LEON BALBAS, DONATO ABITONG, AND NEMESIO VALDEZ, PETITIONERS, VS. MELECIO R. DOMINGO, COMMISSIONER OF INTERNAL REVENUE, MANILA, RESPONDENT.

This petition for the review of a decision of the Court of Tax
Appeals poses the legal question of whether or not a person who enters into a contract with a
sugar cane plantation to
recruit cane cutters and supervise their work during the harvest season, the contract expressly referring to
him as a “contractor”
is taxable under the National Internal Revenue Code,^[1]
as an independent contractor.

As noted in the decision sought to be reviewed, petitioners Balbas, Abitong and Valdez,
on August 10, 1956,
“individually executed contracts with the Canlubang
Sugar Estate” (hereinafter referred to as Canlubang), designated as Harvest Contracts, from which they earned gross
receipts.  They were classified as
independent contractors by the then Commissioner
of Internal Revenue, respondent Domingo, who “assessed against and
demanded from them the payment of the respective sums of P5,722.95,
P4,715.90 and P6,818.70, as fixed
and percentage taxes, surcharge and compromise penalties.”^[2]
Petitioners questioned the validity of such assessments before the Court of Tax Appeals.  Respondent Commissioner was sustained,
petitioners being ordered to pay him the fixed and percentage taxes including
25% surcharges, but not the compromise penalties, petitioner Balbas, in the amount of P5,522.95, petitioner Abitong, P4,515.90 and petitioner Valdez, P6,618.70.

The decisive issue was briefly set forth in the decision of the
Court of Tax Appeals thus:  “The
resolution of this case hinges upon the question whether petitioners are
independent contractors.  If in the affirmative, as contended by
respondent, they are subject to the payment of fixed and percentage taxes in
pursuance of Sections 182 and 191 of the Tax Code.  Otherwise, or if they are merely employees,
as is urged upon us, they are not thusly liable.”

What are
the facts as found by the Court of Tax Appeals?  Under the contracts entered into between petitioners and Canlubang, “the former are obliged to recruit men, preferably natives of the Ilocos provinces, to harvest the cane of [Canlubang] in accordance with the harvest schedule to be
provided by the latter which reserves the right to change the same at any
time.”^[3]
The Court then noted that the fact that a person is empowered to hire the men
who will assist him in the performance of his work “affirms his
independent status.  Reference is then
made to that stipulation in the contracts that petitioners “will pay for [their] own account all recruiting expenses, actual cost of
transportation of recruits and their subsistence allowance while en route to Canlubang.”^[4] That is another indication of the
absence of the employer-employee relationship in the opinion of the tax Court,
the reason being that it is “unusual for an employer or servant to defray
like expenses incurred by persons he hired
to assist him, in the work.”^[5]
Nor did it consider as detracting
from the attribute of independence possessed by petitioners, the contractual limitation limiting
recruitment to natives of specifically named provinces and imposing the condition “that the work be done
in accordance with a harvest schedule.”^[6]
The Circumstance that the next provision of the harvest
contracts dealt with the payment of Canlubang of
services of petitioners at rates fixed per ten from which sum the men hired would be remunerated
was for the Court further proof.  It reached the same conclusion in view of the
preparation of the payrolls by petitioners to be thereafter submitted to Canlubang for verification, with payments being made by
petitioners or their duly authorized representatives.  Its thinking was that if the petitioners were mere employees of Canlubang, this matter would be attended to by its
accounting or clerical department.  The
provisions of the harvest contracts with Canlubang
furnishing the tools, implements and other equipment for which petitioners were
named responsible and any damage thereto due to lack of proper care and
precaution being repaired or replaced at their expense, was likewise viewed by
the Court in the same light.  The obligation
incumbent on petitioners according to the harvest contracts to furnish at their
expense the necessary loading boards and the requirement that they execute
security for the performance of their undertaking and for full payment of all
advances made to them, were seized upon by the Court as reinforcing conclusion
it reached as to their status.

The harvest contracts regulated the daily tonnage of the
harvested steel cane that petitioners could deliver to Canlubang,
specifying the cutting of cane in accordance with rules and instructions laid
down, violation of which would empower Canlubang to
employ other laborers to do the cutting for the account of petitioners plus 50%
penalty.  They also provided for the
gathering of cane found on the ground and left unloaded within two (2) days after cutting for the account of
petitioners plus the same amount of penalty, the nonloading
by them of rotten, deceased or decayed
cane with either deduction from the amount due them based on its weight
or the obligation to sort them out at their expense, and their abiding by the
rules, regulations, orders or instructions furnished by Canlubang
for the proper harvesting of all cane. 
Such provisions were not considered as impairing their independent
character, the Court citing a principle in American law that stipulations that
work is to be done with instructions from the employer or as the employer may
direct do not militate against such status. 
What strengthened the tax Court
further in its firm adherence to
such a conclusion were the “provisions for defraying by the contractor of
expenses and damages for violations of such rules, regulations or instructions
* * *.”^[7]

The Court of Tax Appeals took into account the testimonial
evidence showing the presence of Canlubang personnel
supervising the work of petitioners and seeing to it “that the work is
done according to the rules, regulations or instructions.” It did not
consider such circumstance as lessening their independent status.  Nor it did ignore the fact that medical
treatment was provided cane cutters by Canlubang’s
own physicians in its own hospital, some of them having been paid compensation
under the Workmen’s Compensation Act. 
This was not deemed conclusive “of the subservient status of
petitioners because the probative significance of these circumstances is not
sufficient to change the status of petitioners which is shown by the remainder of the evidence to be an independent
one.”^[8]

Accordingly, the Court of Tax Appeals held, as above referred to,
that petitioners were independent contractors taxable under the National
Internal Revenue Code.  From such a judgment, there was an appeal to
this Court.  We affirm the decision of
the Court of Tax Appeals.

No other conclusion is possible in view of the well settled
principle that this Court is bound by the finding of facts of the Court of Tax
Appeals, only questions of law being
open to it for determination.^[9] As stated in another, decision,
“only errors of law, and not rulings on the weight.  Of evidence, are reviewable
by this court.”^[10]
The facts then as
above ascertained cannot be disturbed.^[11]
In our latest decision, there is a categorical assertion that where the
question is one of fact, it is no longer reviewable.^[12]

With petitioners-appellants assigning as errors, the holding that they were considered independent
contractors taxable under Section 191, the Court of Tax Appeals failing to
consider the extent of the control and supervision over the plan, manner,
means, method and progress of cane harvesting and over their conduct and that of
cane cutters as well as
invoking in support of this decision only the provisions of these contracts
relative to their onerous undertaking but failing to discuss the main issue as
to who was in control and supervision of the plan, manner, means, method and progress
of cane harvesting, resulting in the affirmance of
the assessments imposed on them, errors which they discussed jointly, the
emphasis being on the alleged control of Canlubang
and the extent to which petitioners could be considered independent, the
reversal of the Court of Tax Appeals is out of the question.  In essence,
what petitioners seek is to have us review factual matters.  As has
just been noted, the determination made by the Court of Tax Appeals on those
points should remain undisturbed.

It is true as
held in one of our decisions that to determine the nature of the contract
“courts do not have or are not bound to rely upon the name or title given
it by the contracting parties, should there be a controversy as to what they really had intended to enter
into, but the way the contracting parties do or perform their respective
obligations stipulated or agreed upon may be shown and inquired into, and
should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter.”^[13]
Based on the above test, the harvest contracts entered into by petitioners as
contractors, as analyzed by the Court of Tax Appeals, reveal clearly
the extent of their independence and the correctness
of the conclusion reached. 
Petitioners were correctly adjudged
to be independent contractors.

WHEREFORE, the decision
of the Court of Tax Appeals, is affirmed, with costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, Zaldivar, Sanchez,
Castro, and Angeles, JJ., concur.

^[1]
Section 191 of Commonwealth Act No. 466 as amended provides:  “* * * and other independent
contractors, * * * shall pay a tax equivalent to three per centum their gross receipts.”

^[2]
Decision of the Court of Tax Appeals, Appendix A, Brief for Petitioner-Appellants, pp. I-II.

^[3]
Ibid, p. III.

^[4]
Ibid, p. III.

^[5]
Ibid, pp. III-IV.

^[6]
Ibid, p. IV.

^[7]
Ibid, p. VI.

^[8]
Ibid, p. VII.

^[9]
Sanchez v. Commissioner of Customs (1957) 102 Phil. 37.

^[10]
Castro v. Collector of Internal Revenue, L-12174, April 26, 1962; Yupangco
and Sons v. Commissioner of Customs,
L-22259, January 19, 1966.

^[11]
Commissioner v. Priscila Estate Inc., L-18282,
May 29, 1964;
The Philippine Guaranty v. Commissioner of
Internal Revenue, L-22074, September 6, 1965.

^[12]
Republic of the Philippines v. Razon and Jai
Alai Corporation, L-17462, May 24, 1967.

^[13]
Shell Co. of the Phil., Ltd. v. Firemen’s Ins. Co. of Newark, N. J., et al., (1957) 100 Phil. 757, 764.