Serrano v

Serrano v. Severino Santos

D E C I S I O N  

CARPIO MORALES, J.:

Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as bus conductor by respondent Severino Santos Transit, a bus company owned and operated by its co-respondent Severino Santos.

 After 14 years of service or on July 14, 2006,

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 petitioners 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[1] 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. Respondents, noting that the retirement differential pay amounted to only P1,431.15, explained that in the computation of petitioners retirement pay, five months were

inadvertently not included because some index cards containing his records had been lost.

 By Decision[2] of February 15, 2007, Labor

Arbiter Cresencio Ramos, Jr. ruled in favor of petitioner, awarding himP116,135.45 as retirement pay differential, and 10% of the total monetary award as attorneys fees. In arriving at such computation, the Labor Arbiter ratiocinated:

 In the same Labor Advisory on Retirement Pay Law, it was likewise decisively made clear that the law expanded the concept of one-half month salary from the usual one-month salary divided by two, to wit: 

B. COMPUTATION OF RETIREMENT PAY

 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, a fraction of at least six (6) months being considered as one whole year.

 The law is

explicit that one-half month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13thmonth pay and the cash equivalent of not more than five (5) days service incentive leaves unless the parties provide for broader inclusions. Evidently, the law expanded the concept of one-half month salary from the usual one-month salary divided by two.

 The retirement pay is equal to

half-months pay per year of service. But half-months pay is expanded because it means not just the salary for 15 days but also one-twelfth of the 13th-month pay and the cash value of five-day service incentive

leave. THIS IS THE MINIMUM. The retirement pay package can be improved upon by voluntary company policy, or particular agreement with the employee, or through a collective bargaining agreement. (The Labor Code with Comments and Cases, C.A. Azcunea, Vol. II, page 765, Fifth Edition 2004).

 Thus, having established

that 22.5 days pay per year of service is the correct formula   in arriving at the complete retirement pay of complainant and inasmuch as complainants daily earning is based on commission earned in a day, which varies each day, the next critical issue that needs discernment is the determination of what is a fair and rational amount of daily earning of complainant to be used in the computation of his retirement pay.

 While complainant endeavored

to substantiate his claim that he earned average daily commission of P700.00, however, the documents he presented are not complete, simply representative copies, therefore unreliable. On the other haNd, while respondents question complainants use of P700.00 (daily income) as basis in determining the latters correct retirement pay, however it does not help their defense that they did not present a single Conductors Trip Report to contradict the claim of complainant. Instead, respondents adduced a handwritten summary of complainants monthly income from 1993 until June 2006. It must be noted also that complainant did not contest the amounts stated on the summary of his monthly income as reported by respondents. Given the above considerations, and most importantly that complainant did not dispute the figures stated in that document, we find it logical, just and equitable for both parties to rely on the summary of monthly income provided by respondent, thus, we added complainants monthly income from June 2005 until June 2006 or the last twelve months and we arrived at P189,591.30) and we divided it by twelve (12) to arrive at complainants average monthly earning of P15,799.28. Thereafter, the average monthly of   P 15,799.28 is divided by twenty-six (26) days, the factor commonly used in determining the regular working days in a month, to arrive at his average daily income of   P 607.66 . Finally, P607.66 (average daily income) x 22.5 days = P13,672.35 x 14 (length of service)

= P191,412.90 (COMPLETE RETIREMENT PAY). However, inasmuch as complainant already received   P 75,277.45, the retirement differential pay due him is   P 116,135.45 ( P 191,412.90 P 75,277.45) . (underscoring partly in the original and partly supplied)   The National Labor Relations Commission

(NLRC) to which respondents appealed reversed the Labor Arbiters ruling and dismissed petitioners complaint by Decision[3] dated April 23, 2008. It, however, ordered respondents to pay retirement differential in the amount of P2,365.35.

 Citing R & E Transport, Inc. v. Latag,[4] 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.

 Petitioners motion for reconsideration having

been denied by Resolution[5] of June 27, 2008, he appealed to the Court of Appeals.

 By the assailed Decision[6] of February 11,

2009, the appellate court affirmed the NLRCs ruling, it merely holding that it was based on substantial evidence, hence, should be respected.

 Petitioners motion for reconsideration was

denied, hence, the present petition for review on certiorari.

 The petition is meritorious. Republic Act No. 7641 which was enacted on

December 9, 1992 amended Article 287 of the Labor Code by providing for retirement pay to qualified

private sector employees in the absence of any retirement plan in the establishment. The pertinent provision of said law reads: 

Section 1.    Article 287 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby amended to read as follows: 

x x x x 

In the absence of a retirement plan or agreement providing for retirement benefits of employees   in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years   in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth ( 1 / 12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.  Retail, service and agricultural establishments or operations employing not more than (10) employees or workers are exempted from the

coverage of this provision.  x x x x (emphasis and underscoring supplied)

 Further, the Implementing Rules of said law provide:  

RULE IIRetirement Benefits

 SECTION 1.

 General Statement on Coverage. This Rule shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted under Section 2 hereof. As used herein, the term Act shall refer to Republic Act No. 7641 which took effect on January 7, 1993. 

SECTION 2 

Exemptions. This Rule shall not apply to the following employees:2.1 Employees of the National Government and its political subdivisions, including Government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its regulations.2.2 Domestic helpers and persons in the personal service of another.2.3 Employees of retail, service and agricultural establishment or operations regularly employing not more than ten (10) employees. As used in this sub-section; 

x x x x  

SECTION 5 

Retirement Benefits. 5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (―) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. 5.2 Components of One-half (―) Month Salary. For the purpose of determining the minimum retirement pay due an employee under this Rule, the term one-half month salary shall include all of the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the term salary includes all remunerations paid by an employer to his employees for services rendered during normal working days and hours, whether such payments are fixed or ascertained on a time, task, piece of commission basis, or other method of calculating the same, and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of food, lodging or other facilities customarily furnished by the employer to his employees. The term does not include cost of living allowances, profit-sharing payments and other monetary benefits which are not considered as part of or integrated into the regular salary of the employees.

(b) The cash equivalent of not more than five (5) days of service incentive leave;

(c) One-twelfth of the 13th month pay due the employee.

(d) All other benefits that the employer and employee may agree upon that should be included in the computation of the employees retirement pay. 

x x x x (emphasis supplied)  

Admittedly, petitioner worked for 14 years for the bus company which did not adopt any retirement scheme. Even if petitioner as bus conductor was paid on commission basis then, he falls within the coverage of R.A. 7641 and its implementing rules. As thus correctly ruled by the Labor Arbiter, petitioners retirement pay should include the cash equivalent of the 5-day SIL and 1/12 of the 13th month pay. 

The affirmance by the appellate court of the reliance by the NLRC on R & E Transport, Inc.  is erroneous. In said case, the Court held that a taxi driver paid   according   to   the   boundary   system  is not entitled to the 13th month and the SIL pay, hence, his retirement pay should be computed on the sole basis of his salary.

For purposes, however, of applying the law on SIL, as well as on retirement, the Court notes that there is a difference between drivers paid under the boundary system and conductors who are paid on commission basis.

 In practice, taxi drivers do not receive fixed

wages. They retain only those sums in excess of the boundary or fee they pay to the owners or operators of the vehicles.[7] Conductors, on the other hand, are paid a certain percentage of the bus earnings for the day.

 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. The more recent case of Auto Bus Transport Systems, Inc., v.

Bautista[8]clarifies that an employee who is paid on purely commission basis is entitled to SIL:

 A careful perusal of said

provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.  According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as field personnel.  The phrase other employees whose performance is unsupervised by the employer must not be understood as a separate classification of employees to which service incentive leave shall not be granted.  Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those whose actual hours of work in the field cannot be determined with reasonable certainty.

    The same is true with respect

to the phrase those who are

engaged on task or contract basis, purely commission basis.  Said phrase should be related with field personnel, applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow. Hence, employees engaged on task or contract basis or paid on purely commission   basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.

x x x xAccording 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:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service or performing specific work.  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.

x x x x (emphasis, italics and

underscoring supplied) WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of February 11, 2009 and Resolution of April 28, 2009 are REVERSED and SET ASIDE and the Labor Arbiters Decision dated February 15, 2007 is REINSTATED. 

SO ORDERED. AUTO BUS TRANSPORT SYSTEMS, INC.,

petitioner, vs. ANTONIO BAUTISTA, respondent.

D E C I S I O NCHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision[1] and Resolution[2] of the Court of Appeals affirming the Decision[3] of the National Labor Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the award of 13th month pay and service incentive leave pay) by deleting the award of 13th month pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged buses and that despite respondents pleas for reconsideration, the same was ignored by management. After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondents employment was replete with offenses involving reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters, memos, irregularity reports, and warrants of arrest pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondents employment was terminated only after the latter was provided with an opportunity to explain his side regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,[4] the dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the complainant the following:

a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.[5]

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:

Section 3. Employers covered. The Decree shall apply to all employers except to:

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific work, irrespective of the time consumed in the performance thereof. xxx.

Records show that complainant, in his position paper, admitted that he was paid on a commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay. The other findings are AFFIRMED.[6]

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with the Court of Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.[7]

Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended, is applicable to respondents claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed amount for performing work irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as field personnel. The phrase other employees whose performance is unsupervised by the employer must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those whose actual hours of work in the field cannot be determined with reasonable certainty.[8]

The same is true with respect to the phrase those who are engaged on task or contract basis, purely commission basis. Said phrase should be related with field personnel, applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow.[9] Hence, employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.

Therefore, petitioners contention that respondent is not entitled to the grant of service incentive leave just because he was paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of propriety of the grant of service incentive leave to respondent is whether or not he is a 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[10] which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service or performing specific work. 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. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee would ever be considered a field personnel because every employer, in one way or another, exercises control over his employees. Petitioner further argues that the only criterion that should be considered is the nature of work of the employee in that, if the employees job requires that he works away from the principal office like that of a messenger or a bus driver, then he is inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a field personnel is not merely concerned with the location where the employee regularly performs his duties but also with the fact that the employees performance is unsupervised by the employer. As discussed above, field personnel are those who regularly perform their duties away from the principal place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours of work in the field can be determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to whether or not the employees time and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at strategic places who board the bus and inspect the passengers, the punched tickets, and the conductors reports. There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt departure and arrival from their point of origin to their point of destination. In each and every depot, there is always the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times and arrive at the estimated proper time. These, are present in the case at bar. The driver, the complainant herein, was therefore under constant supervision while in the performance of this work. He cannot be considered a field personnel.[11]

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a field personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of petitioners business. Accordingly, respondent is entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable to respondents claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of action for money claims accrue in order to determine the reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.[12]

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a cause of action transpired. Stated differently, in the computation of the three-year prescriptive period, a determination must be made as to the period when the act constituting a violation of the workers right to the benefits being claimed was committed. For if the cause of action accrued more than three (3) years before the filing of the money claim, said cause of action has already prescribed in accordance with Article 291.[13]

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits being claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining to the period beyond the three-year prescriptive period is therefore barred by prescription. The amount that can only be demanded by the aggrieved employee shall be limited to the amount of the benefits withheld within three (3) years before the filing of the complaint.[14]

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year.[15] Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v. NLRC:[16]

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments,

subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that [e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay. Service incentive leave is a right which accrues to every employee who has served within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year. It is also commutable to its money equivalent if not used or exhausted at the end of the year. In other words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.[17] [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employees services, as the case may be.

The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingmans welfare should be the primordial and paramount consideration.[18] The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor.[19]

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation until his employment was terminated by petitioner. Neither did petitioner compensate his accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from the time of his dismissal, that respondent demanded from his former employer commutation of his accumulated leave credits. His cause of action to claim the payment of his

accumulated service incentive leave thus accrued from the time when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the time the employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal. Since respondent had filed his money claim after only one month from the time of his dismissal, necessarily, his money claim was filed within the prescriptive period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.

SECOND DIVISION

G.R. No. 195466, July 02, 2014

ARIEL L. DAVID, DOING BUSINESS UNDER THE NAME AND STYLE “YIELS HOG DEALER,”

PETITIONER, VS. JOHN G. MACASIO, Respondent.

D E C I S I O N

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision2and the January 31, 2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003.  The CA decision annulled and set aside the May 26, 2010 decision4 of the National Labor Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 decision6 of the Labor Arbiter (LA). The LA’s decision dismissed respondent John G. Macasio’s monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business under the name and style “Yiels Hog Dealer,” for non-payment of overtime pay, holiday pay and 13th month pay.  He also claimed payment for moral and exemplary damages andattorney’s fees. Macasio also claimed payment for service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995.  Macasio claimed that David exercised effective control and supervision over his work, pointing out that David: (1) set the work day, reporting time and hogs to be chopped, as well as the manner by which he was to perform his work; (2) daily paid his salary of P700.00, which was increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and disapproved his leaves.  Macasio added that David owned the hogs delivered for chopping, as well as the work tools and implements; the latter also rented the

workplace.  Macasio further claimed that David employs about twenty-five (25) butchers and delivery drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten employees. He alleged that he hired Macasio as a butcher or chopper on “pakyaw” or task basis who is, therefore, not entitled to overtime pay, holiday pay and 13th month pay pursuant to the provisions of the Implementing Rules and Regulations (IRR) of the Labor Code.  David pointed out that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless of the actual number of hours that he spent chopping the delivered hogs; and (3) was not engaged to report for work and, accordingly, did not receive any fee when no hogs were delivered.

Macasio disputed David’s allegations.11  He argued that, first, David did not start his business only in 2005.  He pointed to the Certificate of Employment12 that David issued in his favor which placed the date of his employment, albeit erroneously, in January 2000. Second, he reported for work every day which the payroll or time record could have easily proved had David submitted them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee as he hired the latter on “pakyaw” or task basis.  He also claimed that he issued the Certificate of Employment, upon Macasio’s request, only for overseas employment purposes.  He pointed to the “Pinagsamang Sinumpaang Salaysay,”14 executed by Presbitero Solano and Christopher (Antonio Macasio’s co-butchers), to corroborate his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of merit.  The LA gave credence to David’s claim that he engaged Macasio on “pakyaw” or task basis. The LA noted the following facts to support this finding: (1) Macasio received the fixed amount of P700.00 for every work done, regardless of the number of hours that he spent in completing the task and of the volume or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the then prevailing daily minimum wage of P382.00.  The LA added that the nature of David’s business as hog dealer supports this “pakyaw” or task basis arrangement.

The LA concluded that as Macasio was engaged on “pakyaw” or task basis, he is not entitled to overtime, holiday, SIL and 13th month pay.

The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not require Macasio to observe an eight-hour work schedule to earn the fixed P700.00 wage; and that Macasio had been performing a non-time work, pointing out that Macasio was paid a fixed amount for the completion of the assigned task, irrespective of the

time consumed in its performance. Since Macasio was paid by result and not in terms of the time that he spent in the workplace, Macasio is not covered by the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations Implementing the 13th month pay law.18

Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010 resolution,20 prompting Macasio to elevate his case to the CA via a petition for certiorari.21

The CA’s Ruling

In its November 22, 2010 decision,22 the CA partly granted Macasio’s certiorari petition and reversed the NLRC’s ruling for having been rendered with grave abuse of discretion.

While the CA agreed with the LA and the NLRC that Macasio was a task basis employee, it nevertheless found Macasio entitled to his monetary claims following the doctrine laid down inSerrano v. Severino Santos Transit.23 The CA explained that as a task basis employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a “field personnel.” As defined by the Labor Code, a “field personnel” is one who performs the work away from the office or place of work and whose regular work hours cannot be determined with reasonable certainty. In Macasio’s case, the elements that characterize a “field personnel” are evidently lacking as he had been working as a butcher at David’s “Yiels Hog Dealer” business in Sta. Mesa, Manila under David’s supervision and control, and for a fixed working schedule that starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay for three years, with 10% attorney’s fees on the total monetary award.  The CA, however, denied Macasio’s claim for moral and exemplary damages for lack of basis.

David filed the present petition after the CA denied his motion for reconsideration24 in the CA’s January 31, 2011 resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a “pakyaw” or task basis.  Hence, the latter is excluded from the coverage of holiday, SIL and 13th month pay.

David reiterates his submissions before the lower tribunals27 and adds that he never had any control over the manner by which Macasio performed his work and he simply looked on to the “end-result.”  He also contends that he never compelled Macasio to report for work and that under their arrangement, Macasio was at liberty to choose whether to report for work or not as other butchers could carry out his tasks. He points out that Solano and Antonio had, in fact, attested to their (David and Macasio’s) established “pakyawan” arrangement that rendered a written contract unnecessary. In as much as Macasio is a task basis employee – who is paid the fixed amount of P700.00 per engagement regardless of the time consumed in

the performance – David argues that Macasio is not entitled to the benefits he claims. Also, he posits that because he engaged Macasio on “pakyaw” or task basis then no employer-employee relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially when, as in this case, they are supported by substantial evidence.  Hence, David posits that the CA erred in reversing the labor tribunals’ findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a “field personnel” as David would have this Court believe.28 He reiterates his arguments before the lower tribunals and adds that, contrary to David’s position, the P700.00 fee that he was paid for each day that he reported for work does not indicate a “pakyaw” or task basis employment as this amount was paid daily, regardless of the number or pieces of hogs that he had to chop.  Rather, it indicates a daily-wage method of payment and affirms his regular employment status.  He points out that David did not allege or present any evidence as regards the quota or number of hogs that he had to chop as basis for the “pakyaw” or task basis payment; neither did David present the time record or payroll to prove that he worked for less than eight hours each day. Moreover, David did not present any contract to prove that his employment was on task basis.  As David failed to prove the alleged task basis or “pakyawan” agreement, Macasio concludes that he was David’s employee.

Procedurally, Macasio points out that David’s submissions in the present petition raise purely factual issues that are not proper for a petition for review on certiorari.  These issues – whether he (Macasio) was paid by result or on “pakyaw” basis; whether he was a “field personnel”; whether an employer-employee relationship existed between him and David; and whether David exercised control and supervision over his work – are all factual in nature and are, therefore, proscribed in a Rule 45 petition.  He argues that the CA’s factual findings bind this Court, absent a showing that such findings are not supported by the evidence or the CA’s judgment was based on a misapprehension of facts.  He adds that the issue of whether an employer-employee relationship existed between him and David had already been settled by the LA29 and the NLRC30 (as well as by the CA per Macasio’s manifestation before this Court dated November 15, 2012),31 in his favor, in the separate illegal case that he filed against David.

The Issue

The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL and 13th month pay to a worker engaged on “pakyaw” or task basis.  In the context of the Rule 65 petition before the CA, the issue is whether the CA correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled to these labor standards benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations: theMontoya ruling and the factual-issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under a Rule 65 proceeding, this Court’s power of review is limited to resolving matters pertaining to any perceived legal errors that the CA may have committed in issuing the assailed decision. This is in contrast with the review for jurisdictional errors, which we undertake in an original certiorari action.  In reviewing the legal correctness of the CA decision, we examine the CA decision based on how it determined the presence or absence of grave abuse of discretion in the NLRC decision before it and not on the basis of whether the NLRC decision on the merits of the case was correct.32  In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions of law raised against the assailed CA decision.34

In this petition, David essentially asks the question – whether Macasio is entitled to holiday, SIL and 13th month pay. This one is a question of law. The determination of this question of law however is intertwined with the largely factual issue of whether Macasio falls within the rule on entitlement to these claims or within the exception. In either case, the resolution of this factual issue presupposes another factual matter, that is, the presence of an employer-employee relationship between David and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on “pakyaw” or task basis.  Very noticeably, David confuses engagement on “pakyaw” or task basis with the lack of employment relationship. Impliedly, David asserts that their “pakyawan” or task basis arrangement negates the existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on “pakyaw” or task basis does not characterize the relationship that may exist between the parties, i.e., whether one of employment or independent contractorship.  Article 97(6) of the Labor Code defines wages as “xxx theremuneration or earnings, however designated, capable of being expressed in terms of money,whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered[.]”35  In relation to Article 97(6), Article 10136 of the Labor Code speaks of workers paid by results or those whose pay is calculated in terms of the quantity or quality of their work output which includes “pakyaw” work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on “pakyaw” or task basis negates employer-employee relationship, David would want the Court to engage on a factual appellate review of the entire case to determine the presence or existence of that relationship. This approach however is not authorized under a Rule 45 petition for review of the CA decision rendered under a Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an employer-employee but because of its finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday and 13th month pay. Second, we consider it crucial, that in the separate illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-employee relationship is in fact a non-issue in this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered by the CA under 65, the narrow scope of inquiry is whether the CA correctly determined the presence or absence of grave abuse of discretion on the part of the NLRC. In concrete question form, “did the NLRC gravely abuse its discretion in denying Macasio’s claims simply because he is paid on a non-time basis?”

At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists baseless. Employing the control test,38 we find that such a relationship exist in the present case.

Even a factual review shows thatMacasio is David’s employee

To determine the existence of an employer-employee relationship, four elements generally need to be considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct. These elements or indicators comprise the so-called “four-fold” test of employment relationship. Macasio’s relationship with David satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of “selection and engagement of the employee.”  David categorically confirmed this fact when, in his “Sinumpaang Salaysay,” he stated that “nag apply po siya sa akin at kinuha ko siya na chopper[.]”39  Also, Solano and Antonio stated in their “Pinagsamang Sinumpaang Salaysay”40 that “[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher” and “kilala namin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming trabaho.”

Second, David paid Macasio’s wages.  Both David and Macasio categorically stated in their respective pleadings before the lower tribunals and even before this Court that the former had been paying the latter P700.00 each day after the latter had finished the day’s task.  Solano and Antonio also confirmed this fact of wage payment in their “Pinagsamang Sinumpaang

Salaysay.”41 This satisfies the element of “payment of wages.”

Third, David had been setting the day and time when Macasio should report for work. This power to determine the work schedule obviously implies power of control.  By having the power to control Macasio’s work schedule, David could regulate Macasio’s work and could even refuse to give him any assignment, thereby effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work as to the means and methods of performing it. In addition to setting the day and time when Macasio should report for work, the established facts show that David rents the place where Macasio had been performing his tasks. Moreover, Macasio would leave the workplace only after he had finished chopping all of the hog meats given to him for the day’s task. Also, David would still engage Macasio’s services and have him report for work even during the days when only few hogs were delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could naturally be expected to observe certain rules and requirements and David would necessarily exercise some degree of control as the chopping of the hog meats would be subject to his specifications.  Also, since Macasio performed his tasks at David’s workplace, David could easily exercise control and supervision over the former.  Accordingly, whether or not David actually exercised this right or power to control is beside the point as the law simply requires the existence of this power to control 4243 or, as in this case, the existence of the right and opportunity to control and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-employee relationship existing between David and Macasio.

Macasio is engaged on “pakyaw” or task basis

At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that Macasio was engaged or paid on “pakyaw” or task basis.  This factual finding binds the Court under the rule that factual findings of labor tribunals when supported by the established facts and in accord with the laws, especially when affirmed by the CA, is binding on this Court.

A distinguishing characteristic of “pakyaw” or task basis engagement, as opposed to straight-hour wage payment, is the non-consideration of the time spent in working. In a task-basis work, the emphasis is on the task itself, in the sense that payment is reckoned in terms of completion of the work, not in terms of the number of time spent in the completion of work.45 Once the work or task is completed, the worker receives a fixed amount as wage, without regard to the standard measurements of time generally used in pay computation.

In Macasio’s case, the established facts show that he would usually start his work at 10:00 p.m.  Thereafter,

regardless of the total hours that he spent at the workplace or of the total number of the hogs assigned to him for chopping, Macasio would receive the fixed amount of P700.00 once he had completed his task.  Clearly, these circumstances show a “pakyaw” or task basis engagement that all three tribunals uniformly found.

In sum, the existence of employment relationship between the parties is determined by applying the “four-fold” test; engagement on “pakyaw” or task basis does not determine the parties’ relationship as it is simply a method of pay computation.  Accordingly, Macasio is David’s employee, albeit engaged on “pakyaw” or task basis.

As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay

The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851.  The NLRC, on the other hand, relied on Article 82 of the Labor Code and the Rules and Regulations Implementing PD No. 851.  Uniformly, these provisions exempt workers paid on “pakyaw” or task basis from the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions, as well as on Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling in Serrano v. Severino Santos Transit.46  These labor law provisions, when read together with the Serrano ruling, exempt those engaged on “pakyaw” or task basis only if they qualify as “field personnel.”

In other words, what we have before us is largely a question of law regarding the correct interpretation of these labor code provisions and the implementing rules; although, to conclude that the worker is exempted or covered depends on the facts and in this sense, is a question of fact: first, whether Macasio is a “field personnel”; and second, whether those engaged on “pakyaw” or task basis, but who are not “field personnel,” are exempted from the coverage of holiday, SIL and 13th month pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under Rule 65 and framed in question form, the legal question is whether the CA correctly ruled that it was grave abuse of discretion on the part of the NLRC to deny Macasio’s monetary claims simply because he is paid on a non-time basis without determining whether he is a field personnel or not.

To resolve these issues, we need to re-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code - provisions governing working conditions and rest periods.

Art. 82. Coverage. — The provisions of [Title I] shall apply   to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.

xxxx

“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. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82, “field personnel” on one hand and “workers who are paid by results” on the other hand, are not covered by the Title I provisions.  The wordings of Article 82 of the Labor Code additionally categorize workers “paid by results” and “field personnel” as separate and distinct types of employees who are exempted from the Title I provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR47reads:chanroblesvirtuallawlibrary

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than (10) workers[.] [emphasis ours]

xxxx

SECTION 1.  Coverage. – This Rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.  [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48pertinently provides:chanroblesvirtuallawlibrary

Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be

entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay of at least five days and those employed in establishments regularly employing less than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and Employment after considering the viability or financial condition of such establishment.  [emphases ours]

xxxx

Section 1. Coverage. – This rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose performance is unsupervised by the employer including those who are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work irrespective of the time consumed in the performance thereof.  [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be excluded from their coverage, an employee must be one of those that these provisions expressly exempt, strictly in accordance with the exemption.

Under the IRR, exemption from the coverage of holiday and SIL pay refer to “field personnel andother employees whose time and performance is unsupervised by the employer including those who are engaged on task or contract basis[.]” Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not exclude employees “engaged on task basis” as a separate and distinct category from employees classified as “field personnel.” Rather, these employees are altogether merged into one classification of exempted employees.

Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who are engaged on task basis, per se, are excluded from the SIL and holiday payment since this is what the Labor Code provisions, in contrast with the IRR, strongly suggest. The arguable interpretation of this rule may be conceded to be within the discretion granted to the LA and NLRC as the quasi-judicial bodies with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the phrase “those who are engaged on task or contract basis” in the rule has already been interpreted to mean as follows:chanroblesvirtuallawlibrary

[the phrase] should however, be related with "field personnel" applying the rule onejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow xxx Clearly, petitioner's teaching personnel cannot be deemed field

personnel which refers "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. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not entitled to the service incentive leave benefit cannot therefore be sustained.

In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the coverage of SIL and holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL pay) only if they qualify as “field personnel.”  The IRR therefore validly qualifies and limits the general exclusion of “workers paid by results” found in Article 82 from the coverage of holiday and SIL pay.  This is the only reasonable interpretation since the determination of excluded workers who are paid by results from the coverage of Title I is “determined by the Secretary of Labor in appropriate regulations.”

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:chanroblesvirtuallawlibrary

A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V.  According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as “field personnel.”  The phrase “other employees whose performance is unsupervised by the employer” must not be understood as a separate classification of employees to which service incentive leave shall not be granted.   Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those “whose actual hours of work in the field cannot be determined with reasonable certainty.”

The same is true with respect to the phrase “ those who are engaged on task or contract basis, purely commission basis.”  Said phrase should be related with “field personnel,” applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting Macasio’s petition.

In Serrano, the Court, applying the rule on ejusdem generis50 declared that “employees engaged on task or contract basis xxx are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.”51  The Court explained that the phrase “including those who are engaged on task or contract basis, purely commission basis” found in Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of employees to

which SIL shall not be granted.  Rather, as with its preceding phrase - “other employees whose performance is unsupervised by the employer” - the phrase “including those who are engaged on task or contract basis” serves to amplify the interpretation of the Labor Code definition of “field personnel” as those “whose actual hours of work in the field cannot be determined with reasonable certainty.”

In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code provisions and the IRR as exempting an employee from the coverage of Title I of the Labor Code based simply and solely on the mode of payment of an employee. The NLRC’s utter disregard of this consistent jurisprudential ruling is a clear act of grave abuse of discretion.52 In other words, by dismissing Macasio’s complaint without considering whether Macasio was a “field personnel” or not, the NLRC proceeded based on a significantly incomplete consideration of the case. This action clearly smacks of grave abuse of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel from Serrano and earlier cases, they would have correctly reached a similar conclusion regarding the payment of holiday pay since the rule exempting “field personnel” from the grant of holiday pay is identically worded with the rule exempting “field personnel” from the grant of SIL pay. To be clear, the phrase “employees engaged on task or contract basis” found in the IRR on both SIL pay and holiday pay should be read together with the exemption of “field personnel.”

In short, in determining whether workers engaged on “pakyaw” or task basis” is entitled to holiday and SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions specifically provided under Article 94 (holiday pay) and Article 95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task basis also falls within the meaning of “field personnel” under the law, then he is not entitled to these monetary benefits.

Macasio does not fall under theclassification of “field personnel”  

Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall under the definition of “field personnel.” The CA’s finding in this regard is supported by the established facts of this case: first, Macasio regularly performed his duties at David’s principal place of business; second, his actual hours of work could be determined with reasonable certainty; and,third, David supervised his time and performance of duties. Since Macasio cannot be considered a “field personnel,” then he is not exempted from the grant of holiday, SIL pay even as he was engaged on “pakyaw” or task basis.

Not being a “field personnel,” we find the CA to be legally correct when it reversed the NLRC’s ruling dismissing Macasio’s complaint for holiday and SIL pay for having been rendered with grave abuse of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC gravely abused its discretion in denying this benefit to Macasio.

The governing law on 13th month pay is PD No. 851.53 As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of those expressly enumerated to be exempted.  Section 3 of the Rules and Regulations Implementing P.D. No. 85154 enumerates the exemptions from the coverage of 13th month pay benefits.  Under Section 3(e), “employers of those who are paid on xxx task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof”55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations Implementing PD No. 851 exempts employees “paid on task basis” without any reference to “field personnel.” This could only mean that insofar as payment of the 13th month pay is concerned, the law did not intend to qualify the exemption from its coverage with the requirement that the task worker be a “field personnel” at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the payment of 13th month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated November 22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.

SO ORDERED.

G.R. No. 194352               January 30, 2013

MAXICARE PCIB CIGNA HEALTHCARE (now MAXICARE HEALTHCARE CORPORATION), ERIC S. NUBLA, JR. M.D. and RUTH A. ASIS, M.D., Petitioners, vs.MARIAN BRIGITTE A. CONTRERAS, M.D., Respondent.

D E C I S I O N

MENDOZA, J.:

Challenged in this petition are the January 28, 2010 Decision1 of the Court of Appeals (CA) and its October 27, 2010 Resolution,2 in CA-G.R. SP No. 101066, which affirmed the March 16, 2007 Decision3 and June 29, 2007 Resolution4 of the National Labor Relations

Com;nission (NLRC), reversing the decision5 of the Labor Arbiter (LA) in this illegal dismissal case, entitled "Marian Brigitte Contreras v. A1axiCare PCJB CJGNA Health Care, et. al."

The Facts

Sometime in March 2003, Maxicare Healthcare Corporation (Maxicare) hired Dr. Marian Brigitte A. Contreras (Dr. Contreras) as a retainer doctor at the Philippine National Bank (PNB) Head Office, Macapagal Avenue, Roxas Boulevard, Manila. Under their verbal agreement, Dr. Contreras would render medical services for one year atP250.00 per hour. Her retainer fee would be paid every 15th and 30th of each month based on her work schedule which was every Tuesday, Thursday and Friday from 6:00 o’clock in the morning to 5:00 o’clock in the afternoon.6

The controversy started when, on July 3, 2003, Dr. Ruth A. Asis, Maxicare’s medical specialist on Corporate Accounts, informed Dr. Contreras that she was going to be transferred to another account after a month. On August 4, 2003, the Service Agreement between Dr. Contreras and Dr. Eric S. Nubla, Maxicare’s Vice-President for Medical Services, was executed, effecting the transfer of the former to Maybank Philippines (Maybank) for a period of four (4) months, from August 5, 2003 to November 29, 2003, with a retainer fee of P168.00 per hour.

Dr. Contreras reported to Maybank for one (1) day only. On August 8, 2003, she filed a complaint before the LA claiming that she was constructively dismissed. Maxicare, on the other hand, insisted that there was no constructive dismissal.

Ruling of the Labor Arbiter

On November 29, 2005, the LA rendered a decision dismissing the complaint of Dr. Contreras for lack of merit. The pertinent portions of the LA’s ruling read:

If indeed complainant was forced to sign the contract of August 4, 2003, she could not have reported to that assignment under it in the first place. In reporting so, she not only ratified the contract of service she signed but also waived all her rights under their previous agreement she is supposed to be entitled to enforce. It may be that there present under the circumstance of a breach of contractual obligation under the previous undertaking which partakes the nature of constructive dismissal based on evidence at hand. At that then, complainant should have at such point ventilated the matter before this forum. She did not. Instead, she proceeded to sign or execute the questioned Service Agreement with the respondent under the terms and conditions therein stated. To a professional like her, a Doctor, complainant should have refused as she is at liberty, in refusing to sign even if what she claimed there appears a threat of dismissal. In this case, she even confirmed what she signed by reporting to duty thereafter. And only after examining what she signed that she realized she thought of initiating the present complaint. In this regard, absent any showing that she was forced to execute the disputed service agreement

of August 4, 2003, complainant’s complaint for constructive dismissal can hardly be sustained by a later change of heart.

Finding substantial basis to support the validity of the Service Agreement of August 4, 2003 entered into by the parties, the present complaint for constructive dismissal must necessarily fail. Consequent claim as relief therefor has no basis.7

Ruling of the NLRC

On March 16, 2007, upon appeal, the NLRC rendered a decision8 reversing and setting aside the LA’s decision. It declared that Dr. Contreras was illegally dismissed and ordered her reinstatement to her former or substantially equivalent position and the payment of her backwages.

The NLRC explained that the "execution of a Service Agreement for another retainership with lower salary does not negate constructive dismissal arising from the termination of complainant’s PNB retainership without either just or authorized cause but simply is anchored on alleged complaints which even Dr. Eric Nubla recognize to be fictitious."9 Dr. Contreras signed the Service Agreement on August 4, 2003, and later repudiated it with a notice to Maxicare that she could not go on serving under such a disadvantageous situation. The disadvantage she was referring to was the disparity in remuneration between the PNB retainership with ₱250.00 per hour and that of Maybank with ₱168.00 per hour. The clear economic prejudice validated her claim of having reservation on the Service Agreement prior to her signature. She signed the new agreement because it, being a contract of adhesion, gave her no realistic chance to haggle for her job. Thus, the NLRC disposed:

WHEREFORE, premises considered, the Decision appealed from is hereby REVERSED and SET ASIDE and a new one entered declaring complainant was illegally dismissed. Accordingly, respondents are hereby ordered to reinstate complainant to her former or substantially equivalent position and to pay her backwages from the time her PNB retainership was terminated until the finality of this Decision.

SO ORDERED.10

Ruling of the Court of Appeals

On January 28, 2010, the CA affirmed the conclusions reached by the NLRC.

On the issue regarding the existence or non-existence of an employer-employee relationship, the CA ruled that Maxicare could not raise the said issue for the first time on appeal. Nonetheless, the CA ruled that the records showed that there existed an employer-employee relationship between Maxicare and Dr. Contreras for the following reasons: 1] Maxicare exercised significant control in her hiring and the conduct of her work; 2] Maxicare was the one who engaged her services; 3] Maxicare determined and

prepared her work assignments, like attending to PNB members needing medical consultation and performing such other duties as may be assigned by

Maxicare to her from time to time; 4] Maxicare determined her specific work schedules, which was for her to render services from 1:00 to 5:00 o’clock in the afternoon "every Tuesday and Thursday;"11 and 5] Maxicare prescribed the conditions of work for her, which were a) that she had to abide by the company rules and regulations, b) that she would keep inviolate all company records, documents, and properties and from disclosing or reproducing these records and documents to anyone without proper authority, c) that she had to surrender upon request for, or upon termination of her services, such records, documents, and properties to Maxicare; d) that Maxicare, through its Customer Care coordinator, Ms. Cecile Samonte, would monitor her work; and e) that she was compensated not according to the result of her efforts, but according to the amount of time she spent at the PNB clinic.12

The CA added that Maxicare impliedly admitted that an employer-employee relationship existed between both parties by arguing that she was not constructively dismissed. Hence, Maxicare was estopped from questioning her status as its employee.13

On the issue of whether or not Dr. Contreras was constructively dismissed, the CA ruled that her transfer to Maybank, which resulted in a diminution of her salary, was prejudicial to her interest and amounted to a constructive dismissal. It stated that Maxicare, as employer, had the burden of proving that not only was her transfer made for valid or legitimate grounds, such as genuine business necessity, but also that such transfer was not unreasonable, inconvenient, or prejudicial to her.14

Maxicare filed a motion for reconsideration but it was denied by the CA in its Resolution,15 dated October 27, 2010.

Not in conformity with the adverse decision, Maxicare filed this petition anchored on the following

GROUNDS

I

THE COURT OF APPEALS, IN RENDERING THE ASSAILED DECISION, ERRONEOUSLY SET ASIDE, EVEN CONTRADICTED, A PLETHORA OF JURISPRUDENCE THAT LACK OR ABSENCE OF JURISDICTION MAY BE RAISED FOR THE FIRST TIME EVEN ON APPEAL.

II

THE COURT OF APPEALS MISAPPLIED THE 4-TIERED TEST TO DETERMINE THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP WITHOUT CONCRETE BASIS.16

Maxicare’s position

Maxicare argues that questions on jurisdiction "may be raised at any stage of the proceedings, even on appeal, and the right to do so is not lost by waiver or by estoppel." Maxicare likewise asserts that "if the issue on jurisdiction may be resolved by an appellate tribunal motu propio when the same has not been raised in the courts below, with more reason that the same should be allowed to be considered and decided upon by the appellate court when, as in the present petition, the said issue has been raised in the pleadings before the appellate court."17

Considering that Dr. Contreras submitted evidence to support not only her claim of constructive dismissal but also the existence of an employer-employee relationship, its act of raising said issue should be sufficient ground for the CA to consider and rule on the issue of jurisdiction.18

Maxicare claims that there could have been no employer-employee relationship arising from the oral medical retainership agreement between the parties. It contends that it could not have effectively exercised control over the means and method adopted by Dr. Contreras in accomplishing her work as a medical retainer; that it did not determine the manner in which she conducted physical examination, immunized, diagnosed, or treated her patients; that Dr. Contreras confirmed that it paid her retainer fees and deducted only 10% "withholding tax payable-expanded;" that she was not in the list of Maxicare’s payroll; and that Maxicare did not deduct SSS contributions from the retainer fees that Dr. Contreras received. Hence, the above circumstances disprove the presence of employer-employee relationship. On the contrary, they strongly indicate a case of an independent contractor.19

Maxicare went on further by stating that Dr. Contreras was an independent contractor because she rendered services for a few hours a week, giving her free time to pursue her private practice as a physician and that upon the terms of their agreement, either party could terminate the arrangement upon one month’s advance notice.20

Finally, Maxicare contends that Dr. Contreras is a highly educated person who freely, willingly and voluntarily signed the new Medical Retainership Agreement.21 Therefore, there is no truth to her claim that she was forced to sign said agreement.22

Dr. Contreras’s position

On the other hand, Dr. Contreras basically counters that Maxicare did not raise the issue of the existence of an employer-employee relationship before the LA. It also did not question such point in the NLRC. Maxicare brought up the matter for the first time only in the CA.

The Court’s Ruling

The petition has no merit at all.

As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court, will not be permitted to change theory on appeal. Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. It would be unfair to the adverse party who would have no opportunity to present further evidence material to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court. To permit Maxicare in this case to change its theory on appeal would thus be unfair to Dr. Contreras, and would offend the basic rules of fair play, justice and due process.

Indeed, Maxicare is already estopped from belatedly raising the issue of lack of jurisdiction considering that it has actively participated in the proceedings before the LA and the NLRC. The Court has consistently held that "while jurisdiction may be assailed at any stage, a party’s active participation in the proceedings before a court without jurisdiction will estop such party from assailing the lack of it." It is an undesirable practice of a party to participate in the proceedings, submit his case for decision and then accept the judgment, if favorable, but attack it for lack of jurisdiction, when adverse.23

In the case at bench, it may be recalled that Dr. Contreras filed a complaint for illegal dismissal against Maxicare before the LA. Maxicare was given the chance to defend its case before the LA. In fact, the LA decision favored Maxicare when it ruled that there was no illegal dismissal. On appeal, however, the NLRC reversed and set aside the LA’s decision and ordered Dr. Contreras’s reinstatement with payment of backwages. Upon the denial of its motion for reconsideration, Maxicare elevated its case to the CA raising the issue of jurisdiction for the first time.

Undeniably, Maxicare never questioned the LA’s jurisdiction from the very beginning and never raised the issue of employer-employee relationship throughout the LA proceedings. Surely, Maxicare is not unaware of Article 217 of the Labor Code which enumerates the cases where the LA has exclusive and original jurisdiction. Maxicare definitely knows the basic rule that the LA can exercise jurisdiction over cases only when there is an employer-employee relationship between the parties in dispute.

If Maxicare was of the position that there was no employer-employee relationship existing between Maxicare and Dr. Contreras, it should have questioned the jurisdiction of the LA right away. Surprisingly, it never did. Instead, it actively participated in the LA proceedings without bringing to the LA’s attention the issue of employer-employee relationship.

On appeal before the NLRC, the subject issue was never raised either. Maxicare only raised the subject issue for the first time when it filed a petition in the CA challenging the adverse decision of the NLRC. It is, therefore, estopped from assailing the jurisdiction of the LA and the NLRC.

It is true that questions of jurisdiction may be raised at any stage. It is also true, however, that in the interest of fairness, questions challenging the jurisdiction of courts will not be tolerated if the party questioning such jurisdiction actively participates in the court proceedings and allows the court to pass judgment on the case, and then questions the propriety of said judgment after getting an unfavorable decision. It must be noted that Maxicare had two (2) chances of raising the issue of jurisdiction: first, in the LA level and second, in the NLRC level. Unfortunately, it remained silent on the issue of jurisdiction while actively participating in both tribunals. It was definitely too late for Maxicare to open up the issue of jurisdiction in the CA.

The Court cannot tolerate this kind of procedural strategy on Maxicare’s part because it would be unfair to Dr. Contreras who would no longer be able to present further evidence material to the new issue raised on appeal. Maxicare’s lapse in procedure has proved fatal to its cause and therefore, it should suffer the consequences. The Court has been consistent in its ruling in a long line of cases, the latest of which is Duty Free Philippines Services, Inc., v. Manolito Q. Tria,24 where it was written:

It was only in petitioner’s Petition for Certiorari before the CA did it impute liability on DFP as respondent’s direct employer and as the entity who conducted the investigation and initiated respondent’s termination proceedings. Obviously, petitioner changed its theory when it elevated the NLRC decision to the CA. The appellate court, therefore, aptly refused to consider the new theory offered by petitioner in its petition. As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants, and to indicate fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with its pleadings. It is a matter of law that when a party adopts a particular theory and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal. The case will be reviewed and decided on that theory and not approached and resolved from a different point of view.

The review of labor cases is confined to questions of jurisdiction or grave abuse of discretion. The alleged absence of employer-employee relationship cannot be raised for the first time on appeal. The resolution of this issue requires the admission and calibration of evidence and the LA and the NLRC did not pass upon it in their decisions. We cannot permit petitioner to change its theory on appeal. It would be unfair to the adverse party who would have no more opportunity to present further evidence, material to the new theory, which it could have done had it been aware earlier of the new theory before the LA and the NLRC. More so in this case as the supposed employer of respondent which is DFP was not and is not a party to the present case.

In Pamplona Plantation Company v. Acosta, petitioner therein raised for the first time in its appeal to the NLRC that respondents therein were not its employees

but of another company. In brushing aside this defense, the Court held:

x x x Petitioner is estopped from denying that respondents worked for it.1âwphi1 In the first place, it never raised this defense in the proceedings before the Labor Arbiter. Notably, the defense it raised pertained to the nature of respondents' employment, i.e., whether they are seasonal employees, contractors, or worked under the pakyaw system. Thus, in its Position Paper, petitioner alleged that some of the respondents are coconut filers and copra hookers or sakadors; some are seasonal employees who worked as scoopers or lugiteros; some are contractors; and some worked under the pakyaw system. In support of these allegations, petitioner even presented the company's payroll which will allegedly prove its allegations.

By setting forth these defenses, petitioner, in effect, admitted that respondents worked for it, albeit in different capacities. Such allegations are negative pregnant - denials pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied, and amounts to an acknowledgment that respondents were indeed employed by petitioner.

Also in Telephone Engineering & Service Co., Inc. v. WCC, et al., the Court held that the lack of employer-employee relationship is a matter of defense that the employer should properly raise in the proceedings below. The determination of this relationship involves a finding of fact, which is conclusive and binding and not subject to review by this Court.

In this case, petitioner insisted that respondent was dismissed from employment for cause and after the observance of the proper procedure for termination. Consequently, petitioner cannot now deny that respondent is its employee. While indeed, jurisdiction cannot be conferred by acts or omission of the parties, petitioner's belated denial that it is the employer of respondent is obviously an afterthought, a devise to defeat the law and evade its obligations.

It is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. Petitioner is bound by its submissions that respondent is its employee and it should not be permitted to change its theory. Such change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules, but as a matter of fairness. [Emphases supplied]

WHEREFORE, the petition is DENIED.

SO ORDERED.

G.R. No. 196426               August 15, 2011

MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners, vs.

COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER 19th DIVISION, GALLERA DE MANDAUE / SPOUSES VICENTE and MARIA LUISA LOOT, Respondents.

D E C I S I O N

VELASCO, JR., J.:

Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the Decision1and Resolution2 dated May 29, 2009 and February 23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA affirmed the October 18, 2006 Resolution3 of the National Labor Relations Commission (NLRC), Fourth Division (now Seventh Division), in NLRC Case No. V-000673-2004.

Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the official masiador and sentenciador, respectively, of the cockpit sometime in 1993.

As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors and orders the start of the cockfight. He also distributes the winnings after deducting the arriba, or the commission for the cockpit. Meanwhile, as the sentenciador, Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks’ physical condition and capabilities to continue the cockfight, and eventually declares the result of the cockfight.4

For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday every week, excluding monthly derbies and cockfights held on special holidays. Their working days start at 1:00 p.m. and last until 12:00 midnight, or until the early hours of the morning depending on the needs of the cockpit. Petitioners had both been issued employees’ identification cards5 that they wear every time they report for duty. They alleged never having incurred any infraction and/or violation of the cockpit rules and regulations.

On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of respondents, and were informed of the termination of their services effective that date. This prompted petitioners to file a complaint for illegal dismissal against respondents.

In answer, respondents denied that petitioners were their employees and alleged that they were associates of respondents’ independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular working time or day and they are free to decide for themselves whether to report for work or not on any cockfighting day. In times when there are few cockfights in Gallera de Mandaue, petitioners go to

other cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued identification cards to indicate that they were free from the normal entrance fee and to differentiate them from the general public.6

In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of respondents as they performed work that was necessary and indispensable to the usual trade or business of respondents for a number of years. The Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered respondents to pay petitioners their backwages and separation pay.7

Respondents’ counsel received the Labor Arbiter’s Decision on September 14, 2004. And within the 10-day appeal period, he filed the respondents’ appeal with the NLRC on September 24, 2004, but without posting a cash or surety bond equivalent to the monetary award granted by the Labor Arbiter.8

It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. Hence, in a Resolution9 dated August 25, 2005, the NLRC denied the appeal for its non-perfection.

Subsequently, however, the NLRC, acting on respondents’ Motion for Reconsideration, reversed its Resolution on the postulate that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a substantial compliance with the rules. The NLRC held in its Resolution of October 18, 2006 that there was no employer-employee relationship between petitioners and respondents, respondents having no part in the selection and engagement of petitioners, and that no separate individual contract with respondents was ever executed by petitioners.10

Following the denial by the NLRC of their Motion for Reconsideration, per Resolution dated January 12, 2007, petitioners went to the CA on a petition for certiorari. In support of their petition, petitioners argued that the NLRC gravely abused its discretion in entertaining an appeal that was not perfected in the first place. On the other hand, respondents argued that the NLRC did not commit grave abuse of discretion, since they eventually posted their appeal bond and that their appeal was so meritorious warranting the relaxation of the rules in the interest of justice.11

In its Decision dated May 29, 2009, the appellate court found for respondents, noting that referees and bet-takers in a cockfight need to have the kind of expertise that is characteristic of the game to interpret messages conveyed by mere gestures. Hence, petitioners are akin to independent contractors who possess unique skills, expertise, and talent to distinguish them from ordinary employees. Further, respondents did not supply petitioners with the tools and instrumentalities they needed to perform work. Petitioners only needed their unique skills and talents to perform their job as masiador and sentenciador.12 The CA held:

In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules in deciding labor cases. In this case, the appeal bond was filed, although late. Moreover, an exceptional circumstance obtains in the case at bench which warrants a relaxation of the bond requirement as a condition for perfecting the appeal. This case is highly meritorious that propels this Court not to strictly apply the rules and thus prevent a grave injustice from being done.

As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual employer-employee exists between the petitioners and the private respondents [constrain] the relaxation of the rules. In this regard, we find no grave abuse attributable to the administrative body.

x x x x

Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit owned by Lucia Loot. Cockfighting, which is a part of our cultural heritage, has a peculiar set of rules. It is a game based on the fighting ability of the game cocks in the cockpit. The referees and bet-takers need to have that kind of expertise that is characteristic of the cockfight gambling who can interpret the message conveyed even by mere gestures. They ought to have the talent and skill to get the bets from numerous cockfighting aficionados and decide which cockerel to put in the arena. They are placed in that elite spot where they can control the game and the crowd. They are not given salaries by cockpit owners as their compensation is based on the "arriba". In fact, they can offer their services everywhere because they are duly licensed by the GAB. They are free to choose which cockpit arena to enter and offer their expertise. Private respondents cannot even control over the means and methods of the manner by which they perform their work. In this light, they are akin to independent contractors who possess unique skills, expertise and talent to distinguish them from ordinary employees.

Furthermore, private respondents did not supply petitioners with the tools and instrumentalities they needed to perform their work. Petitioners only needed their talent and skills to be a "masiador" and "sentenciador". As such, they had all the tools they needed to perform their work. (Emphasis supplied.)

The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing in the main that the CA committed a reversible error in entertaining an appeal, which was not perfected in the first place.

Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the Decision of the Labor Arbiter.13 Article 223 of the Labor Code provides:

Article 223. Appeal. — Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds:

x x x x

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits of the case, has relaxed this rule on, and excused the late posting of, the appeal bond when there are strong and compelling reasons for the liberality,14such as the prevention of miscarriage of justice extant in the case15 or the special circumstances in the case combined with its legal merits or the amount and the issue involved.16 After all, technical rules cannot prevent courts from exercising their duties to determine and settle, equitably and completely, the rights and obligations of the parties.17 This is one case where the exception to the general rule lies.

While respondents had failed to post their bond within the 10-day period provided above, it is evident, on the other hand, that petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-fold test of employment We have repeatedly mentioned in countless decisions: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, which is the most important element.18 1avvphi1

As found by both the NLRC and the CA, respondents had no part in petitioners’ selection and management;19petitioners’ compensation was paid out of the arriba (which is a percentage deducted from the total bets), not by petitioners;20 and petitioners performed their functions as masiador and sentenciador free from the direction and control of respondents.21 In the conduct of their work, petitioners relied mainly on their "expertise that is characteristic of the cockfight gambling,"22 and were never given by respondents any tool needed for the performance of their work.23

Respondents, not being petitioners’ employers, could never have dismissed, legally or illegally, petitioners, since respondents were without power or prerogative to do so in the first place. The rule on the posting of an appeal bond cannot defeat the substantive rights of respondents to be free from an unwarranted burden of answering for an illegal dismissal for which they were never responsible.1avvphi1

Strict implementation of the rules on appeals must give way to the factual and legal reality that is evident from the records of this case.24 After all, the primary objective of our laws is to dispense justice and equity, not the contrary.

WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and February 23, 2010

Resolution of the CA, and the October 18, 2006 Resolution of the NLRC.

SO ORDERED.

G.R. No. 126297             January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner, vs.NATIVIDAD and ENRIQUE AGANA, Respondents.

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

G.R. No. 126467            January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE AGANA, Petitioners, vs.JUAN FUENTES, Respondent.

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

G.R. No. 127590            January 31, 2007

MIGUEL AMPIL, Petitioner, vs.NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Hospitals, having undertaken one of mankind’s most important and delicate endeavors, must assume the grave responsibility of pursuing it with appropriate care. The care and service dispensed through this high trust, however technical, complex and esoteric its character may be, must meet standards of responsibility commensurate with the undertaking to preserve and protect the health, and indeed, the very lives of those placed in the hospital’s keeping.1

Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals’ Decision2 dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming with modification the Decision3 dated March 17, 1993 of the Regional Trial Court (RTC), Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September 21, 1993.

The facts, as culled from the records, are:

On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590,

diagnosed her to be suffering from "cancer of the sigmoid."

On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical City Hospital, performed an anterior resection surgery on Natividad. He found that the malignancy in her sigmoid area had spread on her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband, Enrique Agana, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and closed the incision.

However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending nurses entered these remarks:

"sponge count lacking 2

"announced to surgeon searched (sic) done but to no avail continue for closure."

On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills, including the doctors’ fees, amounted to P60,000.00.

After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of the surgery. Dr. Ampil then recommended that she consult an oncologist to examine the cancerous nodes which were not removed during the operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment. After four months of consultations and laboratory examinations, Natividad was told she was free of cancer. Hence, she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of gauze measuring 1.5 inches in width. He then assured her that the pains would soon vanish.

Dr. Ampil’s assurance did not come true. Instead, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez detected the presence of another foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width which badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organs which forced stool to excrete through the vagina. Another surgical operation was needed to remedy the damage.

Thus, in October 1984, Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a complaint for damages against the Professional Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-43322. They alleged that the latter are liable for negligence for leaving two pieces of gauze inside Natividad’s body and malpractice for concealing their acts of negligence.

Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an administrative complaint for gross negligence and malpractice against Dr. Ampil and Dr. Fuentes, docketed as Administrative Case No. 1690. The PRC Board of Medicine heard the case only with respect to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was then in the United States.

On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly substituted by her above-named children (the Aganas).

On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr. Fuentes liable for negligence and malpractice, the decretal part of which reads:

WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN FUENTES to pay to the plaintiffs, jointly and severally, except in respect of the award for exemplary damages and the interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, as follows:

1. As actual damages, the following amounts:

a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate of P21.60-US$1.00, as reimbursement of actual expenses incurred in the United States of America;

b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;

c. The total sum of P45,802.50, representing the cost of hospitalization at Polymedic Hospital, medical fees, and cost of the saline solution;

2. As moral damages, the sum of P2,000,000.00;

3. As exemplary damages, the sum of P300,000.00;

4. As attorney’s fees, the sum of P250,000.00;

5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of the complaint until full payment; and

6. Costs of suit.

SO ORDERED.

Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals, docketed as CA-G.R. CV No. 42062.

Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its Decision, which was granted in an Order dated May 11, 1993. Thereafter, the sheriff levied upon certain properties of Dr. Ampil and sold them for P451,275.00 and delivered the amount to the Aganas.

Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr. Fuentes to indefinitely suspend any further execution of the RTC Decision. However, not long thereafter, the Aganas again filed a motion for an alias writ of execution against the properties of PSI and Dr. Fuentes. On September 21, 1993, the RTC granted the motion and issued the corresponding writ, prompting Dr. Fuentes to file with the Court of Appeals a petition for certiorari and prohibition, with prayer for preliminary injunction, docketed as CA-G.R. SP No. 32198. During its pendency, the Court of Appeals issued a Resolution5 dated October 29, 1993 granting Dr. Fuentes’ prayer for injunctive relief.

On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.

Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision6 in Administrative Case No. 1690 dismissing the case against Dr. Fuentes. The Board held that the prosecution failed to show that Dr. Fuentes was the one who left the two pieces of gauze inside Natividad’s body; and that he concealed such fact from Natividad.

On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198, thus:

WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan Fuentes is hereby DISMISSED, and with the pronouncement that defendant-appellant Dr. Miguel Ampil is liable to reimburse defendant-appellant Professional Services, Inc., whatever amount the latter will pay or had paid to the plaintiffs-appellees, the decision appealed from is hereby AFFIRMED and the instant appeal DISMISSED.

Concomitant with the above, the petition for certiorari and prohibition filed by herein defendant-appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby GRANTED and the challenged order of the respondent judge dated September 21, 1993, as well as the alias writ of execution issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the

petitioner in connection with the writ of preliminary injunction issued by this Court on November 29, 1993 is hereby cancelled.

Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.

SO ORDERED.

Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution7 dated December 19, 1996.

Hence, the instant consolidated petitions.

In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1) it is estopped from raising the defense that Dr. Ampil is not its employee; (2) it is solidarily liable with Dr. Ampil; and (3) it is not entitled to its counterclaim against the Aganas. PSI contends that Dr. Ampil is not its employee, but a mere consultant or independent contractor. As such, he alone should answer for his negligence.

In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr. Fuentes is not guilty of negligence or medical malpractice, invoking the doctrine of res ipsa loquitur. They contend that the pieces of gauze are prima facie proofs that the operating surgeons have been negligent.

Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable for negligence and malpractice sans evidence that he left the two pieces of gauze in Natividad’s vagina. He pointed to other probable causes, such as: (1) it was Dr. Fuentes who used gauzes in performing the hysterectomy; (2) the attending nurses’ failure to properly count the gauzes used during surgery; and (3) the medical intervention of the American doctors who examined Natividad in the United States of America.

For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding Dr. Ampil liable for negligence and malpractice; second, whether the Court of Appeals erred in absolving Dr. Fuentes of any liability; and third, whether PSI may be held solidarily liable for the negligence of Dr. Ampil.

I - G.R. No. 127590

Whether the Court of Appeals Erred in Holding Dr. Ampil

Liable for Negligence and Malpractice.

Dr. Ampil, in an attempt to absolve himself, gears the Court’s attention to other possible causes of Natividad’s detriment. He argues that the Court should not discount either of the following possibilities: first, Dr. Fuentes left the gauzes in Natividad’s body after performing hysterectomy; second, the attending nurses erred in counting the gauzes; and third, the

American doctors were the ones who placed the gauzes in Natividad’s body.

Dr. Ampil’s arguments are purely conjectural and without basis. Records show that he did not present any evidence to prove that the American doctors were the ones who put or left the gauzes in Natividad’s body. Neither did he submit evidence to rebut the correctness of the record of operation, particularly the number of gauzes used. As to the alleged negligence of Dr. Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes’) work and found it in order.

The glaring truth is that all the major circumstances, taken together, as specified by the Court of Appeals, directly point to Dr. Ampil as the negligent party, thus:

First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding of the patient during the surgical operation.

Second, immediately after the operation, the nurses who assisted in the surgery noted in their report that the ‘sponge count (was) lacking 2’; that such anomaly was ‘announced to surgeon’ and that a ‘search was done but to no avail’ prompting Dr. Ampil to ‘continue for closure’ x x x.

Third, after the operation, two (2) gauzes were extracted from the same spot of the body of Mrs. Agana where the surgery was performed.

An operation requiring the placing of sponges in the incision is not complete until the sponges are properly removed, and it is settled that the leaving of sponges or other foreign substances in the wound after the incision has been closed is at least prima facie negligence by the operating surgeon.8 To put it simply, such act is considered so inconsistent with due care as to raise an inference of negligence. There are even legions of authorities to the effect that such act is negligence per se.9

Of course, the Court is not blind to the reality that there are times when danger to a patient’s life precludes a surgeon from further searching missing sponges or foreign objects left in the body. But this does not leave him free from any obligation. Even if it has been shown that a surgeon was required by the urgent necessities of the case to leave a sponge in his patient’s abdomen, because of the dangers attendant upon delay, still, it is his legal duty to so inform his patient within a reasonable time thereafter by advising her of what he had been compelled to do. This is in order that she might seek relief from the effects of the foreign object left in her body as her condition might permit. The ruling in Smith v. Zeagler10 is explicit, thus:

The removal of all sponges used is part of a surgical operation, and when a physician or surgeon fails to remove a sponge he has placed in his patient’s body that should be removed as part of the operation, he thereby leaves his operation uncompleted and creates a new condition which imposes upon him the legal duty

of calling the new condition to his patient’s attention, and endeavoring with the means he has at hand to minimize and avoid untoward results likely to ensue therefrom.

Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even misled her that the pain she was experiencing was the ordinary consequence of her operation. Had he been more candid, Natividad could have taken the immediate and appropriate medical remedy to remove the gauzes from her body. To our mind, what was initially an act of negligence by Dr. Ampil has ripened into a deliberate wrongful act of deceiving his patient.

This is a clear case of medical malpractice or more appropriately, medical negligence. To successfully pursue this kind of case, a patient must only prove that a health care provider either failed to do something which a reasonably prudent health care provider would have done, or that he did something that a reasonably prudent provider would not have done; and that failure or action caused injury to the patient.11 Simply put, the elements are duty, breach, injury and proximate causation. Dr, Ampil, as the lead surgeon, had the duty to remove all foreign objects, such as gauzes, from Natividad’s body before closure of the incision. When he failed to do so, it was his duty to inform Natividad about it. Dr. Ampil breached both duties. Such breach caused injury to Natividad, necessitating her further examination by American doctors and another surgery. That Dr. Ampil’s negligence is the proximate cause12 of Natividad’s injury could be traced from his act of closing the incision despite the information given by the attending nurses that two pieces of gauze were still missing. That they were later on extracted from Natividad’s vagina established the causal link between Dr. Ampil’s negligence and the injury. And what further aggravated such injury was his deliberate concealment of the missing gauzes from the knowledge of Natividad and her family.

II - G.R. No. 126467

Whether the Court of Appeals Erred in Absolving

Dr. Fuentes of any Liability

The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the ground that it is contrary to the doctrine of res ipsa loquitur. According to them, the fact that the two pieces of gauze were left inside Natividad’s body is a prima facie evidence of Dr. Fuentes’ negligence.

We are not convinced.

Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiff’s prima facie case, and present a question of fact for defendant to meet with an explanation.13 Stated differently, where the thing which caused the injury, without the fault of the

injured, is under the exclusive control of the defendant and the injury is such that it should not have occurred if he, having such control used proper care, it affords reasonable evidence, in the absence of explanation that the injury arose from the defendant’s want of care, and the burden of proof is shifted to him to establish that he has observed due care and diligence.14

From the foregoing statements of the rule, the requisites for the applicability of the doctrine of res ipsa loquitur are: (1) the occurrence of an injury; (2) the thing which caused the injury was under the control and management of the defendant; (3) the occurrence was such that in the ordinary course of things, would not have happened if those who had control or management used proper care; and (4) the absence of explanation by the defendant. Of the foregoing requisites, the most instrumental is the "control and management of the thing which caused the injury."15

We find the element of "control and management of the thing which caused the injury" to be wanting. Hence, the doctrine of res ipsa loquitur will not lie.

It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He requested the assistance of Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left ovary. Dr. Fuentes performed the surgery and thereafter reported and showed his work to Dr. Ampil. The latter examined it and finding everything to be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then resumed operating on Natividad. He was about to finish the procedure when the attending nurses informed him that two pieces of gauze were missing. A "diligent search" was conducted, but the misplaced gauzes were not found. Dr. Ampil then directed that the incision be closed. During this entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left the hospital.

Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of the surgery room and all personnel connected with the operation. Their duty is to obey his orders.16 As stated before, Dr. Ampil was the lead surgeon. In other words, he was the "Captain of the Ship." That he discharged such role is evident from his following conduct: (1) calling Dr. Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes’ permission to leave; and (4) ordering the closure of the incision. To our mind, it was this act of ordering the closure of the incision notwithstanding that two pieces of gauze remained unaccounted for, that caused injury to Natividad’s body. Clearly, the control and management of the thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.

In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create or constitute an independent or separate ground of liability, being a mere evidentiary rule.17 In other

words, mere invocation and application of the doctrine does not dispense with the requirement of proof of negligence. Here, the negligence was proven to have been committed by Dr. Ampil and not by Dr. Fuentes.

III - G.R. No. 126297

Whether PSI Is Liable for the Negligence of Dr. Ampil

The third issue necessitates a glimpse at the historical development of hospitals and the resulting theories concerning their liability for the negligence of physicians.

Until the mid-nineteenth century, hospitals were generally charitable institutions, providing medical services to the lowest classes of society, without regard for a patient’s ability to pay.18 Those who could afford medical treatment were usually treated at home by their doctors.19 However, the days of house calls and philanthropic health care are over. The modern health care industry continues to distance itself from its charitable past and has experienced a significant conversion from a not-for-profit health care to for-profit hospital businesses. Consequently, significant changes in health law have accompanied the business-related changes in the hospital industry. One important legal change is an increase in hospital liability for medical malpractice. Many courts now allow claims for hospital vicarious liability under the theories of respondeat superior, apparent authority, ostensible authority, or agency by estoppel. 20

In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil Code, which reads:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

A derivative of this provision is Article 2180, the rule governing vicarious liability under the doctrine of respondeat superior, thus:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.

x x x x x x

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers acting within

the scope of their assigned tasks even though the former are not engaged in any business or industry.

x x x x x x

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.

A prominent civilist commented that professionals engaged by an employer, such as physicians, dentists, and pharmacists, are not "employees" under this article because the manner in which they perform their work is not within the control of the latter (employer). In other words, professionals are considered personally liable for the fault or negligence they commit in the discharge of their duties, and their employer cannot be held liable for such fault or negligence. In the context of the present case, "a hospital cannot be held liable for the fault or negligence of a physician or surgeon in the treatment or operation of patients."21

The foregoing view is grounded on the traditional notion that the professional status and the very nature of the physician’s calling preclude him from being classed as an agent or employee of a hospital, whenever he acts in a professional capacity.22 It has been said that medical practice strictly involves highly developed and specialized knowledge,23 such that physicians are generally free to exercise their own skill and judgment in rendering medical services sans interference.24 Hence, when a doctor practices medicine in a hospital setting, the hospital and its employees are deemed to subserve him in his ministrations to the patient and his actions are of his own responsibility.25

The case of Schloendorff v. Society of New York Hospital26 was then considered an authority for this view. The "Schloendorff doctrine" regards a physician, even if employed by a hospital, as an independent contractor because of the skill he exercises and the lack of control exerted over his work. Under this doctrine, hospitals are exempt from the application of the respondeat superior principle for fault or negligence committed by physicians in the discharge of their profession.

However, the efficacy of the foregoing doctrine has weakened with the significant developments in medical care. Courts came to realize that modern hospitals are increasingly taking active role in supplying and regulating medical care to patients. No longer were a hospital’s functions limited to furnishing room, food, facilities for treatment and operation, and attendants for its patients. Thus, in Bing v. Thunig,27 the New York Court of Appeals deviated from the Schloendorff doctrine, noting that modern hospitals actually do far more than provide facilities for treatment. Rather, they regularly employ, on a salaried basis, a large staff of physicians, interns, nurses, administrative and manual workers. They charge patients for medical care and treatment, even collecting for such services through legal action, if necessary. The court then concluded

that there is no reason to exempt hospitals from the universal rule of respondeat superior.

In our shores, the nature of the relationship between the hospital and the physicians is rendered inconsequential in view of our categorical pronouncement in Ramos v. Court of Appeals28 that for purposes of apportioning responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. This Court held:

"We now discuss the responsibility of the hospital in this particular incident. The unique practice (among private hospitals) of filling up specialist staff with attending and visiting "consultants," who are allegedly not hospital employees, presents problems in apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is more apparent than real.

In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within the hospital premises. Doctors who apply for ‘consultant’ slots, visiting or attending, are required to submit proof of completion of residency, their educational qualifications, generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in most cases, and references. These requirements are carefully scrutinized by members of the hospital administration or by a review committee set up by the hospital who either accept or reject the application. x x x.

After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient audits and perform other tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In addition to these, the physician’s performance as a specialist is generally evaluated by a peer review committee on the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review committee, is normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting ‘consultant’ staff. While ‘consultants’ are not, technically employees, x x x, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. "

But the Ramos pronouncement is not our only basis in sustaining PSI’s liability. Its liability is also anchored upon the agency principle of apparent authority or agency by estoppel and the doctrine of corporate negligence which have gained acceptance in the determination of a hospital’s liability for negligent acts of health professionals. The present case serves as a perfect platform to test the applicability of these doctrines, thus, enriching our jurisprudence.

Apparent authority, or what is sometimes referred to as the "holding

out" theory, or doctrine of ostensible agency or agency by estoppel,29 has its origin from the law of agency. It imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists.30 The concept is essentially one of estoppel and has been explained in this manner:

"The principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or which he holds the agent out to the public as possessing. The question in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question.31

The applicability of apparent authority in the field of hospital liability was upheld long time ago in Irving v. Doctor Hospital of Lake Worth, Inc.32 There, it was explicitly stated that "there does not appear to be any rational basis for excluding the concept of apparent authority from the field of hospital liability." Thus, in cases where it can be shown that a hospital, by its actions, has held out a particular physician as its agent and/or employee and that a patient has accepted treatment from that physician in the reasonable belief that it is being rendered in behalf of the hospital, then the hospital will be liable for the physician’s negligence.

Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the Civil Code reads:

ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and specializations of the physicians associated or accredited by it, including those of Dr. Ampil and Dr. Fuentes. We concur with the Court of Appeals’ conclusion that it "is now estopped from passing all the blame to the physicians whose names it proudly paraded in the public directory leading the public to believe that it vouched for their

skill and competence." Indeed, PSI’s act is tantamount to holding out to the public that Medical City Hospital, through its accredited physicians, offers quality health care services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their qualifications, the hospital created the impression that they were its agents, authorized to perform medical or surgical services for its patients. As expected, these patients, Natividad being one of them, accepted the services on the reasonable belief that such were being rendered by the hospital or its employees, agents, or servants. The trial court correctly pointed out:

x x x regardless of the education and status in life of the patient, he ought not be burdened with the defense of absence of employer-employee relationship between the hospital and the independent physician whose name and competence are certainly certified to the general public by the hospital’s act of listing him and his specialty in its lobby directory, as in the case herein. The high costs of today’s medical and health care should at least exact on the hospital greater, if not broader, legal responsibility for the conduct of treatment and surgery within its facility by its accredited physician or surgeon, regardless of whether he is independent or employed."33

The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are capable of acting only through other individuals, such as physicians. If these accredited physicians do their job well, the hospital succeeds in its mission of offering quality medical services and thus profits financially. Logically, where negligence mars the quality of its services, the hospital should not be allowed to escape liability for the acts of its ostensible agents.

We now proceed to the doctrine of corporate negligence or corporate responsibility.

One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that PSI as owner, operator and manager of Medical City Hospital, "did not perform the necessary supervision nor exercise diligent efforts in the supervision of Drs. Ampil and Fuentes and its nursing staff, resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in the performance of their duties as surgeons."34 Premised on the doctrine of corporate negligence, the trial court held that PSI is directly liable for such breach of duty.

We agree with the trial court.

Recent years have seen the doctrine of corporate negligence as the judicial answer to the problem of allocating hospital’s liability for the negligent acts of health practitioners, absent facts to support the application of respondeat superior or apparent authority. Its formulation proceeds from the judiciary’s acknowledgment that in these modern times, the duty of providing quality medical service is no longer the sole prerogative and responsibility of the physician. The modern hospitals have changed structure. Hospitals now tend to organize a highly professional medical staff whose competence and performance

need to be monitored by the hospitals commensurate with their inherent responsibility to provide quality medical care.35

The doctrine has its genesis in Darling v. Charleston Community Hospital.36 There, the Supreme Court of Illinois held that "the jury could have found a hospital negligent, inter alia, in failing to have a sufficient number of trained nurses attending the patient; failing to require a consultation with or examination by members of the hospital staff; and failing to review the treatment rendered to the patient." On the basis of Darling, other jurisdictions held that a hospital’s corporate negligence extends to permitting a physician known to be incompetent to practice at the hospital.37 With the passage of time, more duties were expected from hospitals, among them: (1) the use of reasonable care in the maintenance of safe and adequate facilities and equipment; (2) the selection and retention of competent physicians; (3) the overseeing or supervision of all persons who practice medicine within its walls; and (4) the formulation, adoption and enforcement of adequate rules and policies that ensure quality care for its patients.38 Thus, in Tucson Medical Center, Inc. v. Misevich,39 it was held that a hospital, following the doctrine of corporate responsibility, has the duty to see that it meets the standards of responsibilities for the care of patients. Such duty includes the proper supervision of the members of its medical staff. And in Bost v. Riley,40 the court concluded that a patient who enters a hospital does so with the reasonable expectation that it will attempt to cure him. The hospital accordingly has the duty to make a reasonable effort to monitor and oversee the treatment prescribed and administered by the physicians practicing in its premises.

In the present case, it was duly established that PSI operates the Medical City Hospital for the purpose and under the concept of providing comprehensive medical services to the public. Accordingly, it has the duty to exercise reasonable care to protect from harm all patients admitted into its facility for medical treatment. Unfortunately, PSI failed to perform such duty. The findings of the trial court are convincing, thus:

x x x PSI’s liability is traceable to its failure to conduct an investigation of the matter reported in the nota bene of the count nurse. Such failure established PSI’s part in the dark conspiracy of silence and concealment about the gauzes. Ethical considerations, if not also legal, dictated the holding of an immediate inquiry into the events, if not for the benefit of the patient to whom the duty is primarily owed, then in the interest of arriving at the truth. The Court cannot accept that the medical and the healing professions, through their members like defendant surgeons, and their institutions like PSI’s hospital facility, can callously turn their backs on and disregard even a mere probability of mistake or negligence by refusing or failing to investigate a report of such seriousness as the one in Natividad’s case.

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of the Medical City Hospital’s staff, composed of resident doctors, nurses, and interns. As such, it is reasonable

to conclude that PSI, as the operator of the hospital, has actual or constructive knowledge of the procedures carried out, particularly the report of the attending nurses that the two pieces of gauze were missing. In Fridena v. Evans,41 it was held that a corporation is bound by the knowledge acquired by or notice given to its agents or officers within the scope of their authority and in reference to a matter to which their authority extends. This means that the knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI. Now, the failure of PSI, despite the attending nurses’ report, to investigate and inform Natividad regarding the missing gauzes amounts to callous negligence. Not only did PSI breach its duties to oversee or supervise all persons who practice medicine within its walls, it also failed to take an active step in fixing the negligence committed. This renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own negligence under Article 2176. In Fridena, the Supreme Court of Arizona held:

x x x In recent years, however, the duty of care owed to the patient by the hospital has expanded. The emerging trend is to hold the hospital responsible where the hospital has failed to monitor and review medical services being provided within its walls. See Kahn Hospital Malpractice Prevention, 27 De Paul . Rev. 23 (1977).

Among the cases indicative of the ‘emerging trend’ is Purcell v. Zimbelman, 18 Ariz. App. 75,500 P. 2d 335 (1972). In Purcell, the hospital argued that it could not be held liable for the malpractice of a medical practitioner because he was an independent contractor within the hospital. The Court of Appeals pointed out that the hospital had created a professional staff whose competence and performance was to be monitored and reviewed by the governing body of the hospital, and the court held that a hospital would be negligent where it had knowledge or reason to believe that a doctor using the facilities was employing a method of treatment or care which fell below the recognized standard of care.

Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain inherent responsibilities regarding the quality of medical care furnished to patients within its walls and it must meet the standards of responsibility commensurate with this undertaking. Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has confirmed the rulings of the Court of Appeals that a hospital has the duty of supervising the competence of the doctors on its staff. x x x.

x x x x x x

In the amended complaint, the plaintiffs did plead that the operation was performed at the hospital with its knowledge, aid, and assistance, and that the negligence of the defendants was the proximate cause of the patient’s injuries. We find that such general allegations of negligence, along with the evidence produced at the trial of this case, are sufficient to

support the hospital’s liability based on the theory of negligent supervision."

Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be emphasized that PSI, apart from a general denial of its responsibility, failed to adduce evidence showing that it exercised the diligence of a good father of a family in the accreditation and supervision of the latter. In neglecting to offer such proof, PSI failed to discharge its burden under the last paragraph of Article 2180 cited earlier, and, therefore, must be adjudged solidarily liable with Dr. Ampil. Moreover, as we have discussed, PSI is also directly liable to the Aganas.

One final word. Once a physician undertakes the treatment and care of a patient, the law imposes on him certain obligations. In order to escape liability, he must possess that reasonable degree of learning, skill and experience required by his profession. At the same time, he must apply reasonable care and diligence in the exercise of his skill and the application of his knowledge, and exert his best judgment.

WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of Appeals in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.

Costs against petitioners PSI and Dr. Miguel Ampil.

SO ORDERED.

G.R. No. 176484             November 25, 2008

CALAMBA MEDICAL CENTER, INC., petitioner vs.NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS AND MERCEDITHA*LANZANAS, respondents.

D E C I S I O N

CARPIO MORALES, J.:

The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995, respectively, as part of its team of resident physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents were paid a monthly "retainer" of P4,800.00 each.1 It appears that resident physicians were also given a percentage share out of fees charged for out-patient treatments, operating room assistance and discharge billings, in addition to their fixed monthly retainer.2

The work schedules of the members of the team of resident physicians were fixed by petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And they were issued identification cards3 by petitioner and were enrolled in the Social Security System (SSS).4 Income taxes were withheld from them.5

On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently overheard a telephone conversation of respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension telephone line. Apparently, Dr. Lanzanas and Miscala were discussing the low "census" or admission of patients to the hospital.6

Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998 reading:

As a Licensed Resident Physician   employed   in Calamba Medical Center since several years ago, the hospital management has committed upon you utmost confidence in the performance of duties pursuant thereto. This is the reason why you were awarded the privilege to practice in the hospital and were entrusted hospital functions to serve the interest of both the hospital and our patients using your capability for independent judgment.

Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital, the details of which are contained in the hereto attached affidavit of witness.

You are therefore given 24 hours to explain why no disciplinary action should be taken against you .

Pending investigation of your case, you are hereby placed under 30-days [sic] preventive suspension effective upon receipt hereof.7 (Emphasis, italics and underscoring supplied)

Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any work schedule after sending her husband Dr. Lanzanas the memorandum,8 nor inform her the reason therefor, albeit she was later informed by the Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting measures.9

Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998,10 admitted that he spoke with Miscala over the phone but that their conversation was taken out of context by Dr. Trinidad.

On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to unresolved grievances over terms and conditions of employment.12

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension13 before the National Labor Relations Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal dismissal.14

In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified the labor dispute to the NLRC for compulsory

arbitration and issued on April 21, 1998 return-to-work Order to the striking union officers and employees of petitioner   pending resolution of the labor dispute.15

In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor directing all union officers and members to return-to-work "on or April 23, 1998, except those employees that were already terminated or are serving disciplinary actions." Dr. Desipeda thus ordered the officers and members of the union to "report for work as soon as possible" to the hospital's personnel officer and administrator for "work scheduling, assignments and/or re-assignments."

Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as grounds therefor his failure to report back to work despite the DOLE order and his supposed role in the striking union, thus:

On April 23, 1998, you still did not report for work despite memorandum   issued by the CMC Medical Director implementing the Labor Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998,--you still did not report for work [sic].

You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully participating as   member   in the rank-and-file union's concerted activities   despite knowledge that your position in the hospital is managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry out your orders using your independent judgment) which participation is expressly prohibited by the New Labor Code and which prohibition was sustained by the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis and italics in the original; underscoring partly in the original and partly supplied)

For these reasons as grounds for termination, you are hereby terminated for cause from employment effective today, April 25, 1998 ,  without prejudice to further action for revocation of your license before the Philippine [sic] Regulations [sic] Commission.17 (Emphasis and underscoring supplied)

Dr. Lanzanas thus amended his original complaint to include illegal dismissal.18 His and Dr. Merceditha's complaints were consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.

By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want of jurisdiction upon a finding that there was no employer-employee relationship between the parties, the fourth requisite or the "control test" in the determination of an employment bond being absent.

On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:

WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants their full backwages; separation pay of one month salary for every year of service in lieu of reinstatement; moral damages of P500,000.00 each; exemplary damages ofP250,000.00 each plus ten percent (10%) of the total award as attorney's fees.

SO ORDERED.21

Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals on certiorari.

The appellate court, by June 30, 2004 Decision,22 initially granted petitioner's petition and set aside the NLRC ruling. However, upon a subsequent motion for reconsideration filed by respondents, itreinstated the NLRC decision in an Amended Decision 23   dated September 26, 2006 but tempered the award to each of the spouses of moral and exemplary damages to   P 100,000.00 and   P 50,000.00, respectively and omitted the award of attorney's fees.

In finding the existence of an employer-employee relationship between the parties, the appellate court held:

x x x. While it may be true that the respondents are given the discretion to decide on how to treat the petitioner's patients, the petitioner has not denied nor explained why its Medical Director still has   the direct supervision and control over the respondents . The fact is the petitioner's Medical Director still has to   approve the schedule of duties of the respondents . The respondents stressed that the petitioner's Medical Director also issues   instructions or orders to the respondents relating to the means and methods of performing their duties , i.e . admission of patients, manner of characterizing cases, treatment of cases, etc., and   may even overrule, review or revise the decisions of the resident physicians . This was not controverted by the petitioner. The foregoing factors taken together are sufficient to constitute the fourth element, i.e. control test, hence, the existence of the employer-employee relationship. In denying that it had control over the respondents, the petitioner alleged that the respondents were free to put up their own clinics or to accept other retainership agreement with the other hospitals. But, the petitioner failed to substantiate the allegation with substantial evidence. (Emphasis and underscoring supplied)24

The appellate court thus declared that respondents were illegally dismissed.

x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged participation in union activities, specifically in joining the strike and failing to observe the return-to-work order issued by the Secretary of Labor. Yet, the petitioner did not adduce any piece of evidence to show that respondent Ronaldo indeed participated in the strike. x x x.

In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to complainant Ronaldo has given rise to the presumption that her sympat[hies] are likewise with her husband" as a ground for her dismissal is unacceptable. Such is not one of the grounds to justify the termination of her employment.25 (Underscoring supplied)

The fallo of the appellate court's decision reads:

WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment is entered, as follows:

WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated September 24, 2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the MODIFICATION that the moral and exemplary damages are reduced to   P 100,000.00 each and   P 50,000.00 each , respectively.

SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)

Preliminarily, the present petition calls for a determination of whether there exists an employer-employee relationship27 between petitioner and the spouses-respondents.

Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC, overlooked its twice-a-week reporting arrangement with respondents who are free to practice their profession elsewhere the rest of the week. And it invites attention to the uncontroverted allegation that respondents, aside from their monthly retainers, were entitled to one-half of all suturing, admitting, consultation, medico-legal and operating room assistance fees.28 These circumstances, it stresses, are clear badges of the absence of any employment relationship between them.

This Court is unimpressed.

Under the "control test," an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accomplish his task.29

Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, the element of control is absent.30

As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under pain of administrative sanctions.

That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the operating room, or any department or ward for that matter, respondents' work is monitored through its nursing supervisors, charge nurses and orderlies. Without the approval or consent of petitioner or its medical director, no operations can be undertaken in those areas. For control test to apply, it is not essential for the employer to actually supervise the performance of duties of the employee, it being enough that it has the right to wield the power.31

With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie between them and petitioner as this merely mirrors additional form or another form of compensation or incentive similar to what commission-based employees receive as contemplated in Article 97 (f) of the Labor Code, thus:

"Wage" paid to any employee shall mean the remuneration or earning, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. x x x (Emphasis and underscoring supplied),

Respondents were in fact made subject to petitioner-hospital's Code of Ethics,32 the provisions of which cover administrative and disciplinary measures on negligence of duties, personnel conduct and behavior, and offenses against persons, property and the hospital's interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents, namely, the identification cards it issued them, the payslips33 and BIR W-2 (now 2316) Forms which reflect their status as employees, and the classification as "salary" of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare (Philhealth) program. It bears noting at this juncture that mandatory coverage under the SSS Law34 is premised on the existence of an employer-

employee relationship,35 except in cases of compulsory coverage of the self-employed. It would be preposterous for an employer to report certain persons as employees and pay their SSS premiums as well as their wages if they are not its employees.36

And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted March 7, 1998 memorandum explicitly stating that respondent is "employed" in it and of the subsequent termination letter indicating respondent Lanzanas' employment status.

Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-employee relationship exists between the resident physicians and the training hospitals, unless there is a training agreement between them, and the training program is duly accredited or approved by the appropriate government agency. In respondents' case, they were not undergoing any specialization training. They were considered non-training general practitioners, 37   assigned at the emergency rooms and ward sections.

Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private respondents were illegally dismissed.

Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import of the Secretary of Labor's Resolution of May 22, 1998 in OS A-05-15-98 which reads:

x x x x

In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of petitioner are supervisors, namely x x x Rolando Lanzonas [sic] x x x.

A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves that except for the contention that these employees allegedly supervise, they do not however recommend any managerial action. At most, their job is merely routinary in nature and consequently, they   cannot be considered supervisory employees.

They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner [the union] is seeking to represent in the instant case.38 (Emphasis and underscoring supplied)

x x x x

Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national interest. In labor disputes adversely affecting the continued operation of a hospital, Article 263(g) of the Labor Code provides:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.–

x x x x

(g) x x x x

x x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce of medical and other health personnel, whose movement and services shall be unhampered and unrestricted, as are necessary to insure the proper and adequate protection of the life and health of its patients, most especially emergency cases, for the duration of the strike or lockout. In such cases, the Secretary of Labor and Employment is mandated to immediately assume, within twenty-four hours from knowledge of the occurrence of such strike or lockout, jurisdiction over the same or certify to the Commission for compulsory arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders, prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission, under pain of immediate disciplinary action, including dismissal or loss of employment status or payment by the locking-out employer of backwages, damages and other affirmative relief, even criminal prosecution against either or both of them.

x x x x (Emphasis and underscoring supplied)

An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of all striking workers, whether a corresponding return-to-work order had been issued.39 The DOLE Secretary in fact issued a return-to-work Order, failing to comply with which is punishable by dismissal or loss of employment status.40

Participation in a strike and intransigence to a return-to-work order   must, however, be duly proved in order to justify immediate dismissal in a "national interest" case. As the appellate court as well as the NLRC observed, however, there is nothing in the records that would bear out Dr. Lanzanas' actual participation in the strike. And the medical director's Memorandum41 of April 22, 1998 contains nothing more than a general directive to all union officers and members to return-to-work. Mere membership in a labor union does not   ipso facto   mean participation in a strike .

Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never given any work schedule42 was not refuted by petitioner. Petitioner in fact never released any findings of its supposed investigation into Dr. Lanzanas' alleged "inimical acts."

Petitioner thus failed to observe the two requirements,before dismissal can be effected ─ notice and hearing ─ which constitute essential elements of the statutory process; the first to apprise the employee of the particular acts or omissions for which his dismissal is sought, and the second to inform the employee of the employer's decision to dismiss him.43 Non-observance of these requirements runs afoul of the procedural mandate.44

The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that he was apprised of the reason for his dismissal. He was not afforded, however, even the slightest opportunity to explain his side. His was a "termination upon receipt" situation. While he was priorly made to explain on his telephone conversation with Miscala,45 he was not with respect to his supposed participation in the strike and failure to heed the return-to-work order.

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized cause and without observance of due process. In fact, petitioner never proferred any valid cause for her dismissal except its view that "her marriage to [Dr. Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and that when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their workload by the medical doctor, he was presumed to be speaking for himself [and] for his wife Merceditha."46

Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained just that. Its termination of her employment on the basis of her conjugal relationship is not analogous to

any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no matter how strong, cannot substitute for factual findings carefully established through orderly procedure.48

The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's case. There is thus no gainsaying that her dismissal was both substantively and procedurally infirm.

Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list"49 including therein the names of respondents. Consider the following portions of Dr. Merceditha's Memorandum of Appeal:

3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of which [was] procured from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the said list is precisely to harass Complainant and malign her good name and reputation. This is not only unprofessional, but runs smack of oppression as CMC is trying permanently deprived [sic] Complainant of her livelihood by

ensuring that she is barred from practicing in other hospitals.

4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as such, her reputation was not only besmirched, but was damaged, and she suffered social humiliation as it is of public knowledge that she was dismissed from work. Complainant came from a reputable and respected family, her father being a retired full Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all professionals, her brothers, Arnold and Romeo Jr., being engineers. The Complainant has a family protection [sic] to protect. She likewise has a professional reputation to protect, being a licensed physician. Both her personal and professional reputation were damaged as a result of the unlawful acts of the respondents.50

While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to initiate such listing and to circulate the same, viz:

20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were merely lists obtained by one Dr. Ernesto Naval of PAMANA Hospital. Said list was given by a stockholder of respondent who was at the same time a stockholder of PAMAN[A] Hospital. The giving of the list was not a Board action.51 (Emphasis and underscoring supplied)

The circulation of such list containing names of alleged union members intended to prevent employment of workers for union activities similarly constitutes unfair labor practice, thereby giving a right of action for damages by the employees prejudiced.52

A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in deleting it, as exemplary damages were correctly awarded,53 the award of attorney's fees should be reinstated.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED withMODIFICATION in that the award by the National Labor Relations Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other aspects, the decision of the appellate court is affirmed.

SO ORDERED.