[14]

In a long line of decisions, the Court, in determining the existence of an employeremployee 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.
[15]

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 which, in full, reads:
[16]

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 employer-employee 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, 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. 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.
[19]

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. 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.
[22]

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, 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.
[24]

[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. As it is, Article 157 of the Labor Code clearly and unequivocally
allows employers in non-hazardous 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 regular employee. The very phrase that they
[26]

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 verballyrenewed 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, 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 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.
[28]

[29]

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.
Panganiban, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on official leave.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 164156

September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and
JOSEPHINE LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision 1 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. V-000762-2001 (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.
The Antecedents
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.

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:
a) Prepare, arrange airing of commercial broadcasting based on the daily
operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and
lead-in or incoming reports;
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 Rank-and-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
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:
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
4:30 P.M. 12:00 MN Jennifer Deiparine
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.
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, 2001.7Instead of
re-filing 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:
1. Complainants were engaged by respondent ABS-CBN as regular and fulltime 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.
Machine copies of complainants ABS-CBN Employees Identification Card
and salary vouchers are hereto attached as follows, thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employees Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employees Identification Card
Exhibit "C"

Exhibit "D"
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
Length of service: 5 years & 10 months
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
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employees Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of

Complainant Joy Sanchez Lerasan

Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
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:
WHEREFORE, premises considered, this Honorable Arbiter is most
respectfully prayed, to issue an order compelling defendants to pay
complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each
and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.

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.
Complainants pray for such other reliefs as are just and equitable under the
premises.10
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:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo

3) Arangkada (evening edition)

4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:

(a) Siesta Serenata

(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(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
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.
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:
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:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00

III - Jennifer Deiparine 12,025.00

IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of
PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
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.
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.
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.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had
long been dismissed without prejudice for more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional
right to due process of law;

3. That the Labor Arbiter erred in denying respondents Motion for

Reconsideration on an interlocutory order on the ground that the same is a
prohibited pleading;
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:
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:
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:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22

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:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
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.
SO ORDERED.15
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.
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.

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.
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.
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 CBA is a necessary
consequence of the NLRC ruling that respondents, as PAs, are regular
employees.
Finding no merit in petitioners motion for reconsideration, the CA denied the
same in a Resolution17 dated June 16, 2004.

Petitioner thus filed the instant petition for review on certiorari and raises the
following assignments of error:
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.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS
REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO
RESPONDENTS.18
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.
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.
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
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
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 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
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
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.

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."
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 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).
"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.
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:

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.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in
determining whether one is a regular employee:
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
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
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.
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.
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
The law overrides such conditions which are prejudicial to the interest of the
worker whose weak bargaining situation 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
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
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. 41We 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
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 employeremployee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN
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
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, ABSCBN would not have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not
conclusively determine his status. We must consider all the circumstances of
the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees
going to MJMDC. SONZA asserts that this mode of fee payment shows that
he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges "which he would not have enjoyed if he
were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations
that led to the Agreement. If SONZA were ABS-CBNs employee, there would
be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x
x and 13th month pay which the law automatically incorporates into every
employer-employee contract. Whatever benefits SONZA enjoyed arose from
contract and not because of an employer-employee relationship.
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.44
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.
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.
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.
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:
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.
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.
A collective bargaining agreement is a contract entered into by the union
representing the employees and the employer. However, even the nonmember employees are entitled to the benefits of the contract. To accord its
benefits only to members of the union without any valid reason would
constitute undue discrimination against non-members. A collective bargaining
agreement is binding on all employees of the company. Therefore, whatever
benefits are given to the other employees of ABS-CBN must likewise be
accorded to private respondents who were regular employees of petitioner. 48
Besides, only talent-artists were excluded from the CBA and not production
assistants who are regular employees of the respondents. Moreover, under
Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and

all labor contracts shall be construed in favor of the safety and decent living of
the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, ChicoNazario, J.J., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks
to annul and set aside the Decision and Resolution of the Court of Appeals
dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP
No. 78515 dismissing the complaint for constructive dismissal filed by herein
petitioner Angelina Francisco. The appellate court reversed and set aside the
Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the
decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No.
30-10-0-489-01, finding that private respondents were liable for constructive
dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the
company. 5

Although she was designated as Corporate Secretary, she was not entrusted
with the corporate documents; neither did she attend any board meeting nor
required to do so. She never prepared any legal document and never
represented the company as its Corporate Secretary. However, on some
occasions, she was prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired
Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner
was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings
with government agencies, especially with the Bureau of Internal Revenue
(BIR), Social Security System (SSS) and in the city government of Makati; and
to administer all other matters pertaining to the operation of Kasei Restaurant
which is owned and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
Petitioner alleged that she was required to sign a prepared resolution for her
replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting
of all employees of Kasei Corporation and announced that nothing had
changed and that petitioner was still connected with Kasei Corporation as
Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of P22,500.00
as of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did
not receive her salary from the company. She made repeated follow-ups with
the company cashier but she was advised that the company was not earning
well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest
of the officers but she was informed that she is no longer connected with the
company. 11
Since she was no longer paid her salary, petitioner did not report for work and
filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own
discretion without control and supervision of Kasei Corporation. Petitioner had
no daily time record and she came to the office any time she wanted. The
company never interfered with her work except that from time to time, the
management would ask her opinion on matters relating to her profession.
Petitioner did not go through the usual procedure of selection of employees,
but her services were engaged through a Board Resolution designating her as
technical consultant. The money received by petitioner from the corporation
was her professional fee subject to the 10% expanded withholding tax on
professionals, and that she was not one of those reported to the BIR or SSS
as one of the companys employees. 12
Petitioners designation as technical consultant depended solely upon the will
of management. As such, her consultancy may be terminated any time
considering that her services were only temporary in nature and dependent on
the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded
withholding tax which included petitioner. SSS records were also submitted
showing that petitioners latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without
loss of seniority rights and jointly and severally pay complainant her money
claims in accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would accrue up to
actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the
Labor Arbiter, the dispositive portion of which reads:

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

MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at
one month per year of service in addition to full backwages from October 2001
to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in
profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential
award only;
4) The awards representing salary differentials, housing allowance, mid year
bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the
National Labor Relations Commissions dated April 15, 2003 is hereby
REVERSED and SET ASIDE and a new one is hereby rendered dismissing
the complaint filed by private respondent against Kasei Corporation, et al. for
constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent
Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National
Labor Relations Commission on one hand, and the Court of Appeals on the
other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial
evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been
no uniform test to determine the existence of an employer-employee relation.
Generally, courts have relied on the so-called right of control test where the
person for whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in reaching such
end. In addition to the standard of right-of-control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in
the payrolls, can help in determining the existence of an employer-employee
relationship.
However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such
a relationship where several positions have been held by the worker. There
are instances when, aside from the employers power to control the employee
with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as
employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving:
(1) the putative employers power to control the employee with respect to the
means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which
would take into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially appropriate in
this case where there is no written agreement or terms of reference to base
the relationship on; and due to the complexity of the relationship based on the

various positions and responsibilities given to the worker over the period of the
latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan
and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that
there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved
but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing
economic conditions prevailing between the parties, in addition to the standard
of right-of-control like the inclusion of the employee in the payrolls, to give a
clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of
the worker.
Thus, the determination of the relationship between employer and employee
depends upon the circumstances of the whole economic activity, 22 such as:
(1) the extent to which the services performed are an integral part of the
employers business; (2) the extent of the workers investment in equipment
and facilities; (3) the nature and degree of control exercised by the employer;
(4) the workers opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent
enterprise; (6) the permanency and duration of the relationship between the
worker and the employer; and (7) the degree of dependency of the worker
upon the employer for his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line
of business. 24 In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal
Labor Standards Act is dependency. 25By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes
of the Labor Code ought to be the economic dependence of the worker on his
employer.

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

Kasei Corporation because she was under the direct control and supervision
of Seiji Kamura, the corporations Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer,
Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business permits and
other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to
be an employee of respondent corporation because she had served the
company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from
August 1, 1999 to December 18, 2000. 26 When petitioner was designated
General Manager, respondent corporation made a report to the SSS signed by
Irene Ballesteros. Petitioners membership in the SSS as manifested by a
copy of the SSS specimen signature card which was signed by the President
of Kasei Corporation and the inclusion of her name in the on-line inquiry
system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latters line of
business.
In Domasig v. National Labor Relations Commission, 28 we held that in a
business establishment, an identification card is provided not only as a
security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers covering
petitioners salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an
employee of private respondent.

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

workers with the SSS is proof that the latter were the formers employees. The
coverage of Social Security Law is predicated on the existence of an
employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of
petitioners job was as Kamuras direct assistant with the duty of acting as
Liaison Officer in representing the company to secure construction permits,
license to operate and other requirements imposed by government agencies.
Petitioner was never entrusted with corporate documents of the company, nor
required to attend the meeting of the corporation. She was never privy to the
preparation of any document for the corporation, although once in a while she
was required to sign prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself
from the records of the case. 31 Regardless of this fact, we are convinced that
the allegations in the first affidavit are sufficient to establish that petitioner is
an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one,
courts do not generally look with favor on any retraction or recanted testimony,
for it could have been secured by considerations other than to tell the truth
and would make solemn trials a mockery and place the investigation of the
truth at the mercy of unscrupulous witnesses. 32 A recantation does not
necessarily cancel an earlier declaration, but like any other testimony the
same is subject to the test of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was selected and engaged
by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main
job function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement.

Respondent corporation hired and engaged petitioner for compensation, with

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

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

Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15, 2003 in NLRC NCR
CA No. 032766-02, isREINSTATED. The case is REMANDED to the Labor
Arbiter for the recomputation of petitioner Angelina Franciscos full backwages
from the time she was illegally terminated until the date of finality of this
decision, and separation pay representing one-half month pay for every year
of service, where a fraction of at least six months shall be considered as one
whole year.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
MA. ALICIA AUSTRIAMARTINEZ
Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice