THIRD DIVISION 

NATIONAL POWER                               G.R. No. 176006          CORPORATION,                             Petitioner,                      Present:                                               

CORONA, J., Chairperson,VELASCO, JR.,

           -  v e r s u s  -                                   PERALTA,                                                          BERSAMIN* and                                                          MENDOZA, JJ.

PINATUBO COMMERCIAL,represented by ALFREDOA. DY,                                       Respondent.                  Promulgated:

 March 26, 2010

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

D E C I S I O N CORONA, J.:

 

          The National Power Corporation (NPC)[1] questions the decision dated June

30, 2006 rendered by the Regional Trial Court (RTC) of Mandaluyong City,

Branch 213 declaring items 3 and 3.1 of NPC Circular No. 99-75

unconstitutional.  The dispositive portion of the decision provides:

            WHEREFORE then, in view of the foregoing, judgment is hereby rendered declaring item[s] 3 and 3.1 of NAPOCOR Circular No.  99-75,  which  [allow]  only  partnerships  or  corporations  that

directly use aluminum as the raw material in producing finished products either purely or partly out of aluminum, to participate in the bidding for the disposal of ACSR wires as unconstitutional for being violative of substantial due process and the equal protection clause of the

Constitution as well as for restraining competitive free trade and commerce.

            The claim for attorney’s fees is denied for lack of merit.

            No costs.

                        SO ORDERED.[2]

 

          NPC also assails the RTC resolution dated November 20, 2006 denying its

motion for reconsideration for lack of merit.[3]

          In this petition, NPC poses the sole issue for our review:

WHETHER OR NOT THE RTC GRAVELY ERRED WHEN IT DECLARED ITEMS 3 AND 3.1 OF NAPOCOR CIRCULAR NO. 99-75 AS UNCONSTITUTIONAL FOR BEING VIOLATIVE OF SUBSTANTIAL DUE PROCESS AND THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION AS WELL AS FOR RESTRAINING COMPETITIVE FREE TRADE AND COMMERCE.[4]

 

          NPC Circular No. 99-75[5] dated October 8, 1999 set the guidelines in the

“disposal of scrap aluminum conductor steel-reinforced or ACSRs in order to

decongest and maintain good housekeeping in NPC installations and to generate

additional income for NPC."  Items 3 and 3.1 of the circular provide:

3.  QUALIFIED BIDDERS

     3.1  Qualified bidders envisioned in this circular are partnerships or corporations that directly use aluminum as the raw material in producing finished products either purely or partly out of aluminum, or their duly appointed representatives.  These bidders may be based locally or overseas.[6]

 

          In April 2003, NPC published an invitation for the pre-qualification of

bidders for the public sale of its scrap ACSR[7]cables.  Respondent Pinatubo

Commercial, a trader of scrap materials such as copper, aluminum, steel and other

ferrous and non-ferrous materials, submitted a pre-qualification form to

NPC.  Pinatubo, however, was informed in a letter dated April 29, 2003 that its

application for pre-qualification had been denied.[8]  Petitioner asked for

reconsideration but NPC denied it.[9]

          Pinatubo then filed a petition in the RTC for the annulment of NPC Circular

No. 99-75, with a prayer for the issuance of a temporary restraining order and/or

writ of preliminary injunction.[10] Pinatubo argued that the circular was

unconstitutional as it violated the due process and equal protection clauses of the

Constitution, and ran counter to the government policy of competitive public

bidding.[11]

          The RTC upheld Pinatubo’s position and declared items 3 and 3.1 of the

circular unconstitutional.  The RTC ruled that it wasviolative of substantive due

process because, while it created rights in favor of third parties, the circular had not

been published. It also pronounced that the circular violated the equal protection

clause since it favored manufacturers and processors of aluminum scrap vis-à-vis

dealers/traders in the purchase of aluminum ACSR cables from NPC.  Lastly, the

RTC found that the circular denied traders the right to exercise their business and

restrained free competition inasmuch as it allowed only a certain sector to

participate in the bidding.[12]

          In this petition, NPC insists that there was no need to publish the circular

since it was not of general application. It was addressed only to particular persons

or class of persons, namely the disposal committees, heads of offices, regional and

all other officials involved in the disposition of ACSRs.  NPC also contends that

there was a substantial distinction between manufacturers and traders of aluminum

scrap materials specially viewed in the light of RA 7832. [13] According to NPC, by

limiting the prospective bidders to manufacturers, it could easily monitor the

market of its scrap ACSRs. There was rampant fencing of stolen NPC wires. NPC

likewise maintains that traders were not prohibited from participating in the pre-

qualification as long as they had a tie-up with a manufacturer.[14]

          The questions that need to be resolved in this case are:

(1)              whether NPC Circular No. 99-75 must be published; and(2)       whether items 3 and 3.1 of NPC Circular No. 99-75 -  

 (a)       violated the equal protection clause of the Constitution and(b)              restrained free trade and competition. 

Tañada v. Tuvera[15] stressed the need for publication in order for statutes

and administrative rules and regulations to have binding force and effect, viz.:

x x x all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative power or, at present, directly conferred by the Constitution.  Administrative Rules and Regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.[16]

 

          Tañada, however, qualified that:

Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published.  Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.[17] (emphasis ours)

 

          In this case, NPC Circular No. 99-75 did not have to be published since it

was merely an internal rule or regulation.  It did not purport to enforce or

implement an existing law but was merely a directive issued by the NPC President

to his subordinates to regulate the proper and efficient disposal of scrap ACSRs to

qualified bidders.  Thus, NPC Circular No. 99-75 defined the responsibilities of the

different NPC personnel in the disposal, pre-qualification, bidding and award of

scrap ACSRS.[18]  It also provided for the deposit of a proposal bond to be

submitted by bidders, the approval of the award, mode of payment and release of

awarded scrap ACSRs.[19] All these guidelines were addressed to the NPC

personnel involved in the bidding and award of scrap ACSRs.  It did not, in any

way, affect the rights of the public in general or of any other person not involved in

the bidding process. Assuming it affected individual rights, it did so only remotely,

indirectly and incidentally.

Pinatubo’s argument that items 3 and 3.1 of NPC Circular No. 99-75

deprived it of its “right to bid” or that these conferred such right in favor of a third

person is erroneous. Bidding, in its comprehensive sense, means making an offer or

an invitation to prospective contractors whereby the government manifests its

intention to invite proposals for the purchase of supplies, materials and equipment

for official business or public use, or for public works or repair.[20]  Bidding rules

may specify other conditions or require that the bidding process be subjected to

certain reservations or qualifications.[21]  Since a bid partakes of the nature of an

offer to contract with the government,[22] the government agency involved may or

may not accept it.  Moreover, being the owner of the property subject of the bid,

the government has the power to determine who shall be its recipient, as well as

under what terms it may be awarded.  In this sense, participation in the bidding

process is a privilege inasmuch as it can only be exercised under existing criteria

imposed by the government itself. As such, prospective bidders, including

Pinatubo, cannot claim any demandable right to take part in it if they fail to meet

these criteria.  Thus, it has been stated that under the traditional form of property

ownership, recipients of privileges or largesse from the government cannot be said

to have property rights because they possess no traditionally recognized

proprietary interest therein.[23]

Also, as the discretion to accept or reject bids and award

contracts  is  of  such  wide  latitude,  courts  will  not  interfere,  unless it is

apparent that such discretion is exercised arbitrarily, or used as a shield to a

fraudulent award. The exercise of that discretion is a policy decision that

necessitates prior inquiry, investigation, comparison, evaluation, and deliberation.

This task can best be discharged by the concerned government agencies, not by the

courts. Courts will not interfere with executive or legislative discretion exercised

within those boundaries. Otherwise, they stray into the realm of policy decision-

making.[24]

Limiting qualified bidders in this case to partnerships or corporations that

directly use aluminum as the raw material in producing finished products made

purely or partly of aluminum was an exercise of discretion by the NPC.  Unless the

discretion was exercised arbitrarily or used as a subterfuge for fraud, the Court will

not interfere with the exercise of such discretion. 

This brings to the fore the next question: whether items 3 and 3.1 of NPC

Circular No. 99-75 violated the equal protection clause of the Constitution. 

The equal protection clause means that “no person or class of persons shall

be deprived of the same protection of laws which is enjoyed by other persons or

other classes in the same place and in like circumstances.”[25]  The guaranty of

the equal protection of the laws is not violated by a legislation based on a

reasonable classification.[26] The equal protection clause, therefore, does not

preclude classification of individuals who may be accorded different treatment

under the law as long as the classification is reasonable and not arbitrary.[27]

 

Items 3 and 3.1 met the standards of a valid classification.  Indeed, as

juxtaposed by the RTC, the purpose of NPC Circular No. 99-75 was to dispose of

the ACSR wires.[28]  As stated by Pinatubo, it was also meant to earn income for

the government.[29]Nevertheless, the disposal and revenue-generating objective of

the circular was not an end in itself and could not bar NPC from imposing

conditions for the proper disposition and ultimately, the legitimate use of the scrap

ACSR wires.  In giving preference to direct manufacturers and producers, it was

the intent of NPC to support RA 7832, which penalizes the theft of ACSR in

excess of 100 MCM.[30]  The difference in treatment between direct manufacturers

and producers, on one hand, and traders, on the other, was rationalized by NPC as

follows:             x x x NAPOCOR can now easily monitor the market of its scrap ACSR wires and verify whether or not a person’s possession of such materials is legal or not; and consequently, prosecute under R.A. 7832, those whose possession, control or custody of such material is unexplained. This is based upon the reasonable presumption that if the buyer were a manufacturer or processor, the scrap ACSRs end with him as the latter uses it to make finished products; but if the buyer were a trader, there is greater probability that the purchased materials may pass from one trader to another.  Should traders without tie-up to manufacturers or processors of aluminum be allowed to participate in the bidding, the ACSRs bidded out to them will likely co-mingle with those already proliferating in the illegal market.  Thus, great difficulty shall be encountered by NAPOCOR and/or those authorities tasked to implement R.A. 7832 in determining whether or not the ACSRs found in the possession, control and custody of a person suspected of theft [of] electric power transmission lines and materials are the fruit of the offense defined in Section 3 of R.A. 7832.[31]

  

Items 3 and 3.1 clearly did not infringe on the equal protection clause as

these were based on a reasonable classification intended to protect, not the right of

any business or trade but the integrity of government property, as well as promote

the objectives of RA 7832.  Traders like Pinatubo could not claim similar treatment

as direct manufacturers/processors especially in the light of their failure to negate

the rationale behind the distinction. 

Finally, items 3 and 3.1 of NPC Circular No. 99-75 did not restrain free

trade or competition.

 

Pinatubo contends that the condition imposed by NPC under items 3 and 3.1

violated the principle of competitiveness advanced by RA 9184 (Government

Procurement Reform Act) which states: 

SEC. 3. Governing Principles on Government Procurement. – All procurement of the national government, its departments, bureaus, offices and agencies, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units, shall, in all cases, be governed by these principles: 

x x x 

(b)        Competitiveness by extending equal opportunity to enable private contracting parties who are eligible and qualified to participate in public bidding. (emphasis ours)

 

The foregoing provision imposed the precondition that the contracting

parties should be eligible and qualified.  It should be emphasized that the bidding

process was not a “free-for-all” where any and all interested parties, qualified or

not, could take part. Section 5(e) of RA 9184 defines competitive bidding as a

“method of procurement which is open to participation by any interested party and

which consists of the following processes: advertisement, pre-bid

conference, eligibility screening of prospective bidders, receipt and opening of

bids, evaluation of bids, post-qualification, and award of contract x x x.”  The law

categorically mandates that prospective bidders are subject to eligibility screening,

and as earlier stated, bidding rules may specify other conditions or order that the

bidding process be subjected to certain reservations or qualifications.[32] Thus, in its

pre-qualification guidelines issued for the sale of scrap ACSRs, the NPC reserved

the right to pre-disqualify any applicant who did not meet the requirements for pre-

qualification.[33]  Clearly, the competitiveness policy of a bidding process

presupposes the eligibility and qualification of a contestant; otherwise, it defeats

the principle that only “responsible” and “qualified” bidders can bid and be

awarded government contracts.[34] Our free enterprise system is not based on a

market of pure and unadulterated competition where the State pursues a strict

hands-off policy and follows the let-the-devil-devour-the-hindmost rule.[35]

 

Moreover, the mere fact that incentives and privileges are granted to certain

enterprises to the exclusion of others does not render the issuance unconstitutional

for espousing unfair competition.[36] While the Constitution enshrines free

enterprise as a policy, it nonetheless reserves to the government the power to

intervene whenever necessary to promote the general welfare.[37]  In the present

case, the unregulated disposal and sale of scrap ACSR wires will hamper the

government’s effort of curtailing the pernicious practice of trafficking stolen

government property.  This is an evil sought to be prevented by RA 7832 and

certainly, it was well within the authority of the NPC to prescribe conditions in

order to prevent it.

WHEREFORE, the petition is hereby GRANTED.  The decision of the

Regional Trial Court of Mandaluyong City, Branch 213 dated June 30, 2006 and

resolution dated November 20, 2006 are REVERSED and SET ASIDE. Civil

Case No. MC-03-2179 for the annulment of NPC Circular No. 99-75 is

hereby DISMISSED. 

SO ORDERED.

 

RENATO C. CORONAAssociate Justice

Chairperson 

 

WE    CONCUR:

   PRESBITERO J. VELASCO, JR.             DIOSDADO M. PERALTA           Associate Justice                                         Associate Justice 

       LUCAS P. BERSAMIN                          JOSE CATRAL MENDOZA          Associate Justice                                           Associate Justice  

  

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 133250            May 6, 2003

FRANCISCO I. CHAVEZ, petitioner, vs.PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents.

RESOLUTION

CARPIO, J.:

For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by respondent Amari Coastal Bay Development Corporation ("Amari" for brevity) on September 13, 2002; (2) Motion to Set Case for Hearing on Oral Argument filed by Amari on August 20, 2002; (3) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by Amari on July 26, 2002 and August 20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by respondent Public Estates Authority ("PEA" for brevity) on July 26, 2002 and August 8, 2002, respectively; and (5) Motion for Reconsideration and/or Clarification filed by the Office of the Solicitor General on July 25, 2002. Petitioner Francisco I. Chavez filed on November 13, 2002 his Consolidated Opposition to the main and supplemental motions for reconsideration.

To recall, the Court’s decision of July 9, 2002 ("Decision" for brevity) on the instant case states in its summary:

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article

XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice Carpio, before his appointment to the Court, wrote in his Manila Times column of July 1, 1997, "I have always maintained that the law requires the public bidding of reclamation projects." Justice Carpio, then a private law practitioner, also stated in the same column, "The Amari-PEA reclamation contract is legally flawed because it was not bid out by the PEA." Amari claims that because of these statements Justice Carpio should inhibit himself "on the grounds of bias and prejudgment" and that the instant case should be "re-deliberated" after being assigned to a new ponente.

The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after Justice Carpio had already rendered his opinion on the merits of the case. The rule is that a motion to inhibit must be denied if filed after a member of the Court had already given an opinion on the merits of the case,1 the rationale being that "a litigant cannot be permitted to speculate upon the action of the Court xxx (only to) raise an objection of this sort after a decision has been rendered." Second, as can be readily gleaned from the summary of the Decision quoted above, the absence of public bidding is not one of the ratio decidendi of the Decision which is anchored on violation of specific provisions of the Constitution. The absence of public bidding was not raised as an issue by the parties. The absence of public bidding was mentioned in the Decision only to complete the discussion on the law affecting reclamation contracts for the guidance of public officials. At any rate, the Office of the Solicitor General in its Motion for Reconsideration concedes that the absence of public

bidding in the disposition of the Freedom Islands rendered the Amended JVA null and void.2 Third, judges and justices are not disqualified from participating in a case just because they have written legal articles on the law involved in the case. As stated by the Court in Republic v. Cocofed,3 -

The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not disqualify him, in the same manner that jurists will not be disqualified just because they may have given their opinions as textbook writers on the question involved in a case.

Besides, the subject and title of the column in question was "The CCP reclamation project" and the column referred to the Amari-PEA contract only in passing in one sentence.

Amari’s motion to set the case for oral argument must also be denied since the pleadings of the parties have discussed exhaustively the issues involved in the case.

The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall consider in this Resolution only the new arguments raised by respondents.

In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply prospectively, not retroactively to cover the Amended JVA. Amari argues that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached, citing De Agbayani v. PNB,4 thus:

x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to

what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, - with respect to particular relations, individual and corporate, and particular conduct, private and official." This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. x x x.

x x x

x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all the more reason then to yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached.

Amari now claims that "assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive Order Nos. 525 and 654 are inconsistent with the 1987 Constitution, the limitation imposed by the Decision on these decrees and executive orders should only be applied prospectively from the finality of the Decision."

Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested rights. Amari maintains that the new doctrine embodied in the Decision cannot apply retroactively on those who relied on the old doctrine in good faith, citing Spouses Benzonan v. Court of Appeals,5 thus:

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).

The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and acted on the faith thereof.

There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application of doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the present petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free agricultural land when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he would now repurchase for only P327,995.00, the property purchased

by the petitioners in good faith for P1,650,000.00 in 1979 and which, because of improvements and the appreciating value of land must be worth more than that amount now.

The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the disputed lot given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be revived by relying on the 1988 case of Belisario. The right of petitioners over the subject lot had already become vested as of that time and cannot be impaired by the retroactive application of the Belisario ruling.

Amari’s reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the prevailing law or doctrine at the time of the signing of the Amended JVA was that a private corporation could acquire alienable lands of the public domain, and the Decision annulled the law or reversed this doctrine. Obviously, this is not the case here.

Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public domain. But since the effectivity of the 1973 Constitution, private corporations were banned from holding, except by lease, alienable lands of the public domain. The 1987 Constitution continued this constitutional prohibition. The prevailing law before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. The Decision has not annulled or in any way changed the law on this matter. The Decision, whether made retroactive or not, does not change the law since the Decision merely reiterates the law that prevailed since the effectivity of the 1973 Constitution. Thus, De Agbayani, which refers to a law that is invalidated by a decision of the Court, has no application to the instant case.

Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by a subsequent decision which

adopts a new doctrine. In the instant case, there is no previous doctrine that is overruled by the Decision. Since the case of Manila Electric Company v. Judge Castro-Bartolome,6 decided on June 29, 1982, the Court has applied consistently the constitutional provision that private corporations cannot hold, except by lease, alienable lands of the public domain. The Court reiterated this in numerous cases, and the only dispute in the application of this constitutional provision is whether the land in question had already become private property before the effectivity of the 1973 Constitution.7 If the land was already private land before the 1973 Constitution because the corporation had possessed it openly, continuously, exclusively and adversely for at least thirty years since June 12, 1945 or earlier, then the corporation could apply for judicial confirmation of its imperfect title. But if the land remained public land upon the effectivity of the 1973 Constitution, then the corporation could never hold, except by lease, such public land. Indisputably, the Decision does not overrule any previous doctrine of the Court.

The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. This is one of the two main reasons why the Decision annulled the Amended JVA. The other main reason is that submerged areas of Manila Bay, being part of the sea, are inalienable and beyond the commerce of man, a doctrine that has remained immutable since the Spanish Law on Waters of 1886. Clearly, the Decision merely reiterates, and does not overrule, any existing judicial doctrine.

Even on the characterization of foreshore lands reclaimed by the government, the Decision does not overrule existing law or doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and its foreshore areas have always been part of the public domain. And since the enactment of Act No. 1654 on May 18, 1907 until the effectivity of the 1973 Constitution, statutory law never allowed foreshore lands reclaimed by the government to be sold to private corporations. The 1973 and 1987 Constitution enshrined and expanded the ban to include any alienable land of the public domain.

There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution, hold that the sale or transfer of the land may no longer be invalidated because of "weighty considerations of equity and social justice."8 The invalidation of the sale or transfer may also be superfluous if the purpose of the statutory or constitutional ban has been achieved. But none of these cases apply to Amari.

Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen.9 Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved.10 In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party. In the instant case, however, Amari has not transferred the Freedom Islands, or any portion of it, to any qualified party. In fact, Amari admits that title to the Freedom Islands still remains with PEA.11

The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under the principle of res judicata, provided the requisites for res judicata are present.12 Under this principle, the courts and the parties are bound by a prior final decision, otherwise there will be no end to litigation. As the Court declared in Toledo-Banaga v. Court of Appeals,13 "once a judgement has become final and executory, it can no longer be disturbed no matter how erroneous it may be." In the instant case, there is no prior final decision adjudicating the Freedom Islands to Amari.

There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition, two Senate Committees14 had already approved on September 16, 1997 Senate

Committee Report No. 560. This Report concluded, after a well-publicized investigation into PEA’s sale of the Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA.

Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom Islands. Amari states that it has paid PEA only P300,000,000.0015 out of the P1,894,129,200.00 total reimbursement cost agreed upon in the Amended JVA. Moreover, Amari does not claim to have even initiated the reclamation of the 592.15 hectares of submerged areas covered in the Amended JVA, or to have started to construct any permanent infrastructure on the Freedom Islands. In short, Amari does not claim to have introduced any physical improvement or development on the reclamation project that is the subject of the Amended JVA. And yet Amari claims that it had already spent a "whopping P9,876,108,638.00" as its total development cost as of June 30, 2002.16 Amari does not explain how it spent the rest of the P9,876,108,638.00 total project cost after paying PEA P300,000,000.00. Certainly, Amari cannot claim to be an innocent purchaser in good faith and for value.

In its Supplement to Motion for Reconsideration, PEA claims that it is "similarly situated" as the Bases Conversion Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro Manila military camps and other military reservations. PEA’s comparison is incorrect. The Decision states as follows:

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands

become private lands. In the hands of the government agency tasked and authorized to dispose of alienable or disposable lands of the public domain, these lands are still public, not private lands.

PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of Department of Environment and Natural Resources ("DENR" for brevity) as the government agency charged with leasing or selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of DENR, reclaimed foreshore lands are public lands in the same manner that these same lands would have been public lands in the hands of DENR. BCDA is an entirely different government entity. BCDA is authorized by law to sell specificgovernment lands that have long been declared by presidential proclamations as military reservations for use by the different services of the armed forces under the Department of National Defense. BCDA’s mandate is specific and limited in area, while PEA’s mandate is general and national. BCDA holds government lands that have been granted to end-user government entities – the military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as the government agency "primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government."

In Laurel v. Garcia,17 cited in the Decision, the Court ruled that land devoted to public use by the Department of Foreign Affairs, when no longer needed for public use, may be declared patrimonial property for sale to private parties provided there is a law authorizing such act. Well-settled is the doctrine that public land granted to an end-user government agency for a specific public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer

needed for defense or military purposes and reclassifies such lands as patrimonial property for sale to private parties.

Government owned lands, as long they are patrimonial property, can be sold to private parties, whether Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial property18 which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified private corporations.

We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR with respect to reclaimed foreshore lands, thus:

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even individuals acquiring hundreds, if not thousands, of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations

amassing huge landholdings never before seen in this country - creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands. The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition.

Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged areas is "enormous" and "it would be difficult for PEA to accomplish such project without the participation of private corporations."19 The Decision does not bar private corporations from participating in reclamation projects and being paid for their services in reclaiming lands. What the Decision prohibits, following the explicit constitutional mandate, is for private corporations to acquire reclaimed lands of the public domain. There is no prohibition on the directors, officers and stockholders of private corporations, if they are Filipino citizens, from acquiring at public auction reclaimed alienable lands of the public domain. They can acquire not more than 12 hectares per individual, and the land thus acquired becomes private land.

Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper proceedings, on a quantum meruit basis, whatever Amari may have incurred in implementing the Amended JVA prior to its declaration of nullity.

WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED with FINALITY. The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral Argument are likewise DENIED.

SO ORDERED.

Davide, Jr., C.J., Vitug, Panganiban, Quisumbing, Austria- Martinez, Carpio-Morales, and Callejo, Sr., JJ., concur.Bellosillo, J., please see separate opinion, concurring and dissenting.

Puno, J., please see separate opinion.Ynares-Santiago, and Sandoval-Gutierrez, JJ., please see dissenting opinion.Corona, J., I dissent.Azcuna, J., I take no part.

EN BANC 

          G.R. No. 167622 (Gregorio V. Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc. and Renato A. Vergel de Dios)

 

                                                                   Promulgated:

                                                                  

January 25, 2011

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

 

 

D I S S E N T I N G O P I N I O N

 

VELASCO, JR., J.:

 

 

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if Labor had not first existed. Labor is superior to capital, and deserves much the higher consideration.

––Abraham Lincoln

 

Prefatory Statement

 

At the outset, it has to be made clear that the instant petition applies solely to petitioner Tongko with respect to his relationship with Manulife as the latter’s Regional  Manager of Metro North Region and not to ordinary underwriters of different insurance companies claiming to be totaling 45,000 in the Philippines. In view of the facts and circumstances peculiar only to Tongko’s case, the disposition in the instant petition is pro hac vice in line with the previous rulings of this Court that the determination of an employer-employee relationship shall be on a case-to-case basis.[1]

 

There   is,   therefore,  no   reason   to   conclude   that   the  November  7,  2008 Decision of this Court was meant to indiscriminately classify all insurance agents as employees of their respective insurance companies. Nowhere in the Decision was such a conclusion made or espoused. To reiterate, it was specifically stated in the   Decision   that   Tongko,   given   his   administrative   duties   as   a   manager   of Manulife, and not any other insurance agent in the Philippines, was an employee. As   in  every case  involving  the determination of  whether  or  not  an employer-employee   relationship   obtains,   it  must   be   established   in   each   case   that   the alleged employer exercises control over the means and methods employed by the worker in achieving a set objective. Only then can such relationship be said to exist.

 

In a Letter dated December 16, 2008, the Joint Foreign Chambers of the Philippines implored this Court to reverse its November 7, 2008 Decision on the stated ground that it is “a case of judicial legislation that impairs the obligations of 

commercial   contracts   and   interferes   with   established   business   models   and practices.” The Chambers conclusion, sad to state, was based on the erroneous premise   that   the   Decision   was   a   blanket   declaration   that   all   agents   or underwriters are considered employees of the insurance company.

 

The Philippine Life Insurance Association, Inc., through its then President Gregorio D. Mercado, also wrote a letter dated January 12, 2009 reiterating the concerns of the Joint Foreign Chambers of the Philippines. In the letter, Mercado states:

 

Thus, with the recent Decision of the Honorable Supreme Court, generalizing the code of conduct as an indication of control over the means and method of an employee, PLIA is alarmed that the floodgates would   open   to   unscrupulous   claimants   and   leave   PLIA’s   member companies vulnerable to a multitude of law suits from agents who shall insist  on  benefits   that  only  employees  enjoy. Such  a   scenario  would certainly cripple PLIA’s member insurance companies, as their time and resources would be devoted to fending off unscrupulous claims instead of   focusing   on   improving   themselves   to   serve   the   interests   of   the public.

 

 

          Mercado goes on to imply that the finality of the November 7, 2008 Decision would spell the end of the insurance industry.

 

          The grim scenario depicted in Mercado’s letter and the unmistakable veiled threats implied therein are uncalled for.  

 

The November 7, 2008 Decision, to reiterate, applies only to Tongko in light of the circumstances attendant in his case. Certainly, his situation is unique from most other agents considering that he was promoted initially to Unit Manager, then to Branch Manager and, eventually, Regional Manager. By this fact alone, the   Decision   cannot   be   applicable   to   all   other   agents   in   thePhilippines. Furthermore,   the Decision was reached considering the totality  of  all   relevant matters underpinning and/or governing the professional relationship of Tongko and Manulife, not only the Code of Conduct, or certain duties only. All the factors mentioned in the Decision contributed to the conclusion that at the time that Tongko was dismissed, he was an employee of Manulife. And it will only be in the far off possibility that a completely identical case is presented that the findings therein would apply.  

 

Additionally,   in   line   with   the   Court’s   ruling   in   the   November   7,   2008 Decision that Tongko became an employee after his designation as a manager of Manulife,   any   backwages   for   illegal   dismissal   should   only   correspond   to   his income, bonuses and other benefits that were appurtenant to his designation as a manager.   Under   Tongko’s   Career   Agent’s   Agreement,   he   was   entitled   to commissions,   production   bonus   and   persistency   income.   Thus,   the   basis   for backwages would only be his management overrides and other bonuses relative to his position as manager.

 

The Case

 

For the consideration of the Court is the Motion for Reconsideration dated

July 28, 2010, filed by petitioner Gregorio V. Tongko. Tongko seeks the reversal

of our June 29, 2010 Resolution which dismissed the instant petition finding that

Tongko was not an employee of Manufacturers Life Insurance Co. (Phils.), Inc.

(Manulife). The Resolution reversed the Court’s November 17, 2008 Decision.

 

The Facts

 

For clarity, the facts of the case are hereby reiterated:

 

Manufacturers   Life   Insurance   Co.   (Phils.),   Inc.   (Manulife)   is   a   domestic corporation engaged in life insurance business. Renato A. Vergel De Dios (De Dios) was,   during   the   period   material,   its   President   and   Chief   Executive   Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent’s Agreement[2] (Agreement) he executed with Manulife.

 

In the Agreement, it is provided that:

 

It   is  understood and agreed that  the Agent  is  an  independent contractor   and   nothing   contained   herein   shall   be   construed   or interpreted   as   creating   an  employer-employee   relationship  between the Company and the Agent.

 

x x x x

 

a)  The  Agent   shall   canvass   for  applications   for   Life   Insurance, Annuities, Group policies and other products offered by the Company, and collect,   in exchange for provisional receipts issued by the Agent, money due or to become due to the Company in respect of applications or  policies  obtained  by  or   through   the  Agent  or   from policyholders allotted   by   the   Company   to   the   Agent   for   servicing,   subject   to 

subsequent   confirmation  of   receipt  of  payment  by   the  Company  as evidenced by an Official Receipt issued by the Company directly to the policyholder.

 

x x x x

 

14. TERMINATION

 

The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving written notice   to   the   Agent  within   fifteen   (15)   days   from   the   time   of   the discovery   of   the   breach.  No  waiver,   extinguishment,   abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any previous failure to exercise its right under any provision of this Agreement.

 

Either   of   the   parties   hereto   may   likewise   terminate   his Agreement  at  any  time without  cause,  by  giving   to   the  other  party fifteen   (15)   days   notice   in   writing.   This   Agreement   shall   similarly terminate forthwith upon the death of the Agent.

 

In cases of termination, including the Agent’s death, the Agent and/or   his   estate,   executors   or   administrators,   heirs,   assignees   or successors-in-interest,  as the case may be,  shall   remain  liable to the Company   for   all   the   Agent’s   obligations   and   indebtedness   due   the Company arising from law or this Agreement.

 

In 1983, Tongko was named as a Unit Manager in Manulife’s Sales Agency Organization. In 1990, he became a Branch Manager. He was thereafter promoted to Regional Manager. As the Court of Appeals (CA) found, Tongko’s gross earnings from his  work at  Manulife  as  a  Regional  Manager,  consisting of  commissions, persistency income, and management overrides, may be summarized as follows:

 

January to December 10, 2002    -      P 865,096.07

                                         2001    -      6,214,737.11

                             2000    -      8,003,180.38

                                         1999    -      6,797,814.05

                             1998    -      4,805,166.34

                             1997    -      2,822,620.00[3]

 

The   problem   started   sometime   in   2001,   when   Manulife   instituted manpower   development   programs   in   the   regional   sales   management   level. Relative thereto, De Dios addressed a letter dated November 6, 2001[4] to Tongko regarding  an  October  18,   2001  Metro  North  Sales  Managers  Meeting.   In   the letter, De Dios stated:

 

The first step to transforming Manulife into a big league player has been very clear - to increase the number of agents to at least 1,000 strong  for  a  start.  This  may seem diametrically  opposed to   the way Manulife was run when you first joined the organization. Since then, however, substantial changes have taken place in the organization, as these  have  been   influenced  by  developments  both   from within  and without the company.

 

x x x x

 

The issues around agent recruiting are central  to the intended objectives hence the need for a Senior Managers’ meeting earlier last month   when   Kevin   O’Connor,   SVP   -   Agency,   took   to   the   floor   to determine from our senior agency leaders what more could be done to bolster   manpower   development.   At   earlier   meetings,   Kevin   had presented   information where  evidently,  your  Region  was   the   lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.

 

While discussions, in general, were positive other than for certain comments from your end which were perceived to be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it was not clear that we were proceeding in the same direction.

 

Kevin held subsequent series of meetings with you as a result, one   of   which   I   joined   briefly.   In   those   subsequent   meetings   you reiterated   certain   views,   the   validity   of   which   we   challenged   and subsequently found as having no basis.

 

With such views coming from you, I was a bit concerned that the rest  of   the Metro North Managers  may be a  bit  confused as  to  the directions the company was taking. For this reason, I sought a meeting with everyone in your management team, including you, to clear the air, so to speak.

 

This note is intended to confirm the items that were discussed at the said Metro North Region’s Sales Managers meeting held at the 7/F Conference room last 18 October.

 

x x x x

 

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency growth.

 

x x x x

 

I   cannot   afford   to   see   a  major   region   fail   to   deliver   on   its developmental  goals  next  year  and so,  we are making the  following changes in the interim:

 

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you feel ‘may not be your cup of tea”.

 

You have stated, if not implied, that your work as Regional Manager  may be  too   taxing   for  you and  for  your  health.  The above could solve this problem.

 

x x x x

 

2. Effective immediately, Kevin and the rest of the Agency Operations   will   deal   with   the   North   Star   Branch   (NSB)   in autonomous fashion. x x x

 

I have decided to make this change so as to reduce your span   of   control   and   allow   you   to   concentrate  more   fully   on overseeing   the   remaining   groups   under   Metro   North,   your Central Unit and the rest of the Sales Managers in Metro North. I will  hold  you   solely   responsible   for  meeting   the  objectives  of these remaining groups.

 

x x x x

 

The above changes can end at this point and they need not go any further.  This,  however,   is  entirely dependent upon you. But you have to understand that meeting corporate objectives by everyone is primary   and   will   not   be   compromised.   We   are   meeting   tough challenges   next   year   and   I   would   want   everybody   on   board.   Any resistance or holding back by anyone will be dealt with accordingly.

 

Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,[5] terminating Tongko’s services, thus:

 

It  would appear,  however,   that despite the series  of meetings and communications, both one-on-one meetings between yourself and SVP Kevin O’Connor, some of them with me, as well as group meetings with your Sales Managers, all these efforts have failed in helping you align your directions with Management’s avowed agency growth policy.

 

x x x x

 

On  account   thereof,  Management   is  exercising   its  prerogative under Section 14 of your Agents Contract as we are now issuing this notice   of   termination   of   your   Agency   Agreement  with   us   effective fifteen days from the date of this letter.

 

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the National Labor Relations Commission (NLRC) against Manulife for illegal dismissal. The  case,  docketed  as  NLRC NCR Case  No.  11-10330-02,  was   raffled to  Labor Arbiter Marita V. Padolina.

 

In   the  Complaint,   Tongko,   in   a   bid   to   establish   an   employer-employee relationship, alleged that De Dios gave him specific directives on how to manage his area of responsibility in the latter’s letter dated November 6, 2001. He further claimed that Manulife exercised control over him as follows:

 

Such  control  was   certainly  exercised  by   respondents  over   the herein  complainant.   It  was  Manulife  who hired,  promoted and gave various assignments to him. It was the company who set objectives as regards  productions,   recruitment,   training  programs and all  activities pertaining to its business. Manulife prescribed a Code of Conduct which would govern in minute detail all aspects of the work to be undertaken by employees,   including the sales  process,   the underwriting process, signatures,   handling   of  money,   policyholder   service,   confidentiality, legal   and   regulatory   requirements   and   grounds   for   termination   of employment. The letter of Mr. De Dios dated 06 November 2001 left no doubt  as   to  who  was   in   control.   The   subsequent   termination   letter dated 18 December 2001 again established in no uncertain terms the authority   of   the   herein   respondents   to   control   the   employees   of Manulife. Plainly, the respondents wielded control not only as to the ends to be achieved but the ways and means of attaining such ends.[6]

 

Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)[7] and Great Pacific Life Assurance Corporation v. NLRC,[8] which Tongko claimed to be similar to the instant case.

 

Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He also cited the Manulife Code of Conduct by which his actions were controlled by the company.

 

Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,[9] in which it alleged that Tongko is not its employee, and that it did not exercise   “control”   over   him.   Thus,  Manulife   claimed   that   the   NLRC   has   no jurisdiction over the case.

 

In   a   Decision   dated   April   15,   2004,   Labor   Arbiter  Marita   V.   Padolina dismissed the complaint for lack of an employer-employee relationship. Padolina found   that   applying   the   four-fold   test   in   determining   the   existence   of   an employer-employee   relationship,   none   was   found   in   the   instant   case.   The dispositive portion thereof states:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of jurisdiction, there being no employer-employee relationship between the parties.

 

SO ORDERED.

 

Tongko appealed the arbiter’s  Decision to the NLRC which reversed the same and rendered a Decision dated September 27, 2004 finding Tongko to have been illegally dismissed.

 

The NLRC’s First Division, while finding an employer-employee relationship between Manulife and Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios and wrote:

 

The   above-mentioned   letter   shows   the   extent   to   which respondents controlled complainant’s manner and means of doing his work and achieving the goals set by respondents. The letter shows how respondents   concerned   themselves   with   the   manner   complainant managed the Metro North Region as Regional  Sales Manager,  to the point that respondents even had a say on how complainant interacted with other individuals in the Metro North Region. The letter is in fact 

replete with comments and criticisms on how complainant carried out his functions as Regional Sales Manager.

 

More importantly, the letter contains an abundance of directives or orders that are intended to directly affect complainant’s authority and manner of carrying out his functions as Regional Sales Manager.[10]

 

Additionally, the NLRC also ruled that:

 

Further evidence of [respondents’] control over complainant can be found in the records of the case. [These] are the different codes of conduct   such  as   the  Agent  Code of  Conduct,   the  Manulife  Financial Code   of   Conduct,   and   the   Manulife   Financial   Code   of   Conduct Agreement,  which  serve as   the   foundations  of   the  power  of  control wielded by respondents over complainant that is further manifested in the   different   administrative   and   other   tasks   that   he   is   required   to perform. These codes of conduct corroborate and reinforce the display of respondents’ power of control in their 06 November 2001 Letter to complainant.[11]

 

The fallo of the September 27, 2004 NLRC Decision reads:

WHEREFORE,   premises   considered,   the   appealed   Decision   is hereby reversed and set aside.  We find complainant to be a regular employee of respondent Manulife and that he was illegally dismissed from employment by respondents.

 

In lieu of reinstatement, respondent Manulife is hereby ordered to   pay   complainant   separation  pay   as   above   set   forth.   Respondent 

Manulife   is   further  ordered to pay complainant backwages  from the time he was dismissed on 02 January 2002 up to the finality of  this decision also as indicated above.

 

x x x x

 

All other claims are hereby dismissed for utter lack of merit.

 

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in a Resolution dated December 16, 2004.[12]

 

Thus,  Manulife  filed an appeal  with  the CA docketed as CA-G.R.  SP No. 88253.  Thereafter,  the CA  issued the assailed Decision dated March 29,  2005, finding the absence of an employer-employee relationship between the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again applying the four-fold test. The CA found that Manulife did not exercise control over Tongko that would render the latter an employee of Manulife. The dispositive portion reads:

 

WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are hereby ANNULLED and   SET  ASIDE.   The  Decision  dated  April   15,   2004  of   Labor  Arbiter Marita V. Padolina is hereby REINSTATED.

 

Hence, Tongko filed a petition with this Court raising the following issues: (1) whether Tongko was an employee of Manulife; and (2) whether Tongko was illegally dismissed.

 

In the November 17, 2010 Decision, this Court ruled that Tongko was an

employee of Manulife and was illegally dismissed. Applying the four-fold test, the

Court found sufficient indicia of employment to conclude that Manulife and

Tongko had an employer-employee relationship. Thus, the Court further ruled that

because there was no just or valid cause for the termination of Tongko’s

employment, he was therefore illegally dismissed.

 

Manulife appealed such Decision to the Court en banc which reversed the

same in a June 29, 2010 Resolution. In the Resolution, the Court used the intent of

the parties as well as the established insurance industry practices to conclude that

the control required by the labor code to be present to establish an employer-

employee relationship between Manulife and Tongko was not present. It was

further ruled that there was no other concrete evidence to establish that Tongko

was an employee of Manulife.

 

Thereafter, Tongko filed the instant motion for reconsideration of the

Resolution.

 

The motion for reconsideration must be granted.

 Labor laws, not the Insurance Code

or the Corporation Code, shall prevail in the instant case 

 

Manufacturers  Life   Insurance Co.   (Phils.),   Inc.   is  part  of  a  Canada-based multinational financial company claiming to be the largest life insurance company in North  America having   3,000   employees   and   25,000   agents.[13] On   the   other hand, Tongko is but a single Filipino agent/manager of Manulife. It is but just, it is 

but right, that the Court, interpret the relationship between Tongko and Manulife as   one   of   employment   under   labor   laws   and   to   uphold   his   constitutionally protected rights  as  an  employee,   to  security  of   tenure  and an entitlement  to monetary   award   should   such   right   is   infringed.  And   this   constitutionally-guaranteed   right   cannot   be   diminished,   let   alone   undermined,   by   a   mere contract, or however the parties choose to call their true working relationship.[14]Neither, to stress, may the employer-employee relationship, if one exists, be subverted by the manner and form of remuneration or earnings being paid or received,[15] i.e., fixed or on commission basis, or the method of calculating the same.

 

          The controversy in this case arose from the fact that, initially, Tongko

executed a Career Agent’s Agreement whereby he became an agent of Manulife.

As such agent, Manulife did not control the means and methods for accomplishing

his assigned objective of canvassing life insurance applications. It is, therefore

submitted that when he was exclusively an agent of Manulife, he was not the

latter’s employee.

 

          The evidence, however, will reveal that he was later on promoted to the

positions of unit, branch and regional manager. The evidence will also show that

he, similar to his colleagues, was assigned other duties and responsibilities aside

from those enumerated under the Agreement.

 

          And there lies the crux of the problem. There is now an ambiguity as to the

true relationship between Manulife and Tongko. Moreover, it is now unclear as to

what law, labor laws, corporation code, insurance code or civil code, should be

applied to the two parties.

 

          Jurisprudence teaches that, given the doubt as to the applicable law in the

instant case, labor law shall govern.

 

The Constitution acknowledges the reality that capital and labor often do not deal on equal grounds, requiring the state to protect labor from abuse. To level   the   playing   field,   the   framers   of   the   Constitution   incorporated   two   (2) provisions therein to safeguard the employee’s right to security of tenure and enhance protection to employees’ rights and welfare:

 

ARTICLE II

DECLARATION OF PRINCIPLES

AND STATE POLICIES PRINCIPLES

 

STATE POLICIES

Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.

 

 

ARTICLE XIII

SOCIAL JUSTICE AND HUMAN RIGHTS

 

LABOR

Section 3. The State shall afford full protection to labor,   local and   overseas,   organized   and   unorganized,   and   promote   full employment and equality of employment opportunities for all.

 

It  shall  guarantee the rights of all  workers to self-organization, collective   bargaining   and   negotiations,   and   peaceful   concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall  also participate  in policy and decision-making processes affecting their rights and benefits as may be provided by law. (Emphasis supplied.)

 

 

In the Civil Code, it is provided in Articles 1700 and 1702 thereof that:

 

Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.

 

Article 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. (Emphasis supplied.)

 

Verily, the mandate of this Court is to ensure that the provisions of the

Constitution are carried out. The Court has the responsibility to ensure that the

rights of labor, as guaranteed by the Constitution, are actually enjoyed by the

workers. Thus, in several cases, the Court has repeatedly resolved doubts as to the

relationship between parties as that of employment, that which is most favorable to

labor.

 

The Court, in a slew of cases, has consistently ruled that when there is

doubt as to the law to be applied in a case with an allegation of an employer-

employee relationship, labor laws and jurisprudence shall apply. Consider:

 

          1.       In Social Security System v. Court of Appeals,[16] the Court was faced

with the conflicting claims of the workers and the proprietor on the issue of

whether an employer-employee relationship exists. Romeo Carreon and Quality

Tobacco Corporation (QTC) entered into an agreement whereby Carreon would

allegedly purchase and sell QTC’s products. Carreon claims that he was an

employee of QTC while QTC claims that Carreon is an independent contractor. In

the agreement, Carreon was referred to as a vendee of QTC’s products. Their

relationship would therefore be covered by the Civil Code provisions on sales.[17] However, in view of the complaint of Carreon praying for SSS benefits on the

claim that he is an employee of QTC, there arose the question as to which law

should apply––the Civil Code or the Labor Code and jurisprudence. The Court

applied the jurisprudence in labor cases and used the four-fold test to determine the

existence of an employer-employee relationship. The Court stated:

 The issue raised by the petitioner before this Court is the very

same issue resolved by the Court of Appeals-that is, whether or not Romeo Carreon is an employee or an independent contractor under the contract aforequoted. Corollary thereto the question as to whether or not the Mafinco case is applicable to this case was raised by the parties. 

The Court took cognizance of the fact that the question of whether or not an employer-employee relationship exists in a certain situation continues to bedevil the courts. Some businessmen with the aid of lawyers have tried to avoid the bringing about of an employer-employee relationship in some of their enterprises because that juridical relation spawns obligations connected with workmen’s compensation, social security, medicare, minimum wage, termination pay and unionism. 

For this reason, in order to put the issue at rest, this Court has laid down in a formidable line of decisions the elements to be generally considered in determining the existence of an employer-employee relationship, as follows: a) selection and engagement of the employee; b) the payment of wages; c) the power of dismissal; and d) the employer’s power to control the employee with respect to the means and method by-which the work is to be accomplished. The last which is the so-called “control test” is the most important element (Brotherhood Labor Unity Movement of the Phils. vs. Zamora, 147 SCRA 49 [1987]; Dy Ke Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 162 [1979]; Mafinco Trading Corp. vs. Ople, 70 SCRA 141 [1976]; Social Security System vs. Court of Appeals, 37 SCRA 579 [1971]). 

Applying the control test, that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and method by which the same is to be accomplished, the question of whether or not there is an employer-employee relationship for purposes of the Social Security Act has been settled in this jurisdiction in the case of Investment Planning Corp. vs. SSS, 21 SCRA 924 (1967). In other words, where the element of control is absent; where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is compensated according to the result of his effort, the relationship of employer-employee does not exist. (SSS vs. Court of Appeals, 30 SCRA 210 [1969]). (Emphasis supplied.)

 

 

          2.       In Cosmopolitan Funeral Homes, Inc. v. Maalat,[18] Cosmopolitan

Funeral Homes, Inc. engaged the services of Noli Maalat as a “supervisor” to

handle the solicitation of mortuary arrangements, sales and collections. Maalat was

dimissed after having committed violations of the company’s policies. He filed a

complaint for illegal dismissal and nonpayment of commissions. Cosmopolitan

argues that there is no employer-employee relationship between it and Maalat, the

latter being an independent contractor. The Court ruled that:

 In determining whether a person who performs work for

another is the latter's employee or an independent contractor, the prevailing test is the “right of control” test. Under this test, an

employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.

 

The Court did not consider the provisions of the Civil Code on a Contract for a

Piece of Work[19] in determining the relationship between the parties. Instead, it

used the labor law concept, the control test, to determine such relationship.

          3.       The Court in Algon Engineering Construction Corporation v. National

Labor Relations Commission[20] did not consider the Civil Code provisions on lease

when it ruled upon the existence of an employer-employee relationship. In that

case, from March 1, 1983 to May 10, 1985, Algon was in the process of

completing the Lucena Talacogon Project in Del Monte, Talacogon, Agusan del

Sur. Jose Espinosa’s house is located near that project site. Thus, throughout that

same period of time, Espinosa allowed petitioner Algon to use his house and the

grounds adjacent thereto as a parking and storage place for the latter’s heavy

equipment. However, Espinosa also claims in addition thereto that there existed an

employment contract between himself and petitioner Algon which, he insisted,

hired him as a watchman to guard the heavy equipment parked in other leased

house spaces in Libtong, Talacogon, Agusan del Sur. The Court ruled therein that:

 No particular evidence is required to prove the existence of an

employer-employee relationship. All that is necessary is to show that the employer is capable of exercising control over the employee. In labor disputes, it suffices that there be a casual connection between the claim asserted and the employer-employee relations. 

The elements of an employer-employee relationship are: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) employer’s own power to control employee’s conduct. Control of the employee’s conduct is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. In the case at bar, there is no doubt that petitioner exercises control over Espinosa’s conduct, as shown by the fact that, rather than address the loss of batteries as a breach of the purported contract of lease, the memorandum instead emphasized the company rules and regulations and

the fact that Espinosa was “on duty” at the time of the said loss. Moreover, the petitioner’s act of transferring Espinosa to the day shift clearly shows its treatment of Espinosa as an employee, and not as a landlord. Thus, an employer-employee relationship exists where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such an end. (Emphasis supplied.)

 

          4.       Even when faced with the contention that the relationship between two

parties was in the nature of a lawyer-client relationship, the Court, in Equitable

Banking Corporation v. National Labor Relations Commission,[21] still employed

the control test, a strictly labor law concept, to determine the existence of an

employer-employee relationship. There, Ricardo L. Sadac was engaged in 1981 as

Equitable’s Vice-President for the legal department and as its General Counsel. In

1989, nine (9) lawyers of the legal department issued a letter-petition to the

chairperson of the board of the bank accusing private respondent of abusive

conduct, inefficiency, mismanagement, ineffectiveness and indecisiveness. Later,

the lawyers threatened to resign en masse if Sadac was not relieved as the head of

the legal department. After a formal investigation of the charges, Sadac was

advised that he would be substituted as the bank’s legal counsel. Sadac charged the

bank with illegal dismissal. The bank in turn denied the existence of an employer-

employee relationship between it and Sadac. The Court stated in its Decision that:

 In determining the existence of an employer-employee

relationship, the following elements are considered: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal, and (4) the power to control the employee's conduct, with the control test generally assuming primacy in the overall consideration. The power of control refers to the existence of the power and not necessarily to the actual exercise thereof.  It is not essential, in other words, for the employer to actually supervise the performance of duties of the employee; it is enough that the former has the right to wield the power. (Emphasis supplied.)

 

          5.       In Lazaro v. Social Security Commission,[22] Rosalina M. Laudato was

a sales supervisor of Royal Star Marketing, the proprietor of which was Angelito

L. Lazaro. Laudato claimed that the company failed to report her and remit her

contributions as an employee, to the Social Security System (SSS). Denying that

Laudato was a sales supervisor of Royal Star Marketing, Lazaro claimed that the

former was only a sales agent earning on a commission basis. He added that

Laudato did not maintain definite hours of work and therefore could not be

considered as an employee of Royal Star Marketing. The Court, in determining the

true relationship of the parties, did not apply the provisions of the Civil Code on

agency. Rather, the labor law concept of the control test was applied to determine

the relationship of the parties. The Court ruled therein that: 

Lazaro’s   arguments   may   be   dispensed   with   by   applying precedents.  Suffice it to say, the fact that Laudato was paid by way of commission   does   not   preclude   the   establishment   of   an   employer-employee   relationship.  In Grepalife v. Judico, the Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite the fact that the compensation that the agents on commission received was not paid by the company but by the investor or the person insured. The relevant factor remains, as stated earlier, whether the “employer” controls or has reserved the right to control the “employee” not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.

 

Neither   does   it   follow   that   a   person  who   does   not   observe normal   hours   of   work   cannot   be   deemed   an employee.  In Cosmopolitan Funeral Homes, Inc. v. Maalat,   the employer   similarly   denied   the   existence   of   an   employer-employee relationship,   as   the   claimant   according   to   it,  was   a   “supervisor   on commission  basis”  who did  not  observe  normal  hours  of  work.  This Court   declared   that   there  was   an   employer-employee   relationship, noting   that   “[the]   supervisor,  although  compensated  on  commission 

basis, [is] exempt from the observance of normal hours of work for his compensation is measured by the number of sales he makes.”

 

 It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus was subject to the control of management as to how she implements its policies and its end results. x x x (Emphasis supplied.)

 

          6.       While in Dealco Farms, Inc. v. National Labor Relations Commission

(5th Division),[23] the Court declared the workers as employees of Dealco farms and

not independent contractors. There, Albert Caban and Chiquito Bastida were hired

by Dealco as escorts or “comboys” for the transit of live cattle

from General Santos City to Manila in 1993. Sometime 1999, Caban and Bastida

were summarily replaced.  Thus, they filed a case for illegal dismissal. Dealco

claimed that Caban and Bastida were in fact independent contractors hired by the

buyers of the cattle who arranged for the transport thereof to Manila. The Court

again did not take into consideration provisions of the Civil Code on Contracts for

a Piece of Work and instead used the four-fold test to determine the true nature of

the parties’ relationship. The Court ruled:Regrettably, upon an evaluation of the merits of the petition, we

do not find cause to disturb the findings of the Labor Arbiter, affirmed by the NLRC, which are supported by substantial evidence. 

The well-entrenched rule is that factual findings of administrative or quasi-judicial bodies, which are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality, and bind the Court when supported by substantial evidence. Section 5, Rule 133 defines substantial evidence as “that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.” 

Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in labor cases. We may take cognizance of and resolve factual issues only when the findings of fact and conclusions of law of the Labor Arbiter are inconsistent with those of the NLRC and the CA. 

In the case at bench, both the Labor Arbiter and the NLRC were one in their conclusion that respondents were not independent contractors, but employees of petitioner. In determining the existence of an employer-employee relationship between the parties, both the Labor Arbiter and the NLRC examined and weighed the circumstances against the four-fold test which has the following elements: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control the employees’ conduct, or the so-called “control test.” Of the four, the power of control is the most important element. More importantly, the control test merely calls for the existence of the right to control, and not necessarily the exercise thereof.             x x x x             We reject petitioner’s self-serving contention. Having failed to substantiate its allegation on the relationship between the parties, we stick to the settled rule in controversies between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the former’s favor. The policy is reflected in no less than the Constitution, Labor Code and Civil Code. (Emphasis supplied.)

 

7.       Similarly, in South Davao Development Company, Inc. v. Gamo,[24] the Court refused to apply the provisions of the Civil Code on Contract for a

Piece of Work to a copra maker contractor and instead used the control test to

determine the worker’s relationship with the company. South Davao Development

Company was the operator of a coconut and mango farm in San Isidro, Davao

Oriental and Inawayan/Baracatan, Davao del Sur. Sometime in August 1963, the

company hired respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in

1987, Gamo was appointed as a copra maker contractor. Ernesto Belleza, Carlos

Rojas, Maximo Malinao were all employees in petitioner’s coconut farm, while

respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan

were assigned to petitioner’s mango farm. All of the abovenamed respondents

(copra workers) were later transferred by petitioner to Gamo as the latter’s

copraceros. The Court ruled in that case that the workers must be considered as

employees of the company as the latter exercised control over the workers as

evidenced by its power to transfer the copra workers as its employees to that of

Gamo:

 In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in charge of the copra workers although under a different payment scheme. Thus, it is clear that an employer-employee relationship has existed between petitioner corporation and respondents since the beginning and such relationship did not cease despite their reassignments and the change of payment scheme. (Emphasis supplied.)      

 

8.       While   in Abante v. Lamadrid Bearing & Parts Corp.,[25] despite   the allegation that the worker was a commission salesman, the Court still used the four-fold test to determine the existence of an employer-employee relationship. The worker, Empermaco B. Abante, Jr., was employed by respondent company Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of Mindanao.  Sometime  in  2001,  Abante  was   informed  by  his   customers   that Lamadrid had  issued a  letter  informing them that Abante was no  longer their salesman. Thereafter, Abante filed a case against Lamadrid for illegal dismissal. Lamadrid,   for   its  part,  argued that  Abante was not   its  employee but  rather  a freelance salesman on commission basis. The Court ruled therein:

 

We   are   called   upon   to   resolve   the   issue   of  whether   or   not petitioner,  as a commission salesman,  is  an employee of  respondent corporation.To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test,

namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important. The so-called “control test” is commonly regarded   as   the   most   crucial   and   determinative   indicator   of   the presence or absence of an employer-employee relationship. Under the control   test,   an   employer-employee   relationship   exists   where   the person   for  whom   the   services   are   performed   reserves   the   right   to control not only the end achieved, but also the manner and means to be used in reaching that end. (Emphasis supplied.)

 

Verily,   based   on   the   above-mentioned   sample   of   numerous   cases,   the Court has invariably applied labor laws and doctrines, particularly the four-fold and  control   test,   over  Civil  Code  provisions,   to  determine   the   relationship  of parties where an employer-employee relationship is alleged, without regard to the industry or otherwise alleged relationship of the parties. The Court cannot now deviate   from established precedents.  The  four-fold  test  must  be used to determine whether Tongko was an employee of Manulife or not,  and not the Insurance Code or Civil Code as claimed by Manulife.

 

Using the Four-Fold Test, Manulife exercised control over Tongko

 

As   a  matter   of   long   and   settled   jurisprudence,   the   following   are   the elements, constituting the four-fold test, usually considered in determining the existence   of   an   employer-employee   relationship:   (a)   the   selection   of   the employee;   (b)   the payment  of  wages;   (c)   the  power  of  dismissal;  and  (d)   the power to control the employee’s conduct, with the “control test” being the most crucial[26] or generally assuming primacy in the overall consideration.[27]

 

In Meteoro v. Creative Creatures, Inc.,[28] the   Court   stated   that   in   the determination   of   the   existence   of   an   employer-employee   relationship,   any competent and relevant evidence may be considered, to wit:

 

To resolve the issue raised by respondent, that is, the existence of   an   employer-employee   relationship,   there   is   need   to   examine evidentiary  matters.   The   following   elements   constitute   the   reliable yardstick   to   determine   such   relationship:   (a)   the   selection   and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct. There is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to prove the relationship may be admitted.Identification cards, cash vouchers, social   security   registration,   appointment   letters   or   employment contracts,  payrolls,  organization charts,  and  personnel   lists,   serve  as evidence   of   employee   status.   These   pieces   of   evidence   are   readily available, as they are in the possession of either the employee or the employer; and they may easily be looked into by the labor inspector (in the course of   inspection)  when confronted with the question of   the existence or absence of an employer-employee relationship.

 

Some businessmen, however, try to avoid an employer-employee relationship   from   arising   in   their   enterprises,   because   that   juridical relation spawns obligations connected with workmen’s compensation, social   security,   medicare,   termination   pay,   and   unionism. Thus, in addition to the above-mentioned documents, other pieces of evidence are considered in ascertaining the true nature of the parties’ relationship. This is especially true in determining the element of “control.” The   most   important   index   of   an   employer-employee relationship   is   the   so-called   “control   test,”   that   is,   whether   the employer controls or has reserved the right to control the employee, not only as to the result of the work to be done, but also as to the 

means   and   methods   by   which   the   same   is   to   be   accomplished. (Emphasis supplied.)

 

 The NLRC,   taking  stock  of   the affidavits  of  petitioner’s   fellow  insurance managers   therein  detailing  their  duties,  had concluded that  petitioner  was an employee of  Manulife.   Indeed,   the duties,   responsibilities  and undertakings  of these insurance managers are strikingly similar to those of Ernesto and Rodrigo Ruiz,  as set forth  in the Decision in Great Pacific Life Assurance Corporation v. NLRC.[29] There,   the  Court  decreed   that   the  brothers  Ruiz  were  employees  of Grepalife. The reasons behind the declaration need no belaboring. Suffice it to state that vis-à-vis the Ruizes in Grepalife, Manulife had control of the means and methods employed by the petitioner in the performance of his work as a manager of  Manulife.   Following   the stare decisis rule,   there   seems   to  be  no   rhyme  or reason   to   withhold   from   herein   petitioner   the   benefits   accruing   from   an employer-employee relationship.

 

Thus, in the Court’s November 7, 2008 Decision, finding that Tongko was Manulife’s employee, it was ruled that:

 

More importantly, Manulife’s evidence establishes the fact that Tongko was tasked to perform administrative duties that establishes his employment with Manulife.

 

In   its  Comment   (Re:  Petition  for  Review dated 15  April  2005) dated   August   5,   2005,   Manulife   attached   affidavits   of   its   agents purportedly   to   support   its   claim   that   Tongko,   as   a   Regional   Sales Manager, did not perform any administrative functions. An examination of these affidavits would, however, prove the opposite.

 

In  an Affidavit  dated April  28,  2003,   John D.  Chua,  a  Regional Sales Manager of Manulife, stated:

 

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager (RSM) for Metro South Region pursuant to an Agency Contract.  As such RSM,  I have the following functions:

 

1. Refer and recommend prospective agents to Manulife

2. Coach agents to become productive

3. Regularly meet with, and coordinate activities of agents affiliated to my region.

 

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 2003 that:

 

 3. In January 1997, I was assigned as a Branch Manager (BM) of Manulife for the Metro North Sector;

 

4. As such BM, I render the following services:

 

a. Refer and recommend prospective agents to Manulife;

b. Train and coordinate activities of other commission agents;

c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of other commission agents;

 d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and recruitment goals; and

 e.  Sell  the various products of Manulife to my personal clients.

 

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 2003 that:

 

3. In 1977, I was assigned as a Unit Manager (UM) of North Peaks Unit, North Star Branch, Metro North Region;

 

4. As such UM, I render the following services:

 

a.   To   render   or   recommend   prospective   agents   to   be licensed,  trained and contracted to sell  Manulife products and who will be part of my Unit;

b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities, making sure that their respective sales targets are met;

c. To conduct periodic training sessions for my agents to further enhance their sales skills.

d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one evaluation and analysis of particular accounts.

e.   To   provide   opportunities   to  motivate  my   agents   to succeed like conducting promos to increase sales activities and encouraging   them   to   be   involved   in   company   and   industry activities.

f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the LUCAP (Life Underwriters Association of the Philippines).

 

A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific Life Assurance Corporation reveals   a   striking   similarity   that  would  more   than   support   a   similar finding   as   in   that   case.   Thus,   there   was   an   employer-employee relationship between the parties. (Emphasis supplied.)

 

In comparison,  in Great Pacific Life Corporation v. NLRC (Grepalife),[30] the Court stated:

 

Furthermore,   it   cannot  be  gainsaid   that  Grepalife  had  control over  private respondents’  performance as well  as   the result  of   their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by  which   their   jobs  are   to  be  carried  out.   For   instance,   the  District Manager must properly account, record and document the company’s funds spot-check andaudit the work of the zone supervisors, conserve the company’s business in the district through ‘reinstatements’, follow up the submission of weekly remittance reports of the debit agents and zone supervisors,  preserve company property in good condition, train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other   hand,   a   zone   supervisor  must direct and supervise the sales

activities of the debit agents under him, conserve company property through   “reinstatements”,  undertake  and  discharge   the   functions  of absentee  debit   agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents. (Emphasis supplied.)

 

A close scrutiny of the duties and responsibilities of the Manulife managers with those of the Ruizes would show a striking similarity that cannot be denied. More so, taking the aggregate of the evidence presented in this case, a just and objective mind cannot but conclude that, as in Grepalife, the Manulife managers are also employees of Manulife.

 

 

In Equitable Banking Corporation,[31] the Court ruled:

 

The NLRC, in the instant case, based its finding that there existed an   employer-employee   relationship   between   petitioner   bank   and private respondent on these factual settings:

 

“It   was   complainant’s   understanding   with   respondent Morales that he would be appointed and assigned to the Legal Department  as  vice  President  with   the  same salary,  privileges and benefits granted by the respondent bank to its ranking senior officers. He was not hired as lawyer on a retainership basis but as an officer of the bank.

 

“Thus, the complainant was given an appointment as Vice President,   Legal  Department,  effective  August  1,  1981,  with  a monthly   salary  of  P8,000.00,  monthly  allowance  of  P4,500.00, and the usual two months Christmas bonus based on basic salary likewise enjoyed by the other officers of the bank.

 

“Then,  as  part  of   the  ongoing  organization of   the  Legal Department,   the position of  General  Counsel  of   the bank was created   and   extended   to   the   complainant.   In   addition   to   his duties as Vice President  of  the bank,  the complainant’s  duties and responsibilities were so defined as to prove that he was a bank officer working under the supervision of the President and the Board of Directors of the respondent bank.

 

“In   his   more   than   eight   years   employment   with   the respondent bank, the complainant was given the usual payslips to  evidence  his  monthly   gross   compensation.  The   respondent bank, as employer, withheld taxes due to the Bureau of Internal Revenue from the complainant’s salary as employee. Moreover, the  bank enrolled   the complainant  as   its  employee under   the Social Security System and Medicare programs. The complainant contributed to the bank Employees’ Provident Fund.

 

“When   the   respondent   bank   changed   its   payroll accounting system in September 1988 by appointing SGV & Co. to  handle   it   and  Far   East  Bank  &  Trust  Company   to  pay   the salaries   and   other   benefits   of   Equitable   Banking   Corporation officers,   the   complainant   was   included   as   one   of   corporate officers.  Specifically,  that there were eleven Far East Bank and Trust  Company credit  memos starting October 13,  1988 up to September   13,   1989   received   by   the   complainant   from   FBTC 

crediting his salary and Christmas bonus to his account with FBTC per instruction of the respondent bank.

 

“In  as  much as   the complainant  and the  lawyers   in   the Legal Department were receiving salaries and other benefits as other   bank   officers   and   employees,   the   attorney’s   fees, documentary  and notarial   fees earned  in  the exercise  of   their profession as in-house lawyers were not given to or even shared with them, instead all were credited to the income of the bank. In 1987 and 1988, the complainant and his subordinate lawyers were able to generate by way of attorney’s fees, documentary and notarial fees a total income of P973,028.00 for the bank(’s) benefit.   In   turn,   the   respondent   bank   shouldered   the professional tax and Integrated Bar of the Philippines dues of the complainant   and  his   subordinate   lawyers. Further proofs that there existed employer-employee relationship between the respondent bank and the complainant are the following, to wit:

“(1) Complainant’s monthly attendance, like those of other bank officers, was recorded by the Chief Security Officer and reported to the Office of the President with copy of the report furnished to the bank Personnel and HRD Department.

“(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts covering legal services of lawyers to be retained by the respondent bank for its branches on periodical retainership basis.

“(3) Complainant participated as part of management in annual Management Planning Conferences which started in 1986 on objective-setting and long-range planning in response to the requirement of the rapidly changing environment.

“(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified senior officer of the bank.

“(5) Respondent bank since 1982 continuously reported and included the complainant as one of its senior officers in its statements of financial condition holding the position of Vice President. These bank statements have been distributed and circularized to the public, including bank clients and government entities.

“(6) Complainant, like other bank officers, prepared his biographical data for submission to the Central Bank after his assumption of duties in 1981. Thereafter, and pursuant to the regulations of the Central Bank, he has been required to update annually his biographical data."

 

It would virtually be foolhardy to so challenge the NLRC as having committed   grave   abuse   of   discretion   in   coming   up  with   its   above findings. Just   to   the   contrary,   NLRC   appears   to   have   been   rather exhaustive in its examination of this particular question (existence or absence   of   an   employer-employee   relationship   between   the parties).  Substantial   evidence,   which   is   the   quantum   of   evidence 

required to establish a fact  in cases before administrative and quasi-judicial   bodies,   connotes  merely   that   amount   of   relevant   evidence which a reasonable mind might accept to be adequate in justifying a conclusion. (Emphasis supplied.)

 

Here, by virtue of designating Tongko initially as a Unit Manager and later on   as   a   Regional  Manager,  Manulife  must   be   deemed   as   having   considered Tongko as an officer of the company. Furthermore, Tongko has been involved in Manulife’s manpower development programs. Thus, just as in Equitable Banking Corporation, Tongko must be considered as an employee of Manulife.

 

While in Aboitiz Haulers, Inc. v. Damapatoi,[32] Dimapatoi and several other individuals worked as checkers in Mega Warehouse, which Aboitiz Haulers, Inc. owned. Aboitiz claimed that the complaining workers are not its employees, but rather,   of  Grigio   Security   Agency   and  General   Services   (Grigio),   a  manpower agency that supplies security guards, checkers and stuffers.  It allegedly entered into a Written Contract of Service with Grigio in 1994. The workers’ services were terminated by Aboitiz on the pretext  that  its  contract  with Grigio had already expired.   In   this   case,   the  Court   found   that  Aboitiz  was   the   employer   of   the workers exercising control over them:

 

Petitioner’s   allegation   that   Grigio   retained   control   over   the respondents by providing supervisors to monitor the performance of the respondents cannot be given much weight.  Instead of exercising their own discretion or referring the matter to the officers of Grigio, Grigio’s supervisors were obligated to refer to petitioner’s supervisors any discrepancy in the performance of the respondents with their specified duties. The Written Contract of Services provided that:

 

5.c.   That   the   GRIGIO   personnel,   particularly   the supervisors, shall perform the following:

 

The Supervisor for the warehouse operation shall monitor the performance and productivity of all the checkers, jacklifters, stuffers/strippers,   forklift   operators,   drivers,   and   helpers.  He shall coordinate with AHI’s supervisors regarding the operations at the Warehouse to ensure safety at the place of work.

 

He  shall   see   to   it   that   the  cargoes  are  not  overlanded, shortlanded, delivered at a wrong destination, or misdelivered to consignee’s   port   of   destination.  Any   discrepancy   shall   be reported   immediately   to   AHI’s   Logistic   Manager,   Mr.   Andy Valeroso.

 

The control exercised by petitioner’s supervisors over the performance of respondents was to such extent that petitioner’s Warehouse Supervisor, Roger Borromeo, confidently gave an evaluation of the performance of respondent Monaorai Dimapatoi, who likewise felt obliged to obtain such Certification from Borromeo.

 

Petitioner’s control over the respondents is evident.  And it is this right to control the employee, not only as to the result of the work to be done, but also as to the means and methods by which the same is to be   accomplished,   that   constitutes   the  most   important   index  of   the existence of the employer-employee relationship. (Emphasis supplied.)

 

With   this  case,   it  becomes  apparent   that   supervision  and  monitoring   is sufficient   to   establish   control   that   is   evidence   of   an   employer-employee relationship. Such control would, therefore, be even more evident in the instant case considering that Tongko himself was tasked to supervise and monitor the activities of Manulife agents. Moreover, it may be gleaned from the records of the case that Tongko reported to Manulife with regard the performance of his agents. It was not, as if, Tongko was left alone to supervise, and perhaps, discipline such agents. Tongko must be deemed as an employee of Manulife.

 

In fact, in Lazaro,[33] the Court ruled that a Sales Supervisor was considered an employee as she “oversaw and supervised the sales agents of the company”:

 

Lazaro’s   arguments   may   be   dispensed   with   by   applying precedents.  Suffice it to say, the fact that Laudato was paid by way of commission   does   not   preclude   the   establishment   of   an   employer-employee   relationship.  In Grepalife v. Judico,   the   Court   upheld   the existence of an employer-employee relationship between the insurance company and its agents, despite the fact that the compensation that the agents on commission received was not paid by the company but by the   investor  or   the  person   insured.   The   relevant   factor   remains,   as stated earlier,  whether   the  “employer”  controls  or  has   reserved the right to control the “employee” not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.

 

Neither   does   it   follow   that   a   person  who   does   not   observe normal   hours   of   work   cannot   be   deemed   an employee.  In Cosmopolitan Funeral Homes, Inc. v. Maalat,   the employer   similarly   denied   the   existence   of   an   employer-employee relationship,   as   the   claimant   according   to   it,  was   a   “supervisor   on 

commission  basis”  who did  not  observe  normal  hours  of  work.  This Court   declared   that   there  was   an   employer-employee   relationship, noting   that   “[the]   supervisor,  although  compensated  on  commission basis, [is] exempt from the observance of normal hours of work for his compensation is measured by the number of sales he makes.”

 

 It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales supervisor and not a mere agent. As such, Laudato oversaw and supervised the sales agents of the company, and thus was subject to the control of management as to how she implements its policies and its end results. x x x

 

The   finding   of   the   SSC   that   Laudato   was   an employee   of   Royal   Star   is   supported   by   substantial   evidence.  The SSC examined the cash vouchers issued by Royal Star to Laudato, calling cards of Royal Star denominating Laudato as a “Sales Supervisor” of the company,   and   Certificates   of   Appreciation   issued   by   Royal   Star   to Laudato in recognition of her unselfish and loyal efforts in promoting the   company.  On   the  other  hand,   Lazaro  has   failed   to  present   any convincing  contrary  evidence,   relying   instead on  his  bare  assertions. The Court of Appeals correctly ruled that petitioner has not sufficiently shown that the SSC’s ruling was not supported by substantial evidence.

 

 A   piece   of   documentary   evidence   appreciated   by   the   SSC   is Memorandum dated 3 May 1980 of Teresita Lazaro, General Manager of Royal Star,  directing that no commissions were to be given on all “main office” sales from walk-in customers and enjoining salesmen and sales supervisors to observe this new policy. The Memorandum evinces the fact that,  contrary to Lazaro’s claim, Royal Star exercised control over its sales supervisors or agents such as Laudato as to the means and 

methods   through   which   these   personnel   performed   their   work. (Emphasis supplied.)

 

Tongko was held out  as  an officer of  Manulife  by Manulife   itself,  being tagged   as   its  Manager.  He  was   tasked   to   supervise   the   insurance   agents   of Manulife.   Clearly,   the Lazaro case   must   apply   to   Tongko   and   he   must   be considered an employee of Manulife.   

 

Furthermore, the letter of De Dios itself also contained several indicia of control. To reiterate, it was stated in the letter that:

 

All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we have been discussing these past few weeks, i.e., Manulife’s goal to become a major agency-led distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it comes to agency growth.

 

x x x x

 

I   cannot   afford   to   see   a  major   region   fail   to   deliver   on   its developmental  goals  next  year  and so,  we are making the  following changes in the interim:

 

1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be

easily delegated. This   assistant   should   be   so   chosen   as   to complement your skills and help you in the areas where you feel “may not be your cup of tea”.

 

You have stated, if not implied, that your work as Regional Manager  may be  too   taxing   for  you and  for  your  health.  The above could solve this problem.

 

x x x x

 

2. Effective immediately, Kevin and the rest of the Agency Operations   will   deal   with   the   North   Star   Branch   (NSB)   in autonomous fashion. x x x

 

I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining groups. (Emphasis supplied.)

 

The goal of Manulife was to become an agency-driven insurance company. If Tongko were indeed not an employee of Manulife, the company would not set the means and methods to achieve such goal.  As  long as Tongko was able to recruit   the   set  number  of  agents,   there  would  be  no   reason   for  Manulife   to terminate his services as an  independent contractor.  However,  that  is  not the case here. It may be gleaned from the letter that De Dios is directing Tongko to clamor more actively his peers and his agents to recruit other agents. It was not 

sufficient that Tongko, by himself, recruit agents. This directive certainly shows that Manulife sought to prescribe the means and methods to achieve its goal.

 

De  Dios   further  ordered  Tongko   to  hire  at  his  expense  an  assistant  on whom he  “can  unload  you  of  much  of   the   routine   tasks  which  can  be  easily delegated.” There is no other way to classify this order but as an intrusion into the means and methods of achieving the company’s goals.

 

In the letter, Tongko was also informed that his area of responsibility was going to be reduced. In Megascope General Services v. National Labor Relations Commission,[34] between   February   15,   1977   and   January   1,   1989,   petitioner contracted   the   services   of   several   individuals   as   gardeners,   helpers   and maintenance  workers.   These   workers   were   deployed   at   the   National   Power Corporation in Bagac, Bataan.  Except for Gener J. del Rosario whose employment ended on April 30, 1989, the work of the other workers ceased on January 31, 1991. Consequently,  private respondents filed a complaint  for  illegal  dismissal, underpayment of salaries, nonpayment of five-day service incentive leave credits and holiday pay against petitioner with the NLRC. The Court ruled therein that the company exercised control over the workers that would establish an employer-employee relationship when  it  reassigned the workers  from one workplace to another:

 

Private respondents were selected and hired by petitioner which assigned them to  the NPC housing village   in  Bagac  and  in  Km.  168, Morong, Bataan.  They   drew   their   salaries   from   petitioner   which eventually   dismissed   them.  Petitioner’s   control   over   private respondents was manifest in its power to assign and pull them out of clients   at   its  own  discretion.  Power  of   control   refers  merely   to   the existence of the power and not to the actual exercise thereof. It is not 

essential   for   the  employer   to  actually   supervise   the  performance  of duties of the employee. It is enough that the former has the right to wield the power.

 

In South Davao Development Company, Inc.,[35] the  Court   ruled   that   the workers must be considered as employees of the company as the latter exercised control over the means and methods employed by the workers to achieve their objective,   as   evidenced   by   its   power   to   transfer   the   copra   workers   as   its employees to that of Gamo:

 

In   this   case,   it   was   in   the   exercise   of   its   power   of   control   when petitioner   corporation   transferred   the   copra   workers   from   their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in charge of the copra workers although under a different payment scheme. Thus, it is  clear that an employer-employee relationship has existed between petitioner corporation and respondents since the beginning and such relationship did not cease despite their reassignments and the change of payment scheme.

Similarly,   in   the   instant   case,   by   limiting   the   area   of   responsibility   of Tongko,   this   is   akin   to   a   transfer   or   reassignment,   an   exercise  of   control   by Manulife   over   Tongko   that  must   necessarily   determine   the   existence   of   an employer-employee relationship.

 

On the same issue, Justice Carpio-Morales added in her Dissenting Opinion to the June 29, 2010 Resolution that:

 

 More significantly, in the succeeding Insular Life case, the Court found   the   following   indicators  material   in   finding   the   presence   of control in cases involving insurance managers:

 

Exclusivity of service, control of assignments and removal of   agents   under   private   respondent’s   unit,   collection   of premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner. x x x

 

The ponencia concludes that “[a]ll these are obviously absent” in petitioner’s  case.  The facts  show otherwise,  however.  On top of  the exclusive   service   rendered   to   respondent,  which AFP Mutual Benefit Association, Inc. v. NLRC instructs to be not controlling,  other factors were present. Petitioner established no agency of his own as the Metro North Region to which he was assigned remained intact even after his ties with respondent were severed. Respondent provided and furnished company   facilities,   equipments   and   materials   for   petitioner   at respondent’s Makatioffice.   Respondent’s   control   of   assignments  was evident from its act of removing the North Star Branch from petitioner’s scope  of   the  Metro  North  Region,  on  which  a   “memo  to   spell   this matter   out   in   greater   detail”   was   advised   to   be   issued   shortly thereafter. Respondent reserved to impose other improvements in the region   after  manifesting   its   intention   to   closely   follow   the   region. Respondent’s   managers,   like   petitioner,   could   only   refer   and recommend to respondent prospective agents who would be part of their respective units. In other words, respondent had the last say on the composition and structure of the sales unit or region of petitioner. Respondent,   in   fact,   even   devised   the   deployment   of   an   Agency 

Development   Officer   in   the   region   to   “contribute   towards   the manpower   development  work   x   x   x   as   part   of   our   agency   growth campaign.”

 

Such   an   arrangement   leads   to  no  other   conclusion   than   that respondent   exercised   the   type   of   control   of   an   employer,   thereby wiping away the perception that petitioner was only a “lead agent” as viewed   by   the   ponencia.   Even   respondent   sees   otherwise  when   it rebuked petitioner   that  “[y]ou   (petitioner)  may have excelled   in   the past as an agent but, to this date, you still carry the mindset of a senior agent.”   Insofar   as   his   management   functions   were   concerned, petitioner was no longer considered a senior agent.

 

Furthermore,  while   this  Court  has  already   ruled   that  Article  280  of   the Labor Code may not be used to prove the existence of an employer-employee relationship when the same is  denied,[36] the fact  that the work of  the alleged independent contractor is usually necessary or desirable in the usual business or trade of the employer would establish a management structure that would mean that Tongko was Manulife’s employee.

 

Such element of control, however, was only present in the administrative duties   imposed   upon   Tongko   when   he   was   a   manager   of   Manulife.   The Agreement, as well as other the evidence presented, does not show the control necessary to establish an employer-employee relationship while Tongko was just an agent of Manulife. Hence, it is emphasized that it was only upon the imposition of such administrative duties that Tongko was an employee of Manulife and only the consequent change in his remunerations should be considered as his salary. This would consist of his persistency income and management overrides only and not his commissions as an agent.

 

The  majority   would   seem   to   suggest   that   the   notion   of   “control”   as understood in the Labor Code and as applied in labor relations cases differs from the   concept  of   “control”   that  governs   the   relationship  between  an   insurance company and its agents. InGrepalife and in the earlier Insular life Assurance Co. Ltd. v. NLRC (4th Division) (Insular Life),[37] it was distinctly noted that the Court did not   posit   the   dichotomy   presently   parlayed   by   the   majority.   Consider   the following excerpts from Insular Life:

 

Exclusivity   of   service,   control   of   assignments   and   removal   of agents   under   private   respondent’s   unit,   collection   of   premiums, furnishing   of   company   facilities   and   materials   as   well   as   capital described   as   Unit   Development   Fund   are   but   hallmarks   of   the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner.

 

Similarly, Justice Carpio-Morales, in the same Dissenting Opinion, wrote:

 

The Insurance Code may govern the licensing requirements and other  particular   duties  of   insurance   agents,   but it   does  not  bar   the application of the Labor Code with regard to labor standards and labor relations.

 

It bears pointing out that Tongko cannot be considered as an independent contractor   of  Manulife.   There   is   no   evidence   to   establish   such   a   scenario. In Television and Production Exponents, Inc. v. Servaña,[38] the Court enumerates the requirements for a worker to be considered an independent contractor:

 

Aside from possessing substantial capital or investment, a legitimate job contractor   or   subcontractor   carries   on   a   distinct   and   independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the   results   thereof.   TAPE   failed   to   establish   that   respondent   is   an independent contractor. As found by the Court of Appeals:

 

We find the annexes submitted by the private respondents insufficient   to   prove   that   herein   petitioner   is   indeed   an independent contractor.  None of the above conditions exist   in the   case   at   bar.   Private   respondents   failed   to   show   that petitioner has substantial capital or investment to be qualified as an   independent   contractor.   They   likewise   failed   to   present   a written contract which specifies the performance of a specified piece of work, the nature and extent of the work and the term and duration of the relationship between herein petitioner and private respondent TAPE.

 

Here, the records are bereft of any evidence to establish that Tongko had substantial capital or investment to be qualified as an independent contractor.

 

Tongko being allowed the privilege to canvas

insurance applications is not contrary to his employment status

 

The majority described petitioner as a lead insurance agent, at best, the change in his designation––from unit manager to branch manager and then to regional sales manager––being merely reflective of the increase in the number of agents   under   his   guidance   as  well   as   the   increase   in   the   area   of   operation. Tongko, so the majority suggests, never rose to the level of Manulife’s employee, as he did not even present copies of his managerial appointment to prove the fact that his agency relationship changed in the sense that Manulife controlled the means and methods of his work. The majority posits that even though the other managers of Manulife admitted to having duties and responsibilities other than those  contained   in  a  Career  Agents  Agreement,  Tongko  could  not  have  been anything other than an agent.

 

With due respect, I beg to disagree with this posture.

 

It may be stated, as a general proposition, that an insurance agent––who usually sells insurance at his convenience following his own selling methods and who, for the most part, is governed by a set of rules[39] the company promulgates to guide its commission agents in selling its policies that they may not run afoul of the law––is not an employee. But as explained for reasons stated in my Dissent to the June 29, 2010 Resolution, Manulife, upon the petitioner’s appointment as manager,  exercised effective control not only over the results of his work, but also over the means and methods by which it is to be accomplished. For sure, petitioner, while acting as Manulife’s unit or branch manager, was allowed to sell insurance   policies.  And   there   is   nothing   absurd,   let   alone   novel   about   an employee of an insurance company being given the privilege to solicit insurance.

 

In two (2) cases, the Court has already ruled that an individual may be an employee   of   an   insurance   agency   while   concurrently   being   allowed   to   sell insurance   policies   for   the   same   company.   In   the Insular Life case,[40] Insular 

Assurance Co., Ltd. (Insular) entered into an agency contract with Pantaleon de los Reyes authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of commissions.  Later,  on March 1,  1993,  the same parties entered  into another contract where de los Reyes was appointed as Acting Unit Manager. The duties and   responsibilities   of   de   los   Reyes   included   the   recruitment,   training, organization   and   development  within   his   designated   territory   of   a   sufficient number of qualified, competent and trustworthy underwriters, and to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new business  and  in   the   furtherance  of   the  agency’s  assigned goals.  We also stated that:

 

“Aside from soliciting insurance, De los Reyes was also expressly obliged   to   participate   in   the   company’s   conservation   program,   i.e., preservation  and  maintenance  of   existing   insurance  policies,   and   to accept moneys duly receipted on agent’s receipts provided the same were turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes was prohibited from working for other life insurance companies or with the government. He could not also accept a  managerial   or   supervisory   position   in   any   firm   doing   business   in the Philippines without the written consent of petitioner.

 

“Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18 November 1993 that his services were terminated effective 18 December 1993. On 7  March 1994 he filed a  complaint  before  the Labor  Arbiter  on  the ground that  he was  illegally  dismissed and that  he was not paid his salaries and separation pay.” (Emphasis supplied.)

 

The fact that de los Reyes concurrently acted as an agent, selling insurance for Insular, and as an acting Unit Manager, did not prevent the Court from ruling that de los Reyes was Insular’s employee.

 

Similarly,   in   the Grepalife case,[41] the  brothers  Rodrigo   and  Ernesto  Ruiz entered  into agency agreements with Great  Pacific Life Assurance Corporation (Grepalife) for the former to sell the latter’s insurance policies. They started out as trainee agents and later promoted to Zone Supervisor and District Manager, respectively. Describing the brother’s duties, the Court ruled:

 

x x x [T]heir work at the time of their dismissal as zone supervisor and district manager are necessary and desirable to the usual business of   the   insurance   company.   They   were   entrusted   with supervisory, sales and   other   functions   to   guard   Grepalife’s   business interests and to bring in more clients to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully brought to the company.

 

Upon the foregoing factual setting, the Court ruled that the brothers Ruiz are  employees  of  Grepalife,   the   latter  exercising   control  over   the  means  and methods employed by them to reach their objective.

 

Clearly, the fact that an individual acts as an agent of an insurance company is irrelevant to the issue of whether the individual is an employee of the company. The Court has already recognized the reality that an employee of an insurance company may, at the same time, be an agent and allowed to act as such.

 

It may be, as asserted, that petitioner was unable to adduce in evidence copies   of   his   management   contracts   specifying   his   overall   duties   and responsibilities as manager. But then, a management contract,  for purposes of determining the relationship between the worker  and the employer,   is  simply evidence  to  support  a  conclusion either  way.  Such document,  or   the absence thereof,  would not  influence the conclusion on the  issue of employment.  The presence of a management contract would merely simplify the issue as to the duties and responsibilities  of   the employee concerned as  they would  then be clearly  defined.  Moreover,  other  evidence,   like   the   letter  of  De  Dios,  may  be considered to support the contention that he was an employee of Manulife and prove his duties and responsibilities as such.

 

It  may not  be   remiss   to  point  out   that  Tongko  was  dismissed   from his employment with Manulife for his failure to recruit sufficient numbers of agents. As was explained in the November 7, 2008 Decision:

 

The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional  sales management level. Relative thereto, De Dios addressed a letter dated November 6, 2001   to   Tongko   regarding   an  October   18,   2001  Metro  North   Sales Managers Meeting. In the letter, De Dios stated:

The first step to transforming Manulife into a big league player has been very clear to increase the number of agents to at least   1,000   strong   for   a   start.   This   may   seem   diametrically opposed to the way Manulife was run when you first joined the organization.   Since   then,   however,   substantial   changes   have taken place in the organization, as these have been influenced by developments both from within and without the company.

 

Subsequently,   De   Dios   wrote   Tongko   another   letter   dated December 18, 2001, terminating Tongko’s services, thus:

 

It   would   appear,   however,   that   despite   the   series   of meetings   and   communications,   both   one-on-one   meetings between yourself and SVP Kevin O’ Connor, some of them with me,   as  well   as   group  meetings  with   your   Sales  Managers,   all these efforts have failed in helping you align your directions with Managements’ avowed agency growth policy.

 

x x x x

 

On   account   thereof,   Management   is   exercising   its prerogative under Section 14 of your Agents Contract as we are now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter.

 

And   yet,   the   recruitment   of   agents   is   not   among   the   duties   and responsibilities   that  were  designated   to  Tongko   in   the  Agreement.  And  while there may not have been another contract to supersede the Agreement that was presented as evidence, the facts of the case bear out that Tongko was assigned various other duties and responsibilities that were not included therein.

 

 Manulife’s decision not to execute a management contract with petitioner was well within its prerogative.  However, the bare fact of Manulife and petitioner not having executed a management contract, if this were the case, did not reduce the   petitioner   to   a  mere   “lead   agent.”  While   there  was   perhaps   no  written management contract whence petitioner’s duties and undertaking as unit/branch 

manager  may  easily  be  fleshed  out  prefatory   to  determining   if   an  employer-employee relationship with Manulife did exist,  other evidence was adduced to show such duties  and responsibilities.  For  one,   in  his   letter[42] of  November  6, 2001, respondent De Dios addressed petitioner as sales manager. And as I wrote in  my  Dissent   to   the   June  29,   2010  Resolution,   it   is  difficult   to   imagine   that Manulife did not issue promotional appointments to petitioner as unit manager, branch  manager,   and  eventually   regional   sales  manager.   Sound  management practice simply requires an appointment for any upward personnel movement, particularly   when   additional   functions   and   the   corresponding   increase   in compensation are involved.  Then, too, the adverted affidavits of the managers of Manulife   as   to   the   duties   and   responsibilities   of   a   unit   manager,   such   as petitioner,   point   to   the   conclusion   that   these  managers  were   employees   of Manulife, applying the “four-fold” test.

 

Any   lingering   doubt   that   petitioner  was,   by   virtue  of   the  management appointment,   under  Manulife’s   employ   should   be   laid   to   rest   by   its   virtual admission made in its Motion for Reconsideration dated December 3, 2008 that petitioner was dismissed for a just and lawful cause: gross and habitual neglect of duties, inefficiency and willful disobedience of the lawful orders of Manulife, to wit:

 

5.4. And yet, until the November 7 Decision, Respondents never thought for one moment that Petitioner was Manulife’s employee. All the agreements executed with him, his flexible hours, his unsupervised choice of clients and method of selling the products, his ability to take leave anytime, his separate business expenses, his own declarations in his   tax   return,   Respondent   Manulife’s   non-contribution   of   SSS premiums   for   him,   his   non-existence   in   the   company   plantilla, Respondent Manulife’s withholding from him of creditable income tax, 

all consistently showed that Respondent Manulife’s belief was singular in the existence of independent contractorship.

 

x x x x.

 

5.7.   And   yet,   respondent   Manulife   did   indeed   substantially comply   with   the   requirements   for   lawful   dismissal   of   a   regular employee, assuming arguendo that petitioner is one. He was dismissed for a just and lawful cause – for gross disobedience of the lawful orders of   Respondent  Manulife.   Respondents   presented   an   abundance   of evidence demonstrating how termination happened only after failure to meet   company   goals,   after   all   remedial   efforts   to   correct   the inefficiency of Petitioner failed and after Petitioner, as found by the CA, created dissension in Respondent Manulife when he refused to accept the need for improvement in his area and continued to spread the bile of  discontent  and rebellion that  he had generated among the other agents.

 

Notably,   in   the   termination   letter   of  Manulife   that   was   addressed   to Tongko, no mention is made of any valid cause for the termination of his services. No mention was made of any particular rule that Tongko violated leading to his separation. Evidently, Tongko’s termination of employment was without cause. In an apparent about face, Manulife now claims that  it  had a valid cause for the termination of Tongko’s services.

 

While   the   Court   allows   the   presentation   of   inconsistent   defenses, Manulife’s argumentation on this point would destroy its position that Tongko is not its employee. Manulife is essentially pointing out the facts that would show that   it  abided by  the requirements  of   the  Labor  Code on  the dismissal  of  an 

employee.  Article 282,  paragraphs (a)  and (b),  of  the Labor Code requires the presence of valid grounds for the legal dismissal of an employee:

 

Article   282.   Termination   by   employer.   –   An   employer   may terminate an employment for any of the following just causes:

 

(a)    Serious   misconduct   or   willful   disobedience   by   the employee of the lawful orders of his employer or representative in connection with his work;

 

(b)  Gross   and   habitual   neglect   by   the   employee   of   his duties;

 

Stated differently, such requirements are only required of employers with regard to their employees. Manulife had no reason to comply with this provision of law if it did not consider Tongko as an employee. Therefore, the question is begged as to why Manulife deemed it necessary to comply with such provision of law. There is an implied admission that Tongko was Manulife’s employee.

 

The   following   excerpts   appearing   in  my  Dissent   to   the   June   29,   2010 Resolution are self-explanatory: 

 

At this juncture, the Court notes that Manulife has changed its stance on the issue of illegal dismissal. In its Position Paper with Motion to Dismiss filed   before   the   Labor   Arbiter,   in its Motion for Reconsideration (Re: Decision dated 27 September 2004) dated October 11,  2004 filed before the NLRC,  and  in   its Comment dated August  5, 

2006 filed  before   the Court,  Manulife  had consistently  assumed the posture   that   the   dismissal   of   petitioner   was   a   proper   exercise   of termination   proviso   under   the   Career   Agent’s   Agreement.   In   this motion, however, Manulife, in a virtual acknowledgment of petitioner being its employee, contends that the petitioner was “dismissed for a just   and   lawful   cause   –   for   gross   and   habitual   neglect   of   duties, inefficiency  and  willful  disobedience  of   the   lawful  orders.”  Manulife adds that:

 

Respondents   presented   an   abundance   of   evidence demonstrating how termination happened only after failure to meet   company  goals,   after  all   remedial   efforts   to   correct   the inefficiency of Petitioner failed and after Petitioner, as found by the   CA,   created   dissension   in   Respondent  Manulife  when   he refused   to   accept   the  need   for   improvement   in  his   area  and continued to spread the bile of discontent and rebellion that he had generated among the other agents.

 

           

In  all,   I  submit  that petitioner’s  peculiar  circumstances as unit  manager, branch  manager  and  ultimately   regional   sales  manager  of  Manulife,  with   the exclusivity feature of his engagement and his duties as such manager, indicate, at the   very   least,   a prima facieexistence   of   an   employer-employee   relationship, following   the   control   test.   And   given   the   bias   of   the   Constitution,[43]  Labor Code[44] and Civil Code[45]  in favor of labor, any doubt as to the existence of such relationship occasioned by the lack of evidence should be resolved in favor of petitioner and of employment.  In this regard, I hark back anew to what the Court emphatically said in Dealco Farms, Inc. v. National Labor Relations Commission:

 

Having failed to substantiate its allegations on the relationship between   the   parties,   we   stick   to   the   settled   rule   in   controversies between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the former’s favor.[46]   

 

As in Dealco Farms, the sympathies of the Court in this case should be easy and clear. The flip-flopping of the lower tribunals and the change in the Court’s own stand lucidly show the ambiguity and doubt in the application of the labor laws to the instant case. As such, the Court is duty-bound to resolve such doubts in favor of the employee, Tongko.

 

Tongko was illegally dismissed

 

Having established that Tongko was indeed an employee of Manulife when he was a manager thereof, the next question is whether the dismissal was illegal.

 

This must be answered in the affirmative.

 

In the NLRC and the CA, Manulife alleged that Tongko was validly dismissed for   gross   and   habitual   neglect   of   duties,   inefficiency,   as   well   as   willful disobedience of the lawful orders of Manulife. Evidently, such dismissal was due to Tongko’s   failure to recruit  the required number of  agents  from his  area of responsibility.

 

To reiterate, two (2) of the alleged grounds for the dismissal of Tongko fall under Art. 282, paragraphs (a) and (b) of the Labor Code:

 

Article   282.   Termination   by   employer.   –   An   employer   may terminate an employment for any of the following just causes:

(b)   Serious   misconduct   or   willful   disobedience   by   the employee of the lawful orders of his employer or representative in connection with his work;

 

(c)    Gross   and   habitual   neglect   by   the   employee   of   his duties;

 

 

On the other hand, inefficiency as a ground for termination of employment is   equated   with   gross   and   habitual   neglect,   as   the   Court   explained   in St. Luke’s Medical Center, Incorporated v. Fadrigo:[47]

 

Gross inefficiency is closely related to gross neglect, for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business. As a just cause for an employee’s dismissal, inefficiency or neglect of duty must not only be gross but also habitual. Thus, a single or isolated act of negligence does not constitute a just cause for the dismissal of the employee. (Emphasis supplied.)

 

In   cases   of   termination   of   employment   for   just   causes,   the   Court   has repeatedly held that the burden rests on the employer to justify such dismissal. Art. 277, paragraph (b) of the Labor Code states:

 

Article. 277. Miscellaneous provisions. – x x x

 

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and   authorized   cause   and  without   prejudice   to   the   requirement   of notice under Article 283 of this Code, the employer shall  furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance  of  his   representative   if   he   so  desires   in   accordance  with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional  branch of the National  Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. The Secretary of the Department of Labor  and  Employment  may   suspend   the  effects  of   the   termination pending resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before whom such dispute is pending that the termination may cause a serious   labor   dispute   or   is   in   implementation   of   a   mass   lay-off. (Emphasis supplied.)

 

Thus, the Court has ruled in Caltex (Philippines), Inc. v. Agad[48] that:

 

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. When there is no showing of a clear, valid, and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal and the burden is on 

the   employer   to   prove   that   the   termination   was   for   a   valid   or authorized cause.

 

The  quantum of  proof  which   the  employer  must  discharge   is substantial   evidence.   An   employee’s   dismissal   due   to   serious misconduct  and   loss  of   trust  and  confidence  must  be   supported  by substantial evidence. Substantial evidence is that amount of relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise.

 

 

While in Lima Land, Inc. v. Cuevas,[49] the Court ruled:

 

Well-settled is the rule that the essence of due process is simply an opportunity to be heard or, as applied to administrative proceedings, an   opportunity   to   explain   one’s   side   or   an   opportunity   to   seek   a reconsideration of the action or ruling complained of.

 

Moreover,   in   dismissing   an   employee,   the   employer   has   the burden of proving that the former worker has been served two notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other to inform him of his employer’s decision to dismiss  him.  The first  notice must  state  that  dismissal   is sought   for   the   act   or   omission   charged   against   the   employee, otherwise, the notice cannot be considered sufficient compliance with the rules.

 

The first written notice to be served on the employees should contain the specific causes or grounds for termination against  them, and a directive that the employees are given the opportunity to submit their   written   explanation   within   a   reasonable   period.   “Reasonable opportunity” under the Omnibus Rules means every kind of assistance that  management  must  accord to the employees  to enable  them to prepare adequately   for their  defense.  This  should be construed as a period of at least five (5) calendar days from receipt of the notice to give   the   employees   an  opportunity   to   study   the   accusation   against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in   order   to   enable   the   employees   to   intelligently   prepare   their explanation   and   defenses,   the   notice   should   contain   a   detailed narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of the charge will not   suffice.   Lastly,   the   notice   should   specifically   mention   which company rules, if any, were violated and/or which among the grounds under Article 282 is being charged against the employees.

 

Manulife   has   failed   to   overcome   such  burden.  Willful   disobedience,   to justify   termination   from   employment,   must   comply   with   the   following requirements, as enunciated in Areno v. SkyCable PCC-Baguio,[50] to wit:

 

As a just cause for dismissal of an employee under Article 282 of the Labor Code,  willful  disobedience of  the employer’s   lawful  orders requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, i.e., characterized by a wrongful and perverse   attitude;   and   (2)   the   order   violated   must   have   been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge.

 

Neglect of duty, to be a valid ground for termination of employment must also  conform to   the   following   requirements,  as   stated   in Benjamin v. Amellar Corporation:[51]

 

It   bears   stressing   in   dismissing   an   employee   for   gross   and habitual neglect of duties, the negligence should not merely be gross. It should also be habitual. There being nothing in the records to identify what specific duties Anabel violated and whether the violations were gross and habitual, any discussion herein is an exercise in futility.

 

Here, Manulife has failed to identify the rule and the standards by which Tongko’s   acts  were   considered  unsatisfactory.   There  were  no   set   criteria   for determining the sufficiency of Tongko’s recruitment efforts. Moreover, Tongko’s acts were not proved to be willful or gross and habitual as defined by the above-cited jurisprudence. Absent proof establishing such factors, Manulife cannot be considered to have discharged the burden required to prove that the just cause for termination of employment was indeed present. In fact, at the time Tongko’s services were terminated, his area was not the last in agent recruitment. As such, Tongko’s dismissal smacks of arbitrariness.

 

Informal communications violate the principle of sub judice

 

On a final note, the Court received and set for agenda four (4) letters in relation to the instant case: (1) Letter of Tongko dated November 30, 2005;[52] (2) the aforementioned letter of the Joint Foreign Chambers of the Philippines dated December 16, 2008;[53] (3) Letter of Gregorio Mercado, President of the Philippine Life Insurance Association, Inc. dated January 12, 2009;[54]and (4) Letter of Tongko dated March 25, 2009,[55] propounding their positions on the case. At that point in 

time,   the   case   had   not   yet   become   final   and   executory,   hence, sub judice. In Romero v. Estrada,[56] the Court expounded on this principle, to wit:

 

The sub judice rule restricts comments and disclosures pertaining to  judicial  proceedings to avoid prejudging the  issue,   influencing the court, or obstructing the administration of justice. A violation of the sub judice rule may render one liable for indirect contempt under Sec. 3(d), Rule 71 of the Rules of Court. The rationale for the rule adverted to is set out in Nestle Philippines v. Sanchez:

 

[I]t   is   a   traditional   conviction   of   civilized   society everywhere that courts and juries, in the decision of issues of fact and law should be immune from every extraneous influence; that facts should be decided upon evidence produced in court; and that the determination of such facts should be uninfluenced by bias, prejudice or sympathies.

 

The principle of sub judice is a two-way street. Inasmuch as the parties and other interested individuals should refrain from trying to influence the courts, the court   itself  should also be on guard against  such attempts.  The Court  should, therefore, be wary from accepting and putting on record, papers and documents not officially filed with it. Such submissions have the appearance of influencing the Court despite the  latter’s  determined objectivity and must be avoided.  To illustrate, the November 7, 2008 Decision of this Court was decided in favor of Tongko with only one (1) dissent. However, in the July 29, 2010 Resolution, the original Decision was reversed in favor of Manulife by the Court en banc, with only two (2) dissents. The above-mentioned letters were received by the Court after November 7, 2008 but before July 29, 2010. While the letters themselves may not  have  actually   swayed  the  members  of   the  Court,   the  appearance  of impropriety   should  be  avoided.  To   reiterate,  when   the  parties   submitted   the 

aforementioned letters, the case had not yet become final and executory, they had sufficient remedies under the Rules of Court for redress. There was no reason for the parties to have submitted such letters and for this Court to have taken cognizance thereof and to set the same for agenda.

 

 

To   reiterate,   the   declaration   that   Tongko   is   an   employee   of  Manulife, having performed administrative functions as its manager, cannot be applied to insurance agents in general.  Any finding of an employer-employee relationship shall always be on a case-to-case basis. The instant case is no exception. Any fear that the grant of Tongko’s motion for reconsideration shall render all insurance agents in the country as employees of insurance companies is badly misplaced.

  

WHEREFORE,   I  vote to grant Tongko’s Motion for Reconsideration dated July  28,  2010,  to annul  and set  aside the June 29,  2010,  and to reinstate the November 7, 2008 Decision with modification on the amount of backwages to which Tongko shall be entitled. As thus modified and subject to the qualifications defined   in   the  Dissenting  Opinion   to   the   June  29,  2010,  petitioner   should  be awarded backwages, to be computed as the monthly average of his management overrides, as well as other bonuses and benefits, corresponding to the period he was serving Manulife as unit, branch and eventually regional sales manager.

 

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 163072               April 2, 2009

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, vs.CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, Respondents.

D E C I S I O N

CARPIO, J.:

This is a petition for review on certiorari1 of the Decision2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416.

The Facts

Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Parañaque City.

On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. MIAA’s real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows:

TAX DECL

A-RATIO

N

TAXABLE

YEARTAX DUE PENALTY TOTAL

A7- 1997- 243,522,855. 123,351,728. 366,874,583.18

183-08346

2001 00 18

A7-183-05224

1992-2001

113,582,466.00

71,159,414.98

184,741,880.98

A7-191-00843

1992-2001

54,454,800.00

34,115,932.20

88,570,732.20

A7-191-00140

1992-2001

1,632,960.00 1,023,049.44 2,656,009.44

A7-191-00139

1992-2001

6,068,448.00 3,801,882.85 9,870,330.85

A7-183-05409

1992-2001

59,129,520.00

37,044,644.28

96,174,164.28

A7-183-05410

1992-2001

20,619,720.00

12,918,254.58

33,537,974.58

A7-183-05413

1992-2001

7,908,240.00 4,954,512.36 12,862,752.36

A7-183-05412

1992-2001

18,441,981.20

11,553,901.13

29,995,882.33

A7-183-05411

1992-2001

109,946,736.00

68,881,630.13

178,828,366.13

A7-183-05245

1992-2001

7,440,000.00 4,661,160.00 12,101,160.00

GRAND TOTALP642,747,726.20

P373,466,110.13

P1,016,213,836.33

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid.

On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties.

On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition.

The Court of Appeals’ Ruling

The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code.

The Issue

The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax.

The Court’s Ruling

The petition is meritorious.

In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code which read:

SECTION 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environment protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.

The Court of Appeals held that as a government-owned corporation, MIAA’s tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992.

In Manila International Airport Authority v. Court of Appeals6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Parañaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Parañaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Parañaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held:

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability.

MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridgesconstructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.

The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.7 (Emphasis in the original)

The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a

"government-owned or controlled corporation." Obviously, the term government "instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides:

SEC. 2. General Terms Defined.– x x x

(10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.

The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the Administrative Code of 1987:

SEC. 2. General Terms Defined.– x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.

The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation."

A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case:

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. x x x

Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.

x x x

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes.

MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."9

Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.10 Under Section 133(o)11of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties.

Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real

property tax.12 In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like private parties are subject to real property tax by the City of Pasay.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties.

No costs.

SO ORDERED.

ANTONIO T. CARPIOAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief Justice

LEONARDO A. QUISUMBING

Associate Justice

CONSUELO YNARES-SANTIAGO

Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

RENATO C. CORONAAssociate Justice

CONCHITA CARPIO MORALES

Associate Justice

DANTE O. TINGAAssociate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRIONAssociate Justice

DIOSDADO M. PERALTAAssociate Justice

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

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNOChief Justice

Footnotes

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2 Penned by Associate Justice Ruben T. Reyes (now retired Supreme Court Justice) with Associate Justices Remedios Salazar-Fernando and Edgardo F. Sundiam, concurring.

3 Providing for a Revision of Executive Order No. 778 Creating the Manila International Airport Authority, Transferring Existing Assets of the Manila International Airport to the Authority, and Vesting the Authority with Power to Administer and Operate the Manila International Airport.

4 Section 3 of EO 903 reads:

SEC. 3. Creation of the Manila International Airport Authority. There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, that any subsidiary that may be organized shall have the prior approval of the President.

The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through the sale or through any other mode unless specifically approved by the President of the Philippines.

5 Section 22 of EO 903 reads:

SEC. 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property, movable and immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority.

6 G.R. No. 155650, 20 July 2006, 495 SCRA 591.

7 Id. at 644-645.

8 Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 reads:

SEC. 2. General Terms Defined.– x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 94237 February 26, 1997

BUILDING CARE CORPORATION, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, FIRST DIVISION, and ROGELIO RODIL, respondents.

 

PANGANIBAN, J.:

In dismissing this petition, the Court reiterates the well-entrenched doctrines that (1) a motion for reconsideration, as a rule, is an indispensable precondition to the filing of a

petition for certiorari, and (2) findings of facts of the National Labor Relations Commission (NLRC), affirming those of the Labor Arbiter, are binding upon the Supreme Court.

This petition for certiorari under Rule 65 of the Rules of Court seeks to annul the Decision 1 promulgated on May 9, 1990, of the First Division 2 of public respondent in NLRC Case No. NCR-00-04-01605-88 which affirmed the decision of Labor Arbiter Quintin C. Mendoza. The dispositive portion of the affirmed decision of the Labor Arbiter reads: 3

WHEREFORE, decision is hereby rendered for the complainant declaring his suspension and dismissal illegal and ordering the respondent to reinstate him plus backwages from time his (sic) dismissal at the adjusted rate under R.A. 6640 and retaining whatever seniority rights in the job he has (sic) plus his legal holidays pay of P1,178.00 and differential pay of P369.40 and attorney's fees of not more than ten (10%) of the total award.

The Facts

The facts found by public respondent are as follows: 4

Complainant (herein private respondent) alleged that his wages, 13th month pay and service incentive leave pay were unpaid; that he was not paid for work rendered during legal holidays; that on February 11, 1988, he was suspended for one week by his supervisor, H. Silvestre, for no apparent reason; that the suspension was illegal because of the absence of just cause and respondent's (herein petitioner) non-compliance with the requirements of due process; that thereafter, he was not given any assignment, despite repeated follow-ups, summarized as follows:

Date Person Approached Result

2-19-88 Supervisor H. Silvestre Requiredcomplainant toreturn (on) 2-20-88

2-20-88 FEBTC Worked for one pay(should be day); notime card & pay

2-23-88 Mr. Adriatico Referred toSilvestre not givenwork

2-23-88 Mr. Barbosa, FEBTC Told to go home;promise(d) to talk toSilvestre

2-24-88 H. Silvestre/Mr. Adriatico Scolded; not givenwork

2-26-88 Supervisor Ms. Carol Told to return thefollowing day

2-27-88 Supervisors Not given workSilvestre/Ms. Carol

2-29-88 Silvestre Not given work

3-04-88 Supervisors Silvestre, No resultsViray, Melanie

3-23-88 Silvestre No results

3-25-88 Ms. Malig Promised to asksupervisors whathappened

3-28 & 29-88 Ms. Malig Told supervisorsnot around

4-04-88 Ms. Malig Informed he wouldno longer be givenWork.

Respondent contended that complainant was paid his wages and holiday pay in accordance with law; that it was unable to comply with R.A. 6640 immediately because of its client's delay in approving the adjusted contract rates; that it was ready to pay complainant P369.40 representing salary differentials from December 14, 1987 to February 11, 1988; that on February 9, 1988, FEBTC complained that complainant's area of responsibility was improperly cleaned; that complainant was twice instructed to report to respondent's night shift supervisor, but on both times, he failed to do so; that because of such defiance, he was verbally warned that drastic disciplinary action would be taken against him should he persist in failing to report as directed; that on February 11, 1988, the assistant supervisor erroneously noted on the logbook that complainant was being suspended; that the suspension was not carried out as complainant was allowed to work the following day, as shown by his daily time record; that he was advised to report to respondent's office the following day; that, instead, complainant took a long absence without leave starting on February 12, 1988; that he showed up at respondent's office only on March 28, 1988; that he was required to submit a written explanation of his long absence without leave, frequent absences in the post and deteriorating performance; that complainant wrote that he failed to report because his supervisor suspended him for no apparent reason; that he was told that an investigation of his alleged suspension would be conducted and, in view of the forthcoming non-working holidays, advised to report on April 4, 1988; that, in the meantime, respondent's supervisor reported that FEBTC had indicated that it would no longer accept

complainant; that complainant was advised of FEBTC's decision on April 4, 1988; that for humanitarian reasons, complainant was advised that he was going to be temporarily assigned as reliever at respondent's office while there was no available post in its other clients; that complainant requested for a week-long leave, allegedly because he had to bring his family to Quezon Province; that complainant again failed to report for work on April 18, 1988; that he was sent a letter advising him to report to respondent's office; that he never went back to respondent's office; but instead, filed the instant case.

Complainant maintained that he did his work properly; that he was absent from January 18-22 (1988) because he was sick, and he duly advised respondent of his sickness; that he was absent from February 1-8 (1988) because he had to take care of his wife who was sick, as shown by her medical certificate; that he was absent again for one week starting February 12, 1988 because he was illegally suspended; that thereafter, he was never given another assignment, contrary to respondent's untruthful averments; that he was denied due process of law by respondent; that respondent may have sent him a letter after April 4, 1988, but it was too late because he had already instituted the instant case.

Respondent submitted the affidavits of Wendel Viray, Hernani Silvestre and Germel Villamor, its over-all Supervisor and janitor, respectively, stating that instead of implementing the suspension, complainant was transferred from the night shift to the day shift; that complainant requested to be returned to the night shift, but his request was not granted; that he was given a chance to work at respondent's office, but he failed to report there as instructed. (Citations omitted).

Hence, on April 19, 1988, private respondent filed with the Arbitration Branch of the NLRC a complaint for illegal dismissal, underpayment and non-payment of legal holiday pay against petitioner. At the initial hearing, private respondent was offered reinstatement, but he insisted on being paid his backwages because of his alleged unjustified dismissal. Petitioner did not agree. Thus, after the parties submitted their respective position papers and other documentary evidence, the Labor Arbiter issued a decision in favor of private respondent. 5

The Issue

Petitioner raises a single issue in its petition, to wit: 6

With all due respects to the Hon. National Labor Relations Commission, First Division, petitioner submits that in affirming the decision of the Hon. Labor Arbiter and (in) dismissing petitioner's appeal, public respondent committed grave abuse of discretion and acted arbitrarily and capriciously as the questioned (Decision) is contrary to law and evidence.

Petitioner alleges that the labor arbiter relied only on complainant's affidavit. Public respondent failed to consider that the Labor Arbiter gave very little or no probative value to evidence adduced by petitioner, both documentary and testimonial. Petitioner further claims

that both public respondent and the Labor Arbiter missed the antecedent and most important issue of whether or not private respondent had really been dismissed by petitioner. 7According to petitioner, the employer is tasked with the burden of proving just cause for dismissal but "the primary burden of proving the fact of dismissal itself rests upon the complaining employee." 8

Petitioner states that even if it is assumed that private respondent was dismissed, there were just causes for the termination of his service, 9 the conduct of private respondent was inconsistent with proper subordination. 10

Petitioner alleges too that private respondent failed to prove that he had not been paid amounts corresponding to the legal holidays; and there being no merit to private respondent's complaint, attorney's fees should not be awarded either. 11

Public respondent in affirming the decision of the labor arbiter reasoned as follows: 12

Contrary to respondent's (herein petitioner) argument on appeal, the burden of proof in dismissal cases is borne by the employer, who has to prove the existence of a just cause (Asphalt & Cement Pavers, Inc. vs. Leogardo, Jr., 162 SCRA 312). This is even more true if, like the respondent, the employer puts up the defense of abandonment. The rule is that the defense of abandonment should be proved (Penaflor vs. NLRC, 120 SCRA 68; Polymedic General Hospital vs. NLRC, 134 SCRA 420).

We have perused the entire records, and We are inclined to conclude that respondent's theory of abandonment has not been sufficiently proven.

Complainant's (herein private respondent) claim that he was suspended for no apparent reason for one week is borne out by the logbook entry for February 11, 1988 and by his letter-explanation dated March 28, 1988. It should also be noted that complainant stood pat on this claim throughout the entire proceedings.

On the other hand, respondent, in its position paper filed on July 13, 1988, simply contended that complainant failed, without prior leave, to report for work despite respondent's repeated instructions. In the affidavits submitted on September 21, 1988, three of respondent's employees averred that complainant was transferred to the day shift and he quit his job because he was against such transfer. This is an entirely new twist which did not appear in the memoranda and logbook entries earlier submitted by respondent, nor even in its position paper. For this reason, said averment appears to be an after-thought, which cannot be given much weight.

xxx xxx xxx

Finally, We find no compelling reason to disturb the award of holiday pay amounting to P1,178.00 and salary differentials amounting to P369.40. If respondent had really paid complainant holiday pay, it could easily have

presented its payrolls, which constitute the best proof of payment. These are necessarily in the possession of respondent, so complainant cannot be blamed for their non-production. Moreover, respondent admitted its failure to comply with the wage increase mandated by R.A. 6640. (Citations omitted).

The Court's Ruling

The contention of petitioner is without merit. We totally support the Decision of the National Labor Relations Commission.

At the outset, we note that the petition suffers from a procedural defect that warrants its outright dismissal. Petitioner prematurely acted. It did not file a motion for reconsideration with public respondent before availing of the special civil action of certiorari. This premature action constitutes a fatal infirmity as ruled in a catena of cases, most recently in the case of Interorient Maritime Enterprises, Inc., et al., vs. National Labor Relations Commission, et al. 13 in this wise:

. . .The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law against the acts of public respondent. In the instant case, the plain and adequate remedy expressly provided by the law was a motion for reconsideration of the assailed decision, based on palpable or patent errors, to be made under oath and filed within ten (10) calendar days from receipt of the questioned decision.

(T)he filing of such a motion is intended to afford public respondent an opportunity to correct any actual or fancied error attributed to it by way of a re-examination of the legal and factual aspects of the case. Petitioner's inaction or negligence under the circumstances is tantamount to a deprivation of the right and opportunity of the respondent Commission to cleanse itself of an error unwittingly committed or to vindicate itself of an act unfairly imputed. . . .

. . . And for failure to avail of the correct remedy expressly provided by law, petitioner has permitted the subject Resolution to become final and executory after the lapse of the ten day period within which to file such motion for reconsideration.

On the merits, petitioner wants this Court to determine if private respondent was really dismissed. This is a question of fact which cannot be raised in a petition for certiorari under Rule 65.

It should be noted, in the first place, that the instant petition is a special civil action for certiorari under Rule 65 of the Revised Rules of Court. An extraordinary remedy, its use is available only and restrictively in truly exceptional cases — those wherein the action of an inferior court, board or officer performing judicial or quasi-judicial acts is challenged for being wholly void on grounds of jurisdiction. The sole office of the writ of certiorariis the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. It does not include

correction of public respondent NLRC's evaluation of the evidence and factual findings based thereon, which are generally accorded not only great respect but even finality. 14

The recitation of facts evidently shows that public respondent did not rely only on the evidence presented by private respondent. All the evidence presented for or against the position of private respondent have been duly considered in arriving at its conclusion.

Both the Labor Arbiter and the respondent NLRC gave credence to the evidence of the private respondent that he was illegally dismissed. We are not free to tamper with their calibration of the weight of evidence in the absence of a clear showing that it is arbitrary and bereft of any rational basis. 15

Indeed if petitioner wanted to prove its payment of holiday pays and salary differentials, it could have easily presented proofs of such monetary benefits. But it did not. It had failed to comply with the mandate of the law. As public respondent ruled, the burden of proof in this regard belongs to the employer not to the employee.

We also sustain the award of attorney's fees. "It is settled that in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and interest, he is entitled to an award of attorney's fees." 16

WHEREFORE, premises considered, the Petition is DISMISSED and the assailed Decision is AFFIRMED. Double costs against petitioner.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 152752             January 19, 2005

INOCELIA S. AUTENCIO, petitioner, vs.City Administrator, RODEL M. MAÑARA and The CITY OF COTABATO, respondents.

D E C I S I O N

PANGANIBAN, J.:

The essence of due process in administrative proceedings is simply the opportunity to explain one’s side or to seek a reconsideration of the action or ruling complained of. Furthermore, the counsel’s actions and mistakes on procedural matters bind the client. On the other hand, the complainant’s manifestations or representations on questions of law do not bind the decision makers or the courts.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the September 12, 2001 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 56061. The dispositive portion of the Decision reads as follows:

"WHEREFORE, premises considered, the instant petition is dismissed for lack of merit and the assailed resolution of the CSC is affirmed in its entirety."3

Petitioner also assails the February 8, 2000 CA Resolution4 denying her Motion for Reconsideration.

The Facts

The CA summarized the facts in this manner:

"On December 27, 1996, City Administrator Rodel M. Mañara lodged a complaint against petitioner Inocelia S. Autencio with the Office of the City Mayor for dishonesty and misconduct in office. The complaint alleged that on the third week of October 1996, Riza Bravo, an employee of the City Assessor’s Office charged with the preparation of the payroll of casual employees, changed the September 1996 payroll prepared by her upon the order of petitioner. The first prepared payroll for the said month reflected five (5) days attendance of seven (7) casual employees. It was made to appear in the second prepared payroll that the seven casual employees worked for the whole month of September. Despite the fact that the seven casual employees rendered services only for five days for the month of September and two weeks for the month of October 1996, the petitioner directed them to prepare and reflect in their respective daily time records full attendance for the months in question. The petitioner told them that one-half of their salaries for the month of September 1996 will be deducted as their contributions for the Christmas party of their office and that this matter will be a surprise for the regular employees and must be kept secret among themselves.

"Mrs. Bravo personally collected the salaries of the seven casual employees from the City Treasury Office upon instruction of the petitioner on October 28, 1996, and distributed to them only one-half of their salary and gave the remainder to the petitioner.

"Pending investigation of the administrative complaint, on January 2, 1997, petitioner was preventively suspended for a period of ninety (90) days.

"After x x x hearing, the Office for Legal Services of the City of Cotabato, on June 30, 1997, issued a resolution/decision which was approved by the City Mayor Ludovico D. Badoy, declaring the petitioner guilty of misconduct in office for allowing irregularities to happen which led to illegal payment of salaries to casuals. However, as regards to the charge of dishonesty, the same was found wanting due to insufficiency of evidence. A penalty of forced resignation with forfeiture of retirement benefits except for earned leave accumulated before the filing of the complaint was imposed. l^vvphi1.net

"The petitioner appealed the said resolution to the Civil Service Commission (CSC). On June 9, 1998, the CSC issued Resolution No. 981413 modifying the decision of the City Mayor to grave misconduct and imposed on her the penalty of dismissal for cause with all

its accessories. Petitioner moved for reconsideration but the CSC on September 21, 1999 issued Resolution No. 99-2135 denying the same."5

In her Motion for Reconsideration of CSC Resolution No. 98-1413, petitioner alleged that she had waived her right to present her evidence at a formal hearing and agreed to submit the case for resolution, only because of the manifestation of the complainant and the hearing officer that she could be held liable only for the lesser offense of simple negligence.

On September 21, 1999, the CSC issued Resolution No. 99-2135 denying her Motion. According to the CSC, regardless of whether she agreed to submit the case for resolution, the fact remains that she caused the changes in the payroll of the seven casuals and made it appear that they had worked for the full month of September.

Raising the issues of whether she was denied due process and whether the penalty imposed by the CSC was "harsh," petitioner elevated the case to the CA.

On September 12, 2001, the CA affirmed the CSC Resolutions. Petitioner filed a Motion for reconsideration, appending thereto the Manifestation of incumbent Cotabato City Mayor Datu Muslimin G. Sema. The mayor stated therein that, based on the records, petitioner had been misled into waiving her right to a formal hearing; and that he had no objection to the reopening of the case. On February 8, 2002, the CA denied reconsideration.

Ruling of the Court of Appeals

Ruling that petitioner had not been denied due process, the CA reasoned that "the requirements of due process are satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy." Petitioner was given this opportunity -- records show that she was informed of the formal charges against her; she was able to file her Answer as well as documents evidencing her claim; and she was represented by a lawyer during the pre-hearing conference. The CA said that "[t]he failure of petitioner and her counsel to take full advantage of the opportunity to be heard does not change the fact that they were accorded such opportunity." One may be heard not only through oral argument but also through pleadings.

The CA likewise held that the penalty imposed by the CSC was not "harsh." It affirmed the CSC’s finding that the evidence had sufficiently shown her grave misconduct in allowing the irregularities leading to the illegal payment of salaries to casuals. Pursuant to the Omnibus Rules Implementing Book V of the Administrative Code of 1987, the commensurate penalty for such serious offense is dismissal from the service.

Hence, this Petition.6

Issue

The lone issue raised by petitioner in her Memorandum involves a pure question of law:

"x x x [W]as the petitioner deprived of substantial due process?"

The Court’s Ruling

The Petition is devoid of merit.

Lone Issue:

Denial of Substantial Due Process

Petitioner insists that she waived her right to a formal hearing, only because she was made to believe that she would be liable for the lesser offense of simple negligence. She relies emphatically on the Manifestation of the incumbent city mayor of Cotabato stating that an injustice was committed against her because she had been deceived to the point that she waived her right to present evidence. According to her, this Manifestation constituted a judicial admission that the present counsel of the city government did not object to, and that the appellate court should have taken into consideration.

We find no merit in petitioner’s contention. The legal presumption is that official duty has been duly performed.7Government officials are presumed to have regularly performed their functions;8 and strong evidence is necessary to rebut this presumption.9 The Manifestation is insufficient to overturn this principle. It contains mere conclusions, not statements of fact.

In the court -- not the witnesses or the parties -- lies the duty of drawing legal conclusions from the evidence presented. Significantly, the author of the Manifestation was not the city mayor10 at the time the investigation of petitioner’s case was conducted. How could he have known about the alleged misrepresentation? Petitioner did not explain.

Fraud is never presumed; it must be established by clear and convincing evidence.11 In the present case, apart from the Manifestation, there is no clear evidence of fraud. While respondent’s counsel did not object to the admission of the Manifestation, the leeway to consider and assess its probative value12 nonetheless lay in the appellate court.

In her original appeal to the CSC, petitioner did not raise the issue of respondent’s alleged misrepresentation, which had allegedly induced her to agree to submit the case for resolution without any formal hearing. Instead, she merely questioned the harshness of the penalty imposed by the City Government. Failure to invoke a defense within the prescribed period constitutes a waiver thereof.13 Defenses not invoked below cannot be raised on appeal.14

In waiving the presentation of evidence in a formal hearing, the counsel of petitioner might have believed in the futility of resisting the charge; thus, he opted to waive her right to present evidence. That he allegedly relied on respondent’s statement that she could be held liable only for the lesser offense of simple negligence was a risk he took on her behalf. It is jurisprudentially settled that mistakes of counsel as to argumentation, the relevancy or irrelevancy of a certain evidence or the introduction thereof are -- among others -- all mistakes of procedure that bind the client.15

At this point, we stress that complaints against public officers and employees relating or incidental to, or in connection with, the performance of their duties are necessarily

impressed with public interest.16 The need to maintain the faith and confidence of the people in the government demands that the proceedings in administrative cases should not be made to depend on the whims and caprices of complainants.17

Administrative proceedings are akin to criminal prosecutions in the sense that no compromise may be entered into between the parties as regards the penal sanction. Complainants are not vested with the power of removal or suspension. That prerogative belongs to the proper government officials.

Moreover, in a real sense, complainants in administrative cases are just witnesses.18 Therefore, regardless of their desistance or representations, courts will not desist from imposing the appropriate disciplinary sanction, if the evidence so warrants.19 If administrative actions are made to depend upon the whim or will of complainants, the disciplining authorities and the courts would be stripped of their prerogative.20

We agree with the CA that petitioner was afforded due process. On the formal charge against her, she had received sufficient information which, in fact, enabled her to prepare her defense. She filed her Answer controverting the charges against her and submitted Affidavits of personnel in the Assessor’s Office to support her claim of innocence. A pre-hearing conference was conducted by the legal officer, during which she -- assisted by her counsel -- had participated. Finally, she was able to appeal the ruling of City Mayor Badoy to the CSC, and then to the CA.

In administrative cases, a fair and reasonable opportunity to explain one’s side suffices to meet the requirements of due process.21 A formal or trial-type hearing is not always necessary.22 For the purpose of ascertaining the truth, an investigation will be conducted, during which technical rules applicable to judicial proceedings need not always be adhered to.23 And where the party has the opportunity to appeal or seek reconsideration of the action or ruling complained of, defects in procedural due process may be cured.24

Finally, settled is the rule in our jurisdiction that the findings of fact of an administrative agency must be respected, so long as they are supported by substantial evidence.25 It is not the task of this Court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the latter in respect of the sufficiency of evidence.26 In any event, the Decisions of the CSC and the Court of Appeals finding petitioner guilty of the administrative charge prepared against her are supported by substantial evidence.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED.1a\^/phi1.net Costs against petitioner.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 129401      February 2, 2001

FELIPE SEVILLE in his capacity as judicial administrator of the estate of JOAQUIN ORTEGA and/or FELIPE SEVILLE, EMILIA ESTRADA, MARIA S. TEUDER, MA. ISABEL SEVILLE, MA. TERESITA LICARDO, FRANCISCO SEVILLE, RAMON O. SEVILLE, JOSE MARIE SEVILLE, GEMMA ALVAREZ-ASAYAS, ANNABELLE ALVAREZ-GONZALES, SYLVIA ALVAREZ-LIOK, ADOLFO O. ALVAREZ JR., DIANA ALVAREZ-DABON, MARIA SALVADOR O. POLANCOS and JOAQUIN ORTEGA II as successors-in-interest of JOAQUIN ORTEGA and his estate, petitioners, vs.NATIONAL DEVELOPMENT COMPANY, LEYTE SAB-A BASIN DEVELOPMENT AUTHORITY, PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION, LEPANTO CONSOLIDATED MINING CO., PHILIPPINE PHOSPHATE FERTIUZER CORPORATION, CALIXTRA YAP and REGISTER OF DEEDS OF LEYTE,respondents.

PANGANIBAN, J.:

Unless a public land is shown to have been reclassified as alienable or actually alienated by the State to a private person, that piece of land remains part of the public domain. Hence, occupation thereof, however long, cannot ripen into ownership.

The Case

Before us is a Petition for Review on Certiorari assailing the November 29, 1996 Decision of the Court of Appeals1(CA), as well as the May 19, 1997 CA Resolution2 denying the Motion for Reconsideration. The dispositive part of the CA Decision reads as follows:

"WHEREFORE, the appealed decision is REVERSED and SET ASIDE. Another judgment is hereby rendered dismissing the complaint. The counterclaims of appellants are denied. Costs against plaintiffs-appellees."3

The Facts

The appellate court narrated the undisputed facts in this manner:

"1. By virtue of Presidential Decree No. 625, Leyte Sab-A Basin Development Authority (LSBDA) was created to integrate government and private sector efforts for a planned development and balanced growth of the Sab-a Basin in the [P]rovince of Leyte, empowered to acquire real property in the successful prosecution of its business. Letter of Instruction No. 962 authorized LSBDA to acquire privately-owned lands circumscribed in the Leyte Industrial Development Estate (LIDE) by way of negotiated sales with the landowners.

"2. On June 14, 1980, [Respondent] Calixtra Yap sold to LSBDA Lot No. 057 SWO 08-000047 consisting of 464,920 square meters, located at Barangay Sto. Rosario, Isabel, Leyte, covered under Tax Declarations Nos. 3181, 3579, 3425, 1292 and 4251 under the name of said vendor.1âwphi1.nêt

"3. On June 1, 1982, appellant LSBDA fired a Miscellaneous Sales Application with the Bureau of Lands covering said lot together with other lots acquired by LSBDA with an aggregate area of '442,7508 square meters.'

"4. After due notice and investigation conducted by the Bureau of Lands, Miscellaneous Sales Patent No. 9353 was issued in the name of [Respondent] LSBDA on the basis of which Original Certificate of Title No. P-28131 was transcribed in the Registration Book for the [P]rovince of Leyte on August 12, 1983 in the name of [Respondent] LSBDA. On December 14, 1989, LSBDA assigned all its rights over the subject property to its [Co-respondent] National Development Company (NOC) as a result of which a new Transfer Certificate of Title "vas issued on March 2, 1990 by the Registry of Deeds for the Province of Northern Leyte in the name of NDC. The subject property was leased to [Respondents] Philippine Associated Smelting & Refining Corporation (PASAR), Philippine Phosphate Fertilizer Corporation (PHILPHOS) and Lepanto Consolidated Mining Co., Inc. (LEPANTO).

"5. On November 29, 1988, the Estate of Joaquin Ortega represented by judicial administrator Felipe Seville filed with the Regional Trial Court (Branch 12) of Ormoc City, a complaint for recovery of real property, rentals and damages against the above-named [respondents] which complaint was later on amended on May 11, 1990. [Respondents] filed their respective Answers. After trial, the trial court rendered judgment the dispositive portion of which reads as follows:

'WHEREFORE, [a] decision is hereby rendered for [petitioners] and against [respondents].

'1. The Deed of Sale executed by Calixtra Yap on June 14, 1980 in favor of LSBDA, (Exhibit PP and 25) conveying the subject property to said LSBDA is declared NULL and VOID ab initio;

'2. The intestate estate of JOAQUIN ORTEGA is declared the owner in fee simple of the 735,333 square meters real property subject of the present action and defendant NDC is ordered to segregate the same area from OCT P-28131 and CONVEY the same to the Estate of Joaquin Ortega;

'3. Upon the segregation of the 735,333 square meters from OCT No. P-28131 the Register of Deeds of the Province of Leyte is ordered to issue 8 new title to the said portion in the name of the Intestate Estate of Joaquin Ortega;

'4. [Respondents] LSBDA, NDC, PASAR, are ordered to pay jointly and severally to [petitioners] the sum of FOUR MILLION SEVEN HUNDRED EIGHTY FOUR THOUSAND EIGHT HUNDRED FORTY SIX PESOS (P4,784,846.00) as rentals due from 1979 to the present, plus accrued interest pursuant to par. 2 of the Lease Contract between NDC and PASAR. (Exhibit 54)

'5. [Respondents] LSBDA, NDC, and PHILPHOS are also ordered to pay jointly and severally [petitioners] the sum of TWO MILLION EIGHTY SIX THOUSAND THREE HUNDRED NINETY EIGHT PESOS AND SIXTY CENTAVOS (P2,086,398.60) as accrued rentals of PHILPHOS from 1979 to present, plus the accrued interest for non-payment pursuant to paragraph 2 of the same Lease Contract cited above;

'6. [Respondents] are ordered to pay jointly and severally [petitioners] P200,000.00 as indemnity for the value of the ancestral home;

'7. [Respondents] are also ordered to pay jointly and severally [petitioners] the sum of P250,000.00 as reimbursement for attorney's fees and the further sum of P50,000.00 as expenses for litigation;

'8. Finally, [petitioners] and [respondents] are ordered to sit down together and discuss the possibility of a compromise agreement on how the improvements introduced on the landholding subject of the present suit should be disposed of and for the parties to submit to this Court a joint manifestation relative thereto. In the absence of any such compromise agreement, such improvements shall be disposed of pursuant to Article 449 of the New Civil Code.

'Costs against [respondents].

'SO ORDERED.'"4

Ruling of the Court of Appeals

Citing the Regalian doctrine that lands not appearing to be privately owned are presumed to be part of the public domain, the CA held that, first, there was no competent evidence to prove that the property in question was private in character. Second, possession thereof, no matter how long, would not ripen into ownership, absent any showing that the land had been classified as alienable. Third, the property had been untitled before the issuance of the Miscellaneous Sales Patent in favor of LSBDA. Fourth, petitioners were guilty of laches, because they had failed to apply for the judicial confirmation of their title, if they had any. Fifth, there was no evidence of bad faith on "the part of LSBDA in dealing with Yap regarding the property.

Hence, this Petition.5

The Issues

In their Memorandum, petitioners submit the following issues for the consideration of the Court:6

"A. Whether or not the sale by Calixtra Yap of the Estate of the Late Joaquin Ortega in favor of LSBDA was null and void.

"B. Whether or not the issuance of a Miscellaneous Sales Patent and an Original Certificate of Title in favor of LSBDA was valid.

"C. Whether or not petitioners are guilty of laches.

"D. Whether or not petitioners are entitled to the remedy of reconveyance and the damages awarded by the trial court."

In the main, the Court is called upon to determine the validity of LSBDA's title. In resolving this issue, it will also ascertain whether, before the issuance of the title, the land was private or public.

The Court's Ruling

The Petition has no merit.

Main Issue:

Validity of LSBDA

Petitioners argue that LSBDA's title to 73 hectares of the 402- hectare Leyte Industrial Development Estate was void, having allegedly been obtained from Calixtra Yap who had no right to it. They maintain that they acquired title to the disputed property by acquisitive prescription, because they and their predecessors in interest had been in possession of it for more than thirty years.7 Although it was the subject of settlement proceedings, petitioners further claim that Yap sold the same to LSBDA without the permission of the trial court.

Disputing these contentions, respondents and the appellate court maintain that petitioners have not shown that the land had previously been classified as alienable and disposable. Absent such classification, they argue that possession of it, no matter how long, could not ripen into ownership.

We agree with respondents and the appellate court. First, there was no showing that the land had been classified as alienable before the title was issued to LSBDA; hence, petitioners could not have become owners thereof through acquisitive prescription. Second, petitioners' challenge to LSBDA's title cannot be granted, because it is based on a wrong premise and amounts to a collateral attack, which is not allowed by law.

Public Character of the Land

Under the Regalian doctrine, all lands of the public domain belong to the State, which is the source of any asserted right to ownership of land. All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State.8 In Menguito v. Republic,9 the Court held that "[u]nless public land is shown to have been reclassified or alienated to a private person by the State, it remains part of the inalienable public domain. Indeed, 'occupation thereof in the concept of owner, no matter how long, cannot ripen into ownership and be registered as a title.' To overcome such presumption, incontrovertible

evidence must be shown by the applicant. Absent such evidence, the land sought to be registered remains inalienable."

A person in open, continuous, exclusive and notorious possession of a public land for more than thirty years acquires an imperfect title thereto. That title may be the subject of judicial confirmation, pursuant to Section 48 of the Public Land Act, which provides:

"SECTION 48. The following described citizens of the Philippines, occupying lands of public domain or claiming to own any such lands or an interest thereon, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims, and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

x x x      x x x      x x x

(b) those who by themselves or through their predecessor in-interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. They shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall he entitled to a certificate of title under the provisions of this Chapter."

Under Section 4 of Presidential Decree (PD) No. 1073,10 paragraph "b" of the aforecited provision applies only to alienable and disposable lands of the public domain. The provision reads:

"SEC. 4. The provisions of Section 48 (b) and Section 48 (c), Chapter VIII, of the Public Land Act, are hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of the public domain which have been in open, continuous, exclusive and notorious possession and occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of acquisition of ownership, since June 12, 1945."

It should be stressed that petitioners had no certificate of title over the disputed property. Although they claim that their title was based on acquisitive prescription, they fail to present incontrovertible proof that the land had previously been classified as alienable. They simply brush aside the conclusion of the CA on this crucial point by saying that it was "without factual basis."11 Instead, they maintain that the private character of the land was evidenced by various tax declarations, Deeds of Sale, and Decisions of the trial court and even the Supreme Court.12

Petitioners' arguments are not convincing. Tax declarations are not conclusive proofs of ownership, let alone of the private character of the land. At best, they are merely "indicia of a claim of ownership."13 In Spouses Palomo v. CA,14 the Court also rejected tax declarations as proof of private ownership, absent any showing that the forest land in question had been reclassified as alienable.

Moreover, the Deeds of Sale of portions of the disputed property, which Joaquin Ortega and several vendors executed, do not prove that the land was private in character. The question remains: What was the character of the land when Ortega purchased it? Indeed, a vendee acquires only those rights belonging to the vendor. But petitioners failed to show that, at the time, the vendors were already its owners, or that the land was already classified as alienable.

Also misplaced is petitioners' reliance on Ortega v. CA,15 in which the Supreme Court allegedly recognized the private character of the disputed property .In that case, the sole issue was "whether the respondent judge x x x acted in excess of jurisdiction when he converted Civil Case No. 1184-O, an action for quieting of title, declaration of nullity of sale, and annulment of tax declaration of a parcel of land, into an action for the declaration of who is the legal wife, who are the legitimate children, if any, and who are the compulsory heirs of the deceased Joaquin Ortega."16 The Court did not at all make any ruling that the property had been classified as alienable.

In any event, Ortega arose from a suit for quieting of title, an action quasi in rem that was binding only between the parties.17 The present respondents as well as the Bureau of Lands, which subsequently declared that the land was public, are not bound by that ruling, because they were not impleaded therein.

While petitioners refer to the trial court proceedings supposedly recognizing the private character of the disputed property, they make no claim that these cases directly involve the classification of the land, or that the Bureau of Lands is a party thereto.

Clearly, the burden of proof that the land has been classified as alienable is on the claimant.18 In the present case, petitioners failed to discharge this burden. Hence, their possession of the disputed property, however long, cannot ripen into ownership.

LSBDA's Title

Equally unmeritorious is the argument of petitioners that the title of LSBDA is void. As earlier stated, they claim that such title was derived from Calixtra Yap, who was allegedly not the owner of the property. Petitioners assume that LSBDA, having acquired the rights of Yap, resorted to a confirmation of her imperfect title under Section 48 of the Public Land Act. This argument is devoid of factual or legal basis.

Petitioners fail to consider that the title of LSBDA was based, not on the conveyance made by Yap, but on Miscellaneous Sales Patent No. 9353 issued by the director of the Bureau of Lands. In fact, after LSBDA had filed an application for patent, the Bureau of Lands conducted an investigation and found that the land was part of the public domain. After compliance with the notice and publication requirements, LSBDA acquired the property in a public auction conducted by the Bureau of Lands.19

Petitioners insist, however, that LSBDA was estopped from claiming that the land was public, because the Deed of Sale executed by Yap in its favor stipulated that "the seller is the absolute owner in fee simple of the x x x described property."20 It is scarcely necessary to address this point. To begin with, the power to classify a land as alienable belongs to the

State, not to private entities. Hence, the pronouncements of Yap or LSBDA cannot effect the reclassification of the property. Moreover, the assailed misrepresentation was made by Yap as seller. Hence, objections thereto should be raised not by petitioners but by LSBDA, the contracting party obviously aggrieved.

In any case, the actions of LSBDA after Yap's conveyance demonstrated its position that the disputed land was part of the public domain. That this was so can be inferred from LSBDA's subsequent application for a Miscellaneous Sales Patent and, in a public auction, its purchase of the property from the Bureau of Lands. Indeed, Yap merely conveyed a claim, not a title which she did not have.

Collateral Attack

There is another reason for denying the present Petition. Petitioners insist that they "are not seeking the re-opening of a decree under the Torrens system." Supposedly, they are only "praying for the segregation of 735,333 square meters of land, or 73 hectares more or less from the OCT No. P-28131 issued to LSBDA."21 This disputation is mere quibbling over words, plain and simple.

Semantics aside, petitioners are effectively seeking the modification of LSBDA's OCT, which allegedly encompassed even a parcel of land allegedly belonging to them. Hence, the present suit, purportedly filed for the "recovery of real property and damages," is tantamount to a collateral attack not sanctioned by law. Section 48 of PD 1529, the Property Registration Decree, expressly provides:

"SEC. 48. Certificate not subject to collateral attack. -- A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law."

It has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, the reliance on registered titles would be lost.22

Moreover, the title became indefeasible and incontrovertible after the lapse of one year from the time of its registration and issuance.23 Section 32 of PD 1529 provides that "[u]pon the expiration of said period of one year, the decree of registration and the certificate of title shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or other persons responsible for the fraud." Although LSBDA's title was registered in 1983, petitioners filed the amended Complaint only in 1990.

Reconveyance

Petitioners also claim that the disputed property should be reconveyed to them. This cannot be allowed. Considering that the land was public before the Miscellaneous Sales Patent was issued to LSBDA, petitioners have no standing to ask for the reconveyance of the property to them. The proper remedy is an action for reversion, which may be instituted only

by the Office of the Solicitor General, pursuant to Section 101 of the Public Land Act, which reads as follows:

"SEC. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the [Republic] of the Philippines."

Verily, the prayer for reconveyance and, for that matter, the entire case of petitioners rest on the theory that they have acquired the property by acquisitive prescription; and that Yap, without any right or authority, sold the same to LSBDA.

Conclusion

In the light of our earlier disquisition, the theory has no leg to stand on. Absent any showing that the land has been classified as alienable, their possession thereof, no matter how lengthy, cannot ripen into ownership. In other words, they have not become owners of the disputed property. Moreover, LSBDA's title was derived from a Miscellaneous Sales Patent, not from Yap. Finally, petitioners cannot, by a collateral attack, challenge a certificate of title that has already become indefeasible and incontrovertible.

If petitioners believe that they have been defrauded by Yap, they should seek redress, not in these proceedings, but in a proper action in accordance with law.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioners.1âwphi1.nêt

SO ORDERED.

Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

FIRST DIVISION 

 

NATIONAL POWER                                     G.R. No. 159457

CORPORATION,

                     Petitioner,                                     Present:

 

                                                                                 Panganiban, CJ,

                                                                                      Chairman,

          - versus -                                                       Ynares-Santiago,

                                                                                 Austria-Martinez,

                                 Callejo, Sr., and

                                                                                 Chico-Nazario, JJ

PHILIPPINE ELECTRIC                            

PLANT OWNERS ASSOCIATION          Promulgated:

(PEPOA), INC.,

                                           Respondent.           April 7, 2006x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --

-- -- -- -- x

 

DECISION 

 

PANGANIBAN, CJ:

 

 

he supply of electricity is a public service

that affects national security, economic

growth and public interest.  To achieve

coherent and effective policy formulation,

coordination, implementation and monitoring

within the energy sector, it became necessary to

entrust in one body the regulatory functions

covering the energy sector.  Thus, the Energy

Regulatory Board[1] (ERB) was created.  The ERB

was given the power to determine, fix and prescribe

the rates -- including penalty charges -- of all

energy providers, including the National Power

Corporation (NPC). 

 

The Case

 

Before us is a Petition for Review[2] under Rule 45 of

the Rules of Court, assailing the March 3,

2003 Decision[3]and August 12, 2003 Resolution[4] of the

T

Court of Appeals (CA) in CA-GR SP No. 50782.  The

challenged Decision disposed as follows:

 

“WHEREFORE, the instant petition is DENIED and is accordingly DISMISSED for lack of merit.”[5]

 

 

The assailed Resolution denied reconsideration.

 

The Facts

 

The NPC is a government-owned and -controlled

corporation, existing by virtue of Commonwealth Act No.

120 and Republic Act 

No. 6395.  Philippine Electric Plant Owners

Association (PEPOA), Inc., is a non-stock corporation

composed of private electric plant operators.[6]  Some

members of PEPOA purchase electric power from

petitioner to service power requirements in their

respective franchise areas.[7]

 

On December 15, 1995, PEPOA filed before the ERB

a Complaint[8] against the NPC for alleged unauthorized

collection of rates in the guise of penalty for 1) excess

consumption, double or triple the existing rates; or 2)

unused consumption, as if fully availed of.[9]  The

penalties were being charged pursuant to the NPC’s

Rules on the Sale of Electricity, specifically Nos. 5

(Minimum Charges) and 6 (Penalty for Consumption in

Excess of the Allowable Limit of the Contract

Demand/Energy) of the Schedule of Charges.[10]  The

provisions read:

 

“5.      MINIMUM CHARGES

         

“Whenever Customer’s registered demand/ energy falls below the Contract Demand and/or Contract Energy, the difference shall be billed at applicable demand and/or Energy rates as if the Contract Demand and/or Energy [have] been fully availed of.  Provided, that during Customer’s yearly maintenance of its facilities not to exceed two (2) billing periods in a year, the basis of the minimum charge on energy shall be reduced to only fifty percent (50%) of the Contract Energy; provided further, that thirty (30) days advance written notice is given to Corporation, and that actual maintenance is subject to confirmation of Corporation.

 

“6.      PENALTY FOR CONSUMPTION IN EXCESS OF THE ALLOWABLE LIMIT OF THE CONTRACT DEMAND/ ENERGY

 

                   “Customer’s consumption in excess of the maximum  limits  set  forth in the Service Specifications x x x in the Contract, shall be penalized by billing the excess demand and/or energy at a Rate Equal to Twice the unit price of the highest priced block in the rate schedule.”[11]

 

 

 

On December 20, 1995, the ERB issued an

Order[12] directing the NPC to cease and desist from

collecting the penalties, pending resolution of the

case.  On May 12, 1998, the ERB rendered its Decision,

the dispositive portion of which reads:

 

“WHEREFORE, in view of the foregoing, the Board hereby directs respondent NPC to refund or correspondingly credit to the complainants (affected electric distribution utilities) the total amount of P28,870,497.08 corresponding to the said charges as penalties for excess consumption over the maximum allowable demand energy and consumption below the contracted demand/energy, computed as follows:

 

            “A.       Penalties Billed and Collected for Excess Consumption from:

                       

                        “1.        Angeles Electric Corp. (AEC)           P  2,184,952.80

                        “2.        Visayan Electric Co., Inc. (VECO)    P23,471,542.00

                        “3.        Cagayan Electric Power and Light

                                    Co. (CEPALCO)                                 P     590,515.20

            “B.       Penalty Billed and Collected for Below Consumption from:

 

                        “4.        Tarlac Enterprises, Inc. (TEI)             P     2,623,487.08

                       

                        Total Penalties Billed and Collected             P28,870,497.08

                                                                                                  ============

 

                   “However, if the payments made under protest by the affected distribution utilities to respondent NPC were passed on to the utilities customers, the reimbursements thereon should also extend to the end-users.

 

                   “In the event that the affected distribution utilities have actually refunded the same to its customers, the said utilities are hereby directed to submit a report to the Board showing that an actual refund was made to their customers or end-users.

 

                   “The collection/imposition of penalty for consumption in excess of the allowable unit and penalty for below consumption of the contracted demand/energy or unused energy imposed by NPC shall likewise be not applicable to electric cooperatives and all other NPC customers.

 

                   “Finally, the Cease and Desist Order issued by the Board in its Order dated December 20, 1995 is hereby made permanent.”[13]

 

 

 

The ERB denied reconsideration on January 12,

1999.[14]  The NPC filed a Petition for Review with the

Court of Appeals on March 3, 1999.

 

Ruling of the Court of Appeals

 

 

          The CA found no errors of fact or law that would

warrant a 

reversal of the ERB’s Decision.  The imposition of

penalties by the NPC was tantamount to an increase in

rates that required authorization by the ERB, which was

mandated to determine, fix and prescribe electric rates.[15]  Since the latter’s approval had not been sought, the

charges were deemed void.

 

          Hence, this Petition.[16]

 

The Issues 

Petitioner raises the following issues:

 

“I.      Whether or not the Energy Regulatory Board had jurisdiction over the subject matter of imposition of penalties for contract violations.

 

“II.     Whether or not the imposition of the penalties is an increase in power rates that requires authorization of the Energy Regulatory Board.

 

“III.    Whether or not the discounts provided in the Contract also requires the authorization of the Energy Regulatory Board.

 

“IV.    Whether or not the issuance of the cease and desist order without the benefit of notice and hearing is within the authority of the Energy Regulatory Board.

“V.     Whether or not a temporary restraining order/preliminary injunction should be issued pending resolution of the petition for review.”[17]

 

 

 

          The issues can be reduced to the following:

1) whether the ERB has jurisdiction over the

subject matter of this case; and 2) whether its

Cease and Desist Order is justified.

 

The Court’s Ruling 

 

          The Petition is unmeritorious.

 

 

 

First Issue:

Jurisdiction Over the Controversy   

Petitioner contends that the jurisdiction of the ERB

to fix, set and determine rates does not include the

authority to overrule the imposition of penalties

stipulated in the Contract of Sale and Delivery of Power.[18] 

 

The NPC adds that only its rate-making authority

was transferred to the ERB under Section 18 of RA

7638. Petitioner, however, retained its power to

promulgate rules and regulations governing its

operations in order to provide adequate, stable, reliable,

and reasonably priced electric power.[19]  In conducting

its day-to-day operations, it allegedly had to regulate the

system loads of its transmission lines by requiring its

customers to have a contractual level and to maintain a

maximum limit for the demand and the energy

consumption.[20] 

 

In effect, the NPC claims that the penalty clauses in

their contracts with customers are policy matters

relating to the implementation of its corporate purpose,

not to the fixing of rates.

 

Authority to Fix Rates

 

          To complete this decision on the present

controversy, the Court needs to trace briefly petitioner’s

rate-fixing authority. 

 

          Commonwealth Act No. 120[21] created the NPC

and gave it the power to produce and “sell electric

power and to fix the rates and provide for the collection

of the charges for any service rendered.”[22]  The rates

were not subject to revision by the Public Service

Commission,[23] which was then the government entity

that had jurisdiction over all public services.[24]

 

          Republic Act No. 6395[25] revised the charter of the

NPC, whose power to fix the rates and fees was retained,

but became subject to review by the Public Service

Commission.[26]

 

          Later, Republic Act No. 7638,[27] or the “Department

of Energy Act of 1992,” recreated the Department of

Energy and reorganized the functions of some

government agencies.[28]  The power of the NPC to

determine and fix the rates being charged its customers

was transferred to the ERB in this wise:

 

          “The power of the NPC to determine, fix and prescribe the rates being charged to its customers under Section 4 of Republic Act No. 6395, as amended, x x x are hereby transferred to the Energy

Regulatory Board.  x x x.”[29]

 

 

 

ERB Jurisdiction

 

Executive Order No. 172[30] created the ERB to

provide the policy guidelines and regulatory framework

for the activities and operations of the power sector.[31]  The ERB was to regulate the business of importing,

exporting, re-exporting, shipping, transporting,

processing, refining, marketing and distributing energy 

resources.[32]  Under Section 4 of the Executive

Order, it was also tasked to assume the functions of the

Board of Energy[33] and of the Bureau of Energy

Utilization.[34]

 

Significantly, Republic Act No. 7638 transferred the

ERB’s non-price regulatory jurisdiction, powers and

functions to the Department of Energy.[35]

 

Republic Act No. 9136,[36] the “Electric Power

Industry  Reform Act of 2001” (EPIRA), transferred the

powers of the ERB to the Energy Regulatory Commission

(ERC).[37]

 

Rate and Rate-Fixing Defined

 

          The crux of the controversy is whether the penalty

charges imposed by the NPC are included in the term

“rates.” Unfortunately, the pertinent laws stated above

do not define rates and what is involved in rate-

fixing.  The Court, however, is not precluded from using

other means to define these terms.

 

          In the absence of legislative intent to the contrary,

the general rule is that words and phrases are to be

given their plain, ordinary and common-usage meaning.[38]  It is presumed that the lawmakers employed the

words in this sense.[39]

 

          Rate is defined as “a charge, payment, or price

fixed according to a ratio, scale, or standard;”[40]  or “an

amount paid or charged for a good or service.”[41]

 

Rates are fixed on the basis of the investment amount

or property value that the public utility is allowed to earn --

an amount value otherwise called “rate base.”[42]  Property

valuation is dependent on the particular circumstances and

relevant facts affecting each utility.[43]  After all, rate-fixing

calls for a technical examination and a specialized review

of specific details primarily entrusted to the administrative

or regulating authority -- in the present case, the ERB.[44] 

There are many factors considered in ascertaining

this value, such as the original cost of construction; the

amount expended in permanent improvements; the

amount and market value of the bonds and stock of the

public utility; the present cost compared with the

original cost of construction; the probable earning

capacity of the property under the particular rates

prescribed; and the sum required to meet operating

expenses.[45]  It must be noted that the government is not

bound to apply any particular method or formula for

determining rates.[46]

 

          A just rate is founded on conditions that are fair

and reasonable to both the public utility and the public.[47]  This stipulation means that the public utility must

have, as profit, a fair return on the reasonable value of

the property.[48] The imposition of the maximum rates it

charges cannot be confiscatory.[49]  As to the public,

reasonableness requires entitlement to the service at an

affordable cost.[50]

 

Penalties as Rates

 

The penalties imposed by the NPC in its “Rules on

the Sale of Electricity” are covered by the definition

of rate. “Minimum Charges” and “Penalties for

Consumption in Excess of Allowable Limit” are exacted

from customers in relation to the sale of energy.  These

charges cannot be imposed without the sale of

energy.  Indeed, a consideration in fixing rates is the

purpose for which the penalties are constituted: the

regulation of the system loads of transmission lines,[51] so

as to ensure the continuous operation of the public utility

or to cover part of its operating expenses. 

 

The power to determine, fix and prescribe rates

being charged customers is vested in the

ERB.  Therefore, unless it gives prior approval, the

penalties cannot be imposed by the NPC.  Without that

authority, the challenged provisions in the “Rules on the

Sale of Electricity” cannot be imposed on the electric

plant operators that PEPOA represents. While petitioner

may issue rules and regulations 

consistent with its corporate objectives, provisions

that have a bearing on the impositions of rates must be

approved by the ERB.

 

          In determining whether penalties are included in

the term rates, this Court upholds the principle that the

authority of a board or commission is construed in the

light of the purposes for which it was created; and that

whatever is incidentally necessary to a full

implementation of the legislative intent should be upheld

as germane to the law.[52] Jurisdiction over penalties is

necessarily part of the ERB’s regulatory functions; and is

in line with the intent of achieving a coherent and

effective policy formulation, coordination,

implementation and monitoring within the energy sector.[53]

 

Discounts, Not Rates

 

          Petitioner contends that if the penalties are

subject to ERB approval, so too must be the discounts in

the latter’s “Rules on the Sale of Electricity.”[54]  The

discounts allegedly affect rates and benefit electric plant

operators, who must then reimburse the NPC

accordingly.[55]  We do not agree.

 

          Indeed, petitioner correctly points out that because the 

FIRST DIVISION 

 

Spouses ANTHONY and                            G.R. No. 161298

PERCITA OCO,

                         Petitioners,                             Present:

                                                                            

                                                                             Panganiban, CJ,

                                                                                      Chairman,

          - versus -                                                    Yñares-Santiago,

                                                                             Austria-Martinez,

                             Callejo, Sr., and

                                                                              Chico-Nazario, JJ

 

VICTOR LIMBARING,                               Promulgated

                     Respondent.                               January 31, 2006x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --

-- -- -- -- x

 

DECISION 

 

PANGANIBAN, CJ.:

 

 

asic in procedural law is the rule that every

action must be prosecuted or defended in the

name of the real party in interest.  In the present case,

the respondent, who was not a party to the contracts

being sued upon, was not able to prove material interest

in the litigation.  For his failure to do so, the trial court

cannot befaulted for dismissing the action to rescind the

contracts.  His status as trustor remained a bare

allegation, as he had failed to rebut the legal

presumption: that there is absence of a trust when the

B

purchase price in a deed of sale is paid by a parent in

favor of a child.  Here, the prima facie presumption is

“that there is a gift in favor of the child.”  Any allegation

to the contrary must be proven by clear and satisfactory

evidence, a burden that was not discharged by the

plaintiff.

 

The Case

 

Before us is a Petition for Review[1] under Rule 45 of

the Rules of Court, assailing the August 26,

2003Decision[2] and the November 25,

2003 Resolution[3] of the Court of Appeals (CA) in CA-GR

CV No. 69386.   The challenged Decision disposed as

follows: 

 

“WHEREFORE, the order dated October 2, 2000 of the Regional Trial Court, Branch 15, Ozami[s] City in Civil Case No. OZC 99-14 is hereby REVERSED.  The agreement entered upon by plaintiff-appellant and defendant-appellee Percita L. Oco is hereby RESCINDED.  After returning the agreed purchase amount of P60,000.00 to defendants-appellees, the Register of Deeds of Ozami[s] City shall issue the new Transfer Certificates of Title in

the name of plaintiff-appellant thereby canceling the TCT Nos. T-22073 and T-22072.”[4]

 

The Facts

 

The pertinent facts are not disputed.  Sometime in

1996, Sabas Limbaring subdivided his Lot 2325-D,

covered by Transfer Certificate of Title (TCT) No. 5268,

into two lots denominated as Lot Nos. 2325-D-1 and

2325-D-2.[5]  He then executed in favor of

Jennifer Limbaring a Deed of Sale for Lot 2325-D-2

for P60,000; and, in favor of Sarah JaneLimbaring,

another Deed for Lot 2325-D-1 for P14,440.  Accordingly,

TCT No. 5268 was cancelled and TCT Nos. T-21921 and

T-21920 were issued in the names of Jennifer and Sarah

Jane, respectively.[6]

 

Sensing some irregularities in the

transaction, Percita Oco, the daughter of Sabas

Limbaring, left Puerto PrincesaCity and went

to Ozamis City.[7]  She then filed a case of perjury and

falsification of documents against respondent, her uncle

who was the father of Jennifer and Sarah Jane.  During

the pre-litigation conference called by City

ProsecutorLuzminda Uy on July 1, 1996, the parties

agreed that the two parcels of land should

be reconveyed to Percita, who was to pay respondent all

the expenses that had been and would be incurred to

transfer the titles to her name.[8] 

 

Respondent demanded P30,000 for the estimated

expenses for documentation, capital gains, and

documentary stamp taxes; registration fees for the

Register of Deeds; and other incidental expenses for

clearances from the Department of Agrarian Reform

(DAR).[9]  Percita succeeded in lowering the amount

to P25,000, for which she executed an

undertaking  worded as follows:

 

 

“I, Percita Oco, of legal age, and residing at Puerto Princesa, do hereby undertake to give the full amount of Twenty Five Thousand (P25,000.00) Pesos to my uncle Victor Limbaring after document No. 230, series of 1996; Transfer Certificate of Title No. T-21920 and Transfer Certificate of Title No. T-21921 shall have been cancelled and revoked.

 

“Ozamis City, Philippines, July 1, 1996.”[10]

 

 

 

Pursuant to their agreement, respondent facilitated

the transfer of the titles to her from the names of his

daughters.  After the transfer had been effected on July

12, 1996, Percita left for Puerta Princesa on July 17,

1996, without paying the P25,000.  Several demands

were made, but she refused to pay.

On April 6, 1999, respondent filed against Spouses

Anthony and Percita Oco a Complaint for the rescission

of the sales contracts, with recovery of possession and

ownership of the two parcels of land.[11]  Among others,

he claimed 1) that he was the actual buyer of the lots,

but the vendees whose names appeared on the Deeds

were his daughters; 2) that he initially refused to

reconvey the properties because he had paid for them

with his hard-earned money, which was partly used by

Sabas Limbaring for medical expenses; 3)

that Percita had prepared the two Deeds of Sale, which

his daughters signed despite receiving no consideration

as stated in the Deeds; 4) that because she refused to

pay theP25,000, the Limbaring clan held a meeting on

October 26, 1996, during which it was agreed

that P1,000 per month would be given to respondent

from the rentals of Sabas Limbaring’s house; and 5) that

the agreement was not implemented,

because Percita had failed to cooperate.[12]

 

On May 27, 1999, Spouses Oco filed a Motion to

Dismiss on the ground that the plaintiff (herein

respondent) was not the real party in interest.[13]  In his

Opposition to the Motion to Dismiss, respondent

contended that he was a trustor, whose property was

being held in trust by his daughters.[14]  He also averred

that, on the assumption that he was not the real party in

interest, he was entitled to an amendment of the

pleadings.[15]

 

On August 30, 1999, the RTC issued an Order

denying the Motion to Dismiss.  It ruled that evidence

was required to resolve the parties’ respective

allegations.[16] 

 

On October 4, 1999, Spouses Oco filed an Answer

with Counterclaim, alleging in the main: 1) that

respondent had tried to secure a DAR clearance and to

have a certificate of title issued in his name, but failed

because Republic Act (RA) 6657 prohibited the

acquisition of more than five hectares of agricultural

land; 2) that through deceit and manipulation,

respondent was able to convince Sabas Limbaring to

execute the two Deeds of Sale, notwithstanding the lack

of any consideration; 3) that Sabas informed Percita that

the agricultural land had never been sold; 4) that she

refused to pay the P25,000, because the suspensive

conditions stated in the Promissory Note had not been

complied with; 5) that she paid for all the expenses

incurred in their transaction; 6) that for her alleged

failure to pay the P25,000 and for “other deceits,”

respondent filed a criminal Complaint docketed as

Criminal Case No. 2985; 7) that respondent was guilty of

forum shopping for filing that case despite the institution

of the civil aspect in the criminal case; 8) that

respondent was not the real party in interest and had no

legal standing to sue; 9) that the lots, which were

acquired by Jennifer and Sarah Jane without paying any

consideration, should be returned to Percita without any

consideration; and 10) that the Deeds of

Sale reconveying the lots acknowledged receipt

of  consideration.[17]

 

Respondent testified on his behalf.  He then formally

offered his exhibits.[18]  After filing their Comments to

Plaintiff’s Formal Offer of Exhibits, Spouses Oco filed a

Demurrer to Evidence, to which he filed his Opposition.[19]

 

On October 2, 2000, the RTC granted the demurrer

and dismissed the Complaint and Counterclaim,[20] on the

ground that respondent was not the real party in

interest.  The trial court also held that Jennifer and

Sarah Jane had already acknowledged receipt of the

consideration for the reconveyance of the lots.  It added

that the P25,000 was an independent obligation for the

reimbursement of the expenses incurred for the transfer

of the titles.[21] 

 

 

Ruling of the Court of Appeals

 

 

          The CA held that a trust relationship was created

when respondent purchased the lots in favor of his

daughters.[22]  Thus, he was a real party in interest.

 

          The appellate court also ruled that the P25,000

was part of the consideration for the reconveyance of the

two parcels of land.[23]  The CA held that,

since Percita had admitted her failure to pay the amount,

respondent had the right to rescind the contracts of

reconveyance.[24] 

 

          The assailed November 25, 2003 CA Resolution

denied reconsideration.  Hence, this Petition. [25]

         

The Issues 

Petitioners state the issues in this wise:

 

“I.      The Honorable Court of Appeals gravely erred in finding respondent the trustor of the subject properties and in declaring respondent the real party in interest for the rescission of the two deeds of absolute sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the petitioners.

 

“II.     The Honorable Court of Appeals gravely erred in declaring that respondent has fully complied [with] his obligation in the undertaking executed by petitioner after the ownership of the subject properties were transferred to petitioners.

 

“III.    The Honorable Court of Appeals gravely erred and gravely abused [its] discretion in ordering the rescission of the Deed of Absolute Sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the petitioners involving the subject properties.

 

“IV.    The Honorable Court of Appeals gravely abused [its] discretion when it ignored the pending case before the Fourth Division of the Honorable Court of Appeals with the same transaction, essential facts and circumstances in this case.”[26]

 

 

 

          The threshold issue is whether respondent, who

was the plaintiff in the trial court, was a real party in

interest in the suit to rescind the Deeds of

Reconveyance.

 

The Court’s Ruling 

 

          The Petition is meritorious.

 

 

 

Main Issue:

Real Party in Interest

 

 

 

Petitioners contend that respondent was not

a trustor, and therefore not the real party in interest and

had no legal right to institute the suit.[27]  The real

parties in interest were Jennifer and Sarah Jane, to

whom the subject properties had been given as gifts.[28]

 

          The controversy centers on Rule 3 of the Rules of

Court, specifically an elementary rule in remedial law,

which is quoted as follows:

 

“Sec. 2.  Parties in interest. – A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.  Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.”

 

 

 

          As applied to the present case, this provision has

two requirements: 1) to institute an action, the plaintiff

must be the real party in interest; and 2) the action must

be prosecuted in the name of the real party in interest.[29]  Necessarily, the purposes of this provision are 1) to

prevent the prosecution of actions by persons without

any right, title or interest in the case; 2) to require that

the actual party entitled to legal relief be the one to

prosecute the action; 3) to avoid a multiplicity of suits;

and 4) to discourage litigation and keep it within certain

bounds, pursuant to sound public policy.[30]

 

Interest within the meaning of the Rules means

material interest or an interest in issue to be affected by

the decree or judgment of the case, as distinguished

from mere curiosity about the question involved.[31]  One

having no material interest to protect cannot invoke the

jurisdiction of the court as the plaintiff in an action.[32]  When the plaintiff is not the real party in interest, the

case is dismissible on the ground of lack of cause of

action.[33] 

 

Action on Contracts

 

          The parties to a contract are the real parties in

interest in an action upon it, as consistently held by the

Court.[34] Only the contracting parties are bound by the

stipulations in the contract;[35] they are the ones who

would benefit from and could violate it.[36]  Thus, one who

is not a party to a contract, and for whose benefit it was

not expressly made, cannot maintain an action on

it.  One cannot do so, even if the contract performed by

the contracting parties would incidentally inure to one’s

benefit.[37]

 

          As an exception, parties who have not taken part

in a contract may show that they have a real interest

affected by its performance or annulment.[38]  In other

words, those who are not principally or subsidiarily

obligated in a contract, in which they had no

intervention, may show their detriment that could result

from it.[39]  Contracts pour autrui are covered by this

exception.[40]  In this latter instance, the law requires

that the “contracting parties must have clearly and

deliberately conferred a favor upon a third person.”  A

“mere incidental benefit is not enough.”

 

Action on the Contracts

Presently Involved

 

 

Respondent’s Complaint, entitled “Rescission of

Contract & Recovery of Possession & Ownership of Two

Parcels of Land,” is clearly an action on a contract.  The

agreements sought to be rescinded[41] clearly show that

the parties to the Deeds of Absolute Sale were Jennifer

and Sarah Jane Limbaring[42] as vendors and Percita Oco

as vendee.  Clearly then, the action upon the contracts

may -- as a rule -- be instituted only by Jennifer and

Sarah Jane against Percita.

 

Respondent is not a real party in interest.  He was

not a party to the contracts and has not demonstrated

anymaterial interest in their fulfillment.  Evidently, the

allegations in the Complaint do not show that the

properties would be conveyed to him, even

if Percita were to be proven to have committed a breach

of the subject agreements.

 

Trust Relationship

 

          To show material interest, respondent argues that

a trust was created when he purchased the properties

from Sabas Limbaring in favor of his daughters.  As

trustor, he allegedly stands to be benefited or injured by

any decision in the case.[43]

 

Trust is the legal relationship between one person

who has equitable ownership of a property and another

who owns the legal title to the property.[44]  The trustor is

the one who establishes the trust; the beneficiary, the

person for whose benefit the trust was created; and the

trustee, the one in whom, by conferment of a legal title,

confidence has been reposed as regards the property of

the beneficiary.[45]

 

Trusts may be either express or implied.[46]  Express

trusts are those created by direct and positive acts of the

parties, such as by 

some writing, deed or will; or by words either

expressly or impliedly evidencing an intention to create a

trust.  Implied trusts are those that, without being

expressed, are deducible from the nature of the

transaction as matters of intent; or that are super-

induced in the transaction by operation of law as a

matter of equity, independently of the particular

intention of the parties.[47]

 

Respondent has presented only bare assertions that

a trust was created.  Noting the need to prove the

existence of a trust, this Court has held thus:

 “As a rule, the burden of proving the existence of a trust is on

the party asserting its existence, and such proof must be clear and satisfactorily show the existence of the trust and its elements. While implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be fabricated.”[48]

 

 

 

On this point, the Civil Code states as follows:

 

“ART. 1448.  There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property.  The former is the trustee, while the latter is the beneficiary.  However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.” 

 

 

Under the last sentence of Article 1448,

respondent’s alleged acts -- paying the price of the

subject properties and, in the titles, naming his children

as owners -- raise the presumption that a gift was

effected in their favor.  Respondent failed to rebut this

presumption.  Absent any clear proof that a trust was

created, he cannot be deemed a real party in interest.[49]  That he should be deemed a trustor on the basis

merely of having paid the purchase price is plainly

contradicted by the presumption based on Article 1448

of the Civil Code “that there is a gift in favor of the

child,” not a trust in favor of the parent.

 

Other Issues

 

 

 

          Having found that respondent is not a real party in

interest, this Court deems it no longer necessary to rule

on the other issues raised by petitioner.

 

WHEREFORE, the Petition is GRANTED, and the

assailed Decision and Resolution are SET ASIDE.  Civil

Case No. OZC99-14, entitled “Victor Limbaring v.

Spouses Percita L. Oco and Anthony Oco,”

is DISMISSED.  No pronouncement as to costs.

 

discounts affect rates, they should thus be a

consideration in rate-fixing.  They are,

however, not amounts paid or charged for the sale of

electricity, but are reductions in rates.

 

          Republic Act No. 7638 transferred the NPC’s

power to determine, fix and prescribe the rates being

charged customers.  They are charged nothing, though,

when they are given discounts.  Evidently, the ERB’s

approval of the discounts is not necessary. 

 

Second Issue:

Provisional Relief

 

 

          Petitioner further challenges the ERB’s December

20, 1995 Order, which directed it to cease and desist

from collecting the penalties, pending resolution of the

case.[56]  The NPC contends that the provisional relief

required notice and hearing prior to being granted,

similar to the requirement of the rule on preliminary

injunction under Rule 58[57] of the Rules of Court.[58]  Petitioner adds that PEPOA did not submit any

supporting documents or affidavits to show the great or

irreparable injury that would justify the provisional

relief.[59]

 

Authority to Grant

Provisional Relief

 

 

          The authority to grant provisional relief was

conferred on the ERB, not under the Rules of Court but

under Executive Order 172, whose pertinent provision

reads:

       

“Section 8.   Authority to Grant Provisional Relief. — The Board may, upon the filing of an application, petition or complaint or at any stage thereafter and without prior hearing, on the basis of supporting papers duly verified or authenticated, grant provisional relief on motion of a party in the case or on its own initiative, without prejudice to a final decision after hearing, should the Board find that the pleadings, together with such affidavits, documents and other evidence which may be submitted in support of the motion, substantially support the provisional order: Provided, That the Board shall immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication and notice to all affected parties.”

 

 

 

          This Court explained the cited provision

in Citizens’ Alliance for Consumer Protection v. Energy

Regulatory Board,[60] as follows:

 

“x x x [ERB] is authorized in appropriate cases to grant provisional relief, whether on its own initiative or on motion of a party, either (1) upon filing of an application, petition or complaint; or (2) at any state thereafter and without need of prior hearing, subject, however, to conducting a hearing thereon within (30) days thereafter.  Issuance of an order granting such provisional relief must rest upon substantial evidence and is without prejudice, however, to rendition of a final decision after hearing.”[61]

 

 

 

Plainly, the ERB has the authority to issue

provisional relief 1) upon motion or on its own initiative;

2) without notice and hearing; and 3) after the filing of

an application, a petition or a complaint.

 

 

Need to Substantiate

Provisional Relief

 

          The ERB has the discretion to grant provisional

relief.  Section 8 of Executive Order No. 172 simply

requires that its exercise of this discretion be supported

by substantial evidence[62] in the form of authenticated or

verified documents.[63]  The reason can easily be

discerned from the fact that the order is, by its nature,

temporary and subject to adjustment after final hearing.[64]

          The silence of the law cannot be construed as

granting limitless discretion to the ERB.  The standard

for granting provisional relief may be found in the laws

creating or relating to the ERB.  After all, statutes should

be construed as a whole and in relation to their

amendments.[65]  Thus, the ERB should exercise its

discretion in consideration of its mandate to ensure the

quality, reliability, security and affordability of the

supply of electric power.[66]  Provisional relief cannot be

ordered in a whimsical, arbitrary or oppressive manner. 

 

If supported by substantial evidence, the factual

finding of the ERB -- an administrative body charged

with a specific field of expertise -- is conclusive and

should not be disturbed.[67]  Administrative bodies are

given wide latitude in the evaluation of evidence,

including the authority to take judicial notice of facts

within their special competence.[68]  Absent any proof to

the contrary, the presumption is that official duty has

been regularly performed.[69]  Hence, the ERB is

presumed to have performed its duty of studying the

available evidence, prior to the issuance of the

provisional relief. 

The ERB issued the Cease and Desist Order in

recognition of the fact that end consumers would

ultimately pay for the penalties imposed by the NPC.[70]  It is clear that the latter did not even rebut this

justification. 

 

Factual issues may not be raised in a petition for

review under Rule 45.[71]  Even assuming that the present

case falls under the exceptions to this rule,[72] the Court is

precluded from considering the allegation that PEPOA did

not submit any document or affidavit to support the

latter’s prayer for a Cease and Desist Order.  Petitioner

has made only bare allegations without referring at all to

the evidence.

 

WHEREFORE, the Petition is DENIED and the

assailed Decision and Resolution AFFIRMED.   Costs

against petitioner.

 

SO ORDERED. 

 

ARTEMIO V. PANGANIBAN

Chief Justice

                                                             Chairman, First Division

W  E    C  O  N  C  U  R :

 

 

 

CONSUELO YNARES-SANTIAGO   MA. ALICIA AUSTRIA-MARTINEZ

    Associate Justice                                    Associate Justice

 

  

          ROMEO J. CALLEJO, SR.              MINITA V. CHICO-NAZARIO

     Associate Justice                                   Associate Justice

  

 

CERTIFICATION

 

 

Pursuant to Section 13, Article VIII of the

Constitution, I certify that the conclusions in the above

Decision were reached in consultation before the case

was assigned to the writer of the opinion of the Court’s

Division.

 

 

                                                   ARTEMIO V. PANGANIBAN

                                                                   Chief Justice