people vs. quebral, 68 phil.

564
FACTS: The accused was
charged with illegal practice of
medicine because he had
diagnosed, treated and
prescribed for certain diseases
suffered by certain patients from
whom he received monetary
compensation, without having
previously obtained the proper
certificate of registration from
the Board of Medical Examiners,
as provided in Section 770 of
the Administrative Code.
He appealed, and, in this court,
he reiterates his contention that
it is incumbent upon the
prosecution to prove that he
practiced medicine without the
proper certificate, and that there
being no evidence to that effect,
he should be acquitted.
ISSUE: WON it is incumbent
upon the prosecution to prove
that negative fact, and, failure
proving it results in acquittal.
HELD: Yes. Section 770 of the
Administrative Code provides
that "no person shall practice
medicine in the Philippine
Islands without having
previously obtained the proper
certificate of registration issued
by the Board of Medical
Examiners . . .." This provision
clearly includes the want of
certificate as an essential
element of the offense charged.
The negative fact is not
separable from the offense as

defined. It is, therefore,

incumbent upon the prosecution
to prove that negative fact, and
failure to prove it is a ground for
acquittal.
In the instant case, however, the
decision rendered by the lower
court makes mention of Exhibit
F-2 as showing that the accused
is not a registered physician.
That document is signed by Jose
Ma. Delgado, chairman of the
Board of Medical Examiners,
wherein it is stated, in part, that
"there is nothing in the records
of this Board to show that Mr.
Fernando C. Quebral is a
registered physician." This
document is admissible as
evidence of its contents, under
one of the exceptions to the
hearsay rule, regarding official
written statements. "The
certificate of a custodian that he
has diligently searched for a
document or an entry of a
specified tenor and has been
unable to find it ought to be
usually as satisfactory for
evidencing its non-existence in
his office as his testimony on
the stand to this effect would
be." (3 Wigmore on Evidence, p.
561.) Furthermore, Exhibit H-3 is
also mentioned in the decision
of the lower court, which is a
letter of the accused to the
President of the Philippines,
quoting approvingly an article
published in the Philippine

Herald, wherein it is said that

Fernando Quebral is not a holder
of a doctor of medicine degree.
These Exhibits, F-2 and H-3, are
sufficient evidence to show that
the accused has been practicing
medicine without the required
certificate of registration issued
by the Board of Medical
Examiners.
Judgment is affirmed, with costs
against appellant.
GARCIA-RUEDA VS. PASCASIO,
G.R. NO. 118141, SEPTEMBER 5,
1997
FACTS: Florencio V. Rueda,
husband of petitioner Leonila
Garcia-Rueda, underwent
surgical operation at the UST
hospital for the removal of a
stone blocking his ureter. He
was attended by Dr. Domingo
Antonio, Jr. who was the
surgeon, while Dr. Erlinda
Balatbat-Reyes was the
anaesthesiologist. Six hours
after the surgery, however,
Florencio died of complications
of unknown cause, according to
officials of the UST Hospital.
Not satisfied with the findings of
the hospital, petitioner
requested the National Bureau
of Investigation (NBI) to conduct
an autopsy on her husbands
body. Consequently, the NBI
ruled that Florencios death was
due to lack of care by the
attending physician in

administering anaesthesia.
Pursuant to its findings, the NBI
recommended that Dr. Domingo
Antonio and Dr. Erlinda BalatbatReyes be charged for Homicide
through Reckless Imprudence
before the Office of the City
Prosecutor.
ISSUE: WON a physician-patient
relationship was created
between the victim and Drs.
Antonio and Reyes.
HELD: Yes. A word on medical
malpractice or negligence
cases.
In its simplest terms, the type of
lawsuit which has been called
medical malpractice or, more
appropriately, medical
negligence, is that type of claim
which a victim has available to
him or her to redress a wrong
committed by a medical
professional which has caused
bodily harm.
In order to successfully pursue
such a claim, a patient must
prove that a health care
provider, in most cases a
physician, either failed to do
something which a reasonably
prudent health care provider
would have done, or that he or
she did something that a
reasonably prudent provider
would not have done; and that
that failure or action caused
injury to the patient.
Hence, there are four elements
involved in medical negligence

cases: duty, breach, injury and

proximate causation.
Evidently, when the victim
employed the services of Dr.
Antonio and Dr. Reyes, a
physician-patient relationship
was created. In accepting the
case, Dr. Antonio and Dr. Reyes
in effect represented that,
having the needed training and
skill possessed by physicians
and surgeons practicing in the
same field, they will employ
such training, care and skill in
the treatment of their patients.
They have a duty to use at least
the same level of care that any
other reasonably competent
doctor would use to treat a
condition under the same
circumstances. The breach of
these professional duties of skill
and care, or their improper
performance, by a physician
surgeon whereby the patient is
injured in body or in health,
constitutes actionable
malpractice. Consequently, in
the event that any injury results
to the patient from want of due
care or skill during the
operation, the surgeons may be
held answerable in damages for
negligence.
(Additional)
Moreover, in malpractice or
negligence cases involving the
administration of anaesthesia,
the necessity of expert
testimony and the availability of

the charge of res ipsa loquitur to

the plaintiff, have been applied
in actions against
anaesthesiologists to hold the
defendant liable for the death or
injury of a patient under
excessive or improper
anaesthesia. Essentially, it
requires two-pronged evidence:
evidence as to the recognized
standards of the medical
community in the particular kind
of case, and a showing that the
physician in question
negligently departed from this
standard in his treatment.
Another element in medical
negligence cases is causation
which is divided into two
inquiries: whether the doctors
actions in fact caused the harm
to the patient and whether
these were the proximate cause
of the patients injury. Indeed
here, a causal connection is
discernible from the occurrence
of the victims death after the
negligent act of the
anaesthesiologist in
administering the anesthesia, a
fact which, if confirmed, should
warrant the filing of the
appropriate criminal case. To be
sure, the allegation of
negligence is not entirely
baseless. Moreover, the NBI
deduced that the attending
surgeons did not conduct the
necessary interview of the
patient prior to the operation. It

appears that the cause of the

death of the victim could have
been averted had the proper
drug been applied to cope with
the symptoms of malignant
hyperthermia. Also, we cannot
ignore the fact that an antidote
was readily available to
counteract whatever deleterious
effect the anaesthesia might
produce. Why these
precautionary measures were
disregarded must be sufficiently
explained.
The Court dismissed the
petition.
acts: Defendant Buenviaje is
accused of the violation of the
Medical Act. The defendant,
without certificate from the
Board of Medical Examiners
authorizing her to practice
medicine in the Philippines,
treated and manipulated the
head and body of Regino Noble
in order to cure him of ailments
from which he pretended to
suffer. The treatment consisted
in a `thrust' by means of the
application of the hand to the
spinal column and for such
treatment received and
collected from said Noble the
sum of P1. Buenviaje also
advertised herself as a `doctor
of chiropractic,' said
advertisement appearing upon
her business cards and in the
newspaper with the abbreviation
`Dra.' to her name. Defendant

contended that chiropractic has

nothing to do with medicine and
that the practice of that
profession can therefore not be
regarded as practice of
medicine
Issue: Whether or not Buenviaje
is guilty of violating the medical
act
Held: Yes. The court held that
assuming without conceding
that chiropractic does not fall
within the term "practice of
medicine" in its ordinary
acceptation, the statutory
definition contained in section
770 of the Administrative Code
clearly includes the
manipulations employed in
chiropractic. Furthermore, the
subjects in which an
examination is required by
section 778 of the
Administrative Code, as
amended by Act No. 3111,
relate to matters of which a
thorough knowledge seems
necessary for the proper
diagnosis of diseases of the
human body and it is within the
police power of the State to
require that persons who devote
themselves to the curing of
human ills should possess such
knowledge.
Defendant also is held guilty of
the unauthorized use of the title
"doctor", as it necessarily
follows that a person holding
himself out as a doctor of

chiropractic in legal effect

represents himself as a doctor of
medicine.
People v Cole 113 N.E. 790 (NY
1916)
Facts: Mr. Willis Vernon Cole, a
Christian Scientist, was charged
with the crime of practicing
medicine without lawful
authorization and registration,
and the alleged unlawful
practice of medicine occurred on
January 1911. At first he was
discharged by the jury, but
another trial with the same
court resulted in a verdict of
guilty. The said verdict was
appealed to the Appellate
Division.
Practicing medicine when
unaccompanied by acts that are
in themselves evil, vicious and
criminal, is not a crime at
common law. Practicing
medicine is not malum in se. It
is important in the interest of
public health and public welfare
that a person holding himself
out as a physician or healer of
diseases, should have the
education, training, skill and
knowledge adequate for such
purposes. Statutes designed to
protect public health and
general welfare by regulating
the practice of medicine, in
some part or all of the territory
constituting this state, have
been enacted from time to time
since 1760.

When a person is charged with

practicing medicine without a
license it is necessary to
examine the acts of the
legislature to ascertain whether
the practices complained of are
in violation of the statute law.
The Public Health Law of the
state of New York states that
"No Person shall practice
medicine, unless registered and
legally authorized prior to
September first, 1891, or unless
licensed by the regents and
registered under article 8 of
chapters 661 of the laws of
1893 and acts amendatory
thereto, or unless licensed by
the regents and registered as
required by this article. * * *"
(Public Health Law, Section 161)
"The practice of medicine is
defined as follows: A person
practices medicine within the
meaning of this article, except
as herein stated, who holds
himself out as being able to
diagnose, treat, operate or
prescribe for any human
disease, pain, injury, deformity
or physical condition, and who
shall either offer or undertake,
by any means or method, to
diagnose, treat, operate or
prescribe for any human
disease, pain, injury, deformity,
or physical condition." (Public
Health Law, Section 160)
The statute also provides: "This
article shall not be construed to

affect * * * the practice of the

religious tenets of any church *
* *." (Public Health Law, Section
173.)
Their Constitution provides:
"The free exercise and
enjoyment of religious
profession and worship, without
discrimination or preference,
shall forever be allowed in this
state to all mankind; * * * but
the liberty of conscience hereby
secured shall not be so
construed as to excuse acts of
licentiousness, or justify
practices inconsistent with the
peace or safety of this state."
(Constitution of the State of New
York, article 1, section 3.)
The defendant was never
registered or licensed as a
practitioner of medicine. He is a
member of the Christian Science
church and a recognized
practitioner within the rules of
that church. For about seven
years he maintained an office in
the city of New York.
The witness testified that she
seek help from Mr. Cole because
she have read about him in the
newspaper, she said that she
asked him to see if he could
cure her eyes, she was wearing
glasses for ten years.
She also admitted that she was
told that Mr. Cole does not give
medicine and he treats through
prayers. Such treatment
requires faith in God. The

treatment costs $2 for the first

treatment, and $1 for all
subsequent treatments.
During the treatment, Mr. Cole
will raise his hands up to her
face and remained in perfect
silence for 15-20 minutes. After
such prayer, Mr. Cole told her
that will do for the day's
treatment and she was asked to
come back on another day.
She went back and told Mr. Cole
that she have a pain in her
back, there was a porous plaster
on her back at that time, she
was asked by Mr. Cole to
remove her plaster and have
more faith and understanding,
also she must have courage;
that she should remove the
glasses. Mr. Cole even told her
that he can cure locomotor
ataxia thru prayer and having
faith in God.
Mr. Cole says that patients that
have given up by physicians
always turn to Christian Science
for help.
She returned again and brought
her little girl with her who has a
cold and also wears glasses,
same treatment was made by
Mr. Cole.
The defendant during the
interviews stated to the witness
that she had as much power to
heal disease as he had, and
could do so as well if she would
study the Bible and rely upon its
promises and offer the prayer of

understanding and faith. She

understood him when he
asserted that he could cure
disease as saying that he could
bring about the cure by means
of prayer to Almighty God. He
said to her that all diseases are
alike to a Christian Scientist.
He further testified that at the
first interview "I told her I could
not cure her, that I had no more
power to cure her than any one
else, that God was the only
power, and the only healer. * * *
I told her that she could cure
herself just as much as I could if
she would study and purify her
life and her thoughts and
cleanse from her consciousness
fear and in harmony and false
thoughts. I told her that by
studying and gaining an
understanding that she could
apply the principle and law of
Christian Science as well as
anyone else, as well as I could. *
* * I told her that I was nothing
and that she was nothing, it was
God."
He testified that he was
practicing Christian Science as
laid down by the church. He
denied that he was practicing
medicine.
It was conceded on the trial that
Christian Science is a religion
based upon the Scriptures and
founded by Mary Baker Eddy in
1866 and that the church has
about a million members. The

alleged healing of moral, mental

and physical diseases by prayer
was practiced by Christian
Scientists in New York for more
than twenty years.
Issue: WON faith healing is an
unlawful practice of medicine
Held: No. It appears from the
statute that we have quoted
that a person practices medicine
when he "holds himself out as
being able to diagnose, treat,
operate or prescribe for any
human disease, pain, injury,
deformity or physical condition,
and who shall either offer or
undertake, by any means or
method, to diagnose, treat,
operate, or prescribe for any
human disease, pain, injury,
deformity or physical condition."
The language of the statute is
very general. It bears evidence
in itself that the words were
chosen for the express purpose
of prohibiting, except upon
registration and authorization of
the practitioner, as by the
statute provided, every means
and method that could
thereafter be used or claimed to
be used to relieve or cure
disease and infirmity by any
person individually, or as a
representative of a school,
religious body or other
organization.
It does not appear that the
defendant attempted to
diagnose the diseases which the

investigator stated to him that

she had. There was no laying on
of hands, manipulation,
massage, or outward
ceremonial. His direction to her
to remove her glasses and take
off a porous plaster which she
asserted she had upon her back
were, as also asserted by him,
simply to bring about complete
reliance by her upon the power
and willingness of God to heal
her diseases.
The exception in the statute is
not confined to worship or belief
but includes the practice of
religious tenets. If it was the
intention of the legislature to
relieve members of the Christian
Science and other churches
from the provisions of sections
160 and 161 of the Public Health
Law to the extent of permitting
them within the rules,
regulations and tenets of a
church to maintain an office and
there offer prayer for the
healing of the diseases of those
that might come to such church
members for treatment, and the
defendant has in good faith
acted in accordance therewith,
he is not guilty of the crime
alleged in the indictment.
Still, the court reiterated that A
person should not be allowed to
assume to practice the tenets of
the Christian Science or any
church as a shield to cover a
business undertaking. When a

person claims to be practicing

the religious tenets of any
church, particularly where
compensation is taken therefor
and the practice is apart from a
church edifice or the sanctity of
the home of the applicant, the
question whether such person is
within the exception should be
left to a jury as a question of
fact.
Judgment reversed, and a new
trial was ordered to leave the
jury to decide WON such
practice is just to cover a
business undertaking.
IT IS INDEPENDENT FROM
OTHER CRIMES COMMITTED
WITH IT
G.R. Nos. 78813-14 November
8, 1993
PEOPLE vs. HATANI
SUMMARY: This is an appeal
from the RTC convicting
appellant in two criminal cases.
In the first case, the Court found
the accused Farhad Hatani y
Abolhassan, guilty of illegal
practice of medicine in violation
of R.A. 2382 otherwise known as
the Medical Act of 1959 (Secs. 8,
10) penalized by Section 28
thereof. This Court further
recommends that after service
of his sentence the accused be
deported as undesirable alien.
In the second case, the Court
found the accused guilty of the
crime of rape punishable under
Article 335 of the Revised Penal

Code and hereby sentenced said

accused to suffer life
imprisonment or reclusion
perpetua; and to indemnify the
complainant, Precila Borja, in
the sum of fifty thousand pesos
(P50,000.00) and to pay costs.
FACTS: Agustina Borjas 16-year
old daughter, Precila, had high
fever and loose bowel
movement. Upon learning that
Precila was sick, Marita
Fontreras introduced Agustina to
her husband, appellant herein,
whom she said was a medical
doctor. Appellant and Marita
went to the Borja residence,
where he examined Precila. It
was appellant's diagnosis that
Precila was a drug addict and
required further observation and
treatment. Appellant offered to
attend to Precila at his house
and again, Agustina agreed in
the belief that her daughter was
a drug addict.
In the evening of the same day,
Precila was fetched by appellant
and Marita and was brought to
appellant's house. Again, Precila
was given an injection which
caused her to sleep. When she
awoke, she realized that she
was naked and her entire body
was in pain. Appellant was
seated on the bed and was
fondling her private parts.
Shocked, Precila called for her
mother and tried to get up.
Appellant, however, punched

her on the chest and forced her

to lie down. He pressed a pillow
on her face and injected her
again, causing her to fall asleep.
When Precila awoke the second
time, she found appellant in bed
with her. He was naked and
fondling her private parts. The
pain all over her body lingered.
When Precila touched her
private parts, she saw blood
stains on her hand. She tried to
stand up but she was too weak.
Appellant gave her another
injection rendering her
unconscious.
The following morning, Agustina
went to fetch Precila. Upon
reaching the Fontreras'
residence, she went straight to
the bedroom, where, to her
great dismay, she found Precila
and appellant both asleep and
naked. She hurriedly dressed up
Precila and brought her home.
When Precila woke up, she
noticed she was already home
and her mother was crying.
Precila remained dizzy, with
throbbing pains all over her
body. When talked to, she was
incoherent.
That evening, Precila's oldest
sister, Josefina, a nurse by
profession, came home and saw
Precila looking very weak. Her
mother, who was crying
narrated what she had
witnessed that morning. She
also told Josefina that appellant

was in the other bedroom,

treating another sister, Wilma
whom he also diagnosed as a
drug addict. Josefina
immediately proceeded to the
bedroom and saw appellant
about to inject Wilma.
Josefina saw the open bag of
appellant, which contained
empty capsules of dalmane and
empty vials of valium. She
inquired on the need of the
injection and appellant replied
that a second shot of plain
distilled water was required to
cure Wilma of her drug
addiction. Josefina told appellant
to stop but he persisted. Only
upon threat that she would call
the police did appellant stop.
Appellant and his wife then left
the Borja residence.
The following day, Agustina and
Josefina brought Precila and
Wilma to the Philippine
Constabulary Headquarters
where Josefina and Wilma gave
their statements. Precila was
physically examined by a
doctor, whose medical report
stated that Precila's hymen and
"deep, healing lacerations" and
that "subject is in non-virgin
state physically". Several needle
puncture marks were also found
on Precila's arms and buttocks.
A physical examination was
likewise done on Wilma, which
showed that she too had a
needle puncture, as shown in

the Medico-Legal Report.

Acting on the complaint filed
before the Constabulary AntiNarcotics Unit (CANU), a
surveillance of appellant's
residence was conducted.
Subsequently, a search warrant
was secured from Judge Jose P.
Castro of the RTC. Armed with
the warrant, CANU agents
raided appellant's residence.
After the preliminary
investigation, separate
informations for rape and
violation of R.A. No. 2382 were
filed. Appellant pleaded not
guilty to both crimes.
ISSUE: WON the crime of illegal
practice of medicine and rape
should be filed separately
HELD: Yes. The RTC rendered
two separate decisions and
convicted the appellant of both
crimes. In finding appellant
guilty of illegal purchase of
medicine, considerable weight
was given to the prosecution's
exhibits.
The Professional Regulation
Commission certified that
appellant is not among the list
of registered physicians nor
among those with special permit
to practice medicine in a limited
scope.
Appellant failed to refute the
Handwriting Identification
Report released by the PC Crime
Laboratory showing that the
signature of Dr. Jesus D. Yap

prescribing medicine belonged

to him. The pictures also taken
during the raid undeniably
reveal several medical
equipment used by practicing
physicians.
The evidence is overwhelming
that appellant actually treated
and diagnosed Precila and
Wilma Borja. The positive
testimony of Agustina, Precila,
Wilma and Josefina Borja; the
medico-legal reports which
attest to the needle marks; the
Handwriting Identification
Report; the photographs
showing assorted drugs and
medical equipment in
appellant's room; and the
chemistry reports prove that
appellant was engaged in the
practice of medicine. And as to
his allegation that there was no
proof of payment, the law
specifically punishes said act
whether or not done for a fee.
Notwithstanding the RTCs
finding that there was no direct
evidence of rape, it concluded
that circumstantial evidence
indicate that rape was
consummated by appellant.
Therefore, the appealed
decision was affirmed in toto by
the Supreme Court.
ILLEGAL PRACTICE EXPLAINED
IN COURT DECISIONS
G.R. Nos. 78813-14 November
8, 1993

PEOPLE vs. HATANI

SUMMARY: This is an appeal
from the RTC convicting
appellant in two criminal cases.
Our focus for this digest is the
first case wherein the Court
found the accused Farhad
Hatani y Abolhassan, guilty of
illegal practice of medicine in
violation of R.A. 2382 otherwise
known as the Medical Act of
1959 (Secs. 8, 10) penalized by
Section 28 thereof. This Court
further recommends that after
service of his sentence the
accused be deported as
undesirable alien.
FACTS: The information charged
appellant with illegal practice of
medicine, in violation of R.A. No.
2382, otherwise known as the
Medical Act of 1959, committed
as follows:
That on or about the 6th day of
July, 1979, in Quezon City,
Philippines the above named
accused, knowing fully well that
he has not satisfactorily passed
the corresponding Board
Examination, neither is he a
holder of a valid Certificate of
Registration duly issued by the
Board of Medical Examiners, as
in fact he does not even appear
to have taken or completed the
course leading to a medical
degree, did, then and there,
willfully, unlawfully and
feloniously for compensation,
fee and salary, paid to him

directly, physically examined

Priscila Borja Y Loquero and
Wilma Borja Y Loquero,
diagnosed, treated and
administer injections on the
same victims in Violation of
Section 10, in relation to Section
28, Republic Act No. 2382.
Agustina Borjas 16-year old
daughter, Precila, had high fever
and loose bowel movement.
Upon learning that Precila was
sick, Marita Fontreras introduced
Agustina to her husband,
appellant herein, whom she said
was a medical doctor. Appellant
and Marita went to the Borja
residence, where he examined
Precila. It was appellant's
diagnosis that Precila was a
drug addict and required further
observation and treatment.
Appellant offered to attend to
Precila at his house and again,
Agustina agreed in the belief
that her daughter was a drug
addict.
In the evening of the same day,
Precila was fetched by appellant
and Marita and was brought to
appellant's house. Again, Precila
was given an injection which
caused her to sleep. When she
awoke, she realized that she
was naked and her entire body
was in pain. Appellant was
seated on the bed and was
fondling her private parts.
Shocked, Precila called for her
mother and tried to get up.

Appellant, however, punched

her on the chest and forced her
to lie down. He pressed a pillow
on her face and injected her
again, causing her to fall asleep.
When Precila awoke the second
time, she found appellant in bed
with her. He was naked and
fondling her private parts. The
pain all over her body lingered.
When Precila touched her
private parts, she saw blood
stains on her hand. She tried to
stand up but she was too weak.
Appellant gave her another
injection rendering her
unconscious.
The following morning, Agustina
went to fetch Precila. Upon
reaching the Fontreras'
residence, she went straight to
the bedroom, where, to her
great dismay, she found Precila
and appellant both asleep and
naked. She hurriedly dressed up
Precila and brought her home.
When Precila woke up, she
noticed she was already home
and her mother was crying.
Precila remained dizzy, with
throbbing pains all over her
body. When talked to, she was
incoherent.
That evening, Precila's oldest
sister, Josefina, a nurse by
profession, came home and saw
Precila looking very weak. Her
mother, who was crying
narrated what she had
witnessed that morning. She

also told Josefina that appellant

was in the other bedroom,
treating another sister, Wilma
whom he also diagnosed as a
drug addict. Josefina
immediately proceeded to the
bedroom and saw appellant
about to inject Wilma.
Josefina saw the open bag of
appellant, which contained
empty capsules of dalmane and
empty vials of valium. She
inquired on the need of the
injection and appellant replied
that a second shot of plain
distilled water was required to
cure Wilma of her drug
addiction. Josefina told appellant
to stop but he persisted. Only
upon threat that she would call
the police did appellant stop.
Appellant and his wife then left
the Borja residence.
The following day, Agustina and
Josefina brought Precila and
Wilma to the Philippine
Constabulary Headquarters
where Josefina and Wilma gave
their statements. Precila was
physically examined by a
doctor, whose medical report
stated that Precila's hymen and
"deep, healing lacerations" and
that "subject is in non-virgin
state physically". Several needle
puncture marks were also found
on Precila's arms and buttocks.
A physical examination was
likewise done on Wilma, which
showed that she too had a

needle puncture, as shown in

the Medico-Legal Report.
Acting on the complaint filed
before the Constabulary AntiNarcotics Unit (CANU), a
surveillance of appellant's
residence was conducted.
Subsequently, a search warrant
was secured from Judge Jose P.
Castro of the RTC. Armed with
the warrant, CANU agents
raided appellant's residence.
After the preliminary
investigation, separate
informations for rape and
violation of R.A. No. 2382 were
filed. Appellant pleaded not
guilty to both crimes.
ISSUE: WON the accused is
liable for illegal practice of
medicine
HELD: Yes. The Supreme Court
affirmed the appealed decision
in toto. In finding appellant
guilty of illegal purchase of
medicine, considerable weight
was given to the prosecution's
exhibits.
The Professional Regulation
Commission certified that
appellant is not among the list
of registered physicians nor
among those with special permit
to practice medicine in a limited
scope.
Appellant failed to refute the
Handwriting Identification
Report released by the PC Crime
Laboratory showing that the
signature of Dr. Jesus D. Yap

prescribing medicine belonged

to him. The pictures also taken
during the raid undeniably
reveal several medical
equipment used by practicing
physicians.
With respect to the accuseds
conviction of illegal practice of
medicine, appellant presented
inconsistent claims. On one
hand, he claims that the drugs
and other paraphernalia were
planted by the raiding team;
while on the other hand, he
claims that these were seized
without any warrant.
If indeed the evidence were all
planted, how can appellant
explain his handwriting on the
prescription pads in the name of
Dr. Jesus Yap? A perusal of the
photographs showing accused
during the raid, fails to indicate
any protestation by him. In fact,
the other photographs do not
bear any sign of disorder, in
contrast to appellant's
testimony that his room was
made into a mess during the
raid.
The evidence is overwhelming
that appellant actually treated
and diagnosed Precila and
Wilma Borja. The positive
testimony of Agustina, Precila,
Wilma and Josefina Borja; the
medico-legal reports which
attest to the needle marks; the
Handwriting Identification
Report; the photographs

showing assorted drugs and

medical equipment in
appellant's room; and the
chemistry reports prove that
appellant was engaged in the
practice of medicine. And as to
his allegation that there was no
proof of payment, the law
specifically punishes said act
whether or not done for a fee.
DUTIES OF PHYSICIANS TO
THEIR PATIENTS
G.R. No. 86890 January 21, 1994
CARILLO v. PEOPLE
SUMMARY: Petitioner Dr. Leandro
Carillo, an anesthetist, seeks
review of the Decision of the CA
which affirmed his conviction by
the RTC of the crime of simple
negligence resulting in
homicide, for the death of his
thirteen (13) year old patient
Catherine Acosta.
Petitioner and his co-accused,
the surgeon Dr. Emilio Madrid,
were convicted by the RTC and
was affirmed by the CA.
However, only Carillo appealed.
FACTS: The deceased, Catherine
Acosta, a 13 year old girl,
daughter of spouses Domingo
and Yolanda Acosta, complained
to her father of pains in the
lower part of her abdomen.
According to Dr. Emilio Madrid,
his findings might be
appendicitis.
The child was brought to the
Baclaran General Hospital

wherein the child was scheduled

for operation at 5:00 o'clock in
the afternoon. The operation
took place at 5:45 p.m. because
Dr. Madrid arrived only at that
time. When brought inside the
operating room, the child was
feeling very well and they did
not subject the child to ECG
(electrocardiogram) and X-ray.
The appellant Dr. Emilio Madrid,
a surgeon, operated on
Catherine. He was assisted by
appellant, Dr. Leandro Carillo, an
anesthesiologist. During the
operation, while Yolanda,
Catherine's mother, was staying
outside the operating room, she
"noticed something very
unfamiliar." The three nurses
who assisted in the operation
were going in and out of the
operating room, they were not
carrying anything, but in going
out of the operating room, they
were already holding something.
At around 6:30 p.m., Dr. Emilio
Madrid went outside the
operating room and Yolanda
Acosta was allowed to enter the
first door. The appendicitis was
shown to them by Dr. Madrid,
because according to him, they
might be wondering because he
was going to install drainage
near the operating portion of
the child. When asked, the
doctor told them the child was
already out of danger but the
operation was not yet finished.

It has also been established that

the deceased was not weighed
before the administration of
anesthesia on her.
The operation was finished at
7:00 o'clock in the evening and
when the child was brought out
from the operating room, she
was observed to be shivering
(nanginginig); her heart beat
was not normal; she was asleep
and did not wake up; she was
pale; and as if she had difficulty
in breathing and Dr. Emilio
Madrid suggested that she
placed under oxygen tank; that
oxygen was administered to the
child when she was already in
the room.
Witness Yolanda Acosta further
testified that shortly before the
child was transferred from the
operating room to her room, she
(witness) was requested by the
anesthesiologist to go home and
get a blanket. When Catherine
remained unconscious until
noontime the next day, a
neurologist examined her and
she was diagnosed as
comatose. Three (3) days later,
Catherine died without regaining
consciousness.
The CA held that Catherine had
suffered from an overdose of, or
an adverse reaction to,
anesthesia, particularly the
arbitrary administration of
Nubain, a pain killer, without
benefit of prior weighing of the

patient's body mass, which

weight determines the dosage
of Nubain which can safely be
given to a patient. The CA held
that this condition triggered off
a heart attack as a postoperative complication,
depriving Catherine's brain of
oxygen, leading to the brain's
hemorrhage. The CA identified
such cardiac arrest as the
immediate cause of Catherine's
death.
The CA found criminal
negligence on the part of
petitioner Dr. Carillo and his coaccused Dr. Madrid, holding that
both had failed to observe the
required standard of diligence in
the examination of Catherine
prior to the actual
administration of anesthesia;
that it was "a bit rash" on the
part of the accused Dr. Carillo
"to have administered Nubain
without first weighing
Catherine"; and that it was an
act of negligence on the part of
both doctors when, (a) they
failed to monitor Catherine's
heartbeat after the operation
and (b) they left the hospital
immediately after reviving
Catherine's heartbeat, depriving
the latter of immediate and
expert medical assistance when
she suffered a heart attack
approximately fifteen (15) to
thirty (30) minutes later.
ISSUE: WON the findings of fact

of the CA adequately support

the conclusion that petitioner
Dr. Carillo was, along with Dr.
Madrid, guilty of simple
negligence which resulted in
homicide
HELD: YES. The Court observed
that when the patient was
wheeled out of the operating
room after completion of
surgery, she manifested signs of
medical instability (i.e.,
shivering, paleness, irregular
breathing and weak heart beat).
She was not brought to a
properly equipped recovery
room, or intensive care until
which the hospital lacked.
The conduct of Dr. Madrid and of
the petitioner constituted
inadequate care of their patient
in view of her vulnerable
condition. Both doctors failed to
appreciate the serious condition
of their patient whose adverse
physical signs were quite
manifest right after surgery. And
after reviving her heartbeat,
both doctors failed to monitor
their patient closely or extend
further medical care to her; such
conduct was especially
necessary in view of the
inadequate, post-operative
facilities of the hospital.
While Dr. Madrid and a
cardiologist were containing the
patient's convulsions, and after
the latter had diagnosed that
infection had reached the

patient's head, these two (2)

apparently after consultation,
decided to call-in the petitioner.
There is here a strong
implication that the patient's
post-operative condition must
have been considered by the
two (2) doctors as in some way
related to the anesthetic
treatment she had received
from the petitioner either during
or after the surgical procedure.
Once summoned, petitioner
anesthesiologist could not be
readily found. When he finally
appeared at 10:30 in the
evening, he was evidently in a
bad temper, commenting
critically on the dextrose bottles
before ordering their removal.
This circumstance indicated he
was not disposed to attend to
this unexpected call, in violation
of the canons of his profession
that as a physician, he should
serve the interest of his patient
"with the greatest of solicitude,
giving them always his best
talent and skill." Indeed, when
petitioner finally saw his patient,
he offered the unprofessional
bluster to the parents of
Catherine that he would resign if
the patient will not regain
consciousness. The canons of
medical ethics require a
physician to "attend to his
patients faithfully and
conscientiously." He should
secure for them all possible

benefits that may depend upon

his professional skill and care.
As the sole tribunal to adjudge
the physician's failure to fulfill
his obligation to his patient is, in
most cases, his own conscience,
violation of this rule on his part
is "discreditable and
inexcusable".
Nubain was an experimental
drug for anesthesia and postoperative pain and the medical
literature required that a patient
be weighed first before it is
administered and warned that
there was no (or inadequate)
experience relating to the
administration thereof to a
patient less that eighteen (18)
ears of age. Yet, the doctor's
order sheet did not contain this
precaution but instead directed
a reader to apply the drug only
when warranted by the
circumstances.
We note further that the
surgeon Dr. Madrid was fortyfive minutes late in arriving at
the operating theater.
Considering that delay in
treatment of appendicitis
increases the morbidity of the
patient, Dr. Madrid's conduct
can only be explained by a preoperative diagnosis on his part
that the condition of
appendicitis was not yet
attended by complications (i.e.,
a ruptured appendix and
peritonitis).

As early as in People v. Vistan,

the Court defined simple
negligence, penalized under
what is now Article 365 of the
Revised Penal Code, as "a mere
lack of prevision in a situation
where either the threatened
harm is not immediate or the
danger not openly visible." Put
in a slightly different way, the
gravamen of the offense of
simple negligence is the failure
to exercise the diligence
necessitated or called for the
situation which was not
immediately life-destructive but
which culminated, in the present
case, in the death of a human
being three (3) days later. Such
failure to exercise the necessary
degree of care and diligence is a
negative ingredient of the
offense charged. The rule in
such cases is that while the
prosecution must prove the
negative ingredient of the
offense, it needs only to present
the best evidence procurable
under the circumstances, in
order to shift the burden of
disproving or countering the
proof of the negative ingredient
to the accused, provided that
such initial evidence establishes
at least on a prima facie basis
the guilt of the accused. This
rule is particularly applicable
where the negative ingredient of
the offense is of such a nature
or character as, under the

circumstances, to be specially
within the knowledge or control
of the accused. In the instant
case, the Court is bound to
observe that the events which
occurred during the surgical
procedure (including whether or
not Nubain had in fact been
administered as an anesthesia
immediately before or during
the surgery) were peculiarly
within the knowledge and
control of Dr. Carillo and Dr.
Madrid. It was, therefore,
incumbent upon the two (2)
accused to overturn the prima
facie case which the prosecution
had established, by reciting the
measures which they had
actually taken to prevent or to
counter the obviously serious
condition of Catherine Acosta
which was evident right after
surgery. This they failed or
refused to do so.
Still another circumstance of
which account must be taken is
that both petitioner and Dr.
Madrid failed to inform the
parents of their minor patient of
the nature of her illness, or to
explain to them either during
the surgery (if feasible) or at
any time after the surgery, the
events which comprised the
dramatic deterioration of her
condition immediately after
surgery as compared with her
pre-surgery condition.
By way of resume, in the case at

bar, we consider that the chain

of circumstances above noted,
namely: (1) the failure of
petitioner and Dr. Madrid to
appreciate the serious postsurgery condition of their
patient and to monitor her
condition and provide close
patient care to her; (2) the
summons of petitioner by Dr.
Madrid and the cardiologist after
the patient's heart attack on the
very evening that the surgery
was completed; (3) the low level
of care and diligence exhibited
by petitioner in failing to correct
Dr. Madrid's prescription of
Nubain for post-operative pain;
(4) the extraordinary failure or
refusal of petitioner and Dr.
Madrid to inform the parents of
Catherine Acosta of her true
condition after surgery, in
disregard of the requirements of
the Code of Medical Ethics; and
(5) the failure of petitioner and
Dr. Madrid to prove that they
had in fact exercised the
necessary and appropriate
degree of care and diligence to
prevent the sudden decline in
the condition of Catherine
Acosta and her death three (3)
days later, leads the Court to
the conclusion, with moral
certainty, that petitioner and Dr.
Madrid were guilty of simple
negligence resulting in
homicide.
The Decision of the CA is hereby

AFFIRMED.
PEOPLE VS. ANUNCIACION VDA.
DE GOLEZ ; G.R. NO. L-14160 ;
JUNE 30, 1960 FACTS: Although
unlicensed to practice medicine,
Anunciacion De Golez (accused)
diagnosed, prescribed, and
treated Susana Tam, who had
been suffering with bodily
ailment. As a consequence,
Susana Tam died. The provincial
fiscal filed an information in the
CFI charging the accused of
homicide through reckless
imprudence, however he
pleaded not guilty. When the
case was called for trial, the
assistant fiscal made a
manifestation that the accused
had also been charged with the
crime of illegal practice of
medicine before another sala of
the same court. In view of this
manifestation, the trial court
dismissed the information for
being fatally defective, without
prejudice to the filing of the
proper information against the
accused. The grounds given for
dismissal were: Under Par. (a),
Sec. 2 of Rule 113 of the Rules
of Court, the facts charged do
not constitute the offense of
homicide thru reckless
imprudence because illegal
practice of medicine is malicious
per se, and when the accused
practiced medicine without
academical preparation and
without a license to do so, then

she is per se committing a

criminal act for which the
criminal intent is presumed.
Although the crime of homicide
thru reckless imprudence can be
committed by a duly licensed
physician when in the practice
of his profession he fails to
exercise due care and diligence
from which the criminal act
arises, this crime cannot be
imputed to a person who has no
authority to practice this
profession, which act is
malicious per se. The crime
described in Art. 365 of the RPC
results from the performance of
a lawful act which was done
without exercising the care and
diligence that is required by the
circumstances, and not from the
performance of an unlawful act
which is the subject of the
information in this case because
a quack doctor who practices
medicine does so against the
law, and, therefore, his act is
necessarily malicious and
criminal. The provincial fiscal
appealed to the Court and urges
that the court below erred in
dismissing the information.
ISSUE:Whether or not the lower
court erred in dismissing the
information. HELD: Yes. The
Court held that the dismissal is
erroneous because the crime of
illegal practice of medicine is a
statutory offense wherein
criminal intent is taken for

granted, and so a person may

be convicted thereof
irrespective of his intention and
in spite of having acted in good
faith and without malice. As
defined by Section 2678 of the
Revised Administrative Code
(the law then in force), the
offense consists in the mere act
of practicing medicine in
violation of the Medical Law,
even if no injury to another,
much less death, results from
such malpractice. When,
therefore, the patient dies, the
illegal practitioner should be
equally responsible for the
death of his patient, an offense
independent of and distinct from
the illegal practice of medicine.
The allegations in the
information in the case that the
De Golez acted with reckless
negligence in diagnosing,
prescribing, and treating Susana
Tam, knowing that she did not
possess the necessary technical
knowledge or skill to do so, thus
causing her death, sufficiently
charge the crime of homicide
through reckless imprudence
since ordinary diligence
counsels one not to tamper with
human life by trying to treat a
sick man when he knows that he
does not have the special skill,
knowledge, and competence to
attempt such treatment and
cure, and may consequently
reasonably foresee harm or

injury to the latter. However, in

view of the error of the lower
court in dismissing the
information, the Court cannot
sustain the appeal because it
would place the accused in
double jeopardy. The present
information being valid and
sufficient in form and substance
to sustain a conviction, the
dismissal thereof by the court
after the accused had pleaded
not guilty to the charge and
without his consent constitutes
jeopardy as to bar further
proceedings upon the case. The
appeal is, therefore, dismissed,
with costs de oficio.
------------------------------------------------------------------------------------------------------------ SANTIAGO A DEL
ROSARIO, ET. AL., VS.
HONORABLE ALFREDO
BENGZON ; G.R. NO. 88265 ;
DECEMBER 21, 1989 FACTS: This
case is a class suit filed by
officers of the Philippine Medical
Association, the national
organization of medical doctors
in the Philippines, wherein they
asked the Court to declare some
provisions of the Generics Act of
1988 (Rep. Act No. 6675), and of
the implementing Administrative
Order No. 62 issued thereto as
unconstitutional. Republic Act
No. 6675 took effect on March
30, 1989. Section 7, Phase 3 of
Administrative Order No. 62 was
amended by Administrative

Order No. 76 dated August 28,

1989 by postponing to January
1, 1990 the effectivity of the
sanctions and penalties for
violations of the law, provided in
Sections 6 and 12 of the
Generics Act and Sections 4 and
7 of the Administrative Order.
Petitioners' Arguments: 1. The
petitioners' main argument
against paragraphs (a) and (b),
Section 6 of the law, is the
alleged unequal treatment of
government physicians,
dentists, and veterinarians, on
one hand, and those in private
practice on the other hand, in
the manner of prescribing
generic drugs, for, while the
former are allegedly required to
use only generic terminology in
their prescriptions, the latter
may write the brand name of
the drug in parenthesis below
the generic name. The favored
treatment of private doctors,
dentists and veterinarians under
the law is allegedly a specie of
invalid class legislation. 2.
Petitioners also concede that the
requirement for doctors,
dentists, and veterinarians to
use the generic terminology in
writing their prescriptions,
followed by the brand name in
parenthesis is good. However,
they complain that under
paragraph (d) of the law, the
salesgirl at the drugstore
counter is authorized to

"substitute the prescribed

medicine with another medicine
belonging to the same generic
group." Since doctors are not
allowed to instruct the druggist
not to substitute the
prescription, or to "Dispense
only as Prescribed". They argue
that the act of prescribing the
correct medicine for the patient
becomes the act of the salesgirl
at the drugstore counter, no
longer the act of the physician,
dentist, or veterinarian. 3. It
mpairs the obligation of contract
between a physician and his
patient. 4. Petitioners have also
assailed Section 12, paragraphs
b, c and d, of the Generics Act
prescribing graduated penalties
(ranging from a reprimand to a
fine of not less that P10,000 and
the suspension of the
physician's license to practice
his profession for 1 year or
longer, at the discretion of the
court) for violations of its
provisions. Petitioners' alleged
that these penalties violate the
constitutional guarantee against
excessive fines and cruel and
degrading punishment. ISSUE:
Whether or not RA No. 6675 is
unconstitutional. HELD: No. The
Court dismissed the petition for
lack of merit. (Ruling as per
Petitioners' Arguments) 1.
Petitioners' main argument
proceeds from a misreading and
misinterpretation of the letter

and intent of paragraphs (a) and

(b), Section 6 of the Generics
Act. it may be observed that
while paragraph (a) refers to "all
government health agencies,
and their personnel as well as
other government agencies"
(not necessarily physicians,
dentists and veterinarians),
paragraph (b) refers to "all
medical, dental and veterinary
practitioners, including private
practitioners." 2. Petitioners
have distorted the clear
provisions of the law and the
implementing administrative
order. Neither paragraph (d) of
Section 6 of the Generics Act,
nor Section 4 of Administrative
Order No. 62, gives the salesgirl
and/or druggist the discretion to
substitute the doctor's
prescription. The salesgirl at the
drugstore counter, merely
informs the customer, but does
not determine (for she is
incompetent to do so) all the
other drug products or brands
that have the same generic
name, and their corresponding
prices. That information she
may obtain from the list of drug
products determined by the
Bureau of Food and Drugs to
have the same generic name, or
which are the chemical,
biological, and therapeutic
equivalent of the generic drug.
All drugstores or drug outlets
are required by the law to post

such list in a conspicuous place

in their premises for the
information of the customers,
for the choice of whether to buy
the expensive brand name drug,
or the less expensive generic,
should be exercised by the
customer alone. The Court has
been unable to find any
constitutional infirmity in the
Generics Act. It, on the contrary,
implements the constitutional
mandate for the State "to
protect and promote the right to
health of the people" and "to
make essential goods, health
and other social services
available to all the people at
affordable cost" (Section 15, Art.
II and Section 11, Art. XIII, 1987
Constitution). The prohibition
against the use by doctors of
"no substitution" and/or words
of similar import in their
prescription, is a valid regulation
to prevent the circumvention of
the law. It secures to the patient
the right to choose between the
brand name and its generic
equivalent since his doctor is
allowed to write both the
generic and the brand name in
his prescription form. If a doctor
is allowed to prescribe a brandname drug with "no
substitution," the patient's
option to buy a lower-priced, but
equally effective, generic
equivalent would thereby be
curtailed. The law aims to

benefit the impoverished (and

often sickly) majority of the
population in a still developing
country like ours, not the
affluent and generally healthy
minority. 3. There is no merit in
the petitioners' theory that the
Generics Act impairs the
obligation of contract between a
physician and his patient, for no
contract ever results from a
consultation between patient
and physician. A doctor may
take in or refuse a patient, just
as the patient may take or
refuse the doctor's advice or
prescription. As aptly observed
by the public respondent, no
doctor has ever filed an action
for breach of contract against a
patient who refused to take
prescribed medication, undergo
surgery, or follow a
recommended course treatment
by his doctor. In any event, no
private contract between doctor
and patient may be allowed to
override the power of the State
to enact laws that are
reasonably necessary to secure
the health, safety, good order,
comfort, or general welfare of
the community. This power can
neither be abdicated nor
bargained away. 4. It has no
merit. Penal sanctions are
indispensable if the law is to be
obeyed. They are the "teeth" of
the law. Without them, the law
would be toothless, not worth

the paper it is printed on, for

physicians, dentists and
veterinarians may freely ignore
its prescriptions and
prohibitions. The penalty of
suspension or cancellation of
the physician's license is neither
cruel, inhuman, or degrading. It
is no different from the penalty
of suspension or disbarment
that the Court inflicts on lawyers
and judges who misbehave or
violate the laws and the Codes
of Professional and Judicial
Conduct.
FACTS: United Doctors Medical
Center (UDMC) defaulted in
paying its loan obligation of
approximately P55 million to the
Development Bank of the
Philippines (DBP) in 1988. To
stave off the threatened
foreclosure, UDMC, through its
principal officers persuaded the
Yamadas and Enatsu (Japanese
doctors) to invest fresh capital
in UDMC. The wife of Tomotada
Enatsu, Edita Enatsu, is a
Filipina. They invested
approximately P57 million in
UDMC.
Sixto Crisostomo, one of the
original stockholder of UDMC,
filed the petition for certiorari
and prohibition with a prayer for
preliminary injunction alleging
that the SEC en banc abused its
discretion:
xxx
2. in allowing the Japanese

group to have control of UDMC

for it will result in culpable
violation of Section 7, Article XII
of the 1987 Constitution which
provides that no private lands
shall be transferred or conveyed
except to individuals or
corporations qualified to acquire
or hold land of the public
domain, meaning corporations
at least sixty per centum of
whose capital is owned by
Filipino citizens (Sec. 2, Article
XII, 1987 Constitution); and
3. in allowing the Japanese
investors to own more than 40%
of the capital stock of UDMC
(which operates a nursing and
midwifery school) in violation of
Section 4 (2) Article XIV of the
1987 Constitution which
provides that educational
institutions ... shall be owned
solely by citizens of the
Philippines or corporations or
associations at least sixty per
centum of the capital of which is
owned by such citizens.
ISSUE: WON petitioners
contention is tenable.
HELD: No. The Court find no
merit in the petition. That the
P57 million investment of the
Japanese group in UDMC
violates the constitutional
provisions restricting the
transfer or conveyance of
private lands (Art. XIII, Sec. 7,
1987 Constitution) and the
ownership of educational

institutions (Art. XVI, Sec. 14[a],

1987 Constitution), to citizens of
the Philippines or corporations
at least 60% of the capital of
which is owned by Filipino
citizens is unmeritorious. While
82% of UDMC's capital stock is
indeed subscribed by the
Japanese group, only 30%
(equivalent to 171,721 shares or
P17,172.00) is owned by the
Japanese citizens, namely, the
Yamada spouses and Tomotada
Enatsu. 52% is owned by Edita
Enatsu, who is a Filipino.
Accordingly, in its application for
approval/registration of the
foreign equity investments of
these investors, UDMC declared
that 70% of its capital stock is
owned by Filipino citizens,
including Edita Enatsu. That
application was approved by the
Central Bank on August 3, 1988.
The investments in UDMC of
Doctors Yamada and Enatsu do
not violate the Constitutional
prohibition against foreigners
practising a profession in the
Philippines (Section 14, Article
XII, 1987 Constitution) for they
do not practice their profession
(medicine) in the Philippines,
neither have they applied for a
license to do so. They only own
shares of stock in a corporation
that operates a hospital. No law
limits the sale of hospital shares
of stock to doctors only. The
ownership of such shares does

not amount to engaging

(illegally,) in the practice of
medicine, or, nursing. If it were
otherwise, the petitioner's
stockholding in UDMC would
also be illegal.
Aliviado v. P&G ; GR160506 ;
June 6, 2011
FACTS: On March 9, 2010, the
Court rendered a Decision
holding: (a) that Promm-Gem,
Inc. (Promm-Gem) is a
legitimate independent
contractor; (b) that Sales and
Promotions Services (SAPS) is a
labor-only contractor
consequently its employees are
considered employees of Procter
& Gamble Phils., Inc. (P&G); (c)
that Promm-Gem is guilty of
illegal dismissal; (d) that
SAPS/P&G is likewise guilty of
illegal dismissal; (e) that
petitioners are entitled to
reinstatement; and (f) that the
dismissed employees of
SAPS/P&G are entitled to moral
damages and attorneys fees
there being bad faith in their
dismissal. P&G filed a Motion for
Reconsideration, an Opposition,
and Supplemental Opposition.
On the other hand, petitioners
filed a Motion for Partial
Reconsideration and
Comment/Opposition (to P&G's
motion for reconsideration).The
Court denied all these Motions.
Entry of Judgment was made on

July 27, 2010. Before parties

received the notice, P&G filed a
Motion for Leave to File Motion
to Refer the Case to the
Supreme Court En Banc with
Second Motion for
Reconsideration and Motion for
Clarification and a Motion to
Refer the Case to the Supreme
Court En Banc with Second
Motion for Reconsideration and
Motion for Clarification. On
October 4, 2010, P&G filed a
Motion for Leave to Admit the
Attached Supplement to the
Motion to Refer the Case to the
Supreme Court En Banc with
Second Motion for
Reconsideration and Motion for
Clarification as well as a
Supplement to the Motion to
Refer the Case to the Supreme
Court En Banc with Second
Motion for Reconsideration and
Motion for Clarification.
Thereafter, P&G filed a
Manifestation and Motion
praying that its pleadings be
resolved as they were filed
before it received notice of the
entry of judgment. In a
Resolution, the Court resolved to
note the aforesaid pleadings
and at the same time to require
the petitioners to file their
comment thereto. The Court
reiterated its directive for
petitioners to file their comment
. Petitioners filed a Very Urgent
Manifestation in lieu of their

comment. In gist, they reminded

the Court of the Entry of
Judgment made on July 27, 2010
and argued that the motions
filed by P&G are frivolous and
dilatory.
ISSUE: (1) W/N SAPS is a laboronly contractor. (2) W/N the
Court erred in finding that SAPS
has no substantial capital. (3)
W/N the awards of moral
damages and attorney's fees
are proper.
HELD: (1) YES, the Court
correctly determined that SAPS
is a labor-only contractor. There
is no basis for P&G's claim that
the Court erred in not applying
the four-fold test, particularly
the control test in determining
whether SAPS is a legitimate
independent contractor or a
labor-only contractor. Article 106
defines labor-only contracting,
viz: There is labor-only
contracting where the person
supplying workers to an
employer does not have
substantial capital or investment
in the form of tools, equipment,
machineries, work premises,
among others, and the workers
recruited and placed by such
person are performing activities
which are directly related to the
principal business of such
employer. In such cases, the
person or intermediary shall be
considered merely as an agent
of the employer who shall be

responsible to the workers in the

same manner and extent as if
the latter were directly
employed by him. On the same
vein, Rule VIII-A, Book III of the
Omnibus Rules Implementing
the Labor Code, as amended by
Department Order No. 18-02,
pertinently provides: Section 5.
Prohibition against labor-only
contracting. Labor only
contracting is hereby declared
prohibited. For this purpose,
labor-only contracting shall refer
to an arrangement where the
contractor or subcontractor
merely recruits, supplies or
places workers to perform a job,
work or service for a principal,
and ANY of the following
elements are present:
i)The contractor or
subcontractor does not have
substantial capital or investment
which relates to the job, work or
service to be performed and the
employees recruited, supplied
or placed by such contractor or
subcontractor are performing
activities which are directly
related to the main business of
the principal; OR
ii) [T]he contractor does not
exercise the right to control over
the performance of the work of
the contractual employee.
Therefore, the control test is
merely one of the factors to
consider. As stated, labor-only
contracting exists when any of

the two elements is present. It

was established that SAPS has
no substantial capitalization and
it was performing
merchandising and promotional
activities which are directly
related to P&G's business. Since
SAPS met one of the
requirements, it was enough
basis to hold that it is a laboronly contractor. Consequently,
P&G (its principal) is considered
the employer of its employees.
This is pursuant to the ruling in
Aklan v. San Miguel Corporation:
finding that a contractor is a
labor-only contractor, as
opposed to permissible job
contracting, is equivalent to
declaring that there is an
employer-employee relationship
between the principal and the
employees of the supposed
contractor, and the labor-only
contractor is considered as a
mere agent of the principal, the
real employer.
(2) NO, the Court did not err in
finding that SAPS has no
substantial capital. In Vinoya v.
National Labor Relations
Commission, the Court held that
with the current economic
atmosphere in the country, the
paid-in capitalization of PMCI
amounting to P75,000.00 cannot
be considered as substantial
capital and, as such, PMCI
cannot qualify as an
independent contractor.

Applying the same rationale, it

is clear that SAPS having a paidin capital of only P31,250 has no
substantial capital. SAPS' lack of
substantial capital is underlined
by the records which show that
its payroll for its merchandisers
alone for one month would
already total P44,561.00. It has
6-month contracts with P&G. Yet
SAPS failed to show that it could
complete the 6-month contracts
using its own capital and
investment. Its capital is not
even sufficient for one month's
payroll. SAPS failed to show that
its paid-in capital of P31,250.00
is sufficient for the period
required for it to generate
needed revenue to sustain its
operations independently.
Substantial capital refers to
capitalization used in the
performance or completion of
the job, work or service
contracted out. In the present
case, SAPS failed to show
substantial capital.
(3) YES, the awards of moral
damages and attorney's fees
are proper. It must be
emphasized that in labor-only
contracting, the labor-only
contractor is considered merely
an agent of the principal
employer. The principal
employer is responsible to the
employees of the labor-only
contractor as if such employees
had been directly employed by

the principal employer. The

principal employer therefore
becomes solidarily liable with
the labor-only contractor for all
the rightful claims of the
employees. P&G's assertions
that it was held responsible for
10 employees despite their
having no record of having been
assigned by SAPS to P&G and
that petitioners could not be
reinstated because there are no
available positions for them in
the existing plantilla of P&G are
belatedly raised.
ADDITIONAL CONCEPTS: (1)
Once a judgment has become
final and executory, it may no
longer be modified in any
respect, even if the modification
is meant to correct an erroneous
conclusion of fact or law, and
regardless of whether the
modification is attempted to be
made by the court rendering it
or by the highest court of the
land. Exception: (1) the
correction of clerical errors, (2)
the so-called nunc pro tunc
entries which cause no prejudice
to any party, and (3) void
judgments. The object of a
judgment nunc pro tunc is not
the rendering of a new
judgment and the
ascertainment and
determination of new rights, but
is one placing in proper form on
the record, the judgment that
had been previously rendered,

to make it speak the truth, so as

to make it show what the
judicial action really was, not to
correct judicial errors, such as to
render a judgment which the
court ought to have rendered, in
place of the one it did
erroneously render, nor to
supply nonaction by the court,
however erroneous the
judgment may have been. A
nunc pro tunc entry in practice
is an entry made now of
something which was actually
previously done, to have effect
as of the former date. Its office
is not to supply omitted action
by the court, but to supply an
omission in the record of action
really had, but omitted through
inadvertence or mistake.
(2) A second motion for
reconsideration is a prohibited
pleading pursuant to Section 2,
Rule 52 of the Rules of Court.
-----------------------------------------------------------------------------------------------------------Almeda v. Asahi ; GR 177785 ;
Sept 3, 2008
CONCEPTS: (1) Job contracting
or subcontracting - an
arrangement where a principal
agrees to put out or farm out to
a contractor or subcontractor
the performance or completion
of a specific job, work or service
within a definite or
predetermined period,
regardless of whether such job,

work or service is to be
performed or completed within
or outside the premises of the
principal. This conditions must
concur: - The contractor or
subcontractor carries on a
distinct and independent
business and undertakes to
perform the job, work or service
on its own account and under its
own responsibility according to
its own manner and method,
and free from the control and
direction of the principal in all
matters connected with the
performance of the work except
as to the results thereof; - The
contractor or subcontractor has
substantial capital or investment
; - The agreement between the
principal and contractor or
subcontractor assures the
contractual employees
entitlement to all labor and
occupational safety and health
standards, free exercise of the
right to self-organization,
security of tenure, and social
and welfare benefits
(2) Labor-only contracting - a
prohibited act, an arrangement
in which the contractor or
subcontractor merely recruits,
supplies or places workers to
perform a job, work or service
for a principal. Its elements are:
- The contractor or
subcontractor does not have
substantial capital or investment
to actually perform the job, work

or service under its own account

and responsibility; - The
employees recruited, supplied
or placed by such contractor or
subcontractor are performing
activities which are directly
related to the main business of
the principal.
(3) In labor-only contracting, the
statutes create an employeremployee relationship for a
comprehensive purpose: to
prevent circumvention of labor
laws. The contractor is
considered as merely the agent
of the principal employer and
the latter is responsible to the
employees of the labor-only
contractor as if such employees
are directly employed by the
principal employer.
FACTS: Petitioners Randy
Almeda, Edwin Audencial, Nolie
Ramirez, Ernesto Calicagan and
Reynaldo Calicagan filed a
complaint for illegal dismissal
against respondent Asahi Glass
Philippines, Inc. (Asahi) and
SSASI. They alleged that
respondent (domestic
corporation engaged in the
business of glass
manufacturing) and SSASI
(labor-only contractor) entered
into a service contract where
the latter provide the former
with the necessary manpower
for its operations. When Asahi
terminated its service contract
with SSASI, it in turn, terminated

the employment of petitioners.

Believing that SSASI was a
labor-only contractor, and
having continuously worked as
glass cutters and quality
controllers for the respondent
functions which are directly
related to its main line of
business as glass manufacturer
for 3-11 years, petitioners
asserted that they should be
considered regular employees of
the respondent. Respondent, on
the other hand, refuted
petitioners allegations that they
were its regular employees.
Instead, respondent claimed
that petitioners were employees
of SSASI and were merely
assigned by SSASI to work for
respondent to perform
intermittent services pursuant
to an Accreditation Agreement.
Respondent likewise denied
exercising control over
petitioners and asserted that
such was wielded by SSASI.
SSASI averred that it was the
one who hired petitioners and
assigned them to work for
respondent on occasions that
the latters workforce could not
meet the demands of its
customers. Eventually, however,
respondent ceased to give job
orders to SSASI, constraining
the latter to terminate
petitioners employment. The
Labor Arbiter dismissed the
complaint for lack of merit.

However, NLRC reversed Labor

Arbiters decision and gave
more evidentiary weight to
petitioners testimonies,
declaring that SSASI was
engaged in labor-only
contracting since it did not have
substantial capital and
investment in the form of tools,
equipment and machineries. CA
reversed NLRCs decision and
found that there was a
legitimate job contracting
between respondent and SSASI.
ISSUE: (1) W/N petitioners were
employees of Asahi. (2) W/N
petitioners were illegally
dismissed.
HELD: (1) YES. The Court held
that petitioners were employees
of Asahi, as SSASI is a labor-only
contractor; hence, it is
considered as the agent of
respondent. Note: The Court
would only be able to deem
petitioners as employees of
respondent if it is established
that SSASI was a labor-only
contractor, and not a legitimate
job contractor or subcontractor.
An important element of
legitimate job contracting is that
the contractor has substantial
capital or investment, which
respondent failed to prove.
Theres lack of evidence to show
that SSASI possessed
substantial capital or investment
when its contractual relations
began. Also, the Court is

unconvinced by respondents
argument that petitioners were
performing jobs that were not
directly related to respondents
main line of business.
Petitioners supplemented the
regular workforce when the
latter could not comply with the
markets demand; necessarily,
therefore, petitioners performed
the same functions as the
regular workforce. The crucial
element of control over
petitioners also rested in
respondent. Petitioners worked
at the respondents premises,
followed the work schedule
prepared by respondent, and
were required to observe all
rules and regulations pertaining
to the quality of job
performance, regularity of job
output, and the manner and
method of accomplishing the
jobs.
(2) YES, petitioners were
illegally dismissed. Respondent,
as petitioners employer, has
the burden of proving that the
dismissal was for a cause
allowed under the law, and that
they were afforded procedural
due process. However,
respondent failed to discharge
this burden with substantial
evidence as it noticeably
narrowed its defense to the
denial of any employeremployee relationship between
it and petitioners. The sole

reason given for the dismissal of

petitioners by SSASI was the
termination of its service
contract with respondent. But
since SSASI was a labor-only
contractor, and petitioners were
to be deemed the employees of
respondent, then the said
reason would not constitute a
just or authorized cause for
petitioners dismissal. It would
then appear that petitioners
were summarily dismissed
based on the afore-cited reason,
without compliance with the
procedural due process for
notice and hearing.
-----------------------------------------------------------------------------------------------------------Polyfoam v. Concepcion ; GR
172349 ; June 13, 2012
FACTS: It started when
Respondent Edgardo
Concepcion discovered that his
time card was not in the rack
and when he protested to his
supervisor, the latter allegedly
told him that the management
decided to dismiss him due to
an infraction of a company rule.
Natividad Cheng, the companys
manager, refused to face him.
And so, Concepcion filed a
Complaint for illegal dismissal
against Polyfoam and Cheng.
Thereafter, Precilla Gramaje
(also a petitioner) filed a Motion
for Intervention claiming to be
the real employer of

respondent. Also, Polyfoam and

Cheng alleged that NLRC has no
jurisdiction over the case
because of the absence of
employer-employee relationship.
The Labor Arbiter found
respondent to have been
illegally dismissed from
employment. It further held that
petitioners are solidarily liable to
respondent, considering that
Gramaje (the contractor) was
not enrolled as private
employment agency and that
respondent performed a job
directly related to the main
business of Polyfoam. NLRC
modified the LA decision by
exonerating Polyfoam from
liability for respondents, and
found Gramaje to be an
independent contractor who
contracted the packaging aspect
of the finished foam products of
Polyfoam. CA, on the other
hand, agreed with the LAs
conclusion that Gramaje is not a
legitimate job contractor but
only a labor-only contractor.
ISSUE: (1) W/N Gramaje is an
independent job contractor. (2)
W/N an employer-employee
relationship exists between
Polyfoam and respondent. (3)
W/N respondent was illegally
dismissed from employment.
HELD: (1) NO. The Court held
that Gramaje is a Labor-only
contractor pursuant to Art. 106
of the Labor Code. First,

Gramaje has no substantial

capital or investment. The
presumption is that a contractor
is a labor-only contractor unless
he overcomes the burden of
proving that it has substantial
capital, investment, tools, and
the like. Second, Gramaje did
not carry on an independent
business or undertake the
performance of its service
contract according to its own
manner and method, free from
the control and supervision of its
principal (Polyfoam), its
apparent role having been
merely to recruit persons to
work for Polyfoam.
(2) YES, an employer-employee
relationship exists between
respondent and Polyfoam.
Finding that a contractor is a
labor-only contractor is
equivalent to declaring that
there is an employer-employee
relationship between the
principal and the employees of
the supposed contractor, and
the labor-only contractor is
considered as a mere agent of
the principal, the real employer.
In this case, Polyfoam is the
principal employer and Gramaje
is the labor-only contractor.
Polyfoam and Gramaje are,
therefore, solidarily liable for the
rightful claims of respondent.
(3) YES, respondent was illegally
dismissed from employment.
Respondents time card was

suddenly taken off the rack. His

supervisor informed him that
Polyfoams management decided
to dismiss him due to infraction
of company rule. Polyfoam did
not offer any explanation of
such dismissal. It, instead,
explained that respondents real
employer is Gramaje. Gramaje,
on the other hand, denied the
claim of illegal dismissal. She
shifted the blame on respondent
claiming that the latter in fact
abandoned his work. And yet,
respondents actions clearly
negate the intention to abandon
his work. Petitioners failed to
show any valid or authorized
cause under the Labor Code
which allowed it to terminate
the services of respondent.
Neither was it shown that
respondent was given ample
opportunity to contest the
legality of his dismissal. No
notice of termination was given
to him. Clearly, respondent was
not afforded due process.
CONCEPTS: (1) The test of
independent contractorship is
whether one claiming to be an
independent contractor has
contracted to do the work
according to his own methods
and without being subject to the
control of the employer, except
only as to the results of the
work.
(2) Criteria in determining the
existence of an independent and

permissible contractor
relationship: [W]hether or not
the contractor is carrying on an
independent business; the
nature and extent of the work;
the skill required; the term and
duration of the relationship; the
right to assign the performance
of a specified piece of work; the
control and supervision of the
work to another; the employers
power with respect to the hiring,
firing and payment of the
contractors workers; the control
of the premises; the duty to
supply the premises, tools,
appliances, materials, and labor;
and the mode, manner and
terms of payment.
GSIS v NLRC and Lanting
Summary: GSIS and Lanting
Security and Watchman Agency
was held jointly and severally
liable for the payment of
complainants' salary
differentials as the joint and
several liability of the employer
or principal was enacted to
ensure compliance with the
provisions of the Labor Code
particularly on statutory
minimum wage.
Facts: Tomas Lanting, doing
business under the name
Lanting Security and Watchman
Agency (LSWA) entered into a
Security Service Contract to
provide security guards to the
properties of the Government

Service Insurance System (GSIS)

at the contract rate of P3,000.00
per guard per month. During the
effectivity of the contract, LSWA
requested the GSIS for an
upward adjustment of the
contract rate which was
subsequently approved
pursuant to RA 6727 known as
the Wage Rationalization Act. In
1993, GSIS terminated the
Security Service Contract with
LSWA. Complainants then filed
separate complaints against
LSWA for underpayment of
wages and non-payment of
labor standard benefits from
1991 to 1993.
LSWA alleged that complainants
were estopped from claiming
that they were underpaid
because they were informed
that the pay and benefits given
to them were based on the
contract rate of P103.00 per
eight hours of work or about
P3,100.00 per month. GSIS
alleged that the Third-Party
Complaint states no cause of
action against it; that LSWA
obligated itself in the Security
Service Contract to be solely
liable for the enforcement of
and compliance with all existing
labor laws, rules and regulations
and that GSIS fully paid the
services of the security guards
as agreed upon in the Security
Service Contract.
Labor Arbiter rendered a

Decision in favor of
complainants. NLRC upheld the
ruling of the Labor Arbiter. CA
held the GSIS jointly and
severally liable with LSWA for
complainants' money claims
pursuant to Articles 106 and 107
of the Labor Code.
Issue: Whether or not petitioner
GSIS and respondent Lanting
Security and Watchman Agency
should be held jointly and
severally liable for the payment
of complainants' salary
differentials.
Held: Yes. Articles 106 and 107
of the Labor Code provide:
ART. 106. Contractor or
subcontractor. Whenever an
employer enters into contract
with another person for the
performance of the formers
work, the employees of the
contractor and of the latters
subcontractor, if any, shall be
paid in accordance with the
provisions of this Code.
In the event that the contractor
or subcontractor fails to pay the
wage of his employees in
accordance with this Code, the
employer shall be jointly and
severally liable with his
contractor or subcontractor to
such employees to the extent of
the work performed under the
contract, in the same manner
and extent that he is liable to
employees directly employed by
him

ART. 107 Indirect employer. The

provisions of the immediately
preceding Article shall likewise
apply to any person,
partnership, association or
corporation which, not being an
employer, contracts with an
independent contractor for the
performance of any work, task,
job or project.
GSIS cannot evade liability by
claiming that it had fully paid
complainants' salaries by
incorporating in the Security
Service Contract the salary rate
increases mandated.
The joint and several liability of
the employer or principal was
enacted to ensure compliance
with the provisions of the Code,
principally those on statutory
minimum wage. The contractor
or subcontractor is made liable
by virtue of his or her status as
a direct employer, and the
principal as the indirect
employer of the contractors
employees. This liability
facilitates, if not guarantees,
payment of the workers
compensation, thus, giving the
workers ample protection as
mandated by the 1987
Constitution. This is not unduly
burdensome to the employer.
Should the indirect employer be
constrained to pay the workers,
it can recover whatever amount
it had paid in accordance with
the terms of the service contract

between itself and the

contractor.
Joint and solidary liability is
simply meant to assure
aggrieved workers of immediate
and sufficient payment of what
is due them. This is in line with
the policy of the State to protect
and alleviate the plight of the
working class. WHEREFORE, the
petition is DENIED.
WACK WACK GOLF & COUNTRY
CLUB, petitioner, vs. NATIONAL
LABOR RELATIONS
COMMISSION,
Summary: Respondents were
held to have no cause of action
against the petitioner for illegal
dismissal and damages since
they availed the special
separation package.
Consequently, BSMI was ruled to
be an independent contractor as
it satisfied the requisites of an
independent contractor and it
exercised control over the
employees.
Facts: In 1996, a fire destroyed a
large portion of the main
clubhouse of the Wack Wack
Golf and Country Club (Wack
Wack), including its kitchen
which prompted it to suspend
the operations of the Food and
Beverage (F & B) Department
one (1) month thereafter.
Notices to 54 employees (out of
a complement of 85 employees
in the department) were also
sent out. The Wack Wack Golf

Employees Union branded the

suspension of operations of the
F & B Department as arbitrary,
discriminatory and constitutive
of union-busting, so they filed a
notice of strike with the DOLEs
National Conciliation and
Mediation Board (NCMB). An
Agreement was forged whereby
a special separation
benefit/retirement package for
interested Wack Wack
employees. One of the agreed
terms and condition states that
All qualified employees who
may have been separated from
the service under the above
package shall be considered
under a priority basis for
employment by concessionaires
and/or contractors.
In 1997, Wack Wack entered
into a Management Contract
with Business Staffing and
Management, Inc. (BSMI), a
corporation engaged in the
business as Management
Service Consultant undertaking
and managing for a fee projects
which are specialized and
technical in character. Pursuant
to the Agreement, the retired
employees of Wack Wack by
reason of their experience were
given priority by BSMI in hiring.
BSMI then undertook an
organizational analysis and
manpower evaluation to
determine its efficacy, and to
streamline its operations. In the

course of its assessment, BSMI

saw that the positions of
Respondents Cagasan and
Dominguez were redundant,
thus they were terminated. With
respect to Baluyot, he applied
for the position of Chief Porter.
The position, however, was
among those recommended to
be abolished by the BSMI, so he
was offered the position of
Caddie Master Aide. Baluyot
decided not to accept the
position prompting BSMI to
abolish the said position and
Baluyot was dismissed from the
service.
Thereafter, the three employees
filed their respective complaints
with the National Labor
Relations Commission (NLRC) for
illegal dismissal and damages
against Wack Wack and BSMI.
Labor Arbiter found that the
dismissal of Dominguez and
Cagasan was for a valid and
authorized cause, and dismissed
their complaints. The Labor
Arbiter however, found that the
dismissal of Baluyot as Chief
Porter was unjustified and can
not be considered redundant in
the case at bar. NLRC rendered
its Decision ordering Wack Wack
to reinstate Dominguez and
Cagasan to their positions as
they held that BSMI is a
contractor who merely supplies
workers to respondent Wack
Wack. Wack Wack and BMSI filed

a petition for certiorari with the

Court of Appeals which it
subsequently dismissed on the
ground that the petitioner
therein failed to attach an
Affidavit of Service.
Issue: (1) Whether or not
respondents Dominguez and
Cagasan should be reinstated to
their positions
(2) Whether or not respondent
BSMI is an independent
contractor
Held: (1) No. Respondents had
no cause of action against the
petitioner for illegal dismissal
and damages. Respondents
availed the special separation
package offered by the
petitioner. This special
separation package was thought
of and agreed by the two parties
(Wack Wack and the Union) after
a series of discussions and
negotiations to avert any labor
unrest due to the closure of
Wack Wack. When the
respondents voluntarily signed
their quitclaims and accepted
the separation package offered
by the petitioner, they,
thenceforth, already ceased to
be employees of the petitioner.
It is only where there is clear
proof that the waiver was
wangled from an unsuspecting
or gullible person, or the terms
of settlement are
unconscionable on its face, that
the law will step in to annul the

questionable transaction. There

being no employer-employee
relationship between the
petitioner and respondents
Cagasan and Dominguez, the
latter have no cause of action
for illegal dismissal and
damages against the petitioner.
(2) Yes. The ruling of the NLRC is
wrong. An independent
contractor is one who
undertakes job contracting, i.e.,
a person who: (a) carries on an
independent business and
undertakes the contract work on
his own account under his own
responsibility according to his
own manner and method, free
from the control and direction of
his employer or principal in all
matters connected with the
performance of the work except
as to the results thereof; and (b)
has substantial capital or
investment in the form of tools,
equipments, machineries, work
premises and other materials
which are necessary in the
conduct of the business.
Jurisprudence enumerates
several factors which may be
considered in determining
whether or not the contractor is
carrying on an independent
business; the nature and extent
of the work; the skill required;
the term and duration of the
relationship; the right to assign
the performance of specified
pieces of work; the control and

supervision of the work to

another; the employers power
with respect to the hiring, firing,
and payment of the contractors
workers; the control of the
premises; the duty to supply
premises, tools, appliances,
materials and labor; and the
mode, manner and terms of
payment.
There is indubitable evidence
showing that BSMI is an
independent contractor,
engaged in the management of
projects, business operations,
functions, jobs and other kinds
of business ventures, and has
sufficient capital and resources
to undertake its principal
business. It had provided
management services to various
industrial and commercial
business establishments. As a
legitimate job contractor, there
can be no doubt as to the
existence of an employeremployee relationship between
the contractor and the workers.
The right to hire and fire is
another element of the
employer-employee relationship
which actually existed between
the respondents and BSMI, and
not with Wack Wack.
MANILA MEMORIAL PARK
CEMETERY, INC. v. EZARD D.
LLUZ
Summary: An employeremployee relationship exists
between Manila Memorial and

respondent employees as Ward

Trading does not have
substantial capital to be an
independent contractor nor is it
duly registered as a contractor
with DOLE.
Facts: Petitioner Manila
Memorial Park Cemetery, Inc.
(Manila Memorial) entered into a
Contract of Services with
respondent Ward Trading and
Services (Ward Trading). The
Contract of Services provided
that Ward Trading, as an
independent contractor, will
render interment and
exhumation services and other
related work to Manila Memorial
in order to supplement
operations at Manila Memorial
Park, Paranaque City. Among
those assigned by Ward Trading
to perform services at the
Manila Memorial Park were
respondents Lluz, Corral,
Fugaban, Balisi, Fabon,
Aplicador, Curioso, Espares, and
Farinas. In 2007, respondents
filed a Complaint for
regularization and Collective
Bargaining Agreement benefits
against Manila Memorial. Manila
Memorial refused the request
since respondents were
employed by Ward Trading, an
independent labor contractor.
Subsequently, respondents were
dismissed by Manila Memorial.
Thus, respondents amended the
complaint to include the prayer

for their reinstatement and

payment of back wages.
The Labor Arbiter dismissed the
complaint for failing to prove the
existence of an employeremployee relationship. NLRC
reversed the Labor Arbiter's
findings. The NLRC ruled that
Ward Trading was a labor-only
contractor and an agent of
Manila Memorial. The CA
affirmed the ruling of the NLRC
and found the existence of an
employer-employee relationship
between Manila Memorial and
respondents.
Issue: Whether or not an
employer-employee relationship
exists between Manila Memorial
and respondents for the latter to
be entitled to their claim for
wages and other benefits
Held: Yes. Article 106 of the
Labor Code states:
Art. 106. Contractor or
subcontractor. Whenever an
employer enters into a contract
with another person for the
performance of the former's
work, the employees of the
contractor and of the latter's
subcontractor, if any, shall be
paid in accordance with the
provisions of this Code.
In the event that the contractor
or subcontractor fails to pay the
wages of his employees in
accordance with this Code, the
employer shall be jointly and
severally liable with his

contractor or subcontractor to
such employees to the extent of
the work performed under the
contract, in the same manner
and extent that he is liable to
employees directly employed by
him.
Labor-only contracting exists
when the contractor or
subcontractor merely recruits,
supplies or places workers to
perform a job, work or service
for a principal and any of the
following elements are present:
1) The contractor or
subcontractor does not have
substantial capital or investment
which relates to the job, work or
service to be performed and the
employees recruited, supplied
or placed by such contractor or
subcontractor are performing
activities which are directly
related to the main business of
the principal; or
2) The contractor does not
exercise the right to control the
performance of the work of the
contractual employee.
In the present case, Ward
Trading does not have
substantial capital or investment
in the form of tools, equipment,
machinery, work premises and
other materials since it is Manila
Memorial which owns the
equipment used in the
performance of work needed for
interment and exhumation
services. While the Contract of

Service implies that respondent

MMPCI would sell subject
equipment to Ward at some
future time, the former failed to
present any contract of sale as
proof that, indeed, it actually
sold said equipment to Ward.
A perusal of the Service
Contract would also reveal that
respondent Ward is still subject
to petitioner's control as it
specifically provides that
although Ward shall be in
charge of the supervision over
individual respondents, the
exercise of its supervisory
function is heavily dependent
upon the needs of petitioner
Memorial Park. The contract
further provides that petitioner
has the option to take over the
functions of Ward's personnel if
it finds any part or aspect of the
work or service provided to be
unsatisfactory.
Petitioner as well failed to
present any proof that Ward is
duly registered as a contractor
with the Department of Labor
and Employment. Section 11 of
Department Order No. 18-02
mandates registration of
contractors or subcontractors
with the DOLE. Failure to
register shall give rise to the
presumption that the contractor
is engaged in labor-only
contracting.
In this case, Manila Memorial
failed to adduce evidence to

prove that Ward Trading had any

substantial capital, investment
or assets to perform the work
contracted for. Thus, the
presumption that Ward Trading
is a labor-only contractor stands.
Consequently, Manila Memorial
is deemed the employer of
respondents. As regular
employees of Manila Memorial,
respondents are entitled to their
claims for wages and other
benefits as awarded by the
NLRC and affirmed by the CA.
FPIC v Calimbas GR 179256 July
10, 2013
Facts: Private respondent First
Philippine Industrial Corporation
(FPIC) is a corporation engaged
in the transportation of
petroleum products by pipeline.
On the other hand, Raquel
Calimbas and Luisa Mahilom
were engaged by De Gusman
Manpower Services (DGMS) to
perform secretarial and clerical
jobs for FPIC. DGMS is engaged
in the business of supplying
manpower.
FPIC entered into a Contract of
Special Services with DGMS,
wherein the latter agreed to
undertake some aspects of
building and grounds
maintenance at FPIC's premises,
offices and facilities, as well as
to provide clerical and other
utility services as may required
from time to time by FPIC. The
important portions of the said

contract are as follows:

B. Terms of Payment
FIRST PARTY [FPIC] shall pay the
SECOND PARTY [DGMS] a
contract price for services
rendered based on individual
timesheets prepared and
submitted by the SECOND
PARTY....
xxx
C. Other Terms and Conditions
SECOND PARTY shall undertake
FIRST PARTYs projects only if
covered by an approved Project
Contract (Appendix-B) which the
FIRST PARTY will issue to the
SECOND PARTY when the need
arises. The Project Contract shall
indicate the scope of work to be
done, duration and the
manpower required to
undertake the work. The
composition of the workers to be
assigned to a specific
undertaking shall be agreed
upon between the FIRST PARTY
and the SECOND PARTY;
SECOND PARTY shall assign to
FIRST PARTY competent
personnel to do what is required
in accordance with the Project
Contract. FIRST PARTY shall
have the right to request for
replacement of an assigned
personnel who is observed to be
non-productive or unsafe, and if
confirmed by its own
investigation and findings,
SECOND PARTY shall replace
such personnel;

SECOND PARTY shall provide the

maintenance equipment and
tools necessary to complete
assigned works. Parties hereto
shall agree on the equipment,
tools and supplies to be
provided by SECOND PARTY
prior to the start of assigned
work;
SECOND PARTY shall be liable
for loss and/or damage to
SECOND PARTYs property,
found caused by willful act or
negligence of SECOND PARTYs
personnel; and
There shall be no employeremployee relationship between
the FIRST PARTY, on the one
hand, and the SECOND PARTY,
and the person who the
SECOND PARTY may assign to
perform the services called for,
on the other....
xxx
Pursuant to the said Contract,
petitioner Raquel Calimbas and
Luisa Mahilom were engaged by
the DGMS to render services to
FPIC. Thereat, petitioner
Calimbas was assigned as a
department secretary at the
Technical Services Department
beginning June 3, 1996, while
petitioner Mahilom served as a
clerk at the Money Movement
Section of the Finance Division
starting February 13, 1996.
On June 21, 2001, FPIC, through
its Human Resources Manager,
Lorna Young, informed the

petitioners that their services to

the company would no longer be
needed by July 31, 2001 as a
result of the "Pace-Setting"
Study conducted by an outside
consultant. Accordingly, on July
9, 2001, Priscilla de Leon,
Treasurer of DGMS, formally
notified both the petitioners that
their respective work
assignments in FPIC were no
longer available to them
effective July 31, 2001, citing
the termination of the Project
Contract with FPIC as the main
reason thereof. On August 3,
2001, petitioners Calimbas and
Mahilom signed quitclaims,
releasing and discharging DGMS
from whatever claims that they
might have against it by virtue
of their past employment, upon
receipt of the sums of
P17,343.10 and P23,459.14,
respectively.
Despite having executed the
said quitclaims, the petitioners
still filed a Complaint against
FPIC for illegal dismissal and for
the collection of monetary
benefits, damages and
attorneys fees, alleging that
they were regular employees of
FPIC after serving almost five (5)
years, and that they were
dismissed without cause.
Postition of the Petitioners: They
claimed that they were regular
employees of FPIC for having
served the same for almost five

years. Also, claimed that they

were illegally dismissed when
they were relieved from their
work assignments without valid
and serious resons therefor.
The petitioners averred that
DGMS did not have substantial
capital or investment by way of
tools, equipment, machines,
work places and other materials.
They claimed that they only
used office equipment and
materials owned by FPIC at its
offices in Ortigas Center, Pasig
City. DGMS never exercised
control over them in all matters
related to the performance of
their work. In fact, DGMS never
maintained any representative
at the FPICs office to supervise
or oversee their work. They
insisted that their direct
superiors, who were managerial
employees of FPIC, had control
over them since the latter made
sure that they always complied
with the policies of FPIC.
Position of Respondents: FPIC
insisted that the complaint
should be dismissed because
there were no employeremployee relationship between
them. FPIC claimed that the
petitioners were never been
their employees. FPIC insisted
that their true employer was
DGMS considering that the
petitioners were hired by DGMS
and assigned them to FPIC to
render such services.

LA's Decision: holding that

respondents were regular
employees of petitioner, and
that they were illegally
dismissed when their
employment was terminated
without just or authorized cause.
The fallo reads:
WHEREFORE, premises
considered, let the judgment be,
as it is hereby rendered,
declaring complainants
dismissal illegal, and ordering
the respondent, as follows:
1) To reinstate complainants to
their former positions without
loss of seniority rights and other
privileges;
2) To pay complainants, Raquel
M. Calimbas the amount of
P131,555.19; and Luisa P.
Mahilom, the amount of
P115,403.14 representing their
full backwages, from the time
their salaries were withheld from
them up to the date of their
actual reinstatement;
3) To pay the complainants the
amount equivalent to ten (10%)
percent of the total judgment
award, as and for attorneys
fees.
The amount received by
complainants, Raquel M.
Calimbas in the amount of
P17,343.10, and Luisa P.
Mahilom, the amount of
P23,459.14 under the quitclaims
that they signed must be
deducted from the awards

herein made.
NLRC's Decision: dismissed the
appeal of FPIC and upheld LA's
decision.
MR w/ NLRC: NLRC found that
FPIC is free from any liability
because DGMS was the
employer of the petitioners.
Another MR w/ NLRC: affirmed
the latest decision.
CA's Decision: NLRC's
resolutions were reversed and
set aside. and reinstating the
LA's Resolution, in favor of the
laborers.
Issues: (1) WON respondents are
employees of FPIC; and
(2) WON respondents were
lawfully dismissed from their
employment
Held: (1) Yes. the court found
that DGMS is under a "laboronly" contractor. Which makes
them a mere agent and the
court reiterated that the
employer of the herein laborers
is FPIC.
Article 106. Contractor or
subcontractor. Whenever an
employer enters into a contract
with another person for the
performance of the formers
work, the employees of the
contractor and of the latters
subcontractor, if any, shall be
paid in accordance with the
provisions of this Code.
In the event that the contractor
or subcontractor fails to pay the
wages of his employees in

accordance with this Code, the

employer shall be jointly and
severally liable with his
contractor or subcontractor to
such employees to the extent of
the work performed under the
contract, in the same manner
and extent that he is liable to
employees directly employed by
him.
The Secretary of Labor may, by
appropriate regulations, restrict
or prohibit the contracting-out of
labor to protect the rights of
workers established under the
Code. In so prohibiting or
restricting, he may make
appropriate distinctions
between labor-only contracting
and job-contracting as well as
differentiations within these
types of contracting and
determine who among the
parties involved shall be
considered the employer for
purposes of this Code, to
prevent any violation or
circumvention of any provision
of this Code.
There is "labor-only" contracting
where the person supplying
workers to an employer does
not have substantial capital or
investment in the form of tools,
equipment, machineries, work
premises, among others, and
the workers recruited and
placed by such person are
performing activities which are
directly related to the principal

business of such employer. In

such cases, the person or
intermediary shall be considered
merely as an agent of the
employer who shall be
responsible to the workers in the
same manner and extent as if
the latter were directly
employed by him.
In the same manner, Sections 8
and 9 of DOLE Department
Order No. 10, Series of 1997,
state:
Sec. 8. Job contracting. There
is job contracting permissible
under the Code if the following
conditions are met:
(1)
The contractor carries on an
independent business and
undertakes the contract work on
his own account under his own
responsibility according to his
own manner and method, free
from the control and direction of
his employer or principal in all
matters connected with the
performance of the work except
as to the results thereof; and
(2)
The contractor has substantial
capital or investment in the
form of tools, equipment,
machineries, work premises,
and other materials which are
necessary in the conduct of his
business.
Sec. 9. Labor-only contracting.
(a)
Any person who undertakes to

supply workers to an employer

shall be deemed to be engaged
in labor-only contracting where
such person:
(1)
Does not have substantial
capital or investment in the
form of tools, equipment,
machineries, work premises and
other materials; and
(2)
The workers recruited and
placed by such persons are
performing activities which are
directly related to the principal
or operations of the employer in
which workers are habitually
employed.
(b)
Labor-only contracting as
defined herein is hereby
prohibited and the person acting
as contractor shall be
considered merely as an agent
or intermediary of the employer
who shall be responsible to the
workers in the same manner
and extent as if the latter were
directly employed by him.
(c)
For cases not falling under this
Article, the Secretary of Labor
shall determine through
appropriate orders whether or
not the contracting out of labor
is permissible in the light of the
circumstances of each case and
after considering the operating
needs of the employer and the
rights of the workers involved. In

such case, he may prescribe

conditions and restrictions to
insure the protection and
welfare of the workers.
(2) No. FPIC failed to show any
valid or just cause under the
Labor Code on which it may
justify the termination of
services of respondents. Also,
apart from notifying that their
services had already been
terminated, petitioner failed to
comply with the rudimentary
requirement of notifying
respondents regarding the acts
or omissions which led to the
termination of their services as
well as giving them an ample
opportunity to contest the
legality of their dismissal.
Having failed to establish
compliance with the
requirements of termination of
employment under the Labor
Code, respondents dismissal is
tainted with illegality.
Vallum v NLRC GR nos 97320-27
July 30, 1993
Facts: On 1 September 1986,
petitioner Baguio Leisure
Corporation (Hyatt Terraces
Baguio) ("Hyatt Baguio") and
petitioner Vallum Security
Services ("Vallum") entered into
a contract for security services
under the terms of which Vallum
agreed to protect the properties
and premises of Hyatt Baguio by
providing fifty (50) security
guards, on a 24-hour basis, a

day.
On 1 June, 1988, Hyatt Baguio's
General Manager wrote the
President of Vallum advising that
effective 1 july 1988, the
contract of security services
would be terminated.
Vallum informed Mr. Maulbecker,
on 22 June 1988, that it was
agreeable to the termination of
the contract.
On 30 June 1988, private
respondents, who were security
guards provided by Vallum to
Hyatt Baguio, were informed by
Vallum's Personnel Officer that
the contract between the two
(2) had already expired. Private
respondents were directed to
report to Vallum's head office at
Sucat Road, in Muntinlupa,
Metropolitan Manila, not later
than 15 July 1988 for reassignment. They were also told
that failure to report at Sucat
would be taken to mean that
they were no longer interested
in being re-assigned to some
other client of Vallum.
None of the private respondents
reported at Sucat for reassignment. Instead, between
July and September 1988,
private respondents filed several
complaints against petitioners in
the National Labor Relations
Commission's Office ("NLRC") in
Baguio City for illegal dismissal
and unfair labor practices; for
violation of labor standards

relating to underpayment of
wages, premium holiday and
restday pay, uniform allowances
and meal allowances. They
prayed for reinstatement with
full backwages. The several
cases were consolidated
together.
Labor Arbiter: rendered a
decision dismissing the
complaints. He found Vallum to
be an independent contractor
and, consequently declined to
hold Hyatt Baguio liable for
dismissal of private
respondents. NLRC: reveresed
and set aside the resolution of
the LA. adding that respondent
Hyatt Terraces Baguio to
reinstate the complainant from
their former positions with full
backwages limited to 1 year.
Issue: WON the security guards
are employees of Hyatt Baguio.
Held: Yes. The court found that
there is an employer-employee
relationship between the
laborers and Hyatt Baguio.
In determining whether a given
set of circumstances constitute
or exhibit an employeremployee relationship, the
accepted rule is that the
elements or circumstances
relating to the following matters
shall be examined and
considered:
1. the selection and
engagement of the employee;.
2. the payment of wages; 3. the

power of dismissal; and 4. the

power to control the employees'
conduct.
In respect of the selection and
engagement of the employees,
the records here show that
private respondents filled up
Hyatt employment application
forms and submitted the
executed forms directly to the
Security Department of Hyatt
Baguio. In respect of the mode
or manner of payment of wages,
private respondents submitted
in evidence four hundred
twenty-three (423) pay slips
(Exhibits "A" for complainantsprivate respondents), which
bore Hyatt Baguio's logo.
Turning to the matter of location
of the power of dismissal, we
note that the contract provided
that upon loss of confidence on
the part of Hyatt Baguio vis-avis any security guard furnished
by Vallum, such security guard
"may be changed immediately
upon the request to [Vallum] by
[Hyatt Baguio]."
Notwithstanding the terms of
the formal contract between
petitioners, the NLRC found that,
in operative fact, it was Hyatt
Baguio's Chief Security Officer
who exercised the power of
enforcing disciplinary measures
over the security guards.
Coming then to the location of
the power of control over the
activities of the security guards,

the following factors lead us to

the conclusion that power was
effectively located in Hyatt
Baguio rather than in Vallum:
(a) the assignments of particular
security guards was subject to
the approval of Hyatt Baguio's
Chief Security Officer;
(b) promotions of the security
guards from casual to regular
employees were approved or
ratified by the Chief Security
Officer of Hyatt Baguio;
(c) Hyatt Baguio's Chief Security
Officer decided who among the
various security guards should
be an duty or on call, as well as
who, in cases of disciplinary
matters, should be suspended
or dismissed;
(d) the petitioners themselves
admitted that Hyatt Baguio,
through its Chief Security
Officer, awarded citations to
individual security guards for
meritorious services.
We find no basis for overturning
the conclusions reached by the
NLRC that Vallum, in the specific
circumstances of this case, was
not an independent contractor
but was, rather, a "labor-only"
contracor. Section 9 of Rule VII
of Book III entitled "Conditions of
Employment" of the Omnibus
Rules Implementing the Labor
Code provides as follows:
Sec. 9. Labor-only contracting.
(a) Any person who undertakes
to supply workers to an

employer shall be deemed to be

engaged in labor-only
contracting where such person:
(1) Does not have substantial
capital or investment in the
form of tools, equipment,
machineries, work premises and
other materials; and
(2) The workers recruited and
placed by such person are
performing activities which are
directly related to the principal
business or operations of the
employer in which workers are
habitually employed.
(b) Labor-only contracting as
defined herein is hereby
prohibited and the person acting
as contractor shall be
considered merely as an agent
or intermediary of the employer
who shall be responsible to the
workers in the same manner
and extent as if the latter were
directly employed by him.
xxx xxx xxx
Sec. 8. Job contracting. There
is job contracting permissible
under the Code if the following
conditions are met:
(1) The contractor carries on an
independent business and
undertakes the contract work on
his own account under his own
responsibility according his own
manner and method, free from
the control and direction of his
employer or principal in all
matters connected with the
performance of the work except

as to results thereof; and

(2) The contractor has
substantial capital or investment
in the form of tools, equipment,
machineries, work premises,
and other materials which are
necessary in the conduct of his
business.
In the case at bar, we noted that
Vallum did not have a branch
office in Baguio City and that
Hyatt Baguio provided Vallum
with offices at Hyatt's own
premises and allowed Vallum to
use its Security Department in
the processing of applications.
WHEREFORE, premises
considered, the Petition for
Certiorari is hereby DISMISSED
for lack of merit. Costs against
petitioners.
Locsin v PLDT GR 185251 Oct. 2,
2009
Facts: On November 1, 1990,
respondent Philippine Long
Distance Telephone Company
(PLDT) and the Security and
Safety Corporation of the
Philippines (SSCP) entered into a
Security Services Agreement3
(Agreement) whereby SSCP
would provide armed security
guards to PLDT to be assigned
to its various offices.
Pursuant to such agreement,
petitioners Raul Locsin and
Eddie Tomaquin, among other
security guards, were posted at
a PLDT office.
On August 30, 2001, respondent

issued a Letter dated August 30,

2001 terminating the
Agreement effective October 1,
2001.
Despite the termination of the
Agreement, however,
petitioners continued to secure
the premises of their assigned
office. They were allegedly
directed to remain at their post
by representatives of
respondent. In support of their
contention, petitioners provided
the Labor Arbiter with copies of
petitioner Locsins pay slips for
the period of January to
September 2002.
Then, on September 30, 2002,
petitioners services were
terminated.
Thus, petitioners filed a
complaint before the Labor
Arbiter for illegal dismissal and
recovery of money claims such
as overtime pay, holiday pay,
premium pay for holiday and
rest day, service incentive leave
pay, Emergency Cost of Living
Allowance, and moral and
exemplary damages against
PLDT.
LA's Decision: Found PLDT liable
for illegal dismissal. It was
explained in the Decision that
petitioners were found to be
employees of PLDT and not of
SSCP. Such conclusion was
arrived at with the factual
finding that petitioners
continued to serve as guards of

PLDTs offices. As such

employees, petitioners were
entitled to substantive and
procedural due process before
termination of employment. The
Labor Arbiter held that
respondent failed to observe
such due process requirements.
Awarding Raul Locsin and Eddie
Tomaquin, P127,500 each as
Separation Pay, and P240,
954.67 each as Backwages.
Total of P736, 909.34
NLRC: affirmed LA's Decision
CA: applied the four-fold test to
determine the existence of an
employer-employee relationship
but did not find such
relationship. It determined that
SSCP was not a labor-only
contractor and was an
independent contractor having
substantial capital to operate
and conduct its own business.
CA granted the appeal of PLDT.
Issues: (1) WON complainants'
extended services to the
respondent for one year from
the effectivity of the termination
of the contract from the agency
SSPC constitutes an employeremployee relationship between
respondent and the
complainant.
(2) WON complainants are
illegally dismissed
Held. (1) Yes. An EmployerEmployee Relationship Existed
Between the Parties.
It is beyond cavil that there was

no employer-employee
relationship between the parties
from the time of petitioners first
assignment to respondent by
SSCP in 1988 until the alleged
termination of the Agreement
between respondent and SSCP.
In fact, this was the conclusion
that was reached by this Court
in Abella v. Philippine Long
Distance Telephone Company,7
where we ruled that petitioners
therein, including herein
petitioners, cannot be
considered as employees of
PLDT. It bears pointing out that
petitioners were among those
declared to be employees of
their respective security
agencies and not of PLDT.
The only issue in this case is
whether petitioners became
employees of respondent after
the Agreement between SSCP
and respondent was terminated.
This must be answered in the
affirmative.
Notably, respondent does not
deny the fact that petitioners
remained in the premises of
their offices even after the
Agreement was terminated. And
it is this fact that must be
explained.
To recapitulate, the CA, in
rendering a decision in favor of
respondent, found that: (1)
petitioners failed to prove that
SSCP was a labor-only
contractor; and (2) petitioners

are employees of SSCP and not

of PLDT.
In arriving at such conclusions,
the CA relied on the provisions
of the Agreement, wherein SSCP
undertook to supply PLDT with
the required security guards,
while furnishing PLDT with a
performance bond in the
amount of PhP 707,000.
Moreover, the CA gave weight to
the provision in the Agreement
that SSCP warranted that it
"carry on an independent
business and has substantial
capital or investment in the
form of equipment, work
premises, and other materials
which are necessary in the
conduct of its business."
Further, in determining that no
employer-employee relationship
existed between the parties, the
CA quoted the express provision
of the Agreement, stating that
no employer-employee
relationship existed between the
parties herein. The CA
disregarded the pay slips of
Locsin considering that they
were in fact issued by SSCP and
not by PLDT.
From the foregoing explanation
of the CA, the fact remains that
petitioners remained at their
post after the termination of the
Agreement. Notably, in its
Comment dated March 10,
2009,8 respondent never denied
that petitioners remained at

their post until September 30,

2002. While respondent denies
the alleged circumstances
stated by petitioners, that they
were told to remain at their post
by respondents Security
Department and that they were
informed by SSCP Operations
Officer Eduardo Juliano that their
salaries would be coursed
through SSCP as per
arrangement with PLDT, it does
not state why they were not
made to vacate their posts.
Respondent said that it did not
know why petitioners remained
at their posts.
(2) Yes. Evidently, respondent
having the power of control over
petitioners must be considered
as petitioners employerfrom
the termination of the
Agreement onwardsas this
was the only time that any
evidence of control was
exhibited by respondent over
petitioners and in light of our
ruling in Abella.12 Thus, as aptly
declared by the NLRC,
petitioners were entitled to the
rights and benefits of employees
of respondent, including due
process requirements in the
termination of their services.
Both the Labor Arbiter and NLRC
found that respondent did not
observe such due process
requirements. Having failed to
do so, respondent is guilty of
illegal dismissal.

WHEREFORE, we SET ASIDE the

CAs May 6, 2008 Decision and
November 4, 2008 Resolution in
CA-G.R. SP No. 97398. We
hereby REINSTATE the Labor
Arbiters Decision dated
February 13, 2004 and the
NLRCs Resolutions dated
October 28, 2005 and August
28, 2006.
Alilin v Petron GR 177592 June
9, 2014
Note: A contractor is presumed
to be a labor-only contractor,
unless it proves that it has the
substantial capital, investment,
tools and the like. However,
where the principal is the one
claiming that the contractor is a
legitimate contractor, the
burden of proving the supposed
status of the contractor rests on
the principal.
Facts: Petron is a domestic
corporation engaged in the oil
business. It owns several bulk
plants in the country for
receiving, storing and
distributing its petroleum
products.
In 1968, Romualdo D. Gindang
Contractor, which was owned
and operated by Romualdo D.
Gindang (Romualdo), started
recruiting laborers for fielding to
Petrons Mandaue Bulk Plant.
When Romualdo died in1989,
his son Romeo D. Gindang
(Romeo), through Romeo D.
Gindang Services(RDG), took

over the business and continued

to provide manpower services to
Petron. Petitioners were among
those recruited by Romualdo D.
Gindang Contractor and RDG to
work in the premises of the said
bulk plant, together with the
other employees that were hired
by RDG.
On June 1, 2000, Petron and
RDG entered into a Contract for
Services. for the period from
June 1, 2000 to May 31, 2002,
whereby RDG undertook to
provide Petron with janitorial,
maintenance, tanker receiving,
packaging and other utility
services in its Mandaue Bulk
Plant. This contract was
extended on July 31, 2002 and
further extended until
September 30, 2002. Upon
expiration thereof, no further
renewal of the service contract
was done.
Petitioners filed complaints
against Petron and RDG
contending that they were
illegally dismissed, praying for
money claims.
LA: ruled that petitioners are
regular employees of Petron. It
found that their jobs were
directly related to Petrons
business operations; they
worked under the supervision of
Petrons foreman and
supervisor; and they were using
Petrons tools and equipment in
the performance of their works.

The Labor Arbiter also found

that Petron merely utilized RDG
in its attempt to hide the
existence of employee-employer
relationship between it and
petitioners and avoid liability
under labor laws. And there
being no showing that
petitioners dismissal was for
just or authorized cause, the
Labor Arbiter declared them to
have been illegally dismissed.
Awarding the petitioners in total
of P 1M.
NLRC and MR: Dismissed for lack
of merit
CA: found no employeremployee relationship between
the parties. Due to the cases
that doesnt show that
petitioners were directly hired,
selected or employed by Petron.
Also, RDG is responsible for
paying the petitioners' wages.
CA ruled that CA is an
independent labor contractor
with sufficient capitalization and
investment.
Issue: Wether RDG is an
independent labor contractor or
or a labor-only contractor.
Held: Court ruled that RDG is a
labor-only contractor, reinstating
the labor arbiter's decision.
Petron failed to discharge the
burden of proving that RDG is a
legitimate contractor. Hence,
the presumption that RDG is a
labor-only contractor stands.
The Court also finds, as will be

discussed below, that the works

performed by petitioners were
directly related to Petrons
business, another factor which
negates Petrons claim that RDG
is an independent contractor.
Petrons power of control over
petitioners exists in this case.
"[A] finding that a contractor is
a labor-only contractor is
equivalent to declaring that
there is an employer-employee
relationship between the
principal and the employees of
the supposed contractor." In this
case, the employer employee
relationship between Petron and
petitioners becomes all the
more apparent due to the
presence of the power of control
on the part of the former over
the latter.
In sum, the Court finds that RDG
is a labor-only contractor. As
such, it is considered merely as
an agent of Petron.
Consequently, the employeremployee relationship which the
Court finds to exist in this case
is between petitioners as
employees and Petron as their
employer. Petron therefore,
being the principal employer
and RDG, being the labor-only
contractor, are solidarily liable
for petitioners' illegal dismissal
and monetary claims.
PAL v. LIGAN
SUMMARY: Respondents were
consequently declared as

petitioners regular employees

who are entitled to the salaries,
allowances, and other
employment benefits under the
pertinent Collective Bargaining
Agreement. Herein, petitioner
prays for a reconsideration while
respondents for clarification
and/or reconsideration of the
Decision.
FACTS: Petitioners are
maintaining its position that
respondents were employed by
Synergy, and to reinstate
respondents as regular
employees is iniquitous since it
would be compelled to employ
personnel more than what its
operations require. It adds that
the Court should declare that
reinstatement is no longer an
appropriate relief in view of the
long period of time that had
elapsed.
For their part, respondents,
deducing from the Decision that
their termination was found to
be illegal, posit that the portion
of the Decision ordering
petitioner to accept them should
also mean to reinstate them
with backwages. Respondents
additionally pray for the award
to them of attorneys fees, albeit
they admit that they failed to
raise it as an issue.
Both parties point out that the
Courts Decision presupposes or
was based on the erroneous
assumption that respondents

are still in the actual employ of

petitioner.
Respondents disclose that
respondents have all been
terminated in the guise of
retrenchment. Joining such
account, petitioner reveals that
13 out of the 25 respondents
filed an illegal dismissal case,
which is pending before the CA.
Respondents add that the CA
held the illegal dismissal case in
abeyance until after this Court
rules on the present case.
Petitioner also urges the Court
to examine the cases of
respondents Roque Pilapil and
Benedicto Auxtero. Pilapil was
later terminated for submitting
falsified academic credentials.
Pilapils complaint for illegal
dismissal was dismissed by the
labor arbiter, whose decision
was reinstated with modification
by the CA. On Pilapils appeal,
this Court declared the case
terminated when Pilapil failed to
file his intended petition. With
this, petitioner claims that it
already complied with the
judgment awarding separation
pay representing financial
assistance to Pilapil during the
pendency of the present case.
Petitioner also informs the Court
that Auxtero already satisfied
the judgment rendered in the
amount of P1.3 Million, and that
Auxtero had waived
reinstatement.

ISSUE: (1) WON the cases of

Pilapil and Auxtero should affect
the courts decision
(2) WON the courts decision on
the regular status of
respondents should be deemed
to be without prejudice to the
resolution of the issue of illegal
dismissal in the proper case
(3) WON award of attorneys fees
be granted to respondents,
albeit they admit that they
failed to raise it as an issue.
HELD: (1) YES. The Court finds
that a modification of the
Decision is in order, the claims
with respect to Pilapil and
Auxtero having been deemed
extinguished even before the
promulgation of the Decision.
That Pilapil was a regular
employee yields to the final
finding of a valid dismissal in the
supervening case involving his
own misconduct, while Auxteros
attempt at forum-shopping
should not be countenanced.
(2) YES. While this Courts
Decision ruled on the regular
status of respondents, it must
be deemed to be without
prejudice to the resolution of the
issue of illegal dismissal in the
proper case. The subject of the
Decision was respondents
complaints for regularization
and under-/non-payment of
benefits. The Court did not and
could not take cognizance of the
validity of the eventual

dismissal of respondents
because the matter of just or
authorized cause is beyond the
issues of the case. That is why
the Court did not order
reinstatement for such relief
presupposes a finding of illegal
dismissal in the proper case
which, as the parties now
manifest, pends before the
appellate court.
Petitioner, for the first time,
revealed the matter of
termination and the allegation
of financial woes in its MR
before the CA not by way of
defense to a charge of illegal
dismissal but to manifest that
supervening events have
rendered it impossible for
petitioner to comply with the
order to accept respondents as
regular employees.
The Courts finding that
respondents are regular
employees of petitioner neither
frustrates nor preempts the CA
proceedings in resolving the
issue of retrenchment as an
authorized cause for
termination. If an authorized
cause for dismissal is later found
to exist, petitioner would still
have to pay respondents their
corresponding benefits and
salary differential up to June 30,
1998. Otherwise, if there is a
finding of illegal dismissal, an
order for reinstatement with full
backwages does not conflict

with the Courts declaration of

the regular employee status of
respondents.
(3) NO. As to the belated plea of
respondents for attorneys fees,
suffice it to state that parties
who have not appealed cannot
obtain from the appellate court
any affirmative reliefs other
than those granted, if any, in
the decision of the lower
tribunal. Since respondents did
not file a motion for
reconsideration of the appellate
courts decision, much less
appeal therefrom, they can
advance only such arguments
as may be necessary to defeat
petitioners claims or to uphold
the appealed decision, and
cannot ask for a modification of
the judgment in their favor in
order to obtain other positive
reliefs.
WHEREFORE, the Decision is
MODIFIED.
Dispositive portion: Petitioner is
ORDERED to recognize
respondents as its regular
employees in their same or
substantially equivalent
positions, and pay the wages
and benefits due them as
regular employees plus salary
differential corresponding to the
difference between the wages
and benefits given them and
those granted to petitioners
other regular employees of the
same or substantially equivalent

rank, up to June 30, 1998,

without prejudice to the
resolution of the illegal dismissal
case.
There being no data from which
this Court may determine the
monetary liabilities of petitioner,
the case is REMANDED to the
Labor Arbiter solely for that
purpose.
AKLAN v. SAN MIGUEL
SUMMARY: The dichotomy
between impermissible laboronly contracting and legitimate
job contracting was discussed in
this labor case.
FACTS: Respondent BMA
Philasia, Inc. (BMA) is a
domestic corporation engaged
in the business of transporting
and hauling of cargoes, goods,
and commodities of all kinds
with Arlene Eusebio as its
President.
Petitioners, numbering fortyseven (47) in all, are the former
employees of respondent BMA
at respondent San Miguel
Corporations (SMC) warehouse.
Subsequently, a number of
petitioners went to DOLE District
Office to file a complaint against
BMA and Eusebio for
underpayment of wages and
non-payment of premium pay
for rest day, 13th month pay,
and service incentive leave pay.
Thereafter, Petitioner Elmer
Caboteja was charged with
insubordination and disrespect

to superior, failure to properly

perform his job assignment, and
unauthorized change of
schedule. He was directed to
submit his written explanation
within forty-eight (48) hours. His
job was then terminated for the
offenses he committed. He then
filed a complaint for illegal
dismissal against BMA.
On various dates thereafter,
BMA agreed to a settlement with
some of the complainants in the
case for underpayment of
wages. 11 of the present
petitioners executed quitclaims
and releases in favor of BMA
and Eusebio in the presence of
DOLE district officers. BMA
refused to settle the claim of
other complainants.
Thereafter, petitioners Joan
Erico Dumalagan and Ronaldo
Salvador were also terminated
for failure to perform their job
responsibilities. They also filed
complaints for illegal dismissal
against BMA.
Petitioners held a picket at the
warehouse premises to protest
BMAs refusal to pay the claim
for underpayment of the rest of
the workers. This picket
disrupted the business
operations of private
respondents, prompting BMA to
terminate their services.
Subsequently, petitioners filed
separate complaints against
BMA, Eusebio, and SMC for

illegal dismissal. All the

complaints for illegal dismissal
were consolidated.
Petitioners alleged that they
were illegally dismissed after
filing a complaint for
underpayment of wages and
non-payment of benefits before
the DOLE; they were terminated
after staging a peaceful picket
to protest the non-payment of
their claims. According to them,
BMA is a labor-only contractor
and SMC was their true
employer. The manner and
means by which they performed
their work were controlled by
SMC through its Sales Logistic
Coordinator who was overseeing
their performance everyday.
Private respondents BMA and
Eusebio countered that
petitioners Caboteja,
Dumalagan, and Salvador were
validly and justly dismissed.
They were among the eleven
who already signed quitclaims
and releases before the DOLE
district office after receiving an
amount in settlement of their
claims. As for the rest of
petitioners (36 complainants),
there was no illegal dismissal to
speak of. Said employees
simultaneously did not go back
to work for no apparent reason
on October 18, 2001.
Private respondent SMC
maintained that it had no
employer-employee relationship

with petitioners who were hired

and supervised exclusively by
BMA pursuant to a warehousing
and delivery agreement in
consideration of a fixed monthly
fee.
Labor Arbiter and NLRC Ruling
Labor Arbiter Veneranda C.
Guerrero found respondent BMA
liable for illegal dismissal and
ordered the reinstatement of
petitioners. She ruled that the
evidence presented duly
established that BMA was a
legitimate independent
contractor and the actual
employer of petitioners. Its
failure, however, to comply with
the registration and reportorial
requirements of the DOLE
rendered SMC, its principal,
directly liable to the claims of
petitioners. Thus, BMA and SMC
were found jointly and severally
liable for the payment of
petitioners backwages and
money claims.
Respondents appealed the
decision of the Labor Arbiter to
the NLRC. The NLRC reversed
the Labor Arbiter disposition and
ruled that there was no illegal
dismissal. The NLRC found that
petitioners Caboteja,
Dumalagan, and Salvador were
separated from their jobs for
just and valid causes. They were
given the opportunity to explain
their sides. They were asked to
explain and finding their

explanations unacceptable,
respondents dismissed them.
Hence, they are not entitled to
separation pay.
As regards the other
complainants, there is no
showing that they were illegally
dismissed from their jobs by
BMA. They have not given
details on to whom they
reported for work, who barred
them from entering the
respondents premises and from
working, in so many words how
they were told that they were
already dismissed. The only
evident fact is that they just
stopped reporting for work
beginning October 18, 2001
without informing BMA why
there were doing so.
CAs Ruling
Petitioners filed a Rule 65
petition with the CA. The CA
denied the petition, affirming in
full the NLRCs decision. In ruling
against petitioners, the CA
found that the NLRC committed
no reversible error or grave
abuse of discretion in ruling that
petitioners were not illegally
dismissed but actually refused
to report back to work after
staging a surprise stoppage that
paralyzed respondent BMAs
business operations at the Pasig
warehouse.
ISSUE: (1) WON the CA
committed a serious legal error
in not ruling that respondent

San Miguel Corporation and

respondent Arlene Eusebio are
all solidarily liable for petitioners
money claims.
(2) WON the CA committed a
serious legal error in refusing to
hold that respondent SMC was
petitioners real employer
despite the fact that respondent
BMA was not duly registered
with the DOLE and caused the
workers to perform tasks
directly related to the business
of SMC and under the latters
supervision.
(3) WON the CA committed a
legal error and acted with grave
abuse of discretion in holding
that petitioners Elmer Caboteja,
Joan Erico Dumalagan, and
Ronaldo Salvador were not
illegally dismissed from their
jobs, despite a previous ruling of
the Labor Arbiter to the
contrary.
(4) WON the CA seriously
committed an error of law in
holding that the rest of the
petitioners abandoned their jobs
and were not dismissed
therefrom, contrary to the
findings of the Labor Arbiter who
heard the case.
(5) The CA committed a serious
legal error in ruling that the
quitclaims executed by eleven
(11) of the petitioners, in
relation to their claims for
underpayment of wages before
the DOLE, also barred their

subsequent complaint for illegal

dismissal, despite the fact that
the said complaint was not yet
in existence at the time the
quitclaims were executed.
HELD: (1) NO. The Court
affirmed the CAs observation
that respondent BMA is the true
employer of petitioners who
should be held directly liable for
their claims.
A finding that a contractor is a
labor-only contractor, as
opposed to permissible job
contracting, is equivalent to
declaring that there is an
employer-employee relationship
between the principal and the
employees of the supposed
contractor, and the labor-only
contractor is considered as a
mere agent of the principal, the
real employer.
Both the Labor Arbiter and the
NLRC found that the
employment contracts of
petitioners duly prove that an
employer-employee relationship
existed between petitioners and
BMA. In its ruling, the NLRC
considered the following
elements to determine the
existence of an employeremployee relationship: (1) the
selection and engagement of
the workers; (2) power of
dismissal; (3) the payment of
wages by whatever means; and
(4) the power to control the
workers conduct. All four

elements were found by the

NLRC to be vested in BMA. This
NLRC finding was affirmed by
the CA.
(2) NO. The Court ruled that the
employer-employee relationship
between BMA and petitioners is
not tarnished by the absence of
registration with DOLE as an
independent job contractor on
the part of BMA. The absence of
registration only gives rise to
the presumption that the
contractor is engaged in laboronly contracting, a presumption
that respondent BMA ably
refuted.
(3) NO. The Court affirmed the
CA when it ruled that illegal
dismissal was absent.
The records fully disclose that
petitioners Caboteja,
Dumalagan, and Salvador were
separated from their jobs for
just and valid causes. Caboteja
was cited for violation of
company rules and regulations
and disrespectful conduct.
Dumalagan and Salvador were
investigated for failure to
perform duties and
responsibilities. After their
explanations were found
unacceptable, they were
accordingly dismissed.
(4) NO. The Court ruled that it
was shown in the records that
petitioners simply stopped
reporting for work starting
October 18, 2001 when they

staged a picket. The CA

observed under the factual
circumstances, it clearly
appears that petitioners refused
to report back to their work in
order to force their employer
BMA to give in to their
immediate demand for the
salary differentials and unpaid
benefits subject of their
complaint with the DOLE.
Hence, BMA cannot be held
liable for illegal dismissal.
Their claim of having been
prevented from entering the
work premises was not given
due weight for no particulars
was even alleged by them in
their report back to their jobs,
who prevented their entry to the
company premises and details
as to what steps they took to
bring the matter to the attention
of DOLE District Office wherein
their complaint for labor
standards violation was already
pending.
(5) NO. The Court ruled that
unless there is a showing that
the employee signed
involuntarily or under duress,
quitclaims and releases are
upheld by this Court as the law
between the parties. If the
agreement was voluntarily
entered into by the employee,
with full understanding of what
he was doing, and represents a
reasonable settlement of the
claims of the employee, it is

binding on the parties and may

not be later disowned simply
because of a change of mind.
Thus, the quitclaims effectively
barred petitioners from
questioning their dismissal.
WHEREFORE, the petition is
DENIED and the assailed
Decision of the CA is AFFIRMED.
Garden of Memoirs v NLRC
SUMMARY: This is a petition for
review under Rule 45 of the
Rules of Court seeking
nullification of the CAs decision
in finding that petitioner Garden
of Memories Memorial Park and
Life Plan, Inc. was the employer
of respondent Hilaria Cruz, and
that Garden of Memories and
petitioner Paulina Requio, were
jointly and severally liable for
the money claims of Cruz.
FACTS: Petitioner Garden of
Memories is engaged in the
business of operating a
memorial park situated at
Calsadang Bago, Pateros, MetroManila and selling memorial
Plan and services. Respondent
Cruz, on the other hand, worked
at the Garden of Memories
Memorial Park as a utility worker
from August 1991 until her
termination in February 1998.
Cruz filed a complaint for illegal
dismissal, underpayment of
wages, non-inclusion in the
Social Security Services, and
non-payment of legal/special
holiday, premium pay for rest

day, 13th month pay and

service incentive leave pay
against Garden of Memories
before the DOLE.
Upon motion of Garden of
Memories, Requio was
impleaded as respondent on the
alleged ground that she was its
service contractor and the
employer of Cruz.
In her position paper, Cruz
averred that she worked as a
utility worker of Garden of
Memories and was in charge,
among others, of the cleaning
and maintenance of the ground
facilities of the memorial park.
Sometime in February 1998, she
had a misunderstanding with a
co-worker. When the
misunderstanding came to the
knowledge of Requio, the latter
instructed them to go home and
not to return anymore. After
three (3) days, Cruz reported for
work but she was told that she
had been replaced by another
worker. She immediately
reported the matter of her
replacement to the personnel
manager of Garden of Memories
and manifested her protest.
Cruz argued that as a regular
employee of the Garden of
Memories, she could not be
terminated without just or valid
cause. Also, her dismissal was
violative of due process as she
was not afforded the
opportunity to explain her side

before her employment was

terminated.
In its Answer, Garden of
Memories claimed that Requio
was a service contractor who
carried an independent business
and undertook the contract of
work on her own account, under
her own responsibility and
according to her own manner
and method, except as to the
results thereof.
In her defense, Requio prayed
for the dismissal of the
complaint stating that Cruz was
not dismissed from her
employment but that she
abandoned her work.
The LA ruled that Requio was
not an independent contractor
but a labor-only contractor and
that her defense that Cruz
abandoned her work was
negated by the filing of the
present case. The LA declared
both Garden of Memories and
Requio, jointly and severally,
liable for the monetary claims of
Cruz.
Garden of Memories and Requio
appealed the decision to the
NLRC. The NLRC affirmed the
ruling of the LA, stating that
Requio had no substantial
capital or investments in the
form of tools, equipment,
machineries, and work
premises, among others, for her
to qualify as an independent
contractor. It declared the

dismissal of Cruz illegal

reasoning out that there could
be no abandonment of work on
her part since Garden of
Memories and Requio failed to
prove that there was a
deliberate and unjustified
refusal on the part of the
employee to go back to work
and resume her employment.
Garden of Memories moved for
a reconsideration of the NLRC
decision but it was denied for
lack of merit.
Consequently, Garden of
Memories and Requio filed
before the CA a petition for
certiorari under Rule 65 of the
Rules of Court. The CA
dismissed the petition and
affirmed the NLRC decision.
The petitioners claim that there
was a service contract between
Garden of Memories and Requio
for the latter to provide
maintenance work for the
former and that the power of
control, the most important
element in determining the
presence of such a relationship
was missing. Furthermore,
Garden of Memories alleges that
it did not participate in the
selection or dismissal of
Requios employees.
ISSUE: (1) WON petitioner
Requio is not a legitimate
contractor but is only a laboronly contractor
(2) WON respondent Cruz is a

regular employee of Garden of

Memories
(3) WON respondent Cruz was
illegally dismissed
HELD: (1) YES. In the present
case, the LA, the NLRC, and the
CA are one in declaring that
petitioner Requio was not a
legitimate contractor. Echoing
the decision of the LA and the
NLRC, the CA reasoned out that
Requio was not a licensed
contractor and had no
substantial capital or investment
in the form of tool, equipment
and work premises, among
others.
Section 106 of the Labor Code
on contracting and
subcontracting provides:
Article 106. Contractor or
subcontractor. - Whenever, an
employer enters into a contract
with another person for the
performance of the formers
work, the employees of the
contractor and of the latters
subcontractor shall be paid in
accordance with the provisions
of this Code.
In the event that the contractor
or subcontractor fails to pay the
wages of his employees in
accordance with this Code, the
employer shall be jointly and
severally liable with his
contractor or subcontractor to
such employees to the extent of
the work performed under the
contract, in the same manner

and extent that he is liable to

employees directly employed by
him.
The Secretary of Labor may, by
appropriate regulations, restrict
or prohibit the contracting out of
labor to protect the rights of
workers established under this
Code. In so prohibiting or
restricting, he may make
appropriate distinctions
between labor-only contracting
and job contracting as well as
differentiations within these
types of contracting and
determine who among the
parties involved shall be
considered the employer for
purposes of this Code, to
prevent any violation or
circumvention of any provision
of this Code.
There is labor-only contracting
where the person supplying
workers to an employer does
not have substantial capital or
investment in the form of tools,
equipment, machineries, work
premises, among others, and
the workers recruited and
placed by such persons are
performing activities which are
directly related to the principal
business of such employer. In
such cases, the person or
intermediary shall be considered
merely as an agent of the
employer who shall be
responsible to the workers in the
same manner and extent as if

the latter were directly

employed by him.
In the same vein, Sections 8 and
9, DOLE Department Order No.
10, Series of 1997, state that:
Sec. 8. Job contracting. There is
job contracting permissible
under the Code if the following
conditions are met:
(1) The contractor carries on an
independent business and
undertakes the contract work on
his own account under his own
responsibility according to his
own manner and method, free
from the control and direction of
his employer or principal in all
matters connected with the
performance of the work except
as to the results thereof; and
(2) The contractor has
substantial capital or investment
in the form of tools, equipment,
machineries, work premises,
and other materials which are
necessary in the conduct of his
business.
Sec. 9. Labor-only contracting.
(a) Any person who undertakes
to supply workers to an
employer shall be deemed to be
engaged in labor-only
contracting where such person:
(1) Does not have substantial
capital or investment in the
form of tools, equipment,
machineries, work premises and
other materials; and
(2) The workers recruited and
placed by such persons are

performing activities which are

directly related to the principal
business or operations of the
employer in which workers are
habitually employed.
(b) Labor-only contracting as
defined herein is hereby
prohibited and the person acting
as contractor shall be
considered merely as an agent
or intermediary of the employer
who shall be responsible to the
workers in the same manner
and extent as if the latter were
directly employed by him.
(c) For cases not falling under
this Article, the Secretary of
Labor shall determine through
appropriate orders whether or
not the contracting out of labor
is permissible in the light of the
circumstances of each case and
after considering the operating
needs of the employer and the
rights of the workers involved. In
such case, he may prescribe
conditions and restrictions to
insure the protection and
welfare of the workers.
On the matter of labor-only
contracting, Section 5 of Rule
VIII-A of the Omnibus Rules
Implementing the Labor Code,
provides:
Section 5. Prohibition against
labor-only contracting. Laboronly contracting is hereby
declared prohibited. For this
purpose, labor-only contracting
shall refer to an arrangement

where the contractor or

subcontractor merely recruits,
supplies or places workers to
perform a job, work or service
for a principal, and any of the
following elements are present:
i) The contractor or
subcontractor does not have
substantial capital or investment
which relates to the job, work or
service to be performed and the
employees recruited, supplied
or placed by such contractor or
subcontractor are performing
activities related to the main
business of the principal, or
ii) The contractor does not
exercise the right to control over
the performance of the work of
the contractual employee.
Xxxx
Thus, in determining the
existence of an independent
contractor relationship, several
factors may be considered, such
as, but not necessarily confined
to, whether or not the
contractor is carrying on an
independent business; the
nature and extent of the work;
the skill required; the term and
duration of the relationship; the
right to assign the performance
of specified pieces of work; the
control and supervision of the
work to another; the employers
power with respect to the hiring,
firing and payment of the
contractors workers; the control
of the premises; the duty to

supply premises, tools,

appliances, materials and labor;
and the mode, manner and
terms of payment.
On the other hand, there is
labor-only contracting where: (a)
the person supplying workers to
an employer does not have
substantial capital or investment
in the form of tools, equipment,
machineries, work premises,
among others; and (b) the
workers recruited and placed by
such person are performing
activities which are directly
related to the principal business
of the employer.
Another determinant factor that
classifies petitioner Requio as a
labor-only contractor was her
failure to exercise the right to
control the performance of the
work of Cruz. This can be
gleaned from the Service
Contract Agreement between
Garden of Memories and Requio,
to wit:
xxxx
NOW THEREFORE, premises
considered, the parties hereto
have hereunto agreed on the
following terms and conditions:
1. That the Contractor shall
undertake the maintenance of
the above-mentioned works in
strict compliance with and
subject to all the requirements
and standards of GMMPLPI.
xxxx
The requirement of the law in

determining the existence of

independent contractorship is
that the contractor should
undertake the work on his own
account, under his own
responsibility, according to his
own manner and method, free
from the control and direction of
the employer except as to the
results thereof. In this case,
however, the Service Contract
Agreement clearly indicates that
Requio has no discretion to
determine the means and
manner by which the work is
performed. Rather, the work
should be in strict compliance
with, and subject to, all
requirements and standards of
Garden of Memories.
Under these circumstances,
there is no doubt that Requio is
engaged in labor-only
contracting, and is considered
merely an agent of Garden of
Memories. As such, the workers
she supplies should be
considered as employees of
Garden of Memories.
(2) YES. The Court observed that
Cruz was hired as a utility
worker tasked to clean, sweep
and water the lawn of the
memorial park. She performed
activities which were necessary
or desirable to its principal trade
or business. Thus, she was a
regular employee of Garden of
Memories and cannot be
dismissed except for just and

authorized causes.
(3) YES. The Court agrees with
the findings of the tribunals
below that respondent Cruz did
not abandon her work but was
illegally dismissed.
As the employer, Garden of
Memories has the burden of
proof to show the employee's
deliberate and unjustified
refusal to resume his
employment without any
intention of returning. For
abandonment to exist, two
factors must be present: (1) the
failure to report for work or
absence without valid or
justifiable reason; and (2) a
clear intention to sever
employer-employee relationship,
with the second element as the
more determinative factor being
manifested by some overt acts.
It has been said that
abandonment of position cannot
be lightly inferred, much less
legally presumed from certain
equivocal acts. Mere absence is
not sufficient.
On the contrary, her reporting to
the personnel manager that she
had been replaced and the
immediate filing of the
complaint before the DOLE
demonstrated a desire on her
part to continue her
employment with Garden of
Memories. As correctly pointed
out by the CA, the filing of the
case for illegal dismissal

negated the allegation of

abandonment.
WHEREFORE, the petition is
DENIED. The Decision of the CA
is AFFIRMED
MIESCOR v. NLRC, G.R. No.
145402, March 14, 2008
Summary: An indirect employer
(as defined by Article 107) can
only be held solidarily liable with
the independent contractor or
subcontractor (as provided
under Article 109) in the event
that the latter fails to pay the
wages of its employees (as
described in Article 106).
Facts: Petitioner Meralco
Industrial Engineering Services
Corporation (MIESCOR), a
company; and private
respondents Ofelia P. Landrito
General Services (OPLGS), a firm
engaged in providing services
such as janitorial services and
maintenance work to its clients,
and Ofelia P. Landrito, its
Proprietor and General Manager
executed a contract on
November 7, 1984 whereby the
latter would supply the
petitioner janitorial services,
which include labor, materials,
tools and equipment, as well as
supervision of its assigned
employees, at petitioners
Rockwell Thermal Plant in
Makati City. Pursuant thereto,
private respondents assigned
their 49 employees as janitors

to petitioners Rockwell Thermal

Plant.
However, on September 20,
1989, the aforesaid 49
employees (complainants)
lodged a Complaint for illegal
deduction, underpayment, nonpayment of overtime pay, legal
holiday pay, premium pay for
holiday and rest day and night
differentials against the private
respondents before the Labor
Arbiter. The latter found
petitioner jointly and severally
liable with private respondents
in the (1) judgement award on
underpayment and (2) nonpayment of overtime pay.
However, it found the judgment
award on the payment of
separation pay as sole liability of
private respondents.
NLRC rendered a decision
holding petitioner as jointly and
severally liable with private
respondents in the judgment
award on underpayment and on
the non-payment of overtime
pay, its directive being that the
Arbiter should now satisfy said
labor-standards award, as well
as that of the separation pay,
exclusively through the surety
bond posted by private
respondents.
The Court of Appeals (CA)
rendered the assailed Decision
on 24 April 2000, modifying the
Decision of the NLRC dated 30
January 1996 and holding the

petitioner solidarily liable with

the private respondents for the
satisfaction of the laborers
separation pay.
Issue: Whether or not the CA
erred when it ruled that the
petitioner was jointly and
solidarily liable with the private
respondents as regards the
payment of separation pay.
Held: Yes. The appellate court
used as basis Article 109 of the
Labor Code, as amended, in
holding the petitioner solidarily
liable with the private
respondents for the payment of
separation pay:
ART. 109. Solidary Liability. - The
provisions of existing laws to the
contrary notwithstanding, every
employer or indirect employer
shall be held responsible with
his contractor or subcontractor
for any violation of any provision
of this Code. For purposes of
determining the extent of their
civil liability under this Chapter,
they shall be considered as
direct employers. [Emphasis
supplied].
However, the afore-quoted
provision must be read in
conjunction with Articles 106
and 107 of the Labor Code, as
amended.
Article 107 of the Labor Code, as
amended, defines an indirect
employer as any person,
partnership, association or
corporation which, not being an

employer, contracts with an

independent contractor for the
performance of any work, task,
job or project. To ensure that
the contractors employees are
paid their appropriate wages,
Article 106 of the Labor Code, as
amended, provides:
ART. 106. CONTRACTOR OR
SUBCONTRACTOR. x x x.
In the event that the contractor
or subcontractor fails to pay the
wages of his employees in
accordance with this Code, the
employer shall be jointly and
severally liable with his
contractor or subcontractor to
such employees to the extent of
the work performed under the
contract, in the same manner
and extent that he is liable to
employees directly employed by
him. [Emphasis supplied].
Taken together, an indirect
employer (as defined by Article
107) can only be held solidarily
liable with the independent
contractor or subcontractor (as
provided under Article 109) in
the event that the latter fails to
pay the wages of its employees
(as described in Article 106).
Hence, while it is true that the
petitioner was the indirect
employer of the complainants, it
cannot be held liable in the
same way as the employer in
every respect. The petitioner
may be considered an indirect
employer only for purposes of

unpaid wages.
WHEREFORE, premises
considered, the instant Petition
is hereby GRANTED. The
Decision and Resolution of the
Court of Appeals dated 24 April
2000 and 27 September 2000,
respectively, in CA-G.R. SP No.
50806, are hereby REVERSED
AND SET ASIDE. The Decision
dated 30 January 1996 of the
National Labor Relations
Commission in NLRC NCR CA No.
001737-91 (NLRC NCR Case No.
00-09-04432-89) is hereby
REINSTATED. No costs.
Concepts: 1. Law of the Case
The opinion delivered on a
former appeal. It is a term
applied to an established rule
that when an appellate court
passes on a question and
remands the case to the lower
court for further proceedings,
the question there settled
becomes the law of the case
upon subsequent appeal. It
means that whatever is once
irrevocably established as the
controlling legal rule or decision
between the same parties in the
same case continues to be the
law of the case, whether correct
on general principles or not, so
long as the facts on which such
decision was predicated
continue to be the facts of the
case before the court.
2. The only instance when the
principal can also be held liable

with the independent contractor

or subcontractor for the
backwages and separation pay
of the latters employees is
when there is proof that the
principal conspired with the
independent contractor or
subcontractor in the illegal
dismissal of the employees.
--Manila Electric Co. v. Benamira,
G.R. No. 145271, July 14, 2005
Summary: When MERALCO
contracted for security services
with ASDAI as the security
agency that hired individual
respondents to work as guards
for it, MERALCO became an
indirect employer of individual
respondents pursuant to Article
107 of the Labor Code, thus,
making it liable as to the
monetary claims of the
individual respondents.
Facts: The individual
respondents are licensed
security guards formerly
employed by People's Security,
Inc. (PSI) and deployed as such
at MERALCO's head office. On
November 30, 1990, the
security service agreement
between PSI and MERALCO was
terminated.
Immediately thereafter, fifty-six
of PSI's security guards,
including eight individual
respondents, filed a complaint
for unpaid monetary benefits
against PSI and MERALCO.

Meanwhile, the security service

agreement between respondent
Armed Security & Detective
Agency, Inc., (ASDAI) and
MERALCO took effect on
December 1, 1990.
Subsequently, the individual
respondents were absorbed by
ASDAI and retained at
MERALCO's head office.
On June 29, 1992, Labor Arbiter
Manuel P. Asuncion rendered a
decision in favor of the former
PSI security guards, including
the individual respondents.
Less than a month later, or on
July 21, 1992, the individual
respondents filed another
complaint for unpaid monetary
benefits, this time against ASDAI
and MERALCO.
ASDAI denied in general terms
any liability for the claims of the
individual respondents, claiming
that there is nothing due them
in connection with their
services.
On the other hand, MERALCO
denied liability on the ground of
lack of employer-employee
relationship with individual
respondents. It averred that the
individual respondents are the
employees of the security
agencies it contracted for
security services; and that it has
no existing liability for the
individual respondents' claims
since said security agencies
have been fully paid for their

services per their respective

security service agreement.
Labor Arbiter Pablo C. Espiritu,
Jr. rendered a Decision holding
ASDAI and MERALCO jointly and
solidarily liable to the monetary
claims of individual
respondents. NLRC affirmed in
toto the decision of the Labor
Arbiter. Court of Appeals (CA)
modified the decision of the
NLRC by declaring MERALCO as
the direct employer of the
individual respondents.
Issue: 1. Whether or not ASDAI
is a labor-only contractor since,
as MERALCO insisted, they have
their own equipment,
machineries and work premises
which are necessary in the
conduct of their business and
the duties performed by the
security guards are not
necessary in the conduct of
MERALCOs principal business.
2. Whether or not MERALCO, as
principal, becomes jointly and
severally liable for the individual
respondents wages, under
Article 106 and 109 of the Labor
Code.
Held: 1. No, ASDAI are not
"labor-only" contractors. There
is "labor only" contract when the
person acting as contractor is
considered merely as an agent
or intermediary of the principal
who is responsible to the
workers in the same manner
and to the same extent as if

they had been directly

employed by him. On the other
hand, "job (independent)
contracting" is present if the
following conditions are met: (a)
the contractor carries on an
independent business and
undertakes the contract work on
his own account under his own
responsibility according to his
own manner and method, free
from the control and direction of
his employer or principal in all
matters connected with the
performance of the work except
to the result thereof; and (b) the
contractor has substantial
capital or investments in the
form of tools, equipment,
machineries, work premises and
other materials which are
necessary in the conduct of his
business. Given the above
distinction and the provisions of
the security service agreements
entered into by petitioner with
ASDAI, the Court is convinced
that ASDAI was engaged in job
contracting.
2. Yes. The fact that there is no
actual and direct employeremployee relationship between
MERALCO and the individual
respondents does not exonerate
MERALCO from liability as to the
monetary claims of the
individual respondents. When
MERALCO contracted for
security services with ASDAI as
the security agency that hired

individual respondents to work

as guards for it, MERALCO
became an indirect employer of
individual respondents pursuant
to Article 107 of the Labor Code,
which reads:
ART. 107. Indirect employer.
The provisions of the
immediately preceding Article
shall likewise apply to any
person, partnership, association
or corporation which, not being
an employer, contracts with an
independent contractor for the
performance of any work, task,
job or project.
When ASDAI as contractor failed
to pay the individual
respondents, MERALCO as
principal becomes jointly and
severally liable for the individual
respondents' wages, under
Articles 106 and 109 of the
Labor Code, which provide:
ART. 106. Contractor or
subcontractor.Whenever an
employer enters into a contract
with another person for the
performance of the former['s]
work, the employees of the
contractor and of the latter[`s]
subcontractor, if any, shall be
paid in accordance with the
provisions of this Code.
In the event that the contractor
or subcontractor fails to pay the
wages of his employees in
accordance with this Code, the
employer shall be jointly and
severally liable with his

contractor or subcontractor to
such employees to the extent of
the work performed under the
contract, in the same manner
and extent that he is liable to
employees directly employed by
him. xxx
ART. 109. Solidary liability.The
provisions of existing laws to the
contrary notwithstanding, every
employer or indirect employer
shall be held responsible with
his contractor or subcontractor
for any violation of any provision
of this Code. For purpose of
determining the extent of their
civil liability under this Chapter,
they shall be considered as
direct employers.
ASDAI is held liable by virtue of
its status as direct employer,
while MERALCO is deemed the
indirect employer of the
individual respondents for the
purpose of paying their wages in
the event of failure of ASDAI to
pay them.
WHEREFORE, the present
petition is GRANTED. The
assailed Decision, dated
September 27, 2000, of the CA
is REVERSED and SET ASIDE.
The Decision of the Labor
Arbiter dated January 3, 1994
and the Resolution of the NLRC
dated April 10, 1995 are
AFFIRMED with the
MODIFICATION that the joint and
solidary liability of ASDAI and
MERALCO to pay individual

respondents' monetary claims

for underpayment of actual
regular hours and overtime
hours rendered, and premium
pay for holiday and rest day, as
well as attorney's fees, shall be
without prejudice to MERALCO's
right of reimbursement from
ASDAI.
Concepts: It is a settled rule that
in the exercise of the Supreme
Court's power of review, the
Court is not a trier of facts and
does not normally undertake the
re-examination of the evidence
presented by the contending
parties during the trial of the
case considering that the
findings of facts of the CA are
conclusive and binding on the
Court. However, jurisprudence
has recognized several
exceptions in which factual
issues may be resolved by this
Court, to wit:
(1) when the findings are
grounded entirely on
speculation, surmises or
conjectures; (2) when the
inference made is manifestly
mistaken, absurd or impossible;
(3) when there is grave abuse of
discretion; (4) when the
judgment is based on a
misapprehension of facts; (5)
when the findings of facts are
conflicting; (6) when in making
its findings the Court of Appeals
went beyond the issues of the
case, or its findings are contrary

to the admissions of both the

appellant and the appellee; (7)
when the findings are contrary
to the trial court; (8) when the
findings are conclusions without
citation of specific evidence on
which they are based; (9) when
the facts set forth in the petition
as well as in the petitioner's
main and reply briefs are not
disputed by the respondent;
(10) when the findings of fact
are premised on the supposed
absence of evidence and
contradicted by the evidence on
record; and (11) when the Court
of Appeals manifestly
overlooked certain relevant
facts not disputed by the
parties, which, if properly
considered, would justify a
different conclusion.
--Diamond Farms v. Southern
Phils. Fed., G.R. No. 173254,
January 13, 2016
Summary: Since respondentcontractors (1) does not have
substantial capital or investment
in the form of tools, equipment,
machineries, work premises and
other materials; and (2) the
workers recruited and placed by
such person are performing
activities which are directly
related to the principal business
or operations of the employer in
which workers are habitually
employed, the Court ruled that
they are labor-only contractors.

Facts: Diamond Farms, Inc. (DFI)

owns an 800-hectare banana
plantation in Davao. Pursuant to
Comprehensive Agrarian Reform
Law (CARL), the plantation
became subject to compulsory
acquisition and distribution. It
was granted by the Department
of Agrarian Reform (DAR) a
deferment privilege to continue
operations. DFI then closed
some areas of operations and
laid off employees which
resulted to a petition to the DAR
to cancel the deferment
privilege. The DAR approved the
petition and recalled the
deferment privilege resulting in
the plantations automatic
compulsory acquisition and
distribution under the CARL.
The awarded plantation was
turned over to qualified agrarian
reform beneficiaries ("ARBs")
under the CARL. These ARBs are
the same farmers who were
working in the original
plantation. They subsequently
organized themselves into a
multi-purpose cooperative
named "DARBMUPCO," which is
one of the respondents in this
case.
From the start, DARBMUPCO was
hampered by lack of manpower
to undertake the agricultural
operation under the BPPA
because some of its members
were not willing to work. Hence,
to assist DARBMUPCO in

meeting its production

obligations under the BPPA, DFI
engaged the services of the
respondent-contractors, who in
turn recruited the respondentworkers.
The engagement of the
respondent-workers started a
series of labor disputes among
DARBMUPCO, DFI and the
respondent-contractors.
On February 10, 1997,
respondent Southern Philippines
Federation of Labor ("SPFL")a
legitimate labor organization
with a local chapter in the
awarded plantationfiled a
petition for certification election
in the Office of the Med-Arbiter
in Davao City. SPFL filed the
petition on behalf of some 400
workers (the respondentworkers in this petition) "jointly
employed by DFI and
DARBMUPCO" working in the
awarded plantation.
DARBMUPCO and DFI denied
that they are the employers of
the respondent-workers. They
claimed, instead, that the
respondent-workers are the
employees of the respondentcontractors.
Meanwhile, on June 20, 1997
and September 15, 1997, SPFL,
together with more than 300
workers, filed a case for
underpayment of wages, nonpayment of 13th month pay and
service incentive leave pay and

attorneys fees against DFI,

DARBMUPCO and the
respondent-contractors before
the National Labor Relations
Commission ("NLRC") in Davao
City. DARBMUPCO averred that it
is not the employer of
respondent-workers; neither is
DFI. It asserted that the money
claims should be directed
against the true employerthe
respondent-contractors.
The CA agreed with the ruling of
the SOLE that DFI is the
statutory employer of the
respondent-workers. It also
ruled that DFI is the true
employer of the respondentworkers because the
respondent-contractors are not
independent contractors.
DFI is now in Court by way of
Petition for Review on Certiorari
praying that DARBMUPCO be
declared the true employer of
the respondent-workers.
DARBMUPCO filed a Comment
maintaining that under the
control test, DFI is the true
employer of the respondentworkers.
Respondent-contractors filed a
Verified Explanation and
Memorandum asserting that
they were labor-only
contractors; hence, they are
merely agents of the true
employer of the respondentworkers.
Issue: The issue before this

Court is who among DFI,

DARBMUPCO and the
respondent-contractors is the
employer of the respondentworkers.
Held: The Court denied DFIs
petition. It held that DFI is the
principal or employer of the
respondent-workers.
Job contracting shall be deemed
as labor-only contracting, an
arrangement prohibited by law,
if a person who undertakes to
supply workers to an employer:
(1) Does not have substantial
capital or investment in the
form of tools, equipment,
machineries, work premises and
other materials; and
(2) The workers recruited and
placed by such person are
performing activities which are
directly related to the principal
business or operations of the
employer in which workers are
habitually employed.
As a general rule, a contractor is
presumed to be a labor-only
contractor, unless such
contractor overcomes the
burden of proving that it has the
substantial capital, investment,
tools and the like.
Based on the conditions for
permissible job contracting, the
Court ruled that respondentcontractors are labor-only
contractors.
There is no evidence showing
that respondent-contractors are

independent contractors. To
support its argument that
respondent-contractors are the
employers of respondentworkers, and not merely laboronly contractors, DFI should
have presented proof showing
that respondent-contractors
carry on an independent
business and have sufficient
capitalization. The record,
however, is bereft of showing of
even an attempt on the part of
DFI to substantiate its
argument.
Further, respondent-contractors
admit, and even insist that they
are engaged in labor-only
contracting. As said by Court,
respondent-contractors made
the admissions and declarations
on two occasions: first was in
their Formal Appearance of
Counsel and Motion for
Exclusion of Individual PartyRespondents filed before the LA;
and second was in their Verified
Explanation and Memorandum
filed before this Court.
A finding that a contractor is a
labor-only contractor is
equivalent to a declaration that
there is an employer-employee
relationship between the
principal, and the workers of the
labor-only contractor; the laboronly contractor is deemed only
as the agent of the principal.
Thus, in this case, respondentcontractors are the labor-only

contractors and either DFI or

DARBMUPCO is their principal.
The Court held that DFI is the
principal.
Under Article 106 of the Labor
Code, a principal or employer
refers to the person who enters
into an agreement with a job
contractor, either for the
performance of a specified work
or for the supply of manpower.
In this regard, the Court quoted
with approval the findings of the
CA, to wit:
The records show that it is DFI
which hired the individual
[respondent-contractors] who in
turn hired their own men to
work in the 689.88 hectares
land of DARBMUPCO as well as
in the managed area of the
plantation. DFI admits [that]
these [respondent-contractors]
worked under the direction and
supervision of the DFI managers
and personnel. DFI paid the
[respondent-contractors] for the
services rendered in the
plantation and the [respondentcontractors] in turn pay their
workers after they [respondentcontractors] received payment
from DFI. xxx DARBMUPCO did
not have anything to do with the
hiring, supervision and payment
of the wages of the workersrespondents thru the
contractors-respondents. xxx87
(Emphasis supplied.)
WHEREFORE, the petition is

DENIED for lack of merit. The

March 31, 2006 Decision and
the May 30, 2006 Resolution of
the Court of Appeals in C.A.-G.R.
SP Nos. 53806, 61607 and
59958 are hereby AFFIRMED.
Concepts: 1. Contracting or
subcontracting - an
arrangement whereby a
principal (or employer) agrees
to put out or farm out with a
contractor or subcontractor the
performance or completion of a
specific job, work or service
within a definite or
predetermined period,
regardless of whether such job,
work or service is to be
performed or completed within
or outside the premises of the
principal. It involves a trilateral
relationship among the principal
or employer, the contractor or
subcontractor, and the workers
engaged by the contractor or
subcontractor.
2. There is "labor-only"
contracting where the person
supplying workers to an
employer does not have
substantial capital or investment
in the form of tools, equipment,
machineries, work premises,
among others, and the workers
recruited and placed by such
person are performing activities
which are directly related to the
principal business of such
employer. In such cases, the
person or intermediary shall be

considered merely as an agent

of the employer who shall be
responsible to the workers in the
same manner and extent as if
the latter were directly
employed by him.
3. Job contracting is permissible
under the Code if the following
conditions are met:
(a) The contractor carries on an
independent business and
undertakes the contract work on
his own account under his own
responsibility according to his
own manner and method, free
from the control and direction of
his employer or principal in all
matters connected with the
performance of the work except
as to the results thereof; and
(b) The contractor has
substantial capital or investment
in the form of tools, equipment,
machineries, work premises,
and other materials which are
necessary in the conduct of his
business.
4. Job contracting shall be
deemed as labor-only
contracting, an arrangement
prohibited by law, if a person
who undertakes to supply
workers to an employer:
(1) Does not have substantial
capital or investment in the
form of tools, equipment,
machineries, work premises and
other materials; and
(2) The workers recruited and
placed by such person are

performing activities which are

directly related to the principal
business or operations of the
employer in which workers are
habitually employed.
5. As a general rule, a
contractor is presumed to be a
labor-only contractor, unless
such contractor overcomes the
burden of proving that it has the
substantial capital, investment,
tools and the like.
6. In labor-only contracting, it is
the law which creates an
employer-employee relationship
between the principal and the
workers of the labor-only
contractor.
Robina Farms v Villa (OT Pay)
April 18, 2016
FACTS: Petitioner Robina Farms
employed Elizabeth Villa as
sales clerk from 1981. in the
later part of 2001, the petitioner
was informed that she can avail
the company's special
retirement program.
On March 2, 2002, she has
received a memo from Lily
Ngochua to explain her failure to
issue invoices for unhatched
eggs in the months of January to
February 2002. She explained
that the invoices were not
delivered on time because the
delivery receipts were delayed
and overlooked. Despite of her
explanatons she had been
suspended for 10 days from

March 8, 2002 until March 19,

2002.
Upon reporting back to work,
she had been advised to cease
working because her application
for retirement had already been
approved. Though subsequently,
she was informed that the
application had been
disapproved because the
financial assistance of 86%/year
of service was only offered to
employees working in
operations department and not
in admin and sales, and she was
advised to tender her
resignation with a request of
financial assistance of 1/2 per
year of service. She manifested
her intention to return to work
but the petitioner had
confiscated her gate pass to
prevent her from entering the
company premises and she was
told that she had been replaced
by another employee.
The Labor Arbiter ruled that Villa
was not dismissed from
employment but they ordered
Villa's reinstatement but the
claims for backwages and
overtime pay was not
appreciated.
NLRC ruled that she was illegally
dismissed. Granting her
Backwages, Service Incentive
Leave Pay, and overtime pay.
The overtime pay amounting to
3,445.00.
Issue: (1) WON Villa was illegally

dismissed
(2) WON Villa is entitled to
Overtime Pay
Held: (1) Yes, the court ruled
that Villa was illegally dismissed
because ordinarily, after an
employee served her
suspension, she should be
admitted back to work and
continue to receive
compensation for her services.
In the case at bar, it is clear that
she was not admitted
immediately after her
suspension. She was also
prevented to enter the
petitioner's premises by
confiscating her ID and
informing her that a new
employee has already replaced
her.
(2) No, the NLRC's reliance on
the daily time records (DTRs)
showing that Villa had stayed in
the company's premises beyond
eight hours
was misplaced. The DTRs did
not substantially prove the
actual performance of overtime
work. The petitioner correctly
points out that any employee
could render overtime work only
when there was a prior
authorization therefor by the
management. Without the prior
authorization, therefore, Villa
could not validly claim having
performed work beyond the
normal hours of work. Moreover,
Section 4( c ), Rule I, Book III of

the Omnibus Rules

Implementing the Labor Code
relevantly states as follows:
Section 4. Principles in
determining hours worked. - The
following general principles shall
govern in determining whether
the time spent by an employee
is considered hours worked for
purposes of this Rule:
(a) XX X.
(b) xx x.
(c) If the work performed was
necessary, or it benefited the
employer, or the employee
could not abandon his work at
the end of his normal working
hours because he had no
replacement, all time spent for
such work shall be considered
as hours worked, if the work was
with the knowledge of his
employer or immediate
supervisor. (bold emphasis
supplied)
(d) xx x.
Serrano vs. Severino Santos,
G.R. No. 187698; August 9, 2010
(Art. 82)
Facts: Petitioner Serrano was
hired as bus conductor by
respondent Severino Transit on
September 28, 1992. After 14
years of service, petitioner
applied for optional retirement.
from the company whose
representative advised him that
he must first sign the already
prepared Quitclaim before his

retirement pay could be

released. As petitioner's
request to first go over the
computation of his retirement
pay was denied, he signed the
Quitclaim on which he wrote
"U.P." (under protest) after his
signature, indicating his protest
to the amount of P75,277.45
which he received, computed by
the company at 15 days per
year of service.
Petitioner soon after filed a
complaint before the Labor
Arbiter, alleging that the
company erred in its
computation since under
Republic Act No. 7641,
otherwise known as the
Retirement Pay Law, his
retirement pay should have
been computed at 22.5 days per
year of service to include the
cash equivalent of the 5-day
service incentive leave (SIL) and
1/12 of the 13th month pay
which the company did not.
The company maintained,
however, that the Quitclaim
signed by petitioner barred his
claim and, in any event, its
computation was correct since
petitioner was not entitled to
the 5-day SIL and pro-rated 13th
month pay for, as a bus
conductor, he was paid on
commission basis.
Labor Arbiter Cresencio Ramos,
Jr. ruled in favor of petitioner,
awarding him P116,135.45 as

retirement pay differential, and

10% of the total monetary
award as attorney's fees. This is
because under Labor Advisory
on Retirement Pay Law, a
covered employee who retires
pursuant to RA 7641 shall be
entitled to retirement pay
equivalent to at least one-half
(1/12) month salary for every
year of service (one-half month
salary means fifteen (15) days
plus one-twelfth (1/12) of the
13th month pay and the cash
equivalent of not more than five
(5) days service incentive
leaves" unless the parties
provide for broader inclusions),
a fraction of at least six (6)
months being considered as one
whole year
The National Labor Relations
Commission (NLRC) to which
respondents appealed reversed
the Labor Arbiter's ruling and
dismissed petitioner's
complaint. Citing R & E
Transport, Inc. v. Latag, the
NLRC held that since petitioner
was paid on purely commission
basis, he was excluded from the
coverage of the laws on 13th
month pay and SIL pay, hence,
the 1/12 of the 13th month pay
and the 5-day SIL should not be
factored in the computation of
his retirement pay.
Petitioner's motion for
reconsideration having been
denied by Resolution, he

appealed to the Court of

Appeals. The appellate court
affirmed the NLRC's ruling.
Petitioner's motion for
reconsideration was again
denied, hence, the present
petition for review on certiorari
Issue: WON the petitioner is
excluded from the coverage of
the laws on 13th month pay and
SIL pay, hence, the 1/12 of the
13th month pay and the 5-day
SIL should not be factored in the
computation of his retirement
pay.
Held: No. It bears emphasis that
under P.D. 851 or the SIL Law,
the exclusion from its coverage
of workers who are paid on a
purely commission basis is only
with respect to field personnel.
According to Article 82 of the
Labor Code, "field personnel"
shall refer to non-agricultural
employees who regularly
perform their duties away from
the principal place of business
or branch office of the employer
and whose actual hours of work
in the field cannot be
determined with reasonable
certainty.
This definition is further
elaborated in the Bureau of
Working Conditions (BWC),
Advisory Opinion to Philippine
Technical-Clerical Commercial
Employees Association which
states that: If required to be at
specific places at specific times,

employees including drivers

cannot be said to be field
personnel despite the fact that
they are performing work away
from the principal office of the
employee.
Tongko vs. Manufacturers Life,
G.R. No. 167622; June 29, 2010
Facts: A Motion for
Reconsideration was filed by
respondent Manulife to set aside
Court's Decision of November 7,
2008. In the assailed decision,
the Court found that an
employer-employee relationship
existed between Manulife and
petitioner Gregorio Tongko and
ordered Manulife to pay Tongko
backwages and separation pay
for illegal dismissal.
Manulife claimed that "the
November 7[, 2008] Decision
ignores the findings of the CA on
the three elements of the fourfold test other than the "control"
test, reverses well-settled
doctrines of law on employeremployee relationships, and
grossly misapplies the "control
test," by selecting, without
basis, a few items of evidence to
the exclusion of more material
evidence to support its
conclusion that there is
"control."
Issue: WON an employeremployee relationship exists
between petitioner and
respondent?

Held: No. By the Agreement's

express terms, Tongko served as
an "insurance agent" for
Manulife, not as an employee. To
be sure, the Agreement's legal
characterization of the nature of
the relationship cannot be
conclusive and binding on the
courts; as the dissent clearly
stated, the characterization of
the juridical relationship the
Agreement embodied is a
matter of law that is for the
courts to determine. At the
same time, though, the
characterization the parties
gave to their relationship in the
Agreement cannot simply be
brushed aside because it
embodies their intent at the
time they entered the
Agreement, and they were
governed by this understanding
throughout their relationship. At
the very least, the provision on
the absence of employeremployee relationship between
the parties can be an aid in
considering the Agreement and
its implementation, and in
appreciating the other evidence
on record.
Also, the provisions of the
Insurance Code cannot be
disregarded as this Code
expressly envisions a principalagent relationship between the
insurance company and the
insurance agent in the sale of
insurance to the public. For this

reason, we can take judicial

notice that as a matter of
Insurance Code-based business
practice, an agency relationship
prevails in the insurance
industry for the purpose of
selling insurance. Significantly,
evidence shows that Tongko's
role as an insurance agent
never changed during his
relationship with Manulife.
Evidence indicates that Tongko
consistently clung to the view
that he was an independent
agent selling Manulife insurance
products since he invariably
declared himself a business or
self-employed person in his
income tax returns. This
consistency with, and action
made pursuant to the
Agreement were pieces of
evidence that were never
mentioned nor considered in our
Decision of November 7, 2008.
Also, the mere presentation of
codes or of rules and
regulations, however, is not per
se indicative of labor law control
as the law and jurisprudence
teach us.
Given this anemic state of the
evidence, particularly on the
requisite confluence of the
factors determinative of the
existence of employer-employee
relationship, the Court cannot
conclusively find that the
relationship exists in the present
case, even if such relationship

only refers to Tongko's

additional functions. While a
rough deduction can be made,
the answer will not be fully
supported by the substantial
evidence needed.
Calamba Medical vs. NLRC, G.R.
No. 176484; November 25, 2008
Facts: The Calamba Medical
Center (petitioner), a privatelyowned hospital, engaged the
services of medical doctorsspouses Ronaldo Lanzanas (Dr.
Lanzanas) and Merceditha
Lanzanas (Dr. Merceditha) in
March 1992 and August 1995,
respectively, as part of its team
of resident physicians. The work
schedules of the members of
the team of resident physicians
were fixed by petitioner's
medical director Dr. Raul
Desipeda (Dr. Desipeda). 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.
Dr. Desipeda whose attention
was called to the above-said
telephone conversation issued

to Dr. Lanzanas a Memorandum

of March 7, 1998, giving Dr.
Lazanas 24 hours to explain why
no disciplinary action should be
taken against him. Pending
investigation of the case, he was
placed under 30-day preventive
suspension upon receipt thereof.
Dr. Merceditha was also not
given any work schedule.
On March 20, 1998, Dr.
Lanzanas filed a complaint for
illegal suspension before the
National Labor Relations
Commission (NLRC)-Regional
Arbitration Board (RAB) IV. Dr.
Merceditha subsequently filed a
complaint for illegal dismissal.
By Decision of March 23, 1999,
Labor Arbiter Antonio R. Macam
dismissed the spouses'
complaints for want of
jurisdiction upon a finding that
there was no employeremployee 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
Decision of May 3, 2002,
reversed the Labor Arbiter's
findings. 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
Decision.
Issue: WON there exists an
employer-employee relationship
between petitioner and the
spouses-respondents.
Held: Yes. 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. In the case
at bar, first, private respondents
maintained specific workschedules, as determined by
petitioner through its medical
director, which consisted of 24hour shifts totaling forty-eight
hours each week and which
were strictly to be observed
under pain of administrative
sanctions. Second, 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. Third, petitioner itself
provided incontrovertible proof
of the employment status of

respondents, namely, the

identification cards it issued
them, the payslips 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. Lastly, 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.
Century Properties vs. Babiano,
G.R. No. 220978; July 5, 2016
Facts: On October 2, 2002,
Edwin J. Babiano was hired by
Century Properties, Inc. (CPI) as
Director of Sales, and was
eventually appointed as Vice
President for Sales effective
September 1, 2007. During the
same period, Emma B.
Concepcion was initially hired as
Sales Agent by CPI and was
eventually promoted as Project
Director on September 1,
2007As such, she signed an
employment agreement,

denominated as "Contract of
Agency for Project Director
which provided, among others,
that she would directly report to
Babiano. On March 31, 2008,
Concepcion executed a similar
contract anew with CPI in which
she would receive a monthly
subsidy of P50,000.00, 0.5%
commission, and cash
incentives as per company
policy. Notably, it was stipulated
in both contracts that no
employer-employee relationship
exists between Concepcion and
CPI.
After receiving reports that
Babiano provided a competitor
with information regarding CPFs
marketing strategies, spread
false information regarding CPI
and its projects, recruited CPI's
personnel to join the competitor,
and for being absent without
official leave (AWOL) for five (5)
days, CPI sent Babiano a Notice
to Explain on February 23, 2009
directing him to explain why he
should not be charged with
disloyalty, conflict of interest,
and breach of trust and
confidence for his actuations.
On February 25, 2009, Babiano
tendered his resignation and
revealed that he had been
accepted as Vice President of
First Global BYO Development
Corporation (First Global), a
competitor of CPI. On the other
hand, Concepcion resigned as

CPFs Project Director through a

letter dated February 23, 2009,
effective immediately.
On the other hand, Concepcion
resigned as CPFs Project
Director through a letter[22]
dated February 23, 2009,
effective immediately. For its
part, CPI maintained[25] that
Babiano is merely its agent
tasked with selling its projects.
On Concepcion's money claims,
CPI asserted that the NLRC had
no jurisdiction to hear the same
because there was no employeremployee relations between
them, and thus, she should have
litigated the same in an ordinary
civil action. The Labor Arbiter
(LA) ruled in CPI's favor. NLRC
reversed and set aside the LA
ruling. CA affirmed the NLRC
ruling with modification
increasing the award of unpaid
commissions to Babiano and
Concepcion. The CA echoed the
NLRC's finding that there exists
an employer-employee
relationship between
Concepcion and CPI, because
the latter exercised control over
the performance of her duties as
Project Director which is
indicative of an employeremployee relationship.
Issue: WON CPI has employeremployee relationship with
Concepcion.
Held: Yes. Anent the nature of
Concepcion's engagement,

based on case law, the presence

of the following elements evince
the existence of an employeremployee relationship: (a) the
power to hire, i.e., 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, or the so
called "control test." Under this
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.
Guided by these parameters,
the Court finds that Concepcion
was an employee of CPI
considering that: (a) CPI
continuously hired and
promoted Concepcion from
October 2002 until her
resignation on February 23,
2009, thus, showing that CPI
exercised the power of selection
and engagement over her
person and that she performed
functions that were necessary
and desirable to the business of
CPI; (b) the monthly "subsidy"
and cash incentives that
Concepcion was receiving from
CPI are actually remuneration in
the concept of wages as it was
regularly given to her on a

monthly basis without any

qualification, save for the
"complete submission of
documents on what is a sale
policy"; (c) CPI had the power to
discipline or even dismiss
Concepcion as her engagement
contract with CPI expressly
conferred upon the latter "the
right to discontinue [her] service
anytime during the period of
engagement should [she] fail to
meet the performance
standards," among others, and
that CPI actually exercised such
power to dismiss when it
accepted and approved
Concepcion's resignation letter;
and most importantly, (d) as
aptly pointed out by the CA, CPI
possessed the power of control
over Concepcion because in the
performance of her duties as
Project Director - particularly in

the conduct of recruitment

activities, training sessions, and
skills development of Sales
Directors - she did not exercise
independent discretion thereon,
but was still subject to the direct
supervision of CPI, acting
through Babiano.
Besides, while the employment
agreement of Concepcion was
denominated as a "Contract of
Agency for Project Director," it
should be stressed that the
existence of employer-employee
relations could not be negated
by the mere expedient of
repudiating it in a contract. In
the case of Insular Life
Assurance Co., Ltd. v. NLRC, it
was ruled that one's
employment status is defined
and prescribed by law, and not
by what the parties say it should
be.