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G.R. No. 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner,

vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as
Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN,
SR., respondents.

Bedona & Bedona Law Office for petitioner.

Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J.:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision
rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of Appeals, 190
SCRA 477) reviewing the appellate court's conclusion that there exists an employer-employee
relationship between the petitioner and its co-defendant Funtecha. The Court ruled that the petitioner
is not liable for the injuries caused by Funtecha on the grounds that the latter was not an authorized
driver for whose acts the petitioner shall be directly and primarily answerable, and that Funtecha was
merely a working scholar who, under Section 14, Rule X, Book III of the Rules and Regulations
Implementing the Labor Code is not considered an employee of the petitioner.

The private respondents assert that the circumstances obtaining in the present case call for the
application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the
petitioner. The private respondents maintain that under Article 2180 an injured party shall have
recourse against the servant as well as the petitioner for whom, at the time of the incident, the
servant was performing an act in furtherance of the interest and for the benefit of the petitioner.
Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of the
school authorities.

After a re-examination of the laws relevant to the facts found by the trial court and the appellate
court, the Court reconsiders its decision. We reinstate the Court of Appeals' decision penned by the
late Justice Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and Serafin E.
Camilon. Applying Civil Code provisions, the appellate court affirmed the trial court decision which
ordered the payment of the P20,000.00 liability in the Zenith Insurance Corporation policy,
P10,000.00 moral damages, P4,000.00 litigation and actual expenses, and P3,000.00 attorney's
fees.

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of
petitioner Filamer. He was, in relation to the school, an employee even if he was assigned to clean
the school premises for only two (2) hours in the morning of each school day.

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to
take over the vehicle while the latter was on his way home one late afternoon. It is significant to note
that the place where Allan lives is also the house of his father, the school president, Agustin Masa.
Moreover, it is also the house where Funtecha was allowed free board while he was a student of
Filamer Christian Institute.
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Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp
dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79) According to
Allan's testimony, a fast moving truck with glaring lights nearly hit them so that they had to swerve to
the right to avoid a collision. Upon swerving, they heard a sound as if something had bumped
against the vehicle, but they did not stop to check. Actually, the Pinoy jeep swerved towards the
pedestrian, Potenciano Kapunan who was walking in his lane in the direction against vehicular
traffic, and hit him. Allan affirmed that Funtecha followed his advise to swerve to the right. (Ibid., p.
79) At the time of the incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.

Allan testified that he was the driver and at the same time a security guard of the petitioner-school.
He further said that there was no specific time for him to be off-duty and that after driving the
students home at 5:00 in the afternoon, he still had to go back to school and then drive home using
the same vehicle.

Driving the vehicle to and from the house of the school president where both Allan and Funtecha
reside is an act in furtherance of the interest of the petitioner-school. Allan's job demands that he
drive home the school jeep so he can use it to fetch students in the morning of the next school day.

It is indubitable under the circumstances that the school president had knowledge that the jeep was
routinely driven home for the said purpose. Moreover, it is not improbable that the school president
also had knowledge of Funtecha's possession of a student driver's license and his desire to undergo
driving lessons during the time that he was not in his classrooms.

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha
definitely was not having a joy ride. Funtecha was not driving for the purpose of his enjoyment or for
a "frolic of his own" but ultimately, for the service for which the jeep was intended by the petitioner
school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722 [1932]; See also
Association of Baptists for World Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124 SCRA 618
[1983]). Therefore, the Court is constrained to conclude that the act of Funtecha in taking over the
steering wheel was one done for and in behalf of his employer for which act the petitioner-school
cannot deny any responsibility by arguing that it was done beyond the scope of his janitorial duties.
The clause "within the scope of their assigned tasks" for purposes of raising the presumption of
liability of an employer, includes any act done by an employee, in furtherance of the interests of the
employer or for the account of the employer at the time of the infliction of the injury or damage.
(Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the employee driving the
vehicle derived some benefit from the act, the existence of a presumptive liability of the employer is
determined by answering the question of whether or not the servant was at the time of the accident
performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50
ALR 1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner
anchors its defense, was promulgated by the Secretary of Labor and Employment only for the
purpose of administering and enforcing the provisions of the Labor Code on conditions of
employment. Particularly, Rule X of Book III provides guidelines on the manner by which the powers
of the Labor Secretary shall be exercised; on what records should be kept; maintained and
preserved; on payroll; and on the exclusion of working scholars from, and inclusion of resident
physicians in the employment coverage as far as compliance with the substantive labor provisions
on working conditions, rest periods, and wages, is concerned.

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The
Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the Rules is not
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the decisive law in a civil suit for damages instituted by an injured person during a vehicular accident
against a working student of a school and against the school itself.

The present case does not deal with a labor dispute on conditions of employment between an
alleged employee and an alleged employer. It invokes a claim brought by one for damages for injury
caused by the patently negligent acts of a person, against both doer-employee and his employer.
Hence, the reliance on the implementing rule on labor to disregard the primary liability of an
employer under Article 2180 of the Civil Code is misplaced. An implementing rule on labor cannot be
used by an employer as a shield to avoid liability under the substantive provisions of the Civil Code.

There is evidence to show that there exists in the present case an extra-contractual obligation
arising from the negligence or reckless imprudence of a person "whose acts or omissions are
imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or limited
control over (him)." (Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])

Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a
driver's position in order that the petitioner may be held responsible for his grossly negligent act, it
being sufficient that the act of driving at the time of the incident was for the benefit of the petitioner.
Hence, the fact that Funtecha was not the school driver or was not acting within the scope of his
janitorial duties does not relieve the petitioner of the burden of rebutting the presumption juris
tantum that there was negligence on its part either in the selection of a servant or employee, or in
the supervision over him. The petitioner has failed to show proof of its having exercised the required
diligence of a good father of a family over its employees Funtecha and Allan.

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the
guidance of its employees and the issuance of proper instructions intended for the protection of the
public and persons with whom the employer has relations through his employees. (Bahia v. Litonjua
and Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate Appellate Court, 148 SCRA 353
[1987])

An employer is expected to impose upon its employees the necessary discipline called for in the
performance of any act indispensable to the business and beneficial to their employer.

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as
would prohibit any one of its employees from taking control over its vehicles if one is not the official
driver or prohibiting the driver and son of the Filamer president from authorizing another employee to
drive the school vehicle. Furthermore, the petitioner has failed to prove that it had imposed sanctions
or warned its employees against the use of its vehicles by persons other than the driver.

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by
which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the
absence of evidence that the petitioner had exercised the diligence of a good father of a family in the
supervision of its employees, the law imposes upon it the vicarious liability for acts or omissions of
its employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v. Fabros, 93 SCRA 200 [1979];
Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court,
178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability
of the employer is, under Article 2180, primary and solidary. However, the employer shall have
recourse against the negligent employee for whatever damages are paid to the heirs of the plaintiff.

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party
defendant in the civil case for damages. This is quite understandable considering that as far as the
injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was the one
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driving the vehicle and presumably was one authorized by the school to drive. The plaintiff and his
heirs should not now be left to suffer without simultaneous recourse against the petitioner for the
consequent injury caused by a janitor doing a driving chore for the petitioner even for a short while.
For the purpose of recovering damages under the prevailing circumstances, it is enough that the
plaintiff and the private respondent heirs were able to establish the existence of employer-employee
relationship between Funtecha and petitioner Filamer and the fact that Funtecha was engaged in an
act not for an independent purpose of his own but in furtherance of the business of his employer. A
position of responsibility on the part of the petitioner has thus been satisfactorily demonstrated.

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby
GRANTED. The decision of the respondent appellate court affirming the trial court decision is
REINSTATED.

SO ORDERED.

G.R. No. 73199 October 26, 1988

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DR. RENATO SARA and/or ROMEO ARANA petitioners,

vs.
CERILA AGARRADO and the NATIONAL LABOR RELATIONS COMMISSION, respondents.

Amparo & Barcelona Law Offices for petitioners.

The Solicitor General for public respondent. Nicanor A. Magno for private respondent.

FERNAN, C.J.:

Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal over Case No. LRD-
ROXII-006-82, a claim for unpaid commissions and reimbursement of certain sums of money filed by
herein private respondent Cerila Agarrado against herein petitioners Dr. Renato Sara and Romeo
Arabia.

Private respondent Cerila Agarrado was an attendant in the clinic of petitioner Dr. Renato Sara She
quit her job in 1973. Four years later, petitioners Dr. Sara and Romeo Arabia, being owners of a rice
mill and having begun to engage in the buy and sell of palay and rice, entered into a verbal
agreement with private respondent Agarrado whereby it was agreed that the latter would be paid
P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palay
purchased. It was further agreed that private respondent would spend her own money for the
undertaking, but to enable her to carry out the agreement more effectively, she was authorized to
borrow money from other persons, as in fact she did, subject to reimbursement by petitioners. 1

In 1982, private respondent filed with the National Labor Relations Commission (NLRC) Regional
Arbitration Branch No. XI, Cotabato City, a complaint against petitioners for unpaid commission of
P4,598.00 on milled rice sold, P2,982.80 on palay sold, reimbursement of P17,500.00 which she had
borrowed from various persons and Pl,749.00 of her own money which petitioners allegedly had not
reimbursed (LRD-ROXII-006- 82).

By way of defense, petitioners raised the issue of lack of jurisdiction on the part of the Labor Arbiter
to take cognizance of the case, there being no employer-employee relationship between the parties.
They averred that the claim for alleged unpaid commission and certain sums of money is governed
by the law on agency under the Civil Code and hence a purely civil obligation cognizable by the
regular courts.

On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in favor of private
respondent ordering petitioners to pay all the claims amounting to P26,397.80. 2

Petitioner appealed the decision to the NLRC, which in a resolution dated June 25, 1986 affirmed
the Labor Arbiter's decision and dismissed the appeal. 3

Their motion for reconsideration having been denied, petitioners took the present recourse,
maintaining lack of jurisdiction on the part of the Labor Tribunal as well as grave abuse of discretion
on its part in finding them liable to private respondent.

In his comment, the Solicitor General agreed with petitioners that there was no employer-employee
relationship between the parties and that by reason thereof the Labor Arbiter had no jurisdiction over
the case. The Solicitor General's comment was accompanied by a manifestation and motion stating
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that he was filing the comment on his own behalf and that the public respondent NLRC had been
informed about his contrary stand. 4

The primordial issue in this case is whether an employer-employee relationship exists between
petitioners and private respondent as to warrant cognizance by the Labor Arbiter of LRD-ROXII-006-
82.

To determine the existence of an employer-employee relationship, this Court in a long line of

decisions 5 has invariably applied the following four-fold test: [1] the selection and engagement of the
employee; [2] the payment of wages; [3] the power of dismissal; and [4] the power to control the
employee's conduct.

In the case at bar, we find that although there was a selection and engagement of private
respondent in 1977, the verbal agreement between the parties negated the existence of the other
requisites.

As to the payment of wages, the verbal agreement entered into by the parties stipulated that private
respondent would be paid a commission of P2.00 per sack of milled rice sold as well as a 10%
commission on palay purchase. The arrangement thus was explicitly on a commission basis
dependent on the volume of sale or purchase. Private respondent was not guaranteed any minimum
compensation nor was she allowed any drawing account or advance of any kind against unearned
commissions. Her right to compensation depended upon and was measured by the tangible results
she produced the quantity of rice sold and the quantity of palay purchased.

The power to terminate the relationship was mutually vested upon the parties. Either may terminate
the business arrangement at will, with or without cause.

Finally, noticeably absent from the agreement between the parties is the element of control. Among
the four (4) requisites, control is deemed the most important that the other requisites may even be
disregarded. 6 Under the control test, an employer-employee relationship exists if the "employer" has
reserved the right to control the "employee" not only as to the result of the work done but also as to the
means and methods by which the same is to be accomplished. 7Otherwise, no such relationship exists.

We observe that the means and methods of purchasing and selling rice or palay by private
respondent were totally independent of petitioners' control. As established by the NLRC:

... Sometime in June 1977, respondent re-engaged the services of herein

complainant to sell milled rice to the customers of the former, as well as to buy palay
for and in behalf of Dr. Renato Sara, with the verbal agreement that to carry out
effectively the said task, complainant was duly authorized by respondent, Dr. Sara to
spend her own money, if necessary but subject to reimbursment and if that would not
be sufficient, to borrow money from other sources with further understanding that Dr.
Sala will repay the ill thru the complainant; ... ([Emphasis supplied], p. 21, Rollo)

Note that private respondent was never given capital by his supposed employer but relied on her
own resources and if insufficient, she borrowed money from others. Petitioners did not supply private
respondent with tools and appliances needed to enable her to carry her undertaking, except to
authorize her to borrow money from others, subject to reimbursement.

The absence of control is made more evident by the fact that private respondent was not even
obliged to sell the palay she purchased to petitioners. She was at liberty to sell the palay to any
trader offering higher buying rates. She was thus free to sell it to anybody whom she pleased.
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Moreover, private respondent worked for petitioners at her own pleasure and was not subject to
definite hours or conditions of work. She could even delegate the task of buying and selling to
others, if she so desired, or simultaneously engaged in other means of livelihood while selling and
purchasing rice or palay.

Under the conditions set forth in their agreement, private respondent was an independent contractor,
who exercising independent employment, contracted to do a piece of work according to her own
method and without being subject to the control of her employer except as to the result of her work.
She was paid for the result of her labor, unlike an employee who is paid for the labor he performs. 8

The verbal agreement devoid as it was of any stipulations indicative of control leaves no doubt that
private respondent was not an employee of petitioners but was rather an independent contractor.

The Labor Tribunal's jurisdiction being primarily predicated upon the existence of an employer-
employee relationship between the parties, the absence of such element, as in the case at bar,
removes the controversy from the scope of its limited jurisdiction.

WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-ROXII-006-82 of the
National Labor Relations Commission is hereby ordered DISMISSED for lack of jurisdiction.

SO ORDERED.

G.R. No. L-32245 May 25, 1979

DY KEH BENG, petitioner,

vs.
INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL., respondents.
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A. M Sikat for petitioner.

D. A. Hernandez for respondents.

DE CASTRO, J.:

Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial
Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June
10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng
guilty of the unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from
their respective dates of dismissal until fully reinstated without loss to their right of
seniority and of such other rights already acquired by them and/or allowed by law. 1

Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial
Relations:

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND

TUDLA WERE EMPLOYEES OF PETITIONERS.

II

RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND

TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER.

III

RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED

BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF
DISCRIMINATION BY THE PETITIONER HEREIN.

IV

RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR

LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT.

RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS

TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE
DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO
THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY
ACQUIRED BY THEM AND/OR ALLOWED BY LAW.

The facts as found by the Hearing Examiner are as follows:

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A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for
discriminatory acts within the meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No.
875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for
their union activities. After preliminary investigation was conducted, a case was filed in the Court of
Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two of
its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and
that Solano was not his employee because the latter came to the establishment only when there was
work which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover,
Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor
union, Bienvenido Onayan.

After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the
Court of Industrial Relations. An employee-employer relationship was found to have existed between
Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on
piece basis. 4 The issue therefore centered on whether there existed an employee employer relation
between petitioner Dy Keh Beng and the respondents Solano and Tudla .

According to the Hearing Examiner, the evidence for the complainant Union tended to show that
Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15,
1955, 5 respectively, and that except in the event of illness, their work with the establishment was
continuous although their services were compensated on piece basis. Evidence likewise showed that at
times the establishment had eight (8) workers and never less than five (5); including the complainants,
and that complainants used to receive ?5.00 a day. sometimes less. 6

According to Dy Keh Beng, however, Solano was not his employee for the following reasons:

(1) Solano never stayed long enought at Dy's establishment;

(2) Solano had to leave as soon as he was through with the

(3) order given him by Dy;

(4) When there were no orders needing his services there was nothing for him to do;

(5) When orders came to the shop that his regular workers could not fill it was then
that Dy went to his address in Caloocan and fetched him for these orders; and

(6) Solano's work with Dy's establishment was not continuous. , 7

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers,
not employees under Republic Act 875, where an employee 8 is referred to as

shall include any employee and shag not be limited to the employee of a particular
employer unless the Act explicitly states otherwise and shall include any individual
whose work has ceased as a consequence of, or in connection with any current labor
dispute or because of any unfair labor practice and who has not obtained any other
substantially equivalent and regular employment.

while an employer 9
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includes any person acting in the interest of an employer, directly or indirectly but
shall not include any labor organization (otherwise than when acting as an employer)
or anyone acting in the capacity of officer or agent of such labor organization.

Petitioner really anchors his contention of the non-existence of employee-employer relationship on

the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et
al., L-13130, October 31, 1959, where the Court ruled that:

The test ... of the existence of employee and employer relationship is whether there
is an understanding between the parties that one is to render personal services to or
for the benefit of the other and recognition by them of the right of one to order and
control the other in the performance of the work and to direct the manner and method
of its performance.

Petitioner contends that the private respondents "did not meet the control test in the fight of the ...
definition of the terms employer and employee, because there was no evidence to show that
petitioner had the right to direct the manner and method of respondent's work. 10 Moreover, it is
argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in
the establishment only when there was work.

While this Court upholds the control test 11 under which an employer-employee relationship exists
"where the person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end, " it finds no merit with petitioner's
arguments as stated above. It should be borne in mind that the control test calls merely for the existence
of the right to control the manner of doing the work, not the actual exercise of the right. 12Considering the
finding by the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe,
among others, Dy's requirements of size and quality of the kaing. Some control would necessarily be
exercised by Dy as the making of the kaingwould be subject to Dy's specifications. Parenthetically, since
the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could
easily exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court
agrees with the Hearing Examiner that

circumstances must be construed to determine indeed if payment by the piece is just

a method of compensation and does not define the essence of the relation. Units of
time ... and units of work are in establishments like respondent (sic) just yardsticks
whereby to determine rate of compensation, to be applied whenever agreed upon.
We cannot construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him out and take in
another at pleasure.

At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras
who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83
Phil..518, 523), opined that

judicial notice of the fact that the so-called "pakyaw" system mentioned in this case
as generally practiced in our country, is, in fact, a labor contract -between employers
and employees, between capitalists and laborers.
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Insofar as the other assignments of errors are concerned, there is no showing that the Court of
Industrial Relations abused its discretion when it concluded that the findings of fact made by the
Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides
that in unfair labor practice cases, the factual findings of the Court of Industrial Relations are
conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put
into effect in a long line of decisions where the Supreme Court did not reverse the findings of fact of
the Court of Industrial Relations when they were supported by substantial evidence. 14

Nevertheless, considering that about eighteen (18) years have already elapsed from the time the
complainants were dismissed, 15 and that the decision being appealed ordered the payment of
backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to
apply in this connection the formula for backwages worked out by Justice Claudio Teehankee in "cases
not terminated sooner." 16 The formula cans for fixing the award of backwages without qualification and
deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the
employer but subject to increase by way of exemplary damages where there are aggravating
circumstances. 17Considering there are no such circumstances in this case, there is no reason why the
Court should not apply the abovementioned formula in this instance.

WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein
modified to an award of backwages for three years without qualification and deduction at the
respective rates of compensation the employees concerned were receiving at the time of dismissal.
The execution of this award is entrusted to the National Labor Relations Commission. Costs against
petitioner.

SO ORDERED.

G.R. No. L-16600 December 27, 1961

ILOILO CHINESE COMMERCIAL SCHOOL, petitioner,

vs.
LEONORA FABRIGAR and THE WORKMEN'S COMPENSATION COMMISSION, respondents.

Luis G. Hofilea for petitioner.

J. T. de Leon for respondents.
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PAREDES, J.:

As a result of the death of Santiago Fabrigar, on June 28, 1956, his heirs in the person of Leonora
Fabrigar (common-law wife) and their children, filed a claim for compensation with the Workmen's
Compensation Commission, Case No. 1085, W.C.C., entitled "Leonora Fabrigar, et al., Claimants,
vs. Iloilo Chinese Commercial School, Respondent." In this claim, it was alleged that the cause of
death was " pulmonary tuberculosis contracted during and as a result of his employment as janitor."
The Hearing Officer of the WCC denied the claim and dismissed the case, finding that the claimant
failed to prove the casual effect of employment and death; nothing was shown that the disease was
contracted in line of duty; that whatever evidence claimant presented about the cause of death was
only a mere suggestion that progressively developed from tuberculosis with heart trouble to a
sudden fatal turn, ending up for the cause of "beriberi adult" at the time of death, as per certification
of Sanitary Inspector Dr. P. E. Labitoria, of Dao, Capiz (Exhibits C & 4).

The heirs of Santiago Fabrigar appealed the decision with the Workmen's Compensation
Commission which, on November 12, 1959, rendered judgment reversing the decision of its Hearing
Officer, making the following findings of facts:

That Santiago Fabrigar had been employed from 1947 to March 12, 1956, as a janitor-messenger of
the respondent Iloilo Chinese Commercial School, his work consisting of sweeping and scrubbing
the floors, cleaning the classrooms and the school premises, and other janitorial chores; on March
11, 1956, preparatory to graduation day, he carried desks and chairs from the classrooms to the
auditorium, set the curtains and worked harder and faster than usual; that although he felt shortness
of breath and did not feel very well that day, he continued working at the request of the overseer of
respondent, that on the following day he reported for work, but on March 13, he spat blood and
stopped working; that from April 29, 1956 to May 15, 1956, he was under treatment by Dr. Quirico
Villareal "for far advanced pulmonary tuberculosis and for heart disease"; and that previous to said
treatment, he was attended by Dr. Jaranilla for pulmonary tuberculosis. The Commission concluded
that the short period of intervention between his last day of work (March 13, 1956) when he spat
blood and his death on June 28, 1956, due to pulmonary tuberculosis, indicated that he had been
suffering from such disease even during the time he was employed by the respondent and
considering the strenuous work he performed, his employment as janitor aggravated his pre-existing
illness; that although here is a discrepancy between the cause of death "beriberi adult," as appearing
in the death Certificate and the testimony of Dr. Villareal, the latter deserves more credence,
because the information (cause of death) was given by the sanitary inspector who did not, in any
way, examine the deceased before or after his death. The Commission, therefore, ordered the
respondent Chinese Commercial School, Inc., in said case

1. To pay to the claimant, for and in behalf of her minor children by the deceased, namely,
Carlito, Gloria, Rosita and Ernesto, all surnamed Fabrigar, the amount of TWO THOUSAND
FOUR HUNDRED NINETY SIX and 00/00 Pesos (P2,496.00) as Death benefits; and

2. To pay to the Commission the amount of P25.00 as fees pursuant to Section 55 of Act
3428, as amended.

The above decision is now before Us for Review on a Writ of Certiorari, after the motion for
reconsideration had been denied, petitioner alleging that the Commission erred:

1. In disregarding completely the evidentiary value of the death certificate of the attending
physician which was presented as evidence by both claimants and respondent (Exhibits C &
4) to prove the cause of death;
 13

2. In finding that the cause of death of said Santiago Fabrigar was tuberculosis and was
contracted during and as a result of the nature of his employment;

3. In holding that the herein petitioner was the employer of the deceased Santiago Fabrigar;
and

4. In not holding that the herein petitioner is exempt from the scope of the Workmen's
Compensation Law. lawphil.net

Petitioner contends that the preponderance of evidence on the matters involved in this case,
militates in its favor. Considering the doctrine that the Commission, like the Court of Industrial
Relations, is bound not by the rule of preponderance of evidence as in ordinary civil cases, but by
the rule of substantial evidence (Ang Tibay vs. CIR, 69 Phil. 635; Phil. Newspaper Guild vs. Evening
News, 47 Off. Gaz. No. 12, p. 6188; Secs. 43 & 46 Rep. Act No. 772, W.C. Act), petitioner's
pretension is without merit. Substantial evidence supports the decision of the Commission. While
seemingly there exists an inconsistency in the cause of death, as appearing in the death certificate
by Dr. Labitoria and in Dr. Villareal's diagnosis, it is a fact found by the Commission, that the Sanitary
Inspector did not examine the deceased before and after his death. "Undoubtedly," says the
Commission, "the information that he died of beriberi adult, as appearing in the death certificate was
given because it appears that the deceased had also edema of the extremities (swollen legs)." The
evidence of record sustains the following findings of the Commission, is Fabrigar's cause of death to
wit

The short period of time intervening between his last day of work (March 13, 1956) when he
spat blood and his death June 28, 1956 due to pulmonary tuberculosis indicates that he had
been suffering from the disease even during the time that he was employed by the
respondent. Considering the strenuous work that he performed while in the service of the
respondents and the unusually long hours of work he rendered (6:00 p.m. to 1:30 p.m. and
from 2:00 p.m. to 6:00 p.m. or 7:00 p.m.) beyond the normal and legal working hours, we
find that his employment aggravated his pre-existing illness and brought about his death.
Moreover, our conclusion finds support in the fact that immediately preceding his last day of
work with the respondent, he had an unusually hard day lifting desks and other furnitures
and assisting in the preparations for the graduation exercises of the school. Considering also
his complaints during that day (March 11), among which was "shortness of breath", we may
also say that his work affected an already existing heart ailment.

We find no plausible reason for altering or disturbing the above factual findings of the Commission,
in the present appeal by certiorari.

It is claimed that actually the deceased was not an employee of the petitioner, but by the Iloilo
Chinese Chamber of Commerce which was the one that furnished the janitor service in the premises
of its buildings, including the part thereof occupied by the petitioner; that the Chamber of Commerce
paid the salaries of janitors, including the deceased; that the petitioner could not afford to pay rentals
of its premises and janitor due to limited finances depended largely on funds raised among its Board
of Directors, the Chinese Chamber of Commerce and Chinese nationals who helped the school. In
other words, it is pretended that the deceased was not an employee of the school but of the Chinese
Chamber of Commerce which should be the one responsible for the compensation of the deceased.
On one hand, according to the Commission, there is substantial proof to the effect that Fabrigar was
employed by and rendered service for the petitioner and was an employee within the purview of the
Workmen's Compensation Law. On the other hand, the most important test of employer-employee
relation is the power to control the employee's conduct. The records disclose that the person in
 14

charge (encargado) of the respondent school supervised the deceased in his work and had control
over the manner he performed the same.

It is finally contended that petitioner is an institution devoted solely for learning and is not an industry
within the meaning of the Workmen's Compensation Law. Consequently, it is argued, it is exempt
from the scope of the same law. Considering that this factual question has not been properly put in
issue before the Commission, it may not now be entertained in this appeal for the first time (Atlantic
Gulf, etc. vs. CIR, et al., L-16992, Dec. 23, 1961, citing International Oil Factory Union v. Hon.
Martinez, et al., L-15560, Dec. 31, 1960). The decision of the Commission does not show that the
matter was taken up. We are at a loss to state whether the issue was raised in the motion for
reconsideration filed with the Commission, because the said motion is not found in the record before
us. And the resolution to the motion for reconsideration does not touch this question.

IN VIEW HEREOF, the appeal interposed by the petitioner is dismissed, and the decision appealed
from is affirmed, with costs against the herein petitioner.

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.

 15

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, 3ruling:
 16

. . . 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
 17

(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.
 18

Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the
certification case had never become final, being in fact the subject of three pending and unresolved
motions for reconsideration, as well as of a later motion for early resolution. 11 Unfortunately, none of
these motions is incorporated or reproduced in the record before the Court. And, for his part, the private
respondent contends, not only that said decision had been appealed to and been affirmed by the Director
of the BLR, but that a certification election had in fact been held, which resulted in the PTCCEA being
recognized as the sole bargaining agent of the caddies of the Manila Golf and Country Club with respect
to wages, hours of work, terms of employment, etc. 12 Whatever the truth about these opposing
contentions, which the record before the Court does not adequately disclose, the more controlling
consideration would seem to be that, however, final it may become, the decision in a certification case, by
the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to
the existence, or non-existence, of employer-employee relationship between them.

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

Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior
Judgment" that would operate in bar of a subsequent action between the same parties for the same
cause, be adversarial, or contentious, "one having opposing parties; (is) contested, as distinguished
from an ex parte hearing or proceeding. . . . of which the party seeking relief has given legal notice to
the other party and afforded the latter an opportunity to contest it" 14 and a certification case is not such
a proceeding, as this Court already ruled:

A certification proceedings is not a "litigation" in the sense in which the term is

commonly understood, but mere investigation of a non-adversary, fact-finding
character, in which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of the employees as to the
matter of their representation. The court enjoys a wide discretion in determining the
procedure necessary to insure the fair and free choice of bargaining representatives
by the employees. 15

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

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

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

Said Courts holding that upon the facts, there exists (or existed) a relationship of employer and
employee between petitioner and private respondent is, however, another matter. The Court does
 19

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
 20

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.

G.R. No. 102199 January 28, 1997

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE, respondents.

PANGANIBAN, J.:

The determination of the proper forum is crucial because the filing of the petition or complaint in the
wrong court or tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters
and the National Labor Relations Commission have no jurisdiction to entertain and rule on money
 21

claims where no employer-employee relations is involved. Thus, any such award rendered without
jurisdiction is a nullity.

This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the
National Labor Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-
01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the decision
of the labor arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to
private respondent.

The Antecedent Facts

The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of
petitioner AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between
them provided: 2

B. Duties and Obligations:

1. During the lifetime of this Agreement, the SALES AGENT (private respondent)
shall solicit exclusively for AFPMBAI (petitioner), and shall be bound by the latter's
policies, memo circulars, rules and regulations which it may from time to time, revise,
modify or cancel to serve its business interests.

2. The SALES AGENT shall confine his business activities for AFPMBAI while inside
any military camp, installation or residence of military personnel. He is free to solicit
in the area for which he/she is licensed and as authoriied, provided however, that
AFPMBAI may from time to time, assign him a specific area of responsibility and a
production quota on a case to case basis.

xxx xxx xxx

C. Commission

1. The SALES AGENT shall be entitled to the commission due for all premiums
actually due and received by AFPMBAI out of life insurance policies solicited and
obtained by the SALES AGENT at the rates set forth in the applicant's commission
schedules hereto attached.

xxx xxx xxx

D. General Provisions

1. There shall be no employer-employee relationship between the parties, the

SALES AGENT being hereby deemed an independent contractor.

As compensation, he received commissions based on the following percentages of the premiums

paid: 3

"30% of premium paid within the first year;

10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
 22

1% of the premium paid during the fifth year up to

the tenth year.

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

At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to
twenty four (24) months per the Sales Agent Agreement and as stated in the account summary
dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-
company. Said summary showed that private respondent had a total commission receivable of
P438,835.00, of which only P78,039.89 had been paid to him.

Private respondent wrote petitioner seeking the release of his commissions for said 24 months.
Petitioner, through Marketing Manager Juan Concepcion, replied that he was entitled to only
P75,000.00 to P100,000.00. Hence, believing Concepcion's computations, private respondent
signed a quitclaim in favor of petitioner.

Sometime in October 1989, private respondent was informed that his check was ready for release.
In collecting his check, he discovered from a document (account summary) attached to said check
that his total commissions for the 24 months actually amounted to P354,796.09. Said document
stated: 4

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

Private respondent, however, was paid only the amount of P35,000.00.

On November 23, 1989, private respondent filed a complaint with the Office of the Insurance
Commissioner praying for the payment of the correct amount of his commission. Atty. German C.
Alejandria, Chief of the Public Assistance and Information Division, Office of the Insurance
Commissioner, advised private respondent that it was the Department of Labor and Employment that
had jurisdiction over his complaint.

On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming:
(1) commission for 2 years from termination of employment equivalent to 30% of premiums remitted
during employment; (2) P354,796.00 as commission earned from renewals and old business
generated since 1983; (3) P100,000.00 as moral damages; and (4) P100,000.00 as exemplary
damages.

After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated
August 24, 1990, the dispositive portion of which reads: 5

WHEREFORE, all the foregoing premises being considered, judgment is hereby

rendered declaring the dismissal of the complainant as just and valid, and
consequently, his claim for separation pay is denied. On his money claim, the
respondent company is hereby ordered to pay complainant the sum of P319,796.00
plus attorney's fees in the amount of P31,976.60.
 23

All other claims of the complainant are dismissed for want of merit.

The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private
respondent a specific area of responsibility and a production quota, and read it as signalling the
existence of employer- employee relationship between petitioner and private respondent.

On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor
Arbiter. In the assailed Resolution, respondent Commission found no reason to disturb said ruling of the
labor arbiter and
ruled: 7

WHEREFORE, in view of the foregoing considerations, the subject appeal should be

as it is hereby, denied and the decision appealed from affirmed

SO ORDERED.

Hence, this petition.

The Issue

Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that
the labor arbiter had jurisdiction over this case. At the heart of the controversy is the issue of whether
there existed an employer-employee relationship between petitioner and private respondent.

Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no
employer-employee relationship between private respondent and itself. Hence, respondent
commission gravely abused its discretion when it held that the labor arbiter had jurisdiction over the
case.

The Court's Ruling

The petition is meritorious.

First Issue: Not All That Glitters Is Control

Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a

question of fact and that the findings thereon by the labor arbiter and the National Labor Relations
Commission shall be accorded not only respect but even finality when supported by substantial
evidence. 8 The determinative factor in such finality is the presence of substantial evidence to support
said finding, otherwise, such factual findings cannot bind this Court.

Respondent Commission concurred with the labor arbiter's findings that: 9

x x x The complainant's job as sales insurance agent is usually necessary and

desirable in the usual business of the respondent company. Under the Sales Agents
Agreement, the complainant was required to solicit exclusively for the respondent
company, and he was bound by the company policies, memo circulars, rules and
regulations which were issued from time to time. By such requirement to follow
strictly management policies, orders, circulars, rules and regulations, it only shows
that the respondent had control or reserved the right to control the complainant's
 24

work as solicitor. Complainant was not an independent contractor as he did not carry
on an independent business other than that of the company's . . .

To this, respondent Commission added that the Sales Agent's Agreement specifically provided that
petitioner may assign private respondent a specific area of responsibility and a production quota.
From there, it concluded that apparently there is that exercise of control by the employer which is the
most important element in determining employer- employee relationship. 10

We hold, however, that respondent Commission misappreciated the facts of the case. Time and
again, the Court has applied the "four-fold" test in determining the existence of employer-employee
relationship. This test considers the following elements: (1) the power to hire; (2) the payment of
wages; (3) the power to dismiss; and (4) the power to control, the last being the most important
element. 11

The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence
of control. Anent the issue of exclusivity in the case at bar, the fact that private respondent was
required to solicit business exclusively for petitioner could hardly be considered as control in labor
jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85, dated December 17, 1981 and August 7,
1985, respectively, issued by the Insurance Commissioner, insurance agents are barred from serving
more than one insurance company, in order to protect the public and to enable insurance companies to
exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction
clearly springs from a regulation issued by the Insurance Commission, and not from an intention by
petitioner to establish control over the method and manner by which private respondent shall accomplish
his work. This feature is not meant to change the nature of the relationship between the parties, nor does
it necessarily imbue such relationship with the quality of control envisioned by the law.

So too, the fact that private respondent was bound by company policies, memo/circulars, rules and
regulations issued from time to time is also not indicative of control. In its Reply to Complainant's
Position Paper, 13 petitioner alleges that the policies, memo/circulars, and rules and regulations referred
to in provision B(1) of the Sales Agent's Agreement are only those pertaining to payment of agents'
accountabilities, availment by sales agents of cash advances for sorties, circulars on incentives and
awards to be given based on production, and other matters concerning the selling of insurance, in
accordance with the rules promulgated by the Insurance Commission. According to the petitioner,
insurance solicitors are never affected or covered by the rules and regulations
concerning employee conduct and penalties for violations thereof, work standards, performance
appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence, management-union
matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the
same are deemed admitted, or at least proven, thereby leaving nothing to support the respondent
Commission's conclusion that the foregoing elements signified an employment relationship between the
parties.

In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of
the exercise of control over an employee. First of all, the place of work in the business of soliciting
insurance does not figure prominently in the equation. And more significantly, private respondent
failed to rebut petitioner's allegation that it had never issued him any territorial assignment at all.
Obviously, this Court cannot draw the same inference from this feature as did the respondent
Commission.

To restate, the significant factor in determining the relationship of the parties is the presence or
absence of supervisory authority to control the method and the details of performance of the service
being rendered, and the degree to which the principal may intervene to exercise such control. The
presence of such power of control is indicative of an employment relationship, while absence thereof
is indicative of independent contractorship. In other words, the test to determine the existence of
 25

independent contractorship is whether one claiming to be an independent contractor has contracted

to do the work according to his own methods and without being subject to the control of the
employer except only as to the result of the work. 14 Such is exactly the nature of the relationship
between petitioner and private respondent.

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.
The distinction acquires particular relevance in the case of an enterprise affected
with public interest, as is the business of insurance, 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 insurande 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. . . . None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee
relationship between him and the company. 15

Private respondent's contention that he was petitioner's employee is belied by the fact that he was
free to sell insurance at any time as he was not subject to definite hours or conditions of work and in
turn was compensated according to the result of his efforts. By the nature of the business of
soliciting insurance, agents are normally left free to devise ways and means of persuading people to
take out insurance. There is no prohibition, as contended by petitioner, for private respondent to
work for as long as he does not violate the Insurance Code. As petitioner explains:

(Private respondent) was free to solicit life insurance anywhere he wanted and he
had free and unfettered time to pursue his business. He did not have to punch in and
punch out the bundy clock as he was not required to report to the (petitioner's) office
regularly. He was not covered by any employee policies or regulations and not
subject to the disciplinary action of management on the basis of the Employee Code
of Conduct. He could go out and sell insurance at his own chosen time. He was
entirely left to his own choices of areas or territories, with no definite, much less
supervised, time schedule.

(Private respondent) had complete control over his occupation and (petitioner) did
not exercise any right of Control and Supervision over his performance except as to
the payment of commission the amount of which entirely depends on the sole efforts
of (private respondent). He was free to engage in other occupation or practice other
profession for as long as he did not commit any violation of the ethical standards
prescribed in the Sales Agent's Agreement. 16
 26

Although petitioner could have, theoretically, disapproved any of private respondent's transactions,
what could be disapproved was only the result of the work, and not the means by which it was
accomplished.

The "control" which the above factors indicate did not sum up to the power to control private
respondent's conduct in and mode of soliciting insurance. On the contrary, they clearly indicate that
the juridical element of control had been absent in this situation. Thus, the Court is constrained to
rule that no employment relationship had ever existed between the parties.

Second Issue: Jurisdiction of Respondent

Commission & Labor Arbiter

Under the contract invoked, private respondent had never been petitioner's employee, but only its
commission agent. As an independent contractor, his claim for unpaid commission should have been
litigated in an ordinary civil action. 17

The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor
Code. 18 The unifying element running through paragraphs (1) (6) of said provision is the consistent
reference to cases or disputes arising out of or in connection with an employer-employee relationship.
Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the article
included "all other cases arising from employer-employee relation unless expressly excluded by this
Code." 19 Without this critical element of employment relationship, the labor arbiter and respondent
Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on
the part of the labor arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the
respondent Commission's affirmance thereof.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on
appeal. The doctrine of estoppel cannot be properly invoked by respondent Commission to cure this
fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction
over a cause of action. 20 Moreover, in the proceedings below, petitioner consistently challenged the
jurisdiction of the labor arbiter 21 and respondent Commission. 22

It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court
or tribunal without jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction is no judgment
at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to
it and all claims emanating from it have no legal effect. Hence, it can never become final. ". . . (I)t may be
said to be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever and
whenever it exhibits its head." 24

The way things stand, it becomes unnecessary to consider the merits of private respondent's claim
for unpaid commission. Be that as it may, this ruling is without prejudice to private respondent's right
to file a suit for collection of unpaid commissions against petitioner with the proper forum and within
the proper period.

WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE.

SO ORDERED.
 27

G.R. No. 114733 January 2, 1997

AURORA LAND PROJECTS CORP. Doing business under the name "AURORA PLAZA" and
TERESITA T. QUAZON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and HONORIO DAGUI, respondents.

HERMOSISIMA, JR., J.:

The question as to whether an employer-employee relationship exists in a certain situation continues

to bedevil the courts. Some businessmen try to avoid the bringing about of an employer-employee
relationship in their enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay, and
unionism. 1 In light of this observation, it behooves this Court to be ever vigilant in Checking the
 28

unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing their return on
investments at the expense of the lowly workingman.

This petition for certiorari seeks the reversal of the Resolution 2 of public respondent National Labor
Relations Commission dated March 16, 1994 affirming with modification the decision of the Labor Arbiter,
dated May 25, 1992, finding petitioners liable to pay private respondent the total amount of P195,624.00
as separation pay and attorney's fees.

The relevant antecedents:

Private respondent Honorio Dagui was hired by Doa Aurora Suntay Tanjangco in 1953 to take
charge of the maintenance and repair of the Tanjangco apartments and residential buildings. He was
to perform carpentry, plumbing, electrical and masonry work. Upon the death of Doa Aurora
Tanjangco in 1982, her daughter, petitioner Teresita Tanjangco Quazon, took over the administration
of all the Tanjangco properties. On June 8, 1991, private respondent Dagui received the shock of his
life when Mrs. Quazon suddenly told him: "Wala ka nang trabaho mula ngayon," 3 on the alleged
ground that his work was unsatisfactory. On August 29, 1991, private respondent, who was then already
sixty-two (62) years old, filed a complaint for illegal dismissal with the Labor Arbiter.

On May 25, 1992, Labor Arbiter Ricardo C. Nora rendered judgment, the decretal portion of which
reads:

IN VIEW OF ALL THE FOREGOING, respondents Aurora Plaza and/or Teresita Tanjangco
Quazon are hereby ordered to pay the complainant the total amount of ONE HUNDRED
NINETY FIVE THOUSAND SIX HUNDRED TWENTY FOUR PESOS (P195,624.00)
representing complainant's separation pay and the ten (10%) percent attorney's fees within
ten (10) days from receipt of this Decision.

All other issues are dismissed for lack of merit. 4

Aggrieved, petitioners Aurora Land Projects Corporation and Teresita T. Quazon appealed to the
National Labor Relations Commission. The Commission affirmed, with modification, the Labor
Arbiter's decision in a Resolution promulgated on March 16, 1994, in the following manner:

WHEREFORE, in view of the above considerations, let the appealed decision be as it is

hereby AFFIRMED with (the) MODIFICATION that complainant must be paid separation pay
in the amount of P88,920.00 instead of P177,840.00. The award of attorney's fees is hereby
deleted. 5

As a last recourse, petitioners filed the instant petition based on grounds not otherwise succinctly
and distinctly ascribed, viz:

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN AFFIRMING THE LABOR ARBITER'S DECISION
SOLELY ON THE BASIS OF ITS STATEMENT THAT "WE FAIL TO FIND ANY REASON OR
JUSTIFICATION TO DISAGREE WITH THE LABOR ARBITER IN HIS FINDING THAT
HONORIO DAGUI WAS DISMISSED BY THE RESPONDENT" (p. 7, RESOLUTION),
DESPITE AND WITHOUT EVEN BOTHERING TO CONSIDER THE GROUNDS
STATED IN PETITIONERS' APPEAL MEMORANDUM WHICH ARE PLAINLY
MERITORIOUS.
 29

II

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN FINDING THAT COMPLAINANT WAS
EMPLOYED BY THE RESPONDENTS MORE SO "FROM 1953 TO 1991" (p. 3,
RESOLUTION).

III

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN AWARDING SEPARATION PAY IN FAVOR OF
PRIVATE RESPONDENT MORE SO FOR THE EQUIVALENT OF 38 YEARS OF ALLEGED
SERVICE.

IV

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN HOLDING BOTH PETITIONERS LIABLE FOR
SEPARATION PAY. 6

It is our impression that the crux of this petition rests on two elemental issues: (1) Whether or not
private respondent Honorio Dagui was an employee of petitioners; and (2) If he were, whether or not
he was illegally dismissed.

Petitioners insist that private respondent had never been their employee. Since the establishment of
Aurora Plaza, Dagui served therein only as a job contractor. Dagui had control and supervision of
whoever he would take to perform a contracted job. On occasion, Dagui was hired only as a "tubero"
or plumber as the need arises in order to unclog sewerage pipes. Every time his services were
needed, he was paid accordingly. It was understood that his job was limited to the specific
undertaking of unclogging the pipes. In effect, petitioners would like us to believe that private
respondent Dagui was an independent contractor, particularly a job contractor, and not an employee
of Aurora Plaza.

We are not persuaded.

Section 8, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code provides
in part:

There is job contracting permissible under the Code if the following conditions are met:

xxx xxx xxx

(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.

Honorio Dagui earns a measly sum of P180.00 a day (latest salary). 7 Ostensibly, and by no stretch of
the imagination can Dagui qualify as a job contractor. No proof was adduced by the petitioners to show
that Dagui was merely a job contractor, and it is absurd to expect that private respondent, with such
humble resources, would have substantial capital or investment in the form of tools, equipment, and
 30

machineries, with which to conduct the business of supplying Aurora Plaza with manpower and services
for the exclusive purpose of maintaining the apartment houses owned by the petitioners herein.

The bare allegation of petitioners, without more, that private respondent Dagui is a job contractor
has been disbelieved by the Labor Arbiter and the public respondent NLRC. Dagui, by the findings of
both tribunals, was an employee of the petitioners. We are not inclined to set aside these findings.
The issue whether or not an employer-employee relationship exists in a given case is essentially a
question of fact. 8 As a rule, repetitious though it has become to state, this Court does not review
supposed errors in the decision of the NLRC which raise factual issues, because factual findings of
agencies exercising quasi-judicial functions [like public respondent NLRC] are accorded not only respect
but even finality, aside from the consideration that this Court is essentially not a trier of facts. 9

However, we deem it wise to discuss this issue full-length if only to bolster the conclusions reached
by the labor tribunals, to which we fully concur.

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in

dispute, four elements constitute the reliable yardstick: (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's conduct. 10 It is the so-called "control test," and that is, whether the employer
controls or has reserved the right to control the employee not only as to the result of the work to be done
but also as to the means and methods by which the same is to be accomplished, 11which constitute the
most important index of the existence of the employer-employee relationship. Stated otherwise, 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 means to be used in reaching such end. 12

All these elements are present in the case at bar. Private respondent was hired in 1953 by Doa
Aurora Suntay Tanjangco (mother of Teresita Tanjangco-Quazon), who was then the one in charge
of the administration of the Tanjangco's various apartments and other properties. He was employed
as a stay-in worker performing carpentry, plumbing, electrical and necessary work (sic) needed in
the repairs of Tanjangco's properties. 13 Upon the demise of Doa Aurora in 1982, petitioner Teresita
Tanjangco-Quazon took over the administration of these properties and continued to employ the private
respondent, until his unceremonious dismissal on June 8, 1991. 14

Dagui was not compensated in terms of profits for his labor or services like an independent
contractor. Rather, he was paid on a daily wage basis at the rate of P180.00. 15 Employees are those
who are compensated for their labor or services by wages rather than by profits. 16 Clearly, Dagui fits
under this classification.

Doa Aurora and later her daughter petitioner Teresita Quazon evidently had the power of dismissal
for cause over the private respondent. 17

Finally, the records unmistakably show that the most important requisite of control is likewise extant
in this case. It should be borne in mind that the power of control refers merely to the existence of the
power and not to the actual exercise thereof. It is not essential for the employer to actually supervise
the performance of duties of the employee; it is enough that the former has a right to wield the
power. 18 The establishment of petitioners is engaged in the leasing of residential and apartment buildings.
Naturally, private respondent's work therein as a maintenance man had to be performed within the
premises of herein petitioners. In fact, petitioners do not dispute the fact that Dagui reports for work from
7:00 o'clock in the morning until 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore, that
Dagui had to observe the instructions and specifications given by then Doa Aurora and later by Mrs.
Teresita Quazon as to how his work had to be performed. Parenthetically, since the job of a maintenance
crew is necessarily done within company premises, it can be inferred that both Doa Aurora and Mrs.
Quazon could easily exercise control on private respondent whenever they please.
 31

The employment relationship established, the next question would have to be: What kind of an
employee is the private respondent regular, casual or probationary?

We find private respondent to be a regular employee, for Article 280 of the Labor Code provides:

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.

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 year of service,
whether such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while such
actually exists.

As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those
who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed. 19

Whichever standard is applied, private respondent qualifies as a regular employee. As aptly ruled by
the Labor Arbiter:

. . . As owner of many residential and apartment buildings in Metro Manila, the necessity of
maintaining and employing a permanent stay-in worker to perform carpentry, plumbing,
electrical and necessary work needed in the repairs of Tanjangco's properties is readily
apparent and is in fact needed. So much so that upon the demise of Doa Aurora Tanjangco,
respondent's daughter Teresita Tanjangco-Quazon apparently took over the administration of
the properties and continued to employ complainant until his outright dismissal on June 8,
1991. . . . 20

The jobs assigned to private respondent as maintenance man, carpenter, plumber, electrician and
mason were directly related to the business of petitioners as lessors of residential and apartment
buildings. Moreover, such a continuing need for his services by herein petitioners is sufficient
evidence of the necessity and indispensability of his services to petitioners' business or trade.

Private respondent Dagui should likewise be considered a regular employee by the mere fact that he
rendered service for the Tanjangcos for more than one year, that is, beginning 1953 until 1982,
under Doa Aurora; and then from 1982 up to June 8, 1991 under the petitioners, for a total of
twenty-nine (29) and nine (9) years respectively. Owing to private respondent's length of service, he
became a regular employee, by operation of law, one year after he was employed in 1953 and
subsequently in 1982. In Baguio Country Club Corp., v. NLRC, 21 we decided that it is more in
consonance with the intent and spirit of the law to rule that the status of regular employment attaches to
the casual employee on the day immediately after the end of his first year of service. To rule otherwise is
to impose a burden on the employee which is not sanctioned by law. Thus, the law does not provide the
qualification that the employee must first be issued a regular appointment or must first be formally
declared as such before he can acquire a regular status.
 32

Petitioners argue, however, that even assuming arguendo that private respondent can be considered
an employee, he cannot be classified as a regular employee. He was merely a project employee
whose services were hired only with respect to a specific job and only while the same exists, 22 thus
falling under the exception of Article 280, paragraph 1 of the Labor Code. Hence, it is claimed that he is
not entitled to the benefits prayed for and subsequently awarded by the Labor Arbiter as modified by
public respondent NLRC.

The circumstances of this case in light of settled case law do not, at all, support this averment.
Consonant with a string of cases beginning with Ochoco v. NLRC, 23 followed by Philippine National
Construction Corporation v. NLRC, 24Magante v. NLRC, 25 and Capitol Industrial Construction Corporation
v. NLRC, 26 if truly, private respondent was employed as a "project employee," petitioners should have
submitted a report of termination to the nearest public employment office everytime his employment is
terminated due to completion of each project, as required by Policy Instruction No. 20, which provides:

Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the
number of project in which they have been employed by a particular construction company.
Moreover, the company is not required to obtain a clearance from the Secretary of Labor in
connection with such termination. What is required of the company is a report to the nearest
Public Employment Office for statistical purposes.

Throughout the duration of private respondent's employment as maintenance man, there should
have been filed as many reports of termination as there were projects actually finished, if it were true
that private respondent was only a project worker. Failure of the petitioners to comply with this
simple, but nonetheless compulsory, requirement is proof that Dagui is not a project employee. 27

Coming now to the second issue as to whether or not private respondent Dagui was illegally
dismissed, we rule in the affirmative.

Jurisprudence abound as to the rule that the twin requirements of due process, substantive and
procedural, must be complied with, before a valid dismissal exists. 28 Without which the dismissal
becomes void. 29

The twin requirements of notice and hearing constitute the essential elements of due process. This
simply means that the employer shall afford the worker ample opportunity to be beard and to defend
himself with the assistance of his representative, if he so desires. 30 As held in the case of Pepsi Cola
Bottling Co. v. NLRC: 31

The law requires that the employer must furnish the worker sought to be dismissed with two
written notices before termination of employee can be legally effected: (1) notice which apprises
the employee of the particular acts or omissions for which his dismissal is sought; and (2) the
subsequent notice which informs the employee of the employer's decision to dismiss him (Section
13, BP 130; Sections, 2-6, Rule XIV, Book V Rules and Regulations Implementing the Labor
Code as amended), Failure to comply with the requirements taints the dismissal with illegality.
This procedure is mandatory; in the absence of which, any judgment reached by management is
void and inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National Service Corporation v.
NLRC, 168 SCRA 122 [1988]; Ruffy v. NLRC, 182 SCRA 365 [1990].

These mandatory requirements were undeniably absent in the case at bar. Petitioner Quazon
dismissed private respondent on June 8, 1991, without giving him any written notice informing the
worker herein of the cause for his termination. Neither was there any hearing conducted in order to
give Dagui the opportunity to be heard and defend himself. He was simply told: "Wala ka nang
trabaho mula ngayon," allegedly because of poor workmanship on a previous job. 32 The undignified
 33

manner by which private respondent's services were terminated smacks of absolute denial of the
employee's right to due process and betrays petitioner Quazon's utter lack of respect for labor. Such an
attitude indeed deserves condemnation.

The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was
made by both the Labor Arbiter and the NLRC. No backwages were awarded. It must be
remembered that backwages and reinstatement are two reliefs that should be given to an illegally
dismissed employee. They are separate and distinct from each other. In the event that reinstatement
is no longer possible, as in this case, 33 separation pay is awarded to the employee. The award of
separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed
employee is entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and(2) backwages. 34 Payment of backwages is specifically designed to restore an employee's
income that was lost because of his unjust dismissal. 35 On the other hand, payment of separation pay is
intended to provide the employee money during the period in which he will be looking for another
employment. 36

Considering, however, that the termination of private respondent Dagui was made on June 8, 1991
or after the effectivity of the amendatory provision of Republic Act No. 6715 on March 21, 1989,
private respondent's backwages should be computed on the basis of said law.

It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation
pay sans backwages. While as a general rule, a party who has not appealed is not entitled to
affirmative relief other than the ones granted in the decision of the court below, 37 law and
jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors
affecting the lower court's jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical
errors. 38 In this case, the failure of the Labor Arbiter and the public respondent NLRC to award
backwages to the private respondent, who is legally entitled thereto having been illegally dismissed,
amounts to a "plain error" which we may rectify in this petition, although private respondent Dagui did not
bring any appeal regarding the matter, in the interest of substantial justice. The Supreme Court is clothed
with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that
their consideration is necessary in arriving at a just decision of the case. 39 Rules of procedure are mere
tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must always be
avoided. 40 Thus, substantive rights like the award of backwages resulting from illegal dismissal must not
be prejudiced by a rigid and technical application of the rules. 41

Petitioner Quazon argues that, granting the petitioner corporation should be held liable for the claims
of private respondent, she cannot be made jointly and severally liable with the corporation,
notwithstanding the fact that she is the highest ranking officer of the company, since Aurora Plaza
has a separate juridical personality.

We disagree.

In the cases of Maglutac v. National Labor Relations Commission, 42 Chua v. National Labor Relations
Commission, 43and A.C. Ransom Labor Union-CCLU v. National Labor Relations Commission 44 we were
consistent in holding that the highest and most ranking officer of the corporation, which in this case is petitioner Teresita Quazon as manager
of Aurora Land Projects Corporation, can be held jointly and severally liable with the corporation for the payment of the unpaid money claims
of its employees who were illegally dismissed. In this case, not only was Teresita Quazon the most ranking officer of Aurora Plaza at the time
of the termination of the private respondent, but worse, she had a direct hand in the private respondent's illegal dismissal. A corporate officer
is not personally liable for the money claims of discharged corporate employees unless he acted with evident malice and bad faith in
terminating their employment. 45 Here, the failure of petitioner Quazon to observe the mandatory requirements of
due process in terminating the services of Dagui evinced malice and bad faith on her part, thus making
her liable.
 34

Finally, we must address one last point. Petitioners aver that, assuming that private respondent can
be considered an employee of Aurora Plaza, petitioners cannot be held liable for separation pay for
the duration of his employment with Doa Aurora Tanjangco from 1953 up to 1982. If petitioners
should be held liable as employers, their liability for separation pay should only be counted from the
time Dagui was rehired by the petitioners in 1982 as a maintenance man.

We agree.

Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner Teresita
Quazon, as manager of Aurora Plaza, continued to employ private respondent. From 1953 up to the
death of Doa Aurora sometime in 1982, private respondent's claim for separation pay should have
been filed in the testate or intestate proceedings of Doa Aurora. This is because the demand for
separation pay covered by the years 1953-1982 is actually a money claim against the estate of Doa
Aurora, which claim did not survive the death of the old woman. Thus, it must be filed against her
estate in accordance with Section 5, Rule 86 of the Revised Rules of Court, to wit:

Sec. 5. Claims which must be filed under tire notice. If not filed, barred; exceptions. All
claims for money against the decedent, arising from contract, express or implied, whether
the same be due, not due, or contingent, all claims for funeral expenses for the last sickness
of the decedent, and judgment for money against the decedent, must be filed within the time
limited in the notice; otherwise they are barred forever, except that they may be set forth as
counterclaims in any action that the executor or administrator may bring against the
claimants. . . .

WHEREFORE, the instant petition is partly GRANTED and the Resolution of the public respondent
National Labor Relations Commission dated March 16, 1994 is hereby MODIFIED in that the award
of separation pay against the petitioners shall be reckoned from the date private respondent was re-
employed by the petitioners in 1982, until June 8, 1991. In addition to separation pay, full backwages
are likewise awarded to private respondent, inclusive of allowances, and other benefits or their
monetary equivalent pursuant to Article 279 46 of the Labor Code, as amended by Section 34 of
Republic Act No. 6715, computed from the time he was dismissed on June 8, 1991 up to the finality of this
decision, without deducting therefrom the earnings derived by private respondent elsewhere during the
period of his illegal dismissal, pursuant to our ruling in Osmalik Bustamante, et al. v. National Labor
Relations Commission. 47

G.R. No. L-12582 January 28, 1961

LVN PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-
appellees.

x---------------------------------------------------------x

G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., petitioner-appellant,

vs.
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-
appellees.
 35

Nicanor S. Sison for petitioner-appellant.

Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.

CONCEPCION, J.:

Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an
order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine
Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive
bargaining agency of all musicians working with said companies, as well as with the Premiere
Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as
G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving
as they do the same order, the two cases have been jointly heard in this Court, and will similarly be
disposed of.

In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the
Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc.,
Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under
the Philippine laws, engaged in the making of motion pictures and in the processing and distribution
thereof; that said companies employ musicians for the purpose of making music recordings for title
music, background music, musical numbers, finale music and other incidental music, without which a
motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the
musical recordings of said companies are members of the Guild; and that the same has no
knowledge of the existence of any other legitimate labor organization representing musicians in said
companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and
exclusive bargaining agency for all musicians working in the aforementioned companies. In their
respective answers, the latter denied that they have any musicians as employees, and alleged that
the musical numbers in the filing of the companies are furnished by independent contractors. The
lower court, however, rejected this pretense and sustained the theory of the Guild, with the result
already adverted to. A reconsideration of the order complained of having been denied by the
Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review
for certiorari.

Apart from impugning the conclusion of the lower court on the status of the Guild members as
alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for
certification cannot be entertained when the existence of employer-employee relationship between
the parties is contested. However, this claim is neither borne out by any legal provision nor
supported by any authority. So long as, after due hearing, the parties are found to bear said
relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification.

It is next urged that a certification is improper in the present case, because, "(a) the petition does not
allege and no evidence was presented that the alleged musicians-employees of the respondents
constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority
of the other numerous employees of the film companies constituting a proper bargaining unit under
section 12 (a) of Republic Act No. 875."

The absence of an express allegation that the members of the Guild constitute a proper bargaining
unit is fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly
understood, but a 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 employees as to the matter of their representation. In connection therewith, the court
enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of
 36

bargaining representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a
duly registered legitimate labor organization and that ninety-five (95%) percent of the musicians
playing for all the musical recordings of the film companies involved in these cases are members of
the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at
the hearing in the lower court it was merely the status of the musicians as its employees that the film
companies really contested. Besides, the substantial difference between the work performed by said
musicians and that of other persons who participate in the production of a film, and the peculiar
circumstances under which the services of that former are engaged and rendered, suffice to show
that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the
lower court in deciding upon an appropriate unit for collective bargaining purposes is discretionary
(N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this
respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall
Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar.

Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the
musicians working in the aforesaid film companies. It does not intend to represent the other
employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a
majority of all the employees of said film companies, including those who are not musicians. The real
issue in these cases, is whether or not the musicians in question are employees of the film
companies. In this connection the lower court had the following to say:

As a normal and usual course of procedure employed by the companies when a picture is to
be made, the producer invariably chooses, from the musical directors, one who will furnish
the musical background for a film. A price is agreed upon verbally between the producer and
musical director for the cost of furnishing such musical background. Thus, the musical
director may compose his own music specially written for or adapted to the picture. He
engages his own men and pays the corresponding compensation of the musicians under
him.

When the music is ready for recording, the musicians are summoned through 'call slips' in
the name of the film company (Exh 'D'), which show the name of the musician, his musical
instrument, and the date, time and place where he will be picked up by the truck of the film
company. The film company provides the studio for the use of the musicians for that
particular recording. The musicians are also provided transportation to and from the studio
by the company. Similarly, the company furnishes them meals at dinner time.

During the recording sessions, the motion picture director, who is an employee of the
company, supervises the recording of the musicians and tells what to do in every detail. He
solely directs the performance of the musicians before the camera as director, he supervises
the performance of all the action, including the musicians who appear in the scenes so that
in the actual performance to be shown on the screen, the musical director's intervention has
stopped.

And even in the recording sessions and during the actual shooting of a scene, the
technicians, soundmen and other employees of the company assist in the operation. Hence,
the work of the musicians is an integral part of the entire motion picture since they not only
furnish the music but are also called upon to appear in the finished picture.

The question to be determined next is what legal relationship exits between the musicians
and the company in the light of the foregoing facts.
 37

We are thus called upon to apply R.A. Act 875. which is substantially the same as and
patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of
the United States. Hence, reference to decisions of American Courts on these laws on the
point-at-issue is called for.

Statutes are to be construed in the light of purposes achieved and the evils sought to be
remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) .

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the
United States Supreme Court said the Wagner Act was designed to avert the 'substantial
obstruction to the free flow of commerce which results from strikes and other forms of
industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result
from the refusal of employers' to bargain collectively and the inability of workers to bargain
successfully for improvement in their working conditions. Hence, the purposes of the Act are
to encourage collective bargaining and to remedy the workers' inability to bargaining power,
by protecting the exercise of full freedom of association and designation of representatives of
their own choosing, for the purpose of negotiating the terms and conditions of their
employment.'

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively
to 'employees' within the traditional legal distinctions, separating them from 'independent
contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term
of employment, blanket the nation's economy. Some are within this Act, others beyond its
coverage. Large numbers will fall clearly on one side or on the other, by whatever test may
be applied. Inequality of bargaining power in controversies of their wages, hours and working
conditions may characterize the status of one group as of the other. The former, when acting
alone may be as helpless in dealing with the employer as dependent on his daily wage and
as unable to resist arbitrary and unfair treatment as the latter.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary
to create a balance of forces in certain types of economic relationship. Congress recognized
those economic relationships cannot be fitted neatly into the containers designated as
'employee' and 'employer'. Employers and employees not in proximate relationship may be
drawn into common controversies by economic forces and that the very dispute sought to be
avoided might involve 'employees' who are at times brought into an economic relationship
with 'employers', who are not their 'employers'. In this light, the language of the Act's
definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by
underlying economic facts rather than technically and exclusively established legal
classifications. (NLRB vs. Blount, 131 F [2d] 585.)

In other words, the scope of the term 'employee' must be understood with reference to the
purposes of the Act and the facts involved in the economic relationship. Where all the
conditions of relation require protection, protection ought to be given .

By declaring a worker an employee of the person for whom he works and by recognizing and
protecting his rights as such, we eliminate the cause of industrial unrest and consequently
we promote industrial peace, because we enable him to negotiate an agreement which will
settle disputes regarding conditions of employment, through the process of collective
bargaining.
 38

The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term
embraces 'any employee' that is all employees in the conventional as well in the legal sense
expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.).

It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial
unrest by protecting the exercise of their right to self-organization for the purpose of
collective bargaining. (b) To promote sound stable industrial peace and the advancement of
the general welfare, and the best interests of employers and employees by the settlement of
issues respecting terms and conditions of employment through the process of collective
bargaining between employers and representatives of their employees.

The primary consideration is whether the declared policy and purpose of the Act can be
effectuated by securing for the individual worker the rights and protection guaranteed by the
Act. The matter is not conclusively determined by a contract which purports to establish the
status of the worker, not as an employee.

The work of the musical director and musicians is a functional and integral part of the
enterprise performed at the same studio substantially under the direction and control of the
company.

In other words, to determine whether a person who performs work for another is the latter's
employee or an independent contractor, the National Labor Relations relies on 'the right to
control' test. Under this test an employer-employee relationship exist 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 the end. (United Insurance
Company, 108, NLRB No. 115.).

Thus, in said similar case of Connor Lumber Company, the Supreme Court said:.

'We find that the independent contractors and persons working under them are
employees' within the meaning of Section 2 (3) of its Act. However, we are of the
opinion that the independent contractors have sufficient authority over the persons
working under their immediate supervision to warrant their exclusion from the
unit. We shall include in the unit the employees working under the supervision of the
independent contractors, but exclude the contractors.'

'Notwithstanding that the employees are called independent contractors', the Board will hold
them to be employees under the Act where the extent of the employer's control over them
indicates that the relationship is in reality one of employment. (John Hancock Insurance Co.,
2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.).

The right of control of the film company over the musicians is shown (1) by calling the
musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its
studio for recording sessions; (3) by furnishing transportation and meals to musicians; and
(4) by supervising and directing in detail, through the motion picture director, the
performance of the musicians before the camera, in order to suit the music they are playing
to the picture which is being flashed on the screen.

Thus, in the application of Philippine statutes and pertinent decisions of the United States
Courts on the matter to the facts established in this case, we cannot but conclude that to
effectuate the policies of the Act and by virtue of the 'right of control' test, the members of the
 39

Philippine Musicians Guild are employees of the three film companies and, therefore, entitled
to right of collective bargaining under Republic Act No. 875.

In view of the fact that the three (3) film companies did not question the union's majority, the
Philippine Musicians Guild is hereby declared as the sole collective bargaining
representative for all the musicians employed by the film companies."

We are fully in agreement with the foregoing conclusion and the reasons given in support thereof.
Both are substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs.
Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the
employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was
stronger than that of the film companies in these cases. The third parties with whom the
management and the workers contracted in the Maligaya cases were agencies registered with the
Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying
watchmen to steamship companies, with permits to engage in said business issued by the City
Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film
companies claim to have dealt with had nothing comparable to the business standing of said
watchmen agencies. In this respect, the status of said musical directors is analogous to that of the
alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the
particularity that the Caro case involved the enforcement of the liability of an employer under the
Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of
the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to
be legalistic and technical in these cases, than in the Caro case.

Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product
Co., Inc vs. CIR(46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de
Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa
Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said
petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein
respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao"
system, the "parers" and "shellers" in the case were, not independent contractor, but employees of
said company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are
pared whole or that there is not much meat wasted,' in effect limits or controls the means or details
by which said workers are to accomplish their services" as in the cases before us.

The nature of the relation between the parties was not settled in the Viana case, the same having
been remanded to the Workmen's Compensation Commission for further evidence.

The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano
Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio
Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus
sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable
lard, cooking oil and margarine, it was held that the connection between its business and the
painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that
Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay
the compensation provided in the Workmen's Compensation Act. Unlike the Philippine
Manufacturing case, the relation between the business of herein petitioners-appellants and the work
of the musicians is not casual. As held in the order appealed from which, in this respect, is not
contested by herein petitioners-appellants "the work of the musicians is an integral part of the
entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in
the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the
indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while
 40

working as such in one of said buildings even though his services had been allegedly engaged by a
third party who had directly contracted with said owner. In other words, the repair work had not
merely a casual connection with the business of said owner. It was a necessary incident thereof, just
as music is in the production of motion pictures.

The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially
from the present cases. It involved the interpretation of Republic Act No. 660, which amends the law
creating and establishing the Government Service Insurance System. No labor law was sought to be
construed in that case. In act, the same was originally heard in the Court of First Instance of Manila,
the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the
term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched
therein. Moreover, the subject matter of said case was a contract between the management of the
Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the
former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m.
to closing time daily." In the language of this court in that case, "what pieces the orchestra shall play,
and how the music shall be arranged or directed, the intervals and other details such are left to
the leader's discretion."

This is not situation obtaining in the case at bar. The musical directors above referred to
have no such control over the musicians involved in the present case. Said musical directors control
neither the music to be played, nor the musicians playing it. The film companies summon the
musicians to work, through the musical directors. The film companies, through the musical directors,
fix the date, the time and the place of work. The film companies, not the musical directors, provide
the transportation to and from the studio. The film companies furnish meal at dinner time.

What is more in the language of the order appealed from "during the recording sessions, the
motion picture director who is an employee of the company" not the musical director
"supervises the recording of the musicians and tells them what to do in every detail". The motion
picture director not the musical director "solely directs and performance of the musicians
before the camera". The motion picture director "supervises the performance of all the
actors, including the musicians who appear in the scenes, so that in the actual performance to be
shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower
court, "the movie director tells the musical director what to do; tells the music to be cut or tells
additional music in this part or he eliminates the entire music he does not (want) or he may want
more drums or move violin or piano, as the case may be". The movie director "directly controls the
activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he
wants more violin or he does not like that.".

It is well settled that "an employer-employee relationship exists . . .where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end . . . ." (Alabama Highway Express Co., Express Co., v. Local
612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in
the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in
which, by reason of said control, the employer-employee relationship was held to exist between the
management and the workers, notwithstanding the intervention of an alleged independent
contractor, who had, and exercise, the power to hire and fire said workers. The aforementioned
control over the means to be used" in reading the desired end is possessed and exercised by the
film companies over the musicians in the cases before us.

WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is
so ordered.
 41

G.R. No. 169510 August 8, 2011

ATOK BIG WEDGE COMPANY, INC., Petitioner,

vs.
JESUS P. GISON, Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision 1 dated May
31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution 2 dated August
23, 2005 denying petitioners motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on
retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and
Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted
petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal
 42

surface occupants within the area covered by the company's mineral claims. Respondent was
likewise tasked to perform liaison work with several government agencies, which he said was his
expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when
occasionally requested by the management to discuss matters needing his expertise as a
consultant. As payment for his services, respondent received a retainer fee of P3,000.00 a
month,3 which was delivered to him either at his residence or in a local restaurant. The parties
executed a retainer agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his
registration with the Social Security System (SSS), but petitioner did not accede to his request. He
later reiterated his request but it was ignored by respondent considering that he was only a
retainer/consultant. On February 4, 2003, respondent filed a Complaint 4 with the SSS against
petitioner for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a
Memorandum5advising respondent that within 30 days from receipt thereof, petitioner is terminating
his retainer contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint 6 for illegal dismissal, unfair labor practice,
underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the
National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera
Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was
docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok
Big Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the
companys problem involving the 700 million pesos crop damage claims of the residents living at the
minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres
offered to pay him P3,000.00 per month plus representation expenses. It was also agreed upon by
him and Torres that his participation in resolving the problem was temporary and there will be no
employer-employee relationship between him and Atok. It was also agreed upon that his
compensation, allowances and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants
barricaded the only passage to and from the minesite. In the early morning of February 1, 1992, a
dialogue was made by Atok and the crop damage claimants. Unfortunately, Atoks representatives,
including him, were virtually held hostage by the irate claimants who demanded on the spot payment
of their claims. He was able to convince the claimants to release the company representatives
pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the
barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its
partner, Benguet Corporation. After Atok parted ways with Benguet Corporation, some properties
acquired by the partnership and some receivables by Benguet Corporation was the problem. He was
again entangled with documentation, conferences, meetings, planning, execution and clerical works.
After two years, the controversy was resolved and Atok received its share of the properties of the
 43

partnership, which is about 5 million pesos worth of equipment and condonation of Atoks
accountabilities with Benguet Corporation in the amount of P900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok
was relieved of the burden of paying 700 million pesos. In between attending the problems of the
crop damage issue, he was also assigned to do liaison works with the SEC, Bureau of Mines,
municipal government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by
Atok to take charge of some liaison matters and public relations in Baguio and Benguet Province,
and to report regularly to Atoks office in Manila to attend meetings and so he had to stay in Manila at
least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is
already entitled to the benefits due an employee under the law, but management ignored his
requests. However, he continued to avail of his representation expenses and reimbursement of
company-related expenses. He also enjoyed the privilege of securing interest free salary loans
payable in one year through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation
officer and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of
Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to
cause his registration with the SSS. His request was again ignored and so he filed a complaint with
the SSS. After filing his complaint with the SSS, respondents terminated his services. 7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter
Rolando D. Gambito rendered a Decision 8 ruling in favor of the petitioner. Finding no employer-
employee relationship between petitioner and respondent, the Labor Arbiter dismissed the complaint
for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution 9 affirming the decision of the
Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the
Resolution10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA
questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No.
87846. In support of his petition, respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent
Resolutions of the Honorable Public Respondent affirming the same, are in harmony with the
law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in
Dismissing the Complaint of Petitioner and whether or not the Honorable Public Respondent
Committed a Grave Abuse of Discretion when it affirmed the said Decision. 11
 44

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of
the NLRC, the decretal portion of which reads:

WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations
Commission dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE.
Private respondent Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner
Jesus P. Gison to his former or equivalent position without loss of seniority rights and to pay him full
backwages, inclusive of allowances and other benefits or their monetary equivalent computed from
the time these were withheld from him up to the time of his actual and effective reinstatement. This
case is ordered REMANDED to the Labor Arbiter for the proper computation of backwages,
allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge
Company Incorporated.

SO ORDERED.12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter
and the NLRC may have overlooked Article 280 of the Labor Code, 13 or the provision which
distinguishes between two kinds of employees, i.e., regular and casual employees. Applying the
provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse
of one year from his employment. Considering also that respondent had been performing services
for the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular
employee.

The CA added that although there was an agreement between the parties that respondent's
employment would only be temporary, it clearly appears that petitioner disregarded the same by
repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have
waived his right to attain a regular status of employment when he agreed to perform these tasks on
a temporary employment status, still, it was the law that recognized and considered him a regular
employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE
WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A
PROVISION OF LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE
IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR
IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT
ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE
 45

NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND

CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition
for certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or
not there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming
the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining
whether there was an employer-employee relationship between the petitioner and the respondent.
Petitioner contends that where the existence of an employer-employee relationship is in dispute,
Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a
casual employee from a regular employee for purposes of determining the rights of an employee to
be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err
in ruling in his favor.

The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of
the NLRC. It bears stressing that there is no appeal from the decision or resolution of the NLRC. As
this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the special civil action
of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper
vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the
Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate forum
for the relief desired. 16 This Court not being a trier of facts, the resolution of unclear or ambiguous
factual findings should be left to the CA as it is procedurally equipped for that purpose. From the
decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure
before the Supreme Court may be resorted to by the parties. Hence, respondent's resort to the CA
was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between
petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately

a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded
not only respect but even finality when supported by substantial evidence. 17 Being a question of fact,
the determination whether such a relationship exists between petitioner and respondent was well
within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence,
such determination should have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence 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 employee's conduct,
or the so-called "control test."18 Of these four, the last one is the most important. 19 The so-called
"control test" is commonly regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. 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 achieved, but also the manner and means to be used in reaching that end. 20
 46

Applying the aforementioned test, an employer-employee relationship is apparently absent in the

case at bar. Among other things, respondent was not required to report everyday during regular
office hours of petitioner. Respondent's monthly retainer fees were paid to him either at his residence
or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent
would accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent
was left alone and given the freedom to accomplish the tasks using his own means and method.
Respondent was assigned tasks to perform, but petitioner did not control the manner and methods
by which respondent performed these tasks. Verily, the absence of the element of control on the part
of the petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly
admitted that petitioner hired him in a limited capacity only and that there will be no employer-
employee relationship between them. As averred in respondent's Position Paper: 21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered
him a pay in the amount of Php3,000.00 per month plus representation expenses. It was also
agreed by Mr. Torres and the complainant that his participation on this particular problem of Atok will
be temporary since the problem was then contemplated to be limited in nature, hence, there will be
no employer-employee relationship between him and Atok. Complainant agreed on this
arrangement. It was also agreed that complainant's compensations, allowances, representation
expenses and reimbursement of company- related expenses will be processed and paid through
disbursement vouchers;22

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of
the petitioner and he agreed to perform tasks for the petitioner on a temporary employment status
only. However, respondent anchors his claim that he became a regular employee of the petitioner
based on his contention that the "temporary" aspect of his job and its "limited" nature could not have
lasted for eleven years unless some time during that period, he became a regular employee of the
petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular
employee of petitioner. The appellate court's 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. In fact, any agreement may provide that one party shall render services for and in behalf
of another, no matter how necessary for the latter's business, even without being hired as an
employee.23 Hence, respondent's length of service and petitioner's repeated act of assigning
respondent some tasks to be performed did not result to respondent's entitlement to the rights and
privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven
years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor
Code, in which the lower court used to buttress its findings that respondent became a regular
employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said
provision is not the yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits, to join or form a
union, or to security of tenure; it does not apply where the existence of an employment relationship
is in dispute.24 It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in
determining whether an employer-employee relationship exists between respondent and the
petitioner
 47

Considering that there is no employer-employee relationship between the parties, the termination of
respondent's services by the petitioner after due notice did not constitute illegal dismissal warranting
his reinstatement and the payment of full backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of
the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions
dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission are
REINSTATED.

SO ORDERED.