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. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by Director Carmelo S. Noriel, denying the Club's motion for reconsideration; 1

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

respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging in substance that the petitioners, caddies by occupation, were allowed into the Club premises to render services as such to the individual members and guests playing the Club's golf course and who themselves paid for such services; that as such caddies, the petitioners were not subject to the direction and control of the Club as regards the manner in which they performed their work; and hence, they were not the Club's employees.

Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security coverage, avowedly coming to realize that indeed there was no employment relationship between them and the Club. The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the two holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for lack of merit, 3

ruling:

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

Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as bat unloader and helper, respectively, including their ground men, house and administrative personnel, a situation indicative of the latter's concern with the rights and welfare of its employees under the SS law, as amended. The unrebutted testimony of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely intended to identify the holders as accredited caddies of the club and privilege(d) to ply their trade or occupation within its premises which could be withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense posture of respondent that petitioners were never its employees is well taken. 4

From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and Jomok. After the appeal was docketed 5

and

some months before decision thereon was reached and promulgated, Raymundo Jomok's appeal was dismissed at

his instance, leaving Fermin Llamar the lone appellant. 6

The appeal ascribed two errors to the SSC:

(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National Capital Regional Office in the certification election case (R-4-LRD-M-10-504-78) supra, on the

precise issue of the existence of employer-employee relationship between the respondent club and the appellants, it being contended that said issue was "a function of the proper labor office"; and

(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor Relations, which "has not only become final but (has been) executed or (become) res adjudicata." 7

The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance. Nor, it would appear, did it find any greater merit in the second alleged error. Although said Court reserved the appealed SSC decision and declared Fermin Llamar an employee of the

Manila Gold and Country Club, ordering that he be reported as such for social security coverage and paid any corresponding benefits, 8 it conspicuously ignored the

issue of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's

ruling in Investment Planning Corporation of the Philippines vs. Social Security System, supra 9 and declared that

upon the evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-called "control test," establishment in the case — i.e., "whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished," — the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect of the conduct that the caddy must observe, or avoid, when serving as such, any violation of any which could subject him to disciplinary action, which may include suspending or cutting off his access to the club premises;

(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number which designates his turn to serve a player;

(c) the club's "suggesting" the rate of fees payable to the caddies.

Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the Club, that they observed no definite working hours and earned no fixed income. It quoted with approval from an American decision 10

to the effect that: "whether the club paid the caddies and afterward

collected in the first instance, the caddies were still employees of the club." This, no matter that the case which produced this ruling had a slightly different factual cast, apparently having involved a claim for workmen's compensation made by a caddy who, about to leave the premises of the club where he worked, was hit and injured by an automobile then negotiating the club's private driveway.

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

LRDX-M-10-504-78), where the decision of the Med-Arbiter found for the existence of employer-employee relationship between the parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never thereafter appealed according to the private respondent; on the other, the compulsory arbitration case (NCR Case No. AB-4-1771-79), instituted by or for the same respondent at about the same time, which was dismissed for lack of merit by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on the ground that there existed no such relationship between the Club and the private respondent. And, as if matters were not already complicated enough, the same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third proceeding for compulsory social security coverage with the Social Security Commission (SSC Case No. 5443), with the result already mentioned.

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had never become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as of a later motion for early resolution. 11

Unfortunately, none of these motions is incorporated or

reproduced in the record before the Court. And, for his part, the private respondent contends, not only that said decision had been appealed to and been affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in the PTCCEA being recognized as the sole bargaining agent of the caddies of the

Manila Golf and Country Club with respect to wages, hours of work, terms of employment, etc. 12

Whatever the truth

about these opposing contentions, which the record before the Court does not adequately disclose, the more controlling consideration would seem to be that, however, final it may become, the decision in a certification case, by the very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or non-existence, of employer-employee relationship between them.

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

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious,

"one having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it" 14

and a certification case is not such a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but mere investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by the employees. 15

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

In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting ruling just adverted to should be accorded primacy, given the fact that it was he who actively sought them simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for forum-shopping may not be applied to him retroactively.

Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on contrary, it acted correctly in doing so.

Said Court’s 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.

D E C I S I O N

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.

x x x

Q. In this Exhibit 2 you were informing Encyclopaedia Britannica that you have hired a certain person and you were telling Britannica how her salary was going to be taken cared of, is it not?

A. Yes, sir.

Q. You said here, please be informed that we have appointed Miss Luz Villan as division trainer effective May 1, 1971 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

with or without cause. Like the "Career Agent's (or Unit Manager's) Agreement" first signed by Carungcong, 5

this

latest Agreement stressed that the "New Business Manager in performance of his duties defined herein, shall be considered an independent contractor and not . . an employee of Sun Life," and that "(u)nder no circumstance shall the New Business Manager and/or his employees be considered employees of Sun Life."

Now, it appears that sometime in November, 1989. Ms. Eleizer Sibayan, Manager of Sun Life's Internal Audit Department, commenced an inquiry into the special fund availments of Carungcong and other New Business Managers; this, allegedly because the Company's Vice President for Far East Asia, respondent Lance Kemp, had been receiving reports of anomalies in relation thereto from unit managers and agents. 6

These special fund availments are

governed by the following portion of the Agreement of January 1, 1986 under the sub-head, "New Business Manager's Expenses," viz:

Sun Life agrees to reimburse the New Business Manager for actual reasonable expenses properly incurred in performing his duties as New Business Manager provided such expenses are within the guidelines issued by Sun Life from time to time and are incurred for the purposes of gaining or producing income and that they are accounted for in the manner established by Sun Life and made known to the New Business Manager.

Such reimbursement by Sun Life of said expenses will be made only upon the submission by the New Business Manager of a statement in

form and content acceptable to Sun Life detailing said expenses with attached receipts.

It also appears that Ms. Sibayan drew up a report (Summary of Availments) 7

after having examined and analyzed the pertinent records, and interviewed the unit managers and

agents mentioned in the receipts presented by Carungcong to support her claims for reimbursement of expenses for 1987, 1988 and 1989. Thereafter, on January 4, 1990, and again on January 10, 1990, Carungcong was confronted with and asked to explain the discrepancies set out in Sibayan's report. On January 11, 1990, she was given a letter signed by "Merton V. Deveza, CLU, Director, Marketing," which advised of the termination of her relationship with Sun

Life, viz.: 8

In our meeting with you yesterday we presented the charge of fraudulent reimbursement of the Branch Special Fund against you. Accordingly, you admitted having committed said act.

For dishonesty, disloyalty and breach of your Agent's Agreement and New Business Manager's Agreement with Sun Life of Canada dated June 10, 1974 and January 1, 1986, respectively, the Management has decided to terminate you as Agent and New Business Manager of Sun Life of Canada effective immediately.

Carungcong promptly instituted proceedings for vindication in the Arbitration Branch of the National Labor Relations Commission January 16, 1990. There she succeeded in obtaining a favorable judgment. 9

Labor Arbiter Ernesto S. Dinopol found

that there existed an employer-employee relationship between her and Sun Life; ruled that she had been illegally dismissed, thus entitled to reinstatement without loss of seniority rights and other benefits; and ordered Sun Life, and

its co-respondents Lance Kemp and Merton Deveza, 10

jointly and severally to pay her P12,475,973.25 as "back

commissions," P8,000,000.00 as moral damages, P2,000,000.00 as exemplary damages, and P2,047,597.32 as

attorney's fees — a total of P22,523,570.57. 11

On appeal, the National Labor Relations Commission reversed the Arbiter's judgment. It affirmed that no employment relationship existed between Carungcong and Sun Life. Nevertheless, it awarded to her P2,696,252.00 as "lost average commission" on the ground that during the appeal, she had neither been restored to work nor reinstated in payroll. 12

However, the NLRC later

eliminated this monetary award in a second decision promulgated on October 28, 1994 on the basis of a motion for reconsideration of Sun Life and its co-respondents. The NLRC declared itself without competence to make such an

award absent an employment relationship between the parties. 13

Opting not to file a motion for reconsideration of the Commission's judgment, 14

Carungcong forthwith initiated the special civil action of certiorari at bar (after obtaining an

extension of time to do so), in which she seeks invalidation of the Commission's decision of October 28, 1994, and consequent restoration of the Labor Arbiter's awards.

Carungcong claims that although she was not, as "new business manager," required either to account for her time or perform her duties in a fixed manner, she was nonetheless an employee subject to the control and supervision of Sun Life like any other managerial employee. She brands as ludicrous the accusation leveled against her, of having defrauded Sun Life of the sum of P6,000.00, since her annual income at that time was in excess of P3,000,000.00. 15

She contends that the accusation was a mere fabrication of her Unit Managers, Jorge Chua

and Corazon de Mesa, who were promoted to Branch Managers after termination of her employment, 16

and that she

actually had no hand in the preparation of the vouchers involved in the imputed anomaly, this task being entrusted to the branch office secretary, Lilet Ginete, selected and hired by Sun Life.

She also contends that in dismissing her, Sun Life failed to observe procedural due process. She was not furnished with copies of the audit report of her supposedly fraudulent use of her special fund availments, and was never afforded an opportunity to be heard by Sun Life officials prior to termination of her employment. 17

She assails the decisions of the NLRC as tainted with bias and grave abuse of discretion,

particularly in ignoring the "deluge of evidence" adduced before the labor arbiter.

On the other hand, Sun Life and its co-respondents argue that the challenged decisions were in fact precisely based on Carungcong's so-called "deluge of evidence," and thus cannot in any sense be deemed "capricious, whimsical, arbitrary or despotic." 18

They invoke the familiar rule that the findings of fact of administrative agencies are

accorded respect, if not indeed finality, by this Court. The assert that jurisprudence and Carungcong's admissions before the Labor Arbiter negate the existence of an employment relationship; that in truth Carungcong was duly informed of the charge of fraud and dishonesty, a charge supported by adequate proof; and that therefore the cancellation of the business relationship between them and Carungcong was valid and legal, effected with due process and for just cause.

The facts involved in this case are laid bare in considerable detail, and the issues identified and extensively discussed by the parties, in their pleadings, namely: respondents' Comment dated May 4, 1995; 19

petitioner's Reply thereto dated

September 11, 1995; 20

respondents' Rejoinder of October 31, 1995; 21

their Manifestation dated November 2, 1995,

submitting copies of their exhibits in the proceedings a quo; 22

Comment on the petition of the Office of the Solicitor

General, dated November 22, 1995 23

— in which it makes common cause with Carungcong; petitioner's Sur-

Rejoinder dated December 11, 1995; 24

her Counter-Manifestation of December 11, 1995, submitting copies of her

own exhibits in the proceedings below; 25

respondents' Reply (dated January 8, 1996) to the Comment of the Solicitor

General's Office; 26

the Addendum to Respondents' Comment, dated July 15, 1997; 27

and petitioner's "Reply to

Private Respondents' 'Addendum' filed without leave of court, with Motion to Expunge . . ," dated July 30, 1997. 28

The record does indeed disclose what Carungcong calls a "deluge of evidence" submitted by the parties before the Labor Arbiter. Carungcong submitted two (2) affidavits of hers (Exhibits A and B) in lieu of her direct examination, and numerous documents marked as Exhibits C to Z, inclusive, and from AA to ZZ, and again from AAA to EEE and EEE-1 (to FFF and FFF-7). 29

Sun Life and its co-respondents in turn submitted more than thirty-eight (38) exhibits, including the affidavits of

five witnesses. 30

Facts are thereby established which the Court cannot ignore.

As already mentioned, as Sun Life's New Business Manager, Carungcong had the prerogative under her contract to claim reimbursement "for actual reasonable expenses properly incurred in performing . . (her) duties . . ." Reimbursement was to be made by Sun Life "only upon . . (her) submission . . of a statement in form and content acceptable to Sun Life detailing said expenses with attached receipts." Availing of this prerogative, Carungcong presented several statements of reimbursable expenses (appending the corresponding receipts), on the strength of which she duly received full reimbursement from Sun Life. These statements included claims for reimbursement for:

1) more than P30,000.00, representing the cost of prizes or awards ostensibly advanced by Susan Carungcong; and

2) several sums of money, representing the cost of food and drinks shouldered by Carungcong for dinner or snacks in various restaurants and on different dates to which she had supposedly invited agents of Sun Life, namely: Jorge Chua, Unit Manager, Prosperity Unit; Corazon de Mesa, Dynamic Unit: Robert Tan, Royal Unit; NNBO; Lucila L. Natividad, Samaritan Unit; Cristina J, Gloton, NNBO; Cynthia Suan; Zenaida B. Lim; Maynard Granados.

The record reveals the fraudulent character of these claims, that is to say, the unclean hands with which Carungcong has come to court. Her claims are categorically belied by no less than the eight (8) insurance managers and agents specifically named by her in her supporting documents, about whose impartially or credibility the Court has been cited to no persuasive cause for doubt or misgiving. Jorge Chua 31

and Corazon de Mesa 32

deposed that as regards the special fund

raised by Carungcong for prizes, awards, and outings, they had in fact contributed thereto but the latter had made it

appear that she had raised and disbursed the entire fund by herself, and although she later obtained reimbursement therefor in the sum of more than P30,000.00, she never returned to them what they had contributed.

Chua and de Mesa also denied Carungcong's claim that she had treated them to food and drinks on December 7, 1987 at Kimpura (the bill amounting to P570.90), at Jade Garden on January 20, 1988 (the bill being P734.16), or at Flavors & Spices on November 5, 1988 (the bill coming to P420.66). 33

De

Mesa also affirmed that contrary to Carungcong's claim, she had not been treated by the latter at the Kamayan (the

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

Robert Tan belied Carungcong's claim that she had paid for their food or drinks at the Emerald Garden (the bill presented being in the sum of P742.33) or at Sugarhouse (the bill being P220.02). 35

Lucila L. Natividad also belied Carungcong's assertion that she had treated her at the Flavours and Spices (the bill being P834.48). 36

So, too, Cristina J. Gloton gave the lie to Carungcong's claim that she had treated her at the Hotel Intercontinental (the bill on one occasion being P559.98). 37

Cynthia Suan denied having been entertained by Carungcong at the Manila Peninsula (the bill supposedly being in the sum of P359.75). 38

Zenaida B. Lim confirmed her earlier denial that Carungcong had paid for their snacks at Bing-Bing's (the bill being P182.40). 39

Maynard Granados denied, among other things, that he was treated to dinner by Carungcong at the Hotel Intercontinental on March 29, 1988 (the bill being

supposedly P437.95). 40

The record thus appears to establish adequate cause for Sun Life to terminate its relationship with Susan Carungcong. Her attention was drawn to the perfidious nature of her claims for reimbursement; she was accorded an opportunity to explain the same; she refused to do so.

Prescinding therefrom, the contracts she had willingly and knowingly signed with Sun Life 41

repeatedly and clearly provided that said agreements were terminable by either party by written

notice with or without cause. Her "Career Agent's (or Unit Manager's) Agreement" inter alia provided for termination of

the agreement by death, or by written notice "with or without cause," 42

Her "MANAGER'S Supplementary

Agreement." effective July 1, 1979, contained provisions regarding termination of the agreement inter alia by written

notice "without cause." 43

A subsequent agreement by which she was named Manager for New Business, dated

January 1, 1986, similarly provided for termination of relation, by among others, notice in writing with or without cause.

Noteworthy is that this last agreement of January 1, 1986 emphasized, like the "Career Agent's (or Unit Manager's) Agreement" first signed by her, 44

that in the

performance of her duties defined herein. Carungcong would be considered an independent contractor and not . . an employee of Sun Life," and that "(u)nder no circumstance shall the New Business Manager and/or his employees be considered employees of Sun Life."

It is germane to advert to the fact, which should by now be apparent, that Carungcong was not your ordinary run-of-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.

R E S O L U T I O N

KAPUNAN, J.:

Private respondents De Los Santos Medical Center, Dr. Orlino Hosaka and Dr. Perfecta Gutierrez move for a reconsideration of the Decision, dated December 29, 1999, of this Court holding them civilly liable for petitioner Erlinda Ramos’ comatose condition after she delivered herself to them for their professional care and management.

For better understanding of the issues raised in private respondents’ respective motions, we will briefly restate the facts of the case as follows:

Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical help, was advised to undergo an operation for the removal of a stone in her gall bladder (cholecystectomy). She was referred to Dr. Hosaka, a

surgeon, who agreed to perform the operation on her. The operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De Los Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her husband, petitioner Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended to them the services of Dr. Gutierrez.

Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation. By 7:30 in the morning of the following day, petitioner Erlinda was already being prepared for operation. Upon the request of petitioner Erlinda, her sister-in-law, Herminda Cruz, who was then Dean of the College of Nursing at the Capitol Medical Center, was allowed to accompany her inside the operating room.

At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in touch with him by phone. Thereafter, Dr. Gutierrez informed Cruz that the operation might be delayed due to the late arrival of Dr. Hosaka. In the meantime, the patient, petitioner Erlinda said to Cruz, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor."

By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio already wanted to pull out his wife from the operating room. He met Dr. Garcia, who remarked that he was also tired of waiting for Dr. Hosaka. Dr. Hosaka finally arrived at the hospital at around 12:10 in the afternoon, or more than three (3) hours after the scheduled operation.

Cruz, who was then still inside the operating room, heard about Dr. Hosaka’s 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 Erlinda’s 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 Erlinda’s 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 court’s 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 attorney’s 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 APPEAL’S 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 PETITIONER’S 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 Erlinda’s

comatose condition. The following objective facts allegedly negate a finding of negligence on her part: 1) That the outcome of the procedure was a comatose patient and not a dead one; 2) That the patient had a cardiac arrest; and 3) That the patient was revived from that cardiac arrest.9 In effect, Dr. Gutierrez insists that, contrary to the finding of this Court, the intubation she performed on Erlinda was successful.

Unfortunately, Dr. Gutierrez’ claim of lack of negligence on her part is belied by the records of the case. It has been sufficiently established that she failed to exercise the standards of care in the administration of anesthesia on a patient. Dr. Egay enlightened the Court on what these standards are:

x x x What are the standards of care that an anesthesiologist should do before we administer anesthesia? The initial step is the preparation of the patient for surgery and this is a pre-operative evaluation because the anesthesiologist is responsible for determining the medical status of the patient, developing the anesthesia plan and acquainting the patient or the responsible adult particularly if we are referring with the patient or to adult patient who may not have, who may have some mental handicaps of the proposed plans. We do pre-operative evaluation because this provides for an opportunity for us to establish identification and personal acquaintance with the patient. It also makes us have an opportunity to alleviate anxiety, explain techniques and risks to the patient, given the patient the choice and establishing consent to proceed with the plan. And lastly, once this has been agreed upon by all parties concerned the ordering of pre-operative medications. And following this line at the end of the evaluation we usually come up on writing, documentation is very important as far as when we train an anesthesiologist we always emphasize this because we need records for our protection, well, records. And it entails having brief summary of patient history and physical findings pertinent to anesthesia, plan, organize as a problem list, the plan anesthesia technique, the plan post operative, pain management if appropriate, special issues for this particular patient. There are needs for special care after surgery and if it so it must be written down there and a request must be made known to proper authorities that such and such care is necessary. And the request for

medical evaluation if there is an indication. When we ask for a cardio-pulmonary clearance it is not in fact to tell them if this patient is going to be fit for anesthesia, the decision to give anesthesia rests on the anesthesiologist. What we ask them is actually to give us the functional capacity of certain systems which maybe affected by the anesthetic agent or the technique that we are going to use. But the burden of responsibility in terms of selection of agent and how to administer it rest on the anesthesiologist.10

The conduct of a preanesthetic/preoperative evaluation prior to an operation, whether elective or emergency, cannot be dispensed with.11 Such evaluation is necessary for the formulation of a plan of anesthesia care suited to the needs of the patient concerned.

Pre-evaluation for anesthesia involves taking the patient’s 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 patient’s 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 patient’s 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 patient’s heart and lungs and checked the latter’s blood pressure to determine if Erlinda was indeed fit for operation.15 However, she did not proceed to examine the patient’s airway. Had she been able to check petitioner Erlinda’s 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 physician’s 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 Erlinda’s hapless condition was due to any fault or negligence on the part of Dr. Gutierrez while she (Erlinda) was under the latter’s care. Dr. Gutierrez maintains that the bronchospasm and cardiac arrest resulting in the patient’s 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 Erlinda’s 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 Court’s attention to her synopsis on what transpired during Erlinda’s intubation:

12:15 p.m. Patient was inducted with sodium pentothal 2.5% (250 mg)

given by slow IV. 02 was started by mask. After pentothal injection this was followed by IV injection of Norcuron 4mg. After 2 minutes 02 was given by positive pressure for about one minute. Intubation with endotracheal tube 7.5 m in diameter was done with slight difficulty (short neck & slightly prominent upper teeth) chest was examined for breath sounds & checked if equal on both sides. The tube was then anchored to the mouth by plaster & cuff inflated. Ethrane 2% with 02 4 liters was given. Blood pressure was checked 120/80 & heart rate regular and normal 90/min.

12:25 p.m. After 10 minutes patient was cyanotic. Ethrane was discontinued & 02 given alone. Cyanosis disappeared. Blood pressure and heart beats stable.

12:30 p.m. Cyanosis again reappeared this time with sibilant and sonorous rales all over the chest. D_5%_H20 & 1 ampule of aminophyline by fast drip was started. Still the cyanosis was persistent.

Patient was connected to a cardiac monitor. Another ampule of of [sic] aminophyline was given and solu cortef was given.

12:40 p.m. There was cardiac arrest. Extra cardiac massage and

intercardiac injection of adrenalin was given & heart beat reappeared in less than one minute. Sodium bicarbonate & another dose of solu cortef was given by IV. Cyanosis slowly disappeared & 02 continuously given & assisted positive pressure. Laboratory exams done (see results in chart).

Patient was transferred to ICU for further management.22

From the foregoing, it can be allegedly seen that there was no withdrawal (extubation) of the tube. And the fact that the cyanosis allegedly disappeared after pure oxygen was supplied through the tube proved that it was properly placed.

The Court has reservations on giving evidentiary weight to the entries purportedly contained in Dr. Gutierrez’ synopsis. It is significant to note that the said record prepared by Dr. Gutierrez was made only after Erlinda was taken out of the operating room. The standard practice in anesthesia is that every single act that the anesthesiologist performs must be recorded. In Dr. Gutierrez’ case, she could not account for at least ten (10) minutes of what happened during the administration of anesthesia on Erlinda. The following exchange between Dr. Estrella, one of the amicii curiae, and Dr. Gutierrez is instructive:

DR. ESTRELLA

Q You mentioned that there were two (2) attempts in the intubation period?

DR. GUTIERREZ

Yes.

Q There were two attempts. In the first attempt was the tube inserted or was the laryngoscope only inserted, which was inserted?

A All the laryngoscope.

Q All the laryngoscope. But if I remember right somewhere in the re-direct, a certain lawyer, you were asked that you did a first attempt and the question was – did you withdraw the tube? And you said – you never withdrew the tube, is that right?

A Yes.

Q Yes. And so if you never withdrew the tube then there was no, there was no insertion of the tube during that first attempt. Now, the other thing that we have to settle here is – when cyanosis occurred, is it recorded in the anesthesia record when the cyanosis, in your recording when did the cyanosis occur?

A (sic)

Q Is it a standard practice of anesthesia that whatever you do during that period or from the time of induction to the time that you probably get the patient out of the operating room that every single action that you do is so recorded in your anesthesia record?

A I was not able to record everything I did not have time anymore because I did that after the, when the patient was about to leave the operating room. When there was second cyanosis already that was the (interrupted)

Q When was the first cyanosis?

A The first cyanosis when I was (interrupted)

Q What time, more or less?

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

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

A Yes, Your Honor.

Q And the first medication you gave was what?

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

Q Yes, so, that is about 12:13?

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

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

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

Q 12:18?

A Yes, and then after giving the oxygen we start the menorcure which is a relaxant. After that relaxant (interrupted)

Q After that relaxant, how long do you wait before you do any manipulation?

A Usually you wait for two minutes or three minutes.

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

A Maybe.

Q 12:19. And at that time, what would have been done to this patient?

A After that time you examine the, if there is relaxation of the jaw which you push it downwards and when I saw that the patient was relax because that monorcure is a relaxant, you cannot intubate the patient or insert the laryngoscope if it is not keeping him relax. So, my first attempt when I put the laryngoscope on I saw the trachea was deeply interiorly.

So, what I did ask "mahirap ata ito ah." So, I removed the laryngoscope and oxygenated again the patient.

Q So, more or less you attempted to do an intubation after the first attempt as you claimed that it was only the laryngoscope that was inserted.

A Yes.

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

A Yes.

Q And at that point, you made a remark, what remark did you make?

A I said "mahirap ata ito" when the first attempt I did not see the trachea right away. That was when I (interrupted)

Q That was the first attempt?

A Yes.

Q What about the second attempt?

A On the second attempt I was able to intubate right away within two to three seconds.

Q At what point, for purposes of discussion without accepting it, at what point did you make the comment "na mahirap ata to intubate, mali ata ang pinasukan"

A I did not say "mali ata ang pinasukan" I never said that.

Q Well, just for the information of the group here the remarks I am making is based on the documents that were forwarded to me by the Supreme Court. That is why for purposes of discussion I am trying to

clarify this for the sake of enlightenment. So, at what point did you ever make that comment?

A Which one, sir?

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

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

Q At what point?

A When the first attempt when I inserted the laryngoscope for the first time.

Q So, when you claim that at the first attempt you inserted the laryngoscope, right?

A Yes.

Q But in one of the recordings somewhere at the, somewhere in the transcript of records that when the lawyer of the other party try to inquire from you during the first attempt that was the time when "mayroon ba kayong hinugot sa tube, I do not remember the page now, but it seems

to me it is there. So, that it was on the second attempt that (interrupted)

A I was able to intubate.

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

A Maybe, I cannot remember the time, Sir.

Q Okay, assuming that this was done at 12:21 and looking at the anesthesia records from 12:20 to 12:30 there was no recording of the vital signs. And can we presume that at this stage there was already some problems in handling the patient?

A Not yet.

Q But why are there no recordings in the anesthesia record?

A I did not have time.

Q Ah, you did not have time, why did you not have time?

A Because it was so fast, I really (at this juncture the witness is laughing)

Q No, I am just asking. Remember I am not here not to pin point on anybody I am here just to more or less clarify certainty more ore less on the record.

A Yes, Sir.

Q And so it seems that there were no recording during that span of ten (10) minutes. From 12:20 to 12:30, and going over your narration, it seems to me that the cyanosis appeared ten (10) minutes after induction, is that right?

A Yes.

Q And that is after induction 12:15 that is 12:25 that was the first cyanosis?

A Yes.

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

A We cannot (interrupted)

Q Huwag ho kayong makuwan, we are just trying to enlighten, I am just going over the record ano,kung mali ito kuwan eh di ano. So, ganoon po ano, that it seems to me that there is no recording from 12:20 to 12:30, so, I am just wondering why there were no recordings during the period and then of course the second cyanosis, after the first cyanosis. I think that was the time Dr. Hosaka came in?

A No, the first cyanosis (interrupted).23

We cannot thus give full credence to Dr. Gutierrez’ synopsis in light of her admission that it does not fully reflect the events that transpired during the administration of anesthesia on Erlinda. As pointed out by Dr. Estrella, there was a ten-minute gap in Dr. Gutierrez’ synopsis, i.e., the vital signs of Erlinda were not recorded during that time. The absence of these data is particularly significant because, as found by the trial court, it was the absence of oxygen supply for four (4) to five (5) minutes that caused Erlinda’s 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, Erlinda’s sister-in-law, was with her inside the operating room. Moreover, being a nurse and Dean of the Capitol Medical Center School of Nursing at that, she is not entirely ignorant of anesthetic procedure. Cruz narrated that she heard Dr. Gutierrez remark, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan." She observed that the nailbeds of Erlinda became bluish and thereafter Erlinda was placed in trendelenburg position.25 Cruz further averred that she noticed that the abdomen of Erlinda became distended.26

The cyanosis (bluish discoloration of the skin or mucous membranes caused by lack of oxygen or abnormal hemoglobin in the blood) and enlargement of the stomach of Erlinda indicate that the endotracheal tube was improperly inserted into the esophagus instead of the trachea. Consequently, oxygen was delivered not to the lungs but to the gastrointestinal tract. This conclusion is supported by the fact that Erlinda was placed in trendelenburg position. This indicates that there was a decrease of blood supply to the patient’s 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 patient’s 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 patient’s throat was held liable for the injury suffered by the latter.

This contention fails to persuade.

That there is a trend in American jurisprudence to do away with the Captain-of-the-Ship doctrine does not mean that this Court will ipso facto follow said

trend. Due regard for the peculiar factual circumstances obtaining in this case justify the application of the Captain-of-the-Ship doctrine. From the facts on record it can be logically inferred that Dr. Hosaka exercised a certain degree of, at the very least, supervision over the procedure then being performed on Erlinda.

First, it was Dr. Hosaka who recommended to petitioners the services of Dr. Gutierrez. In effect, he represented to petitioners that Dr. Gutierrez possessed the necessary competence and skills. Drs. Hosaka and Gutierrez had worked together since 1977. Whenever Dr. Hosaka performed a surgery, he would always engage the services of Dr. Gutierrez to administer the anesthesia on his patient.36

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

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

While the professional services of Dr. Hosaka and Dr. Gutierrez were secured primarily for their performance of acts within their respective fields of expertise for the treatment of petitioner Erlinda, and that one does not exercise control over the other, they were certainly not completely independent of each other so as to absolve one from the negligent acts of the other physician.

That they were working as a medical team is evident from the fact that Dr. Hosaka was keeping an eye on the intubation of the patient by Dr. Gutierrez, and while doing so, he observed that the patient’s nails had become dusky and had to call Dr. Gutierrez’s attention thereto. The Court also notes that the counsel for Dr. Hosaka admitted that in practice, the anesthesiologist would also have to observe the surgeon’s 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 other’s 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 patient’s 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 Erlinda’s 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 patient’s 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 patient’s 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 DLSMC’s liability for the resulting injury to petitioner Erlinda, we held that respondent hospital is solidarily liable with respondent doctors therefor under Article 2180 of the Civil Code45 since there exists an 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 employer-employee relationship exists between the parties, the following elements must be present: (1) selection and engagement of services; (2) payment of wages; (3) the power to hire and fire; and (4) the power to control not only the end to be achieved, but the means to be used in reaching such an end.47

DLSMC maintains that first, a hospital does not hire or engage the services of a consultant, but rather, accredits the latter and grants him or her the privilege of maintaining a clinic and/or admitting patients in the hospital upon a showing by the consultant that he or she possesses the necessary qualifications, such as accreditation by the appropriate board (diplomate), evidence of fellowship and references.48 Second, it is not the hospital but the patient who pays the consultant’s 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 hospital’s 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 doctor’s orders are carried out strictly.51

After a careful consideration of the arguments raised by DLSMC, the Court finds that respondent hospital’s 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 DLSMC’s 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 Erlinda’s 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 Erlinda’s 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 Erlinda’s 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 equitable—and certainly not in the best interests of the administration of justice—for the victim in such cases to constantly come before the courts and invoke their aid in seeking adjustments to the compensatory damages previously awarded—temperate 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, attorney’s 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 attorney’s 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.

D E C I S I O N

CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari1 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 Arbiter’s 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 SONZA’s services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows:

a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;

b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3

ABS-CBN agreed to pay for SONZA’s 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-CBN’s 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 SONZA’s 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 SONZA’s 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 respondent’s 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 Respondent’s Position Paper with Motion to Expunge Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s 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:

x x x

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 Sonza’s monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be necessary.

The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All these

benefits are merely talent fees and other contractual benefits and should not be deemed as ‘salaries, wages and/or other remuneration’ accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such benefit."

The fact that complainant was made subject to respondent’s 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 Arbiter’s 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 NLRC’s finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the NLRC’s 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-appellant’s 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 stocks…with 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-appellant’s 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-CBN’s Motion to Dismiss dated July 10, 1996).

Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellant’s 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 NLRC’s 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 NLRC’S DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14

The Court’s 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 Arbiter’s 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 employer’s power to control the employee on the means and methods by which the work is accomplished.18 The last element, the so-called "control test", is the most important element.19

A. Selection and Engagement of Employee

ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s 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 respondent’s claim of independent contractorship."

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

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

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBN’s 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

SONZA’s 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 SONZA’s 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 SONZA’s 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 SONZA’s 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 SONZA’s talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.25

SONZA assails the Labor Arbiter’s 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. SONZA’s 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-Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("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 master’s 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." Alberty’s 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." Alberty’s 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.

SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s 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-CBN’s 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 SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s 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-CBN’s 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 SONZA’s work.

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

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in full SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s 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-CBN’s approval. This proves that ABS-CBN’s control was limited only to the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s 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-CBN’s 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 SONZA’s 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-CBN’s employee because

ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-CBN’s 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 Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.

In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The

law makes the principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the employees.48 These circumstances are not present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN’s 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 SONZA’s 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-CBN’s 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-CBN’s 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

x x x

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 latter’s 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 employer-employee relationship. To hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to render his services without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television program hosts can render their services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are present as in this case.

Nature of SONZA’s 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 SONZA’s 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, SONZA’s 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

D E C I S I O N

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 employer-

employee relationship, as the claimant according to it, was a supervisor on

commission basis who did not observe normal hours of work. This Court

declared that there was an 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 Laudato was an

employee of Royal Star is supported bysubstantial

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.

D E C I S I O N

GARCIA, J.:

Before us is this appeal by way of a petition for review on certiorari from the 12 September 2002 Decision[1] and the 13 February 2003 Resolution[2] of the Court of Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the National Labor Relations Commission against petitioner.

As culled from the records, the pertinent facts are:

Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in the business of communication services and allied activities, while respondent Ricardo De Vera is a physician by profession whom petitioner enlisted to attend to the medical needs of its employees. At the crux of the controversy is Dr. De Veras status vis a vis petitioner when the latter terminated his engagement.

It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,[3] offered his services to the petitioner, therein proposing his plan of works required of a practitioner in industrial medicine, to include the following:

1. Application of preventive medicine including periodic check-up of employees;

2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours daily for consultation services to employees;

3. Management and treatment of employees that may necessitate hospitalization including emergency cases and accidents;

4. Conduct pre-employment physical check-up of prospective employees with no

additional medical fee;

5. Conduct home visits whenever necessary;

6. Attend to certain medical administrative function such as accomplishing medical forms,

evaluating conditions of employees applying for sick leave of absence and subsequently issuing proper certification, and all matters referred which are medical

in nature.

The parties agreed and formalized respondents proposal in a document denominated as RETAINERSHIP CONTRACT[4] which will be for a period of one year subject to renewal, it being made clear therein that respondent will cover the retainership the Company previously had with Dr. K. Eulau and that respondents retainer fee will be at P4,000.00 a month. Said contract was renewed yearly. [5] The retainership arrangement went on from 1981 to 1994 with changes in the retainers fee. However, for the years 1995 and 1996, renewal of the contract was only made verbally.

The turning point in the parties relationship surfaced in December 1996 when Philcom, thru a letter[6] bearing on the subject boldly written as TERMINATION RETAINERSHIP CONTRACT, informed De Vera of its decision to discontinue the latters retainers contract with the Company effective at the close of business hours of December 31, 1996 because management has decided that it would be more practical to provide medical services to its employees through accredited hospitals near the company premises.

On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission (NLRC), alleging that that he had been actually employed by Philcom as its company physician since 1981 and was dismissed without due process. He averred that he was designated as a company physician on retainer basis for reasons allegedly known only to Philcom. He likewise professed that since he was not conversant with labor laws, he did not give much attention to the designation as anyway he worked on a full-time basis and was paid a basic monthly salary plus fringe benefits, like any other regular employees of Philcom.

On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a decision[7] dismissing De Veras complaint for lack of merit, on the rationale that as a retained physician under a valid contract mutually agreed upon by the parties, De Vera was an independent contractor and that he was not dismissed but rather his contract with [PHILCOM] ended when said contract was not renewed after December 31, 1996.

On De Veras appeal to the NLRC, the latter, in a decision[8] dated 23 October 2000, reversed (the word used is modified) that of the Labor Arbiter, on a finding that De Vera is Philcoms regular employee and accordingly directed the company to reinstate him to his former position without loss of seniority rights and privileges and with full backwages from the date of his dismissal until actual reinstatement. We quote the dispositive portion of the decision:

WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate

complainant to his former position without loss of seniority rights and privileges with full backwages from the date of his dismissal until his actual reinstatement computed as follows:

Backwages:

a) Basic Salary From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.

P44,400.00 x 39.33 mos. P1,750,185.00 b) 13th Month Pay:

1/12 of P1,750,185.00 145,848.75

c) Travelling allowance: P1,000.00 x 39.33 mos. 39,330.00

GRAND TOTAL P1,935,363.75

The decision stands in other aspects.

SO ORDERED.

With its motion for reconsideration having been denied by the NLRC in its order of 27 February 2001,[9] Philcom then went to the Court of Appeals on a petition for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC when it reversed the findings of the labor arbiter and awarded thirteenth month pay and traveling allowance to De Vera even as such award had no basis in fact and in law.

On 12 September 2002, the Court of Appeals rendered a decision,[10] modifying that of the NLRC by deleting the award of traveling allowance, and ordering payment of separation pay to De Vera in lieu of reinstatement, thus:

WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23

October 2000, is MODIFIED. The award of traveling allowance is deleted as the same is

hereby DELETED. Instead of reinstatement, private respondent shall be paid separation pay computed at one (1) month salary for every year of service computed from the time private

respondent commenced his employment in 1981 up to the actual payment of the backwages and separation pay. The awards of backwages and 13th month pay STAND.

SO ORDERED.

In time, Philcom filed a motion for reconsideration but was denied by the appellate court in its resolution of 13 February 2003.[11]

Hence, Philcoms present recourse on its main submission that -

THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE

NATIONAL LABOR RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE

FACTS AND APPLICABLE LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM THE EMPLOYER-

EMPLOYEE RELATIONSHIP.

We GRANT.

Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court in decisions rendered by the Court of Appeals. There are instances, however, where the Court departs from this rule and reviews findings of fact so that substantial justice may be served. The exceptional instances are where:

xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion;

(4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting;

(6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees; (7) the findings of fact of the Court of Appeals are

contrary to those of the trial court; (8) said findings of facts are conclusions without citation of

specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and (10) the findings of

fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record.[12]

As we see it, the parties respective submissions revolve on the primordial issue of whether an employer-employee relationship exists between petitioner and respondent, the existence of which is, in itself, a question of fact[13] well within the province of the NLRC. Nonetheless, given the reality that the NLRCs findings are at odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez vs. National Labor Relations Commission,[14] is constrained to look deeper into the attendant circumstances obtaining in this case, as appearing on record.

In a long line of decisions,[15] the Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold test, to wit: [1] the selection and engagement of the employee; [2] the payment of wages; [3] the power of dismissal; and [4] the power to control the employees conduct, or the so-called control test, considered to be the most important element.

Applying the four-fold test to this case, we initially find that it was respondent himself who sets the parameters of what his duties would be in offering his services to petitioner. This is borne by no less than his 15 May 1981 letter[16] which, in full, reads:

May 15, 1981

Mrs. Adela L. Vicente

Vice President, Industrial Relations

PhilCom, Paseo de Roxas Makati, Metro Manila

M a d a m :

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.[19] It simply runs against the grain of common experience to imagine that an ordinary employee has yet to bill his employer to receive his salary.

We note, too, that the power to terminate the parties relationship was mutually vested on both. Either may terminate the arrangement at will, with or without cause.[20]

Finally, remarkably absent from the parties arrangement is the element of control, whereby the employer has reserved the right to control the employee not only as to the result of the work done but also as to the means and methods by which the same is to be accomplished.[21]

Here, petitioner had no control over the means and methods by which respondent went about performing his work at the company premises. He could even embark in the private practice of his profession, not to mention the fact that respondents work hours and the additional compensation therefor were negotiated upon by the parties.[22] In fine, the parties themselves practically agreed on every terms and conditions of respondents engagement, which thereby negates the element of control in their relationship. For sure, respondent has never cited even a single instance when petitioner interfered with his work.

Yet, despite the foregoing, all of which are extant on record, both the NLRC and the Court of Appeals ruled that respondent is petitioners regular employee at the time of his separation.

Partly says the appellate court in its assailed decision:

Be that as it may, it is admitted that private respondents written retainer contract was renewed

annually from 1981 to 1994 and the alleged renewal for 1995 and 1996, when it was allegedly

terminated, was verbal.

Article 280 of the Labor code (sic) provides:

The provisions of written agreement to the contrary notwithstanding and regardless of the

oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform in the usual business or trade of the employer, except

where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or

where the work or services to be performed is seasonal in nature and the employment is for the

duration of the season.

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

paragraph: Provided, That, any employee who has rendered at least one (1) year of

service, whether such is continuous or broken, shall be considered a regular with respect to

the activity in which he is employed and his employment shall continue while such activity

exists.

Parenthetically, the position of company physician, in the case of petitioner, is usually necessary

and desirable because the need for medical attention of employees cannot be foreseen, hence, it

is necessary to have a physician at hand. In fact, the importance and desirability of a physician in a company premises is recognized by Art. 157 of the Labor Code, which requires the

presence of a physician depending on the number of employees and in the case at bench, in petitioners case, as found by public respondent, petitioner employs more than 500 employees.

Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a

written agreement to the contrary notwithstanding or the existence of a mere oral agreement, if the employee is engaged in the usual business or trade of the employer, more so, that he

rendered service for at least one year, such employee shall be considered as a regular employee. Private respondent herein has been with petitioner since 1981 and his

employment was not for a specific project or undertaking, the period of which was pre-

determined and neither the work or service of private respondent seasonal. (Emphasis by the CA itself).

We disagree to the foregoing ratiocination.

The appellate courts premise that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. For, we take it that any agreement may provide that one party shall render services for and in behalf of another, no matter how necessary for the latters business,even without being hired as an employee. This set-up is precisely true in the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of employees, i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship is in dispute.[23]

Buttressing his contention that he is a regular employee of petitioner, respondent invokes Article 157 of the Labor Code, and argues that he satisfies all the requirements thereunder. The provision relied upon reads:

ART. 157. Emergency medical and dental services. It shall be the duty of every employer to

furnish his employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds

fifty (50) but not more than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider

shall be provided for the protection of the workers, where no registered nurse is

available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of employees does not exceed

fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an

emergency clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency hospital with one bed capacity

for every one hundred (100) employees when the number of employees exceeds

three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or

dentist who cannot stay in the premises of the establishment for at least two (2) hours, in the

case of those engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician

and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and

attendance in case of emergency.

Had only respondent read carefully the very statutory provision invoked by him, he would have noticed that in non-hazardous workplaces, the employer may engage the services of a physician on retained basis. As correctly observed by the petitioner, while it is true that the provision requires employers to engage the services of medical practitioners in certain establishments depending on the number of their employees, nothing is there in the law which says that medical practitioners so engaged be actually hired as employees,[24] adding that the law, as written, only requires the employer to retain, not employ, a part-time physician who needed to stay in the premises of the non-hazardous workplace for two (2) hours.[25]

Respondent takes no issue on the fact that petitioners business of telecommunications is not hazardous in nature. As such, what applies here is the last paragraph of Article 157 which, to stress, provides that the employer may engage the services of a physician and dentist on retained basis, subject to such regulations as the Secretary of Labor may prescribe. The successive retainership agreements of the parties definitely hue to the very statutory provision relied upon by respondent.

Deeply embedded in our jurisprudence is the rule that courts may not construe a statute that is free from doubt. Where the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.[26] As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in 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

may be engaged on retained basis, revolts against the idea that this engagement gives rise to an employer-employee relationship.

With the recognition of the fact that petitioner consistently engaged the services of respondent on a retainer basis, as shown by their various retainership contracts, so can petitioner put an end, with or without cause, to their retainership agreement as therein provided.[27]

We note, however, that even as the contracts entered into by the parties invariably provide for a 60-day notice requirement prior to termination, the same was not complied with by petitioner when it terminated on 17 December 1996 the verbally-renewed retainership agreement, effective at the close of business hours of 31 December 1996.

Be that as it may, the record shows, and this is admitted by both parties, [28] that execution of the NLRC decision had already been made at the NLRC despite the pendency of the present recourse. For sure, accounts of petitioner had already been garnished and released to respondent despite the previous Status Quo Order[29] issued by this Court. To all intents and purposes, therefore, the 60-day notice requirement has become moot and academic if not waived by the respondent himself.

WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals REVERSED and SET ASIDE. The 21 December 1998 decision of the labor arbiter is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

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.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. 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 ½

8:00 A.M.-12:00 noon

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½

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

Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary vouchers are hereto attached as follows, thus:

I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employee’s 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 Employee’s 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 Employee’s 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 Employee’s 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 PA’s 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 Attorney’s 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 respondent’s 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 attorney’s 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 petitioner’s 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 LATTER’S 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 party’s 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 petitioner’s 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 petitioner’s 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 petitioner’s 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 petitioner’s 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 one’s 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 Arbiter’s 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 Arbiter’s 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. Respondent’s 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, petitioner’s contention that respondents are considered as its talents, hence, not regular employees of the broadcasting company. Petitioner’s 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" worker’s 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 petitioner’s 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 employer-employee relationship exists.

Petitioner’s 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 SONZA’S services to co-host its television and radio programs because of SONZA’S 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 respondent’s claim of independent contractorship."

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific

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

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

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBN’s 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.

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

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, Chico-Nazario, 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.

D E C I S I O N

YNARES-SANTIAGO, J.:

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

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6

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

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected with the company. 11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter.

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

Petitioner’s 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 petitioner’s 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 complainant’s 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% Attorney’s 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% attorney’s 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 petitioner’s 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 employer’s 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 employer’s 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 latter’s employment.

The control test initially found application in the case of Viaña 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 employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s 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 corporation’s 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. Petitioner’s 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 latter’s 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 petitioner’s 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 former’s 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 petitioner’s job was as Kamura’s 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 Francisco’s full backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year.

SO ORDERED.

CONSUELO YNARES-SANTIAGO

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN

Chief Justice Chairperson

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN

Chief Justice