G.R. No.

164156

September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and
the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision 2 and Resolution3 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001)
which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno,
Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network
of television and radio stations, whose operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television
operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to operate by
the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different
dates. They were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station,
with a monthly compensation of P4,000. They were issued ABS-CBN employees identification cards and were required to
work for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following tasks
and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABSCBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio. 4
Their respective working hours were as follows:

Name Time No. of Hours

1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo
Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA. 6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1,
2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be as follows:
Monday Saturday
4:30 A.M. 8:00 A.M. Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M. 12:00 MN Jennifer Deiparine
Sunday
5:00 A.M. 1:00 P.M. Jennifer Deiparine
1:00 P.M. 10:00 P.M. Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages

against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers.
Upon respondents failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez
issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case.
Respondents received a copy of the Order on May 16, 2001. 7 Instead of re-filing their complaint with the NLRC within 10
days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case For Resolution. 8 The Labor Arbiter granted this motion in an Order dated June
18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of
more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing
of this complaint on November 20, 2000.
Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto attached as
follows, thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employees Identification Card
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employees Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit "D-2" - ABS-CBN Salary Voucher from March
1999 to January 2001 at P4,000.00
Date employed: September 1, 1995
Length of service: 5 years & 10 months

III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employees Identification Card
Exhibit "E" - ABS-CBN Salary Voucher from Nov.
Exhibit "E-1" & 1999 to December 2000
Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employees Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "F-3"
Exhibit "F-4" - Certification dated July 6, 2000
Acknowledging regular status of
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They
prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling
defendants to pay complainants the following:

1. One Hundred Thousand Pesos (P100,000.00) each

and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;
8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a
condition precedent for their admission into the existing union and collective bargaining unit of respondent company
where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises. 10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a
particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a program
or a particular production. They are considered in the industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by the station for a particular or specific program broadcasted by
the radio station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the programs to which they shall later be called on
to assist. The program assignments of complainants were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:

1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)

4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce,
such as drama talents in other productions. As program employees, a PAs engagement is coterminous with the
completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be
assigned to new programs upon the cancellation of one program and the commencement of another. As such program
employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of
the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and
benefits due them under the law. 12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially
since respondents were not covered by the bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular
employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular
employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay
complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE
HUNDRED TEN (P52,910.00).

Respondent Veneranda C. Sy is absolved from any liability.

SO ORDERED.13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction
to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in
Article 261 of the Labor Code.
Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on
August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their
Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal,
conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for
more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave
pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees. 14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the
decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE
and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49

c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing
their rice subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents motion to
refile the complaint and admit their position paper. Although respondents were not parties to the CBA between petitioner
and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents
monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the
Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and not
as members of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code.
The validity of respondents claim does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who
contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and
substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b)
whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint of respondents with
the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor
Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining
and resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary Arbitrators as

provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits
to respondents under the CBA although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be
upon the expiration of the last day to appeal by all parties, should there be several parties to a case. Since respondents
received their copies of the decision on September 8, 2001 (except respondent Nazareno who received her copy of the
decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal Memorandum.
Moreover, the CA declared that respondents failure to submit their position paper on time is not a ground to strike out the
paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular
employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its
project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the 19961999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution 17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN
UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF
THE LATTERS DECISION AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING
RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC
AWARDING CBA BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the
NLRC, and entertained respondents appeal from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal must
be reckoned from receipt of a partys counsel, not from the time the party learns of the decision, that is, notice to counsel
is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the
Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of
dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely appeal
that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may still be
given due course in the interest of substantial justice as an exception to the general rule that the negligence of a counsel
binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike it out
from the records or dismiss the complaint.

We find no merit in the petition.

We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is not
only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives the
appellate court or body of the legal authority to alter the final judgment, much less entertain the appeal. However, this
Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if greater injustice
may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed. 19 The
Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the
greater principles of substantial justice and equity. 20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor Code a
liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of equitably
and completely resolving the rights and obligations of the parties. 22 We have held in a catena of cases that technical rules
are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the workingman. 23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period
therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely appeal, the
NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of November 14, 2002.
Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a
separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both parties. 24
We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted respondents
position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure,
all in the interest of due process.25 Indeed, as stressed by the appellate court, respondents failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint. 26 Likewise,
there is simply no truth to petitioners assertion that it was denied due process when the Labor Arbiter admitted
respondents position paper without requiring it to file a comment before admitting said position paper. The essence of
due process in administrative proceedings is simply an opportunity to explain ones side or an opportunity to seek
reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that would suggest that
petitioner had absolute lack of opportunity to be heard. 27 Petitioner had the right to file a motion for reconsideration of the
Labor Arbiters admission of respondents position paper, and even file a Reply thereto. In fact, petitioner filed its position
paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in our statute books to hinder
the circumvention by unscrupulous employers of the employees right to security of tenure by indiscriminately and
absolutely ruling out all written and oral agreements inharmonious with the concept of regular employment defined
therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June 2001 as
violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while
suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly
submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents suggestion
acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus,

entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice.
Respondents suggestion, betrays its notion of prolonging, rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without
prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules
Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the arbitration
branch of origin."
the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be refiled
because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law
or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and
the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which were
belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the
interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate
Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had
filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are
given the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers".
(Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law. 29
We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence, not
regular employees of the broadcasting company. Petitioners claim that the functions performed by the respondents are
not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they
coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial

evidence.30 The question of whether respondents are regular or project employees or independent contractors is
essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the legions
of production assistants working in the Philippine broadcasting industry.
We agree with respondents contention that where a person has rendered at least one year of service, regardless of the
nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular as
long as the activity exists, the reason being that a customary appointment is not indispensable before one may be
formally declared as having attained regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or services
to be performed is seasonal in nature and the employment is for the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular
employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the
former is usually necessary or desirable in the usual business or trade of the employer. The connection can be
determined by considering the nature of work performed and its relation to the scheme of the particular business or trade
in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered
regular, but only with respect to such activity and while such activity exists. 32
As elaborated by this Court in Magsalin v. National Organization of Working Men: 33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" workers security of tenure, however, can hardly be doubted. In determining whether an employment should be
considered regular or non-regular, the applicable test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law
itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that
can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which
the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from
the normal activities required in carrying on the particular business or trade. But, although the work to be performed is
only for a specific project or seasonal, where a person thus engaged has been performing the job for at least one year,
even if the performance is not continuous or is merely intermittent, the law deems the repeated and continuing need for its
performance as being sufficient to indicate the necessity or desirability of that activity to the business or trade of the
employer. The employment of such person is also then deemed to be regular with respect to such activity and while such
activity exists.34

Not considered regular employees are "project employees," the completion or termination of which is more or less
determinable at the time of employment, such as those employed in connection with a particular construction project, and
"seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any
employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent
fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their employment. Respondents cannot be
considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees.
They are regular employees who perform several different duties under the control and direction of ABS-CBN executives
and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are
necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have
rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are
employed.35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the will
or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the employee or
the manner of paying the salary or the actual time spent at work. It is the character of the activities performed in relation to
the particular trade or business taking into account all the circumstances, and in some cases the length of time of its
performance and its continued existence.36 It is obvious that one year after they were employed by petitioner, respondents
became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees because no evidence was presented to
show that the duration and scope of the project were determined or specified at the time of their engagement. Under
existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a particular
job or undertaking that is within the regular or usual business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined
or determinable times. Second, the term project may also refer to a particular job or undertaking that is not within the
regular business of the employer. Such a job or undertaking must also be identifiably separate and distinct from the
ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or
determinable times.38
The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking, the
duration and scope of which were specified at the time the employees were engaged for that project. 39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years.
Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting need for
their services is sufficient evidence of the necessity and indispensability of such services to petitioners business or
trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to
determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital,
necessary and indispensable to the usual trade or business of the employer. 41 We note further that petitioner did not

report the termination of respondents employment in the particular "project" to the Department of Labor and Employment
Regional Office having jurisdiction over the workplace within 30 days following the date of their separation from work,
using the prescribed form on employees termination/ dismissals/suspensions. 42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier
pleadings, petitioner classified respondents as program employees, and in later pleadings, independent contractors.
Program employees, or project employees, are different from independent contractors because in the case of the latter,
no employer-employee relationship exists.
Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation 43 is misplaced. In that
case, the Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor
and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAS services to co-host its television and radio programs because of SONZAS peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondents
claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and
13th month pay which the law automatically incorporates into every employer-employee contract. Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship.
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZAS unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and

receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement. 44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required
from them because they were merely hired through petitioners personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee
relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent
contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly
dependent on the petitioner for continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates
the allegation that respondents are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an independent business or professional service, such work is a regular
employment of such employee and not an independent contractor. 45 The Court will peruse beyond any such agreement to
examine the facts that typify the parties actual relationship. 46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its
rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47 We quote with approval the ruling of the appellate court, that the reason why
production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as
project employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under
the 1996-1999 CBA is a necessary consequence of public respondents ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not considered as claims involving the
interpretation or implementation of the collective bargaining agreement. The reason why production assistants were
excluded from the said agreement is precisely because they were classified and treated as project employees by
petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but
the nature of the activities performed by such employee in relation to the particular business or trade of the employer.
Considering that We have clearly found that private respondents are regular employees of petitioner, their exclusion from
the said CBA on the misplaced belief of the parties to the said agreement that they are project employees, is therefore not

proper. Finding said private respondents as regular employees and not as mere project employees, they must be
accorded the benefits due under the said Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the employer.
However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue discrimination against non-members. A collective
bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other
employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner. 48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.

ANGELINA FRANCISCO, Petitioner, -versus- NATIONAL LABOR RELATIONS COMMISSION, KASEI

CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD
LIZA and RAMON ESCUETA, Respondents.
G.R. No. 170087

August 31, 2006

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the
Decision and Resolution of the Court of Appeals dated October 29, 2004[1] and October 7, 2005,[2] respectively, in CAG.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The
appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003,[3] in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July
31, 2002,[4] in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive
dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for
the initial operation of the company.[5]

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents;
neither did she attend any board meeting nor required to do so. She never prepared any legal document and never
represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company.[6]

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu
of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies, especially with
the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to

administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation.[7]

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.[8]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was
required to sign a prepared resolution for her replacement but she was assured that she would still be connected with
Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation
and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical
Assistant to Seiji Kamura and in charge of all BIR matters.[9]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September
2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not receive her salary from the company.
She made repeated follow-ups with the company cashier but she was advised that the company was not earning well.[10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was
informed that she is no longer connected with the company.[11]

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive
dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that
petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own discretion without control and supervision of
Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company
never interfered with her work except that from time to time, the management would ask her opinion on matters relating to
her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not
one of those reported to the BIR or SSS as one of the companys employees.[12]

Petitioners designation as technical consultant depended solely upon the will of management. As such, her
consultancy may be terminated any time considering that her services were only temporary in nature and dependent on
the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of
employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records
were also submitted showing that petitioners latest employer was Seiji Corporation.[13]

The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1.
finding complainant an employee of respondent corporation;
2.
declaring complainants dismissal as illegal;
3.
ordering respondents to reinstate complainant to her former position without loss
of seniority rights and jointly and severally pay complainant her money claims in accordance with the
following computation:
a.
b.
c.
d.
e.
f.
g.
h.

Backwages 10/2001 07/2002

275,000.00
(27,500 x 10 mos.)
Salary Differentials (01/2001 09/2001) 22,500.00
Housing Allowance (01/2001 07/2002) 57,000.00
Midyear Bonus 2001
27,500.00
13th Month Pay
27,500.00
10% share in the profits of Kasei
Corp. from 1996-2001
361,175.00
Moral and exemplary damages
100,000.00
10% Attorneys fees
87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant

separation pay with additional backwages that would accrue up to actual payment of separation pay.
SO ORDERED.[14]

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion
of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1)
Respondents are directed to pay complainant separation pay computed at one
month per year of service in addition to full backwages from October 2001 to July 31, 2002;

2)
The awards representing moral and exemplary damages and 10% share in profit
in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3)

The award of 10% attorneys fees shall be based on salary differential award only;

4)
The awards representing salary differentials, housing allowance, mid year bonus
and 13th month pay are AFFIRMED.
SO ORDERED.[15]

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor
Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is
hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al.
for constructive dismissal.
SO ORDERED.[16]

The appellate court denied petitioners motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship
between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one
hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial evidence.[17]

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform test to determine
the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of
an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between
the parties, owing to the complexity of such a relationship where several positions have been held by the worker. There

are instances when, aside from the employers power to control the employee with respect to the means and methods by
which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or
some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the
totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate
in this case where there is no written agreement or terms of reference to base the relationship on; and due to the
complexity of the relationship based on the various positions and responsibilities given to the worker over the period of
the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,[19] and lately in Leonardo
v. Court of Appeals,[20] where we held that there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved but also the manner and means used to
achieve that end.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give
a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances
of the whole economic activity,[22] such as: (1) the extent to which the services performed are an integral part of the
employers business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of
control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of
the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business.[23]

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for
his continued employment in that line of business.[24] In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency.[25] By
analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor
Code ought to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she
was under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for
work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the
company and performing functions necessary and desirable for the proper operation of the corporation such as securing
business permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating
her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000.[26] When petitioner was designated General Manager,
respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and
the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation.[27]

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latters line of business.

In Domasig v. National Labor Relations Commission,[28] we held that in a business establishment, an

identification card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers covering petitioners salaries for the months stated
therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee
of private respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the SSS is proof that
the latter were the formers employees. The coverage of Social Security Law is predicated on the existence of an
employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never
acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners
job was as Kamuras direct assistant with the duty of acting as Liaison Officer in representing the company to secure
construction permits, license to operate and other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the meeting of the corporation. She was never
privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared
documentation for the company.[30]

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case.[31] Regardless of this fact, we are convinced that
the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with
favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth
and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses.
[32] A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to
the test of credibility and should be received with caution.[33]

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job function involved accounting and tax
services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means and methods by which the work is to be
accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January
to September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal
is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to an employee.[35] In Globe Telecom, Inc. v. FlorendoFlores,[36] we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee
to continue working for her employer. Hence, her severance from the company was not of her own making and therefore
amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or
creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers,
we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This
would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving
maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in
furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October
29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the

time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month
pay for every year of service, where a fraction of at least six months shall be considered as one whole year.

SO ORDERED.

ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY, ANGELICA, NANCY, and
MICHAEL CHRISTOPHER,
all surnamed NOGALES, Petitioners -versus- CAPITOL MEDICAL CENTER, DR.
OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSA UY, DR. JOEL ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE
ESPINOLA, and NURSE J. DUMLAO, Respondents.
G.R. No. 142625
December 19, 2006

DECISION

CARPIO, J.:

The Case

This petition for review[1] assails the 6 February 1998 Decision[2] and 21 March 2000 Resolution[3] of the Court
of Appeals in CA-G.R. CV No. 45641. The Court of Appeals affirmed in toto the 22 November 1993 Decision[4] of the
Regional Trial Court of Manila, Branch 33, finding Dr. Oscar Estrada solely liable for damages for the death of his patient,
Corazon Nogales, while absolving the remaining respondents of any liability. The Court of Appeals denied petitioners
motion for reconsideration.

The Facts

Pregnant with her fourth child, Corazon Nogales (Corazon), who was then 37 years old, was under the
exclusive prenatal care of Dr. Oscar Estrada (Dr. Estrada) beginning on her fourth month of pregnancy or as early as
December 1975. While Corazon was on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood
pressure and development of leg edema[5] indicating preeclampsia,[6] which is a dangerous complication of pregnancy.
[7]

Around midnight of 25 May 1976, Corazon started to experience mild labor pains prompting Corazon and
Rogelio Nogales (Spouses Nogales) to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her
immediate admission to the Capitol Medical Center (CMC).

On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted the written
admission request[8] of Dr. Estrada. Upon Corazons admission at the CMC, Rogelio Nogales (Rogelio) executed and
signed the Consent on Admission and Agreement[9] and Admission Agreement.[10] Corazon was then brought to the
labor room of the CMC.

Dr. Rosa Uy (Dr. Uy), who was then a resident physician of CMC, conducted an internal examination of
Corazon. Dr. Uy then called up Dr. Estrada to notify him of her findings.

Based on the Doctors Order Sheet,[11] around 3:00 a.m., Dr. Estrada ordered for 10 mg. of valium to be
administered immediately by intramuscular injection. Dr. Estrada later ordered the start of intravenous administration of
syntocinon admixed with dextrose, 5%, in lactated Ringers solution, at the rate of eight to ten micro-drops per minute.

According to the Nurses Observation Notes,[12] Dr. Joel Enriquez (Dr. Enriquez), an anesthesiologist at CMC,
was notified at 4:15 a.m. of Corazons admission. Subsequently, when asked if he needed the services of an
anesthesiologist, Dr. Estrada refused. Despite Dr. Estradas refusal, Dr. Enriquez stayed to observe Corazons condition.

At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10 a.m., Corazons bag of water
ruptured spontaneously. At 6:12 a.m., Corazons cervix was fully dilated. At 6:13 a.m., Corazon started to experience
convulsions.

At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr. Ely Villaflor (Dr.
Villaflor), who was assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate.

At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazons baby. In the process,
a 1.0 x 2.5 cm. piece of cervical tissue was allegedly torn. The baby came out in an apnic, cyanotic, weak and injured
condition. Consequently, the baby had to be intubated and resuscitated by Dr. Enriquez and Dr. Payumo.

At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse. Corazons
blood pressure dropped from 130/80 to 60/40 within five minutes.
There was continuous profuse vaginal bleeding.
The assisting nurse administered hemacel through a gauge 19 needle as a side drip to the ongoing intravenous injection
of dextrose.

At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled blood. It took approximately 30
minutes for the CMC laboratory, headed by Dr. Perpetua Lacson (Dr. Lacson), to comply with Dr. Estradas order and
deliver the blood.

At 8:00 a.m., Dr. Noe Espinola (Dr. Espinola), head of the Obstetrics-Gynecology Department of the CMC, was
apprised of Corazons condition by telephone. Upon being informed that Corazon was bleeding profusely, Dr. Espinola
ordered immediate hysterectomy. Rogelio was made to sign a Consent to Operation.[13]

Due to the inclement weather then, Dr. Espinola, who was fetched from his residence by an ambulance, arrived
at the CMC about an hour later or at 9:00 a.m. He examined the patient and ordered some resuscitative measures to be
administered. Despite Dr. Espinolas efforts, Corazon died at 9:15 a.m. The cause of death was hemorrhage, post partum.
[14]

On 14 May 1980, petitioners filed a complaint for damages[15] with the Regional Trial Court[16] of Manila
against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola, and a certain Nurse J. Dumlao for
the death of Corazon. Petitioners mainly contended that defendant physicians and CMC personnel were negligent in the
treatment and management of Corazons condition. Petitioners charged CMC with negligence in the selection and
supervision of defendant physicians and hospital staff.

For failing to file their answer to the complaint despite service of summons, the trial court declared Dr. Estrada,
Dr. Enriquez, and Nurse Dumlao in default.[17] CMC, Dr. Villaflor, Dr. Uy, Dr. Espinola, and Dr. Lacson filed their
respective answers denying and opposing the allegations in the complaint. Subsequently, trial ensued.

After more than 11 years of trial, the trial court rendered judgment on 22 November 1993 finding Dr. Estrada
solely liable for damages. The trial court ruled as follows:

The victim was under his pre-natal care, apparently, his fault began from his incorrect and inadequate
management and lack of treatment of the pre-eclamptic condition of his patient. It is not disputed that
he misapplied the forceps in causing the delivery because it resulted in a large cervical tear which
had caused the profuse bleeding which he also failed to control with the application of inadequate
injection of magnesium sulfate by his assistant Dra. Ely Villaflor. Dr. Estrada even failed to notice the
erroneous administration by nurse Dumlao of hemacel by way of side drip, instead of direct
intravenous injection, and his failure to consult a senior obstetrician at an early stage of the problem.
On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel Enriquez, Dr. Lacson, Dr.
Espinola, nurse J. Dumlao and CMC, the Court finds no legal justification to find them civilly liable.

On the part of Dra. Ely Villaflor, she was only taking orders from Dr. Estrada, the principal
physician of Corazon Nogales. She can only make suggestions in the manner the patient maybe
treated but she cannot impose her will as to do so would be to substitute her good judgment to that of
Dr. Estrada. If she failed to correctly diagnose the true cause of the bleeding which in this case
appears to be a cervical laceration, it cannot be safely concluded by the Court that Dra. Villaflor had
the correct diagnosis and she failed to inform Dr. Estrada. No evidence was introduced to show that
indeed Dra. Villaflor had discovered that there was laceration at the cervical area of the patients
internal organ.
On the part of nurse Dumlao, there is no showing that when she administered the hemacel
as a side drip, she did it on her own. If the correct procedure was directly thru the veins, it could only
be because this was what was probably the orders of Dr. Estrada.
While the evidence of the plaintiffs shows that Dr. Noe Espinola, who was the Chief of the
Department of Obstetrics and Gynecology who attended to the patient Mrs. Nogales, it was only at
9:00 a.m. That he was able to reach the hospital because of typhoon Didang (Exhibit 2). While he
was able to give prescription in the manner Corazon Nogales may be treated, the prescription was
based on the information given to him by phone and he acted on the basis of facts as presented to
him, believing in good faith that such is the correct remedy. He was not with Dr. Estrada when the
patient was brought to the hospital at 2:30 oclock a.m. So, whatever errors that Dr. Estrada
committed on the patient before 9:00 oclock a.m. are certainly the errors of Dr. Estrada and cannot be
the mistake of Dr. Noe Espinola. His failure to come to the hospital on time was due to fortuitous
event.
On the part of Dr. Joel Enriquez, while he was present in the delivery room, it is not
incumbent upon him to call the attention of Dr. Estrada, Dra. Villaflor and also of Nurse Dumlao on the
alleged errors committed by them. Besides, as anesthesiologist, he has no authority to control the
actuations of Dr. Estrada and Dra. Villaflor. For the Court to assume that there were errors being
committed in the presence of Dr. Enriquez would be to dwell on conjectures and speculations.
On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist and in-charge of the
blood bank of the CMC. The Court cannot accept the theory of the plaintiffs that there was delay in
delivering the blood needed by the patient. It was testified, that in order that this blood will be made
available, a laboratory test has to be conducted to determine the type of blood, cross matching and
other matters consistent with medical science so, the lapse of 30 minutes maybe considered a
reasonable time to do all of these things, and not a delay as the plaintiffs would want the Court to
believe.
Admittedly, Dra. Rosa Uy is a resident physician of the Capitol Medical Center. She was
sued because of her alleged failure to notice the incompetence and negligence of Dr. Estrada.
However, there is no evidence to support such theory. No evidence was adduced to show that Dra.
Rosa Uy as a resident physician of Capitol Medical Center, had knowledge of the mismanagement of
the patient Corazon Nogales, and that notwithstanding such knowledge, she tolerated the same to
happen.
In the pre-trial order, plaintiffs and CMC agreed that defendant CMC did not have any hand
or participation in the selection or hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as attending
physician[s] of the deceased. In other words, the two (2) doctors were not employees of the hospital
and therefore the hospital did not have control over their professional conduct. When Mrs. Nogales
was brought to the hospital, it was an emergency case and defendant CMC had no choice but to
admit her. Such being the case, there is therefore no legal ground to apply the provisions of Article

2176 and 2180 of the New Civil Code referring to the vicarious liability of an employer for the
negligence of its employees. If ever in this case there is fault or negligence in the treatment of the
deceased on the part of the attending physicians who were employed by the family of the deceased,
such civil liability should be borne by the attending physicians under the principle of respondeat
superior.

WHEREFORE, premises considered, judgment is hereby rendered finding defendant Dr.

Estrada of Number 13 Pitimini St. San Francisco del Monte, Quezon City civilly liable to pay plaintiffs:
1) By way of actual damages in the amount of P105,000.00; 2) By way of moral damages in the
amount of P700,000.00; 3) Attorneys fees in the amount of P100,000.00 and to pay the costs of suit.
For failure of the plaintiffs to adduce evidence to support its [sic] allegations against the
other defendants, the complaint is hereby ordered dismissed. While the Court looks with disfavor the
filing of the present complaint against the other defendants by the herein plaintiffs, as in a way it has
caused them personal inconvenience and slight damage on their name and reputation, the Court
cannot accepts [sic] however, the theory of the remaining defendants that plaintiffs were motivated in
bad faith in the filing of this complaint. For this reason defendants counterclaims are hereby ordered
dismissed.
SO ORDERED.[18]

Petitioners appealed the trial courts decision. Petitioners claimed that aside from Dr. Estrada, the remaining
respondents should be held equally liable for negligence. Petitioners pointed out the extent of each respondents alleged
liability.

On 6 February 1998, the Court of Appeals affirmed the decision of the trial court. [19] Petitioners filed a motion
for reconsideration which the Court of Appeals denied in its Resolution of 21 March 2000.[20]
Hence, this petition.

Meanwhile, petitioners filed a Manifestation dated 12 April 2002[21] stating that respondents Dr. Estrada, Dr.
Enriquez, Dr. Villaflor, and Nurse Dumlao need no longer be notified of the petition because they are absolutely not
involved in the issue raised before the [Court], regarding the liability of [CMC].[22] Petitioners stressed that the subject
matter of this petition is the liability of CMC for the negligence of Dr. Estrada.[23]

The Court issued a Resolution dated 9 September 2002[24] dispensing with the requirement to submit the
correct and present addresses of respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao. The Court stated
that with the filing of petitioners Manifestation, it should be understood that they are claiming only against respondents

CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy who have filed their respective comments. Petitioners are foregoing further
claims against respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.

The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals affirming the decision of the
Regional Trial Court. Accordingly, the decision of the Court of Appeals, affirming the trial courts judgment, is already final
as against Dr. Oscar Estrada.

Petitioners filed a motion for reconsideration[25] of the Courts 9 September 2002 Resolution claiming that Dr.
Enriquez, Dr. Villaflor and Nurse Dumlao were notified of the petition at their counsels last known addresses. Petitioners
reiterated their imputation of negligence on these respondents. The Court denied petitioners Motion for Reconsideration
in its 18 February 2004 Resolution.[26]

The Court of Appeals Ruling

In its Decision of 6 February 1998, the Court of Appeals upheld the trial courts ruling. The Court of Appeals
rejected petitioners view that the doctrine in Darling v. Charleston Community Memorial Hospital[27] applies to this case.
According to the Court of Appeals, the present case differs from the Darling case since Dr. Estrada is an independent
contractor-physician whereas the Darling case involved a physician and a nurse who were employees of the hospital.

Citing other American cases, the Court of Appeals further held that the mere fact that a hospital permitted a
physician to practice medicine and use its facilities is not sufficient to render the hospital liable for the physicians
negligence.[28] A hospital is not responsible for the negligence of a physician who is an independent contractor.[29]

The Court of Appeals found the cases of Davidson v. Conole[30] and Campbell v. Emma Laing Stevens
Hospital[31] applicable to this case. Quoting Campbell, the Court of Appeals stated that where there is no proof that
defendant physician was an employee of defendant hospital or that defendant hospital had reason to know that any acts
of malpractice would take place, defendant hospital could not be held liable for its failure to intervene in the relationship of
physician-patient between defendant physician and plaintiff.

On the liability of the other respondents, the Court of Appeals applied the borrowed servant doctrine
considering that Dr. Estrada was an independent contractor who was merely exercising hospital privileges. This doctrine
provides that once the surgeon enters the operating room and takes charge of the proceedings, the acts or omissions of
operating room personnel, and any negligence associated with such acts or omissions, are imputable to the surgeon. [32]

While the assisting physicians and nurses may be employed by the hospital, or engaged by the patient, they normally
become the temporary servants or agents of the surgeon in charge while the operation is in progress, and liability may be
imposed upon the surgeon for their negligent acts under the doctrine of respondeat superior.[33]

The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as the attending physician of his wife,
any liability for malpractice must be Dr. Estradas sole responsibility.

While it found the amount of damages fair and reasonable, the Court of Appeals held that no interest could be
imposed on unliquidated claims or damages.

The Issue

Basically, the issue in this case is whether CMC is vicariously liable for the negligence of Dr. Estrada. The
resolution of this issue rests, on the other hand, on the ascertainment of the relationship between Dr. Estrada and CMC.
The Court also believes that a determination of the extent of liability of the other respondents is inevitable to finally and
completely dispose of the present controversy.

The Ruling of the Court

The petition is partly meritorious.

On the Liability of CMC

Dr. Estradas negligence in handling the treatment and management of Corazons condition which ultimately
resulted in Corazons death is no longer in issue. Dr. Estrada did not appeal the decision of the Court of Appeals which
affirmed the ruling of the trial court finding Dr. Estrada solely liable for damages. Accordingly, the finding of the trial court
on Dr. Estradas negligence is already final.

Petitioners maintain that CMC is vicariously liable for Dr. Estradas negligence based on Article 2180 in relation
to Article 2176 of the Civil Code. These provisions pertinently state:
Art. 2180. The obligation imposed by article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.
xxxx

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

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

Similarly, in the United States, a hospital which is the employer, master, or principal of a physician employee,
servant, or agent, may be held liable for the physicians negligence under the doctrine of respondeat superior.[34]

In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice and admit patients at
CMC, should be liable for Dr. Estradas malpractice. Rogelio claims that he knew Dr. Estrada as an accredited physician of
CMC, though he discovered later that Dr. Estrada was not a salaried employee of the CMC. [35] Rogelio further claims
that he was dealing with CMC, whose primary concern was the treatment and management of his wifes condition. Dr.
Estrada just happened to be the specific person he talked to representing CMC.[36] Moreover, the fact that CMC made
Rogelio sign a Consent on Admission and Admission Agreement[37] and a Consent to Operation printed on the letterhead
of CMC indicates that CMC considered Dr. Estrada as a member of its medical staff.

On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere visiting physician and that it
admitted Corazon because her physical condition then was classified an emergency obstetrics case.[38]

CMC alleges that Dr. Estrada is an independent contractor for whose actuations CMC would be a total stranger. CMC
maintains that it had no control or supervision over Dr. Estrada in the exercise of his medical profession.

The Court had the occasion to determine the relationship between a hospital and a consultant or visiting
physician and the liability of such hospital for that physicians negligence in Ramos v. Court of Appeals,[39] to wit:
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the
conduct of their work within the hospital premises. Doctors who apply for consultant slots, visiting or
attending, are required to submit proof of completion of residency, their educational qualifications;
generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in
most cases, and references. These requirements are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital who either accept or reject the
application. This is particularly true with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally
required to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and
residents, moderate grand rounds and patient audits and perform other tasks and responsibilities, for
the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting
patients into the hospital. In addition to these, the physicians performance as a specialist is generally
evaluated by a peer review committee on the basis of mortality and morbidity statistics, and feedback
from patients, nurses, interns and residents. A consultant remiss in his duties, or a consultant who
regularly falls short of the minimum standards acceptable to the hospital or its peer review committee,
is normally politely terminated.
In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting consultant staff. While consultants are not, technically employees, a point which
respondent hospital asserts in denying all responsibility for the patients condition, the control
exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of
an employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the
basis of the foregoing, we rule that for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship in effect exists between hospitals and
their attending and visiting physicians. This being the case, the question now arises as to whether
or not respondent hospital is solidarily liable with respondent doctors for petitioners condition.
The basis for holding an employer solidarily responsible for the negligence of its employee
is found in Article 2180 of the Civil Code which considers a person accountable not only for his own
acts but also for those of others based on the formers responsibility under a relationship of patria
potestas. x x x[40] (Emphasis supplied)

While the Court in Ramos did not expound on the control test, such test essentially determines whether an employment
relationship exists between a physician and a hospital based on the exercise of control over the physician as to details.
Specifically, the employer (or the hospital) must have the right to control both the means and the details of the process by
which the employee (or the physician) is to accomplish his task.[41]

After a thorough examination of the voluminous records of this case, the Court finds no single evidence pointing
to CMCs exercise of control over Dr. Estradas treatment and management of Corazons condition. It is undisputed that
throughout Corazons pregnancy, she was under the exclusive prenatal care of Dr. Estrada. At the time of Corazons

admission at CMC and during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There
was no showing that CMC had a part in diagnosing Corazons condition. While Dr. Estrada enjoyed staff privileges at
CMC, such fact alone did not make him an employee of CMC.[42] CMC merely allowed Dr. Estrada to use its facilities[43]
when Corazon was about to give birth, which CMC considered an emergency. Considering these circumstances, Dr.
Estrada is not an employee of CMC, but an independent contractor.
The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an
independent contractor-physician.
In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however,
an exception to this principle. The hospital may be liable if the physician is the ostensible agent of the hospital.[44] This
exception is also known as the doctrine of apparent authority.[45] In Gilbert v. Sycamore Municipal Hospital,[46] the Illinois
Supreme Court explained the doctrine of apparent authority in this wise:

[U]nder the doctrine of apparent authority a hospital can be held vicariously liable for the negligent
acts of a physician providing care at the hospital, regardless of whether the physician is an
independent contractor, unless the patient knows, or should have known, that the physician is an
independent contractor. The elements of the action have been set out as follows:
For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1) the
hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the
individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the
acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had
knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the
hospital or its agent, consistent with ordinary care and prudence.
The element of holding out on the part of the hospital does not require an express representation by
the hospital that the person alleged to be negligent is an employee. Rather, the element is satisfied if
the hospital holds itself out as a provider of emergency room care without informing the patient that
the care is provided by independent contractors.
The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the
hospital to provide complete emergency room care, rather than upon a specific physician.

The doctrine of apparent authority essentially involves two factors to determine the liability of an independentcontractor physician.

The first factor focuses on the hospitals manifestations and is sometimes described as an inquiry whether the
hospital acted in a manner which would lead a reasonable person to conclude that the individual who was alleged to be
negligent was an employee or agent of the hospital.[47] In this regard, the hospital need not make express
representations to the patient that the treating physician is an employee of the hospital; rather a representation
may be general and implied.[48]

The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil Code
provides that [t]hrough estoppel, an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon. Estoppel rests on this rule: Whenever a party has,
by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to
act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.
[49]

In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. Through CMCs acts,
CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses Nogales to believe that Dr. Estrada was an
employee or agent of CMC. CMC cannot now repudiate such authority.

First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and facilities to Dr. Estrada.
Upon Dr. Estradas request for Corazons admission, CMC, through its personnel, readily accommodated Corazon and
updated Dr. Estrada of her condition.

Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to Corazons admission and
supposed hysterectomy, CMC asked Rogelio to sign release forms, the contents of which reinforced Rogelios belief that
Dr. Estrada was a member of CMCs medical staff.[50] The Consent on Admission and Agreement explicitly provides:

KNOW ALL MEN BY THESE PRESENTS:

I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar St., Malate Mla., being
the father/mother/brother/sister/spouse/relative/ guardian/or person in custody of Ma. Corazon, and
representing his/her family, of my own volition and free will, do consent and submit said Ma. Corazon
to Dr. Oscar Estrada (hereinafter referred to as Physician) for cure, treatment, retreatment, or
emergency measures, that the Physician, personally or by and through the Capitol Medical
Center and/or its staff, may use, adapt, or employ such means, forms or methods of cure,
treatment, retreatment, or emergency measures as he may see best and most expedient; that
Ma. Corazon and I will comply with any and all rules, regulations, directions, and instructions
of the Physician, the Capitol Medical Center and/or its staff; and, that I will not hold liable or
responsible and hereby waive and forever discharge and hold free the Physician, the Capitol Medical
Center and/or its staff, from any and all claims of whatever kind of nature, arising from directly or
indirectly, or by reason of said cure, treatment, or retreatment, or emergency measures or intervention
of said physician, the Capitol Medical Center and/or its staff.
x x x x[51] (Emphasis supplied)

While the Consent to Operation pertinently reads, thus:

I, ROGELIO NOGALES, x x x, of my own volition and free will, do consent and submit said
CORAZON NOGALES to Hysterectomy, by the Surgical Staff and Anesthesiologists of Capitol
Medical Center and/or whatever succeeding operations, treatment, or emergency measures as may
be necessary and most expedient; and, that I will not hold liable or responsible and hereby waive and
forever discharge and hold free the Surgeon, his assistants, anesthesiologists, the Capitol Medical
Center and/or its staff, from any and all claims of whatever kind of nature, arising from directly or
indirectly, or by reason of said operation or operations, treatment, or emergency measures, or
intervention of the Surgeon, his assistants, anesthesiologists, the Capitol Medical Center and/or its
staff.[52] (Emphasis supplied)

Without any indication in these consent forms that Dr. Estrada was an independent contractor-physician, the Spouses
Nogales could not have known that Dr. Estrada was an independent contractor. Significantly, no one from CMC informed
the Spouses Nogales that Dr. Estrada was an independent contractor. On the contrary, Dr. Atencio, who was then a
member of CMC Board of Directors, testified that Dr. Estrada was part of CMCs surgical staff.[53]

Third, Dr. Estradas referral of Corazons profuse vaginal bleeding to Dr. Espinola, who was then the Head of the
Obstetrics and Gynecology Department of CMC, gave the impression that Dr. Estrada as a member of CMCs medical
staff was collaborating with other CMC-employed specialists in treating Corazon.

The second factor focuses on the patients reliance. It is sometimes characterized as an inquiry on whether the
plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.[54]

The records show that the Spouses Nogales relied upon a perceived employment relationship with CMC in
accepting Dr. Estradas services. Rogelio testified that he and his wife specifically chose Dr. Estrada to handle Corazons
delivery not only because of their friends recommendation, but more importantly because of Dr. Estradas connection with
a reputable hospital, the [CMC].[55] In other words, Dr. Estradas relationship with CMC played a significant role in the
Spouses Nogales decision in accepting Dr. Estradas services as the obstetrician-gynecologist for Corazons delivery.
Moreover, as earlier stated, there is no showing that before and during Corazons confinement at CMC, the Spouses
Nogales knew or should have known that Dr. Estrada was not an employee of CMC.

Further, the Spouses Nogales looked to CMC to provide the best medical care and support services for
Corazons delivery. The Court notes that prior to Corazons fourth pregnancy, she used to give birth inside a clinic.
Considering Corazons age then, the Spouses Nogales decided to have their fourth child delivered at CMC, which Rogelio
regarded one of the best hospitals at the time.[56] This is precisely because the Spouses Nogales feared that Corazon
might experience complications during her delivery which would be better addressed and treated in a modern and big
hospital such as CMC. Moreover, Rogelios consent in Corazons hysterectomy to be performed by a different physician,
namely Dr. Espinola, is a clear indication of Rogelios confidence in CMCs surgical staff.

CMCs defense that all it did was to extend to [Corazon] its facilities is untenable. The Court cannot close its
eyes to the reality that hospitals, such as CMC, are in the business of treatment. In this regard, the Court agrees with the
observation made by the Court of Appeals of North Carolina in Diggs v. Novant Health, Inc.,[57] to wit:

The conception that the hospital does not undertake to treat the patient, does not undertake to act
through its doctors and nurses, but undertakes instead simply to procure them to act upon their own
responsibility, no longer reflects the fact. Present day hospitals, as their manner of operation
plainly demonstrates, do far more than furnish facilities for treatment. They regularly employ
on a salary basis a large staff of physicians, nurses and internes [sic], as well as
administrative and manual workers, and they charge patients for medical care and treatment,
collecting for such services, if necessary, by legal action. Certainly, the person who avails
himself of hospital facilities expects that the hospital will attempt to cure him, not that its
nurses or other employees will act on their own responsibility. x x x (Emphasis supplied)
Likewise unconvincing is CMCs argument that petitioners are estopped from claiming damages based on the Consent on
Admission and Consent to Operation. Both release forms consist of two parts. The first part gave CMC permission to
administer to Corazon any form of recognized medical treatment which the CMC medical staff deemed advisable. The
second part of the documents, which may properly be described as the releasing part, releases CMC and its employees
from any and all claims arising from or by reason of the treatment and operation.
The documents do not expressly release CMC from liability for injury to Corazon due to negligence during her
treatment or operation. Neither do the consent forms expressly exempt CMC from liability for Corazons death due to
negligence during such treatment or operation. Such release forms, being in the nature of contracts of adhesion, are
construed strictly against hospitals. Besides, a blanket release in favor of hospitals from any and all claims, which
includes claims due to bad faith or gross negligence, would be contrary to public policy and thus void.
Even simple negligence is not subject to blanket release in favor of establishments like hospitals but may only
mitigate liability depending on the circumstances.[58] When a person needing urgent medical attention rushes to a
hospital, he cannot bargain on equal footing with the hospital on the terms of admission and operation. Such a person is
literally at the mercy of the hospital. There can be no clearer example of a contract of adhesion than one arising from such
a dire situation. Thus, the release forms of CMC cannot relieve CMC from liability for the negligent medical treatment of
Corazon.

On the Liability of the Other Respondents

Despite this Courts pronouncement in its 9 September 2002[59] Resolution that the filing of petitioners
Manifestation confined petitioners claim only against CMC, Dr. Espinola, Dr. Lacson, and Dr. Uy, who have filed their
comments, the Court deems it proper to resolve the individual liability of the remaining respondents to put an end finally to
this more than two-decade old controversy.

a) Dr. Ely Villaflor

Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazons bleeding and to suggest the
correct remedy to Dr. Estrada.[60] Petitioners assert that it was Dr. Villaflors duty to correct the error of Nurse Dumlao in
the administration of hemacel.

The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of magnesium sulfate. However,
this was after informing Dr. Estrada that Corazon was no longer in convulsion and that her blood pressure went down to a
dangerous level.[61] At that moment, Dr. Estrada instructed Dr. Villaflor to reduce the dosage of magnesium sulfate from
10 to 2.5 grams. Since petitioners did not dispute Dr. Villaflors allegation, Dr. Villaflors defense remains uncontroverted.
Dr. Villaflors act of administering a lower dosage of magnesium sulfate was not out of her own volition or was in
contravention of Dr. Estradas order.

b) Dr. Rosa Uy

Dr. Rosa Uys alleged negligence consisted of her failure (1) to call the attention of Dr. Estrada on the incorrect
dosage of magnesium sulfate administered by Dr. Villaflor; (2) to take corrective measures; and (3) to correct Nurse
Dumlaos wrong method of hemacel administration.

The Court believes Dr. Uys claim that as a second year resident physician then at CMC, she was merely
authorized to take the clinical history and physical examination of Corazon.[62] However, that routine internal examination
did not ipso facto make Dr. Uy liable for the errors committed by Dr. Estrada. Further, petitioners imputation of negligence
rests on their baseless assumption that Dr. Uy was present at the delivery room. Nothing shows that Dr. Uy participated in
delivering Corazons baby. Further, it is unexpected from Dr. Uy, a mere resident physician at that time, to call the attention
of a more experienced specialist, if ever she was present at the delivery room.

c) Dr. Joel Enriquez

Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. Villaflor, and Nurse Dumlao
about their errors.[63] Petitioners insist that Dr. Enriquez should have taken, or at least suggested, corrective measures to
rectify such errors.

The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of expertise is definitely not
obstetrics and gynecology. As such, Dr. Enriquez was not expected to correct Dr. Estradas errors. Besides, there was no
evidence of Dr. Enriquezs knowledge of any error committed by Dr. Estrada and his failure to act upon such observation.

d) Dr. Perpetua Lacson

Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of blood Corazon needed. [64]
Petitioners claim that Dr. Lacson was remiss in her duty of supervising the blood bank staff.

As found by the trial court, there was no unreasonable delay in the delivery of blood from the time of the request
until the transfusion to Corazon. Dr. Lacson competently explained the procedure before blood could be given to the
patient.[65] Taking into account the bleeding time, clotting time and cross-matching, Dr. Lacson stated that it would take
approximately 45-60 minutes before blood could be ready for transfusion.[66] Further, no evidence exists that Dr. Lacson
neglected her duties as head of the blood bank.

e) Dr. Noe Espinola

Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy without determining the
underlying cause of Corazons bleeding. Dr. Espinola should have first considered the possibility of cervical injury, and
advised a thorough examination of the cervix, instead of believing outright Dr. Estradas diagnosis that the cause of
bleeding was uterine atony.

Dr. Espinolas order to do hysterectomy which was based on the information he received by phone is not
negligence. The Court agrees with the trial courts observation that Dr. Espinola, upon hearing such information about
Corazons condition, believed in good faith that hysterectomy was the correct remedy. At any rate, the hysterectomy did
not push through because upon Dr. Espinolas arrival, it was already too late. At the time, Corazon was practically dead.

f) Nurse J. Dumlao

In Moore v. Guthrie Hospital Inc.,[67] the US Court of Appeals, Fourth Circuit, held that to recover, a patient
complaining of injuries allegedly resulting when the nurse negligently injected medicine to him intravenously instead of
intramuscularly had to show that (1) an intravenous injection constituted a lack of reasonable and ordinary care; (2) the
nurse injected medicine intravenously; and (3) such injection was the proximate cause of his injury.

In the present case, there is no evidence of Nurse Dumlaos alleged failure to follow Dr. Estradas specific
instructions. Even assuming Nurse Dumlao defied Dr. Estradas order, there is no showing that side-drip administration of
hemacel proximately caused Corazons death. No evidence linking Corazons death and the alleged wrongful hemacel
administration was introduced. Therefore, there is no basis to hold Nurse Dumlao liable for negligence.

On the Award of Interest on Damages

The award of interest on damages is proper and allowed under Article 2211 of the Civil Code, which states that
in crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the
court.[68]

WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent Capitol Medical Center
vicariously liable for the negligence of Dr. Oscar Estrada. The amounts of P105,000 as actual damages and P700,000 as
moral damages should each earn legal interest at the rate of six percent (6%) per annum computed from the date of the
judgment of the trial court. The Court affirms the rest of the Decision dated 6 February 1998 and Resolution dated 21
March 2000 of the Court of Appeals in CA-G.R. CV No. 45641.

SO ORDERED.