Factual Antecedents
Petitioner Expedition Construction Corporation (Expedition), with
FIRST DIVISION
G.R. No. 228671, December 14, 2017
EXPEDITION CONSTRUCTION CORPORATION, SIMON LEE PAZ, AND
JORDAN JIMENEZ,*Petitioners, v. ALEXANDER M. AFRICA, MARDY
MALAPIT, JESUS ESER, JACOB RONGCALES, JONAMEL CARO, ALFREDO
RILES,* REYNALDO GARCIA, FREDDIE DELA CRUZ, JUNIE AQUIBAN,
CRISINCIO GARCIA,* DINO AQUIBAN, SAMUEL PILLOS, JEFFREY
A.VALENZUELA, ERWIN VELASQUEZ HALLARE AND WILLIAM RAMOS
DAGDAG, Respondents.
DECISION
DEL CASTILLO, J.:
Before us is a Petition for Review on Certiorari with Application for
Temporary Restraining Order and/or Writ of Preliminary
Injunction1 seeking to set aside the March 31, 2016 Decision2 of the
Court of Appeals (CA) in CA G.R. SP No. 142007, which dismissed the
Petition for Certiorari3 filed therewith and affirmed with modification
the April 30, 2015 Resolution4 of the National Labor Relations
Commission (NLRC) by ordering the reinstatement and the payment of
full back wages of respondents Alexander M. Africa, Mardy Malapit,
Jesus Eser, Jacob Rongcales, Jonamel Caro, Alfredo Riles, Reynaldo
Garcia, Freddie Dela Cruz, Junie Aquiban, Crisincio Garcia, Dino
Aquiban, Samuel Pillos, Jeffrey A. Valenzuela, Erwin Velasquez Hallare,
and William Ramos Dagdag (respondents) for having been illegally
dismissed. Likewise assailed is the December 9, 2016 Resolution5 of the
CA denying petitioners' Motion for Reconsideration.6
petitioners Simon Lee Paz and Jordan Jimenez as its Chief Executive
Officer and Operations Manager, respectively, is a domestic
corporation engaged in garbage collection/hauling. It engaged the
services of respondents as garbage truck drivers to collect garbage
from different cities and transport the same to the designated
dumping site.
Respondents filed separate cases7 (which were later on consolidated)
against Expedition for illegal dismissal; underpayment and
non-payment of salaries/wages, holiday pay, holiday premium, rest
day premium, service incentive leave pay, 13th month pay, separation
pay, and Emergency Cost of Living Allowance (ECOLA); illegal
deduction; moral and exemplary damages and attorney's fees. In
their Position Paper,8 respondents alleged that in August 2013, they
were illegally terminated from employment when they were
prevented from entering the premises of Expedition without cause or
due process. They claimed that they were regular employees of
Expedition; were required to work a minimum of 12 hours a day, seven
days a week, even on holidays, without rest or vacation; and, were not
paid the minimum wage, holiday or premium pay, overtime pay,
service incentive leave pay and 13th month pay. They also averred
that the costs of repair and maintenance of the garbage trucks were
illegally deducted from their salaries.
Expedition, in its Position Paper,9 countered that respondents were not
illegally dismissed. It averred that it entered into separate contracts
with the cities of Quezon, Mandaluyong, Caloocan, and Muntinlupa
for the col1ection and transport of their garbage to the dump site;
that it engaged the services of respondents, as dump truck drivers,
who were oftentimes dispatched in Quezon City and Caloocan City;
that the need for respondents' services significantly decreased
sometime in 2013 after its contracts with Quezon City and Caloocan
City were not renewed; and, that it nonetheless tried to
accommodate respondents by giving them intermittent trips
whenever the need arose.
Expedition denied that respondents were its employees. It claimed
that respondents were not part of the company's payroll but were
being paid on a per trip basis. Respondents were not under
Expedition's direct control and supervision as they worked on their own,
were not subjected to company rules nor were required to observe
regular/fixed working hours, and that respondents hired/paid their
respective garbage collectors. As such, respondents' money claims
had no legal basis.
In their Reply,10 respondents insisted that they worked under
Expedition's control and supervision considering that: (1) Expedition
owned the dump trucks; (2) Expedition expressly instructed that the
trucks should be used exclusively to collect garbage in their assigned
areas and transport the garbage to the dump site; (3) Expedition
directed them to park the dump trucks in the garage located at
Group 5 Area Payatas, Quezon, City after completion of each delivery;
and (4) Expedition determined how, where, and when they would
perform their tasks.
Respondents also adverted to petitioners' counsel's manifestation
during the mandatory conciliation proceedings,11 regarding
Expedition's willingness to accept them back to work, as proof of their
status as Expedition's regular employees. To further support their claim,
respondents attached in their Rejoinder12affidavits of Eric
Rosales13 (Rosales) and Roger A. Godoy14 (Godoy), both claiming to
be former employees of Dodge Corporation/Expedition Construction
Corporation and attesting that respondents were regular employees
of Expedition.
Ruling of the Labor Arbiter
In a Decision15 dated June 26, 2014, the LA dismissed respondents'
complaints and held that there was no employer-employee
relationship between Expedition and respondents. The LA did not find
any substantial proof that respondents were regular employees of
Expedition. First, respondents had no fixed salary and were
compensated based on the total number of trips made. Next,
Expedition had no power to terminate respondents. More importantly,
respondents performed their work independent of Expedition's control.
The LA ruled that respondents were independent contractors,
contracted to do a piece of work according to their own method and
without being subjected to the control of Expedition except as to the
results of their work.
Respondents appealed to the NLRC where they insisted that they
were under Expedition's control and supervision and that they were
regular employees who worked continuously and exclusively for an
uninterrupted period ranging from four to 15 years and whose tasks
were necessary and desirable in the usual business of Expedition.
Ruling of the National Labor Relations Commission
In a Resolution16 dated September 30, 2014, the NLRC dismissed
respondents' appeal and affirmed the ruling of the LA. The NLRC
similarly found no evidence of an employer-employee relationship
between Expedition and respondents. The NLRC did not consider as
evidence the alleged admission of petitioners during the mandatory
conciliation conference since statements made in these proceedings
are regarded as privileged communication. Likewise, the affidavits of
Rosales and Godoy did not help respondents' cause as the affiants
were not employees of Expedition but of some other company.
The NLRC opined that respondents were project employees hired for a
specific undertaking of driving garbage trucks, the completion and
termination of which was coterminous with Expedition’s contracts with
the Local Government Units (LGUs). As project employees,
respondents were not dismissed from work but their employment
simultaneously ended when Expedition's contracts with Quezon City
and Caloocan City expired. There being no illegal dismissal, the NLRC re-assigned, the NLRC opted to award separation pay in lieu of
found no basis in awarding respondents their money claims. reinstatement. The dispositive portion of the Resolution reads:

Undaunted, respondents filed a Motion for Reconsideration17 arguing WHEREFORE, complainants-appellants' Motion for
that they were not project employees because the nature of their Reconsideration is hereby PARTLY GRANTED. Our
work was necessary and desirable to Expedition's line of business and Resolution dated 30 September 2014 is MODIFIED finding
that their continuous and uninterrupted employment reaffirmed their employer-employee relationship between complainants
status as regular employees. They averred further that there was no and the respondents and concomitantly the latter is
written contract evidencing project employment nor were they hereby ordered to pay complainants' separation pay at
informed of their status as project employees. They stressed that the rate of ½ month salary for every year of service a
Expedition's right of control over the performance of their work was fraction of at least 6 months to be considered as one (1)
apparent when: (1) they were made to report everyday at the whole year in the following computed amounts:
premises owned by Expedition; (2) there was an express instruction to
report from Monday to Sunday; (3) they were not allowed to engage
1. Alexander M. Africa 426 x 13 x 12 = 66,456
in any other project; (4) they. were mandated to return the hauling
2. Jesus Eser 426 x 13 x 10 = 55,380
truck and park the same at Expedition's premises after the garbage
3. Jonamel Caro 426 x 13 x 12 = 66,456
collection was completed; (5) Expedition determined how, where,
4. Reynaldo Garcia 426 x 13 x 15 = 83,070
and when they would perform their tasks; and, (6) they were not
5. Mardy Malapit 426 x 13 x 14 = 77,532
allowed to collect garbage beyond the area indicated by Expedition.
6. Jacob Rongcales 426 x 13 x 14 = 77,532
7. Alfredo Rilles 426 x 13 x 15 = 83,070
In a Resolution18 dated April 30, 2015, the NLRC partly granted
8. Freddie Dela Cruz 426 x 13 x 5 = 27,690
respondents' motion for reconsideration and modified its earlier
9. Junie Aquiban 426 x 13 x 5 = 27,690
Resolution of September 30, 2014. This time, the NLRC ruled that
10. Dino Aquiban 426 x 13 x 4 = 22,152
respondents were employees of Expedition in view of Expedition's
11. Samuel G. Pillos 426 x 13 x 5 = 27,690
admission that it hired and paid respondents for their services. The
12. William Dagdag 426 x 13 x 14 = 77,532
NLRC was also persuaded that Expedition exercised control on when
13. Crisincio Garcia 426 x 13 x 12 = 66,456
and how respondents would collect garbage.
14. Jeffrey A. Valenzuela 426 x 13 x 5 = 27,690
15. Erwin V. Hallare 426 x 13 x 9 = 49,842
The NLRC, however, sustained its earlier finding that there was no
illegal dismissal ratiocinating that respondents were merely placed on
a floating status when the contract with Quezon City and Caloocan
The rest of Our resolution is hereby AFFIRMED.
City expired and thus were merely waiting to be re-assigned to other
similar work. As there was no dismissal to speak of, the NLRC ordered
SO ORDERED.19
respondents’ reinstatement but without the payment of back wages.
However, due to lack of clients where respondents could be
Expedition filed a Motion for Reconsideration20 attributing error on the
NLRC in ruling that there was an employer-employee relationship and
in awarding separation pay despite the finding that there was no
illegal dismissal. Expedition also questioned the NLRC's computation of
separation pay and sought the remand of the case to the LA for
proper determination of the correct amount. This motion, however,
was denied by the NLRC in its Resolution21 of June 30, 2015.
Expedition sought recourse to the CA via a Petition for Certiorari.22
Ruling of the Court of Appeals
On March 31, 2016, the CA rendered a Decision23 dismissing
Expeditions Petition for Certiorari and ruling in favor of respondents.
The CA affirmed the April 30, 2015 Resolution of the NLRC insofar as the
existence of an employer-employee relationship between the parties.
The CA noted that respondents were hired and paid by Expedition.
Further, Expedition exercised the power to provide and withhold work
from respondents. Most importantly, the power of control was evident
since Expedition determined how, where and when respondents
would perform their tasks. The CA held that the respondents needed
Expedition's instruction and supervision in the performance of their
duties. The CA likewise ruled that respondents were regular employees
entitled to security of tenure because they continuously worked for
several years for the company, an indication that their duties were
necessary and desirable in the usual business of Expedition.
The CA, however, did not agree with the NLRC that respondents were
on floating status since petitioners did not adduce proof of any dire
exigency justifying failure to give respondents any further assignments.
The CA observed that the irregular dispatch of respondents due
allegedly to the decrease in the need for drivers led to the eventual
discontinuance of respondents' services and ultimately, their illegal
termination. Accordingly, the CA ruled that respondents were illegally
dismissed when Expedition prevented them from working, and
consequently, ordered their reinstatement with full back wages. The
dispositive portion of the Decision reads:
FOR THESE REASONS, the petition is DISMISSED. The
Decision of the National Labor Relations Commission
dated April 30, 2015 is hereby AFFIRMED with
MODIFICATIONS. The respondents were illegally dismissed,
and are thus entitled to reinstatement with full
backwages from the time of illegal dismissal up to the
finality of this Decision and attorney's fee equivalent to
ten percent (10%) of the total monetary award. The
monetary awards herein granted shall earn legal interest
at the rate of six percent (6%) per annum from the date
of the finality of this Decision until fully paid. The case is
remanded to the Labor Arbiter for the computation of
respondents' monetary awards.
SO ORDERED.24
Expedition filed a Motion for Reconsideration25 on the ground that the
CA erred in finding that respondents were its employees and that
respondents were illegally dismissed. It impugned the award of
reinstatement and back wages in favor of respondents, submitting
that an amount of financial assistance would be the more equitable
remedy for respondents' cause. It, then, manifested its willingness to
offer financial assistance to respondents in the amounts equivalent to
the separation pay awarded to respondents in the April 30, 2015 NLRC
Resolution.
Expedition's motion was, however, denied by the CA in its
Resolution26 dated December 9, 2016.
Issues
Hence, Expedition filed this instant Petition presenting the following
grounds for review:
 [1.] THE COURT OF APPEALS GRAVELY ERRED WHEN IT
UPHELD THE NLRC'S FINDING THAT THERE WAS AN
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PETITIONER
CORPORATION AND RESPONDENTS.
[2.] EVEN ASSUMING ARGUENDO THAT THERE WAS
EMPLOYER-EMPLOYEE RELATIONSHIP, THE COURT OF
APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS
WERE REGULAR EMPLOYEES.
[3.] THE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT RESPONDENTS WERE ILLEGALLY DISMISSED.
[4.] AGAIN, EVEN ASSUMING THAT RESPONDENTS WERE
REGULAR EMPLOYEES AND THAT THEY HAD BEEN
ILLEGALLY DISMISSED, THE COURT OF APPEALS GRAVELY
ERRED WHEN IT AWARDED REINSTATEMENT WITH FULL
BACKWAGES INSTEAD OF SEPARATION PAY ONLY.27
Expedition maintains that it did not exercise the power of selection or
engagement, payment of wages, dismissal, and control over
respondents. The CA, thus, had no legal basis in finding that
respondents were its employees, much less had regular employment
status with it. Expedition likewise insists that there was no illegal
dismissal and that the CA erred in awarding reinstatement and
backwages instead of separation pay, which was prayed for by
respondents.
Our Ruling
The Petition is partly granted.
Respondents were regular employees of Expedition.
At the outset, it bears emphasis that the question of whether or not
respondents were employees of Expedition is a factual issue. It is
settled that only questions of law may be raised in a petition for review
on certiorari filed under Rule 45.28 However, there are also recognized
exceptions to this rule, one of which is when the factual findings of the
labor tribunals are contradictory to each other,29 such as obtaining in
the case at bar.
Jurisprudence has adhered to the four-fold test in determining the
existence of an employer-employee relationship, 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'".30
In ruling that respondents were employees of Expedition, the CA found
all the elements of employer-employee relationship to be present. As
shown in the records, Expedition hired respondents as dump truck
drivers and paid them the amount of P620.00 per trip. The CA held that
Expedition wielded the power to dismiss respondents based on
Expedition's admission that when the dispatch of drivers became
irregular, it tried to accommodate them by giving trips when the need
arose. The control test was likewise established because Expedition
determined how, where, and when respondents would perform their
tasks.
Expedition, however, proffers that the actual findings of the CA on this
matter had no legal basis. It claims that respondents were never hired
but were merely engaged as drivers; that they worked on their own
and were not subjected to its control and supervision; that they were
compensated based on output or number of trips made in a day; that
they selected their own garbage collectors, chose their own route and
determined the manner by which they would collect the garbage;
and, that they performed their work at their own pleasure without fear
of being sanctioned if they chose not to report for work.
The Court finds Expedition's position untenable. First, as clearly
admitted, respondents were engaged/hired by Expedition as
garbage truck drivers. Second, it is undeniable that respondents
received compensation from Expedition for the services that they
rendered to the latter. The fact that respondents were paid on a per
trip basis is irrelevant in determining the existence of an
employer-employee relationship because this was merely the method
of computing the proper compensation due to respondents.31 Third,
Expedition's power to dismiss was apparent when work was withheld
from respondents as a result of the termination of the contracts with
Quezon City and Caloocan City. Finally, Expedition has the power of
control over respondents in the performance of their work. It was held
that "the power of control refers merely to the existence of the power
and not to the actual exercise thereof.”32 As aptly observed by the CA,
the agreements for the collection of garbage were between
Expedition and the various LGUs, and respondents needed the
instruction and supervision of Expedition to effectively perform their
work in accordance with the stipulations of the agreements.
Moreover, the trucks driven by respondents were owned by Expedition.
There was an express instruction that these trucks were to be
exclusively used to collect and transport garbage. Respondents were
mandated to return the trucks to the premises of Expedition after the
collection of garbage. Expedition determined the clients to be served,
the location where the garbage is to be collected and when it is to be
collected. Indeed, Expedition determined how, where, and when
respondents would perform their tasks.
Respondents were neither independent contractors nor project
employees. There was no showing that respondents have substantial
capital or investment and that they were performing activities which
were not directly related to Expedition's business to be qualified as
independent contractors.33 There was likewise no written contract that
can prove that respondents were project employees and that the
duration and scope of such employment were specified at the time
respondents were engaged. Therefore, respondents should be
accorded the presumption of regular employment pursuant to Article
280 of the Labor Code which provides that "employees who have
rendered at least one year of service, whether such service is
continuous or broken x x x shall be considered [as] regular employees
with respect to the activity in which they are employed and their
employment shall continue while such activity exists."34Furthermore,
the fact that respondents were performing activities which were
directly related to the business of Expedition confirms the conclusion
that respondents were indeed regular employees.35
Having gained regular status, respondents were entitled to security of
tenure and could only be dismissed for just or authorized cause after
they had been accorded due process. Thus, the queries: Were
respondents dismissed? Were they dismissed in accordance with law?
There was no illegal dismissal.
In illegal dismissal cases, the employer has the burden of proving that
the termination was for a valid or authorized cause. However, it is
likewise incumbent upon an employee to first establish by substantial
evidence the fact of his dismissal from employment36 by positive and
overt acts of an employer indicating the intention to dismiss.37 It must
also be stressed that the evidence must be clear, positive and
convincing.38 Mere allegation is not proof or evidence.39
In this case, there was no positive or direct evidence to substantiate
respondents' claim that they were dismissed from employment. Aside
from mere assertions, the record is bereft of any indication that
respondents were barred from Expedition's premises. If at all, the
evidence on record showed that Expedition intended to give
respondents new assignments as a result of the termination of the
garbage hauling contracts with Quezon City and Caloocan City
where respondents were regularly dispatched. Despite the loss of
some clients, Expedition tried to accommodate respondents and
offered to engage them in other garbage hauling projects with other
LGUs, a fact which respondents did not refute. However, instead of
returning and waiting for their next assignments, respondents instituted
an illegal dismissal case against Expedition. Note that even during the
mandatory conciliation and mediation conference between the
parties, Expedition manifested its willingness to accept respondents
back to work. Unfortunately, it was respondents who no longer wanted
to return to work. In fact, in their complaints, respondents prayed for
the payment of separation pay instead of reinstatement.
Here, there was no sufficient proof that respondents were actually laid
off from work. Thus, the CA had no basis in ruling that respondents'
employment was illegally terminated since the fact of dismissal was
not adequately supported by substantial evidence. There being no
dismissal, the status quo between respondents and Expedition should
be maintained. However, it cannot be denied that their relationship
has already been ruptured in that respondents are no longer willing to
be reinstated anymore. Under the circumstances, the Court finds that
the grant of separation pay as a form of financial assistance is
deemed equitable.
As a measure of social justice, the award of separation pay/financial
assistance has been upheld in some cases40 even if there is no finding
of illegal dismissal. The Court, in Eastern Shipping Lines, Inc. v.
Sedan,41 had this to say:
x x x We are not unmindful of the rule that financial
assistance is allowed only in instances where the
employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral
character. Neither are we unmindful of this Court's
pronouncements in Arc-Men Food Industries Corporation
v. NLRC, and Lemery Savings and Loan Bank v. NLRC,
where the Court ruled that when there is no dismissal to
speak of, an award of financial assistance is not in order.
But we must stress that this Court did allow, in several
instances, the grant of financial assistance. In the words
of Justice Sabino de Leon, Jr., now deceased, financial
assistance may be allowed as a measure of social justice
[under] exceptional circumstances, and as an equitable
concession. The instant case equally calls for balancing
the interests of the employer with those of the worker, if
only to approximate what Justice Laurel calls justice in its
secular sense.
In a Manifestation42 submitted before the CA, Expedition expressed
willingness to extend gratuitous assistance to respondents and to pay
them the amounts equivalent to the separation pay awarded to each
respondent in the April 30, 2015 NLRC Resolution. In view of this and
taking into account respondents' long years of service ranging from
four to 15 years, the Court finds that the grant of separation pay at the
rate of one-half (½) month's salary for every year of service, as
adjudged in the April 30, 2015 Resolution of the NLRC, is proper.
WHEREFORE, the Petition for Review on Certiorari is PARTLY GRANTED.
The assailed Decision dated March 31, 2016 and Resolution dated
December 9, 2016 of the Court of Appeals in CA-G.R. SP No. 142007
are AFFIRMED with MODIFICATION that the awards of reinstatement,
back wages, attorney's fees and legal interest are DELETED there being
no illegal dismissal. The award of separation pay, as a form of financial
assistance, in the National Labor Relations Commission's Resolution
dated April 30, 2015 is REINSTATED.
SO ORDERED.
 Facts

Sumifru is a domestic corporation and is the surviving corporation after

its merger with Fresh Banana Agricultural Corporation (FBAC) in
2008. 7 FBAC was engaged in the buying, marketing, and exportation
of Cavendish bananas. 8

Respondent Nagkahiusang Mamumuo sa Suyapa Farm (NAMASUF

FIRST DIVISION
ANAFLU-KMU) (NAMASUFA) is a labor organization affiliated with the
National Federation of Labor Unions and Kilusang Mayo Uno. 9
June 7, 2017

The CA summarized the start of the proceedings with the Med-Arbiter

G.R. No. 202091
as follows:
SUMIFRU (PHILIPPINES) CORP. (surviving entity of a merger with Fresh
Banana Agricultural Corporation and other corporations), Petitioner
vs.
NAGKAHIUSANG MAMUMUO SA SUYAPA
FARM1 (NAMASUFA-NAFLU-KMU), Respondent
DECISION
CAGUIOA, J.:
Before the Court is a Petition for Review on Certiorari 2 under Rule 45 of
the Rules of Court filed by petitioner Sumifru (Philippines) Corp.
(Sumifru), assailing the Decision 3 dated February 8, 2012 and
Resolution 4 dated May 18, 2012 of the Court of Appeals (CA) in
CA-G.R. SP No. 03574. The CA affirmed the Resolution dated February
8, 2010 5 of the Secretary of the Department of Labor and Employment
(DOLE) which, in turn, affirmed the Order dated July 28, 2008 6 of DOLE
Regional Office No. XI Circuit Mediator-Arbiter (Med-Arbiter), which
ordered the conduct of certification election of the rank-and-file
employees of Sumifru in P-1 Upper Siocon, Compostela, Comval
Province.
On March 14, 2008, the private respondent
Nagkahiusang Mamumuo sa Suyapa Farm (NAMASUF
A-NAFLU-KMU), a legitimate labor organization, filed a
Petition for Certification Election before the Department
of Labor and Employment, Regional Office No. XI in
Davao City. NAMASUFA sought to represent all
rank-and-file employees, numbering around one
hundred forty, of packing plant 90 (PP 90) of Fresh
Banana Agricultural Corporation (FBAC). NAMASUF A
claimed that there was no existing union in the
aforementioned establishment.
On May 9, 2008 FBAC filed an Opposition to the Petition.
It argued that there exists no employer-employee
relationship between it and the workers involved. It
alleged that members of NAMASUF A are actually
employees of A2Y Contracting Services (A2Y), a duly
licensed independent contractor, as evidenced by the
payroll records of the latter.
NAMASUFA, in its Comment to Opposition countered,
among others, that its members were former workers of
 Stanfilco before FBAC took over its operations sometime
in 2002. The said former employees were then required to
join the Compostela Banana Packing Plant Workers'
Cooperative (CBPPWC) before they were hired and
allowed to work at the Packing Plant of FBAC. It further
alleged that the members of NAMASUF A were working
at PP 90 long before A2Y came.
In June 20, 2008, pending resolution of the petition, FBAC
was merged with SUMIFRU, the latter being the surviving
corporation. 10
On July 28, 2008, the DOLE Med-Arbiter issued an Order granting the
Petition for Certification Election of NAMASUF A and declared that
Sumifru was the employer of the workers concerned. The dispositive
portion of the Order states:
WHEREFORE, premises considered, the petition for certification election
filed by Nagkahiusang Mamumuo sa Suyapa Farm (NAMASUFA) -
NAFLU - KMU is hereby GRANTED. Let a certification election among
the rank-and-file workers of Fresh Banana Agricultural Corporation be
conducted at the company premises located at P-1 Upper Siocon,
Compostela, Comval Province with the following as choices:
1. Nagkahiusang Mamumuo sa Suyapa Farm (NAMASUF A) - NAFLU
-KMU; and
2. No Union
Let the entire records of this case be forwarded to Comval Field Office,
this Department, for the usual pre-election conference.
The employer Fresh Banana Agricultural Corporation is
hereby DIRECTED to submit within five (5) days from receipt of this
Order, a certified list of the rank-and-file employees in the
establishment or the payrolls covering the members of the bargaining
unit for the last three (3) months prior to the issuance of this Order.
SO ORDERED. 11
In ruling that an employer-employee relationship existed, the
MedArbiter stated:
The "four-fold test" will show that respondent FBAC is the
employer of petitioner's members. The elements to
determine the existence of an employment relationship
are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal;
and (d) the employer's power to control the employee's
conduct. The most important element is the employer's
control of the employee's conduct, not only as to the
result of the work to be done, but also as to the means
and methods to accomplish it.
On the first factor, (selection and engagement of the
employer), it is apparent that the staff of respondent
FBAC advised those who are interested to be hired in the
Packing Plant to become members first of CBPPWC and
get a recommendation from it.
On the second factor (payment of wages), while the
respondent tried to impress upon us that workers are
paid by A2Y Contracting Services, this at best is but an
administrative arrangement. We agree with petitioner
that the payroll summary submitted does not contain the
relevant information such as the employee's rate of pay,
deductions made and the amount actually paid to the
employee.
On the third factor, (the power of dismissal), it is very
clear that respondent FBAC is the authority that imposes
 disciplinary measures against erring workers. This alone
proves that it wields disciplinary authority over them.
Finally, on the fourth factor which is the control test, the
fact that the respondent FBAC gives instructions to the
workers on how to go about their work is sufficient
indication that it exercises control over their movements.
The workers are instructed as to what time they are
supposed to report and what time they are supposed to
return. They were required to fill up monitoring sheets as
they go about their jobs and even the materials which
they used in the packing plant were supplied by FBAC.
Viewed from the above circumstances, it is clear that
respondent FBAC is the real employer of the workers of
Packing Plant 90. They are in truth and in fact the
employees of the respondent and its attempt to seek
refuge on A2Y Contracting Services as the ostensible
employer was nothing but an elaborate scheme to
deprive them their right to self-organization. 12
Sumifru appealed to the DOLE Secretary and in a Resolution dated
February 8, 2010, the DOLE Secretary dismissed the appeal, the
dispositive portion of which states:
WHEREFORE, considering the foregoing, the appeal is
hereby PISMISSED for lack of merit and the assailed
Order dated 28 July 2008 of DOLE Regional Office No. XI
Circuit Mediator-Arbiter Gerardine A. Jamora
is AFFIRMED.
Let the entire records of this case be remanded to the
Regional Office of origin for the immediate conduct of a
certification election subject to the usual pre-election
conference.
SO RESOLVED.13
The DOLE Secretary ruled that Sumifru is the true employer of the
workers, as follows:
In the present case, it is undisputed that CBPPWC is
supplying workers to FBAC (now Sumifru). In fact, FBAC
required its applicants to become members of the
cooperative first and seek recommendation from it
before hiring them. Appellant Sumifru failed to proffer
evidence to prove that CBPPWC is duly registered under
Department Order No. 18-02. Also, it does not appear on
record that CBPPWC possesses substantial capital or
investment in relation with the work or services that are
being performed by its members and that the
employees placed by CBPPWC in Sumifru are performing
activities distinct and independent from that of the main
business of Sumifru. As such, this Office is inclined to
believe that CBPPWC is engaged in labor-only
contracting and the true employer of the subject
workers is Sumifru.
The alleged partnership agreement between CBPPWC
and A2Y is of no moment. It is well-settled that mere
allegation without evidence to prove the same is
self-serving that should not be given weight in any
proceedings. Nonetheless, even if the alleged
agreement indeed took place, the four-fold test in
determining the existence of an employer-employee
relationship still points to Sumifru as the employer.
xxxx
In this case, Sumifru's control over the subject employees
is evident. The fact that the subject workers are required
by Sumifru to fill up monitoring sheets as they go about
 their jobs and the imposition of disciplinary actions for
non-compliance with the "No Helmet - No Entry and No
ID - No Entry" policies prove that it is indeed Sumifru, and
not A2Y Contracting Services, that exercises control over
the conduct of the subject workers. 14
Sumifru then filed a Petition for Certiorari with the CA raising the issue of
whether the DOLE Secretary committed grave abuse of discretion in
declaring it as the employer of the workers at PP 90.15 But the CA
dismissed the petition. The dispositive portion of the CA Decision states:
WHEREFORE, finding no grave abuse of discretion on the
part of the public respondent, the petition is DENIED. The
Resolution dated February 8, 2010 issued by the public
respondent Honorable Secretary of the Department of
Labor and Employment is hereby AFFIRMED.
SO ORDERED. 16
The CA ruled that the DOLE Secretary did not commit grave abuse of
discretion because the latter's ruling that Sumifru was the employer of
the workers was anchored on substantial evidence, thus:
SUMIFRU raises the same issue of non-existence of
employeremployee relationship, which had been
squarely resolved in the negative by the Med-Arbiter
and the DOLE Secretary. We find no traces of abuse in
discretion in the ruling of the DOLE Secretary anchored
as it is on substantial evidence.
The Court has consistently applied the "four-fold test" to
determine the existence of an employer-employee
relationship: the employer (a) selects and engages the
employee; (b) pays his wages; (c) has power to dismiss
him; and (d) has control over his work. Of these, the most
crucial is the element of control. Control refers to the
right of the employer, whether actually exercised or
reserved, to control the work of the employee as well as
the means and methods by which he accomplishes the
same.
In this case, the records are replete with evidence which
would show that SUMIFRU has control over the
concerned workers, to wit:
1. FBAC memorandum on "Standardized Packing Plant
Breaktime";
2. Material Requisition for PP 90;
3. Memorandum dated February 9, 2008 on "no helmet,
no entry" policy posted at the packing plant;
4. Memorandum dated October 15, 2007 on "no ID, no
entry policy";
5. Attendance Sheet for General Assembly Meeting
called by FBAC on February 18[,] 2004;
6. Attendance Sheet for Packers ISO awareness seminar
on February 11, 2004 called by FBAC;
7. FBAC Traypan Fruit Inspection Packer's Checklist issued
by FBAC for the use of workers in the Packing Plant;
8. FBAC KD Gluing Pattern Survey.
The above orders issued by SUMIFRU/FBAC would show
that not only does it have control over the results of the
workers in PP 90 but also in the manners and methods of
its accomplishment. 17
The CA, after reviewing the records, accorded respect to the findings
of facts of the DOLE Secretary, which affirmed the Med-Arbiter, as they
have special knowledge and expertise over matters under their
jurisdiction. The CA ruled:
As stated beforehand, there is no cogent reason to set
aside the ruling of the DOLE Secretary which affirmed the
findings of the Med-Arbiter.1âwphi1 By reason of their
special knowledge and expertise over matters falling
under their jurisdiction, they are in a better position to
pass judgment thereon and their findings of fact in that
regard are generally accorded respect and even finality
by the courts when supported by substantial evidence,
as in this case. 18
Sumifru moved for reconsideration but the CA denied this in its
Resolution dated May 18, 2012.
Hence, this Petition.
Issues
As stated in its Petition, Sumifru raised the following:
THE COURT OF APPEALS COMMITTED PALPABLE MISTAKE
AND RULED CONTRARY TO LAW AND SETTLED
JURISPRUDENCE WHEN IT AFFIRMED THE FINDINGS OF THE
DOLE SECRETARY AND CONCLUDED THAT HEREIN
PETITIONER, SUMIFRU, IS THE EMPLOYER OF THE WORKERS
ENGAGED BY THE COOPERATIVE AND/OR A2Y FOR THE
UPPER SIOCON GROWERS' PACKAGING OPERATIONS IN
PACKING PLANT 90.
A. A2Y Contracting Services was engaged either by the
Upper Siocon Growers or the Cooperative for the
packing operations at PP 90.
B. Even assuming, for the sake of argument, that the
Cooperative and/or A2Y are not legitimate labor
contractors, only the Upper Siocon Growers, and not
SUMIFRU, may be deemed the employer of the workers
at PP 90.
C. The Department of Labor and Employment
committed grave and palpable mistake when it grossly
misapprehended the facts and evidence on record,
that if properly appreciated will clearly establish that
SUMIFRU is not the employer of the members of
NAMASUFA working at PP 90.
D. The reliance on the alleged inconsistencies in the
pleadings submitted by SUMIFRU is misplaced as there
are no inconsistencies at all. 19 (Emphasis omitted)
The Court's Ruling
The Petition is denied.
Sumifru's arguments raise questions of facts. Indeed, it even submitted
to this Court, as annexes to its Petition, the very same evidence it had
presented before the Med-Arbiter, the DOLE Secretary, and the CA in
its attempt to try to convince the Court that the members of
NAMASUFA are not its employees.
It is fundamental that in a petition for review on certiorari, the Court is
limited to only questions of law.1âwphi1 As specifically applied in a
labor case, the Court is limited to reviewing only whether the CA was
correct in determining the presence or absence of grave abuse of
discretion on the part of the DOLE Secretary. Thus, in Holy Child
Catholic School v. Sta. Tomas, 20 the Court ruled:
Our review is, therefore, limited to the determination of
whether the CA correctly resolved the presence or
 absence of grave abuse of discretion in the decision of
the [Secretary of Labor and Employment (SOLE)], not on
the basis of whether the latter's decision on the merits of
the case was strictly correct. Whether the CA committed
grave abuse of discretion is not what is ruled upon but
whether it correctly determined the existence or want of
grave abuse of discretion on the part of the SOLE. 21
FFW v. Court of Appeals, 22 findings of fact of quasi-judicial agencies
are entitled to great respect when they are supported by substantial
evidence and, in the absence of any showing of a whimsical or
capricious exercise of judgment, the factual findings bind the Court:
We take this occasion to emphasize that the office of a
petition for review on certiorari under Rule 45 of the Rules
of Court requires that it shall raise only questions of law.
The factual findings by quasi-judicial agencies, such as
the Department of Labor and Employment, when
supported by substantial evidence, are entitled to great
respect in view of their expertise in their respective fields.
Judicial review of labor cases does not go so far as to
evaluate the sufficiency of evidence on which the labor
official's findings rest. It is not our function to assess and
evaluate all over again the evidence, testimonial and
documentary, adduced by the parties to an appeal,
particularly where the findings of both the trial court
(here, the DOLE Secretary) and the appellate court on
the matter coincide, as in this case at bar. The Rule limits
that function of the Court to the review or revision of
errors of law and not to a second analysis of the
evidence. Here, petitioners would have us re-calibrate all
over again the factual basis and the probative value of
the pieces of evidence submitted by the Company to
the DOLE, contrary to the provisions of Rule 45. Thus,
absent any showing of whimsical or capricious exercise
of judgment, and unless lack of any basis for the
conclusions made by the appellate court be amply
demonstrated, we may not disturb such factual
findings. 23 (Emphasis supplied.)1âwphi1
Here, the CA was correct in finding that the DOLE Secretary did not
commit any whimsical or capricious exercise of judgment when it
found substantial evidence to support the DOLE Secretary's ruling that
Sumifru was the employer of the members of NAMASUFA.
As defined, substantial evidence is "that amount of relevant evidence
as a reasonable mind might accept as adequate to support a
conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise."24Here, the Med-Arbiter found, based on
documents submitted by the parties, that Sumifru gave instructions to
the workers on how to go about their work, what time they were
supposed to report for work, required monitoring sheets as they went
about their jobs, and provided the materials used in the packing
plant. 25
In affirming the Med-Arbiter, the DOLE Secretary relied on the
documents submitted by the parties and ascertained that Sumifru
indeed exercised control over the workers in PP 90. The DOLE Secretary
found that the element of control was present because Sumifru
required monitoring sheets and imposed disciplinary actions for
non-compliance with "No Helmet - No Entry" "No ID - No Entry"
policies. 26
In turn, the CA, even as it recognized that the findings of facts of the
DOLE Secretary and the Med-Arbiter were binding on it because they
were supported by substantial evidence, even went further and itself
reviewed the records - to arrive, as it did arrive, at the same conclusion
reached by the DOLE Secretary and Med-Arbiter: that is, that Sumifru
exercised control over the workers in PP 90. 27
In light of the foregoing, the Court cannot re-calibrate the factual
bases of the Med-Arbiter, DOLE Secretary, and the CA, contrary to the
provisions of Rule 45, especially where, as here, the Petition fails to
show any whimsicality or capriciousness in the exercise of judgment of
the Med-Arbiter or the DOLE Secretary in finding the existence of an
employer-employee relationship.

WHEREFORE, premises considered, the petition for review is

hereby DENIED. The Decision of the Court of Appeals dated February 8,
2012 and Resolution dated May 18, 2012 are hereby AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
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 Decision1 dated May 31, 2005 of the Court of Appeals (CA) in
CA-G.R. SP No. 87846, and the Resolution2 dated August 23, 2005
denying petitioner’s 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 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 ₱3,000.00 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
Complaint4 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 Complaint6 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 company’s
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
₱3,000.00 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, Atok’s 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
partnership, which is about 5 million pesos worth of equipment and
condonation of Atok’s accountabilities with Benguet Corporation in
the amount of ₱900,000.00.
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 Atok’s 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
Decision8 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
Resolution9 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
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 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
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

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.

FIRST DIVISION
G.R. No. 194765, April 23, 2018
MARSMAN & COMPANY, INC., Petitioner, v. RODIL C. STA.
RITA, Respondent.
DECISION
LEONARDO-DE CASTRO,[*] J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court filed by Marsman & Company, Inc. (Marsman), now
Metro Alliance Holdings & Equities Corporation, seeking the annulment
and reversal of the Decision 1 dated June 25, 2010 and the
Resolution2 dated December 9, 2010 of the Court of Appeals in
CA-G.R. SP No. 106516. The appellate court's issuances reversed the
Decision3 dated July 31, 2008 of the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 30-01-00362-00 (NLRC CA
No. 032892-02) dismissing respondent Rodil C. Sta. Rita's (Sta. Rita's)
complaint and the Resolution4 denying his motion for reconsideration.
The Court of Appeals instead found Marsman guilty of illegal dismissal
and ordered the company to pay for backwages, separation pay,
moral damages, exemplary damages and attorney's fees.
Marsman, a domestic corporation, was formerly engaged in the
business of distribution and sale of pharmaceutical and consumer
products for different manufacturers within the country.5 Marsman
purchased Metro Drug Distribution, Inc. (Metro Drug), now Consumer
Products Distribution Services, Inc. (CPDSI), which later became its
business successor-in-interest. The business transition from Marsman to
CPDSI generated confusion as to the actual employer of Sta. Rita at
the time of his dismissal.
Marsman temporarily hired Sta. Rita on November 16, 1993 as a
warehouse helper with a contract that was set to expire on April 16,
1994, and paid him a monthly wage of P2,577.00. After the contract
expired, Marsman rehired Sta. Rita as a warehouseman and placed
him on probationary status on April 18, 1994 with a monthly salary of
P3,166.00.6 Marsman then confirmed Sta. Rita's status as a regular
employee on September 18, 1994 and adjusted his monthly wage to
P3,796.00. Later, Sta. Rita joined Marsman Employees Union (MEU), the
recognized sole and exclusive bargaining representative of Marsman's
employees.7
Marsman administered Sta. Rita's warehouse assignments. Initially,
Marsman assigned Sta. Rita to work in its GMA warehouse. Marsman
then transferred Sta. Rita to Warehouses C and E of Kraft General
Foods, Inc. on September 5, 1995. Thereafter, Marsman reassigned Sta.
Rita to Marsman Consumer Product Division Warehouse D in ACSIE,
Parañaque.8
Sometime in July 1995, Marsman purchased Metro Drug, a company
that was also engaged in the distribution and sale of pharmaceutical
and consumer products, from Metro Pacific, Inc. The similarity in
Marsman's and Metro Drug's business led to the integration of their
employees which was formalized in a Memorandum of
Agreement,9 dated June 1996, which provides:
MARSMAN & COMPANY, INC.
City of Makati
MEMORANDUM OF AGREEMENT
MARSMAN AND CO., INC. hereinafter referred to as the
MANAGEMENT, represented by MR. JOVEN D. REYES,
Group President and Chief Executive Officer and the
MARSMAN EMPLOYEES UNION-PSMM/DFA as the Union,
represented hereinafter by MR. BONIFACIO M.
PANALIGAN, PSMM President,
WITNESSETH, THAT:
WHEREAS, Marsman Employees Union-PSMM/DFA is the
recognized sole and exclusive bargaining representative
of Marsman & Co., Inc. regular employees in the rank
and file and non-managerial category except those
excluded in Article I, Section 2 of their existing CBA
signed last June 1995;
WHEREAS, Marsman & Co. Inc. bought Metro Drug
Distribution, Inc. from Metro Pacific Inc. last July, 1995;
WHEREAS, the Management of Marsman & Co., Inc.
decided to limit Marsman & Co. Inc.'s, functions to those
of a holding company and run Metro Drug Distribution,
Inc. as the main operating company;
WHEREAS, in view of this, Management decided to
integrate the employees of Marsman & Co. Inc. and
Metro Drug Distribution, Inc. effective July 1, 1996 under
the Metro Drug legal entity;
THEREFORE, Management and Marsman Employees
Union PSMM/DFA agree: .
1. That, the Union acknowledges Management's decision
to transfer all employees of Marsman, including
members of MEU-PSMM/DFA, to Metro Drug Distribution,
Inc.
2. That, the Management recognizes the Marsman
Employees Union-PSMM/DFA as the exclusive bargaining
representative of all the rank and file employees
transferred from Marsman & Co. Inc. to Metro Drug
Distribution, Inc. and the other employees who may join
the Union later.
3. That, the name of Marsman Employees
Union-PSMM/DFA is retained.
4. That, the tenure or service years of all employees
transferred shall be recognized and carried over and will
be included in the computation/consideration of their
retirement and other benefits.
5. That, the provisions of the existing Collective
Bargaining Agreement signed last June 1995 and the
Memorandum of Agreement signed also last June 1995
will be respected, honored and continue to be
implemented until expiry or until superseded as per item
8 below.
6. That, there will be no diminution of present salaries and
benefits being enjoyed even after the transfer.
7. That, upon transfer of MCI employees to Metro Drug
Distribution, Inc. all employees covered by the CBA or
otherwise shall enjoy the same terms and conditions of
employment prior to transfer and shall continue to enjoy
the same including company practice until a new CBA is
concluded.
8. That, all of the above rights and obligations of the
parties pertaining to the recognition of the union as
exclusive bargaining representative, the effectivity,
coverage and validity of the CBA and all other issues
 relative to the representation of the former Marsman
employees are subject to and be superseded by the
result of a Certification Election between Marsman
Employees Union-PSMM/DFA and Metro Drug Corp. MARSMAN EMPLOYEES UNION-PSSM/DFA
Employees Association-FFW in 1996 or at a date to be
agreed upon by MEU and MDCEA as coordinated by (signed)
the DOLE, and by any agreement that may be entered
into by management and the winner in said certification BONIFACIO M. PANALIGAN
election.

9. That, upon transfer, the Management agrees to President

address all pending/unresolved grievances and issues
lodged by Marsman Employees Union-PSMM/DFA.

10. That, also upon transfer, the Management agrees to Witnessed by:
continue negotiation of Truckers and Forwarders issue as
stipulated in the MOA signed last June, 1995.
(signed)
JOSE MILO M. GILLESANIA
11. That, Management and Union may continue to LUISITO N. REYES
1st Vice-President
negotiate/discuss other concerns/issues with regard to Vice-President
MEU-PSMM/DFA
the transfer and integration. Finance & Administration

IN WITNESS WHEREOF, the parties have caused this

document to be executed by their authorized
representatives this ______day of June, 1996 at Makati
Attested by:
City. [Emphases supplied.]
(signed)
ABNER M. PADILLA
MARSMAN & COMPANY, INC. Conciliator-Mediator
NCMB, DOLE
(signed)

Concomitant to the integration of employees is the transfer of all office,

JOVEN D. REYES sales and warehouse personnel of Marsman to Metro Drug and the
President & Chief Exec. Officer latter's assumption of obligation with regard to the affected
employees' labor contracts and Collective Bargaining Agreement.
The integration and transfer of employees ensued out of the transitions
of Marsman and CPDSI into, respectively, a holding company and an
operating company. Thereafter, on November 7, 1997, Metro Drug
amended its Articles of Incorporation by changing its name to
"Consumer Products Distribution Services, Inc." (CPDSI) which was
approved by the Securities and Exchange Commission.10
In the meantime, on an unspecified date, CPDSI contracted its logistic
services to EAC Distributors (EAC). CPDSI and EAC agreed that CPDSI
would provide warehousemen to EAC's tobacco business which
operated in EAC-Libis Warehouse. A letter issued by Marsman
confirmed Sta. Rita's appointment as one of the warehousemen for
EAC-Libis Warehouse, effective October 13, 1997, which also stated
that the assignment was a "transfer that is part of our cross-training
program."11
Parenthetically, EAC's use of the EAC-Libis Warehouse was dependent
upon the lease contract between EAC and Valiant Distribution
(Valiant), owner of the EAC-Libis Warehouse. Hence, EAC's operations
were affected when Valiant decided to terminate their contract of
lease on January 31, 2000. In response to the cessation of the contract
of lease, EAC transferred their stocks into their own warehouse and
decided to operate the business by themselves, thereby ending their
logistic service agreement with CPDSI.12
This sequence of events left CPDSI with no other option but to
terminate the employment of those assigned to EAC-Libis Warehouse,
including Sta. Rita. A letter13 dated January 14, 2000, issued by Michael
Leo T. Luna, CPDSI's Vice-President and General Manager, notified Sta.
Rita that his services would be terminated on February 28, 2000 due to
redundancy. CPDSI rationalised that they could no longer
accommodate Sta. Rita to another work or position. CPDSI however
guaranteed Sta. Rita's separation pay and other employment benefits.
The letter is reproduced in full as follows:
a MARSMAN company
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
January 14, 2000
MR. RODIL STA. RITA
Warehouse Supervisor
EAC Libis Operation
Libis, Quezon City
Dear Rodil,
As we have earlier informed you, EAC Distributors, Inc.
has advised us that their Lessor, Valiant Distribution has
terminated their lease contract effective January 31,
2000.
Accordingly, we were informed by EAC Distributors, Inc.,
that they will no longer need our services effective on
the same date. As a result thereof, your position as
warehouseman will become redundant thereafter.
We have exerted efforts to find other work for you to do
or other positions where you could be accommodated.
Unfortunately, our efforts proved futile.
In view thereof, we regret to inform you that your services
will be terminated effective upon the close of business
hours on the 28th of February, 2000.
You will be paid separation pay and other employment
benefits in accordance with the company policies and
the law, the details of which shall be discussed with you
by your immediate superior.
In order to cushion the impact of your separation from
the service and to give you ample time to look for other
 employment elsewhere, you need not report for work
from the 18th of January up the end of February, 2000,
although you will remain in the payroll of the company
and will be paid the salary corresponding to this period.
We thank you for your contribution to this organization
and we wish you well in your future endeavors.
Sincerely,
(signed)
MICHAEL LEO T. LUNA
Vice President & General Manager14
CPDSI thereafter reported the matter of redundancy to the
Department of Labor and Employment in a letter15 dated January 17,
2000, conveying therein Sta. Rita's impending termination. The letter
stated:
occupying such positions and whose names are
enumerated in the attachment list of (Annex "A") will be
terminated.
In accordance with law, the above enumerated
employees will be paid their separation pay in due
course. Individual notices of the termination of
employment of said employees have already been
served upon them.
Very truly yours,
CONSUMER PRODUCTS DISTRIBUTION SERVICES, INC.
BY:
(signed)
MICHAEL LEO T. LUNA
Vice President and General Manager

The Regional Director xxxx

Department of Labor & Employment
National Capital Region
LIST OF TERMINATED WORKERS
Palacio De Gobernador
Intramuros, Manila
Names of Workers
Occupation/Skills Salary
Dear Sir: Terminated

In compliance with the provisions of Article 283 of the xx

Labor Code, as amended, Consumer Products RION L. V. RUZGAL WHSE SUPERVISOR P16,000.00
x
Distribution Services, Inc. (CPDSI) "Company" hereby
gives notice that our company is implementing a
xx
comprehensive streamlining program affecting levels of GLENN V. VISTO WHSE SUPERVISOR P15,600.00
x
employment with the objective of further reducing
operating expenses and to cope with the current
economic difficulties. The employment of the employees
CONRADO C. xx 2. As a regular employee, his salary was increased
SR. WHSEMAN P7,200.0016 by P1,600.00 in 1995; in 1996 was increased by
TIUSINGCO, JR. x
P1,300.00; in 1997 was increased by P1,050.00,
making a total of P7,740.00 up to his separation
xx from employment on January 18, 2000 x x x;
LOLITA D. JAMERO WHSE SUPERVISOR P14,500.00
x
3. He cannot fathom to know why he was
xx terminated from employment, save the better (sic)
ARTURO G. CASTRO, JR. WHSEMAN P7,616.00
x of Mr. Michael Leo T. Luna, Vice President and
General Manager of Marsman Company
(Consumer Products Distribution Services, Inc.) on
xx
RODIL C. STA. RITA WHSEMAN P7,746.00 January 14, 2000;
x

4. His termination from employment is in diametric

xx
EMILIO MADRIAGA WHSEMAN P7,616.00
x Art. 282 of the Labor Code, as amended, i.e., he
Aggrieved, Sta. Rita filed a complaint in the NLRC, National Capital
Region-Quezon City against Marsman on January 25, 2000 for illegal
dismissal with damages in the form of moral, exemplary, and actual
damages and attorney's fees. Sta. Rita alleged that his dismissal was
without just or authorized cause and without compliance with
procedural due process. His affidavit-complaint reads:
opposition to Art VI. Sec. 3(d) of the CBA and to
was no[t] given the 30-day period prior to his
termination, making his dismissal as illegal per se;
5. In the absence of any derogatory record of Mr.
Rodil Sta. Rita for six (6) years, he is entitled to
moral and exemplary damages, in addition to
back wages and separation pay, short of
reinstatement and without loss of seniority rights.17

RODIL C. STA RITA, of legal age, single, Filipino citizen,
with residence and postal address at 1128 R. Papa Street,
Bo. Obrero, Tondo, Manila being under oath hereby
deposes and says:
1. He was employed with Marsman on November 16,
1993, with offices and address at Manalac
Avenue, Taguig, Metro Manila, as warehouseman
with a basic salary P3,790.00 more (sic);
Marsman filed a Motion to Dismiss18 on March 16, 2000 on the premise
that the Labor Arbiter had no jurisdiction over the complaint for illegal
dismissal because Marsman is not Sta. Rita's employer. Marsman
averred that the Memorandum of Agreement effectively transferred
Sta. Rita's employment from Marsman and Company, Inc. to CPDSI.
Said transfer was further verified by Sta. Rita's: 1) continued work in
CPDSI's premises; 2) adherence to CPDSI's rules and regulations; and 3)
receipt of salaries from CPDSI. Moreover, Marsman asserted that CPDSI
terminated Sta. Rita.
Labor Arbiter Gaudencio P. Demaisip, Jr. (Demaisip) rendered his
Decision19 on April 10, 2002 finding Marsman guilty of illegal dismissal,
thus:
This Office finds in favor of the complainant.
Article 167 of the Labor Code defines employer, to wit:
"Employer means any person, natural or
juridical, employing the services of the
employee."
Likewise, Article 212 of the Labor Code defines employer
in this wise:
"Employer includes any person acting in
the interest of an employer directly or
indirectly."
Consumer did not perform any act, thru its responsible
officer, to show that it had employed the complainant.
Nevertheless, Marsman acted in the interest of
Consumer because "sometime in 1996, for purposes of
efficiency and economy Marsman integrated its
distribution business with the business operations of
Consumer Products Distribution Services, Inc. xxx" and "in
line with the integration of the distribution businesses of
Marsman and CPDSI, the employment of all Marsman
office, sales, and warehouse personnel was transferred
to CPDSI. x x x"
Thusly, Marsman qualifies as the employer of the
complainant under the aforequoted provisions of the
Labor Code.
The MOA was concluded between Marsman and. Co.
Inc. and Marsman Employees Union-PSMM/DFA. A
perusal of its contents show that matters, concerning
terms and conditions of employment, were contracted
and concluded.
On the contrary, the MOA is a piece of evidence that
Marsman is the employer of complainant because it is
solely the employer who can negotiate and conclude
the terms and conditions of employment of the workers.
Ironically, the MOA does not establish the contention
that Consumer is the employer of the complainant.
Rule XVI of Department Order No. 9, Series of 1997, which
took effect on June 21, 1997, requires among others, the
ratification by the majority of all workers in the Collective
Bargaining Unit of the Agreement. The non-compliance
of the requirement, under said Department Order,
renders the MOA ineffective.
Further, it may be concluded that the Consumer is an
agent of respondent Marsman, because the former
does "[t]he employment of all Marsman office sales, and
warehouse personnel x x x."
Nevertheless, the employer of the complainant is
Marsman and Company, Inc.
In illegal dismissal, the burden, to establish the just cause
of termination, rest on the employer. The records of this
case [are] devoid of the existence of such cause.
Indeed, the respondent Marsman and Company, Inc.
failed to show the cause of complainant's dismissal,
warranting the twin remedies of reinstatement and
backwages. However, insofar as reinstatement is
 concerned, this remedy appears to be impractical
because, as gleaned from the position paper of [Sta.
Rita], there is uncertainty in the availability of assignment
for the complainant. Instead, the payment of separation
pay equivalent to one half month for every year or a
fraction of at least six (6) months be considered as one
year, would be equitable.
The rest of the claims are dismissed for lack of merit.
WHEREFORE, premises considered, the complainant is
herein declared to have been illegally dismissed.
Marsman and Company, Inc. is directed to pay the
complainant backwages and separation pay on the
total amount of P152,757.55.20
Marsman appealed the foregoing Decision arguing that the Labor
Arbiter had no jurisdiction over the complaint because an
employer-employee relationship did not exist between the
party-litigants at the time of Sta. Rita's termination. Furthermore,
Marsman stated that the ratification requirement under Rule XVI of
Department Order No. 9, Series of 199721 applied only to Collective
Bargaining Agreements, and the Memorandum of Agreement was
certainly not a replacement for the Collective Bargaining Agreement
which Marsman and MEU entered into in the immediately succeeding
year prior to the ratification of the Memorandum of Agreement.
Marsman also maintained that it had a personality that was separate
and distinct from CPDSI thus it may not be made liable to answer for
acts or liabilities of CPDSI and vice-versa. Finally, Marsman claimed
that Sta. Rita was validly declared redundant when CPDSI's logistics
agreement with EAC was not renewed.22
Sta. Rita filed his own appeal, contesting the failure of the Labor
Arbiter to award him moral and exemplary damages, and attorney's
fees.
The NLRC in its Decision dated July 31, 2008, reversed Labor Arbiter
Demaisip's Decision and found that there was no employer-employee
relationship between Marsman and Sta. Rita. The NLRC held:
Applying the four-fold test in determining the existence
of employer-employee relationship fails to convince Us
that complainant is respondent Marsman's employee.
On selection and engagement, by complainant's
transfer to CPDSI, he had become the employee of
CPDSI. It should be emphasized that respondent
Marsman and CPDSI are corporate entities which are
separate and distinct from one another.
On payment of wages, it was CPDSI which paid
complainant's salaries and benefits. Complainant never
claimed that it was still respondent Marsman which paid
his salaries.
On the power of dismissal, after EAC's lease contract
expired deciding to transfer its stock to its own
warehouse and handle its warehousing operations,
complainant was left without any work. CPDSI decided
to terminate his services by issuing him a termination
notice on January 14, 2000.
On the employer's power to control the employee with
respect to the means and methods by which his work is
to be accomplished, complainant was under the control
and supervision of CPDSI concomitant to the logistic
services which respondent Marsman had integrated to
that of CPDSI. CPDSI saw to it that its obligation to
provide logistic services to its client EAC is carried out
with complainant working as warehouseman in the
warehouse rented by EAC. The power of control is the
 most decisive factor in determining the existence of an
employer-employee relationship. x x x.
Having determined that employer-employee
relationship does not exist between complainant and
respondent Marsman, complainant has no cause of
action for illegal dismissal against the latter. There is no
necessity to resolve the [other] issues.
WHEREFORE, premises considered, the Decision of the
Labor Arbiter is VACATED and SET ASIDE. A NEW decision
is entered dismissing the complaint for lack of
employer-employee relationship.23
In a Resolution dated November 11, 2008, the NLRC denied Sta. Rita's
motion for reconsideration because his motion "raised no new matters
of substance which would warrant reconsideration of the Decision of
[the] Commission."24
Sta. Rita filed before the Court of Appeals a Petition
for Certiorari25 imputing grave abuse of discretion on the part of the
NLRC for 1) finding a lack of employer-employee relationship between
the party-litigants; and 2) not awarding backwages, separation pay,
damages and attorney's fees.
The Court of Appeals promulgated its Decision on June 25, 2010,
reversing the NLRC Decision. The Court of Appeals held that Marsman
was Sta. Rita's employer because Sta. Rita was allegedly not part of
the integration of employees between Marsman and CPDSI. The Court
gave credence to Sta. Rita's contention that he purposely refused to
sign the Memorandum of Agreement because such indicated his
willingness to be transferred to CPDSI. In addition, the appellate court
considered Sta. Rita's assignment to the EAC-Libis Warehouse as part
of Marsman's cross-training program, concluding that only Sta. Rita's
work assignment was transferred and not his employment.
The appellate court also found no merit in the NLRC's contention that
CPDSI paid Sta. Rita's salaries and that it exercised control over the
means and methods by which Sta. Rita performed his tasks. On the
contrary, the Court of Appeals observed that Sta. Rita filed his
applications for leave of absence with Marsman. Finally, the Court of
Appeals adjudged that CPDSI, on the assumption that it had the
authority to dismiss Sta. Rita, did not comply with the requirements for
the valid implementation of the redundancy program.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the instant petition for certiorari is GRANTED.
The assailed Decision and Resolution of the public
respondent National Labor Relations Commission
are ANNULLEDand SET ASIDE. Judgment is rendered
declaring petitioner Rodil C. [Sta. Rita's] dismissal from
work as illegal and accordingly, private respondent
Marsman and Company, Inc. is ordered to pay said
[respondent] the following:
1. backwages computed from 18 January 2000 up
to the finality of this Decision;
2. separation pay in lieu of reinstatement computed
at the rate of one (1) month pay for every year of
service from 16 November 1993 up to the finality
of this Decision;
3. the amount of P15,000.00 as moral damages;
4. the amount of P15,000.00 as exemplary damages;
and
5. the amount equivalent to 10% of his total
monetary award, as and for attorney's fees.
 Let this case be REMANDED to the Labor Arbiter for the
purpose of computing, with reasonable dispatch,
petitioner's monetary awards as above discussed.26
Hence, Marsman lodged the petition before us raising the lone issue:
WITH ALL DUE RESPECT, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED IN DECIDING A QUESTION OF
SUBSTANCE IN A MANNER NOT IN ACCORD WITH THE LAW,
APPLICABLE DECISIONS OF THIS HONORABLE COURT AND
EVIDENCE ON RECORD WHEN IT ANNULLED AND SET
ASIDE THE NLRC'S DECISION AND RESOLUTION
EFFECTIVELY RULING THAT [STA. RITA] WAS ILLEGALLY
DISMISSED FROM SERVICE WHEN THE LATTER COULD NOT
HAVE BEEN DISMISSED AT ALL ON ACCOUNT OF THE
ABSENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN SAID [STA. RITA] AND THE COMPANY27
Simply stated, the issue to be resolved is whether or not an
employer-employee relationship existed between Marsman and Sta.
Rita at the time of Sta. Rita's dismissal.
This petition is impressed with merit.
The issue of whether or not an employer-employee relationship exists in
a given case is essentially a question of fact. As a rule, this Court is not
a trier of facts and this applies with greater force in labor cases.28 This
petition however falls under the exception because of variance in the
factual findings of the Labor Arbiter, the NLRC and the Court of
Appeals. Indeed, on occasion, the Court is constrained to wade into
factual matters when there is insufficient or insubstantial evidence on
record to support those factual findings; or when too much is
concluded, inferred or deduced from the bare or incomplete facts
appearing on record.29 The Court in the case of South Cotabato
Communications Corporation v. Sto. Tomas30 held that:
The findings of fact should, however, be supported by
substantial evidence from which the said tribunals can
make their own independent evaluation of the facts. In
labor cases, as in other administrative and quasi-judicial
proceedings, the quantum of proof necessary is
substantial evidence, or such amount of relevant
evidence which a reasonable mind might accept as
adequate to justify a conclusion. Although no particular
form of evidence is required to prove the existence of an
employer-employee relationship, and any competent
and relevant evidence to prove the relationship may be
admitted, a finding that the relationship exists must
nonetheless rest on substantial evidence. (Citations
omitted)
Settled is the tenet that allegations in the complaint must be duly
proven by competent evidence and the burden of proof is on the
party making the allegation.31 In an illegal dismissal case, the onus
probandirests on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a case for illegal
dismissal can prosper, an employer-employee relationship must first be
established.32 In this instance, it was incumbent upon Sta. Rita as the
complainant to prove the employer-employee relationship by
substantial evidence. Unfortunately, Sta. Rita failed to discharge the
burden to prove his allegations.
To reiterate the facts, undisputed and relevant to the disposition of this
case, Marsman hired Sta. Rita as a warehouseman when it was still
engaged in the business of distribution and sale of pharmaceutical
and consumer products. Marsman paid Sta. Rita's wages and
controlled his warehouse assignments, acts which can only be
attributed to a bona fide employer. Marsman thereafter purchased
Metro Drug, now CPDSI, which at that time, was engaged in a similar
business. Marsman then entered into a Memorandum of Agreement
with MEU, its bargaining representative, integrating its employees with
CPDSI and transferring its employees, their respective employment
contracts and the attendant employment obligation to CPDSI. The
planned integration was then carried out sometime in 1996, as
admitted by Sta. Rita in his pleading.33
It is imperative to point out that the integration and transfer was a
necessary consequence of the business transition or corporate
reorganization that Marsman and CPDSI had undertaken, which had
the characteristics of a corporate spin-off. To recall, a proviso in the
Memorandum of Agreement limited Marsman's function into that of a
holding company and transformed CPDSI as its main operating
company. In business parlance, a corporate spin-off occurs when a
department, division or portions of the corporate business enterprise is
sold-off or assigned to a new corporation that will arise by the process
which may constitute it into a subsidiary of the original corporation.34
The spin-off and the attendant transfer of employees are legitimate
business interests of Marsman. The transfer of employees through the
Memorandum of Agreement was proper and did not violate any
existing law or jurisprudence.
Jurisprudence has long recognized what are termed as "management
prerogatives." In SCA Hygiene Products Corporation Employees
Association-FFW v. SCA Hygiene Products Corporation,35 we held that:
The hiring, firing, transfer, demotion, and promotion of
employees have been traditionally identified as a
management prerogative subject to limitations found in
the law, a collective bargaining agreement, or in
general principles of fair play and justice. This is a
function associated with the employer's inherent right to
control and manage effectively its enterprise. Even as
the law is solicitous of the welfare of employees, it must
also protect the right of an employer to exercise what
are clearly management prerogatives. The free will of
management to conduct its own business affairs to
achieve its purpose cannot be denied. x x x.
Tinio v. Court of Appeals36 also acknowledged management's
prerogative to transfer its employees within the same business
establishment, to wit:
This Court has consistently recognized and upheld the
prerogative of management to transfer an employee
from one office to another within the business
establishment, provided there is no demotion in rank or a
diminution of salary, benefits and other privileges. As a
rule, the Court will not interfere with an employer's
prerogative to regulate all aspects of employment which
include among others, work assignment, working
methods and place and manner of work. Labor laws
discourage interference with an employer's judgment in
the conduct of his business.
xxxx
But, like other rights, there are limits thereto. The
managerial prerogative to transfer personnel must be
exercised without grave abuse of discretion, bearing in
mind the basic elements of justice and fair play. Having
the right should not be confused with the manner in
which the right is exercised. Thus, it cannot be used as a
subterfuge by the employer to rid himself of an
undesirable worker. The employer must be able to show
that the transfer is not unreasonable, inconvenient, or
prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries, privileges,
and other benefits. x x x. (Citations omitted.)
Analogously, the Court has upheld the transfer/absorption of
employees from one company to another, as successor employer, as
long as the transferor was not in bad faith37 and the employees
absorbed by a successor-employer enjoy the continuity of their
employment status and their rights and privileges with their former
employer.38
Sta. Rita's contention that the absence of his signature on the
Memorandum of Agreement meant that his employment remained
with Marsman is merely an allegation that is neither proof nor
evidence. It cannot prevail over Marsman's evident intention to
transfer its employees.
To assert that Marsman remained as Sta. Rita's employer even after
the corporate spin-off disregards the separate personality of Marsman
and CPDSI. It is a fundamental principle of law that a corporation has
a personality that is separate and distinct from that composing it as
well as from that of any other legal entity to which it may be
related.39 Other than Sta. Rita's bare allegation that Michael Leo T.
Luna was Marsman's and CPDSI's Vice-President and General
Manager, Sta. Rita failed to support his claim that both companies
were managed and operated by the same persons, or that Marsman
still had complete control over CPDSI's operations. Moreover, the
existence of interlocking directors, corporate officers and shareholders
without more, is not enough justification to pierce the veil of corporate
fiction in the absence of fraud or other public policy considerations.40
Verily, the doctrine of piercing the corporate veil also finds no
application in this case because bad faith cannot be imputed to
Marsman.41 On the contrary, the Memorandum of Agreement
guaranteed the tenure of the employees, the honoring of the
Collective Bargaining Agreement signed in June 1995, the
preservation of salaries and benefits, and the enjoyment of the same
terms and conditions of employment by the affected employees.
Sta. Rita also failed to satisfy the four-fold test which determines the
existence of an employer-employee relationship. The elements of the
four-fold test are: 1) the selection and engagement of the employees;
2) the payment of wages; 3) the power of dismissal; and 4) the power
to control the employee's conduct.42 There is no hard and fast rule
designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status.43
The Memorandum of Agreement effectively transferred Marsman's
employees to CPDSI. However, there was nothing in the agreement to
negate CPDSI's power to select its employees and to decide when to
engage them. This is in line with Article 1700 of the Civil Code which
provides that:
Art. 1700. The relations between capital and labor are
not merely contractual. They are so impressed with
public interest that labor contracts must yield to the
common good. Therefore, such contracts are subject to
the special laws on labor unions, collective bargaining,
strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
A labor contract merely creates an action in personam and does not
create any real right which should be respected by third parties.44 This
conclusion draws its force from the right of an employer to select
his/her employees and equally, the right of the employee to refuse or
voluntarily terminate his/her employment with his/her new employer
by resigning or retiring. That CPDSI took Sta. Rita into its employ and
assigned him to one of its clients signified the former's acquiescence to
the transfer.
Marsman's letter45 to Sta. Rita dated September 29, 1997 neither
assumed nor disturbed CPDSI's power of selection. The letter reads:
MARSMAN & COMPANY, INC.
TO: MR. RODIL STA. RITA
 RE: TRANSFER OF ASSIGNMENT
This is to confirm in writing your appointment as
warehouseman for EAC-Libis Warehouse and Mercury
Drug effective 13 October 1997. This transfer is part of our
cross-training program.
Prior to the effectivity of your appointment, you may be
instructed to proceed to EAC-Libis Warehouse for work
familiarization and other operational matters related to
the job.
You will directly report to Mr. Eusebio Paisaje, warehouse
supervisor.
Good luck.
(signed)
Irene C. Nagrampa
cc: EDB/QRI
LRP/Noynoy Paisaje
HRG-201 file
file
It would be amiss to read this letter independent of the Memorandum
of Agreement because the Memorandum of Agreement clearly
reflected Marsman's intention to transfer all employees to CPDSI. When
read in isolation, the use of "cross-training program" may be subject to
a different interpretation but reading it together with the MOA
indicates that the "cross training program" was in relation to the
transition phase that Marsman and CPDSI were then undergoing. It is
clear under the terms of the Memorandum of Agreement that
Marsman may continue to negotiate and address issues with the Union
even after the signing and execution of said agreement in the course
of fully implementing the transfer to, and the integration of operations
with, CPDSI.
To prove the element on the payment of wages, Sta. Rita submitted
forms for leave application, with either Marsman's logo or CPDSI's logo.
Significantly, the earlier leave forms bore Marsman's logo but the latest
leave application of Sta. Rita already had CPDSI's logo. In any event,
the forms for leave application did not sufficiently establish that
Marsman paid Sta. Rita's wages. Sta. Rita could have presented pay
slips, salary vouchers, payrolls, certificates of withholding tax on
compensation income or testimonies of his witnesses.46 The submission
of his Social Security System (SSS) identification card (ID) only proved
his membership in the social insurance program. Sta. Rita should have
instead presented his SSS records which could have reflected his
contributions, and the name and address of his employer.47 Thus, Sta.
Rita fell short in his claim that Marsman still had him in its payroll at the
time of his dismissal.
As to the power of dismissal, the letter dated January 14, 2000 clearly
indicated that CPDSI, and not Marsman, terminated Sta. Rita's services
by reason of redundancy.
Finally, Sta. Rita failed to prove that Marsman had the power of control
over his employment at the time of his dismissal. The power of an
employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee
relationship.48 Control in such relationships addresses the details of day
to day work like assigning the particular task that has to be done,
monitoring the way tasks are done and their results, and determining
the time during which the employee must report for work or
accomplish his/her assigned task.49 The Court likewise takes notice of
the company IDs attached in Sta. Rita's pleading. The "old" ID bore
Marsman's logo while the "new" ID carried Metro Drug's logo. The Court
has held that in a business establishment, an identification card is
usually provided not only as a security measure but mainly to identify
the holder thereof as a bona fideemployee of the firm that issues
it.50 Thus the "new" ID confirmed that Sta. Rita was an employee of
Metro Drug, which, to reiterate, later changed its name to CPDSI.
Having established that an employer-employee relationship did not
exist between Marsman and Sta. Rita at the time of his dismissal, Sta.
Rita's original complaint must be dismissed for want of jurisdiction on
the part of the Labor Arbiter to take cognizance of the case. For this
reason, there is no need for the Court to pass upon the other issues
raised.

WHEREFORE, premises considered, the petition is GRANTED. The Court

of Appeals' assailed Decision dated June 25, 2010 and Resolution
dated December 9, 2010 in CA-G.R. SP No. 106516 are,
accordingly, REVERSED and SET ASIDE. The NLRC Decision dated July
31, 2008 in NLRC NCR Case No. 30-01-00362-00 (NLRC CA No.
032892-02) is REINSTATED.

SO ORDERED.

THIRD DIVISION
G.R. No. 209085, June 06, 2018
NICANOR F. MALCABA, CHRISTIAN C. NEPOMUCENO, AND LAURA MAE
FATIMA F. PALIT-ANG, Petitioners, v. PROHEALTH PHARMA PHILIPPINES,
INC., GENEROSO R. DEL CASTILLO, JR., AND DANTE M.
BUSTO, Respondents.
DECISION
LEONEN, J.:
This case involves fundamental principles in labor cases.
First, in appeals of illegal dismissal cases, employers are strictly
mandated to file an appeal bond to perfect their appeals. Substantial
compliance, however, may merit liberality in its application.
Second, before any labor tribunal takes cognizance of termination
disputes, it must first have jurisdiction over the action. The Labor Arbiter
and the National Labor Relations Commission only exercise jurisdiction
over termination disputes between an employer and an employee.
They do not exercise jurisdiction over termination disputes between a
corporation and a corporate officer.
Third, while this Court recognizes the inherent right of employers to
discipline their employees, the penalties imposed must be
commensurate to the infractions committed. Dismissal of employees
for minor and negligible offenses may be considered as illegal
dismissal.
This is a Petition for Review on Certiorari1 assailing the Court of Appeals
February 19, 2013 Decision2 and September 10, 2013 Resolution3 in
CA-G.R. SP No. 119093, which reversed the judgments of the Labor
Arbiter and of the National Labor Relations Commission. The Court of
Appeals found that Nicanor F. Malcaba (Malcaba), a corporate
officer, should have questioned his dismissal before the Regional Trial
Court, not before the Labor Arbiter. It likewise held that Christian C.
Nepomuceno (Nepomuceno) and Laura Mae Fatima F. Palit-Ang
(Palit-Ang) were validly dismissed from service for loss of trust and
confidence, and insubordination, respective1y.
ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation
engaged in the sale of pharmaceutical products and health food on
a wholesale and retail basis. Generoso Del Castillo (Del Castillo) is the
Chair of the Board of Directors and Chief Executive Officer while
Dante Busto (Busto) is the Executive Vice President. Malcaba, Tomas
Adona, Jr. (Adona), Nepomuceno, and Palit-Ang were employed as
its President, Marketing Manager, Business Manager, and Finance
Officer, respectively. 4
Malcaba had been employed with ProHealth since it started in 1997.
He was one of its incorporators together with Del Castillo and Busto,
and they were all members of the Board of Directors in 2004. He held
1,000,000 shares in the corporation. He was initially the Vice President
for Sales then became President in 2005.5
Malcaba alleged that Del Castillo did acts that made his job difficult.
He asked to take a leave on October 23, 2007. When he attempted to
return on November 5, 2007, Del Castillo insisted that he had already
resigned and had his things removed from his office. He attested that
he was paid a lower salary in December 2007 and his benefits were
withheld.6 On January 7, 2008, Malcaba tendered his resignation
effective February 1, 2008.7
Nepomuceno, for his part, alleged that he was initially hired as a
medical representative in 1999 but was eventually promoted to District
Business Manager for South Luzon. On March 24, 2008, he applied for
vacation leave for the dates April 24, 25, and 28, 2008, which Busto
approved. When he left for Malaysia on April 23, 2008, ProHealth sent
him a Memorandum dated April 24, 2008 asking him to explain his
absence. He replied through email that he tried to call ProHealth to
inform them that his flight was on April 22, 2008 at 9:00p.m. and not on
April 23, 2008 but was unable to connect on the phone. He tried to
explain again on May 2, 2008 and requested for a personal dialogue
with Del Castillo.8
On May 7, 2008, Nepomuceno was given a notice of termination,
which was effective May 5, 2008, on the ground of fraud and willful
breach of trust.9
Palit-Ang, on the other hand, was hired to join ProHealth's audit team
in 2007. She was later promoted to Finance Officer.10 On November 26,
2007, Del Castillo instructed Palit-Ang to give P3,000.00 from the
training funds to Johnmer Gamboa (Gamboa), a District Business
Manager, to serve as cash advance. 11
On November 27, 2007, Busto issued a show cause memorandum for
Palit-Ang's failure to release the cash advance. Palit-Ang was also
relieved of her duties and reassigned to the Office of the Personnel
and Administration Manager. 12
In her explanation, Palit-Ang alleged that when Gamboa saw that she
was busy receiving cash sales from another District Business Manager,
he told her that he would just return the next day to collect his cash
advance.13 When he told her that the cash advance was for car
repairs, Palit-Ang told him to get the cash from his revolving fund,
which she would reimburse after the repairs were done. Del Castillo
was dissatisfied with her explanation and transferred her to another
office.14
On December 3, 2007, Palit-Ang was invited to a fact-finding
investigation,15 which was held on December 10, 2007, where
Palit-Ang was again asked to explain her actions.16
On December 17, 2007, she was handed a notice of termination
effective December 31, 2007, for disobeying the order of ProHealth's
highest official.17
Malcaba, Nepomuceno, Palit-Ang, and Adona separately filed
Complaints18 before the Labor Arbiter for illegal dismissal, nonpayment
of salaries and 13th month pay, damages, and attorney's fees.
The Labor Arbiter found that Malcaba was constructively dismissed. He
found that ProHealth never controverted the allegation that Del
Castillo made it difficult for Malcaba to effectively fulfill his duties. He
likewise ruled that ProHealth's insistence that Malcaba's leave of
absence in October 2007 was an act of resignation was false since
Malcaba continued to perform his duties as President through
December 2007.19
The Labor Arbiter declared that Nepomuceno's failure to state the
actual date of his flight was an excusable mistake on his part,
considering that this was his first infraction in his nine (9) years of service.
He noted that no administrative proceedings were conducted before
Nepomuceno's dismissal, thereby violating his right to due process.20
Palit-Ang's dismissal was also found to have been illegal as delay in
complying with a lawful order was not tantamount to disobedience.
The Labor Arbiter further noted that delay in giving a cash advance for
car maintenance would not have affected the company's operations.
He declared that Palit-Ang's dismissal was too harsh of a penalty.21
The dispositive portion of the Labor Arbiter's April 5, 2009
Decision22 read:
WHEREFORE, premises considered, judgment is hereby
rendered declaring that complainants were illegally
dismissed by respondents. Accordingly, respondents are
directed solidarily to pay complainants the following:
1. Complainant Nicanor F. Malcaba:
1. Separation pay of P1,800,000.00;
2. Full backwages from the time of his
illegal dismissal [o]n 11 November
2007 until the finality of this decision,
which as of this date amounts to
P2,810,795.40;
3. 13th month pay for the years 2007
and 2008 amounting to P126,625.00;
2. Complainant Christian C. Nepomuceno:
1. Separation pay of P190,000.00;
2. Full backwages from the time of his
illegal dismissal [i]n May 2007 until
the finality of this decision, which as
of this date amounts to P568,827.45;
3. 13th month pay for 2008 amounting
to P6,333.33;
3. Complainant Laura Mae Fatima F.
Palit-Ang:
1. Separation pay of P30,000.00;
2. Full backwages from the time of her
illegal dismissal on 1 January 2008
until the finality of this decision,
which as of [t]his date amounts to
P266,694.63;
3. 13th month pay for 2008 of P18,000.00;
and
4. Complainant Tomas C. Adona, Jr.:
1. Separation pay of P75,000.00;
2. Full backwages from time of his
illegal dismissal [i]n June 2007 until
the finality of this decision, which as
of this date amounts to P609,832.37;
3. 13th month pay for 2008 of
P10,416.66.
Complainants are further awarded moral damages of
Php100,000.00 each and exemplary damages of
Php100,000.00 each.
Finally, respondents are assessed the sum equivalent to
ten percent (10%) of the total monetary award as and
for attorney's fees.
All other claims are dismissed for lack of merit.
SO ORDERED.23
ProHealth appealed to the National Labor Relations Commission.24 On
September 29, 2010, the National Labor Relations Commission
rendered its Decision,25 affirming the Labor Arbiter's April 5, 2009
Decision with modifications. The dispositive portion of this Decision
read:
WHEREFORE, premises considered, the appeal is partially
granted. The assailed Decision is modified in that: a)
complainant Adona is declared to have voluntarily
resigned and is entitled only to his 13th month pay; b) the
award of moral and, exemplary damages in favor of
 complainants Nepomuceno and Palit-Ang are deleted;
and c) respondents del Castillo and Busto are held jointly
and severally liable with ProHealth for the claims of
complainant Malcaba.
All dispositions not affected by the modifications stay.
SO ORDERED.26
ProHealth moved for reconsideration27 but was denied by the National
Labor Relations Commission in its January 31, 2011 Resolution.28 Thus,
ProHealth, Del Castillo, and Busto filed a Petition for Certiorari29before
the Court of Appeals.
On February 19, 2013, the Court of Appeals rendered its
Decision30 reversing and setting aside the National Labor Relations
Commission September 29, 2010 Decision.
On the procedural issues, the Court of Appeals found that ProHealth
substantially complied with the requirement of an appeal bond
despite it not appearing in the records of the surety company since
ProHealth believed in good faith that the bond it secured was
genuine.31
On the substantive issues, the Court of Appeals held that there was no
employer-employee relationship between Malcaba and ProHealth
since he was a corporate officer. Thus, he should have filed his
complaint with the Regional Trial Court, not with the Labor Arbiter,
since his dismissal from service was an intra-corporate dispute.32
The Court of Appeals likewise concluded that ProHealth was justified in
dismissing Nepomuceno and Palit-Ang since both were given
opportunities to fully explain their sides.33 It found that Nepomuceno's
failure to diligently check the true schedule of his flight abroad and his
subsequent lack of effort to inform his superiors were enough for his
employer to lose its trust and confidence in him.34 It likewise found that
Palit-Ang displayed "arrogance and hostility" when she defied the
lawful orders of the company's highest ranking officer; thus, her
insubordination was just cause to terminate her services.35
While the Court of Appeals ordered the return of the amounts given to
Malcaba, it allowed Nepomuceno and Palit-Ang to keep the amounts
given considering that even if the finding of illegal dismissal were
reversed on appeal, the employer was still obliged to reinstate and
pay the wages of a dismissed employee during the period of
appeal.36 The dispositive portion of the Court of Appeals February 19,
2013 Decision read:
WHEREFORE, premises considered, it is hereby ruled:
that the September 29, 2010 Decision and January 31, 2011
Resolution of the National Labor Relations Commission are
(a)
REVERSED and SET ASIDE for being issued with grave abuse of
discretion;
that Our Decision is without prejudice to Mr. Nicanor F. Malcaba's
(b) available recourse for relief through the appropriate remedy in
the proper forum;
that all the amounts released in favor of Mr. Nicanor F. Malcaba
amounting to Four Million Nine Hundred Thirty[-]Seven Thousand
(c)
Four Hundred Twenty pesos and 40/100 (P4,937,420.[40]) be
RETURNED to herein petitioners;
 return, resulting in his resignation in January 2008. Thus, they argue that
that NO REFUND will be ordered by this Court against Mr. Christian
(d) petitioner Malcaba was constructively dismissed.42
Nepomuceno and Ms. Laura Mae Fatima Palit-Ang.

Petitioners likewise argue that petitioners Nepomuceno and Palit-Ang

were illegally dismissed. They claim that petitioner Nepomuceno
SO ORDERED.37
committed an "honest and negligible mistake"43 that should not have
warranted dismissal considering his loyal service for nine (9) years. They
Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but
contend that petitioner Nepomuceno's absence did not injure
were denied in a Resolution38 dated September 10, 2013. Hence, this
respondent ProHealth's business since he turned over all pending work
Petition39 was filed before this Court.
to a reliever before he left and even surpassed his sales quota for the
Petitioners argue that the Court of Appeals should have dismissed month.44 They likewise claim that his dismissal was done in violation of
outright the Petition for Certiorari since respondents failed to post a his right to due process since he was not given any opportunity to
genuine appeal bond before the National Labor Relations explain his side and was only given a notice of termination two (2)
Commission. They allege that when Sheriff Ramon Nonato P. Dayao days after he was actually dismissed.45
attempted to enforce the judgment award against the appeal bond,
Petitioners maintain that petitioner Palit-Ang believed in good faith
he was informed that the appeal bond procured by respondents did
that Gamboa would just claim his cash advance the day after he tried
not appear in the records of Alpha Insurance and Surety Company,
to claim it and that there was nothing in her actions that would prove
Inc. (Alpha Insurance). They also claim that respondents were notified
that she intended to disobey or defy respondent Del Castillo's
by the National Labor Relations Commission four (4) times that their
instructions. They insist that delay in complying with orders is not
appeal bond was not genuine, showing that respondents did not
tantamount to disobedience and would not constitute just cause for
comply with the requirement in good faith.40
petitioner Palit-Ang's dismissal. They likewise submit that while petitioner
Petitioners contend that petitioner Malcaba properly filed his Palit-Ang was subjected to a fact-finding investigation, respondents
Complaint before the Labor Arbiter since he was an employee of failed to inform her of her right to be assisted by counsel.46
respondent ProHealth, albeit a high-ranking one. They argue that
Respondents, on the other hand, counter that a liberal application of
respondents merely alleged that petitioner Malcaba is a corporate
the procedural rules was necessary in their case since they acted in
officer but failed to substantiate this allegation.41They maintain that
good faith in posting their appeal bond.47 They likewise contend that
petitioner Malcaba did not resign on September 24, 2007 considering
the issue should have already been considered moot since petitioners
that the General Information Sheet for 2007 submitted on October 11,
"were able to garnish and collect the amounts allegedly due to
2007 listed him as respondent ProHealth's President. They submit that
them."48
respondent Del Castillo's action took a toll on petitioner Malcaba's
well-being; hence, the latter merely took a leave of absence and
Respondents likewise insist that petitioner Malcaba was a corporate
returned to work in November 2007. They claim that respondents
officer considering that he was not only an incorporator and
made it difficult for petitioner Malcaba to continue his work upon his
stockholder, but also an elected Director and President of respondent
ProHealth.49 They also point out that he filed his labor complaint seven
(7) months after his resignation and that his voluntary resignation
already disproves his claim of constructive dismissal.50
Respondents argue that they were justified in dismissing petitioners
Nepomuceno and Palit-Ang. They contend that petitioner
Nepomuceno's abandonment of his duties at a critical sales period
and his failure to immediately advise his superiors of his whereabouts
was ground for respondents to lose their trust and confidence in
him.51 They likewise maintain that petitioner Palit-Ang was correctly
found by the Court of Appeals to have defied the lawful instructions of
respondent Del Castillo and illustrated her "grave disrespect towards
authority."52
From the arguments and allegations of the parties, it is clear that this
case involves three (3) different illegal dismissal complaints, with three
(3) different complainants in three (3) different factual situations during
three (3) different time periods. The only commonality is that they
involve the same respondents.
While this Court commends the economy by which the National Labor
Relations Commission resolved these cases, the three (3) complaints
should have been resolved separately since the three (3) petitioners
raise vastly different substantive issues. This leaves this Court with the
predicament of having to resolve three (3) different cases of illegal
dismissal in one (1) Petition for Review. Thus, each petitioner's case will
have to be resolved separately within this Decision. This Court's ruling
over one (1) petitioner may not necessarily affect the other
co-petitioners. The National Labor Relations Commission's zeal for
economy and convenience should never prejudice the individual
rights of each party. The National Labor Relations Commission should
know the rule that joinder of parties53 or causes of action54 applies
suppletorily in appeals55 and for good reason.56
Petitioners raise the common procedural issue of whether or not
respondents failed to perfect their appeal when it was discovered that
their appeal bond was a forged bond, which this Court will address
before proceeding with the substantive issues. The substantive issues
raised, however, are dependent on the factual circumstances
applicable to each petitioner. This Court tackles these substantive
issues in order:
First, whether or not the Labor Arbiter and National Labor Relations
Commission had jurisdiction over petitioner Nicanor F. Malcaba's
termination dispute considering the allegation that he was a
corporate officer, and not a mere employee;
Second, whether or not petitioner Christian C. Nepomuceno was
validly dismissed for willful breach of trust when he failed to inform
respondents ProHealth Pharma Philippines, Inc., Generoso R. Del
Castillo, Jr., and Dante M. Busto of the actual dates of his vacation
leave; and
Finally, whether or not petitioner Laura Mae Fatima F. Palit-Ang was
validly dismissed for willful disobedience when she failed to
immediately comply with an order of her superior.
I
Appeal is not a matter of right.57 Courts and tribunals have the
discretion whether to give due course to an appeal or to dismiss it
outright. The perfection of an appeal is, thus, jurisdictional.
Non-compliance with the manner in which to file an appeal renders
the judgment final and executory.58
In labor cases, an appeal by an employer is perfected only by filing a
bond equivalent to the monetary award. Thus, Article 229 [223]59 of
the Labor Code provides:
Article 229. [223] Appeal.
...
 In case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary
award in the judgment appealed from.
This requirement is again repeated m the 2011 National Labor
Relations Commission Rules of Procedure:
Section 4. Requisites for Perfection of Appeal. — (a) The
appeal shall be:
....
(5) accompanied by:
....
(ii) posting of a cash or surety bond as provided in
Section 6 of this Rule[.]
....
Section 6. Bond. — In case the decision of the Labor
Arbiter or the Regional Director involves a monetary
award, an appeal by the employer may be perfected
only upon the posting of a bond, which shall either be in
the form of cash deposit or surety bond equivalent in the
amount to the monetary award, exclusive of damages
and attorney's fees.
In case of surety bond, the same shall be issued by a
reputable bonding company duly accredited by the
Commission and shall be accompanied by original or
certified true copies of the following:
(a) a joint declaration under oath by the
employer, his/her counsel, and the
bonding company, attesting that the bond
posted is genuine, and shall be in effect
until final disposition of the case;
(b) an indemnity agreement between the
employer appellant and bonding
company;
(c) proof of security deposit or collateral
securing the bond: provided, that a check
shall not be considered as an acceptable
security; and,
(d) notarized board resolution or secretary's
certificate from the bonding company
showing its authorized signatories and their
specimen signatures.
The Commission through the Chairman may on justifiable
grounds blacklist an accredited bonding company.
A cash or surety bond shall be valid and effective from
the date of deposit or posting, until the case is finally
decided, resolved or terminated, or the award satisfied.
This condition shall be deemed incorporated in the terms
and conditions of the surety bond, and shall be binding
on the appellants and the bonding company.
The appellant shall furnish the appellee with a certified
true copy of the said surety bond with all the
above-mentioned supporting documents. The appellee
shall verify the regularity and genuineness thereof and
immediately report any irregularity to the Commission.
Upon verification by the Commission that the bond is
irregular or not genuine, the Commission shall cause the
immediate dismissal of the appeal, and censure the
 responsible parties and their counsels, or subject them to
reasonable fine or penalty, and the bonding company
may be blacklisted.
No motion to reduce bond shall be entertained except
on meritorious grounds, and only upon the posting of a
bond in a reasonable amount in relation to the monetary
award.
The mere filing of a motion to reduce bond without
complying with the requisites in the preceding
paragraphs shall not stop the running of the period to
perfect an appeal.60
The purpose of requiring an appeal bond is "to guarantee the
payment of valid and legal claims against the employer."61 It is a
measure of financial security granted to an illegally dismissed
employee since the resolution of the employer's appeal may take an
indeterminable amount of time. In particular:
The requirement that the employer post a cash or surety
bond to perfect its/his appeal is apparently intended to
assure the workers that if they prevail in the case, they
will receive the money judgment in their favor upon the
dismissal of the employer's appeal. It was intended to
discourage employers from using an appeal to delay, or
even evade, their obligation to satisfy their employees'
just and lawful claims.62
Procedural rules require that the appeal bond filed be "genuine." An
appeal bond determined by the National Labor Relations Commission
to be "irregular or not genuine" shall cause the immediate dismissal of
the appeal.63
In this case, petitioners allege that respondents' appeal should not
have been given due course by the National Labor Relations
Commission since the appeal bond they filed "[did] not appear in the
records of [Alpha Insurance]"64 and was, therefore, not genuine. As
evidence, they presented a certification from Alpha Insurance, which
read:
This is to certify that the bond being presented by MR.
JOSEPH D. DE JESUS is allegedly a Surety Bond filed with
the NATIONAL LABOR RELATIONS COMMISSION,
identified as Bond No. G(16)00358/2009 on an alleged
case NLRC NCR Case No. 08-12090-08, is a faked and
forged bond, and it was not issued by ALPHA INSURANCE
& SURETY COMPANY, INC.65
This Court in Navarro v. National Labor Relations Commission66 found
that an employer failed to perfect its appeal as it submitted an appeal
bond that was "bogus[,] having been issued by an officer no longer
connected for a long time with the bonding company."67 The mere
fictitiousness of the bond, however, was not the only factor taken into
consideration. This Court likewise took note of the employer's failure to
sufficiently explain this irregularity and its failure to file the bond within
the reglementary period.
In Quiambao v. National Labor Relations Commission,68 this Court held
that the mandatory and jurisdictional requirement of the filing of an
appeal bond could be relaxed if there was substantial
compliance. Quiambao proceeded to outline situations that could be
considered as substantial compliance, such as late payment, failure of
the Labor Arbiter to state the exact amount of money judgment due,
and reliance on a notice of judgment that failed to state that a bond
must first be filed in order to appeal.69Rosewood Processing v. National
Labor Relations Commission70 likewise enumerated other instances
where there would be a liberal application of the procedural rules:
Some of these cases include: (a) counsel's reliance on
the footnote of the notice of the decision of the labor
arbiter that the aggrieved party may appeal . . . within
 ten (10) working days; (b) fundamental consideration of
substantial justice; (c) prevention of miscarriage of justice
or of unjust enrichment, as where the tardy appeal is
from a decision granting separation pay which was
already granted in an earlier final decision; and (d)
special circumstances of the case combined with its
legal merits or the amount and the issue involved.71
Thus, while the procedural rules strictly require the employer to submit
a genuine bond, an appeal could still be perfected if there was
substantial compliance with the requirement.
In this instance, the National Labor Relations Commission certified that
respondents filed a security deposit in the amount of P6,512,524.84
under Security Bank check no. 0000045245,72 showing that the
premium for the appeal bond was duly paid and that there was
willingness to post it.73 Respondents likewise attached documents
proving that Alpha Insurance was a legitimate and accredited
bonding company.74
Despite their failure to collect on the appeal bond, petitioners do not
deny that they were eventually able to garnish the amount from
respondents' bank deposits.75 This fulfills the purpose of the bond, that
is, "to guarantee the payment of valid and legal claims against the
employer[.]"76 Respondents are considered to have substantially
complied with the requirements on the posting of an appeal bond.
II
Under the Labor Code, the Labor Arbiter exercises original and
exclusive jurisdiction over termination disputes between an employer
and an employee while the National Labor Relations Commission
exercises exclusive appellate jurisdiction over these cases:
Article 224. 217 Jurisdiction of the Labor Arbiters and the
Commission. — (a) Except as otherwise provided under
this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the
parties for decision without extension, even in the
absence of stenographic notes, the following cases
involving all workers, whether agricultural or
non-agricultural:
...
(2) Termination disputes;
...
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.77
The presumption under this provision is that the parties have an
employer-employee relationship. Otherwise, the case would be
cognizable in different tribunals even if the action involves a
termination dispute.
Petitioner Malcaba alleges that the Court of Appeals erred m
dismissing his complaint for lack of jurisdiction, insisting that he was an
employee of respondent, not a corporate officer.
At the time of his alleged dismissal, petitioner Malcaba was the
President of respondent corporation. Strangely, this same petitioner
disputes this position as respondents' bare assertion,78 yet he also insists
that his name appears as President in the corporation's General
Information Sheet for 2007.79
Under Section 25 of the Corporation Code,80 the President of a
corporation is considered a corporate officer. The dismissal of a
corporate officer is considered an intra-corporate dispute, not a labor
dispute. Thus, in Tabang v. National Labor Relations Commission:81
 A corporate officer's dismissal is always a corporate act,
or an intra-corporate controversy, and the nature is not
altered by the reason or wisdom with which the Board of
Directors may have in taking such action. Also, an
intra-corporate controversy is one which arises between
a stockholder and. the corporation. There is no
distinction, qualification, nor any exemption whatsoever.
The provision is broad and covers all kinds of
controversies between stockholders and corporations.82
Further, in Matling Industrial and Commercial Corporation v.
Coros,83 this Court stated that jurisdiction over intra-corporate disputes
involving the illegal dismissal of corporate officers was with the
Regional Trial Court, not with the Labor Arbiter:
Where the complaint for illegal dismissal concerns a
corporate officer, however, the controversy falls under
the jurisdiction of the Securities and Exchange
Commission (SEC), because the controversy arises out of
intra-corporate or partnership relations between and
among stockholders, members, or associates, or
between any or all of them and the corporation,
partnership, or association of which they are
stockholders, members, or associates, respectively; and
between such corporation, partnership, or association
and the State insofar as the controversy concerns their
individual franchise or right to exist as such entity; or
because the controversy involves the election or
appointment of a director, trustee, officer, or manager of
such corporation, partnership, or association. Such
controversy, among others, is known as an
intra-corporate dispute.
Effective on August 8, 2000, upon the passage of
Republic Act No. 8799, otherwise known as The Securities
Regulation Code, the SEC's jurisdiction over all
intra-corporate disputes was transferred to the RTC,
pursuant to Section 5.2 of RA No. 8799, to wit:
5.2. The Commission's jurisdiction over all
cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby
transferred to the Courts of general
jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in
the exercise of its authority may designate
the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The
Commission shall retain jurisdiction over
pending cases involving intra-corporate
disputes submitted for final resolution which
should be resolved within one (1) year from
the enactment of this Code. The
Commission shall retain jurisdiction over
pending suspension of
payments/rehabilitation cases filed as of 30
June 2000 until finally disposed.84
The mere designation as a high-ranking employee, however, is not
enough to consider one as a corporate officer. In Tabang, this Court
discussed the distinction between an employee and a corporate
officer, regardless of designation:
The president, vice-president, secretary and treasurer are
commonly regarded as the principal or executive
officers of a corporation, and modern corporation
statutes usually designate them as the officers of the
corporation. However, other offices are sometimes
created by the charter or by-laws of a corporation, or
the board of directors may be empowered under the
by-laws of a corporation to create additional offices as
may be necessary.
 It has been held that an "office" is created by the charter
of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an
"employee" usually occupies no office and generally is
employed not by action of the directors or stockholders
but by the managing officer of the corporation who also
determines the compensation to be paid to such
employee.85
The clear weight of jurisprudence clarifies that to be considered a
corporate officer, first, the office must be created by the charter of the
corporation, and second, the officer must be elected by the board of
directors or by the stockholders.
Petitioner Malcaba was an incorporator of the corporation and a
member of the Board of Directors.86Respondent corporation's By-Laws
creates the office of the President. That foundational document also
states that the President is elected by the Board of Directors:
ARTICLE IV
OFFICER
Section 1. Election/Appointment — Immediately after
their election, the Board of Directors shall formally
organize by electing the President, the Vice President,
the Treasurer, and the Secretary at said meeting.87
This case is similar to Locsin v. Nissan Lease Philippines:88
Locsin was undeniably Chairman and President, and was
elected to these positions by the Nissan board pursuant
to its By-laws. As such, he was a corporate officer, not an
employee. The CA reached this conclusion by relying on
the submitted facts and on Presidential Decree 902-A,
which defines corporate officers as "those officers of a
corporation who are given that character either by the
Corporation Code or by the corporation's by-laws."
Likewise, Section 25 of Batas Pambansa Blg. 69, or the
Corporation Code of the Philippines (Corporation Code)
provides that corporate officers are the president,
secretary, treasurer and such other officers as may be
provided for in the by-laws.89 (Emphasis in the original)
Petitioners cite Prudential Bank and Trust Company v. Reyes90 as basis
that even high-ranking officers may be considered regular employees,
not corporate officers.91Prudential Bank, however, is not applicable to
this case.
In Prudential Bank, an employer was considered estopped from raising
the argument of an intra-corporate dispute since this was only raised
when the case was filed with this Court. This Court also noted that an
employee rose from the ranks and was regularly performing tasks
integral to the business of the employer throughout the length of her
tenure, thus:
It appears that private respondent was appointed
Accounting Clerk by the Bank on July 14, 1963. From that
position she rose to become supervisor. Then in 1982, she
was appointed Assistant Vice-President which she
occupied until her illegal dismissal on July 19, 1991. The
bank's contention that she merely holds an elective
position and that in effect she is not a regular employee
is belied by the nature of her work and her length of
service with the Bank. As earlier stated, she rose from the
ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As
Assistant Vice President of the foreign department of the
Bank, she is tasked, among others, to collect checks
drawn against overseas banks payable in foreign
currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal
letters covering the same. It has been stated that "the
 primary standard of determining regular employment is
the reasonable connection between the particular
activity performed by the employee in relation to the
usual trade or business of the employer.["] Additionally,
"an employee is regular because of the nature of work
and the length of service, not because of the mode or
even the reason for hiring them." As Assistant
Vice-President of the Foreign Department of the Bank
she performs tasks integral to the operations of the bank
and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of
the bank. In fine, as a regular employee, she is entitled to
security of tenure; that is, her services may be terminated
only for a just or authorized cause. This being in truth a
case of illegal dismissal, it is no wonder then that the
Bank endeavored to the very end to establish loss of trust
and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no
avail.92
An "Assistant Vice President" is not among the officers stated in Section
25 of the Corporation Code.93 A corporation's President, however, is
explicitly stated as a corporate officer.
Finding that petitioner Malcaba is the President of respondent
corporation and a corporate officer, any issue on his alleged dismissal
is beyond the jurisdiction of the Labor Arbiter or the National Labor
Relations Commission. Their adjudication on his money claims is void
for lack of jurisdiction. As a matter of equity, petitioner Malcaba must,
therefore, return all amounts received as judgment award pending
final adjudication of his claims. This Court's dismissal of petitioner
Malcaba's claims, however, is without prejudice to his filing of the
appropriate case in the proper forum.
III
Article 294 [279] of the Labor Code provides that an employer may
terminate the services of an employee only upon just or authorized
causes.94 Article 297 [282] enumerates the just causes for termination,
among which is "[f]raud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized representative[.]"
Loss of trust and confidence is a just cause to terminate either
managerial employees or rank-and-file employees who regularly
handle large amounts of money or property in the regular exercise of
their functions.95
For an act to be considered a loss of trust and confidence, it must
be first, work-related, and second, founded on clearly established
facts:
The complained act must be work related such as would
show the employee concerned to be unfit to continue
working for the employer and it must be based on a
willful breach of trust and founded on clearly established
facts. The basis for the dismissal must be clearly and
convincingly established but proof beyond reasonable
doubt is not necessary.96
The breach of trust must likewise be willful, that is, "it is done
intentionally, knowingly and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently."97
Petitioner Nepomuceno alleges that he was illegally dismissed merely
for his failure to inform his superiors of the actual dates of his vacation
leave. Respondents, however, contend that as District Business
Manager, petitioner Nepomuceno lost the corporation's trust and
confidence by failing to report for work during a crucial sales period.
As found by the National Labor Relations Commission, petitioner
Nepomuceno had filed for leave, which was approved, for April 24, 25,
and 28, 2008 to go on vacation in Malaysia. However, he left for
Malaysia on the evening of April 22, 2008, and thus, failed to report for
work on April 23, 2008.
Petitioner Nepomuceno claims that he only knew that his flight was for
the evening of April 22, 2008 on the day of his flight. Respondents,
however, insist that he "deliberately concealed the actual date of
departure as he knows that he would be out of the country on a
crucial period of sales generation and bookings . . . [and] therefore
knew that his application for leave would be denied."98 Otherwise
stated, respondents contend that his dismissal was a valid exercise of
their management prerogative to discipline and dismiss managerial
employees unworthy of their trust and confidence.
The concept of a management prerogative was already passed upon
by this Court in San Miguel Brewery Sales Force Union v. Ople:99
Except as limited by special laws, an
employer is free to regulate, according to
his own discretion and judgment, all
aspects of employment, including hiring,
work assignments, working methods, time,
place and manner of work, tools to be
used, processes to be followed, supervision
of workers, working regulations, transfer of
employees, work supervision, lay-off of
workers and the discipline, dismissal and
recall of work. . . .
Every business enterprise endeavors to increase its profits.
In the process, it may adopt or devise means designed
towards that goal. In Abott Laboratories vs. NLRC, . . . We
ruled:
. . . Even as the law is solicitous of the
welfare of the employees, it must also
protect the right of an employer to exercise
what are clearly management
prerogatives. The free will of management
to conduct its own business affairs to
achieve its purpose cannot be denied.
So long as a company's management prerogatives are
exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating
or circumventing the rights of the employees under
special laws or under valid agreements, this Court will
uphold them.100
While an employer is free to regulate all aspects of employment, the
exercise of management prerogatives must be in good faith and must
not defeat or circumvent the rights of its employees.
In industries that mainly rely on sales, employers are free to discipline
errant employees who deliberately fail to report for work during a
crucial sales period. It would have been reasonable for respondents to
discipline petitioner Nepomuceno had he been a problematic
employee who unceremoniously refused to do his work.
However, as found by the Labor Arbiter and the National Labor
Relations Commission, petitioner Nepomuceno turned over all of his
pending work to a reliever before he left for Malaysia. He was able to
reach his sales quota and surpass his sales target even before taking
his vacation leave. Respondents did not suffer any financial damage
as a result of his absence. This was also petitioner Nepomuceno's first
infraction in his nine (9) years of service with respondents.101 None of
these circumstances constitutes a willful breach of trust on his part. The
penalty of dismissal, thus, was too severe for this kind of infraction.
The manner of petitioner Nepomuceno's dismissal was likewise
suspicious. In all cases of employment termination, the employee must
be granted due process. The manner by which this is accomplished is
stated in Book V, Rule XXIII, Section 2 of the Rules Implementing the
Labor Code:
Section 2. Standard of due process: requirements of
notice.
— In all cases of termination of employment, the
following standards of due process shall be substantially
observed.
I. For termination of employment based on just causes as
defined in Article 282 of the Code:
(a) A written notice served on the employee specifying
the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the
employee so desires, is given opportunity to respond to
the charge, present his evidence or rebut the evidence
presented against him; and
(c) A written notice of termination served on the
employee indicating that upon due consideration of all
the circumstance, grounds have been established to
justify his termination.
Here, petitioner Nepomuceno received a memorandum on April 23,
2008, asking him to explain why no administrative investigation should
be held against him. He submitted an explanation on the same day
and another explanation on May 2, 2008. On May 7, 2008, he was
given his notice of termination, which had already taken effect two (2)
days earlier, or on May 5, 2008.102
It is true that "[t]he essence of due process is simply an opportunity to
be heard."103 Petitioner Nepomuceno had two (2) opportunities within
which to explain his actions. This would have been sufficient to satisfy
the requirement. The delay in handing him his notice of termination,
however, appears to have been an afterthought. While strictly not a
violation of procedural due process, respondents should have been
more circumspect in complying with the due process requirements
under the law.
Considering that petitioner Nepomuceno's dismissal was done without
just cause, he is entitled to reinstatement and full backwages.104 If
reinstatement is not possible due to strained relations between the
parties, he shall be awarded separation pay at the rate of one (1)
month for every year of service. 105
IV
Under Article 297 [282] of the Labor Code, an employer may terminate
the services of an employee who commits willful disobedience of the
lawful orders of the employer:
Article 297. [282] Termination by Employer. — An
employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work[.]
For disobedience to be considered as just cause for termination, two
(2) requisites must concur: first, "the employee's assailed conduct must
have been wilful or intentional," and second, "the order violated must
have been reasonable, lawful, made known to the employee and
must pertain to the duties which he [or she] had been engaged to
discharge."106 For disobedience to be willful, it must be "characterized
by a wrongful and perverse mental attitude rendering the employee's
act inconsistent with proper subordination."107
The conduct complained of must also constitute "harmful behavior
against the business interest or person of his [or her] employer."108 Thus,
it is implied in every case of willful disobedience that "the erring
employee obtains undue advantage detrimental to the business
interest of the employer."109
Petitioner Palit-Ang, as Finance Officer, was instructed by respondent
Del Castillo to give a cash advance of P3,000.00 to District Branch
Manager Gamboa on November 26, 2007. This order was reasonable,
lawful, made known to petitioner Palit-Ang, and pertains to her
duties.110 What is left to be determined, therefore, is whether petitioner
Palit-Ang intentionally and willfully violated it as to amount to
insubordination.
When Gamboa went to collect the money from petitioner Palit-Ang,
he was told to return the next day as she was still busy. When petitioner
Palit-Ang found out that the money was to be used for a car tune-up,
she suggested to Gamboa to just get the money from his mobilization
fund and that she just would reimburse it after.111 The Court of Appeals
found that these circumstances characterized petitioner Palit-Ang's
"arrogance and hostility,"112 in failing to comply with respondent Del
Castillo's order, and thus, warranted her dismissal.
On the contrary, there was no ill will between Gamboa and petitioner
Palit-Ang. Petitioner Palit-Ang's failure to immediately give the money
to Gamboa was not the result of a perverse mental attitude but was
merely because she was busy at the time. Neither did she profit from
her failure to immediately give the cash advance for the car tune-up
nor did respondents suffer financial damage by her failure to comply.
The severe penalty of dismissal was not commensurate to her
infraction. In Dongon v. Rapid Movers and Forwarders:113
To us, dismissal should only be a last resort, a penalty to
be meted only after all the relevant circumstances have
been appreciated and evaluated with the goal of
ensuring that the ground for dismissal was not only serious
but true. The cause of termination, to be lawful, must be
a serious and grave malfeasance to justify the
deprivation of a means of livelihood. This requirement is
in keeping with the spirit of our Constitution and laws to
lean over backwards in favor of the working class, and
with the mandate that every doubt must be resolved in
their favor.
Although we recognize the inherent right of the
employer to discipline its employees, we should still
ensure that the employer exercises the prerogative to
discipline humanely and considerately, and that the
sanction imposed is commensurate to the offense
involved and to the degree of the infraction. The
discipline exacted by the employer should further
consider the employee's length of service and the
number of infractions during his employment. The
employer should never forget that always at stake in
disciplining its employee are not only his position but also
his livelihood, and that he may also have a family entirely
dependent on his earnings.114
Petitioner Palit-Ang likewise assails the failure of respondents to inform
her of her right to counsel when she was being investigated for her
infraction. As previously discussed, "[t]he essence of due process is
simply an opportunity to be heard,"115 not that the employee must be
accompanied by counsel at all times. A hearing was conducted and
she was furnished a notice of termination explaining the grounds for
her dismissa1.116 She was not denied due process.
Petitioner Palit-Ang, nonetheless, is considered to have been illegally
dismissed, her penalty not having been proportionate to the infraction
committed. Thus, she is entitled to reinstatement and full
backwages.117 If reinstatement is not possible due to strained relations
between the parties, she shall be awarded separation pay at the rate
of one (1) month for every year of service.118

WHEREFORE, the Petition is PARTIALLY GRANTED. Petitioner Christian C.

Nepomuceno and petitioner Laura Mae Fatima F. Palit-Ang
are DECLARED to have been illegally dismissed. They are, therefore,
entitled to reinstatement without loss of seniority rights, or in lieu thereof,
separation pay; and the payment of backwages from the filing of their
Complaints until finality of this Decision.

The Court of Appeals February 19, 2013 Decision and September 10,
2013 Resolution in CA-G.R. SP No. 119093, finding that the National
Labor Relations Commission had no jurisdiction to adjudicate
petitioner Nicanor F. Malcaba's claims is SUSTAINED. Petitioner
Malcaba is further ordered to RETURN the amount of P4,937,420.40 to
respondents for having been erroneously awarded. This shall be
without prejudice to the filing of petitioner Malcaba's claims in the
proper forum.

This case is hereby REMANDED to the Labor Arbiter for the proper
computation of petitioners Christian C. Nepomuceno's and Laura Mae
Fatima F. Palit-Ang's money claims.

SO ORDERED.

THIRD DIVISION
G.R. No. 196650, June 07, 2017
SPECTRUM SECURITY SERVICES, INC., Petitioner, v. DAVID GRAVE, ARIEL
V. AROA, TOMASINO R. DE CHAVEZ, JR., LUCITO P. SAMARITA,
SAIDOMAR M. MAROHOM, LITO V. MAHILOM AND OLIVER N.
MARTIN, Respondents.
DECISION
BERSAMIN, J.:
A security guard placed on reserved or off-detail status is deemed
constructively dismissed only if the status should last more than six
months. Any claim of constructive dismissal must be established by
clear and positive evidence.
The Case
The petitioner seeks the reversal of the decision promulgated March
1, 2011,1 whereby the Court of Appeals (CA) dismissed its petition
for certiorari and affirmed the decision of the National Labor Relations
Commission (NLRC) dated March 16, 2010 finding it liable for the illegal
dismissal of respondent security guards.2
Antecedents
The petitioner – a domestic corporation engaged in the business of
providing security services – employed and posted the respondents at
the premises of Ibiden Philippines, Inc. (Ibiden) located in the First
Philippine Industrial Park in Sto. Tomas, Batangas. The controversy
started when the petitioner implemented an action plan as part of its
operational and manpower supervision enhancement program
geared towards the gradual replacement of security guards at
Ibiden.3 Pursuant to the action plan, it issued separate "Notice(s) to
Return to Unit" to the respondents in July and August 2008 directing
them to report to its head office and to update their documents for
re-assignment.4
On August 14, 2008, the respondents filed their complaint against the
petitioner for constructive dismissal in Regional Arbitration Branch No.
IV of the NLRC, claiming that the implementation of the action plan
was a retaliatory measure against them for bringing several
complaints5 along with other employees of the petitioner to recover
unpaid holiday pay and 13th month pay.6 The complaints were
consolidated, and a decision was later on rendered ordering the
petitioner to pay to the respondents and their co-employees their
unpaid entitlements corresponding to the period from October 16,
2007 to June 30, 2008.7
Decision of the Labor Arbiter
On May 22, 2009, Labor Arbiter Enrico Angelo C. Portillo dismissed the
complaint for constructive dismissal upon finding that "there is no
evidence adduced by complainants in the form of a termination letter
and the like to substantiate their claim that they were indeed
unceremoniously terminated by [petitioner] Spectrum."8 He declared
that the return to work notices issued by the petitioner belied the
respondents' charge of illegal dismissal, opining that a security guard
could be considered as having been constructively dismissed only
when he had been placed on floating status for a period of more than
six months.9
Ruling of the NLRC
Aggrieved, the respondents appealed to the NLRC.
On March 16, 2010, the NLRC reversed the Labor Arbiter's dismissal,
and ordered the petitioner to reinstate the respondents with
backwages. It noted that had the petitioner really intended to
re-assign the respondents to new posts, the petitioner should have
indicated in the notices the new postings or re-assignments, to wit:
It is too much coincidence that the complainants were
relieved from their posts at Ibiden Phils., Inc. just sixteen
days after the six of them filed a complaint for recovery
of certain money claims against the respondents, and
eight days after three of them filed a similar complaint
against the respondents.
Moreover, if, as contended by the respondents, their
intention in relieving the complainants from their posts
was simply to implement a "long standing policy of
re-assignment/rotation", their "Action Plan", which has
the appearance of having been carefully laid out,
should have provided for new assignments for the
complainants. The fact [is] that it does not indicate that
the respondents never intended to give the
complainants new assignments. It is also too much of a
coincidence that the only security guards who were
affected by the respondents' "Action Plan" were the
complainants.
Ordinarily, where the security guards are relieved from
their posts, they are given notices informing them of their
new assignments, or requiring them to explain certain
charges against them. A notice directing a security
guard who had just been relieved from his post to simply
report to the office of the security agency is a badge of
bad faith because it usually means that the security
agency has no intention of giving him a new assignment
Otherwise stated, the security agency has the burden of
proving that the security guard who was relieved from his
post for other than disciplinary reasons was actually
given a new assignment Failing in this, it could only be
concluded that there was an unjustified dismissal.
WHEREFORE, the decision appealed from is
hereby REVERSED. The respondent Spectrum Security
Services, Inc. is hereby ordered to REINSTATE the
complainants, and to pay them FULL BACKWAGES from
the dates they were relieved from their last posts up to
the dates of their actual reinstatement. In addition, the
said respondent is ordered to pay them ten (10%)
percent of the total monetary award as attorney's fees.
For lack of employer-employee relationship, Ibiden
Philippines, Inc. is hereby dropped as party-respondent
herein.
SO ORDERED.10
The NLRC denied the motion for reconsideration of the petitioner on
May 17, 2010.
Decision of the CA
The petitioner assailed the adverse ruling of the NLRC in the CA
on certiorari, contending that the NLRC gravely abused its discretion
amounting to lack or excess of its jurisdiction in arbitrarily ruling that the
respondents had been illegally dismissed by the petitioner.
On March 1, 2011, the CA promulgated its assailed decision upholding
the NLRC, viz.:
WHEREFORE, upon the foregoing, the petition
is DISMISSED. The assailed Decision dated 17 May 2010 of
the NLRC is hereby AFFIRMED.
SO ORDERED.11
The CA concluded that although the complaint for illegal dismissal
was prematurely filed because six months had not yet elapsed to
warrant considering the dismissal as constructive dismissal, the
continued failure to give the respondents new assignments during the
proceedings before the Labor Arbiter that exceeded the reasonable
six-month period rendered the petitioner liable for constructive
dismissal of the respondents; that the petitioner's insistence that the
respondents had abandoned their employment was bereft of basis;
and that abandonment as a just ground for dismissal required clear,
willful, deliberate and unjustified refusal on the part of the employees
to resume their employment; hence, their mere absence from work or
failure to report for work even after the notice to return was not
tantamount to abandonment.
Issue
The petitioner submits that the CA erred in finding that the petitioner
was guilty of illegally dismissing the respondents despite the fact that
the totality of the circumstances negated such finding.
Ruling of the Court
The appeal has merit.
The NLRC and the CA concluded that there was illegal or constructive
dismissal in this case as the private respondents were not given new
assignments immediately after being placed on reserved status; that
the lack of any indication from the "Notices to Return to Unit" of their
re-assignments was a badge of bad faith; and that the timing was off
because the action plan was implemented by the petitioner after the
respondents had filed the complaints for their monetary claims against
the petitioner and received a favorable decision thereon.
The CA also pointed out that the petitioner's failure to provide the
re-assignments or new posts for the respondents during the
proceedings exceeded the reasonable six-month period of being on
reserved status; hence, their off-detail became permanent.
We cannot uphold the CA.
Security guards, like other employees in the private sector, are entitled
to security of tenure. However, their situation should be differentiated
from that of other employees or workers. The employment of security
guards generally depends on their employers' contracts with clients
who are third parties to the employment relationship, and the
requirements of the latter for security services and what will be
beneficial to them dictate the posting of the security guards. It is also
relevant to mention that their employers retain the management
prerogative to change their assignments and postings, and to decide
to temporarily relieve them of their assignments. In other words, their
security of tenure, though it shields them from demotions in rank or
diminutions of salaries, benefits and other privileges, does not vest
them with the right to their positions or assignments that will prevent
their transfers or re-assignments (unless the transfers or re-assignments
are motivated by discrimination or bad faith, or effected as a form of
punishment or demotion without sufficient cause). Such peculiar
conditions of their employment render inevitable that some of them
just have to undergo periods of reserved or off-detail status that should
not by any means equate to their dismissal. Only when the period of
their reserved or off-detail status exceeds the reasonable period of six
months without re-assignment should the affected security guards be
regarded as dismissed.12
Indeed, there should be no indefinite lay-offs. After the period of six
months, the employers should either recall the affected security
guards to work or consider them permanently retrenched pursuant to
the requirements of the law; otherwise, the employers would be held
to have dismissed them, and would be liable for such dismissals.13
On December 18, 2001, the Department of Labor and Employment
(DOLE), through Secretary Patricia A. Sto. Tomas, adopted and
promulgated DOLE Department Order No. 014-01 (Guidelines
Governing the Employment and Working Conditions of Security
Guards and Similar Personnel in the Private Security Industry) precisely
to address the peculiarities of the situation of the security guards.
Under DOLE Department Order No. 014-01, the tenure of security
guards in their employment is ensured by guaranteeing that their
services are to be terminated only for just or authorized causes
expressly recognized by the Labor Code after due process.
Of specific relevance is that Subsection 9.3 of DOLE Department Order
No. 014-01 constitutes guidelines to be followed when the security
guards are placed on reserved status, to wit:
9.3 Reserved Status — A security guard or similar
personnel may be placed in a workpool or on reserved
status due to lack of service assignments after expiration
or termination of the service contract with the principal
where he/she is assigned, or due to the temporary
suspension of agency operations.
No security guard or personnel can be placed in a
workpool or on reserved status in any of the following
situations: a) after expiration of a service contract if there
are other principals where he/she can be assigned; b) as
a measure to constructively dismiss the security guard;
and c) as an act of retaliation for filing complaints
against the employer on violations of labor laws, among
others.
If, after a period of 6 months, the security
agency/employer cannot provide work or give an
assignment to the reserved security guard, the latter can
be dismissed from service and shall be entitled to
separation pay as prescribed in subsection 5.6.
Security guards on reserved status who accept
employment in other security agencies or employers
before the end of the above six-month period may not
be given separation pay.14
The respondents insist that they were constructively dismissed when
they were relieved from their posts at Ibiden. However, the Labor
Arbiter found that such insistence was unsupported by any factual
foundation because there was no evidence showing that they had
been dismissed. The finding of the Labor Arbiter is correct. The notices
sent to them contained nothing from which to justly infer their having
been terminated from their employment. Moreover, their complaint
for illegal dismissal was even prematurely filed on August 14, 2008
because the notices15 were sent to each of them only in the period
from July 3, 2008 to August 2, 2008.
Nor was the CA justified to simply dismiss the right of the petitioner to
implement the action plan and thereby effect the rotation and
replacement of the respondents as their security guards posted at
Ibiden. We have already recognized the management prerogative of
the petitioner as their employer to change their postings and
assignments without severing their employment
relationship.16 Although the CA might have regarded the
implementation of the action plan as dubious because the petitioner
had relieved the respondents from their posts at Ibiden just 16 days
after they had brought their complaint for the recovery of certain
money claims from the former, thereby imputing bad faith to the
petitioner would be bereft of factual or legal basis considering the
failure of the respondents to sufficiently establish the fact of their
dismissal from their employment. In illegal dismissal cases, the general
rule is that the employer has the burden of proving that the dismissal
was legal. To discharge this burden, the employee must first prove, by
substantial evidence, that he had been dismissed from
employment.17 In this case, We find otherwise. Respondents failed to
properly establish that they were dismissed by the petitioner. Aside
from the respondents' plain allegation that they were illegally
dismissed by the petitioner, no other evidence was presented by the
respondents to support their contentions.
We can only uphold the Labor Arbiter's conclusion that the
respondents had actually abandoned their employment and had
severed their employment relationship with the petitioner themselves.
Despite having been notified of the need for them to appear before
the petitioner's head office to update their documents for purposes of
reposting, the respondents, except Lucito P. Samarita18 and Saidomar
M. Marohom,19 refused to receive the notices, and did not sign the
same,20 without first knowing the contents of the memo.
the human resource office and the company did not provide them
with new assignments at that time, the six-month period had not yet
lapsed. Note that the position paper submitted by the respondents to
the NLRC was only received by the NLRC on December 11,2008. The
reckoning of the end of the six-month period from the supposed
termination (i.e., July and August 2008, the period when they were
each given the "Notice to Return to Unit") would only be in January or
February 2009.
Lastly, the CA erred in holding that the petitioner was guilty of
providing the respondents with new assignments during the pendency
of the proceedings. It appears, indeed, that by the time the
respondents appealed their case in the NLRC, some of them had
already gained regular employment as security guards elsewhere
during their reserved status with the petitioner and prior to the lapse of
the six-month period.
The new employments were indicated m their SSS employment
history,23 thusly:
Employee Name Employment Employer Name
Date
Ariel Aroa 01-2009 Commander Security
Services Inc.

The petitioner sufficiently established, too, that it did not ignore the Lucito Samarita 08-2008 Phoenix Security &
respondents, contrary to their claims. As the records bear out, one of Allied Services
the respondents reported to the head office but only to claim his
salary and to avail himself of a loan from the Social Security System Lito Mahilom 09-2008 Emirate Security
(SSS);21 and that another respondent, Oliver Martin, albeit notified of Specialists
his endorsement to a new posting with a different client
company,22 did not report to the new posting.
Tomasino De Chavez 09-2008 Commander Security
Furthermore, assuming arguendo that when respondents reported to
 Services Inc.
No pronouncement on costs of suit.

Oliver Martin Saidomar 09-2008 Sentinel Integrated SO ORDERED.

Marohom Services Inc.

The act of some of the respondents of gaining employment as security

guards elsewhere constituted abandonment of their employment with
the petitioner. Abandonment requires the concurrence of two
elements, namely: one, the employee must have failed to report for
work or must have been absent without valid or justifiable reason;
and, two, there must have been a clear intention on the part of the
employee to sever the employer-employee relationship manifested by
some overt act.24 Although mere absence or failure to report for work,
even after notice to return, does not necessarily amount to
abandonment, the law requires that there be clear proof of deliberate
and unjustified intent on the part of the employee to sever the
employer-employee relationship. Abandonment is a matter of
intention and cannot be lightly presumed from certain equivocal acts.
In other words, the operative act is still the employee's ultimate act of
putting an end to his employment.25

Contrary to the findings of the CA, the respondents intended to sever

their employer-employee relationship with the petitioner because they
applied for and obtained employment with other security agencies
while they were on reserved status. Their having done so constituted a
clear and unequivocal intent to abandon and sever their employment
with the petitioner. Thereby, the filing of their complaint for illegal
dismissal was inconsistent with the established fact of their
abandonment.

WHEREFORE, the Court GRANTS the petition for review

on certiorari; REVERSES and SETS ASIDE the decision promulgated on
March 1, 2011; and REINSTATES the decision of the Labor Arbiter
dismissing the complaint for illegal dismissal.
 SECOND DIVISION
[G.R. NO. 176484 : November 25, 2008]
CALAMBA MEDICAL CENTER, INC., Petitioner v. NATIONAL LABOR
RELATIONS COMMISSION, RONALDO LANZANAS AND
MERCEDITHA*LANZANAS, Respondents.
DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned hospital,
engaged the services of medical doctors-spouses Ronaldo Lanzanas
(Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March
1992 and August 1995, respectively, as part of its team of resident
physicians. Reporting at the hospital twice-a-week on twenty-four-hour
shifts, respondents were paid a monthly "retainer" of P4,800.00 each.1 It
appears that resident physicians were also given a percentage share
out of fees charged for out-patient treatments, operating room
assistance and discharge billings, in addition to their fixed monthly
retainer.2
The work schedules of the members of the team of resident physicians
were fixed by petitioner's medical director Dr. Raul Desipeda (Dr.
Desipeda). And they were issued identification cards3 by petitioner
and were enrolled in the Social Security System (SSS).4 Income taxes
were withheld from them.5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident
physician at the hospital, inadvertently overheard a telephone
conversation of respondent Dr. Lanzanas with a fellow employee,
Diosdado Miscala, through an extension telephone line. Apparently,
Dr. Lanzanas and Miscala were discussing the low "census" or
admission of patients to the hospital.6
Dr. Desipeda whose attention was called to the above-said telephone
conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998
reading:
As a Licensed Resident Physician employed in Calamba
Medical Center since several years ago, the hospital
management has committed upon you utmost
confidence in the performance of duties pursuant
thereto. This is the reason why you were awarded the
privilege to practice in the hospital and were entrusted
hospital functions to serve the interest of both the
hospital and our patients using your capability for
independent judgment.
Very recently though and unfortunately, you have
committed acts inimical to the interest of the hospital,
the details of which are contained in the hereto
attached affidavit of witness.
You are therefore given 24 hours to explain why no
disciplinary action should be taken against you.
Pending investigation of your case, you are hereby
placed under 30-days [sic] preventive suspension
effective upon receipt hereof.7 (Emphasis, italics and
underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who
was not involved in the said incident, any work schedule after sending
her husband Dr. Lanzanas the memorandum,8 nor inform her the
reason therefor, albeit she was later informed by the Human Resource
Department (HRD) officer that that was part of petitioner's cost-cutting
measures.9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9,
1998,10admitted that he spoke with Miscala over the phone but that
their conversation was taken out of context by Dr. Trinidad.
On March 14, 1998,11 the rank-and-file employees union of petitioner
went on strike due to unresolved grievances over terms and conditions
of employment.12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal
suspension13 before the National Labor Relations Commission
(NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha
subsequently filed a complaint for illegal dismissal.14
In the meantime, then Sec. Cresenciano Trajano of the Department of
Labor and Employment (DOLE) certified the labor dispute to the NLRC
for compulsory arbitration and issued on April 21, 1998 return-to-work
Order to the striking union officers and employees of
petitioner pending resolution of the labor dispute.15
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22,
1998 order of the Secretary of Labor directing all union officers and
members to return-to-work "on or April 23, 1998, except those
employees that were already terminated or are serving disciplinary
actions." Dr. Desipeda thus ordered the officers and members of the
union to "report for work as soon as possible" to the hospital's personnel
officer and administrator for "work scheduling, assignments and/or
re-assignments."
Petitioner later sent Dr. Lanzanas a notice of termination which he
received on April 25, 1998, indicating as grounds therefor his failure to
report back to work despite the DOLE order and his supposed role in
the striking union, thus:
On April 23, 1998, you still did not report for work despite
memorandum issued by the CMC Medical Director
implementing the Labor Secretary's ORDER. The same is
true on April 24, 1998 and April 25, 1998, - -you still did not
report for work [sic].
You are likewise aware that you were observed (re:
signatories [sic] to the Saligang Batas of
BMCMC-UWP) to be unlawfully participating
as member in the rank-and-file union's concerted
activities despite knowledge that your position in the
hospital is managerial in nature (Nurses, Orderlies, and
staff of the Emergency Room carry out your orders using
your independent judgment) which participation is
expressly prohibited by the New Labor Code and which
prohibition was sustained by the
Med-Arbiter's ORDER dated February 24, 1998. (Emphasis
and italics in the original; underscoring partly in the
original and partly supplied)
For these reasons as grounds for termination, you are
hereby terminated for cause from employment effective
today, April 25, 1998, without prejudice to further action
for revocation of your license before the Philippine [sic]
Regulations [sic] Commission.17(Emphasis and
underscoring supplied)cralawlibrary
Dr. Lanzanas thus amended his original complaint to include illegal
dismissal.18His and Dr. Merceditha's complaints were consolidated and
docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam
dismissed the spouses' complaints for want of jurisdiction upon a
finding that there was no employer-employee relationship between
the parties, the fourth requisite or the "control test" in the determination
of an employment bond being absent.
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor
Arbiter's findings, disposing as follows:
 WHEREFORE, the assailed decision is set aside. The
respondents are ordered to pay the complainants their
full backwages; separation pay of one month salary for
every year of service in lieu of reinstatement; moral
damages of P500,000.00 each; exemplary damages
of P250,000.00 each plus ten percent (10%) of the total
award as attorney's fees.
SO ORDERED.21
Petitioner's motion for reconsideration having been denied, it brought
the case to the Court of Appeals on certiorari .
The appellate court, by June 30, 2004 Decision,22 initially granted
petitioner's petition and set aside the NLRC ruling. However, upon a
subsequent motion for reconsideration filed by respondents,
it reinstated the NLRC decision in an Amended Decision23 dated
September 26, 2006 but tempered the award to each of the spouses
of moral and exemplary damages to P100,000.00 and P50,000.00,
respectively and omitted the award of attorney's fees.
In finding the existence of an employer-employee relationship
between the parties, the appellate court held:
x x x. While it may be true that the respondents are given
the discretion to decide on how to treat the petitioner's
patients, the petitioner has not denied nor explained
why its Medical Director still has the direct supervision
and control over the respondents. The fact is the
petitioner's Medical Director still has to approve the
schedule of duties of the respondents. The respondents
stressed that the petitioner's Medical Director also
issues instructions or orders to the respondents relating to
the means and methods of performing their duties, i.e.
admission of patients, manner of characterizing cases,
treatment of cases, etc., and may even overrule, review
or revise the decisions of the resident physicians. This was
not controverted by the petitioner. The foregoing factors
taken together are sufficient to constitute the fourth
element, i.e. control test, hence, the existence of the
employer-employee relationship. In denying that it had
control over the respondents, the petitioner alleged that
the respondents were free to put up their own clinics or
to accept other retainership agreement with the other
hospitals. But, the petitioner failed to substantiate the
allegation with substantial evidence. (Emphasis and
underscoring supplied)24
The appellate court thus declared that respondents were illegally
dismissed.
x x x. The petitioner's ground for dismissing respondent
Ronaldo Lanzanas was based on his alleged
participation in union activities, specifically in joining the
strike and failing to observe the return-to-work order
issued by the Secretary of Labor. Yet, the petitioner did
not adduce any piece of evidence to show that
respondent Ronaldo indeed participated in the strike. x x
x.
In the case of respondent Merceditha Lanzanas, the
petitioner's explanation that "her marriage to
complainant Ronaldo has given rise to the presumption
that her sympat[hies] are likewise with her husband" as a
ground for her dismissal is unacceptable. Such is not one
of the grounds to justify the termination of her
employment.25(Underscoring supplied)cralawlibrary
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for
Reconsideration is GRANTED, and the Court's decision
 dated June 30, 2004, is SET ASIDE. In lieu thereof, a new
judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The
assailed decision dated May 3, 2002 and
order dated September 24, 2002 of the
NLRC in NLRC NCR CA No. 019823-99 are
AFFIRMED with the MODIFICATION that
the moral and exemplary damages are
reduced to P100,000.00 each
and P50,000.00 each, respectively.
SO ORDERED.26 (Emphasis and italics in the original;
underscoring supplied)
Preliminarily, the present petition calls for a determination of whether
there exists an employer-employee relationship27 between petitioner
and the spouses-respondents.
Denying the existence of such relationship, petitioner argues that the
appellate court, as well as the NLRC, overlooked its twice-a-week
reporting arrangement with respondents who are free to practice their
profession elsewhere the rest of the week. And it invites attention to
the uncontroverted allegation that respondents, aside from their
monthly retainers, were entitled to one-half of all suturing, admitting,
consultation, medico-legal and operating room assistance
fees.28 These circumstances, it stresses, are clear badges of the
absence of any employment relationship between them.
This Court is unimpressed.
Under the "control test," an employment relationship exists between a
physician and a hospital if the hospital controls both the means and
the details of the process by which the physician is to accomplish his
task.29
Where a person who works for another does so more or less at his own
pleasure and is not subject to definite hours or conditions of work, and
is compensated according to the result of his efforts and not the
amount thereof, the element of control is absent.30
As priorly stated, private respondents maintained specific
work-schedules, as determined by petitioner through its medical
director, which consisted of 24-hour shifts totaling forty-eight hours
each week and which were strictly to be observed under pain of
administrative sanctions.
That petitioner exercised control over respondents gains light from the
undisputed fact that in the emergency room, the operating room, or
any department or ward for that matter, respondents' work is
monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director,
no operations can be undertaken in those areas. For control test to
apply, it is not essential for the employer to actually supervise the
performance of duties of the employee, it being enough that it has the
right to wield the power.31
With respect to respondents' sharing in some hospital fees, this scheme
does not sever the employment tie between them and petitioner as
this merely mirrors additional form or another form of compensation or
incentive similar to what commission-based employees receive as
contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the
remuneration or earning, however designated, capable
of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis,
or other method of calculating the same, which is
payable by an employer to an employee under a
written or unwritten contract of employment for work
done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as
 determined by the Secretary of Labor, of board, lodging,
or other facilities customarily furnished by the employer
to the employee. x x x (Emphasis and underscoring
supplied),
Respondents were in fact made subject to petitioner-hospital's Code
of Ethics,32the provisions of which cover administrative and disciplinary
measures on negligence of duties, personnel conduct and behavior,
and offenses against persons, property and the hospital's interest.
More importantly, petitioner itself provided incontrovertible proof of
the employment status of respondents, namely, the identification
cards it issued them, the payslips33 and BIR W-2 (now 2316) Forms which
reflect their status as employees, and the classification as "salary" of
their remuneration. Moreover, it enrolled respondents in the SSS and
Medicare (Philhealth) program. It bears noting at this juncture that
mandatory coverage under the SSS Law34 is premised on the existence
of an employer-employee relationship,35 except in cases of
compulsory coverage of the self-employed. It would be preposterous
for an employer to report certain persons as employees and pay their
SSS premiums as well as their wages if they are not its employees.36
And if respondents were not petitioner's employees, how does it
account for its issuance of the earlier-quoted March 7, 1998
memorandum explicitly stating that respondent is "employed" in it and
of the subsequent termination letter indicating respondent Lanzanas'
employment status.
Finally, under Section 15, Rule X of Book III of the Implementing Rules of
the Labor Code, an employer-employee relationship exists between
the resident physicians and the training hospitals, unless there is a
training agreement between them, and the training program is duly
accredited or approved by the appropriate government agency. In
respondents' case, they were not undergoing any specialization
training. They were considered non-training general
practitioners, assigned at the emergency rooms and ward sections.
37
Turning now to the issue of dismissal, the Court upholds the appellate
court's conclusion that private respondents were illegally dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee but
part of the rank-and-file. This is the import of the Secretary of Labor's
Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxx
In the motion to dismiss it filed before the Med-Arbiter,
the employer (CMC) alleged that 24 members of
petitioner are supervisors, namely x x x Rolando
Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the alleged
supervisors narrated by the employer only proves that
except for the contention that these employees
allegedly supervise, they do not however recommend
any managerial action. At most, their job is
merely routinary in nature and consequently,
they cannot be considered supervisory employees.
They are not therefore barred from membership in the
union of rank[-]and[-]file, which the petitioner [the union]
is seeking to represent in the instant case.38 (Emphasis
and underscoring supplied)cralawlibrary
xxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is
considered indispensable to the national interest. In labor disputes
adversely affecting the continued operation of a hospital, Article
263(g) of the Labor Code provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.–
 xxx
(g) x x x x
x x x x. In labor disputes adversely affecting the
continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or
locking-out employer to provide and maintain an
effective skeletal workforce of medical and other health
personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure
the proper and adequate protection of the life and
health of its patients, most especially emergency cases,
for the duration of the strike or lockout. In such cases, the
Secretary of Labor and Employment is mandated to
immediately assume, within twenty-four hours from
knowledge of the occurrence of such strike or lockout,
jurisdiction over the same or certify to the Commission for
compulsory arbitration. For this purpose, the contending
parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the
Secretary of Labor and Employment or the Commission,
under pain of immediate disciplinary action, including
dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and
other affirmative relief, even criminal prosecution against
either or both of them.
x x x x (Emphasis and underscoring
supplied)cralawlibrary
An assumption or certification order of the DOLE Secretary
automatically results in a return-to-work of all striking workers, whether
a corresponding return-to-work order had been issued.39 The DOLE
Secretary in fact issued a return-to-work Order, failing to comply with
which is punishable by dismissal or loss of employment status.40
Participation in a strike and intransigence to a return-to-work
order must, however, be duly proved in order to justify immediate
dismissal in a "national interest" case. As the appellate court as well as
the NLRC observed, however, there is nothing in the records that
would bear out Dr. Lanzanas' actual participation in the strike. And the
medical director's Memorandum41 of April 22, 1998 contains nothing
more than a general directive to all union officers and members to
return-to-work. Mere membership in a labor union does not ipso
facto mean participation in a strike.
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended
on or before April 9, 1998, he was never given any work schedule42 was
not refuted by petitioner. Petitioner in fact never released any findings
of its supposed investigation into Dr. Lanzanas' alleged "inimical acts."
Petitioner thus failed to observe the two requirements,before dismissal
can be effected ─ notice and hearing ─ which constitute essential
elements of the statutory process; the first to apprise the employee of
the particular acts or omissions for which his dismissal is sought, and the
second to inform the employee of the employer's decision to dismiss
him.43 Non-observance of these requirements runs afoul of the
procedural mandate.44
The termination notice sent to and received by Dr. Lanzanas on April
25, 1998 was the first and only time that he was apprised of the reason
for his dismissal. He was not afforded, however, even the slightest
opportunity to explain his side. His was a "termination upon receipt"
situation. While he was priorly made to explain on his telephone
conversation with Miscala,45 he was not with respect to his supposed
participation in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having
been effected without any just or authorized cause and without
observance of due process. In fact, petitioner never proferred any
valid cause for her dismissal except its view that "her marriage to [Dr.
Lanzanas] has given rise to the presumption that her sympath[y] [is]
with her husband; [and that when [Dr. Lanzanas] declared that he
was going to boycott the scheduling of their workload by the medical
doctor, he was presumed to be speaking for himself [and] for his wife
Merceditha."46
Petitioner's contention that Dr. Merceditha was a member of the union
or was a participant in the strike remained just that. Its termination of
her employment on the basis of her conjugal relationship is not
analogous to
any of the causes enumerated in Article 28247 of the Labor Code.
Mere suspicion or belief, no matter how strong, cannot substitute for
factual findings carefully established through orderly procedure.48
The Court even notes that after the proceedings at the NLRC,
petitioner never even mentioned Dr. Merceditha's case. There is thus
no gainsaying that her dismissal was both substantively and
procedurally infirm.
Adding insult to injury was the circulation by petitioner of a "watchlist"
or "watch out list"49 including therein the names of respondents.
Consider the following portions of Dr. Merceditha's Memorandum of
Appeal:
3. Moreover, to top it all, respondents have circulated a
so called "Watch List" to other hospitals, one of which
[was] procured from Foothills Hospital in Sto. Tomas,
Batangas [that] contains her name. The object of the
said list is precisely to harass Complainant and malign her
good name and reputation. This is not only
unprofessional, but runs smack of oppression as CMC is
trying permanently deprived [sic] Complainant of her
livelihood by ensuring that she is barred from practicing
in other hospitals.
4. Other co-professionals and brothers in the profession
are fully aware of these "watch out" lists and as such, her
reputation was not only besmirched, but was damaged,
and she suffered social humiliation as it is of public
knowledge that she was dismissed from work.
Complainant came from a reputable and respected
family, her father being a retired full Colonel in the Army,
Col. Romeo A. Vente, and her brothers and sisters are all
professionals, her brothers, Arnold and Romeo Jr., being
engineers. The Complainant has a family protection [sic]
to protect. She likewise has a professional reputation to
protect, being a licensed physician. Both her personal
and professional reputation were damaged as a result of
the unlawful acts of the respondents.50
While petitioner does not deny the existence of such list, it pointed to
the lack of any board action on its part to initiate such listing and to
circulate the same, viz:
20. x x x. The alleged watchlist or "watch out list," as
termed by complainants, were merely lists obtained by
one Dr. Ernesto Naval of PAMANA Hospital. Said list was
given by a stockholder of respondent who was at the
same time a stockholder of PAMAN[A] Hospital. The
giving of the list was not a Board action.51(Emphasis and
underscoring supplied)cralawlibrary
The circulation of such list containing names of alleged union
members intended to prevent employment of workers for union
activities similarly constitutes unfair labor practice, thereby giving a
right of action for damages by the employees prejudiced.52
A word on the appellate court's deletion of the award of attorney's
fees. There being no basis advanced in deleting it, as exemplary
damages were correctly awarded,53 the award of attorney's fees
should be reinstated.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No.
75871 is AFFIRMED with MODIFICATION in that the award by the
National Labor Relations Commission of 10% of the total judgment
award as attorney's fees is reinstated. In all other aspects, the decision
of the appellate court is affirmed.

SO ORDERED.
 FIRST DIVISION
[G.R. NO. 165881 : April 19, 2006]
OSCAR VILLAMARIA, JR. Petitioner, v. COURT OF APPEALS and JERRY V.
BUSTAMANTE, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the
Revised Rules of Court assailing the Decision1 and Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the
Resolution3 of the National Labor Relations Commission (NLRC) in
NCR-30-08-03247-00, which in turn affirmed the Decision4 of the Labor
Arbiter dismissing the complaint filed by respondent Jerry V.
Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a
sole proprietorship engaged in assembling passenger jeepneys with a
public utility franchise to operate along the Baclaran-Sucat route. By
1995, Villamaria stopped assembling jeepneys and retained only nine,
four of which he operated by employing drivers on a "boundary basis."
One of those drivers was respondent Bustamante who drove the
jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to
Villamaria as boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997, Villamaria
verbally agreed to sell the jeepney to Bustamante under the
"boundary-hulog scheme," where Bustamante would remit to
Villarama P550.00 a day for a period of four years; Bustamante would
then become the owner of the vehicle and continue to drive the
same under Villamaria's franchise. It was also agreed that Bustamante
would make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled
"Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng
Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660,
Chassis No. EVER95-38168-C and Motor No. SL-26647. The parties
agreed that if Bustamante failed to pay the boundary-hulog for three
days, Villamaria Motors would hold on to the vehicle until Bustamante
paid his arrears, including a penalty of P50.00 a day; in case
Bustamante failed to remit the daily boundary-hulog for a period of
one week, the Kasunduan would cease to have legal effect and
Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the
vehicle without prior authority from Villamaria Motors. Thus,
Bustamante was authorized to operate the vehicle to transport
passengers only and not for other purposes. He was also required to
display an identification card in front of the windshield of the vehicle;
in case of failure to do so, any fine that may be imposed by
government authorities would be charged against his account.
Bustamante further obliged himself to pay for the cost of replacing any
parts of the vehicle that would be lost or damaged due to his
negligence. In case the vehicle sustained serious damage,
Bustamante was obliged to notify Villamaria Motors before
commencing repairs. Bustamante was not allowed to wear slippers,
short pants or undershirts while driving. He was required to be polite
and respectful towards the passengers. He was also obliged to notify
Villamaria Motors in case the vehicle was leased for two or more days
and was required to attend any meetings which may be called from
time to time. Aside from the boundary-hulog, Bustamante was also
obliged to pay for the annual registration fees of the vehicle and the
premium for the vehicle's comprehensive insurance. Bustamante
promised to strictly comply with the rules and regulations imposed by
Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and
control of Villamaria. As agreed upon, he made daily remittances of
P550.00 in payment of the purchase price of the vehicle. Bustamante
failed to pay for the annual registration fees of the vehicle, but
Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same
arrangement with Villamaria Motors failed to pay their respective
boundary-hulog. This prompted Villamaria to serve a
"Paalala," reminding them that under the Kasunduan, failure to pay
6 1. Reinstate complainant to his former position without
the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He
warned the drivers that the Kasunduan would henceforth be strictly
enforced and urged them to comply with their obligation to avoid
litigation.
On July 24, 2000, Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal
against Villamaria and his wife Teresita. In his Position
Paper,8 Bustamante alleged that he was employed by Villamaria in
July 1996 under the boundary system, where he was required to remit
P450.00 a day. After one year of continuously working for them, the
spouses Villamaria presented the Kasunduan for his signature, with the
assurance that he (Bustamante) would own the jeepney by March
2001 after paying P550.00 in daily installments and that he would
thereafter continue driving the vehicle along the same route under
the same franchise. He further narrated that in July 2000, he informed
the Villamaria spouses that the surplus engine of the jeepney needed
to be replaced, and was assured that it would be done. However, he
was later arrested and his driver's license was confiscated because
apparently, the replacement engine that was installed was taken from
a stolen vehicle. Due to negotiations with the apprehending
authorities, the jeepney was not impounded. The Villamaria spouses
took the jeepney from him on July 24, 2000, and he was no longer
allowed to drive the vehicle since then unless he paid them
P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully prayed
that judgment be rendered ordering the respondents, jointly and
severally, the following:
loss of seniority rights and execute a Deed of Sale in favor
of the complainant relative to the PUJ with Plate No.
PVU-660;
2. Ordering the respondents to pay backwages in the
amount of P400.00 a day and other benefits computed
from July 24, 2000 up to the time of his actual
reinstatement;
3. Ordering respondents to return the amount of
P10,000.00 and P180,000.00 for the expenses incurred by
the complainant in the repair and maintenance of the
subject jeep;
4. Ordering the respondents to refund the amount of
One Hundred (P100.00) Pesos per day counted from
August 7, 1997 up to June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than
P200,000.00;
6. Attorney's fee[s] of not less than 10% of the monetary
award.
Other just and equitable reliefs under the premises are also being
prayed for.9
In their Position Paper,10 the spouses Villamaria admitted the existence
of the Kasunduan, but alleged that Bustamante failed to pay the
P10,000.00 downpayment and the vehicle's annual registration fees.
They further alleged that Bustamante eventually failed to remit the
requisite boundary-hulog of P550.00 a day, which prompted them to
issue the Paalaala. Instead of complying with his obligations,
Bustamante stopped making his remittances despite his daily trips and
even brought the jeepney to the province without permission. Worse,
the jeepney figured in an accident and its license plate was
confiscated; Bustamante even abandoned the vehicle in a gasoline
station in Sucat, Parañaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved
and Teresita Villamaria asked Bustamante for the keys, Bustamante
told her: "Di kunin ninyo." When the vehicle was finally retrieved, the
tires were worn, the alternator was gone, and the battery was no
longer working.
Citing the cases of Cathedral School of Technology v. NLRC11 and
Canlubang Security Agency Corporation v. NLRC,12 the spouses
Villamaria argued that Bustamante was not illegally dismissed since
the Kasunduan executed on August 7, 1997 transformed the
employer-employee relationship into that of vendor-vendee. Hence,
the spouses concluded, there was no legal basis to hold them liable
for illegal dismissal. They prayed that the case be dismissed for lack of
jurisdiction and patent lack of merit.
In his Reply,13 Bustamante claimed that Villamaria exercised control
and supervision over the conduct of his employment. He maintained
that the rulings of the Court in National Labor Union v.
Dinglasan,14 Magboo v. Bernardo,15 and Citizen's League of Free
Workers v. Abbas16 are germane to the issue as they define the nature
of the owner/operator-driver relationship under the boundary system.
He further reiterated that it was the Villamaria spouses who presented
the Kasunduan to him and that he conformed thereto only upon their
representation that he would own the vehicle after four years.
Moreover, it appeared that the Paalala was duly received by him, as
he, together with other drivers, was made to affix his signature on a
blank piece of paper purporting to be an "attendance sheet."
On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of
the spouses Villamaria and ordered the complaint dismissed on the
following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the
PAALALA, to prove their claim that complainant violated the terms of
their contract and afterwards abandoned the vehicle assigned to him.
As against the foregoing, [the] complaint's (sic) mere allegations to
the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to
damages and attorney's fees.18
Bustamante appealed the decision to the NLRC,19 insisting that the
Kasunduan did not extinguish the employer-employee relationship
between him and Villamaria. While he did not receive fixed wages, he
kept only the excess of the boundary-hulog which he was required to
remit daily to Villamaria under the agreement. Bustamante
maintained that he remained an employee because he was
engaged to perform activities which were necessary or desirable to
Villamaria's trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of merit,
thus:
WHEREFORE, premises considered, complainant's appeal is hereby
DISMISSED for reasons not stated in the Labor Arbiter's decision but
mainly on a jurisdictional issue, there being none over the subject
matter of the controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship
between Bustamante and Villamaria was that of vendor and vendee,
hence, the Labor Arbiter had no jurisdiction over the complaint.
Bustamante filed a Motion for Reconsideration, which the NLRC
resolved to deny on May 30, 2003.22
Bustamante elevated the matter to the CA via Petition for Certiorari,
alleging that the NLRC erred
I added that the boundary-hulog plan was basically a scheme to help
IN DISMISSING PETITIONER'S APPEAL "FOR REASON NOT
STATED IN THE LABOR ARBITER'S DECISION, BUT MAINLY
ON JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING
JURISPRUDENCE WHEN IT DECLARED THAT THE
RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS
DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE
MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship
between him and Villamaria continued to be that of
employer-employee and as such, the Labor Arbiter had jurisdiction
over his complaint. He further alleged that it is common knowledge
that operators of passenger jeepneys (including taxis) pay their drivers
not on a regular monthly basis but on commission or boundary basis, or
even the boundary-hulog system. Bustamante asserted that he was
dismissed from employment without any lawful or just cause and
without due notice.
For his part, Villamaria averred that Bustamante failed to adduce
proof of their employer-employee relationship. He further pointed out
that the Dinglasan case pertains to the boundary system and not the
boundary-hulog system, hence inapplicable in the instant case. He
argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee
relationship. Noting that he was engaged in the manufacture and sale
of jeepneys and not in the business of transporting passengers for
consideration, Villamaria contended that the daily fees which
Bustmante paid were actually periodic installments for the the vehicle
and were not the same fees as understood in the boundary system. He
the driver-buyer earn money and eventually pay for the unit in full, and
for the owner to profit not from the daily earnings of the driver-buyer
but from the purchase price of the unit sold. Villamaria further asserted
that the apparently restrictive conditions in the Kasunduan did not
mean that the means and method of driver-buyer's conduct was
controlled, but were mere ways to preserve the vehicle for the benefit
of both parties: Villamaria would be able to collect the agreed
purchase price, while Bustamante would be assured that the vehicle
would still be in good running condition even after four years.
Moreover, the right of vendor to impose certain conditions on the
buyer should be respected until full ownership of the property is vested
on the latter. Villamaria insisted that the parallel circumstances
obtaining in Singer Sewing Machine Company v. Drilon24 has
analogous application to the instant issue.
In its Decision25 dated August 30, 2004, the CA reversed and set aside
the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions
of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE,
and judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to
pay petitioner Jerry Bustamante separation pay
computed from the time of his employment up to the
time of termination based on the prevailing minimum
wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr.
to pay petitioner Jerry Bustamante back wages
computed from the time of his dismissal up to March
 2001 based on the prevailing minimum wage at the time
of his dismissal.
Without Costs.
SO ORDERED.26
The appellate court ruled that the Labor Arbiter had jurisdiction over
Bustamante's complaint. Under the Kasunduan, the relationship
between him and Villamaria was dual: that of vendor-vendee and
employer-employee. The CA ratiocinated that Villamaria's exercise of
control over Bustamante's conduct in operating the jeepney is
inconsistent with the former's claim that he was not engaged in the
transportation business. There was no evidence that petitioner was
allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned
in the Kasunduan, it did not mean that Villamaria could not exercise it.
It explained that the existence of an employment relationship did not
depend on how the worker was paid but on the presence or absence
of control over the means and method of the employee's work. In this
case, Villamaria's directives (to drive carefully, wear an identification
card, don decent attire, park the vehicle in his garage, and to inform
him about provincial trips, etc.) was a means to control the way in
which Bustamante was to go about his work. In view of Villamaria's
supervision and control as employer, the fact that the "boundary"
represented installment payments of the purchase price on the
jeepney did not remove the parties' employer-employee relationship.
While the appellate court recognized that a week's default in paying
the boundary-hulog constituted an additional cause for terminating
Bustamante's employment, it held that the latter was illegally dismissed.
According to the CA, assuming that Bustamante failed to make the
required payments as claimed by Villamaria, the latter nevertheless
failed to take steps to recover the unit and waited for Bustamante to
abandon it. It also pointed out that Villamaria neither submitted any
police report to support his claim that the vehicle figured in a mishap
nor presented the affidavit of the gas station guard to substantiate the
claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and
filed, on September 17, 2004, a motion for reconsideration thereof. The
CA denied the motion in a Resolution27 dated November 2, 2004, and
Villamaria received a copy thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via Petition for
Review on Certiorari under Rule 65 of the Rules of Court, alleging that
the CA committed grave abuse of its discretion amounting to excess
or lack of jurisdiction in reversing the decision of the Labor Arbiter and
the NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was a
combination of employer-employee and vendor-vendee relationships.
The terms and conditions of the Kasunduan clearly state that he and
respondent Bustamante had entered into a conditional deed of sale
over the jeepney; as such, their employer-employee relationship had
been transformed into that of vendor-vendee. Petitioner insists that he
had the right to reserve his title on the jeepney until after the purchase
price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate
remedy of petitioner was an appeal via a Petition for Review
on Certiorari under Rule 45 of the Rules of Court and not a special civil
action of certiorari under Rule 65. He argues that petitioner failed to
establish that the CA committed grave abuse of its discretion
amounting to excess or lack of jurisdiction in its decision, as the said
ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by
petitioner which provides for a boundary-hulog scheme was a devious
circumvention of the Labor Code of the Philippines. Respondent insists
that his juridical relationship with petitioner is that of
employer-employee because he was engaged to perform activities
which were necessary or desirable in the usual business of petitioner,
his employer.
In his Reply, petitioner avers that the Rules of Procedure should be
liberally construed in his favor; hence, it behooves the Court to resolve
the merits of his petition.
We agree with respondent's contention that the remedy of petitioner
from the CA decision was to file a Petition for Review
on Certiorari under Rule 45 of the Rules of Court and not the
independent action of certiorari under Rule 65. Petitioner had 15 days
from receipt of the CA resolution denying his motion for the
reconsideration within which to file the petition under Rule 45.28 But
instead of doing so, he filed a petition for certiorari under Rule 65 on
November 22, 2004, which did not, however, suspend the running of
the 15-day reglementary period; consequently, the CA decision
became final and executory upon the lapse of the reglementary
period for appeal. Thus, on this procedural lapse, the instant petition
stands to be dismissed.29
It must be stressed that the recourse to a special civil action under Rule
65 of the Rules of Court is proscribed by the remedy of appeal under
Rule 45. As the Court elaborated in Tomas Claudio Memorial College,
Inc. v. Court of Appeals:30
We agree that the remedy of the aggrieved party from a decision or
final resolution of the CA is to file a Petition for Review
on Certiorari under Rule 45 of the Rules of Court, as amended, on
questions of facts or issues of law within fifteen days from notice of the
said resolution. Otherwise, the decision of the CA shall become final
and executory. The remedy under Rule 45 of the Rules of Court is a
mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review
is not a matter of right but is a matter of judicial discretion. The
aggrieved party may, however, assail the decision of the CA via a
petition for certiorari under Rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying the
motion for reconsideration of the same. This is based on the premise
that in issuing the assailed decision and resolution, the CA acted with
grave abuse of discretion, amounting to excess or lack of jurisdiction
and there is no plain, speedy and adequate remedy in the ordinary
course of law. A remedy is considered plain, speedy and adequate if it
will promptly relieve the petitioner from the injurious effect of the
judgment and the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if
appeal is available, for the remedies of appeal and certiorari are
mutually exclusive and not alternative or successive. The aggrieved
party is, likewise, barred from filing a petition for certiorari if the remedy
of appeal is lost through his negligence. A petition for certiorari is an
original action and does not interrupt the course of the principal case
unless a temporary restraining order or a writ of preliminary injunction
has been issued against the public respondent from further
proceeding. A petition for certiorari must be based on jurisdictional
grounds because, as long as the respondent court acted within its
jurisdiction, any error committed by it will amount to nothing more than
an error of judgment which may be corrected or reviewed only by
appeal.31
However, we have also ruled that a petition for certiorari under Rule 65
may be considered as filed under Rule 45, conformably with the
principle that rules of procedure are to be construed liberally,
provided that the petition is filed within the reglementary period under
Section 2, Rule 45 of the Rules of Court, and where valid and
compelling circumstances warrant that the petition be resolved on its
merits.32 In this case, the petition was filed within the reglementary
period and petitioner has raised an issue of substance: whether the
existence of a boundary-hulog agreement negates the
employer-employee relationship between the vendor and vendee,
and, as a corollary, whether the Labor Arbiter has jurisdiction over a
complaint for illegal dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof,
as well as, which court or agency of the government has jurisdiction
over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the
reliefs prayed for, whether or not the complainant/plaintiff is entitled to
any or all of such reliefs.33 A prayer or demand for relief is not part of
the petition of the cause of action; nor does it enlarge the cause of
action stated or change the legal effect of what is alleged.34In
determining which body has jurisdiction over a case, the better policy
is to consider not only the status or relationship of the parties but also
the nature of the action that is the subject of their controversy.35
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter
exclusive original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wage, rates of pay,
hours of work, and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; andcralawlibrary
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relationship,
including those of persons in domestic or household
service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.
(b) The Commission shall have exclusive
appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation or
implementation of collective bargaining
agreements, and those arising from the
interpretation or enforcement of company
personnel policies shall be disposed of by
the Labor Arbiter by referring the same to
the grievance machinery and voluntary
arbitration as may be provided in said
agreements.
In the foregoing cases, an employer-employee relationship is an
indispensable jurisdictional requisite.36 The jurisdiction of Labor Arbiters
and the NLRC under Article 217 of the Labor Code is limited to disputes
arising from an employer-employee relationship which can only be
resolved by reference to the Labor Code, other labor statutes or their
collective bargaining agreement.37 Not every dispute between an
employer and employee involves matters that only the Labor Arbiter
and the NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial powers. Actions between employers and employees
where the employer-employee relationship is merely incidental is
within the exclusive original jurisdiction of the regular courts.38 When
the principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case falls within the exclusive
jurisdiction of the Labor Arbiter and the NLRC even though a claim for
damages might be asserted as an incident to such claim.39
We agree with the ruling of the CA that, under the boundary-hulog
scheme incorporated in the Kasunduan, a dual juridical relationship
was created between petitioner and respondent: that of
employer-employee and vendor-vendee. The Kasunduan did not
extinguish the employer-employee relationship of the parties extant
before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v.
Dinglasan40 that the jeepney owner/operator-driver relationship under
the boundary system is that of employer-employee and not
lessor-lessee. This doctrine was affirmed, under similar factual settings,
in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42and was
analogously applied to govern the relationships between auto-calesa
owner/operator and driver,43 bus owner/operator and
conductor, and taxi owner/operator and driver.
44 45
The boundary system is a scheme by an owner/operator engaged in
transporting passengers as a common carrier to primarily govern the
compensation of the driver, that is, the latter's daily earnings are
remitted to the owner/operator less the excess of the boundary which
represents the driver's compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control over
the chattel leased but the lessee is still ultimately responsible for the
consequences of its use. The management of the business is still in the
hands of the owner/operator, who, being the holder of the certificate
of public convenience, must see to it that the driver follows the route
prescribed by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations. The fact that the
driver does not receive fixed wages but only the excess of the
"boundary" given to the owner/operator is not sufficient to change the
relationship between them. Indubitably, the driver performs activities
which are usually necessary or desirable in the usual business or trade
of the owner/operator.46
Under the Kasunduan, respondent was required to remit P550.00 daily
to petitioner, an amount which represented the boundary of
petitioner as well as respondent's partial payment (hulog) of the
purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his
daily wage. Thus, the daily remittances also had a dual purpose: that
of petitioner's boundary and respondent's partial payment (hulog) for
the vehicle. This dual purpose was expressly stated in the Kasunduan.
The well-settled rule is that an obligation is not novated by an
instrument that expressly recognizes the old one, changes only the
terms of payment, and adds other obligations not incompatible with
the old provisions or where the new contract merely supplements the
previous one.47 The two obligations of the respondent to remit to
petitioner the boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine
the contract itself, keeping in mind that when the terms of the
agreement are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations shall
prevail.48 The intention of the contracting parties should be
ascertained by looking at the words used to project their intention,
that is, all the words, not just a particular word or two or more words
standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.49 The parts and clauses must
be interpreted in relation to one another to give effect to the whole.
The legal effect of a contract is to be determined from the whole read
together.50
Under the Kasunduan, petitioner retained supervision and control over
the conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG
IKALAWANG PANIG ang sasakyan ipinagkatiwala sa
kanya ng TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng
TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay
bilang pampasada o pangangalakal sa malinis at
maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng
TAUHAN NG IKALAWANG PANIG sa mga bagay na
makapagdudulot ng kahihiyan, kasiraan o nagmamaneho ay naka-tsinelas, naka short pants at
pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng
opisina ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay
kinakailangang maglagay ng ID Card sa harap ng
windshield upang sa pamamagitan nito ay madaliang
malaman kung ang nagmamaneho ay awtorisado ng
VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang
[halaga ng] multa kung sakaling mahuli ang sasakyang
ito na hindi nakakabit ang ID card sa wastong lugar o
anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG
ang materyales o piyesa na papalitan ng nasira o
nawala ito dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe
habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang
sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG,
ang TAUHAN NG IKALAWANG PANIG ay obligadong
itawag ito muna sa VILLAMARIA MOTORS bago ipagawa
sa alin mang Motor Shop na awtorisado ng VILLAMARIA
MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG
PANIG sa panahon ng pamamasada na ang
nakasando lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan upang igalang ng
mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang
awtorisado niyang driver ay magpapakita ng
magandang asal sa mga pasaheros at hindi dapat
magsasalita ng masama kung sakali man may
pasaherong pilosopo upang maiwasan ang anumang
kaguluhan na maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng
BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG
sa loob ng tatlong (3) araw ay ang opisina ng
VILLAMARIA MOTORS ang may karapatang mangasiwa
ng nasabing sasakyan hanggang matugunan ang lahat
ng responsibilidad. Ang halagang dapat bayaran sa
opisina ay may karagdagang multa ng P50.00 sa
araw-araw na ito ay nasa pangangasiwa ng
VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay
hindi makapagbigay ng BOUNDARY HULOG sa loob ng
isang linggo ay nangangahulugan na ang kasunduang
ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN
NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang
bayad sa rehistro, comprehensive insurance taon-taon
at kahit anong uri ng aksidente habang ito ay
hinuhulugan pa sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay
obligadong dumalo sa pangkalahatang pagpupulong
ng VILLAMARIA MOTORS sa tuwing tatawag ang mga
tagapangasiwa nito upang maipaabot ang anumang
mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa
sa lahat ng mga patakaran na magkakaroon ng
pagbabago o karagdagan sa mga darating na
panahon at hindi magiging hadlang sa lahat ng mga
balakin ng VILLAMARIA MOTORS sa lalo pang
ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi
magiging buwaya sa pasahero upang hindi kainisan ng
kapwa driver at maiwasan ang pagkakasangkot sa
anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang
siyasatin ang kalagayan lalo na sa umaga bago
pumasada, at sa hapon o gabi naman ay sisikapin
mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay
maaarkila at aabutin ng dalawa o higit pang araw sa
lalawigan ay dapat lamang na ipagbigay alam muna
ito sa VILLAMARIA MOTORS upang maiwasan ang mga
anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan
ang pakikipag-unahan sa kaninumang sasakyan upang
maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay
mayroon sasabihin sa VILLAMARIA MOTORS mabuti man
or masama ay iparating agad ito sa kinauukulan at
iwasan na iparating ito kung [kani-kanino] lamang
upang maiwasan ang anumang usapin. Magsadya
agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong
galang at puso kong sinasang-ayunan at buong sikap
na pangangalagaan ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan at gagamitin lamang ito
sa paghahanapbuhay at wala nang iba pa.51
The parties expressly agreed that petitioner, as vendor, and
respondent, as vendee, entered into a contract to sell the jeepney on
a daily installment basis of P550.00 payable in four years and that
petitioner would thereafter become its owner. A contract is one of
conditional sale, oftentimes referred to as contract to sell, if the
ownership or title over the
property sold is retained by the vendor, and is not passed to the
vendee unless and until there is full payment of the purchase price
and/or upon faithful compliance with the other terms and conditions
that may lawfully be stipulated.52 Such payment or satisfaction of
other preconditions, as the case may be, is a positive suspensive
condition, the failure of which is not a breach of contract, casual or
serious, but simply an event that would prevent the obligation of the
vendor to convey title from acquiring binding force.53 Stated
differently, the efficacy or obligatory force of the vendor's obligation
to transfer title is subordinated to the happening of a future and
uncertain event so that if the suspensive condition does not take
place, the parties would stand as if the conditional obligation had
never existed.54 The vendor may extrajudicially terminate the
operation of the contract, refuse conveyance, and retain the sums or
installments already received, where such rights are expressly provided
for.55
Under the boundary-hulog scheme, petitioner retained ownership of
the jeepney although its material possession was vested in respondent
as its driver. In case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be of no force
and effect and respondent would have to return the jeepney to
petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue
driving the jeepney on a boundary basis of P550.00 daily despite the
termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner
and respondent was not negated by the foregoing stipulation in the
Kasunduan, considering that petitioner retained control of
respondent's conduct as driver of the vehicle. As correctly ruled by the
CA:
The exercise of control by private respondent over petitioner's
conduct in operating the jeepney he was driving is inconsistent with
private respondent's claim that he is, or was, not engaged in the
transportation business; that, even if petitioner was allowed to let some
other person drive the unit, it was not shown that he did so; that the
existence of an employment relation is not dependent on how the
worker is paid but on the presence or absence of control over the
means and method of the work; that the amount earned in excess of
the "boundary hulog" is equivalent to wages; and that the fact that
the power of dismissal was not mentioned in the Kasunduan did not
mean that private respondent never exercised such power, or could
not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or
to wear an identification card, or to don a decent attire, or to park the
vehicle in Villamaria Motors garage, or to inform Villamaria Motors
about the fact that the unit would be going out to the province for
two days of more, or to drive the unit carefully, etc. necessarily related
to control over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing Machine but
National Labor Union since the latter case involved jeepney
owners/operators and jeepney drivers, and that the fact that the
"boundary" here represented installment payment of the purchase
price on the jeepney did not withdraw the relationship from that of
employer-employee, in view of the overt presence of supervision and
control by the employer.56
Neither is such juridical relationship negated by petitioner's claim that
the terms and conditions in the Kasunduan relative to respondent's
behavior and deportment as driver was for his and respondent's
benefit: to insure that respondent would be able to pay the requisite
daily installment of P550.00, and that the vehicle would still be in good
condition despite the lapse of four years. What is primordial is that
petitioner retained control over the conduct of the respondent as
driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the
franchise, is entitled to exercise supervision and control over the
respondent, by seeing to it that the route provided in his franchise, and
the rules and regulations of the Land Transportation Regulatory Board
are duly complied with. Moreover, in a business establishment, an
identification card is usually provided not just as a security measure
but to mainly identify the holder thereof as a bona fide employee of
the firm who issues it.57
As respondent's employer, it was the burden of petitioner to prove that
respondent's termination from employment was for a lawful or just
cause, or, at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do
so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected
in accordance with law. The just and authorized causes for termination
of employment are enumerated under Articles 282, 283 and 284 of the
Labor Code.
Parenthetically, given the peculiarity of the situation of the parties here,
the default in the remittance of the boundary hulog for one week or
longer may be considered an additional cause for termination of
employment. The reason is because the Kasunduan would be of no
force and effect in the event that the purchaser failed to remit the
boundary hulog for one week. The Kasunduan in this case pertinently
stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi
makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at
kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa.
Moreover, well-settled is the rule that, the employer has the burden of
proving that the dismissal of an employee is for a just cause. The failure
of the employer to discharge this burden means that the dismissal is
not justified and that the employee is entitled to reinstatement and
back wages.
In the case at bench, private respondent in his position paper before
the Labor Arbiter, alleged that petitioner failed to pay the
miscellaneous fee of P10,000.00 and the yearly registration of the unit;
that petitioner also stopped remitting the "boundary hulog," prompting
him (private respondent) to issue a "Paalala," which petitioner however
ignored; that petitioner even brought the unit to his (petitioner's)
province without informing him (private respondent) about it; and that
petitioner eventually abandoned the vehicle at a gasoline station
after figuring in an accident. But private respondent failed to
substantiate these allegations with solid, sufficient proof. Notably,
private respondent's allegation viz, that he retrieved the vehicle from
the gas station, where petitioner abandoned it, contradicted his
statement in the Paalala that he would enforce the provision (in the
Kasunduan) to the effect that default in the remittance of the
boundary hulog for one week would result in the forfeiture of the unit.
The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
"Sa pamamagitan ng 'BOUNDARY HULOG'
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan
particular na ang paragrapo 13 na nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa
ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng
wala ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin
na pong ipatutupad ang nasabing Kasunduan kaya't aking
pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa
kasunduan upang maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang
hindi na tayo makaabot pa sa korte kung sakaling hindi ninyo isasauli
ang inyong sasakyan na hinuhulugan na ang mga magagastos ay
kayo pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa
kasunduan ang naging dahilan ng pagsampa ng kaso.
"Sumasainyo

"Attendance: 8/27/99

"(The Signatures appearing herein

include (sic) that of petitioner's) (Sgd.)

OSCAR VILLAMARIA, JR."

If it were true that petitioner did not remit the boundary hulog for one
week or more, why did private respondent not forthwith take steps to
recover the unit, and why did he have to wait for petitioner to
abandon it?ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

On another point, private respondent did not submit any police report
to support his claim that petitioner really figured in a vehicular mishap.
Neither did he present the affidavit of the guard from the gas station
to substantiate his claim that petitioner abandoned the unit there.58

Petitioner's claim that he opted not to terminate the employment of

respondent because of magnanimity is negated by his (petitioner's)
own evidence that he took the jeepney from the respondent only on
July 24, 2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of

the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs
against petitioner.

SO ORDERED.