SECOND
DIVISION
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ARSENIO T. MENDIOLA,
Petitioner, - versus - COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION, PACIFIC
Respondents. |
G.R. No. 159333 Present: PUNO, J.,
Chairperson, SANDOVAL-GUTIERREZ, AZCUNA, and GARCIA, JJ. Promulgated: |
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PUNO,
J.:
On appeal are the Decision[1]
and Resolution[2]
of the Court of Appeals, dated
The facts are
as follows:
Private respondent
Pacific
Private respondent
Pacfor entered into a “Side Agreement on Representative Office known as Pacific
Forest Resources (Phils.), Inc.”[5] with
petitioner Arsenio T. Mendiola (ATM), effective
On
In March 1997,
the Side Agreement was amended through a “Revised Operating and Profit Sharing
Agreement for the Representative Office Known as Pacific Forest Resources (
In July 2000,
petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking
confirmation of his 50% equity of Pacfor Phils.[10] Private respondent Pacfor, through William
Gleason, its President, replied that petitioner is not a part-owner of Pacfor Phils.
because the latter is merely Pacfor-USA’s representative office and not an
entity separate and distinct from Pacfor-USA.
“It’s simply a ‘theoretical company’ with the purpose of dividing the
income 50-50.”[11] Petitioner presumably knew of this arrangement
from the start, having been the one to propose to private respondent Pacfor the
setting up of a representative office, and “not a branch office” in the
Philippines to save on taxes.[12]
Petitioner claimed that he was all
along made to believe that he was in a joint venture with them. He alleged he would have been better off
remaining as an independent agent or representative of Pacfor-USA as ATM
Marketing Corp.[13] Had he known that no joint venture existed,
he would not have allowed Pacfor to take the profitable business of his own
company, ATM Marketing Corp.[14] Petitioner raised other issues, such as the
rentals of office furniture, salary of the employees, company car, as well as
commissions allegedly due him. The
issues were not resolved, hence, in October 2000, petitioner wrote Pacfor-USA
demanding payment of unpaid commissions and office furniture and equipment rentals,
amounting to more than one million dollars.[15]
On November 27, 2000, private respondent
Pacfor, through counsel, ordered petitioner to turn over to it all papers,
documents, files, records, and other materials in his or ATM Marketing
Corporation’s possession that belong to Pacfor or Pacfor Phils.[16]
On
Private respondent Pacfor likewise
sent letters to its clients in the
Until further
notice, please course all inquiries and communications for Pacific Forest
Resources (
200 Tamal Plaza,
(415) 927 1700
phone
(415) 381 4358 fax
Please do not
send any communication to Mr. Arsenio “Boy” T. Mendiola or to the offices of
ATM Marketing Corporation at Room 504,
In another letter addressed to Davao
Corrugated Carton Corp. (DAVCOR), dated December 2000, private respondent directed
said client “to please communicate directly with us on any further questions
associated with these payments or any future business. Do not communicate with [Pacfor] and/or [ATM].”[20]
Petitioner construed
these directives as a severance of the “unregistered partnership” between him
and Pacfor, and the termination of his employment as resident manager of Pacfor
Phils.[21] In a memorandum to the employees of Pacfor
Phils., dated
I received a
letter from Pacific Forest Resources, Inc. demanding the turnover of all
records to them effective
Please let me
know if you are interested.[22]
On the basis of the “Side Agreement,”
petitioner insisted that he and Pacfor equally own Pacfor Phils. Thus, it follows that he and Pacfor likewise
own, on a 50/50 basis, Pacfor Phils.’ office furniture and equipment and the
service car. He also reiterated his
demand for unpaid commissions, and proposed to offset these with the remaining
Christmas giveaway fund in his possession.[23] Furthermore, he did not renew the lease
contract with Pulp and Paper, Inc., the lessor of the office premises of Pacfor
Phils., wherein he was the signatory to the lease agreement.[24]
On
Petitioner denied the charges. He reiterated that he considered the import
of Pacfor President William Gleason’s letters as a “cessation of his position
and of the existence of Pacfor Phils.”
He likewise informed private respondent Pacfor that ATM Marketing Corp.
now occupies Pacfor Phils.’ office premises,[26]
and demanded payment of his separation pay.[27] On
In the meantime, private respondent Pacfor
lodged fresh charges against petitioner.
In a memorandum dated
Labor Arbiter Felipe Pati ruled in
favor of petitioner, finding there was constructive dismissal. By directing petitioner to turn over all
office records and materials, regardless of whether he may have retained
copies, private respondent Pacfor virtually deprived petitioner of his job by
the gradual diminution of his authority as resident manager. Petitioner’s position as resident manager
whose duty, among others, was to maintain the security of its business transactions
and communications was rendered meaningless.
The dispositive portion of the decision of the Labor Arbiter reads:
WHEREFORE,
premises considered, judgment is hereby rendered ordering herein respondents
Cellmark AB and Pacific Forest Resources, Inc., jointly and severally to
compensate complainant Arsenio T. Mendiola separation pay equivalent to at
least one month for every year of service, whichever is higher (sic), as
reinstatement is no longer feasible by reason of the strained relations of the
parties equivalent to five (5) months in the amount of $32,000.00 plus the sum
of P250,000.00; pay complainant the sum of P500,000.00 as moral and exemplary damages and ten percent
(10%) of the amounts awarded as and for attorney’s fees.
All
other claims are dismissed for lack of basis.
SO
ORDERED.[30]
Private
respondent Pacfor appealed to the NLRC which ruled in its favor. On
The NLRC
denied petitioner’s Motion for Reconsideration.[32]
Petitioner
was not successful on his appeal to the Court of Appeals. The appellate court upheld the ruling of the
NLRC.
Petitioner’s
Motion for Reconsideration[33]
of the decision of the Court of Appeals was denied.
Hence, this
appeal.[34]
Petitioner
assigns the following errors:
A.
The
Respondent Court of Appeals committed reversible error and abused its
discretion in rendering judgment against petitioner since jurisdiction has been
acquired over the subject matter of the case as there exists employer-employee
relationship between the parties.
B.
The
Respondent Court of Appeals committed reversible error and abused its
discretion in ruling that jurisdiction over the subject matter cannot be waived
and may be alleged even for the first time on appeal or considered by the court
motu prop[r]io.[35]
The
first issue is whether an employer-employee relationship exists between
petitioner and private respondent Pacfor.
Petitioner argues that he is an
industrial partner of the partnership he formed with private respondent Pacfor,
and also an employee of the partnership.
Petitioner insists that an industrial partner may at the same time be an
employee of the partnership, provided there is such an agreement, which, in
this case, is the “Side Agreement” and the “Revised Operating and Profit
Sharing Agreement.” The Court of Appeals
denied the appeal of petitioner, holding that “the legal basis of the complaint
is not employment but perhaps partnership, co-ownership, or independent contractorship.” Hence, the Labor Code cannot apply.
We hold that petitioner is an
employee of private respondent Pacfor and that no partnership or co-ownership
exists between the parties.
In a partnership, the members become
co-owners of what is contributed to the firm capital and of all property that
may be acquired thereby and through the efforts of the members.[36] The property or stock of the partnership
forms a community of goods, a common fund, in which each party has a
proprietary interest.[37] In fact, the New Civil Code regards a partner
as a co-owner of specific partnership property.[38] Each partner possesses a joint interest in
the whole of partnership property. If
the relation does not have this feature, it is not one of partnership.[39] This essential element, the community of
interest, or co-ownership of, or joint interest in partnership property is
absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-owner of Pacfor
Phils. William Gleason, private respondent
Pacfor’s President established this fact when he said that Pacfor Phils. is
simply a “theoretical company” for the purpose of dividing the income 50-50. He stressed that petitioner knew of this
arrangement from the very start, having been the one to propose to private respondent
Pacfor the setting up of a representative office, and “not a branch office” in
the Philippines to save on taxes. Thus,
the parties in this case, merely shared profits. This alone does not make a partnership.[40]
Besides,
a corporation cannot become a member of a partnership in the absence of express
authorization by statute or charter.[41] This doctrine is based on the following
considerations: (1) that the mutual agency between the partners, whereby the
corporation would be bound by the acts of persons who are not its duly
appointed and authorized agents and officers, would be inconsistent with the
policy of the law that the corporation shall manage its own affairs separately
and exclusively; and, (2) that such an arrangement would improperly allow
corporate property to become subject to risks not contemplated by the stockholders
when they originally invested in the corporation.[42] No such authorization has been proved in the case
at bar.
Be that as it may, we hold that on
the basis of the evidence, an employer-employee relationship is present in the
case at bar. The
elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.[43]
In the instant case, all the
foregoing elements are present. First,
it was private respondent Pacfor which selected and engaged the services of
petitioner as its resident agent in the
Lastly and most important, private respondent
Pacfor has the power of control over the means and method of petitioner in
accomplishing his work.
The power of control refers merely to
the existence of the power, and
not to the actual exercise thereof. The
principal consideration is whether the employer has the right to control the
manner of doing the work, and it is not the actual exercise of the right by
interfering with the work, but the right to control, which constitutes the test
of the existence of an employer-employee relationship.[44] In the case at bar, private respondent
Pacfor, as employer, clearly possesses such right of control. Petitioner, as private respondent Pacfor’s
resident agent in the
This right of control was exercised
by private respondent Pacfor during the period of November to December 2000, when
it directed petitioner to turn over to it all records of Pacfor Phils.; when it
ordered petitioner to remit the Christmas giveaway fund intended for clients of
Pacfor Phils.; and, when it withdrew all its offers of settlement and ordered
petitioner to transfer title and turn over to it the possession of the service
car. It was also during this period when
private respondent Pacfor sent letters to its clients in the
Next, we shall determine if
petitioner was constructively dismissed from employment.
The evidence shows that when
petitioner insisted on his 50% equity in Pacfor Phils., and would not quit
however, private respondent Pacfor began to systematically deprive petitioner
of his duties and benefits to make him
feel that his presence in the company was no longer wanted. First, private respondent Pacfor directed
petitioner to turn over to it all records of Pacfor Phils. This would certainly make the work of
petitioner very difficult, if not impossible.
Second, private respondent Pacfor ordered petitioner to remit the
Christmas giveaway fund intended for clients of Pacfor Phils. Then it ordered petitioner to transfer title
and turn over to it the possession of the service car. It also advised its clients in the
Although there is no reduction of the
salary of petitioner, constructive dismissal is still present because continued
employment of petitioner is rendered, at the very least, unreasonable.[46] There is an act of clear discrimination,
insensibility or disdain by the employer that continued employment may become
so unbearable on the part of the employee so as to foreclose any choice on his
part except to resign from such employment.[47]
The harassing acts of the private
respondent are unjustified. They were
undertaken when petitioner sought clarification from the private respondent
about his supposed 50% equity on Pacfor Phils.
Private respondent Pacfor invokes its rights as an owner. Allegedly, its issuance of the foregoing
directives against petitioner was a valid exercise of management
prerogative. We remind private respondent
Pacfor that the exercise of management prerogative is not absolute. “By its very nature, encompassing as it could
be, management prerogative must be exercised in good faith and with due regard
to the rights of labor – verily, with the principles of fair play at heart and
justice in mind.” The exercise of
management prerogative cannot be utilized as an implement to circumvent our
laws and oppress employees.[48]
As resident agent of private respondent
corporation, petitioner occupied a position involving trust and
confidence. In the light of the strained
relations between the parties, the full restoration of an employment
relationship based on trust and confidence is no longer possible. He should be awarded separation pay, in lieu
of reinstatement.
IN VIEW WHEREOF,
the petition is GRANTED. The Court of Appeals’ P250,000.00
representing an alleged increase in petitioner’s salary shall be deducted from
the grant of separation pay for lack of evidence.
SO ORDERED.
REYNATO S. PUNO
Associate Justice
WE
CONCUR:
CANCIO C. GARCIA
Associate Justice
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
REYNATO S. PUNO
Associate Justice
Chairperson
Pursuant
to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above decision had been reached
in consultation before the case was assigned to the writer of the opinion of
the Court’s Division.
ARTEMIO
V. PANGANIBAN
[1] CA
rollo, pp. 1058-1072.
[2]
[3]
[4]
[5]
[6]
[7] Rollo, p. 63.
[8]
[9] CA rollo, p. 684. Other terms of the revised agreement include:
a)
ATM and Pacfor-USA shall jointly manage Pacfor Phils.
b)
Pacfor-Phils. will earn commissions at 1.5% of F.O.B.
value, the computation of which shall be shown in a credit memo issued by
Cellmark/Pacfor.
c)
Losses, if any, will be reimbursed by Cellmark/Pacfor
to ATM for ATM’s share of the loss, for two consecutive years beginning with
the first year of loss.
d)
The revised agreement shall take effect on
e)
Cash paid to the representative office by Pacific Paper
belongs to Pacfor and will be held in trust by ATM.
[10]
[11] Rollo, p. 528.
[12]
[13] Ibid.
[14]
[15]
[16]
[17]
[18]
[19] CA
rollo, p. 829.
[20]
[21] Rollo,
pp. 546-550.
[22]
[23]
[24]
[25]
[26]
[27]
[28] CA
rollo, p. 652.
[29] Rollo,
pp. 562-563.
[30]
[31]
[32] CA
rollo, pp. 333-335.
[33]
[34] Rollo,
pp. 14-36.
[35]
[36] Esteban
B. Bautista, Treatise on Philippine Partnership Law, 1978 ed., citing Nelson
v. Abraham, 177 P.2d 931 (1947); Henry v. Darnall, 246 Ill.App. 250 (1927), cited
in Notes of Decisions, 7 U.L.A. 15 (1949).
[37] Esteban
B. Bautista, Treatise on Philippine Partnership Law, 1978 ed., citing
Darden v. Cox, 123 So.2d 68 (1960).
[38] Art.
1811 (1st par.).
[39] Esteban
B. Bautista, Treatise on Philippine Partnership Law, 1978 ed.
[40] Fortis
v. Gutierrez Hermanos, 6 Phil. 100 (1906).
[41] J.M.
Tuason v. Bolanos, 95 Phil. 106 (1954); Esteban B. Bautista, Treatise on
Philippine Partnership Law, 1978 ed., citing 60 A.L.R.2d 917; 6
Fletcher, Cyclopedia of Corporations, Sec. 2520 (1950).
[42] Esteban
B. Bautista, Treatise on Philippine Partnership Law, 1978 ed., citing 13
Am.Jur. 830; 60 A.L.R.2d 913.
[43] Sy v. Court of Appeals, G.R. No. 142293, February 27, 2003, 398 SCRA 301, citing Caurdanetaan
Piece Workers Union v. Laguesma, 286 SCRA 401, 420
(1998); Maraguinot,
Jr. v. NLRC, 284 SCRA 539, 552 (1998); APP Mutual
Benefit Association, Inc. v. NLRC, 267 SCRA 47, 57 (1997); Aurora Land
Projects Corp. v. NLRC, 266 SCRA 48, 59 (1997); Encyclopedia
Britannica (Phils.), Inc. v. NLRC, 264 SCRA 1, 6-7 (1996).
[44]
[45] CA rollo, pp. 724-733.
[46] Philippine
Japan Active Carbon Corp. v. NLRC, G.R. No. 83239,
[47] Unicorn
Safety Glass, Inv. v. Basarte, G.R. No. 154689,
[48] Ibid.