Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 201103 September 25, 2013

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
JIMMY CEDENIO y PERALTA, Accused-Appellant.

RESOLUTION

REYES, J.:

Appealed in this case is the Decision1 dated July 29, 2011 of the Court of Appeals (CA) in CA-G.R.
CR-HC No. 04220, affirming with modification the Decision2 dated September 21, 2009 rendered by
the Regional Trial Court (RTC) of Pasay City, Branch 119, in Criminal Case No. 04-2742 for Rape.
The dispositive portion of the CA's Decision provides:

FORTHE STATED REASONS, the assailed RTC Decision convicting accused-appellant Jimmy
Cedenio of the crime of rape is AFFIRMED with the MODIFICATION that, in addition to the award
of 50,000.00 as civil indemnity, he is ORDERED to pay [AAA]3 the amount of 50,000.00 as moral
damages.

SO ORDERED.4

The evidence for the prosecution established the following: Twenty one (21)-year old AAA and
accused-appellant Jimmy Cedenio (Cedenio) rented separate rooms on the same floor of a building in
Pasay City. AAA lives with her boyfriend BBB and two (2) other persons, while Cedenio lives with
his family. They all use a common bathroom. At around 9:30 a.m. of October 20, 2004, after her
roommates left for work, AAA went back inside the room after taking a bath. She noticed that the light
inside the room was on. Upon entering the room, Cedenio, from behind the door, placed his arm
around her and poked a fan knife at her side. She pleaded for him not to killor rape her but he told her
that he only wanted to talk. Cedenio, however, then told her to lie down on the foam spread on the
floor, and grabbed the towel wrapped around her. She pleaded with him to spare her and told him that
she was having her period, to no avail. After Cedenio was able to have sex with AAA, he threatened to
kill her if she tells anybody about it. With Cedenio still inside the room, AAA hurriedly dressed up
and left. She went to Baclaran Mall where BBB was working and related her ordeal to him. They
immediately went to the barangay hall to report the incident. While there, AAA saw Cedenio in the
vicinity and told BBB who immediately ran after Cedenio. BBB was joined by barangay tanods and
Cedenio was eventually collared. At that point, PO3 Herman Abanilla, who was on board a tricycle,
saw the fracas, arrested Cedenio and brought him to the police headquarters.5

Cedenio denied the accusation against him and set up the defense of alibi. He claimed that he was out
selling cigarettes and candies in Pasay Rotunda at the time of the incident. He went back home at
around 10:30a.m. to put down his goods and thereafter fetched his children from school. He was near
the barangay hall in the afternoon to buy food when the tanods approached him and, after confirming
his identity, arrested him.6

Both the RTC and the CA gave more weight and credit to the prosecutions version of the incident and
did not heed Cedenios alibi. Both courts did not find any reason to disbelieve AAAs testimony and
ruled that Cedenio failed to establish any ill-motive on AAAs part for her to maliciously implicate
him. The CA further disregarded Cedenios claim that AAAs lack of physical resistance is contrary to
common human behavior, ruling that AAA was at knife point at that instance and there is no uniform
reaction from rape victims.7 The CA thus affirmed Cedenios conviction for Rape, the imposition of
reclusion perpetua as penalty and the award of 50,000.00 as civil indemnity. The CA also awarded
moral damages in the amount of 50,000.00.8

Upon review, the Court does not find any reason to overturn Cedenios conviction of the crime of
Rape.

Under Article 266-A (1)(a) of the Revised Penal Code, as amended, rape is committed when: (1) the
offender had carnal knowledge of a woman; and (b) that the same was committed by using force and
intimidation.9 In this case, the prosecutions evidence established that Cedenio was able to forcibly
have carnal knowledge of AAA on October 20, 2004 after he poked her with a knife and threatened to
kill her. The Court, like the CA, cannot sustain Cedenios claim that AAAs lack of physical resistance
is not a normal behavior in such cases. "Physical resistance need not be established in rape cases when
intimidation is exercised upon the victim who submits against her will because of fear for her life and
personal safety."10 If a knife on ones side is not a sufficient source and cause of fear, then what is?

Moreover, Cedenios defense of alibi is an inherently weak defense that is easy to fabricate.11

Cedenio failed to present clear and convincing evidence that he was in a place other than the situs
criminis at the time the crime was committed, such that it was physically impossible for him to have
been at the scene of the crime when it was committed.12 The CA noted that Cedenios job gave him
mobility and it was easy for him to go home and commit the crime; thus, his alibi cannot prosper.13

The CA also correctly affirmed the imposition of reclusion perpetua as penalty.14 The same should be
imposed without eligibility for parole.15

As to the civil liability, both the RTC and the CA ordered Cedenio to pay AAA 50,000 00 as civil
indemnity.1wphi1 The CA further awarded 50,000.00 as moral damages. Civil indemnity is
mandatory upon the finding of the fact of rape, while moral damages are proper without need of proof
other than the fact of rape by virtue of the undeniable moral suffering of AAA due to the rape. 16 The
amounts awarded are all in accord with prevailing jurisprudence.17

The Court, however, further awards exemplary damages in the amount of 30,000.00. The award of
exemplary damages is justified under Article 2229 of the Civil Code to set a public example or
correction for the public good.18 In addition, interest at the rate of six percent (6%) per annum shall be
imposed on all the damages awarded, to earn from the date of the finality of the Court's resolution
until fully paid.19
WHEREFORE, the appeal is hereby DISMISSED. The Decision dated July 29, 2011 of the Court of
Appeals in CA-G.R. CR-HC No. 04220 is AFFIRME'D, with modifications that exemplary damages
in the amount of THIRTY THOUSAND PESOS (30,000.00) be awarded and that the penalty of
reclusion perpetua imposed on accused-appellant Jimmy Cedenio shall be without eligibility for
parole. Moreover, the damages awarded in this case shall earn an interest at the rate of six percent
(6%) per annum from the date of the finality of this Resolution until fully paid.

SO ORDERED.

BIEVENIDO L. REYES
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO ESTELA M. PERLAS-BERNABE*

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN**

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Resolution
had been reached in consultation before the case was assigned to the writer of the opinion of the Court's
Division.

MARIA LOURDES P. A. SERENO

Chief Justice

FIRST DIVISION

G.R. No. 171953, October 21, 2015

NATIONAL HOUSING AUTHORITY, Petitioner, v. ERNESTO ROXAS, Respondent.

DECISION

BERSAMIN, J.:

The National Housing Authority (NHA), a government-owned and -controlled corporation created and
existing under Presidential Decree No. 757,1 may sue and be sued. However, no court should issue a
writ of execution upon any monetary judgment rendered against the NHA unless such monetary
judgment is first submitted to and passed upon by the Commission on Audit (COA).
 The Case

Being challenged on appeal by the NHA is the adverse decision promulgated on February 20, 2006,2
whereby the Court of Appeals (CA) dismissed the NHA's petition for certiorari brought to nullify the
orders issued in Special Civil Action No. 93-060-MN entitled Ernesto Roxas v. National Housing
Authority, et al. by the Regional Trial Court (RTC), Branch 72, in Malabon City. The first order, dated
May 3, 2002, had granted the motion for the issuance of the writ of execution filed by respondent
Ernesto Roxas.3 The other order, dated January 6, 2003, had denied the NHA's motion for
reconsideration.4 The NHA had also thereby assailed the writ of execution consequently issued on
February 24, 2003.5 In its petition for certiorari, the NHA insisted that the RTC had thereby
committed grave abuse of discretion amounting to lack or excess of jurisdiction.

Antecedents

The NHA is charged, among others, with the development of the Dagat-dagatan Development Project
(project) situated in Navotas, Metro Manila.6 On December 4, 1985, Roxas applied for commercial
lots in the project, particularly Lot 9 and Lot 10 in Block 11, Area 3, Phase III A/B, with an area of
176 square meters, for the use of his business of buying and selling gravel, sand and cement products.7
The NHA approved his application, and issued on December 6, 1985 the order of payment respecting
the lots. On December 27, 1985, the NHA issued the notice of award for the lots in favor of Roxas,8 at
P1,500.00/square meter.9 On the basis of the order of payment and the notice of award, Roxas made
his downpayment of P79,200.00.10 A relocation/reblocking survey resulted in the renumbering of Lot
9 to Lot 5 and Lot 10 to Lot 6 (subject lots).11 He completed his payment for the subject lots on
December 20, 1991.

In the meanwhile, the NHA conducted a final subdivision project survey, causing the increase in the
area of the subject lots from 176 to 320 square meters. The NHA informed Roxas about the increase in
the area of the subject lots, and approved the award of the additional area of 144 square meters to him
at P3,500.00/square meter.12 Although manifesting his interest in acquiring the additional area, he
appealed for the reduction of the price to Pl,500.00/square meter,13 pointing out that Lot 5 and Lot 6
were a substitution unilaterally imposed by the NHA that resulted in the increase of 144 square meters
based on the technical description, and that although he desired to purchase the increased area, the
purchase must be in accordance with the terms and conditions contained in the order of payment and
notice of award issued to him. After the NHA rejected his appeal,14 he commenced in the RTC this
action for specific performance and damages, with prayer for the issuance of a writ of preliminary
injunction. He amended the complaint15 to compel the NHA to comply with the terms and conditions
of the order of payment and the notice of award.

The NHA countered in its answer16 that Roxas' prayer to include in the original contract the increase in
lot measurement of 144 square meters was contrary to its existing rules and regulation; that he could
not claim more than what had been originally awarded to him; and that at the very least, his right in
the additional area was limited only to first refusal.

On July 15, 1994, after trial, the RTC rendered judgment against the NHA,17 decreeing: chanRob lesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff Ernesto Roxas
and against defendant NHA, represented by its General Manager and its Dagat-dagatan Development
Project Manager, as follows:
1. Declaring plaintiff Ernesto Roxas the legal awardee of subject lots 5 and 6 in the full total area
thereof of 320 sq. meters;

2. Ordering defendant NHA, thru its General Manager Robert P. Balao and the project Manager for
its Dagat-dagatan Development Project Evelyn V. Ramos, or whoever shall be the incumbents of the
positions at the time of the enforcement hereof to execute the corresponding Contract to Sell for the
entire area of subject lots 5 and 6 totaling to 320 sq. meters at the cost of PI,500.00 per sq. meter under
the same terms and conditions as that provided for in the Order of Payment and Notice of Award
(Exhs. B and D), respectively, deducting whatever has already been paid by plaintiff;

3. Ordering defendant NHA to pay plaintiff P30,000.00 by way of reasonable Attorney's Fees.
The Writ of Preliminary Injunction issued in this case on January 31, 1994 is hereby made permanent.

Costs against defendant NHA.

SO ORDERED. cralawlawlibrary

The NHA appealed in due course, but the CA affirmed the judgment of the RTC, prompting the NHA
to seek to undo the adverse decision of the CA through its petition for certiorari. On July 5, 2000,
however, the Court dismissed the petition for certiorari. It later denied the NHA's motion for
reconsideration.18

On July 27, 2001, Roxas filed his motion for the issuance of the writ of execution,19 which the RTC
granted on May 3, 2002.20 The NHA sought reconsideration, but its motion was denied on January 6,
2003. Accordingly, on February 24, 2003, the RTC issued the writ of execution to enforce the final
and executory decision of July 15, 1994.21

In order to prevent the execution, the NHA brought another petition for certiorari in the CA, docketed
as C.A.-G.R. SP No. 76468, imputing to the RTC grave abuse of discretion amounting to lack or
excess of jurisdiction for ordering the execution of the judgment.

On February 20, 2006, the CA dismissed the NFIA's petition for certiorari through the presently
assailed decision because it found that the RTC did not gravely abuse its discretion amounting to lack
or excess of jurisdiction in granting Roxas' motion for the issuance of the writ of execution and in
issuing the writ of execution.22 The CA observed that the NHA was a government-owned and -
controlled corporation whose funds were not exempt from garnishment or execution; and ruled that
Roxas did not need to first file his claim in the COA.

Issues

The NHA insists that the judgment of the RTC did not lie against it because its submission to the
litigation did not necessarily imply that the Government had thereby given its consent to liability; and
that the money judgment awarded to Roxas could not be recovered by motion for execution but should
have been first filed in the COA.23
Roxas counters that the main relief under the final and executory judgment of the RTC directed the
NHA to execute the contract to sell the subject lots at the rate of P1,500.00/square meter as provided
for in the order of payment and the notice of award. He claims that the award of attorney's fees in his
favor was only incidental to the main relief of specific performance; and argues that the Government
abandons its sovereign capacity and is treated like any other corporations whenever it enters into a
commercial transaction.24

Ruling of the Court

The appeal is partly meritorious.

First of all, the mantle of the State's immunity from suit did not extend to the NHA despite its being a
government-owned and -controlled corporation. Under Section 6(i) of Presidential Decree No. 757,
which was its charter, the NHA could sue and be sued. As such, the NHA was not immune from the
suit of Roxas.

And, secondly, for purposes of the implementation of the writ of execution, it is necessary to
distinguish between, on the one hand, the main relief adjudicated in the judgment of July 15, 1994,
which was the decree of specific performance as to the right of Roxas to acquire the subject lots at
Pl,500.00/square meter as stated in the original agreement between the parties, and, on the other, the
secondary relief for the attorney's fees of P30,000.00 to be paid by the NHA to Roxas.

Section 12 of Presidential Decree No. 757 has authorized the NHA to "determine, establish and
maintain the most feasible and effective program for the management or disposition of specific
housing or resettlement projects undertaken by [it]", and "[u]nless otherwise decided by the Board,
completed housing or resettlement projects shall be managed and administered by [it]." The execution
of the contract to sell by the NHA conformably with the main relief under the judgment would be in
the ordinary course of the management or disposition of the Dagat-dagatan Development Project
undertaken by the NHA. In other words, the NHA possessed the legal competence and authority to
directly afford the main relief without Roxas needing to first submit to the COA the contract to sell for
review and approval. To maintain otherwise is to unconstitutionally grant to the COA the power of
judicial review in respect of the decision of a court of law.

However, settling or paying off the secondary relief for the attorney's fees of 30,000.00, being a
monetary obligation of the NHA, would not be in the usual course of the activities of the NHA under
its charter. That such relief was the consequence of the suit that granted the main relief did not matter.
Pursuant to Section 26 of Presidential Decree No. 1445, Roxas should first bring it to the COA prior to
its enforcement against the NHA.25 Indeed, Section 26 specifically vested in the COA the power,
authority and duty to examine, audit and settle "all debts and claims of any sort" due from or owing to
the Government, or any of its subdivisions, agencies, or instrumentalities, including government-
owned and controlled corporations with original charters, viz.: chanRo blesvirtualLawlibrary

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and
comprehend all matters relating to auditing procedures, systems and controls, the keeping of the
general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten
years, the examination and inspection of the books, records, and papers relating to those accounts; and
the audit and settlement of the accounts of all persons respecting funds or property received or
held by them in an accountable capacity, as well as the examination, audit, and settlement of all
debts and claims of any sort due from or owing to the Government or any of its subdivisions,
agencies and instrumentalities. The said jurisdiction extends to all government-owned or
controlled corporations, including their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, and as herein prescribed, including non-
governmental entities subsidized by the government, those funded by donations through the
government, those required to pay levies or government share, and those for which the
government has put up a counterpart fund or those partly funded by the government, (bold
underscoring supplied for emphasis)
cralawlawlibrary

As the text of the legal provision plainly shows, the audit jurisdiction of the COA extends to all
government-owned or -controlled corporations, their subsidiaries, and other self-governing boards,
commissions, or agencies of the Government, as well as to all non-governmental entities subsidized by
the Government, or funded by donations through the Government, or required to pay levies or
government share, or for which the Government has put up a counterpart fund, or those partly funded
by the Government. There is no distinction as to the class of claims. Ubi lex non distinguish nee nos
distinguere debemos.26 Indeed, a general term or phrase should not be reduced into parts and one part
distinguished from the other so as to justify its exclusion from the operation of the law. In other words,
there should be no distinction in the application of a statute where none is indicated. Corollary to this
rule is the principle that where the law does not make any exception, the courts may not exempt
something therefrom, unless there is compelling reason to the contrary.27

There is no question that the NHA could sue or be sued, and thus could be held liable under the
judgment rendered against it. But the universal rule remains to be that the State, although it gives its
consent to be sued either by general or special law, may limit the claimant's action only up to the
completion of proceedings anterior to the stage of execution. In other words, the power of the court
ends when the judgment is rendered because government funds and property may not be seized
pursuant to writs of execution or writs of garnishment to satisfy such judgments. The functions and
public services of the State cannot be allowed to be paralyzed or disrupted by the diversion of public
fund from their legitimate and specific objects, and as appropriated by law. The rule is based on
obvious considerations of public policy. Indeed, the disbursements of public funds must be covered by
the corresponding appropriation as required by law.28

WHEREFORE, the Court PARTLY GRANTS the petition for review on certiorari; and
MODIFIES the writ of execution dated February 24, 2003 by enjoining the respondent to file his
claim for attorney's fees with the Commission on Audit pursuant to Presidential Decree No. 1445.

SO ORDERED. chanroblesvirtuallawlibrary

Sereno, C.J., *Velasco, Leonardo-De Castro, and Perlas-Bernabe, JJ., concur

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-26146 October 31, 1969

SOCIAL SECURITY SYSTEM, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, MANILA JOCKEY CLUB, INC., PHILIPPINE
RACING CLUB, INC., respondents.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Frine C. Zaballero and
Attorneys Luz M. Villamor and Luis S. Topacio for petitioner.
Lichauco, Picazo and Agcaoili for respondent Manila Jockey Club, Inc.
Cesar S. de Guzman for respondent Phil. Racing Club, Inc.

FERNANDO, J.:

A recent decision, Investment Planning Corporation v. Social Security System,1 is decisive of this
controversy, the issue involved being whether or not jockeys connected with respondents Manila
Jockey Club, Inc. and Philippine Racing Club, Inc. may be considered as their employees and,
therefore, fall within the coverage of the Social Security Act. Respondent Court of Appeals, in its
decision of February 4, 1966, set aside a resolution of petitioner Social Security System of July 3,
1963, which held that for the purposes of coverage under the Social Security Act, there is an
employer-employee relationship between the two above-named respondents on the one hand and the
jockeys on the other. The matter was elevated to the Court of Appeals with the result aforesaid, the
dispositive portion of its decision of February 4, 1966 stating: "Let a new resolution be entered
declaring [that] jockeys are not employees of [Manila Jockey Club, Inc.] and [Philippine Racing Club,
Inc.] ... within the purview of the Social Security Act." Hence, this appeal by certiorari from such
Court of Appeals decision, the Social Security System being the petitioner.

We have to affirm in the light of the facts as found by the Court of Appeals under the control test set
forth in authoritative Investment Planning Corporation decision.

The facts are as found by the Court of Appeals are as follows: "1. That there are only two (2) racing
entities in the Philippines, namely, the [Manila Jockey Club, Inc.], and the [Philippine Racing Club,
Inc.], whose clubs and personnel are expressly prohibited by the [Games and Amusements Board]
Rules from owning a race horse ...; 2. That about 10 days before a scheduled race, the clubs receive
inscription of horses, accomplished on entry forms, whereon the names of the horses and their owners
appear, duly certified by the owners ... . Thereafter, the handicapper prepares a list of the entries to
enable horse owners to determine whether to join the scheduled race. If they decide to join, they file
with the club a declaration therefor ... stating the name of the horse and of the jockey, together with
the jockey's signature thereon to show his conformity thereto. Upon receipt of said declarations, the
clubs screen the same in order that disqualified jockeys or disqualified race mounts may not
participate. Once the screening is completed, the program on the race is printed and released to the
public, after which no changes can be made except where the entry is incapacitated by reason of
sickness or accident; 3. That the maximum number of participants allowed in a racing event, are 14
qualified horses mounted by the same number of qualified jockeys; 4. That from the total bets in a
single race, the law allots 1/2% to the [Games and Amusements Board], 6-1/2% to the club, 5-1/2% as
prize money, and the remainder for dividends to bettors. The prize money must, in turn, be shared by
the horse owner of the winning mounts with his jockey and trainers, who get 20% and 10% each of
said prize money. However, the jockeys and trainees of mounts who do not place first, second or third,
do not receive anything from the prize money; 5. That the stewards are, under the law, officials of the
club which pays their per diems but licensed by the [Games and Amusements Board] whose duty it
is to supervise the conduct of the races and enforce [its] rules as well, as to penalize mounts and
jockey for infractions relative thereto; 6. That for a person to ride as jockey, he must first secure a
license from the [Games and Amusements Board]. And upon payment to the club of the nominal fee
of P6.00, the jockey may use the race tracks for training, may participate in racing meets held therein
and/or to sit as spectator in the grandstand A of the hippodrome; and 7. That the clubs have
employees, such as janitors, club guards, and the like, who maintain and operate the offices and the
race tracks, which personnel are already under SSS coverage."2

In the decision now sought to be reviewed, reference is made to the statutory definition of the term
"employee" under the Social Security Act.3 Thus: "Employee Any person who performs services
for an 'employer' in which either or both mental and physical efforts are used and who received
compensation for such services, where there is an employer-employee relationship."4

Why jockeys do not fall under the facts obtaining within such a category was explained in the Court of
Appeals decision in this wise: "The evidence invariably shows that the selection and employment of
the jockey is made by the race horse owner whose horse the jockey will ride, not by the race club.
Upon the other hand, the jockey decides for himself the horse he is to mount. This was testified to by
Samuel Sharuff, a race horse owner, corroborated by Exhibits B and B-5 consisting of declaration
forms which race horse owners file with the race club before the scheduled race meet, stating inter alia
the name of the race horse being entered in the race and the name of the jockey chosen to ride the
mount, which declaration must bear the signature of the jockey concerned as evidence of his
conformity thereto, in accordance with the [Games and Amusements Board] rules ... ."5 It went on to
state: "Thus, the matter as to which jockey shall ride which horse, is mutually agreed upon by and
between the race horse owner and the jockey. Once such agreement is reached, the race club cannot
compel the race horse owner to accept another jockey or the jockey to ride another horse. Nor can the
race club prevent the jockey from riding the horse, which the jockey had previously agreed with the
race horse owner to ride."6

After citing the pertinent statutory provision as well as the rules of the Games and Amusements
Board,7 the Court of Appeals concluded, as noted, that there was no employer-employee relationship,
especially so in view of the undeniable fact that no control was exercised by respondents over the
jockeys. Such control is exercised by racing stewards who, as noted, are entrusted with the duty to
supervise the conduct of the races and enforce the Games and Amusements Board rules. As noted in
the decision: "The stewards admittedly received per diems from the race clubs. However, the acts and
decisions of race stewards, when exercising their office as such, are not under the control of the race
clubs. The powers and authority of the stewards proceed from the law aforecited, not from the club
sponsoring the race meet. Such powers and authority of the race stewards are in turn defined and
delimited by the same law and by the [Games and Amusements Board] rules. Consequently, the acts
and decision of the stewards when acting as such, are independent of and not subject to the will of
anybody, save the [Games and Amusements Board]. And the jockeys, the race horse owners as well as
the racing clubs must abide by the decision of the stewards relative to the conduct of the race and the
enforcement of [such] rules."8The absence of control that may be exercised on the part of respondents
over the jockeys negates the existence of an employer-employee relationship. That is the principle
adopted by us in the leading Investment Planning Corporation decision. Thus: "The specific question
of when there is 'employer-employee relationship' for purposes of the Social Security Act has not yet
been settled in this jurisdiction by any decision of this Court. But in other connections wherein the
term is used the test that has been generally applied is the so-called control test, that is, whether the
'employer' controls or has reserved the right to control the 'employee' not only as to the result of the
work to be done but also as to the means and methods by which the same is to be accomplished."9

As was noted further by Justice Makalintal who penned the decision: "The logic of the situation
indeed dictates that where the element of control is absent; where a person who works for another does
so more or less at his own pleasure and is not subject to definite hours or conditions of works, and in
turn is compensated according to the result of his efforts and not the amount thereof, we should not
find that the relationship of employer and employee exists."10

Petitioner Social Security System would have us reverse the decision of the Court of Appeals with the
plea that instead of the control test the "economic facts of the relation" test should be the criterion as to
whether or not the matter falls within the coverage of the Social Security Act. As set forth in its brief:
"The Supreme Court of the United States in the case of National Labor Relations Board vs. Hearst
Publications, Inc., 322 U.S. 111, 88 L. Ed. 1170, considered the aforementioned 'economic facts of the
relation' test as more reliable, thus: 'In short when the particular situation of employment combines
those characteristics so that the economic facts of the relation make more nearly one of the
employment than of independent business enterprise with respect to the ends sought to be
accomplished by the legislation, those characteristics may outweigh technical legal classification for
purposes unrelated to the statute's objectives and bring the relation within its position."'11

We are unable to accord acceptance to such a plea in view of the controlling Investment Planning
Corporation decision. In fairness to petitioner Social Security System, it must be stated that our
decision was rendered on November 18, 1967 but its brief was filed as far back as February 8 of the
same year. Our decision noted United v. Silk, 12 quoted with approval in a case decided the same year,
Bartels v. Birmingham.13 Then came this citation from Bartels: "'In United States v. Silk, No. 312, 331
US 704, ante, 1957, 67 S. Ct. 1463, ..., we held that the relationship of employer-employee, which
determines the liability for employment taxes under the Social Security Act was not to be determined
solely by the idea of control which an alleged employer may or could exercise over the details of the
service rendered to his business by the worker or workers. Obviously control is characteristically
associated with the employer-employee relationship, but in the application of social legislation
employees are those who as a matter of economic reality are dependent upon the business to which
they render service.'"14 After which the Investment Planning Corporation opinion goes on to state:
"However, the 'economic-reality' test was subsequently abandoned as not reflective of the intention of
Congress in the enactment of the original Security Act of 1935. The change was accomplished by
means of an amendatory Act passed in 1948, which was construed and applied in later cases."15

Petitioner Social Security System is not in agreement with such a view. For it, as noted, the
"economic-reality" or the "economic facts of relation" test, the distinction being simply a matter of
terminology, calls for acceptance. If it were a new question, perhaps such a plea might be impressed
with a greater persuasive force.

Considering, however, that such an approach was suggested and rejected in the Investment Planning
Corporation decision, we cannot yield assent. We adhere to the Investment Planning Corporation
doctrine. It bears reiteration. Thus: "Considering the similarity between the definition of 'employee' in
the Federal Social Security Act (U.S.) as amended and its definitions in our own Social Security Act,
and considering further that the local statute is admittedly patterned after that of the United States, the
decisions of American courts on the matter before us may well be accorded persuasive force. The
logic of the situation indeed dictates that where the element of control is absent; where a person who
works for another does so more or less at his own pleasure and is not subject to definite hours or
conditions of work, and in turn, is compensated according to the result of his efforts and not the
amount thereof, we should not find that the relationship of employer and employee exists."16

The matter being thus foreclosed, there being a reaffirmance of the authoritative holding in the
Investment Planning Corporation decision, there is nothing that calls for a reversal of the Court of
Appeals decision, now sought to be reviewed.

WHEREFORE, the decision of the Fourth Division of the Court of Appeals of February 4, 1966 is
affirmed. Without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Teehankee, JJ.,
concur.
Barredo, J., took no part.
 SECOND DIVISION
G.R. No. 212256, December 09, 2015
FARIDA YAP BITTE AND THE HEIRS OF BENJAMIN D. BITTE, NAMELY:
JACOB YAP BITTE, SHAIRA DAYANARA YAP BITTE, FATIMA YAP BITTE
AND ALLAN ROBERT YAP BITTE, PETITIONERS, VS. SPOUSES FRED AND
ROSA ELSA SERRANO JONAS, RESPONDENTS.

DECISION

MENDOZA, J.:

In this petition for review on certiorari[1] under Rule 45 of the Rules of Court, the petitioners, Farida
Yap Bitte and Heirs of Benjamin Bitte (the petitioners), seek the review of the September 26, 2013
Decision[2] and February 26, 2014 Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No.
01596-MIN, which reversed the January 18, 2007 Joint Decision[4] of the Regional Trial Court,
Branch 13, Davao (RTC-Branch 13), arrived at in favor of respondents, Spouses Fred and Rosa Elsa
Serrano Jonas (Spouses Jonas).

Factual Antecedents

This controversy stemmed from two civil cases filed by the parties against each other relative to a
purported contract of sale involving a piece of property situated at 820 corner Jacinto Street and
Quezon Boulevard, Davao City (subject property). It was initially covered by TCT No. T-112717 in
the name of Rosa Elsa Serrano Jonas (Rosa Elsa) and presently by TCT No. T-315273 under the name
of Ganzon Yap, married to Haima Yap (Spouses Yap).

On July 19, 1985, before Rosa Elsa went to Australia, she had executed a Special Power of Attorney
(SPA) authorizing her mother, Andrea C. Serrano (Andrea), to sell the property.

Sometime in May 1996, Cipriano Serrano (Cipriano), son of Andrea and brother of Rosa Elsa, offered
the property for sale to Spouses Benjamin and Farida Yap Bitte (Spouses Bitte) showing them the
authority of Andrea. On September 3, 1996, Cipriano received from Spouses Bitte the amount of
P200,000.00 as advance payment for the property. Later on, on September 10, 1996, he received the
additional amount of P400,000.00.

Spouses Bitte sought a meeting for final negotiation with Rosa Elsa, the registered owner of the
subject property. At that time, Rosa Elsa was in Australia and had no funds to spare for her travel to
the Philippines. To enable her to come to the country, Spouses Bitte paid for her round trip ticket.

On October 10, 1996, shortly after her arrival here in the Philippines, Rosa Elsa revoked the SPA,
through an instrument of even date, and handed a copy thereof to Andrea.

The next day, on October 11, 1996, the parties met at Farida Bitte's office, but no final agreement was
reached. The next day, Rosa Elsa withdrew from the transaction.

On October 17, 1996, Spouses Bitte filed before the RTC a Complaint for Specific Performance with
Damages seeking to compel Rosa Elsa, Andrea and Cipriano to transfer to their names the title over
the subject property. The case was docketed as Civil Case No. 24,771-96 and raffled to RTC-Branch
13.

While the case was pending, Andrea sold the subject property to Spouses Bitte, through a deed of
absolute sale, dated February 25, 1997, and notarized by one Atty. Bernardino Bolcan, Jr.

Immediately thereafter, Rosa Elsa asked Andrea about the sale. Her questions about the sale, however,
were ignored and her pleas for the cancellation of the sale and restoration of the property to her
possession were disregarded.

Undisputed by the parties is the fact that Rosa Elsa earlier mortgaged the subject property to Mindanao
Development Bank. Upon failure to pay the loan on maturity, the mortgage was foreclosed and sold at
a public auction on December 14, 1998 as evidenced by the annotation on the title, Entry No.
1173153.[5]

Armed with the deed of absolute sale executed by Andrea, Spouses Bitte were able to redeem the
property on September 14, 1998 from the highest bidder, Thelma Jean Salvana, for P1.6 Million
Pesos.

Thereafter, Spouses Bitte sold the property to Ganzon Yap (Ganzon), married to Haima Yap.[6]

Civi Case No. 24,771-96

(Spouses Bitte v. Rosa Elsa Serrano Jonas, Andrea C. Serrano and Cipriano Serrano, Jr.)

As earlier recited, on October 17, 1996, Spouses Bitte filed before the RTC Civil Case No. 24,771-96,
a Complaint for Specific Performance with Damages seeking to compel Rosa Elsa, Andrea and
Cipriano to transfer the title of the subject property to their names.

In their Complaint, Spouses Bitte alleged that sometime in May 1996, the property was offered to
them for sale by Cipriano, who showed them the SPA in favor of Andrea; that on September 3, 1996
and September 10, 1996, Cipriano received from them the respective amounts of P200,000.00 and
then P400,000.00 as advance payments for the property; that they sought a meeting for final
negotiation with Rosa Elsa, then the registered owner of the subject property; that at that time, Rosa
Elsa was in Australia and had no funds to spare in order to return to the Philippines; that to enable her
to come to the country, they paid for her round trip ticket; that on October 11, 1996, they and Rosa
Elsa met at Farida Bitte's office; that an agreement of sale of the subject property for the total purchase
price of P6.2 Million Pesos was reached; that P5 Million thereof would be paid on October 18, 1996
and the balance, thirty (30) days thereafter; that on the following day, Rosa Elsa withdrew from the
transaction; and that on the same date, they demanded, through a letter, the execution of the necessary
documents to effect the transfer of the property to their names, but to no avail.

On October 18, 1996, RTC-Branch 13 granted the prayer for the issuance of a Temporary Restraining
Order (TRO) preventing Rosa Elsa and her agents from disposing the subject property. Subsequently,
on November 8, 1996, a Writ of Preliminary Injunction (WPI) was issued in favor of Spouses Bitte.

In response, Rosa Elsa countered that despite her appointment of her mother, Andrea, as her attorney-
in-fact/agent, she later gave her instructions not to sell the property; that her revocation barred the
consummation of the contract to sell; that it was her belief that her return to the Philippines was in
connection with the sale of another property situated in Cawag, San Isidro, Davao Oriental; that it was
a surprise to her when she learned that Cipriano was still negotiating for the sale of the subject
property; that for said reason, she asked for a meeting with Spouses Bitte to discuss the issue; that in
the meeting, upon learning of the source of her air fare, she offered to refund it and to return the
unused ticket for her return trip, but Spouses Bitte refused her offer; that no authority was given to
Cipriano to receive any advance payment for the property; and that Andrea's authority was revoked
through a Deed of Revocation of the Special Power of Attorney (SPA), dated October 10, 1996.

During the pre-trial conference held on July 30, 1999, Spouses Bitte failed to appear. Consequently,
RTC-Branch 13 dismissed their complaint and set the reception of Rosa Elsa's counterclaim for
hearing.

Later on, Benjamin Bitte manifested the withdrawal of their counsel. RTC-Branch 13 then cancelled
the reception of Rosa Elsa's evidence without reconsidering the dismissal of the complaint.

Civil Case No. 27,667-99

(Spouses Fred Jonas and Rosa Elsa Serrano Jonas v. Sps. Benjamin Bitte and Farida Yap Bitte,
Andrea C. Serrano, Reg. of Deeds and the Clerk of Court, RTC, Davao City)

On November 16, 1999, Spouses Jonas filed before the RTC Civil Case No. 27,667-99, a complaint
for Annulment of Deed of Absolute Sale, Cancellation of TCT and Recovery of Possession,
Injunction, and Damages against Spouses Bitte.

In the Complaint, Spouses Jonas alleged that Rosa Elsa acquired the property before marriage; that on
July 19, 1985, when she decided to leave for Australia to reside there, she executed an SPA of even
date, granting her mother, Andrea, the authority to sell the subject property; that while in Australia,
she decided that she would no longer sell the property; that she instructed her mother to stop offering
the property to prospective buyers; that upon arrival here in the Philippines in 1996, she revoked the
SPA, through an instrument, dated October 10, 1996, and handed a copy thereof to Andrea; that later,
she received information that the property was subsequently sold to Spouses Bitte, through a Deed of
Absolute Sale, dated February 25, 1997, signed by her mother, Andrea; and that she then pleaded for
the return of the property, but Andrea repeatedly ignored her.

Spouses Jonas eventually sought judicial recourse through the filing of a complaint for the Annulment
of the Deed of Absolute Sale and Reconveyance of the Property which was raffled to RTC-Branch 9.

On November 17, 1999, Branch 9 issued a 20-day TRO restraining Spouses Bitte from selling or
disposing the subject property. On December 6, 1999, after hearing, it issued a WPI for the same
purpose.

On July 11, 2000, Rosa Elsa moved for the admission of an Amended Complaint in order to implead
Spouses Yap because the title over the subject property had been subsequently registered in their
names.

Consolidation of the Two Cases

As earlier recited, RTC-Branch 13 dismissed the complaint of Spouses Bitte and set the reception of
Rosa Elsa's counterclaim for hearing.

Later on, RTC-Branch 13 cancelled the reception of Rosa Elsa's evidence without reconsidering the
dismissal of the complaint.

Nonetheless, on May 26, 2000, RTC-Branch 13 reconsidered its earlier ruling after seeing the need to
consolidate Civil Case No. 27,667-99 with Civil Case No. 24,771-99 pending before the RTC, Branch
9, Davao (RTC-Branch 99). In the October 4, 2001 Order, the cases were ordered consolidated and
were thereafter scheduled to be jointly heard before Branch 13.

On April 17, 2002, Spouses Bitte were again declared in default by RTC- Branch 13 for their failure to
attend the pre-trial.

On January 4, 2003, the counsel of Spouses Bitte withdrew and a new one entered his appearance and
then filed a verified motion for reconsideration.

On August 21, 2003, Spouses Bitte once again failed to appear in the pre-trial and were, thus, declared
non-suited. Rosa Elsa then presented her evidence ex parte.

Joint Decision of the RTC-Branch 13

On January 18, 2007, RTC-Branch 13 rendered a Joint Decision,[7] confirming the dismissal of Civil
Case No. 24,771-96 and directing Spouses Bitte to pay Rosa Elsa the amount of PI,546,752.80,
representing the balance of the sale of the subject. The dispositive portion of the Joint Decision reads:
WHEREFORE, judgment is hereby rendered in these cases as follows:

a. Reiterating the dismissal of Civil Case No. 24,771-96;

b. Directing spouses Benjamin and Farida Bitte to pay Rosa Elsa Serrano Jonas the
amount of P1,546,752.80 (one million five hundred forty-thousand seven hundred fifty
two and 80/100 pesos) representing the balance of the sale of the property subject of
this case to them;

c. Directing spouses Benjamin and Farida Bitte to pay interest on the balance at the rate of
12% per annum from the date of this decision until fully paid.

SO ORDERED.[8]
Ruling of the CA

Aggrieved, Spouses Jonas appealed to the CA. On September 26, 2013, the CA reversed the RTC-
Branch 13 Joint Decision. In so ruling, the CA focused on the validity and enforceability of the deed
of absolute sale executed by Andrea in the name of Rosa Elsa. The CA explained:
1. Andrea's execution on behalf of Rosa Elsa of the deed of absolute sale in favor of Spouses Bitte was
void and unenforceable as the authority to represent Rosa Elsa had already been revoked as early as
October 10, 1996. Without the authority to effect the conveyance, the contract was without effect to
Rosa Elsa, who was a stranger to the conveyance in favor of Spouses Bitte. Rosa Elsa did not consent
to the transaction either.

2. Considering that no valid conveyance was effected, Spouses Bitte had no right to redeem the
foreclosed property because they were not among those persons who could redeem a property under
Sec. 6 of Act. No. 3135 and Section 27 of Rule 39 of the Rules of Court. They could not be considered
successors-in-interest or transferees because no right was conveyed by Rosa Elsa on account of the
revocation of the authority given to Andrea.

3. Ganzon, the one who subsequently purchased the property from Spouses Bitte, was not an innocent
purchaser of the property as the conveyance was attended with circumstances which should have
alerted him of the fallibility of the title over the property. Ganzon transacted with Spouses Bitte, who
were then not yet the registered owners of the property. He should have made inquiries first as to how
Spouses Bitte acquired the rights over the property.

Thus, the CA disposed as follows:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED and the Joint
Decision, dated 18 January 2007 of the RTC, Eleventh Judicial Region, Branch 13, Davao City,
insofar as it pertains to Civil Case No. 27,667-99 is hereby REVERSED and SET ASIDE.
Accordingly,

a) The Deed of Absolute Sale dated 25 February 1997 is hereby declared NULL and VOID.

b) Transfer Certificate of Title (TCT) No. T-315273 in the name of Ganzon Yap, married to Haima
Yap, is declared NULL and VOID, and the Registry of Deeds of Davao City is hereby
DIRECTED to cancel TCT No. T-315273, and to issue a new title reinstating TCT No. T-
112717 in the name of Rosa Elsa S. Serrano; and

c) Ganzon and Haima Yap and/or whoever is in possession of the subject property, or their agents
and those acting for in their behalf are hereby DIRECTED to VACATE the subject property and
surrender the possession of the same to plaintiff-appellant Rosa Elsa Serrano-Jonas.

SO ORDERED.[9]
Aggrieved, Spouses Bitte moved for reconsideration, but their motion was denied by the CA on
February 26, 2014.[10]

Hence, this petition by the petitioners, Farida Yap Bitte and the Heirs of Benjamin Bitte.[11]
ISSUES

WHETHER OR NOT THE COURT OF APPEALS-MINDANAO STATION DEPARTED

FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHEN IT
ALLOWED THE APPELLANTS BRIEF FILED BY RESPONDENTS IN VIOLATION OF
SECTION 7, RULE 44 OF THE RULES OF COURT.

II

WHETHER OR NOT THE RULING OF THE COURT OF APPEALS FINDING THE

REVOCATION OF THE SPA, DESPITE LACK OF BASIS, ENFORCEABLE AGAINST
THIRD PERSONS IS IN ACCORD WITH LAW.

III

WHETHER OR NOT THE RULING OF THE COURT OF APPEALS FINDING THE DEED
OF SALE INVALID IS SUPPORTED BY STRONG AND CONCLUSIVE EVIDENCE AS
REQUIRED BY LAW.

IV

WHETHER OR NOT THE RULING OF THE COURT OF APPEALS DISREGARDING THE

LEGAL EFFECTS OF THE FORECLOSURE SALE IS A DEPARTURE FROM THE
ESTABLISHED JURIDICIAL PRONOUNCEMENTS.

VI

WHETHER OR NOT THE RULING OF THE COURT OF APPEALS NOT FINDING

GANZON YAP AS INNOCENT PURCHASER FOR VALUE IS CONSISTENT WITH THE
PRINCIPLE OF INDEFEASIBLITY OF TITLE.[12]
In advocacy of their positions, the petitioners submit the following arguments:

1. The deed of absolute sale executed by Andrea was valid and legal because the SPA was
not validly revoked as the revocation was not registered in the Office of the Register of
Deeds of Davao City. Thus, Andrea's authority to transact with them on behalf of Rosa
Elsa subsisted.

2. The CA decision, declaring the deed of absolute sale null and void, directing the
cancellation of TCT No. T-315273, and reinstating TCT No. T-112717, without
attacking the auction sale and redemption made by Spouses Bitte was a highly
questionable act.

3. Considering that the deed of absolute sale was valid, they could redeem the property
pursuant to Act. No. 3135, as amended, and Sec. 27 of Rule 39 of the Rules of Court.

4. No evidence was presented showing that Ganzon indeed bought the property in bad
faith considering that the TCT No. T-112717 did not bear any annotation that should
have alarmed him before buying the property. Ganzon could not have been expected to
go beyond the title and look for vices or defects that could have rendered him not a
purchaser in good faith and for value.
In their Comment,[13] Spouses Jonas called the attention of the Court to the fact that Spouses Bitte had
been declared in default by the RTC. Spouses Jonas contended that, being in default, Spouses already
lost the legal personality to resort to this petition. They also averred that the questions presented in this
petition are one of facts and not of law. Not being a trier of facts, this Court must deny the petition.

On the merits, they argued that the SPA was not enforceable; that the deed of absolute sale executed
by Andrea was a nullity because it was made with knowledge on the part of Spouses Bitte of the
revocation of Andrea's authority; and that Spouses Yap could not be considered purchasers in good
faith as they failed to verify the authority of the vendors, Spouses Bitte, considering that the certificate
of title was still under Rosa Elsa's name.

In their Reply,[14] Spouses Bitte reiterated their positions as set out in their petition.

Ruling of the Court

The Court denies the petition.

Procedural Issues

Before tackling the substantive issues, a few procedural matters must first be threshed out.

The first is on the issue of the personality of the petitioners to file this petition. Spouses Jonas claim
that the door to any reliefs for Spouses Bitte, be it through a motion for reconsideration or this subject
petition, was closed by the finality and immutability of the RTC declaration of their default. In other
words, it is their stand that the petitioners do not have the right to obtain recourse from this Court.

Spouses Jonas are mistaken.

The rule is that "right to appeal from the judgment by default is not lost and can be done on grounds
that the amount of the judgment is excessive or is different in kind from that prayed for, or that the
plaintiff failed to prove the material allegations of his complaint, or that the decision is contrary to
law."[15] If a party who has been declared in default has in his arsenal the remedy of appeal from the
judgment of default on the basis of the decision having been issued against the evidence or the law,
that person cannot be denied the remedy and opportunity to assail the judgment in the appellate court.
Despite being burdened by the circumstances of default, the petitioners may still use all other remedies
available to question not only the judgment of default but also the judgment on appeal before this
Court. Those remedies necessarily include an appeal by certiorari under Rule 45 of the Rules of
Court.

The second is on the propriety of the questions raised in the petition. Spouses Jonas claims that that
the issues raised here, being factual, are inappropriate for being beyond the inquiry of this Court; that
the factual findings of the CA could no longer be modified or even reviewed citing the long standing
rule that they are final and conclusive. Although the rule admits of exceptions, they insist that none of
them obtains in this case.

Indeed, the questions forwarded by Spouses Bitte are without doubt factual issues. This Court, being
not a trier of facts, has no recourse but to give credence to the findings of the CA. Although it is true
that there are exceptions as enumerated in Development Bank of the Philippines v. Traders Royal
Bank,[16] none of these were invoked or cited in the petition.

On that score alone, this petition should be denied outright.

Substantive Issues

The Genuineness and Due Execution of the Deed of Sale in favor of Spouses Bitte were not proven

The Court agrees with the CA that the genuineness and due execution of the deed of sale in favor
Spouses Bitte were not established. Indeed, a notarized document has in its favor the presumption of
regularity. Nonetheless, it can be impugned by strong, complete and conclusive proof of its falsity or
nullity on account of some flaws or defects on the document.[17]

In the case at bench, it is on record that the National Archives, Records Management and Archives
Office, Regional Archives Division, Davao City, certified that it had no copy on file of the Deed of
Absolute Sale, dated February 25, 1997, sworn before Atty. Bernardino N. Bolcan, Jr., denominated as
Doc. No. 988, Page No. 198, Book No. 30, Series of 1997. Their record shows that, instead, the
document executed on said date with exactly the same notarial entries pertained to a Deed of
Assignment of Foreign Letter of Credit in favor of Allied Banking Corporation.[18] Such irrefutable
fact rendered doubtful that the subject deed of absolute sale was notarized.

Article 1358 of the New Civil Code requires that the form of a contract transmitting or extinguishing
real rights over immovable property should be in a public document. Pertinently, Section 19, Rule 132
of the Rules of Court reads:
Section 19 Classes of documents. - For the purposes of their presentation in evidence, documents are
either public or private.

Public documents are:

(a) The written official acts, or records of the official acts of the sovereign authority, official bodies
and tribunals, and public officers, whether of the Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills and testaments; and
(c) Public records, kept in the Philippines, of private documents required by law to be entered
therein.
All other writings are private.
Not having been properly and validly notarized, the deed of sale cannot be considered a public
document. It is an accepted rule, however, that the failure to observe the proper form does not render
the transaction invalid. It has been settled that a sale of real property, though not consigned in a public
instrument or formal writing is, nevertheless, valid and binding among the parties, for the time-
honored rule is that even a verbal contract of sale or real estate produces legal effects between the
parties.[19]

Not being considered a public document, the deed is subject to the requirement of proof under Section
20, Rule 132, which reads:
Section 20. Proof of private document. - Before any private document offered as authentic is received
in evidence its due execution and authenticity must be proved either:
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of the maker.

Any other private document need only be identified as that which it is claimed to be.
Accordingly, the party invoking the validity of the deed of absolute sale had the burden of proving its
authenticity and due execution. Unfortunately, Spouses Bitte were declared as in default and, for said
reason, they failed to discharge such burden in the court below. Thus, the Court agrees with the CA
that the RTC erred in applying the presumption of regularity that attaches only to duly notarized
documents as distinguished from private documents.

Without the presumption of regularity accorded to the deed coupled with the default of the party
relying much on the same, the purported sale cannot be considered. It is as if there was no deed of sale
between Spouses Bitte and Spouses Jonas.

The genuineness and due execution of the deed of sale in favor of Spouses Bitte not having been
established, the said deed can be considered non-existent.

Spouses Bitte, however, are questioning the "non-existent" deed of sale.

Granting that its genuineness and due of execution were proven, the deed of sale is still
unenforceable; Doctrine of Apparent Authority

Granting arguendo that the deed of sale may still be considered, the transaction is, nevertheless,
unenforceable.

In this regard, petitioners posit that the deed must be recognized and enforced for the reason that,
despite the revocation of the authority of Andrea prior to the execution of the deed, they should not be
bound by that revocation for lack of notice. Consequently, they contend that as far as they are
concerned, the contract of sale should be given effect for having been executed by someone appearing
to them as authorized to sell.

They further argue that the failure of Rosa Elsa to register, file and enter the deed of revocation in the
Registry of Deeds did not bind Spouses Bitte under Section 52 of the Property Registration Decree.
Said section provides that "[e]very conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed or entered in the Office of the
Register of Deeds for the province or city where the land to which it relates lies, be constructive notice
to all persons from the time of such registering, filing or entering." It is their position that without the
registration of the revocation, they cannot be bound by it and the Court must respect the sale executed
by her agent, Andrea.

The Court is not persuaded.

Basic is the rule that the revocation of an agency becomes operative, as to the agent, from the time it is
made known to him. Third parties dealing bona fide with one who has been accredited to them as an
agent, however, are not affected by the revocation of the agency, unless notified of such revocation.[20]
This refers to the doctrine of apparent authority. Under the said doctrine, acts and contracts of the
agent within the apparent scope of the authority conferred on him, although no actual authority to do
such acts or has been beforehand withdrawn, revoked or terminated, bind the principal.[21] Thus, as to
a third person, "apparent authority, when present, trumps restrictions that the principal has privately
imposed on the agent. The relevant appearance is that the principal has conferred authority on an
agent. An actor may continue to possess apparent authority although the principal has terminated the
actor's actual authority or the agency relationship between them. This is so because a third party may
reasonably believe that the actor continues to act as an agent and within the scope of actual authority
on the basis of manifestations previously made by the principal. Such a manifestation, once made,
remains operative until the third party has notice of circumstances that make it unreasonable to believe
that the actor continues to have actual authority."[22] Hence, apparent authority may survive the
termination of actual authority or of an agency relationship.[23]

To persons who relied in good faith on the appearance of authority, no prejudice must be had by virtue
of such reliance on what appeared to them as perfectly in accordance with the observable authority of
an agent. It must not be disturbed unless it can be shown that they had been notified or became aware
of the termination of the agency. Stated differently, a third party cannot be bound by a revocation
unless he had notice or knowledge of such revocation.

The notice or knowledge may be actual or implied. In either case, there is no apparent authority to
speak of and all contracts entered into by the former agent with a third person cannot bind the
principal. The reason behind this is that a third person cannot feign ignorance of facts which should
have put him on guard and which he had a means of knowing. "Apparent authority ends when it is no
longer reasonable for the third party with whom an agent deals to believe that the agent continues to
act with actual authority."[24] In Cervantes v. Court of Appeals[25] the Court wrote that "when the third
person, knows that the agent was acting beyond his power or authority, the principal cannot be held
liable for the acts of the agent."

Generally, implied notice, also known as constructive notice, is attributed to third persons through the
registration of the termination in the Registry of Deeds.

Under Article 1924 of the New Civil Code, "an agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third persons." Logic dictates that when a
principal disregards or bypasses the agent and directly deals with such person in an incompatible or
exclusionary manner, said third person is deemed to have knowledge of the revocation of the agency.
They are expected to know circumstances that should have put them on guard as to the continuing
authority of that agent. The mere fact of the principal dealing directly with the third person, after the
latter had dealt with an agent, should be enough to excite the third person's inquiring mind on the
continuation of his authority.

In the case at bench, records show that Spouses Bitte initially transacted with Andrea as Rosa Elsa's
agent on the basis of the SPA, dated July 19, 1985. Thereafter, however, Rosa Elsa returned to the
Philippines and directly negotiated with them on October 11, 1996. Rosa Elsa's act of taking over in
the actual negotiation for the sale of the property only shows that Andrea's authority to act has been
revoked pursuant to Article 1924. At that point, Spouses Bitte had information sufficient enough to
make them believe that Andrea was no longer an agent or should have compelled them to make further
inquiries. No attempt was shown that Spouses Bitte took the necessary steps to inquire if Andrea was
still authorized to act at that time. Despite their direct negotiation with Rosa Elsa, they still entered
into a contract with Andrea on February 25, 1997.
Persons dealing with an agent are bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of the agents authority, and in case
either is controverted, the burden of proof is upon them to establish it.[26]
Legal Consequence

"It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent him. A
contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly,
by the person on whose behalf it has been executed, before it is revoked by the other contracting
party."[27] Considering that the sale was executed by an agent whose authority, be it actual or apparent,
had been revoked, the transaction is unenforceable pursuant to Article 1317 and 1403(1) of the Civil
Code which read:
Article 1317. No one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him.

A contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly,
by the person on whose behalf it has been executed, before it is revoked by the other contracting party.
(1259a)

ART. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into the name of another person by one who has been given no authority or legal
representation, or who has acted beyond his powers;

xxx. [Emphases Supplied]

Considering that the deed of absolute sale was executed at a time when Spouses Bitte were deemed
notified of the termination of the agency, the sale must be treated as having been entered into by
Andrea in her personal capacity. One can sell only what one owns or is authorized to sell, and the
buyer can acquire no more right than what the seller can transfer legally.[28] Accordingly, Spouses
Bitte acquired no better title than what Andrea had over the property, which was nil.

In sum, the deed of absolute sale executed by Andrea in favor of Spouses Bitte is unenforceable
against Rosa Elsa because of their notice of the revocation of the agency.

Spouses Bitte did not possess the required personality to redeem the subject property

Obviously, Spouses Bitte acquired no interest in the subject property because the deed that they were
anchoring their claims on did not bind Rosa Elsa. Hence, they did not have the personality to redeem
the foreclosed property as provided under Act No. 3135, as amended by Act No. 4118, and of Section
27, Rule 39 of the Rules of Court.
Act No. 3135, as amended, provides:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year from
and after the date of the sale; and such redemption shall be governed by the provisions of sections four
hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so
far as these are not inconsistent with the provisions of this Act.

[Emphases Supplied]
Section 27 of Rule 39 of the Rules of Court enumerates the persons who may exercise the right of
redemption of a foreclosed property:
Section 27. Who may redeem real property so sold. Real property sold as provided in the last
preceding section, or any part thereof sold separately, may be redeemed in the manner hereinafter
provided, by the following persons:

(a) The judgment obligor; or his successor in interest in the whole or any part of the property; and

(c) A creditor having a lien by virtue of an attachment, judgment or mortgage on the property sold,
or on some part thereof, subsequent to the lien under which the property was sold. Such
redeeming creditor is termed a redemptioner.
In Castro v. IAC,[29] as correctly cited by the CA, "only such persons as are authorized to do so by
statute can redeem from an execution sale." Spouses Bitte were not so authorized considering that they
were not among those enumerated in Act No. 3135 and Section 27 of Rule 39.

Spouses Yap were also not Purchasers in Good Faith and For Value

After the purported "transfer" to Spouses Yap, the subject property was registered and a new title was
issued in their names. Despite being impleaded in the case, however, they were silent and did not
even join Spouses Bitte in the subject petition. It is Spouses Bitte who have been taking the cudgels
for them.

On the issue, Spouses Bitte contend that Spouses Yap were purchasers in good faith and for value,
and, for that reason, should have been recognized to have good title over the subject property.

Settled is the rule that the burden of proving the status of a purchaser in good faith and for value lies
upon one who asserts that status.[30] This onus probandi cannot be discharged by mere invocation of
the ordinary presumption of good faith.[31] Considering that the title was still registered in the name of
Rosa Elsa when Spouses Yap bought it from Spouses Bitte, the burden was on them to prove that they
were purchasers in good faith. In this regard, they failed. Not an iota of evidence was adduced by them
to prove their ignorance of the true situation.

Through Spouses Bitte, Spouses Yap are invoking good faith for want of notice on their part that
Andrea's authority had already been revoked. They point out that Ganzon, being a layman, could not
have been expected to know the intricacies of the law for which reason that he could not attribute any
fault in the deed of sale executed by a person with a SPA.

The Court is not persuaded.

Spouses Yap were not purchasers in good faith and for value. Significantly, Ganzon transacted with
someone who was not even the registered owner of the property. At the time of the transfer, the
property was still registered in the name of Rosa Elsa.

The rule is that a person who buys from one who is not the registered owner is expected to examine
not only the certificate of title but all factual circumstances necessary for [one] to determine if there
are any flaws in the title of the transferor, or in [the] capacity to transfer the land. A higher degree of
prudence is thus expected from that person even if the land object of the transaction is registered.[32]

Here, no evidence was presented to show that Spouses Yap exerted that required diligence in
determining the factual circumstances relating to the title and authority of Spouses Bitte as sellers of
the property. The records are bereft of any proof that Spouses Yap showed eagerness to air their side
despite being impleaded.

Hence, the protection the law accords to purchasers in good faith and for value cannot be extended to
them. They have failed to show the required diligence needed in protecting their rights as buyers of
property despite knowledge of facts that should have led them to inquire and investigate the possible
defects in the title of the seller. Thus, in the same way that Spouses Bitte cannot claim valid title over
the property, Spouses Yap cannot also do the same.
A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in the title of the vendor.[33]
In sum, the transfer to Spouses Yap was null and void as Spouses Bitte had nothing to sell or transfer
to them.

WHEREFORE, the petition is DENIED.

SO ORDERED.

Carpio, (Chairperson), Del Castillo, Perez,* and Leonen, JJ., concur.

 Problem Areas in Legal Ethics Unconscionable Attorneys Fees Quantum Meruit

In 1994, Isabel Sugar Company, Inc. (ISCI) sold a parcel of land to Urban Bank, Inc. (UBI). The land was sold
for P240 million. As the land was occupied by unauthorized sub-tenants, ISCIs lawyer, Atty. Magdaleno Pea
had to negotiate with them for them to relocate. But the said occupants, knowing that the land was already
transferred to UBI, refused to recognize Pea. ISCI then communicated with UBI so that the latter may
authorize Pea to negotiate with the tenants. Pea had to barricade himself inside the property to keep the
tenants out who were forcing their way in especially so that the local cops are now sympathetic to them. Pea
then had a phone conversation with Teodoro Borlongan, president of UBI, where Pea explained to him the
situation. In said conversation, Pea asked authorization from Borlongan to negotiate with the tenants. Pea
also asked that he be paid 10% of the purchase price or (P24 million) for his efforts. Borlongan agreed over the
phone on the condition that Pea should be able to settle with the tenants otherwise he forfeits said 10% fee.
Pea also asked that said authorization be put into writing.

The authorization was put into writing but no mention was made as regards the 10% fee, (in short, that part was
not written in the written authorization released by UBI). Pea was able to settle and relocate the tenants. After
everything was settled and the property is now formally under the possession of UBI, Pea began sending
demands to UBI for the latter to pay him the P24 million fee agreed upon, plus his expenses for the relocation
of the tenants and the hiring of security guards or an additional P3 million. But UBI refused to make payment
hence Pea filed a complaint for recovery against UBI.

The trial court ruled in favor of Pea as it found there indeed was a contract of agency created between and
UBI and that Pea is entitled to the 10% fee plus the expenses he incurred including litigation expenses. In sum,
the trial court awarded him P28 million.

The Court of Appeals however reversed the order of the trial court. It ruled that no agency was formed but for
his legal services, Pea is entitled to payment but applying the principle of unjust enrichment and quantum
meruit, Pea should only be paid P3 million.

ISSUE: Whether or not Atty. Magdaleno Pea is entitled to receive the P28 million.

HELD: No. The Supreme Court ruled that said amount is unconscionable. Pea is entitled to payment for
compensation for services rendered as agent of Urban Bank, but on the basis of the principles of unjust
enrichment and quantum meruit. In the first place, other than the self-serving testimony of Pea, there was no
other evidence presented to support his claim that Borlongan agreed to pay him that 10% over the phone. The
written authorization later issued merely confirms the power granted him to negotiate with the tenants. The
written authorization proved the existence of agency but not the existence of any agreement as to how much
Pea should be paid.

Absent any such agreement, the principle of quantum meruit should be applied. In this case, Pea is entitled to
receive what he merit for his services, or as much as he has earned. In dealing with the tenants, Pea didnt have
to perform any extraordinary acts or legal maneuvering. Hence, he is entitled to receive P1.5 million for his
legal services. He is also entitled to reimbursement for his expenses in securing the property, to wit, P1.5
million for the security guards he had to hire and another P1.5 million for settling and relocating the 23 tenants.
Total of P4.5 million.
The Supreme Court emphasized that lawyering is not a business; it is a profession in which duty to public
service, not money, is the primary consideration.

RESOLUTION

BRION, J.:

This resolves the Motion for Reconsideration1[1] dated December 3, 2008 filed by respondent
The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set aside our Decision of November
7, 2008. In the assailed decision, we found that an employer-employee relationship existed between
Manulife and petitioner Gregorio Tongko and ordered Manulife to pay Tongko backwages and
separation pay for illegal dismissal.

The following facts have been stated in our Decision of November 7, 2008, now under
reconsideration, but are repeated, simply for purposes of clarity.

The contractual relationship between Tongko and Manulife had two basic phases. The first
or initial phase began on July 1, 1977, under a Career Agents Agreement (Agreement) that provided:

It is understood and agreed that the Agent is an independent contractor and

nothing contained herein shall be construed or interpreted as creating an employer-
employee relationship between the Company and the Agent.

xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange for
provisional receipts issued by the Agent, money due to or become due to the Company
 in respect of applications or policies obtained by or through the Agent or from
policyholders allotted by the Company to the Agent for servicing, subject to subsequent
confirmation of receipt of payment by the Company as evidenced by an Official Receipt
issued by the Company directly to the policyholder.

xxxx

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

Either of the parties hereto may likewise terminate his Agreement at any time
without cause, by giving to the other party fifteen (15) days notice in writing.2[2]

Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to
maintain a standard of knowledge and competency in the sale of Manulifes products, satisfactory to
Manulife and sufficient to meet the volume of the new business, required by his Production Club
membership.3[3]

The second phase started in 1983 when Tongko was named Unit Manager in Manulifes Sales
Agency Organization. In 1990, he became a Branch Manager. Six years later (or in 1996), Tongko
became a Regional Sales Manager.4[4]
 Tongkos gross earnings consisted of commissions, persistency income, and management
overrides. Since the beginning, Tongko consistently declared himself self-employed in his income
tax returns. Thus, under oath, he declared his gross business income and deducted his business
expenses to arrive at his taxable business income. Manulife withheld the corresponding 10% tax on
Tongkos earnings.5[5]

In 2001, Manulife instituted manpower development programs at the regional sales management
level. Respondent Renato Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns
that were brought up during the October 18, 2001 Metro North Sales Managers Meeting. De Dios wrote:

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

xxxx

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

While discussions, in general, were positive other than for certain comments from your
end which were perceived to be uncalled for, it became clear that a one-on-one meeting
with you was necessary to ensure that you and management, were on the same plane. As
gleaned from some of your previous comments in prior meetings (both in group and one-
on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of which
we challenged and subsequently found as having no basis.

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

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

xxxx

Issue # 2: Some Managers are unhappy with their earnings and would want to revert to
the position of agents.

This is an often repeated issue you have raised with me and with Kevin. For this reason,
I placed the issue on the table before the rest of your Regions Sales Managers to verify
its validity. As you must have noted, no Sales Manager came forward on their own to
confirm your statement and it took you to name Malou Samson as a source of the same,
an allegation that Malou herself denied at our meeting and in your very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I now
believe what I had thought all along, that these allegations were simply meant to muddle
the issues surrounding the inability of your Region to meet its agency development
objectives!

Issue # 3: Sales Managers are doing what the company asks them to do but, in the process,
they earn less.

xxxx

All the above notwithstanding, we had your own records checked and we found that you
made a lot more money in the Year 2000 versus 1999. In addition, you also volunteered
the information to Kevin when you said that you probably will make more money in the
Year 2001 compared to Year 2000. Obviously, your above statement about making less
money did not refer to you but the way you argued this point had us almost believing that
you were spouting the gospel of truth when you were not. x x x

xxxx

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

xxxx

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

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

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

xxxx

2. Effective immediately, Kevin and the rest of the Agency Operations will
deal with the North Star Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow
you to concentrate more fully on overseeing the remaining groups under Metro
North, your Central Unit and the rest of the Sales Managers in Metro North. I will
hold you solely responsible for meeting the objectives of these remaining groups.

xxxx

The above changes can end at this point and they need not go any further. This, however,
is entirely dependent upon you. But you have to understand that meeting corporate
objectives by everyone is primary and will not be compromised. We are meeting tough
challenges next year, and I would want everybody on board. Any resistance or holding
back by anyone will be dealt with accordingly.6[6]

Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating
Tongkos services:

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

xxxx

On account thereof, Management is exercising its prerogative under Section 14 of your

Agents Contract as we are now issuing this notice of termination of your Agency
Agreement with us effective fifteen days from the date of this letter.7[7]

Tongko responded by filing an illegal dismissal complaint with the National Labor Relations
Commission (NLRC) Arbitration Branch. He essentially alleged despite the clear terms of the letter
terminating his Agency Agreement that he was Manulifes employee before he was illegally
dismissed.8[8]

Thus, the threshold issue is the existence of an employment relationship. A finding that none
exists renders the question of illegal dismissal moot; a finding that an employment relationship exists,
on the other hand, necessarily leads to the need to determine the validity of the termination of the
relationship.

A. Tongkos Case for Employment Relationship

Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding
P50,000.00, regardless of production levels attained and exclusive of commissions and bonuses. He also
claimed that as Regional Sales Manager, he was given a travel and entertainment allowance of
P36,000.00 per year in addition to his overriding commissions; he was tasked with numerous
administrative functions and supervisory authority over Manulifes employees, aside from merely selling
policies and recruiting agents for Manulife; and he recommended and recruited insurance agents subject
to vetting and approval by Manulife. He further alleges that he was assigned a definite place in the
Manulife offices when he was not in the field at the 3rd Floor, Manulife Center, 108 Tordesillas corner
Gallardo Sts., Salcedo Village, Makati City for which he never paid any rental. Manulife provided the
office equipment he used, including tables, chairs, computers and printers (and even office stationery),
and paid for the electricity, water and telephone bills. As Regional Sales Manager, Tongko additionally
asserts that he was required to follow at least three codes of conduct.9[9]

B. Manulifes Case Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was
paid commissions of varying amounts, computed based on the premium paid in full and actually received
by Manulife on policies obtained through an agent. As sales manager, Tongko was paid overriding sales
commission derived from sales made by agents under his unit/structure/branch/region. Manulife also
points out that it deducted and withheld a 10% tax from all commissions Tongko received; Tongko even
declared himself to be self-employed and consistently paid taxes as suchi.e., he availed of tax deductions
such as ordinary and necessary trade, business and professional expenses to which a business is entitled.
 Manulife asserts that the labor tribunals have no jurisdiction over Tongkos claim as he was not
its employee as characterized in the four-fold test and our ruling in Carungcong v. National Labor
Relations Commission.10[10]

The Conflicting Rulings of the Lower Tribunals

The labor arbiter decreed that no employer-employee relationship existed between the parties.
However, the NLRC reversed the labor arbiters decision on appeal; it found the existence of an
employer-employee relationship and concluded that Tongko had been illegally dismissed. In the petition
for certiorari with the Court of Appeals (CA), the appellate court found that the NLRC gravely abused
its discretion in its ruling and reverted to the labor arbiters decision that no employer-employee
relationship existed between Tongko and Manulife.

Our Decision of November 7, 2008

In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment
relationship existed between Tongko and Manulife. We concluded that Tongko is Manulifes employee
for the following reasons:
 1. Our ruling in the first Insular11[11] case did not foreclose the possibility of an insurance agent
becoming an employee of an insurance company; if evidence exists showing that the company
promulgated rules or regulations that effectively controlled or restricted an insurance agents choice of
methods or the methods themselves in selling insurance, an employer-employee relationship would be
present. The determination of the existence of an employer-employee relationship is thus on a case-to-
case basis depending on the evidence on record.

2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee,
as shown by the following indicators:

2.1 Tongko undertook to comply with Manulifes rules, regulations and other
requirements, i.e., the different codes of conduct such as the Agent Code of Conduct, the
Manulife Financial Code of Conduct, and the Financial Code of Conduct Agreement;

2.2 The various affidavits of Manulifes insurance agents and managers, who
occupied similar positions as Tongko, showed that they performed administrative duties that
established employment with Manulife;12[12] and

2.3 Tongko was tasked to recruit some agents in addition to his other
administrative functions. De Dios letter harped on the direction Manulife intended to take, viz.,
 greater agency recruitment as the primary means to sell more policies; Tongkos alleged failure
to follow this directive led to the termination of his employment with Manulife.

The Motion for Reconsideration

Manulife disagreed with our Decision and filed the present motion for reconsideration on the
following GROUNDS:

1. The November 7[, 2008] Decision violates Manulifes right to due process by:
(a) confining the review only to the issue of control and utterly disregarding all the other
issues that had been joined in this case; (b) mischaracterizing the divergence of
conclusions between the CA and the NLRC decisions as confined only to that on control;
(c) grossly failing to consider the findings and conclusions of the CA on the majority of
the material evidence, especially [Tongkos] declaration in his income tax returns that he
was a business person or self-employed; and (d) allowing [Tongko] to repudiate his
sworn statement in a public document.

2. The November 7[, 2008] Decision contravenes settled rules in contract law and
agency, distorts not only the legal relationships of agencies to sell but also distributorship
and franchising, and ignores the constitutional and policy context of contract law vis--
vis labor law.

3. The November 7[, 2008] Decision ignores the findings of the CA on the three
elements of the four-fold test other than the control test, reverses well-settled doctrines
of law on employer-employee relationships, and grossly misapplies the control test, by
selecting, without basis, a few items of evidence to the exclusion of more material
evidence to support its conclusion that there is control.

4. The November 7[, 2008] Decision is judicial legislation, beyond the scope
authorized by Articles 8 and 9 of the Civil Code, beyond the powers granted to this Court
under Article VIII, Section 1 of the Constitution and contravenes through judicial
legislation, the constitutional prohibition against impairment of contracts under Article
III, Section 10 of the Constitution.
 5. For all the above reasons, the November 7[, 2008] Decision made
unsustainable and reversible errors, which should be corrected, in concluding that
Respondent Manulife and Petitioner had an employer-employee relationship, that
Respondent Manulife illegally dismissed Petitioner, and for consequently ordering
Respondent Manulife to pay Petitioner backwages, separation pay, nominal damages and
attorneys fees.13[13]

THE COURTS RULING

A. The Insurance and the Civil Codes;

the Parties Intent and Established

Industry Practices

We cannot consider the present case purely from a labor law perspective, oblivious that the
factual antecedents were set in the insurance industry so that the Insurance Code primarily governs.
Chapter IV, Title 1 of this Code is wholly devoted to Insurance Agents and Brokers and specifically
defines the agents and brokers relationship with the insurance company and how they are governed by
the Code and regulated by the Insurance Commission.

The Insurance Code, of course, does not wholly regulate the agency that it speaks of, as agency
is a civil law matter governed by the Civil Code. Thus, at the very least, three sets of laws namely, the
Insurance Code, the Labor Code and the Civil Code have to be considered in looking at the present case.
Not to be forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and which no
one disputes) that the parties adopted to govern their relationship for purposes of selling the insurance
the company offers. To forget these other laws is to take a myopic view of the present case and to add
to the uncertainties that now exist in considering the legal relationship between the insurance company
and its agents.

The main issue of whether an agency or an employment relationship exists depends on the
incidents of the relationship. The Labor Code concept of control has to be compared and distinguished
with the control that must necessarily exist in a principal-agent relationship. The principal cannot but
also have his or her say in directing the course of the principal-agent relationship, especially in cases
where the company-representative relationship in the insurance industry is an agency.

a. The laws on insurance and agency

The business of insurance is a highly regulated commercial activity in the country, in terms
particularly of who can be in the insurance business, who can act for and in behalf of an insurer, and
how these parties shall conduct themselves in the insurance business. Section 186 of the Insurance Code
provides that No person, partnership, or association of persons shall transact any insurance business
in the Philippines except as agent of a person or corporation authorized to do the business of insurance
in the Philippines. Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among
other provisions, provide:

Section 299. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any person for
services in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an insurance
broker as hereinafter provided.

No person shall act as an insurance agent or as an insurance broker in the

solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first procuring
a license so to act from the Commissioner x x x The Commissioner shall satisfy himself
as to the competence and trustworthiness of the applicant and shall have the right to
refuse to issue or renew and to suspend or revoke any such license in his discretion.

Section 300. Any person who for compensation solicits or obtains insurance
on behalf of any insurance company or transmits for a person other than himself an
application for a policy or contract of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance shall be an insurance agent within
the intent of this section and shall thereby become liable to all the duties, requirements,
liabilities and penalties to which an insurance agent is subject.

The application for an insurance agents license requires a written examination, and the applicant must
be of good moral character and must not have been convicted of a crime involving moral
turpitude.14[14] The insurance agent who collects premiums from an insured person for remittance to
the insurance company does so in a fiduciary capacity, and an insurance company which delivers an
insurance policy or contract to an authorized agent is deemed to have authorized the agent to receive
payment on the companys behalf.15[15] Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy and this covers any rebate from the
premium or any special favor or advantage in the dividends or benefit accruing from the policy.

Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and
must also act within the parameters of the authority granted under the license and under the contract
with the principal. Other than the need for a license, the agent is limited in the way he offers and
negotiates for the sale of the companys insurance products, in his collection activities, and in the delivery
of the insurance contract or policy. Rules regarding the desired results (e.g., the required volume to
continue to qualify as a company agent, rules to check on the parameters on the authority given to the
agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of
control specific to an insurance agency and should not and cannot be read as elements of control that
attend an employment relationship governed by the Labor Code.

On the other hand, the Civil Code defines an agent as a person [who] binds himself to render
some service or to do something in representation or on behalf of another, with the consent or authority
of the latter.16[16] While this is a very broad definition that on its face may even encompass an
employment relationship, the distinctions between agency and employment are sufficiently established
by law and jurisprudence.
 Generally, the determinative element is the control exercised over the one rendering service. The
employer controls the employee both in the results and in the means and manner of achieving this result.
The principal in an agency relationship, on the other hand, also has the prerogative to exercise control
over the agent in undertaking the assigned task based on the parameters outlined in the pertinent laws.

Under the general law on agency as applied to insurance, an agency must be express in light of
the need for a license and for the designation by the insurance company. In the present case, the
Agreement fully serves as grant of authority to Tongko as Manulifes insurance agent.17[17] This
agreement is supplemented by the companys agency practices and usages, duly accepted by the agent
in carrying out the agency.18[18] By authority of the Insurance Code, an insurance agency is for
compensation,19[19] a matter the Civil Code Rules on Agency presumes in the absence of proof to the
contrary.20[20] Other than the compensation, the principal is bound to advance to, or to reimburse, the
agent the agreed sums necessary for the execution of the agency.21[21] By implication at least under
Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out the same
assigned tasks,22[22] based necessarily on the specific instructions and directives given to them.
 With particular relevance to the present case is the provision that In the execution of the agency,
the agent shall act in accordance with the instructions of the principal.23[23] This provision is pertinent
for purposes of the necessary control that the principal exercises over the agent in undertaking the
assigned task, and is an area where the instructions can intrude into the labor law concept of control so
that minute consideration of the facts is necessary. A related article is Article 1891 of the Civil Code
which binds the agent to render an account of his transactions to the principal.

B. The Cited Case

The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish
that the company rules and regulations that an agent has to comply with are indicative of an employer-
employee relationship.24[24] The Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice
Conchita Carpio Morales also cite Insular Life Assurance Co. v. National Labor Relations Commission
(second Insular case)25[25] to support the view that Tongko is Manulifes employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor
Relations Commission (AFPMBAI case)26[26] to support its allegation that Tongko was not its
employee.
 A caveat has been given above with respect to the use of the rulings in the cited cases because
none of them is on all fours with the present case; the uniqueness of the factual situation of the present
case prevents it from being directly and readily cast in the mold of the cited cases. These cited cases are
themselves different from one another; this difference underscores the need to read and quote them in
the context of their own factual situations.

The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife,
and the second Insular Life cases. A critical difference, however, exists as these cited cases dealt with
the proper legal characterization of a subsequent management contract that superseded the
original agency contract between the insurance company and its agent. Carungcong dealt with a
subsequent Agreement making Carungcong a New Business Manager that clearly superseded the
Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The
Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the
Ruiz brothers to positions higher than their original position as insurance agents. Thus, after analyzing
the duties and functions of the Ruiz brothers, as these were enumerated in their contracts, we concluded
that the company practically dictated the manner by which the Ruiz brothers were to carry out their jobs.
Finally, the second Insular Life case dealt with the implications of de los Reyes appointment as acting
unit manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was
clearly defined under a subsequent contract. In all these cited cases, a determination of the presence
of the Labor Code element of control was made on the basis of the stipulations of the subsequent
contracts.

In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only
contract or document extant and submitted as evidence in the present case is the Agreement a pure
agency agreement in the Civil Code context similar to the original contract in the first Insular Life case
and the contract in the AFPMBAI case. And while Tongko was later on designated unit manager in 1983,
Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract regarding these
undertakings appears in the records of the case. Any such contract or agreement, had there been any,
could have at the very least provided the bases for properly ascertaining the juridical relationship
established between the parties.

These critical differences, particularly between the present case and the Grepalife and the second
Insular Life cases, should therefore immediately drive us to be more prudent and cautious in applying
the rulings in these cases.

C. Analysis of the Evidence

c.1. The Agreement

The primary evidence in the present case is the July 1, 1977 Agreement that governed and
defined the parties relations until the Agreements termination in 2001. This Agreement stood for more
than two decades and, based on the records of the case, was never modified or novated. It assumes
primacy because it directly dealt with the nature of the parties relationship up to the very end; moreover,
both parties never disputed its authenticity or the accuracy of its terms.

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

The parties legal characterization of their intent, although not conclusive, is critical in this case
because this intent is not illegal or outside the contemplation of law, particularly of the Insurance and
the Civil Codes. From this perspective, the provisions of the Insurance Code cannot be disregarded as
this Code (as heretofore already noted) expressly envisions a principal-agent relationship between the
insurance company and the insurance agent in the sale of insurance to the public. For this reason, we
can take judicial notice that as a matter of Insurance Code-based business practice, an agency
relationship prevails in the insurance industry for the purpose of selling insurance. The Agreement,
by its express terms, is in accordance with the Insurance Code model when it provided for a principal-
agent relationship, and thus cannot lightly be set aside nor simply be considered as an agreement that
does not reflect the parties true intent. This intent, incidentally, is reinforced by the system of
compensation the Agreement provides, which likewise is in accordance with the production-based sales
commissions the Insurance Code provides.

Significantly, evidence shows that Tongkos role as an insurance agent never changed during his
relationship with Manulife. If changes occurred at all, the changes did not appear to be in the nature of
their core relationship. Tongko essentially remained an agent, but moved up in this role through
Manulifes recognition that he could use other agents approved by Manulife, but operating under his
guidance and in whose commissions he had a share. For want of a better term, Tongko perhaps could
be labeled as a lead agent who guided under his wing other Manulife agents similarly tasked with the
selling of Manulife insurance.

Like Tongko, the evidence suggests that these other agents operated under their own agency
agreements. Thus, if Tongkos compensation scheme changed at all during his relationship with
Manulife, the change was solely for purposes of crediting him with his share in the commissions the
agents under his wing generated. As an agent who was recruiting and guiding other insurance agents,
Tongko likewise moved up in terms of the reimbursement of expenses he incurred in the course of his
lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received
greater reimbursements for his expenses and was even allowed to use Manulife facilities in his
interactions with the agents, all of whom were, in the strict sense, Manulife agents approved and certified
as such by Manulife with the Insurance Commission.

That Tongko assumed a leadership role but nevertheless wholly remained an agent is the
inevitable conclusion that results from the reading of the Agreement (the only agreement on record in
this case) and his continuing role thereunder as sales agent, from the perspective of the Insurance and
the Civil Codes and in light of what Tongko himself attested to as his role as Regional Sales Manager.
To be sure, this interpretation could have been contradicted if other agreements had been submitted as
evidence of the relationship between Manulife and Tongko on the latters expanded undertakings. In the
absence of any such evidence, however, this reading based on the available evidence and the applicable
insurance and civil law provisions must stand, subject only to objective and evidentiary Labor Code
tests on the existence of an employer-employee relationship.

In applying such Labor Code tests, however, the enforcement of the Agreement during the course
of the parties relationship should be noted. From 1977 until the termination of the Agreement, Tongkos
occupation was to sell Manulifes insurance policies and products. Both parties acquiesced with the terms
and conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing from the
Agreement, particularly the generous commissions.

Evidence indicates that Tongko consistently clung to the view that he was an independent agent
selling Manulife insurance products since he invariably declared himself a business or self-employed
person in his income tax returns. This consistency with, and action made pursuant to the Agreement
were pieces of evidence that were never mentioned nor considered in our Decision of November
7, 2008. Had they been considered, they could, at the very least, serve as Tongkos admissions against
his interest. Strictly speaking, Tongkos tax returns cannot but be legally significant because he certified
under oath the amount he earned as gross business income, claimed business deductions, leading to his
net taxable income. This should be evidence of the first order that cannot be brushed aside by a mere
denial. Even on a laymans view that is devoid of legal considerations, the extent of his annual income
alone renders his claimed employment status doubtful.27[27]

Hand in hand with the concept of admission against interest in considering the tax returns, the
concept of estoppel a legal and equitable concept28[28] necessarily must come into play. Tongkos
previous admissions in several years of tax returns as an independent agent, as against his belated claim
that he was all along an employee, are too diametrically opposed to be simply dismissed or ignored.
Interestingly, Justice Velascos dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulifes persistent refusal to recognize him as its
employee.29[29] Regrettably, the dissent has shown no basis for this conclusion, an understandable
omission since no evidence in fact exists on this point in the records of the case. In fact, what the
evidence shows is Tongkos full conformity with, and action as, an independent agent until his
relationship with Manulife took a bad turn.

Another interesting point the dissent raised with respect to the Agreement is its conclusion that
the Agreement negated any employment relationship between Tongko and Manulife so that the
commissions he earned as a sales agent should not be considered in the determination of the backwages
and separation pay that should be given to him. This part of the dissent is correct although it went on to
twist this conclusion by asserting that Tongko had dual roles in his relationship with Manulife; he was
an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his
capacity as a manager. Thus, the dissent concluded that Tongkos backwages should only be with respect
to his role as Manulifes manager.

The conclusion with respect to Tongkos employment as a manager is, of course, unacceptable
for the legal, factual and practical reasons discussed in this Resolution. In brief, the factual reason is
grounded on the lack of evidentiary support of the conclusion that Manulife exercised control over
Tongko in the sense understood in the Labor Code. The legal reason, partly based on the lack of factual
basis, is the erroneous legal conclusion that Manulife controlled Tongko and was thus its employee. The
practical reason, on the other hand, is the havoc that the dissents unwarranted conclusion would cause
the insurance industry that, by the laws own design, operated along the lines of principal-agent
relationship in the sale of insurance.

c.2. Other Evidence of Alleged Control

A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that
Manulife ever exercised means-and-manner control, even to a limited extent, over Tongko during his
ascent in Manulifes sales ladder. In 1983, Tongko was appointed unit manager. Inexplicably, Tongko
never bothered to present any evidence at all on what this designation meant. This also holds true for
Tongkos appointment as branch manager in 1990, and as Regional Sales Manager in 1996. The best
evidence of control the agreement or directive relating to Tongkos duties and responsibilities was never
introduced as part of the records of the case. The reality is, prior to de Dios letter, Manulife had
practically left Tongko alone not only in doing the business of selling insurance, but also in guiding the
agents under his wing. As discussed below, the alleged directives covered by de Dios letter, heretofore
quoted in full, were policy directions and targeted results that the company wanted Tongko and the other
sales groups to realign with in their own selling activities. This is the reality that the parties presented
evidence consistently tells us.
 What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife
imposes on its agents in the sale of insurance. The mere presentation of codes or of rules and regulations,
however, is not per se indicative of labor law control as the law and jurisprudence teach us.

As already recited above, the Insurance Code imposes obligations on both the insurance
company and its agents in the performance of their respective obligations under the Code, particularly
on licenses and their renewals, on the representations to be made to potential customers, the collection
of premiums, on the delivery of insurance policies, on the matter of compensation, and on measures to
ensure ethical business practice in the industry.

The general law on agency, on the other hand, expressly allows the principal an element of
control over the agent in a manner consistent with an agency relationship. In this sense, these control
measures cannot be read as indicative of labor law control. Foremost among these are the directives that
the principal may impose on the agent to achieve the assigned tasks, to the extent that they do not involve
the means and manner of undertaking these tasks. The law likewise obligates the agent to render an
account; in this sense, the principal may impose on the agent specific instructions on how an account
shall be made, particularly on the matter of expenses and reimbursements. To these extents, control can
be imposed through rules and regulations without intruding into the labor law concept of control for
purposes of employment.

From jurisprudence, an important lesson that the first Insular Life case teaches us is that a
commitment to abide by the rules and regulations of an insurance company does not ipso facto make
the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agents
conduct necessarily indicate control as this term is defined in jurisprudence. Guidelines indicative of
labor law control, as the first Insular Life case tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature of dictating
the means or methods to be employed in attaining the result, or of fixing the methodology and of
binding or restricting the party hired to the use of these means. In fact, results-wise, the principal
can impose production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the companys objectives. These are management policy decisions that the labor
law element of control cannot reach. Our ruling in these respects in the first Insular Life case was
practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulifes codes of
conduct,30[30] all of which do not intrude into the insurance agents means and manner of conducting
their sales and only control them as to the desired results and Insurance Code norms, cannot be used as
basis for a finding that the labor law concept of control existed between Manulife and Tongko.

The dissent considers the imposition of administrative and managerial functions on Tongko as
indicative of labor law control; thus, Tongko as manager, but not as insurance agent, became Manulifes
employee. It drew this conclusion from what the other Manulife managers disclosed in their affidavits
(i.e., their enumerated administrative and managerial functions) and after comparing these statements
with the managers in Grepalife. The dissent compared the control exercised by Manulife over its
managers in the present case with the control the managers in the Grepalife case exercised over their
employees by presenting the following matrix:31[31]

Duties of Manulifes Manager Duties of Grepalifes Managers/Supervisors

- to render or recommend prospective - train understudies for the position of

agents to be licensed, trained and district manager
contracted to sell Manulife products and
who will be part of my Unit

- to coordinate activities of the agents - properly account, record and document the
under [the managers] Unit in [the agents] companys funds, spot-check and audit the
 daily, weekly and monthly selling work of the zone supervisors, x x x follow
activities, making sure that their up the submission of weekly remittance
respective sales targets are met; reports of the debit agents and zone
supervisors

- to conduct periodic training sessions for

[the] agents to further enhance their sales - direct and supervise the sales activities of
skill; and the debit agents under him, x x x undertake
and discharge the functions of absentee
debit agents, spot-check the record of debit
agents, and insure proper documentation of
- to assist [the] agents with their sales sales and collections of debit agents.
activities by way of joint fieldwork,
consultations and one-on-one evaluation
and analysis of particular accounts

Aside from these affidavits however, no other evidence exists regarding the effects of Tongkos
additional roles in Manulifes sales operations on the contractual relationship between them.

To the dissent, Tongkos administrative functions as recruiter, trainer, or supervisor of other sales
agents constituted a substantive alteration of Manulifes authority over Tongko and the performance of
his end of the relationship with Manulife. We could not deny though that Tongko remained, first and
foremost, an insurance agent, and that his additional role as Branch Manager did not lessen his main and
dominant role as insurance agent; this role continued to dominate the relations between Tongko and
Manulife even after Tongko assumed his leadership role among agents. This conclusion cannot be
denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July
1, 1977 Agreement, a distinction the present case has with the contractual changes made in the second
Insular Life case. Tongkos results-based commissions, too, attest to the primacy he gave to his role as
insurance sales agent.

The dissent apparently did not also properly analyze and appreciate the great qualitative
difference that exists between:
 the Manulife managers role is to coordinate activities of the agents under the
managers Unit in the agents daily, weekly, and monthly selling activities, making sure that their
respective sales targets are met.

the District Managers duty in Grepalife is to properly account, record, and

document the company's funds, spot-check and audit the work of the zone supervisors, conserve the
company's business in the district through reinstatements, follow up the submission of weekly remittance
reports of the debit agents and zone supervisors, preserve company property in good condition, train
understudies for the position of district managers, and maintain his quota of sales (the failure of which
is a ground for termination).

the Zone Supervisors (also in Grepalife) has the duty to direct and supervise the
sales activities of the debit agents under him, conserve company property through reinstatements,
undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents,
and insure proper documentation of sales and collections by the debit agents.

These job contents are worlds apart in terms of control. In Grepalife, the details of how to do the job are
specified and pre-determined; in the present case, the operative words are the sales target, the
methodology being left undefined except to the extent of being coordinative. To be sure, a coordinative
standard for a manager cannot be indicative of control; the standard only essentially describes what a
Branch Manager is the person in the lead who orchestrates activities within the group. To coordinate,
and thereby to lead and to orchestrate, is not so much a matter of control by Manulife; it is simply a
statement of a branch managers role in relation with his agents from the point of view of Manulife whose
business Tongkos sales group carries.
 A disturbing note, with respect to the presented affidavits and Tongkos alleged administrative
functions, is the selective citation of the portions supportive of an employment relationship and the
consequent omission of portions leading to the contrary conclusion. For example, the following portions
of the affidavit of Regional Sales Manager John Chua, with counterparts in the other affidavits, were
not brought out in the Decision of November 7, 2008, while the other portions suggesting labor law
control were highlighted. Specifically, the following portions of the affidavits were not brought
out:32[32]

1.a. I have no fixed wages or salary since my services are compensated by way of
commissions based on the computed premiums paid in full on the policies obtained
thereat;

1.b. I have no fixed working hours and employ my own method in soliticing insurance
at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my business of
selling insurance;

xxxx

6. I have my own staff that handles the day to day operations of my office;

7. My staff are my own employees and received salaries from me;

xxxx

9. My commission and incentives are all reported to the Bureau of Internal Revenue
(BIR) as income by a self-employed individual or professional with a ten (10) percent
creditable withholding tax. I also remit monthly for professionals.
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases,
would have readily yielded the conclusion that no employer-employee relationship existed between
Manulife and Tongko.

Even de Dios letter is not determinative of control as it indicates the least amount of intrusion
into Tongkos exercise of his role as manager in guiding the sales agents. Strictly viewed, de Dios
directives are merely operational guidelines on how Tongko could align his operations with Manulifes
re-directed goal of being a big league player. The method is to expand coverage through the use of more
agents. This requirement for the recruitment of more agents is not a means-and-method control as it
relates, more than anything else, and is directly relevant, to Manulifes objective of expanded business
operations through the use of a bigger sales force whose members are all on a principal-agent
relationship. An important point to note here is that Tongko was not supervising regular full-time
employees of Manulife engaged in the running of the insurance business; Tongko was effectively
guiding his corps of sales agents, who are bound to Manulife through the same Agreement that he
had with Manulife, all the while sharing in these agents commissions through his overrides. This
is the lead agent concept mentioned above for want of a more appropriate term, since the title of Branch
Manager used by the parties is really a misnomer given that what is involved is not a specific regular
branch of the company but a corps of non-employed agents, defined in terms of covered territory,
through which the company sells insurance. Still another point to consider is that Tongko was not even
setting policies in the way a regular company manager does; company aims and objectives were simply
relayed to him with suggestions on how these objectives can be reached through the expansion of a non-
employee sales force.

Interestingly, a large part of de Dios letter focused on income, which Manulife demonstrated, in
Tongkos case, to be unaffected by the new goal and direction the company had set. Income in insurance
agency, of course, is dependent on results, not on the means and manner of selling a matter for Tongko
and his agents to determine and an area into which Manulife had not waded. Undeniably, de Dios letter
contained a directive to secure a competent assistant at Tongkos own expense. While couched in terms
of a directive, it cannot strictly be understood as an intrusion into Tongkos method of operating and
supervising the group of agents within his delineated territory. More than anything else, the directive
was a signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongkos
perceived weakness in delivering results could be remedied. It was a solution, with an eye on results,
for a consistently underperforming group; its obvious intent was to save Tongko from the result that he
then failed to grasp that he could lose even his own status as an agent, as he in fact eventually did.

The present case must be distinguished from the second Insular Life case that showed the
hallmarks of an employer-employee relationship in the management system established. These were:
exclusivity of service, control of assignments and removal of agents under the private respondents unit,
and furnishing of company facilities and materials as well as capital described as Unit Development
Fund. All these are obviously absent in the present case. If there is a commonality in these cases, it is in
the collection of premiums which is a basic authority that can be delegated to agents under the Insurance
Code.

As previously discussed, what simply happened in Tongkos case was the grant of an expanded
sales agency role that recognized him as leader amongst agents in an area that Manulife defined.
Whether this consequently resulted in the establishment of an employment relationship can be
answered by concrete evidence that corresponds to the following questions:

as lead agent, what were Tongkos specific functions and the terms of his additional engagement;

was he paid additional compensation as a so-called Area Sales Manager, apart from the
commissions he received from the insurance sales he generated;

what can be Manulifes basis to terminate his status as lead agent;

can Manulife terminate his role as lead agent separately from his agency contract; and

to what extent does Manulife control the means and methods of Tongkos role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly
discussed above. But strictly speaking, the questions cannot definitively and concretely be answered
through the evidence on record. The concrete evidence required to settle these questions is simply not
there, since only the Agreement and the anecdotal affidavits have been marked and submitted as
evidence.

Given this anemic state of the evidence, particularly on the requisite confluence of the factors
determinative of the existence of employer-employee relationship, the Court cannot conclusively find
that the relationship exists in the present case, even if such relationship only refers to Tongkos additional
functions. While a rough deduction can be made, the answer will not be fully supported by the
substantial evidence needed.

Under this legal situation, the only conclusion that can be made is that the absence of evidence
showing Manulifes control over Tongkos contractual duties points to the absence of any employer-
employee relationship between Tongko and Manulife. In the context of the established evidence,
Tongko remained an agent all along; although his subsequent duties made him a lead agent with
leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-
and-manner control.

This conclusion renders unnecessary any further discussion of the question of whether an agent
may simultaneously assume conflicting dual personalities. But to set the record straight, the concept of
a single person having the dual role of agent and employee while doing the same task is a novel one in
our jurisprudence, which must be viewed with caution especially when it is devoid of any
jurisprudential support or precedent. The quoted portions in Justice Carpio-Morales dissent,33[33]
borrowed from both the Grepalife and the second Insular Life cases, to support the duality approach of
the Decision of November 7, 2008, are regrettably far removed from their context i.e., the cases factual
situations, the issues they decided and the totality of the rulings in these cases and cannot yield the
conclusions that the dissenting opinions drew.

The Grepalife case dealt with the sole issue of whether the Ruiz brothers appointment as zone
supervisor and district manager made them employees of Grepalife. Indeed, because of the presence of
the element of control in their contract of engagements, they were considered Grepalifes employees.
This did not mean, however, that they were simultaneously considered agents as well as employees of
Grepalife; the Courts ruling never implied that this situation existed insofar as the Ruiz brothers were
concerned. The Courts statement the Insurance Code may govern the licensing requirements and other
particular duties of insurance agents, but it does not bar the application of the Labor Code with regard
to labor standards and labor relations simply means that when an insurance company has exercised
control over its agents so as to make them their employees, the relationship between the parties, which
was otherwise one for agency governed by the Civil Code and the Insurance Code, will now be governed
by the Labor Code. The reason for this is simple the contract of agency has been transformed into an
employer-employee relationship.

The second Insular Life case, on the other hand, involved the issue of whether the labor bodies
have jurisdiction over an illegal termination dispute involving parties who had two contracts first, an
original contract (agency contract), which was undoubtedly one for agency, and another subsequent
contract that in turn designated the agent acting unit manager (a management contract). Both the Insular
Life and the labor arbiter were one in the position that both were agency contracts. The Court disagreed
with this conclusion and held that insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We
never said in this case though that the insurance agent had effectively assumed dual personalities for the
simple reason that the agency contract has been effectively superseded by the management contract. The
management contract provided that if the appointment was terminated for any reason other than for
cause, the acting unit manager would be reverted to agent status and assigned to any unit.

The dissent pointed out, as an argument to support its employment relationship conclusion, that
any doubt in the existence of an employer-employee relationship should be resolved in favor of the
existence of the relationship.34[34] This observation, apparently drawn from Article 4 of the Labor
Code, is misplaced, as Article 4 applies only when a doubt exists in the implementation and application
of the Labor Code and its implementing rules; it does not apply where no doubt exists as in a situation
where the claimant clearly failed to substantiate his claim of employment relationship by the quantum
of evidence the Labor Code requires.

On the dissents last point regarding the lack of jurisprudential value of our November 7, 2008
Decision, suffice it to state that, as discussed above, the Decision was not supported by the evidence
adduced and was not in accordance with controlling jurisprudence. It should, therefore, be reconsidered
and abandoned, but not in the manner the dissent suggests as the dissenting opinions are as factually and
as legally erroneous as the Decision under reconsideration.

In light of these conclusions, the sufficiency of Tongkos failure to comply with the guidelines
of de Dios letter, as a ground for termination of Tongkos agency, is a matter that the labor tribunals
cannot rule upon in the absence of an employer-employee relationship. Jurisdiction over the matter
belongs to the courts applying the laws of insurance, agency and contracts.
 WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of
November 7, 2008, GRANT Manulifes motion for reconsideration and, accordingly, DISMISS
Tongkos petition. No costs.

SO ORDERED.