G.R. No.

152459

June 15, 2006

EMELITA LEONARDO, CONRADO

BARGAMENTO, EMELITA NUEZ, RODOLFO
GRABAN, and ROBERTO GRABAN, Petitioners,
vs.
COURT OF APPEALS and DIGITAL
TELECOMMUNICATIONS PHILIPPINES,
INC., Respondents.
DECISION

contract, DIGITEL was to provide personnel,

consultancy and technical expertise in the
management, administration, and operation of
BALTELs telephone service in Balagtas, Bulacan.
DIGITEL also undertook to improve the internal and
external plants of BALTELs telephone system and
to handle customer relations and such other matters
necessary for the efficient management and
operation of the telephone system.

CARPIO, J.:
The Case

In a letter8 dated 27 January 1994, BALTEL

informed the NTC that it would cease to operate

Before the Court is a petition for review assailing the

effective 28 February 1994 because it was no

29 June 2001 Decision1 and 20 February 2002

longer in a financial position to continue its

Resolution of the Court of Appeals in CA-G.R. SP

operations. On 17 February 1994, BALTEL

No. 51160. The Court of Appeals set aside the

assigned to DIGITEL its buildings and other

Decision of the National Labor Relations

improvements on a parcel of land in Balagtas,

Commission (NLRC) which sustained the Labor

Bulacan covered by OCT No. O-7280 where

Arbiters Decision holding Digital

BALTEL conducted its business operations. The

Telecommunications Philippines, Inc. (DIGITEL)

assignment was in partial payment of BALTELs

jointly and severally liable with Balagtas Telephone

obligation to DIGITEL which as of 31 December

Company (BALTEL) and its proprietor Domingo de

1993 amounted to P712,471.74.

Asis.

On 28 February 1994, petitioners employment

The Antecedent Facts
BALTEL holds the franchise from the Municipality of
Balagtas, Bulacan to operate a telephone service in
the municipality. BALTEL also has authority from the
National Telecommunications Commission (NTC) to
operate in the municipality.
BALTEL hired Emelita Leonardo, Conrado
Bargamento, Emelita Nuez, Rodolfo Graban, and
Roberto Graban ("petitioners") for various
positions4 in the company. On 22 April
1991,5 BALTEL6 and DIGITEL entered into a
management contract.7 Under the terms of the

ceased. They executed separate, undated and

similarly worded quitclaims acknowledging receipt
of various amounts representing their claims from
BALTEL. In their quitclaims, petitioners absolved
and released BALTEL from all monetary claims that
arose out of their employer-employee relationship
with the company. Petitioners also acknowledged
that BALTEL closed its operations due to serious
business losses.
On 1 March 1994, petitioners filed a complaint
against BALTEL and Domingo De Asis for recovery
of salary differential and attorneys fees. Petitioners
later filed a supplemental complaint to include illegal

dismissal as additional cause of action and to

dismissal or separation including payment of their

implead DIGITEL as additional respondent.

prevailing basic salaries and all other benefits or at

DIGITEL denied having any liability on the ground

the option of the employer merely reinstate in the

that it was not petitioners employer. In its 29 May

payroll also with the payment of their salaries and

1995 Decision, Labor Arbiter Dominador B.

all other benefits in accordance with Article 223 of

Saludares ruled as follows:

the Labor Code, as amended by R.A. No. 6715.

Respondents are further ordered to submit upon

WHEREFORE, premises considered, judgment is

receipt hereof their compliance with the

hereby entered in favor of the complainants and

reinstatement aspect.

against respondents Balagtas Telephone System

and/or Domingo de Asis and Digital

SO DECIDED.10

Telecommunications Phils., Inc. ordering the latter,

jointly and severally as follows:

DIGITEL appealed the Labor Arbiters Decision

before the NLRC. In its 29 December 1997

1. To pay the sum of P14,950.00 representing the

Decision,11 the NLRC dismissed the appeal.

unpaid salaries of all the five (5) complainants for

DIGITEL moved for the reconsideration of the

the month of February 1994;

NLRC Decision. In its 29 July 1998 Decision,12 the

NLRC denied DIGITELs motion for reconsideration.

2. To pay another sum of P4,486.44 representing

the unpaid overtime pay of complainants Emelita

DIGITEL filed a petition for review before this Court.

Leonardo, Conrado Bargamento and Emelita Nuez

In its 2 December 1998 Resolution, this Court

for February 1994;

referred the case to the Court of Appeals pursuant

to St. Martin Funeral Homes v. NLRC.13

3. To pay the sum of P71,400.00 as salary

differential of the complainants;

The Ruling of the Court of Appeals

4. To pay the backwages of all complainants from

In its 29 June 2001 Decision, the Court of Appeals

the date they were dismissed on February 28, 1994

reversed and set aside the NLRC Decision insofar

up to this writing computed in the sum total

as it held DIGITEL severally liable with BALTEL and

of P224,250.00, less their separation pay which

Domingo de Asis. The Court of Appeals ruled that

they have received;

DIGITEL is not the successor-in-interest of BALTEL.

The Court of Appeals held that the records do not

5. To pay the sum of P31,508.64 as attorneys fees

show that DIGITEL became the absolute owner of

which is equivalent to ten (10%) percent of the

BALTEL, or that DIGITEL absorbed BALTELs

amount of the award; and

employees. The Court of Appeals further ruled that

6. To immediately reinstate all the complainants to

their former or equivalent positions under the same
terms and conditions prevailing prior to their

there was no showing that DIGITEL acquired

BALTELs franchise. The Court of Appeals ruled:

WHEREFORE, the petition is GRANTED. The

issues raised by the parties. In R & E Transport,

assailed decision of the National Labor Relations

Inc. v. Latag,15 this Court held:

Commission is ANNULLED and SET ASIDE insofar

as it held petitioner jointly and severally liable with

The power of the CA to review NLRC decisions via

Balagtas Telephone Company and Domingo de Asis

a Rule 65 petition is now a settled issue. As early as

for the obligations of the two to private respondents,

St. Martin Funeral Homes v. NLRC, we have

with the result that private respondents complaint

definitively ruled that the proper remedy to ask for

against petitioner before the labor arbiter is

the review of a decision of the NLRC is a special

DISMISSED.

civil action for certiorari under Rule 65 of the Rules

of Court, and that such petition should be filed with

SO ORDERED.14

the CA in strict observance of the doctrine on the

hierarchy of courts. Moreover, it has already been

Petitioners moved for the reconsideration of the

explained that under Section 9 of Batas Pambansa

Court of Appeals Decision. In its 20 February 2002

(BP) 129, as amended by Republic Act 7902, the

Resolution, the Court of Appeals denied petitioners

CA pursuant to the exercise of its original

motion for reconsideration for lack of merit.

jurisdiction over petitions for certiorari was

Hence, the petition before this Court.

Petitioners allege that the Court of Appeals erred in
disregarding the factual findings of both the Labor
Arbiter and the NLRC which should have been
given more weight by appellate tribunals.
The Issues

specifically given the power to pass upon the

evidence, if and when necessary, to resolve factual
issues.
We agree with petitioners that factual findings of
quasi-judicial and administrative bodies are
accorded great respect and even finality by the
courts. However, this rule is not absolute. When
there is a showing that the factual findings of

The petition raises the following issues:

administrative bodies were arrived at arbitrarily or in

disregard of the evidence on record, they may be

1. Whether DIGITEL is the successor-in-interest of

examined by the courts.16 In this case, the Court of

BALTEL; and

Appeals found "nothing in the records [to support]

2. Whether an employer-employee relationship

exists between petitioners and DIGITEL.
The Ruling of This Court
The petition has no merit.
The Court of Appeals has the power to review the
decisions of the NLRC and to pass upon factual

the conclusion that DIGITEL became the absolute

owner of BALTEL or that the former absorbed the
latters employees." Hence, the Court of Appeals is
justified in reviewing the factual findings of both the
Labor Arbiter and the NLRC.
DIGITEL is not BALTELs Successor-in-Interest

Petitioners allege that DIGITEL took over the

service/system unless otherwise mutually agreed

ownership of BALTEL, and as the new owner,

upon by the herein parties in writing.

DIGITEL then absorbed petitioners as employees.

5. Grants Digitel the right of first option to buy the
The Court of Appeals correctly held that DIGITEL is

franchise and the telephone system, provided that

not BALTELs successor-in-interest.

the purchase shall be subject to the prior approval

of the Municipal Council of Balagtas, Bulacan, the

It is not disputed that BALTEL has the franchise to

NTC and the DOTC. For this purpose, Digitel shall

operate a telephone system in Balagtas, Bulacan. It

remit to Estela de Asis as attorney-in-fact of

is also not disputed that on 21 April 1991, BALTEL

Domingo de Asis the amount of P415,000.00, as

and DIGITEL entered into a management contract

option money, which shall be deducted from a

which:

mutually agreed purchase price in the event Digitel

2. Appoints and contracts Digital

Telecommunications Philippines, Inc. (Digitel for
short), a corporation organized and existing under
the laws of the Philippines, to provide personnel,
consultancy and technical expertise in the
management, administration and operation of the

exercises the option by written notice to Estela or

Domingo de Asis within 180 days from date hereof.
In the event there is no agreement on the purchase
price, then such price shall be the net asset value
(original cost less depreciation) of all the
serviceable equipment as of the date hereof.17

telephone service/system in Balagtas, Bulacan; to

The contract gives DIGITEL the option to buy

improve the internal and external plants of such

BALTELs franchise. However, the records do not

system, provided that any improvement, whether by

show that DIGITEL exercised the option. Petitioners

addition or replacement, shall belong to Digitel

failed to show that DIGITEL eventually purchased

unless such improvement(s) is fully reimbursed; to

BALTELs franchise and telephone system. The

handle customer relations and such other matters

Court also notes that the purchase shall be subject

necessary for the efficient management and

to the prior approval of the Municipal Council of

operation of said telephone service/system.

Balagtas, Bulacan, the NTC and the Department of

3. Subject to paragraph B, defines the terms of this

Appointment and Agreement to one (1) year from
date hereof unless renewed for another term at the
option of Digitel.
4. Agrees to reimburse Digitel for all expenses
incurred in the performance of its aforesaid services
provided that such expenses do not exceed the net
operating cash revenues of said telephone

Transportation and Communications (DOTC). The

records do not show that DIGITEL sought the
approval of the Municipal Council of Balagtas,
Bulacan, the NTC or the DOTC to purchase
BALTELs franchise. When BALTEL eventually
discontinued its operations, Estela de Asis informed
the NTC of the cessation of its operations.
On DIGITELs continued operations in Balagtas,
Bulacan, we adopt the findings of the Court of
Appeals that it is pursuant to a Financial Lease

Agreement18 entered into by DOTC and DIGITEL.

The Court notes that DIGITEL did not hire

Under the Financial Lease Agreement, the DOTC

petitioners. BALTEL had already employed

grants DIGITEL the exclusive right to lease,

petitioners when BALTEL entered into the

operate, and develop DOTCs local exchange

management contract with DIGITEL. We also agree

facilities and to perform the telecommunications

with the Court of Appeals that the fact that DIGITEL

services in the cities or municipalities covered by

uses its payslips does not necessarily imply that

the Financial Lease Agreement. Under Project NTP

DIGITEL pays petitioners salaries. As pointed out

I-1,19 Balagtas, Bulacan is among the municipalities

by the Court of Appeals, DIGITEL introduced its

covered by the Financial Lease Agreement.

own financial and accounting systems to BALTEL

and it included the use of DIGITELs payslips for

There is No Employer-Employee Relationship

Between DIGITEL and Petitioners
To determine the existence of an employeremployee relationship, the Court has to resolve who
has the power to select the employees, who pays
for their wages, who has the power to dismiss them,

accounting purposes. The management contract

provides that BALTEL shall reimburse DIGITEL for
all expenses incurred in the performance of its
services and this includes reimbursement of
whatever amount DIGITEL paid or advanced to
BALTELs employees.

and who exercises control in the methods and the

Finally, DIGITEL has no power to dismiss BALTELs

results by which the work is accomplished. The

employees. When DIGITEL wanted to dismiss

most important element of an employer-employee

Roberto Graban for habitual tardiness, BALTEL did

relationship is the control test. Under the control

not approve DIGITELs recommendation. In the end,

test, there is an employer-employee relationship

Roberto Graban was just suspended from work.

20

when the person for whom the services are

performed reserves the right to control not only the

In sum, no employer-employee relationship exists

end achieved but also the manner and means used

between petitioners and DIGITEL. Hence, DIGITEL

to achieve that end.21

is not solidarily liable with BALTEL and Domingo de

Asis to petitioners.

In this case, DIGITEL undoubtedly has the power of

control. However, DIGITELs exercise of the power

WHEREFORE, we DENY the petition.

of control necessarily flows from the exercise of its

We AFFIRM the 29 June 2001 Decision and 20

responsibilities under the management contract

February 2002 Resolution of the Court of Appeals in

which includes providing for personnel, consultancy

CA-G.R. SP No. 51160.

and technical expertise in the management,

administration, and operation of the telephone
system. Thus, the control test has no application in
this case.

SO ORDERED.