G.R. No. 55674. July 25, 1983
LA SUERTE CIGAR AND CIGARETTE FACTORY, PETITIONER, VS. DIRECTOR OF THE BUREAU OF LABOR RELATIONS, THE LA SUERTE CIGAR AND CIGARETTE FACTORY PROVINCIAL (LUZON) AND METRO MANILA S…
GUERRERO, J.:
In the determination of the basic issue raised in the case at bar
involving the status of some 14 members of private respondent local union
whether they are employees of petitioner company in which case they should be
included in the 30% jurisdictional requirement necessary to support the
petition for certification election, or independent contractors and hence,
excluded therefrom, Our rulings in Mafinco Trading Corp. vs. Ople,
70 SCRA 139, where We reiterated the “control
test” earlier laid down in Investment Planning Corp. vs. Social Security
System, 21 SCRA 924, and in Social Security System
vs. Hon. Court of Appeals and Shriro (Phils.) Inc., 37 SCRA 579 are
authoritative and controlling.
In the Mafinco case, the
Court, through Justice Aquino, said:
“In a petition for certiorari, the issue of whether
respondents are employees or independent contractors should be resolved mainly
in the light of their peddling contracts. – Pro hac vice
the issue of whether Repomanta and Moralde were employees of Mafinco
or were independent contractors should be resolved mainly in the light of their
peddling contracts. A different approach
would lead this Court astray into the field of factual controversy where its
legal pronouncements would not rest on solid grounds.
“A contract whereby one engages to purchase and sell soft
drinks on trucks supplied by the manufacturer but providing that other party
(peddler) shall have the right to employ his own workers, shall post a bond to
protect the manufacturer against losses, shall be responsible for damages
caused to third persons, shall obtain the necessary licenses and permits and
bear the expenses incurred in the sale of the soft drinks is not a contract of
employment. – We hold that under their peddling contracts Repomanta
and Moralde were not employees of Mafinco
but were independent contractors as found by the NLRC
and its factfinder and by the
committee appointed by the Secretary of Labor to look into the status of Cosmos
and Mafinco peddlers.
They were distributors of Cosmos soft drinks with their own capital and
employees. Ordinarily, an employee or a
mere peddler does not execute a formal contract of employment. He is simply hired and he works under the
direction and control of the employer. Repomanta and Moralde voluntarily
executed with Mafinco formal peddling contracts which
indicate the manner in which they would sell Cosmos soft drinks. That circumstance signifies that they were
acting as independent businessmen. They
were free to sign or not to sign that contract.
If they did not want to sell Cosmos products under the conditions
defined in that contract, they were free to reject it. But having signed it, they were bound by its
stipulations and the consequences thereof under existing labor laws. One such stipulation is the right of the
parties to terminate the contract upon 5 days’ prior notice. Whether the termination in this case was an
unwarranted dismissal of an employee, as contended by Repomanta
and Moralde, is a point that cannot be resolved
without submission of evidence. Using
the contract itself as the sole criterion, the termination should perforce be
characterized as simply the exercise of a right freely stipulated upon by the
parties.
“Tests for determining the existence of
employer-employee relationship. – In determining the existence of
employer-employee relationship, the following elements are generally considered,
namely: (1) the selection and engagement
of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employees’ conduct – although the latter is the most
important element.
“Factors to determine existence of
independent contract relationship. – An independent contractor is one
who exercises independent employment and contracts to do a piece of work according
to his own methods and without being subject to control of his employer except
as to the result of the work. ‘Among the
factors to be considered are whether the contractor is carrying on an
independent business; whether the work is part of the employer’s general
business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of the work
to another; the power to terminate the relationship; the existence of a
contract for the performance of a specified piece of work; the control and
supervision of the work; the employer’s powers and duties with respect to the
hiring, firing, and payment of the contractor’s servants; the control of the
premises; the duty to supply the premises, tools, appliances, material and
labor; and the mode, manner, and terms of payment.'”
In the Shriro case, We held that the common law rule of determining the
existence of employer-employee relationship, principally the “control
test”, applies in this jurisdiction.
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, relationship of
employer and employee does not exist.
And supplementing the above jurisprudence is Our ruling in Social
Security System vs. The Hon. Court of Appeals, Manila Jockey Club, Inc., Phil.
Racing Club, 30 SCRA 210 wherein the Supreme Court,
speaking through then Associate Justice, now Chief Justice Fernando, held:
“The question of when there is employer-employee relationship
for purposes of the Social Security Act has been settled in this jurisdiction
in the case of Investment Planning Corp. vs. Social Security System, 21 SCRA 924 which applied 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. In other words, where the element of control
is absent; whether 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. This decision rejected the
economic facts of the relation test.”
The instant petition for certiorari seeks to reverse the
resolution of the Director of the Bureau of Labor Relations dated January 15,
1980 ordering that a certification election be conducted among the sales
personnel of La Suerte Cigar and Cigarette Factory,
as well as his resolution dated November 18, 1980 denying the motion for
reconsideration and directing that a certification election be conducted
immediately. The said resolutions
reversed and set aside the order of dismissal dated August 29, 1979 of the Med-Arbiter.
The antecedent facts show that on April 7, 1979, the La Suerte
Cigar and Cigarette Factory Provincial (Luzon) and Metro
Manila Sales Force Association (herein referred to as the local union) applied
for and was granted chapter status by the National
Association of Trade Unions (hereinafter referred to as NATU).
On April 16, 1979,
some thirty-one (31) local union members signed a joint letter withdrawing
their membership from NATU.
Nonetheless, on April 18, 1979, the local union and NATU filed a petition for direct certification or
certification election which alleged among others, that forty-eight of the
sixty sales personnel of the Company were members of the local union; that the
petition is supported by no less than 75% of the sales force; that there is no
existing recognized labor union in the Company representing the said sales
personnel; that there is likewise no existing collective bargaining agreement;
and that there had been no certification election in the last twelve months
preceding the filing of the petition.
The Company then filed a motion to dismiss the petition on June
13, 1979 on the ground that it is not supported by at least 30% of the members
of the proposed bargaining unit because (a) of the alleged forty-eight (48)
members of the local union, thirty-one (31) had withdrawn prior to the filing
of the petition; and (b) fourteen (14) of the alleged members of the union were
not employees of the Company but were independent contractors.
NATU and the local union opposed the
Company’s motion to dismiss alleging that the fourteen dealers are actually
employees of the Company because they are subject to its control and
supervision.
On August 29, 1979, the Med-Arbiter issued an order dismissing
the petition for lack of merit as the fourteen dealers who joined the union
should not be counted in determining the 30% consent requirement because they
are not employees but independent contractors and the withdrawal of the 31
salesmen from the union prior to the filing of the petition for certification
election was uncontroverted by the parties.
Thereafter, on September 24, 1979, the local union on its own
signed only by the local union President, filed a motion for reconsideration
and/or appeal from the order of dismissal on the following grounds: (a) the findings of facts of the med-arbiter
as it appears on the order are contrary to facts and (b) in finding that no
employer-employee relationship exists between the alleged dealers and
respondent firm, the med-arbiter decided in a manner not in accord with the
factual circumstances attendant to the relationship.
Acting on the motion for reconsideration/appeal, the Director of
the Bureau of Labor Relations, in the Resolution dated January 15, 1980,
reversed and set aside the order of dismissal, holding that the withdrawal of
the 31 signatories to the petition two days prior to the filing of the instant
petition did not establish the fact that the same was executed freely and
voluntarily and that the records are replete with company documents showing
that the alleged dealers are in fact employees of the company.
The Company then filed a motion to set aside the resolution dated
January 15, 1980 of the Director of the Bureau of Labor Relations, contending
that the appeal was never perfected or is jurisdictionally defective, copy of
the motion for reconsideration/appeal not having been served upon the Company,
and that the Resolution was based solely on the distorted and self-serving
allegations of the union.
The local union opposed the Company’s Motion for reconsideration
and submitted a memorandum on April
22, 1980 in amplification of its opposition.
At this juncture, the legal counsel of NATU
filed a manifestation on May 15, 1980 stating that the act of the local union
of engaging another lawyer to handle the case amounts to disaffiliation, for
which reason said legal counsel was withdrawing from the case. The local union counter-manifested that the
local union had not been officially notified of its expulsion from the NATU; that there was no valid ground for its expulsion;
that the National Executive Council of NATU had not
approved such expulsion; and that it had no objection to the withdrawal of
Atty. Marcelino Lontok, Jr.
as its counsel.
Then came a motion of NATU through its President and legal counsel withdrawing as
petitioner and contending that since the local union was no longer affiliated
with it, it was no longer interested in the case. Twelve members of the National Executive
Council then came in and manifested that they constitute a majority of the
Executive Board of NATU and affirmed that the local
union was still an affiliate of NATU.
There followed a counter-manifestation of Atty. Marcelino Lontok, Jr. on August
27, 1980 stating that six signatories to the aforesaid manifestation had no
authority to make the said foregoing statement as they had resigned from the
Executive Board en masse; that the acts of the President may not
be reversed by the
Executive Council; and that the twelve signatories did not
constitute a majority of the sixty (60) members of the Executive Council.
The local union made its reply to the counter-manifestation stating
that the power to expel an affiliate exclusively belonged to the National
Executive Council of NATU, under Section 2, Article V
of the NATU Constitution and By-Laws; that such power
could only be wielded after due investigation and hearing; that disaffiliation
is effected only by voluntary act of the local union, which is not the case
here, because it is the President and legal counsel who are trying to expel the
union.
Simultaneously with said reply, the local union filed an
opposition to Atty. Lontok’s motion to
dismiss/withdraw petition, stating that Atty. Lontok
had no more personality to file the same inasmuch as he had previously
withdrawn as counsel in his manifestation dated May 7, 1980, and the local
union has accepted the same in its counter-manifestation dated May 16, 1980;
that expulsion requires two-thirds vote of the members of the National
Executive Council, as well as investigation and hearing; that engaging another
lawyer is not a ground for expulsion of an affiliate; and that the local union
was compelled to hire another lawyer because up to the last day of the reglementary period, Atty. Lontok
still had not filed an appeal from the decision of the Med-Arbiter.
On November 18, 1980,
the Director of the Bureau of Labor Relations promulgated a resolution denying
the Company’s motion for reconsideration and directing that the certification
election be conducted immediately. Hence, this petition.
In the apparently simple task of determining whether the Director
of the Bureau of Labor Relations committed grave abuse of discretion amounting
to lack of jurisdiction in ordering the direct certification election, three
difficult issues must be resolved, namely:
I.
Whether or not the 14 dealers are employees or
independent contractors.
II.
Whether or not the withdrawal of 31 union
members from the NATU affected the petition for
certification election insofar as the thirty per cent requirement is concerned.
III.
Whether or not the withdrawal of the petition
for certification election by the NATU, through its
President and legal counsel, was valid and effective.
A basic factor underlying the exercise of rights under the Labor
Code is status of employment. The
question of whether employer-employee relationship exists is a primordial
consideration before extending labor benefits under the workmen’s compensation,
social security, medicare, termination
pay and labor relations law. It is
important in the determination of who shall be included in a proposed
bargaining unit because it is the sine qua non, the fundamental and
essential condition that a bargaining unit be composed of employees. Failure to establish this juridical
relationship between the union members and the employer affects the legality of
the union itself. It means the
ineligibility of the union members to present a petition for certification
election as well as to vote therein. Corollarily, when a petition for certification election is
supported by 48 signatories in a bargaining unit composed of 60 salesmen, but
14 of the 48 lacks employee status, the petition is vitiated thereby. Herein lies the
importance of resolving the status of the dealers in this case.
It is the contention of the company that the dealers in the sale
of its tobacco products are independent contractors. On the other hand, the Union
contends that such dealers are actually employees entitled to the coverage and
benefits of labor relations laws.
According to the petitioner, to effectively market its products,
the Company maintains a network of dealers all over the country. These arrangements are covered by a
dealership agreement signed between the Company and a dealer in a particular
area or territory. And attached to the
petition is a representative copy of the said dealership agreement which We quote below:
“DEALERSHIP
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This DEALERSHIP AGREEMENT, executed at Pasay
City, Philippines, this 8 day of March 1977, entered into by JOSE TAN SIU KEE, JR., of legal age
married and a resident of 178-E San Ramon Street, Iloilo City, hereinafter referred
to as DEALER, and TELENGTAN BROTHERS & SONS,
INC., doing business under the style of “LA SUERTE
CIGAR & CIGARETTE FACTORY”, hereinafter referred to as FACTORY, bears
witness that:
WHEREAS, JOSE TAN SIU KEE,
JR. of 178-E San Ramon Street, Iloilo City, had applied to be a DEALER of the
FACTORY for the territories of ILOILO and/or such other territories that the
FACTORY may designate from time to time; and
WHEREAS, the FACTORY had accepted the application of JOSE TAN SIU KEE, JR., and therefore,
appointed him as one of its dealers in ILOILO and/or such other territories
that the FACTORY may designated from time to time, who is willing and able to
do so as such for the main purpose of extensively selling the products of the
FACTORY in the said territories, under the following express terms and
conditions, to wit:
1.
That the DEALER shall handle for sale and
distribution of cigarette products of the factory covering the territories of
ILOILO and/or such other territories that the FACTORY may designate from time
to time, in accordance with existing laws and regulations of the government,
without however, incurring any expenses in doing so, without the previous
written consent of the FACTORY being first had and obtained;
2.
That for the purpose of selling the cigarettes
or products of the FACTORY, the DEALER shall send his orders to the FACTORY
plant in Parañaque, Metro Manila, either in cash or
in credit; Provided, however, that in cases of credit order the DEALER can only
get or order the supply of cigarettes up to the amount of not more than FIFTY
THOUSAND PESOS (P50,000.00) only at any given time during the existence of this
Contract, unless allowed by the FACTORY to get more;
3.
That the FACTORY shall supply the DEALER with a
truck or panel delivery and all expenses shall be borne by the FACTORY; driver
shall be borne by the DEALER;
4.
That the DEALER shall not receive any commission
from the FACTORY but the latter shall give the DEALER a discount for all sales
either on consignment or in cash, and said discount shall be decided by the
FACTORY from time to time;
5.
That the FACTORY shall not be liable for any
violation of any law, which the DEALER may commit, and that the DEALER alone
shall be responsible for any violation;
6.
The geographical area (hereinafter referred to
as “Territory”) covered by this Agreement in which the DEALER shall
undertake the responsibilities provided herein is ILOILO. It is, however, agreed and understood that
the FACTORY may from time to time, upon written notice thereof the DEALER,
change or subdivide the Territory as the business exigencies, and the policy of
the FACTORY with respect thereto will dictate.
7.
The DEALER agrees that during the term of this
Agreement:
(a)
He will diligently, loyally and faithfully serve
the FACTORY as its DEALER and diligently canvass for buyers of the FACTORY’s Products in the Territory;
(b)
He shall not sell or distribute goods of a
similar nature or such as would compete and interfere with the sale of the
Products of the FACTORY in the Territory, either on his account or on behalf of
any other person whatsoever;
(c)
Furnish to the FACTORY every three (3) months a
list of the buyers/customers in the Territory, specifying the names and address
of such customers as well as their individual daily supply/stock requirements;
(d)
He will faithfully and religiously abide by the
FACTORY policy, rules and regulations, particularly with respect to the pricing
of all Products to be sold and distributed by him;
(e)
He will keep account of all his dealings
hereunder and promptly liquidate his account with the FACTORY with respect to
the Products sold by him in the Territory;
(f)
He will not engage in any activity which will in
any manner prejudice either the business or name of the FACTORY, such as, but
not limited to, “black-marketing” operations;
(g)
He will not withdraw cigarettes if the maximum
volume allotted to him by the FACTORY has been exceeded;
8.
That the DEALER shall sell the Products of the
FACTORY at a price to be agreed upon between both parties;
9.
That the DEALER shall hereby bind and obligate
himself to furnish the FACTORY, within a week from the date of this Contract
with Surety or Cash Bond in the amount of not less than FIFTY THOUSAND PESOS
(P50,000.00). The surety bond should be
issued by one or several bonding companies acceptable to and approved by the
FACTORY to guarantee and secure complete and faithful performance of the DEALER
and his obligations herein enumerated, particularly the payment of his
financial obligations with the FACTORY.
The bond may be increased as required by the FACTORY;
10. In
the event that the DEALER should become incapacitated to discharge his undertakings
and responsibilities under this Agreement, for any reason whatsoever, the
FACTORY may designated, for the duration of such incapacity, a substitute to
handle the sale and distribution of the Products in the Territory;
11. The
FACTORY reserves its right to determine, from time to time, the amount of
credit granted or to be granted to the DEALER with respect to the Products to
be sold and distributed in the Territory;
12. This
Agreement may be cancelled and/or terminated by the FACTORY should the DEALER
violate its undertaking under this Agreement especially with respect to
Paragraph 7(f) hereof. It is understood,
however, that the failure of the FACTORY to enforce at any time or for any
period of time, any right, power or remedy accruing to the FACTORY upon default
by the DEALER of his undertakings under this Agreement shall not impair any
such right, power or remedy or to be construed to be a waiver or an
acquiescence in such default; nor shall the action of the FACTORY in respect of
any default, or any acquiescence by it in any default, affect or impair any
right, power or remedy of the FACTORY in respect of any other default.
13. That
either party may terminate this Contract without cause by giving to the other
party fifteen (15) days notice in writing but without prejudice to any right or
claim which as of that date may have accrued to either of the parties
hereunder, however, in the event of breach of this Contract, the FACTORY may
terminate this Contract without notice to the DEALER.
14. That
it is hereby finally stipulated and agreed that in case of litigation arising
out of or in connection with this Contract, the Municipal Court of Parañaque or the Court of First Instance of Rizal, as the case may be, shall be the competent court
wherein to file such action or actions.
15. That
this Contract shall supersede any Contract which the DEALER may have with the
FACTORY.
IN WITNESS WHEREOF, these presents are signed at Pasay City, Philippines
on this 8 day of March 1977.
TELENGTAN
BROTHERS & SONS, INC.
(La Suerte
Cigar & Cigarette Factory)
FACTORY
By:
(SGD.)
LIM HAN ENG (SGD.) JOSE TAN SIU KEE, JR.
Assistant
Manager Dealer
Sales Department TAN
5976-397-9
SIGNED IN THE
PRESENCE OF:
(SGD.)
ILLEGIBLE (SGD.) ILLEGIBLE”
(Acknowledgment omitted)
The records embody standard copies of the Dealership
Supplementary Agreement which We also quote hereunder:
“DEALERSHIP
SUPPLEMENTARY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Supplementary Agreement, made and entered into this 14th
day of February, 1975 in Pasay
City, Philippines,
by and between –
TELENGTAN BROTHERS & SONS, INC., a
corporation duly organized and existing under the laws of the Philippines and
doing business under the business name and style of “LA SUERTE CIGAR & CIGARETTE FACTORY”, with principal
place of business at Km. 14 South Super Highway, Parañaque,
Rizal, represented in this act by its duly authorized
Manager, Mr. ROBERT UY, hereinafter referred
to as COMPANY;
a n d
MR. PURISIMO EMBING,
of legal age, married, Filipino and with postal address at 3047 Lawaan, UP II, Parañaque, Rizal, hereinafter referred to as DEALER,
WITNESSETH:
That
For and in consideration of the mutual covenants and agreements
made herein, by one to the other, the COMPANY and the DEALER, by these
presents, enter into this Supplementary Agreement whereby the COMPANY will
avail of the services of the DEALER to handle the sale and distribution of its
cigarette products, consisting of MARLBORO REGULAR, MARLBORO KING SIZE,
MARLBORO 100’S; PHILIP MORRIS REGULAR, PHILIP MORRIS FILTER KING, PHILIP MORRIS
100’S MENTHOL, PHILIP MORRIS 100’S REGULAR; ALPINE 100’S; MR. SLIM 100’S
REGULAR, MR. SLIM 100’S MENTHOL, subject to the following terms and conditions:
1.
The COMPANY hereby constitutes and appoints the
DEALER as its authorized dealer for the sale and distribution of the COMPANY’s products as enumerated above, (hereinafter
referred to as “Products”) and the DEALER hereby accepts such
appointment, all upon the terms and conditions herein contained.
2.
The geographical area (hereinafter referred to
as “Territory”) covered by this Agreement in which the DEALER shall
undertake the responsibilities provided herein is GREATER MANILA AND SUBURBS. It is, however, agreed and understood that
the COMPANY may from time to time, upon written notice thereof to the DEALER,
change or subdivide the Territory as the business exigencies, and the policy of
the COMPANY with respect thereto will dictate.
3.
The DEALER agrees that during the term of this
Agreement:
(a)
He will diligently, loyally and faithfully serve
the COMPANY as its DEALER and diligently canvass for buyers of the COMPANY’s Products in the Territory;
(b)
He shall not sell or distribute goods of a
similar nature or such as would compete and interfere with the sale or the
Products of the COMPANY in the Territory, either on this account or on behalf
of any other person whatsoever;
(c)
Furnish to the COMPANY every three (3) months a
list of the buyers/customers in the Territory, specifying the names and address
of such customers as well as their individual daily supply/stock requirements;
(d)
He will faithfully and religiously abide by the
COMPANY policy, rules and regulations, particularly with respect to the pricing
of all Products to be sold and distributed by him;
(e)
He will keep account of all his dealings
hereunder and promptly liquidate his account with the COMPANY with respect to
the Products sold by him in the Territory;
(f)
He will not engage in any activity which will in
any manner prejudice either the business or name of the COMPANY, such as, but
not limited to, “Black marketing” operations;
(g) He
will not withdraw cigarettes if the maximum volume allotted to him by the
COMPANY has been exceeded;
5.
The DEALER shall put up a bond, or additional
bond, with the COMPANY in such amount or amounts, as in the judgment of the
COMPANY, will be satisfactory. It is
agreed that the COMPANY can apply against said bond or additional bond, such
damages as may be suffered by the COMPANY by reason of breach on the part of
the DEALER of any of the latter’s undertakings under this Agreement.
6.
In the event that the DEALER should become
incapacitated to discharge his undertakings and responsibilities under this Agreement,
for any reason whatsoever, the COMPANY may designate for the duration of such
incapacity, a substitute to handle the sale and distribution of the Products
in the Territory;
7.
The COMPANY reserves its right to determine,
from time to time, the amount of credit granted or to be granted to the DEALER
with respect to the Products to be sold and distributed in the Territory.
8.
This Agreement may be cancelled and/or
terminated by the COMPANY should the DEALER violate its undertaking under this
Agreement especially with respect to Paragraph 4(f) hereof. It is understood, however, that the failure
of the COMPANY to enforce at any time or for any period of time, any right,
power or remedy accruing to the COMPANY upon default by the DEALER of his undertakings
under this Agreement shall not impair any such right, power or remedy or be
construed to be a waiver or an acquiescence in such default; nor shall the
action of the COMPANY in respect of any default, or any acquiescence by it in
any default, affect or impair any right, power or remedy of the COMPANY in
respect of any other default.
9.
In the appropriate cases, this Agreement shall
constitute as a supplement, revision or modification of any agreement between
the company and the DEALER now existing.
However, should there be a conflict between the provisions of this
Agreement and any such existing agreement between the COMPANY and the DEALER,
this Agreement shall prevail.
IN WITNESS WHEREOF, the parties hereto have caused these presents
to be signed at the place and on the date hereinabove written.
TELENGTAN
BROTHERS & SONS, INC.
(La Suerte
Cigar & Cigarette Factory)
By:
(SGD.) ROBERT UY (SGD.) PURISIMO EMBING
Manager DEALER”
(Signature of Witnesses &
Acknowledgment Omitted)
Following the rule in the Mafinco
case that in a petition for certiorari, the issue of whether
respondents are employees or independent contractors should be resolved mainly
in the light of their peddling contracts, so must We likewise resolve the
status of the 14 members of the local union involved herein mainly on their
dealership agreements for verily, “a different approach would lead this
Court astray into the field of factual controversy where its legal
pronouncements would not rest on solid grounds.” We must stress the Supreme
Court is not a trier of facts.
Accordingly, after considering the terms and stipulations of the
Dealership Contracts which are clear and leave no doubt upon the intention of
the contracting parties in establishing the relationship between the dealers on
one hand and the company on the other as that of buyer and seller, We find that
the status thereby created is one of independent contractorship,
pursuant to the first rule in the interpretation of contracts that the literal
meaning of the stipulations shall control.
(Article 1370, New Civil Code)
From the plain language of the Dealership Agreement, We find that
the same is premised with the prefatory statement “the factory has
accepted the application of (name of applicant) and therefore has appointed him
as one of its dealers.” Its terms and conditions include the
following: that the dealer shall handle
the products in accordance with existing laws and regulations of the government
(par. 1); that the dealer shall send his orders to the factory plant in cash in
any amount or on credit up to the amount of not more than P10,000.00 only at
any given time (par. 2); that the factory shall supply the dealer with a truck
or a panel delivery and all expenses for repairs shall be borne by the factory
(par. 3); and that the dealer shall not receive any commission but shall be
given a discount for all sales and said discount shall be decided by the
factory from time to time (par. 4).
It also provides that the dealer alone shall be responsible for
any violation of any law (par. 5); that the dealer shall be assigned to a
particular territory which the factory may decide from time to time (par. 6);
that the dealer shall sell the products at the price to be agreed upon between
the parties (par. 7) and that the dealer shall post a surety bond of not less
than P10,000.00 to guarantee and secure complete and
faithful performance (par. 8).
Either party may terminate the contract without cause by giving
15 days notice in writing; however, in the event of breach or failure to comply
with any of the conditions, the factory may terminate or rescind the contract
immediately (par. 9 and 10).
The Dealership Supplementary Agreement reiterates that the
Company “hereby constitute and appoints the DEALER as its authorized
dealer for the sale and distribution of the COMPANY’s
products” and “the DEALER hereby accepts such appointment” (par.
1). It also provides that the
geographical area in which the dealer shall undertake his responsibilities is
Greater Manila and Suburbs. However, the
Company may change or subdivide the territory as the business exigencies and
the policy of the Company will dictate (par. 2).
Under said supplementary agreement, the dealer undertakes
to: (a) diligently canvass for buyers of
the Company’s products; (b) refrain from selling or distributing goods of
similar nature; (c) furnish the Company every 3 months a list of
buyers/customers, specifying their addresses and individual daily supply; (d)
abide by the Company policy, particularly with respect to pricing; (e) keep
account of all his dealings and promptly liquidate his accounts; (f) refrain
from engaging in any activity which will prejudice the Company from withdrawing
cigarettes beyond the maximum volume allotted to him (par. 3).
In case of incapacity of the dealer, the Company may designate a
substitute (par. 6). The Company also
reserves the right to determine, from time to time, the amount of credit
granted or to be granted to the dealer (par. 7).
It is likewise immediately noticeable that no such words as
“to hire and employ” are present.
The Dealership Agreement uses the words “the factory has accepted
the application of (name of applicant) and therefore has appointed him as one
of its dealers”; whereas the Dealership Supplementary Agreement is prefaced
with the statement: “For and in
consideration of the mutual covenants and agreements made herein, by one to the
other, the COMPANY and the DEALER by these presents, enter into this
Supplementary Agreement whereby the COMPANY will avail of the services of the
DEALER to handle the sale and distribution of the cigarette
products”. Nothing in the terms and
conditions likewise reveals that the dealers were engaged as employees.
Again, on the basis of the clear terms of the dealership
agreements, no mention is made of the wages of the dealers. In fact, it specifies that the dealer shall
not receive any commission from the factory but the latter shall give the
dealer a discount for all sales either on consignment or in cash (par. 4).
Considering the matter of wages, the term “wages” as
defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602) as amended, is
as follows:
“(g) ‘Wage’ paid to any employee shall mean the
remuneration or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, piece, commission
basis, or other method of calculating the same, which is payable by an employer
under a written or unwritten contract of employment for work done or to be done
or for services rendered or to be rendered, and includes the fair and
reasonable value, as determined by the Secretary of Labor, of board, lodging,
or other facilities customarily furnished by the employer to the employee x x x.”
Section 10(k) of the same law also provides:
“(k) Notification of wage conditions. – It
shall be the duty of every employer to notify his employees at the time of
hiring of the wage conditions under which they are employed, which shall
include the following:
(1)
The rate of wages payable;
(2)
The method of calculation of wages;
(3)
The periodicity of wage payment; the day, the
hour and place of payment; and
(4)
Any change with respect to any of the foregoing
items.”
then, par. (h) of Sec. 10 of said law provides that such “wages”
must be paid to them periodically at least once every two weeks or twice a
month. Considering the foregoing, the
dealer’s discount lacks the foregoing characteristics of the term
“wage”. Since it varies from
month to month depending on the volume of the sales, it lacks the
characteristic of periodicity in the manner and procedure contemplated in the
Minimum Wage Law.
Respondents, in effect, admit the clarity of the terms and
conditions of the agreements which covenant that the relationship between the dealers
and the Company is one of buyer and seller of La Suerte
products, and therefore, one of an independent contractorship
when they claimed that the dealership arrangement as established under the
Dealership Agreement and the Dealership Supplementary Agreement is essentially
a legal cover, cloak or disguise to hide the continuing Employer-Employee relationship
established prior to 1964. (Respondents’ Joint Memorandum, p. 34).
Precisely, there was need to change the contract of employment
because of the change of relationship, from an employee to that of an
independent dealer or contractor. The
employees were free to enter into the new status, to sign or not to sign the
new agreement. As in the Mafinco case, the respondents therein as in
the instant case, were free to reject the terms of the dealership but having
signed it, they were bound by its stipulations and the consequences thereof
under existing labor laws. The fact that
the 14 local union members voluntarily executed with La Suerte
formal dealership agreements which indicate the distribution and sale of La Suerte cigarettes signifies that they were acting as
independent businessmen.
We ruled earlier that the terms and stipulations of the
dealership agreement leave no room for doubt that the parties entered into a
transaction for the distribution and sale of La Suerte
products whereby the distributor/seller or dealer assumes the status of an
independent contractor. We note that
the applicant who is appointed dealer “is willing and able to do as such
for the main purpose of extensively selling the products of the FACTORY
in the said territories under certain expressed terms and conditions”
among them: “1. That the DEALER
shall handle for sale and distribution cigarette products of the factory
x x x“; “2. That for the purpose of selling
cigarettes or products of the factory, the dealer shall send his order to the
factory plant in Parañaque, Metro Manila either in
cash or on credit x x x“;
“4. That the dealer shall not
receive any commission from the factory but the latter shall give the dealer a
discount for all sales either on consignment or in cash x x x“; “7. (b) He shall
not sell or distribute goods of a similar nature or such as would
compete and interfere with the sale of the products of the factory in
the territory, either on his account or on behalf of any other person
whatsoever x x x“;
“8. That the
dealer shall sell the products of the factory at a price to be agreed
upon between both parties.”
It is not disputed that under the dealership agreement, the
dealer purchases and sells the cigarettes manufactured by the company under and
for his own account. The dealer places
his order for the purchase of cigarettes to be sold by him in a particular
territory by filling up an Issuance Slip.
The Issuance Slip is approved by the Sales Manager and after the sale is
approved, a Sales Invoice is then issued to the dealer. On the basis of the approved Issuance Slip
and the Sales Invoice, the dealer secures the delivery of his order from the
warehouse of the company and upon delivery of the cigarettes from the
warehouse, the dealer has the obligation to pay whether the cigarettes are
disposed or not. The dealer on his own
account sells the cigarettes in any manner he deems best without constraint as
to time. The dealers do not devote their
full time in selling company products.
They are likewise engaged in other livelihood and businesses while
selling cigarettes manufactured by the company.
The sales to the dealers are either on cash or credit basis. Where it is on cash basis, the amount is paid
immediately upon the delivery of the products from the company’s
warehouse. If it is on credit, the
dealer would usually settle his account within one week from the time the
credit is extended to him. Upon payment
of the purchase price, a company official receipt is issued to him.
Private respondents contend that there are essential differences
between the dealership agreement and that in actual practice and operation,
then proceeded to point them in the attempt to prove the control of La Suerte over the sales effort of the dealers. They also contend that the dealership
agreement, as stated earlier, is essentially a legal cover, a cloak or disguise
to hide the continuing employer-employee relationship established prior to
1964.
We reject both contentions as being without merit.
In the first place, We cannot accept nor consider evidence
varying the terms of the agreement other than the contents of the writing
itself, pursuant to Section 7, Rule 130 of the Revised Rules of Court, which
provides that:
“Section 7. Evidence of written agreements.
– When the terms of an agreement have been reduced to writing, it is to be
considered as containing all such terms, and, therefore, there can be, between
the parties and their successors in interest, no evidence of the terms of the
agreement other than the contents of the writing except in the following cases:
(a)
Where a mistake or imperfection of the writing,
or its failure to express the true intent and agreement of the parties, or the
validity of the agreement is put in issue by the pleadings,
(b)
When there is an intrinsic ambiguity in the
writing.
The term ‘agreement’ includes wills.”
If there are changes by reason of actual practice and operation, certiorari
is not the proper proceeding or remedy therefor.
In the second place, petitioner’s claim that respondent local
union relies heavily on evidence dehors the
record or extraneous evidence found in cases other than the one at bar, as the
testimony in the Limarez case, NCR Case
AB-3-4960-80 cited extensively (pp. 63, 64, 65-66, 66-67, 68-69, 70-72, 73-76,
77-83, 84-85, 86-87, 89, 90-94, 97-98, 107, Comment of Local Union) and that
practically all the appendages to the Comment of Local Union constituting the
main bulk thereof (Annexes 1 to 52) were evidence introduced in other cases and
not in the case at bar, is meritorious.
We reject said evidence dehors the
record and the appendages raised for the first time on appeal as extrinsic,
beyond the scope of this review.
Private respondents contend that under the dealership agreement,
the totality of the powers expressly reserved to the company, respecting
essential aspects or facets of the sales operation of the dealers, clearly
establish company control over the manner and details of performance. And they cite the following: “(1) The dealer shall be assigned to a
particular territory which the factory shall decide from time to time (par. 6);
(2) The dealer shall handle for sale and distribution cigarette products of the
company…without however incurring any expense in doing so, without previous
written consent of the factory being first had and obtained (par. 1); (3) In
cases of credit order, the dealer can only get or order the supply of
cigarettes up to the amount of not more than P10,000.00 only at any given time
during the existence of this contract, unless allowed by the factory to get
more (par. 2); (4) The company shall give the dealer a discount for all
sales…and said discount shall be decided by the factory from time to time
(par. 4); (5) It is however agreed and understood that the company may, from
time to time, upon written notice thereof to the dealer, change or divide the
territory as the business exigencies and policy of the factory with respect thereto
will dictate (par. 2, Annex 10); (6) Each dealer will faithfully and
religiously abide by the company policy, rules and regulations, particularly
with respect to pricing of all products to be sold and distributed by him (par.
3, sub-par. (d), Annex 10); (7) The dealer shall put up a bond or additional
bond with the company in such amounts as in the judgment of the company may be
satisfactory (par. 5, Annex 10); (8) In the event that the dealer should become
incapacitated for any reason whatsoever, the factory may designate for the
duration of said incapacity a substitute to handle the sale and distribution of
the products in the territory (par. 6, Annex 10); (9) The company reserves the
right to determine, from time to time, the amount of credit granted or to be
granted the dealer (par. 7, Annex 10); (10) This agreement may be cancelled
and/or terminated by the company should the dealer violate its undertaking
under this Agreement, especially par. 7(f) hereof (par. 8, Annex 10); (11)
That either party may terminate this contract without cause by giving to the
other party 15 days notice in writing (par. 9, Annex 9); and (12) In the event
of breach of this contract, the company may terminate this contract without
notice to the dealer (proviso in par. 9, Annex 9).”[1]
Disputing private respondents’ above contention that the company
exercises company control over the manner and details of the sales operation of
the dealers and not merely over the result of the work of each dealer,
petitioner maintains that:
1.
The allocation of a definite territory to be
assigned to a dealer or distributor is standard practice in dealership
agreements, whether international or domestic.
Allocation of area responsibility and territorial and customer
restrictions are common features of dealership agreements. Thus, a company may be appointed exclusive
distributor or dealer of a product in the Philippines,
the Asian region or in the Far East in the same way that
some Philippine manufacturers appoint exclusive dealers for the United
States or Canada;
2.
In the Shriro
case, the expenses for handling and delivery of the goods to the customers
are all for the account of the company (See Social Security System vs. Hon.
Court of Appeals & Shriro (Phil.) Inc., 37 SCRA 579) and there, the Supreme Court did not consider the
facts as indicia of an employment relation;
3.
In limiting a credit order for cigarettes up to
the amount of P10,000.00 only at any given time during the existence of the
contract, unless allowed by the factory to get more, the company merely
controls the result of the work of the dealer.
The credit order is limited because in a dealership contract, the
transaction is one of buy and sell and once an order is made, specially a
credit order, the risk of loss is passed on to the dealer;
4.
In the Mafinco
case, the peddlers are given also a discount and the Supreme Court held
that the peddling contract is not a contract of employment but signifies an
independent contractor relationship.
5.
The change or division of the territory to which
a dealer is assigned as the business exigencies and policy of the factory with
respect thereto will dictate from time to time is no indicia of company control
over the means and methods for in the Mafinco
case the peddlers are also assigned definite area routes or zones.
6.
That the dealers shall abide with the company
policies and rules, particularly in pricing of products is a standard practice
in dealership agreements and more so in franchising agreements. The fact that a person has to conform with standards of conduct set by the company does not
declassify such a person as an independent contractor so long as he can
determine his own day to day activities.
In independent contracts, there is always the element of control as to
what shall be done as distinguished from how it should be done.
7.
The posting of a surety bond under par. 8 of the
Dealers Agreement is similar to the giving of a cash bond under par. 7, Peddlers
Contract in the Mafinco case wherein it
is ruled that the Peddlers Contract involved therein is not an employment
agreement.
8.
The right to designate a substitute dealer in
the event of the incapacity of the regular dealer is no indication of an
employer-employee relationship. It is
just business prudence to provide for substitute dealers in case of the regular
dealer’s incapacity.
9.
That the company may determine from time to time
the amount of credit granted or to be granted the dealer is more a control over
the result rather than the means as in the Shriro
case where the company even reserves the right to approve or reject a sales
order, whether on cash or on credit basis.
10.
The power to cancel or terminate should the
dealer violate its undertaking under the agreement on the basis of the
company’s opinion that the dealer must engage in any activity which will in any
manner prejudice either the business or name of the factory is a standard
practice in dealership agreements.
We agree with the petitioner.
We hold further that the terms and conditions for the termination of the
contract are the usual and common stipulations in independent contractorship agreements.
In any event, the contention that the totality of the
powers expressly reserved to the company establish company control over
the manner and details of performance is merely speculative and conjectural.
There are indeed striking similarities between the Peddler’s
Contract in the Mafinco case and the
Dealer’s Agreement and Supplementary Dealer’s Agreement in the case at
bar. Thus:
1.
Use of company facilities – La Suerte provides dealers with truck or panel delivery (par.
3, Dealer’s Agreement) whereas in Mafinco, the
company also provides peddler with delivery truck (par. 1, Peddling Contract);
2.
Salary of drivers – Dealer in this La Suerte case pays salary of driver (par. 3, Dealer’s
Agreement). In Mafinco,
the salary of drivers is for peddler’s account (par. 2, Peddling Contract);
3.
Expenses of operation and
maintenance – La Suerte pays for expenses and
repair pertaining to the truck or panel delivery (par. 3, Dealership
Agreement). In Mafinco,
the company furnishes gasoline and oil to run trucks and bear costs of
maintenance and repair (par. 4, Peddling Contract);
4.
Profit Margin – In instant La Suerte case, no commission given. Company gives a sales discount (par. 4,
Dealership Agreement). In Mafinco, no commission is also given. Peddler given a sales discount (par. 6,
Peddler’s Contract);
5.
Collateral – Dealer in La Suerte
gives a surety bond (par. 8, Dealer’s Agreement). In Mafinco, peddler
gives a cash bond (par. 7, Peddler’s Contract);
6.
Payment – Dealer required to promptly liquidate
account (par. 3, (e), Supplementary Dealer’s Contract). In Mafinco, peddler
liquidates everyday at the end of each day, otherwise his cash bond shall
answer for unliquidated account (par. 8, Peddler’s
Contract);
7.
Termination – In La Suerte
case, no fixed period but either party may terminate after 15 days written
notice (par. 9, Dealer’s Contract). In Mafinco, the contract is for one year but either party may
terminate earlier upon 5-day written notice (par. 9, Peddler’s Contract);
8.
Government licenses – Dealers secure own
municipal license and Mayor’s permit (Annexes 23 to 24, Comment of Local
Union). In Mafinco,
peddler secure own licenses to peddle (Committee Report, 70 SCRA
157);
9.
Working hours – Dealers have to get quotas daily
but no fixed time. In Mafinco, peddlers get their trucks in the morning
and have to report daily (Report of Committee, 70 SCRA
154-156). No fixed time;
10.
Territory – Dealer assigned a particular territory
(par. 6, Dealer’s Agreement). In Mafinco, peddlers have a fixed territory in Manila,
see whereas clause of Peddler’s Contract, subject to pre-arranged routes, areas
and zones agreed upon by Peddler’s Association (Committee Report, 70 SCRA 156);
11.
Supervision – Supervisors also for market
analysis in La Suerte case. In Mafinco,
Liaison Officer or Supervisors for market analysis (Committee Report, 70 SCRA 156);
12.
Basic Agreement – In the instant La Suerte case, the dealer is “appointed” (not hired
as in employment contract) “to handle” products without commission
but with sales discount through sales invoices which state “sold to”
dealer (Annex B, Petition; Annex D, Petition).
Payments duly receipted (Annex E, Petition). In Mafinco,
the peddler is “desirous of buying and selling” (70 SCRA 143).
On the second issue – whether or not the withdrawal of 31 union
members from NATU affected the petition for
certification election insofar as the 30% requirement is concerned, We reverse
the Order of the respondent Director of the Bureau of Labor Relations, it
appearing undisputably that the 31 union members had
withdrawn their support to the petition before the filing of said
petition. It would be otherwise if the
withdrawal was made after the filing of the petition for it would then be
presumed that the withdrawal was not free and voluntary. The presumption would arise that the
withdrawal was procured through duress, coercion or for valuable consideration. In other words, the distinction must be that
withdrawals made before the filing of the petition are presumed voluntary
unless there is convincing proof to the contrary, whereas withdrawals made
after the filing of the petition are deemed involuntary.
The reason for such distinction is that if the withdrawal or
retraction is made before the filing of the petition, the names of employees
supporting the petition are supposed to be held secret to the opposite
party. Logically, any such withdrawal or
retraction shows voluntariness in the absence of
proof to the contrary. Moreover, it
becomes apparent that such employees had not given consent to the filing of the
petition, hence the subscription requirement has not
been met.
When the withdrawal or retraction is made after the petition is
filed, the employees who are supporting the petition become known to the
opposite party since their names are attached to the petition at the time of
filing. Therefore, it would not be
unexpected that the opposite party would use foul means for the subject
employees to withdraw their support.
In recapitulation, We hold and rule that
the 14 members of respondent local union are dealers or independent
contractors. They are not employees of petitioner company.
With the withdrawal by 31 members of their support to the petition prior
to or before the filing thereof, making a total of 45, the remainder of 3 out
of the 48 alleged to have supported the petition can hardly be said to
represent the union. Hence, the
dismissal of the petition by the Med-Arbiter was correct and justified. Respondent Director committed grave abuse of
discretion in reversing the order of the Med-Arbiter.
With the above pronouncements, the resolution of the third issue
raised herein is unnecessary.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the Resolution
dated January 15, 1980 of respondent Director of the Bureau of Labor Relations
and the Resolution dated November 18, 1980 are hereby REVERSED and SET ASIDE,
and the petition for certification election is ordered dismissed.
No costs.
SO ORDERED.
Makasiar, (Chairman), Concepcion, Jr., Abad Santos, and Escolin, JJ., concur.
Aquino, J., in the result.
De Castro, J., on leave.
[1]
Annex 9 refers to the Dealership Supplementary Agreement; Annex 10, to the
Dealership Agreement.