474 Phil. 414


[ G.R. No. 159890, May 28, 2004 ]




This is a petition for review under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the Decision dated March 7, 2003 of the Court of Appeals in CA-G.R. SP No. 73102 which affirmed the Resolution dated April 2, 2002 of the National Labor Relations Commission.

Petitioner was employed by respondent company Lamadrid Bearing and Parts Corporation sometime in June 1985 as a salesman earning a commission of 3% of the total paid-up sales covering the whole area of Mindanao. His average monthly income was more or less P16,000.00, but later was increased to approximately P20,269.50. Aside from selling the merchandise of respondent corporation, he was also tasked to collect payments from his various customers. Respondent corporation had complete control over his work because its President, respondent Jose Lamadrid, frequently directed him to report to a particular area for his sales and collection activities, and occasionally required him to go to Manila to attend conferences regarding product competition, prices, and other market strategies.

Sometime in 1998, petitioner encountered five customers/clients with bad accounts, namely:

  1) A&B Engineering Services
P 86,431.20
  2) Emmanuel Engineering Services
  3) Panabo Empire Marketing
  4) Southern Fortune Marketing
  5) Alreg Marketing
56, 901.18
    Less Returns: 691.02
56, 210.16
  Total Bad Accounts
P 687,166.62

Petitioner was confronted by respondent Lamadrid over the bad accounts and warned that if he does not issue his own checks to cover the said bad accounts, his commissions will not be released and he will lose his job. Despite serious misgivings, he issued his personal checks in favor of respondent corporation on condition that the same shall not be deposited for clearing and that they shall be offset against his periodic commissions.[1]

Not contented with the issuance of the foregoing checks as security for the bad accounts, respondents “tricked” petitioner into signing two documents, which he later discovered to be a Promissory Note[2] and a Deed of Real Estate Mortgage.[3]

Pursuant to the parties’ agreement that the checks would not be deposited, as their corresponding values would be offset from petitioner’s sales commissions, respondents returned the same to petitioner as evidenced by the undeposited checks and respondent Lamadrid’s computations of petitioner’s commissions.[4]

Due to financial difficulties, petitioner inquired about his membership with the Social Security System in order to apply for a salary loan. To his dismay, he learned that he was not covered by the SSS and therefore was not entitled to any benefit. When he brought the matter of his SSS coverage to his employer, the latter berated and hurled invectives at him and, contrary to their agreement, deposited the remaining checks which were dishonored by the drawee bank due to “Account Closed.”

On March 22, 2001, counsel for respondent corporation sent a letter to petitioner demanding that he make good the dishonored checks or pay their cash equivalent. In response, petitioner sent a letter addressed to Atty. Meneses, counsel for respondent corporation, which reads:[5]
This has reference to your demand letter dated March 22, 2001 which I received on March 30, 2001, relative to the checks I issued to my employer LAMADRID BEARING PARTS CORPORATION.

May I respectfully request for a consideration as to the payment of the amount covered by the said checks, as follows:
  1. I have an earned commission in the amount of P33,412.39 as shown in the hereto attached Summary of Sales as of February 28, 2001 (P22,748.60) and as of March 31, 2001 (P10,664.79), which I offer to be charged or deducted as partial payment thereof;

  2. I hereby commit One Hundred Percent (100%) of all my commission to be directly charged or deducted as payment, from date onward, until such time that payment will be completed;

    Sir, kindly convey my good faith to your client and my employer, as is shown by my willingness to continue working as Commission Salesman, having served the Company for the last sixteen (16) years.

    I’m sincerely appealing to my employer, through you, Sir, to settle these accountabilities which all resulted from the checks issued by my customers which bounced and later charged to my account, in the manner afore-cited.

    May this request merit your kindest consideration, Sirs.

    Thank you very much.
On April 2, 2001, petitioner sent another letter to respondent Lamadrid, to wit:[6]
Dear Mr. Lamadrid,

This is to inform your good office that if you pursue the case against me, I may refer this problem to Mr. Paul Dominguez and Atty. Jesus Dureza to solicit proper legal advice. I may also file counter charges against your company of (sic) unfair labor practice and unfair compensation of 3% commission to my sales and commissions of more or less 90,000,000.00 (all collected and covered with cleared check payments) for 16 years working with your company up to the present year 2001.

If I am not wrong your company did not exactly declare the correct amount of P90,000,000.00 more or less representing my sales and collections (all collected and covered with cleared check payments to the Bureau of Internal Revenue [BIR] for tax declaration purposes). In short your company profited large amount of money to (sic) the above-mentioned sales and collections of P90,000,000.00 more or less for 16 years working with your company.

I remember that upon my employment with your company last 1985 up to the present year 2001 as commission basis salesman, I have not signed any contract with your company stating that all uncollected accounts including bounced checks from Lamadrid Bearing & Parts Corp. will be charged to me. I wonder why your company forcibly instructed me to secure checking account to pay and issue check payment of P15,000.00 per month to cover your company’s bad accounts in which this amount is too heavy on my part paying a total bad accounts of more than P650,000.00 for my 16 years employment with your company as commission basis salesman.

Recalling your visit here at my Davao City residence, located at Zone 1 2nd Avenue, San Vicente Buhangin Davao City, way back 1998, you even forced me to sign mortgage contract of my house and lot located at Zone 1 2nd Avenue, San Vicente, Buhangin, Davao City, according to Mr. Jose Lamadrid this mortgage contract of my house and lot will serve as guarantee to the uncollected and bounced checks from Lamadrid Bearing and Parts Corp., customers. I have asked 1 copy of the mortgage contract I have signed but Mr. Jose C. Lamadrid never furnished me a copy.

Very truly yours,

(Sgd) Empermaco B. Abante, Jr.
While doing his usual rounds as commission salesman, petitioner was handed by his customers a letter from the respondent company warning them not to deal with petitioner since it no longer recognized him as a commission salesman.

In the interim, petitioner received a subpoena from the Office of the City Prosecutor of Manila for violations of Batas Pambansa Blg. 22 filed by respondent Lamadrid.

Petitioner thus filed a complaint for illegal dismissal with money claims against respondent company and its president, Jose Lamadrid, before the NLRC Regional Arbitration Branch No. XI, Davao City.

By way of defense, respondents countered that petitioner was not its employee but a freelance salesman on commission basis, procuring and purchasing auto parts and supplies from the latter on credit, consignment and installment basis and selling the same to his customers for profit and commission of 3% out of his total paid-up sales. Respondents cite the following as indicators of the absence of an employer-employee relationship between them:

petitioner constantly admitted in all his acts, letters, communications with the respondents that his relationship with the latter was strictly commission basis salesman;

(2) he does not have a monthly salary nor has he received any benefits accruing to regular employment;

he was not required to report for work on a daily basis but would occasionally drop by the Manila office when he went to Manila for some other purpose;

(4) he was not given the usual pay-slip to show his monthly gross compensation;

neither has the respondent withheld his taxes nor was he enrolled as an employee of the respondent under the Social Security System and Philhealth;

he was in fact working as commission salesman of five other companies, which are engaged in the same line of business as that of respondent, as shown by certifications issued by the said companies;[7]

if respondent owed petitioner his alleged commissions, he should not have executed the Promissory Note and the Deed of Real Estate Mortgage.[8]

Finding no necessity for further hearing the case after the parties submitted their respective position papers, the Labor Arbiter rendered a decision dated November 29, 2001, the decretal portion of which reads:[9]
WHEREFORE, premises considered judgment is hereby rendered DECLARING respondents LAMADRID BEARING & PARTS CORPORATION AND JOSE LAMADRID to pay jointly and severally complainant EMPERMACO B. ABANTE, JR., the sum of PESOS ONE MILLION THREE HUNDRED THIRTY SIX THOUSAND SEVEN HUNDRED TWENTY NINE AND 62/100 ONLY (P1,336,729.62) representing his awarded separation pay, back wages (partial) unpaid commissions, refund of deductions, damages and attorney’s fees.

On appeal, the National Labor Relations Commission reversed the decision of the Labor Arbiter in a Resolution dated April 5, 2002, the dispositive portion of which reads:[10]
WHEREFORE, the Appeal is GRANTED. Accordingly, the appealed decision is Set Aside and Vacated. In lieu thereof, a new judgment is entered dismissing the instant case for lack of cause of action.

Petitioner challenged the decision of the NLRC before the Court of Appeals, which rendered the assailed judgment on March 7, 2003, the dispositive portion of which reads:[11]
WHEREFORE, premises considered, petition is hereby DENIED. Let the supersedeas bond dated 09 January 2002, issued the Philippine Charter Insurance Corporation be cancelled and released.

Upon denial of his motion for reconsideration, petitioner filed the instant appeal based on the following grounds:





Initially, petitioner challenged the statement by the appellate court that “petitioner, who was contracted a 3% of the total gross sales as his commission, was tasked to sell private respondent’s merchandise in the Mindanao area and to collect payments of his sales from the customers.” He argues that this statement, which suggests contracting or subcontracting under Department Order No. 10-97 Amending the Rules Implementing Books III and VI of the Labor Code, is erroneous because the circumstances to warrant such conclusion do not exist. Not being an independent contractor, he must be a regular employee pursuant to Article 280 of the Labor Code because an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer.

Petitioner likewise disputes the finding of the appellate court that no employer-employee relationship exists between him and respondent corporation since the power of control, which is the most decisive element to determine such relationship, is wanting. He argues that the following circumstances show that he was in truth an employee of the respondent corporation:
(1) As salesman of the private respondents, petitioner was also the one collecting payment of his sales from various customers. Thus, he was bringing with him Provisional Receipts, samples of which are attached to his Position Paper filed with the Labor Arbiter.

(2) Private respondents had complete control over the work of the petitioner. From time to time, respondent JOSE LAMADRID was directing him to report to a particular area in Mindanao for his sales and collection activities, and sometimes he was required to go to Manila for a conference regarding competitions, new prices (if any), special offer (if competitors gave special offer or discounts), and other selling/marketing strategy. In other words, respondent JOSE LAMADRID was closely monitoring the sales and collection activities of the petitioner.
Petitioner further contends that it was illogical for the appellate court to conclude that since he was not required to report for work on a daily basis, the power of control is absent. He reasons that being a field personnel, as defined under Article 82 of the Labor Code, who is covering the Mindanao area, it would be impractical for him to report to the respondents’ office in Manila in order to keep tab of his actual working hours.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence. The decisive factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot be accorded finality by this Court.[12] Considering the conflicting findings of fact by the Labor Arbiter and the NLRC as well as the Court of Appeals, there is a need to reexamine the records to determine with certainty which of the propositions espoused by the contending parties is supported by substantial evidence.

We are called upon to resolve the issue of whether or not petitioner, as a commission salesman, is an employee of respondent corporation. To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important.[13] The so-called “control test” is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.

Applying the aforementioned test, an employer-employee relationship is notably absent in this case. It is undisputed that petitioner Abante was a commission salesman who received 3% commission of his gross sales. Yet no quota was imposed on him by the respondent; such that a dismal performance or even a dead result will not result in any sanction or provide a ground for dismissal. He was not required to report to the office at any time or submit any periodic written report on his sales performance and activities. Although he had the whole of Mindanao as his base of operation, he was not designated by respondent to conduct his sales activities at any particular or specific place. He pursued his selling activities without interference or supervision from respondent company and relied on his own resources to perform his functions. Respondent company did not prescribe the manner of selling the merchandise; he was left alone to adopt any style or strategy to entice his customers. While it is true that he occasionally reported to the Manila office to attend conferences on marketing strategies, it was intended not to control the manner and means to be used in reaching the desired end, but to serve as a guide and to upgrade his skills for a more efficient marketing performance. As correctly observed by the appellate court, reports on sales, collection, competitors, market strategies, price listings and new offers relayed by petitioner during his conferences to Manila do not indicate that he was under the control of respondent.[14] Moreover, petitioner was free to offer his services to other companies engaged in similar or related marketing activities as evidenced by the certifications issued by various customers.[15]

In Encyclopedia Britannica (Philippines), Inc. v. NLRC,[16] we reiterated the rule that there could be no employer-employee relationship 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, no relationship of employer-employee exists.

We do not agree with petitioner’s contention that Article 280[17] is a crucial factor in determining the existence of an employment relationship. It merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining their rights to certain benefits, such as to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.[18]

Neither can we subscribe to petitioner’s misplaced reliance on the case of Songco v. NLRC.[19] While in that case the term “commission” under Article 96 of the Labor Code was construed as being included in the definition of the term “wage” available to employees, there is no categorical pronouncement that the payment of compensation on commission basis is conclusive proof of the existence of an employer-employee relationship. After all, commission, as a form of remuneration, may be availed of by both an employee or a non-employee.

Petitioner decried the alleged intimidation and trickery employed by respondents to obtain from him a Promissory Note and to issue forty-seven checks as security for the bad accounts incurred by five customers.

While petitioner may have been coerced into executing force to issue the said documents, it may equally be true that petitioner did so in recognition of a valid financial obligation. He who claims that force or intimidation was employed upon him lies the onus probandi. He who asserts must prove. It is therefore incumbent upon petitioner to overcome the disputable presumption that private transactions have been prosecuted fairly and regularly, and that there is sufficient consideration for every contract.[20] A fortiori, it is difficult to imagine that petitioner, a salesman of long standing, would accede without raising a protest to the patently capricious and oppressive demand by respondent of requiring him to assume bad accounts which, as he contended, he had not incurred. This lends credence to the respondent’s assertion that petitioner procured the goods from the said company on credit, consignment or installment basis and then sold the same to various customers. In the scheme of things, petitioner, having directly contracted with the respondent company, becomes responsible for the amount of merchandise he took from the respondent, and in turn, the customer/s would be liable for their respective accounts to the seller, i.e., the petitioner, with whom they contracted the sale.

All told, we sustain the factual and legal findings of the appellate court and accordingly, find no cogent reason to overturn the same.

WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated March 7, 2003 in CA-G.R. SP No. 73102, which denied the petition of Empermaco B. Abante, is AFFIRMED in toto.


Panganiban, (Working Chairman), Carpio, and Azcuna, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.


Check No.

1. 3320013401 8-28-98

2. 3320013402 9-28-98
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3. 3320013403 10-28-98
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4. 3320013404 11-28-98
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5. 3320013405 12-28-98
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[2] Annex “4” to Affidavit of Jose Lamadrid dated 4 June 2001 attached to Atty. Meneses’ letter dated 4 June 2001 addressed to Hon. Arturo L. Gamolo.

[3] Annex “5” to Affidavit of Jose Lamadrid dated 4 June 2001 attached to Atty. Meneses’ letter dated 4 June 2001 addressed to Hon. Arturo L. Gamolo.

[4] See Annexes “F” to “P”.

[5] CA Records, p. 153.

[6] Annex “7” to Jose Lamadrid’s Affidavit dated 4 June 2001 attached to Atty. Meneses’ letter to Hon. Arturo L. Gamolo dated 4 June 2001.

[7] Annexes “G to J”.

[8] Annexes “D & E”.

[9] Decision penned by Labor Arbiter Arturo L. Gamolo.

[10] Decision penned by Commissioner Leon G. Gonzaga, Jr., concurred in by Acting Presiding Commissioner Oscar N. Abella, Fifth Division NLRC.

[11] Decision penned by Associate Justice Buenaventura J. Guerrero, concurred in by Associate Justices Teodoro P. Regino and Mariano C. Del Castillo, Court of Appeals- Second Division.

[12] AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47.

[13] Ushio Marketing v. NLRC, G.R. No. 124551, 28 August 1998, 294 SCRA 673; Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 119930, 12 March 1998, 287 SCRA 476.

[14] Rollo, p. 72.

[15] Supra note 5.

[16] G.R. No. 87098, 4 November 1996, 264 SCRA 1, 7.

[17] Art. 280. Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

[18] Singer Sewing Machine Company v. Drilon, G.R. No. 91307, 24 January 1991, 193 SCRA 270.

[19] G.R. Nos. 50999-51000, 23 March 1990, 183 SCRA 610.

[20] Revised Rules on Evidence, Rule 131, Section 3, pars. P & Q.

Source: Supreme Court E-Library
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