EN BANC

[ G.R. No. 167622, June 29, 2010 ]

GREGORIO V. TONGKO, PETITIONER, VS. THE MANUFACTURERS LIFE

INSURANCE CO. (PHILS.), INC. AND RENATO A. VERGEL DE DIOS,
RESPONDENTS.

RESOLUTION

BRION, J.:

This resolves the Motion for Reconsideration[1] dated December 3, 2008 filed by
respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set
aside our Decision of November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife and petitioner Gregorio
Tongko and ordered Manulife to pay Tongko backwages and separation pay for
illegal dismissal.

The following facts have been stated in our Decision of November 7, 2008, now
under reconsideration, but are repeated, simply for purposes of clarity.

The contractual relationship between Tongko and Manulife had two basic
phases. The first or initial phase began on July 1, 1977, under a Career
Agent's Agreement (Agreement) that provided:

It is understood and agreed that the Agent is an independent contractor and

nothing contained herein shall be construed or interpreted as creating an employer-
employee relationship between the Company and the Agent.

x x x x

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange for
provisional receipts issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or through the Agent or
from policyholders allotted by the Company to the Agent for servicing, subject to
subsequent confirmation of receipt of payment by the Company as evidenced by an
Official Receipt issued by the Company directly to the policyholder.

x x x x

The Company may terminate this Agreement for any breach or violation of any of
the provisions hereof by the Agent by giving written notice to the Agent within
fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate
this Agreement by the Company shall be construed for any previous failure to
exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time
without cause, by giving to the other party fifteen (15) days notice in writing.[2]

Tongko additionally agreed (1) to comply with all regulations and requirements of
Manulife, and (2) to maintain a standard of knowledge and competency in the sale
of Manulife's products, satisfactory to Manulife and sufficient to meet the volume of
the new business, required by his Production Club membership.[3]

The second phase started in 1983 when Tongko was named Unit Manager in
Manulife's Sales Agency Organization. In 1990, he became a Branch Manager. Six
years later (or in 1996), Tongko became a Regional Sales Manager.[4]

Tongko's gross earnings consisted of commissions, persistency income, and

management overrides. Since the beginning, Tongko consistently declared
himself self-employed in his income tax returns. Thus, under oath, he
declared his gross business income and deducted his business expenses to
arrive at his taxable business income. Manulife withheld the corresponding
10% tax on Tongko's earnings.[5]

In 2001, Manulife instituted manpower development programs at the regional sales

management level. Respondent Renato Vergel de Dios wrote Tongko a letter dated
November 6, 2001 on concerns that were brought up during the October 18, 2001
Metro North Sales Managers Meeting. De Dios wrote:

The first step to transforming Manulife into a big league player has been very clear
- to increase the number of agents to at least 1,000 strong for a start. This may
seem diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the
organization, as these have been influenced by developments both from within and
without the company.

x x x x

The issues around agent recruiting are central to the intended objectives hence the
need for a Senior Managers' meeting earlier last month when Kevin O'Connor, SVP-
Agency, took to the floor to determine from our senior agency leaders what more
could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a
per Manager basis) in terms of recruiting in 2000 and, as of today, continues to
remain one of the laggards in this area.

While discussions, in general, were positive other than for certain comments from
your end which were perceived to be uncalled for, it became clear that a one-on-
one meeting with you was necessary to ensure that you and management, were on
the same plane. As gleaned from some of your previous comments in prior
meetings (both in group and one-on-one), it was not clear that we were proceeding
in the same direction.

Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of
which we challenged and subsequently found as having no basis.

With such views coming from you, I was a bit concerned that the rest of the Metro
North Managers may be a bit confused as to the directions the company was taking.
For this reason, I sought a meeting with everyone in your management team,
including you, to clear the air, so to speak.

This note is intended to confirm the items that were discussed at the said Metro
North Region's Sales Managers meeting held at the 7/F Conference room last 18
October.

x x x x

Issue # 2: "Some Managers are unhappy with their earnings and would want to
revert to the position of agents."

This is an often repeated issue you have raised with me and with Kevin. For this
reason, I placed the issue on the table before the rest of your Region's Sales
Managers to verify its validity. As you must have noted, no Sales Manager came
forward on their own to confirm your statement and it took you to name Malou
Samson as a source of the same, an allegation that Malou herself denied at our
meeting and in your very presence.

This only confirms, Greg, that those prior comments have no solid basis at all. I
now believe what I had thought all along, that these allegations were simply meant
to muddle the issues surrounding the inability of your Region to meet its agency
development objectives!

Issue # 3: "Sales Managers are doing what the company asks them to do but, in
the process, they earn less."

x x x x

All the above notwithstanding, we had your own records checked and we found that
you made a lot more money in the Year 2000 versus 1999. In addition, you also
volunteered the information to Kevin when you said that you probably will make
more money in the Year 2001 compared to Year 2000. Obviously, your above
statement about making "less money" did not refer to you but the way you argued
this point had us almost believing that you were spouting the gospel of truth when
you were not. x x x

x x x x

All of a sudden, Greg, I have become much more worried about your ability to lead
this group towards the new direction that we have been discussing these past few
weeks, i.e., Manulife's goal to become a major agency-led distribution company in
the Philippines. While as you claim, you have not stopped anyone from recruiting, I
have never heard you proactively push for greater agency recruiting. You have not
been proactive all these years when it comes to agency growth.

x x x x

I cannot afford to see a major region fail to deliver on its developmental goals next
year and so, we are making the following changes in the interim:

1. You will hire at your expense a competent assistant who can unload you of much
of the routine tasks which can be easily delegated. This assistant should be so
chosen as to complement your skills and help you in the areas where you feel "may
not be your cup of tea."

You have stated, if not implied, that your work as Regional Manager may be too
taxing for you and for your health. The above could solve this problem.

x x x x

2. Effective immediately, Kevin and the rest of the Agency Operations will deal with
the North Star Branch (NSB) in autonomous fashion. x x x

I have decided to make this change so as to reduce your span of control and allow
you to concentrate more fully on overseeing the remaining groups under Metro
North, your Central Unit and the rest of the Sales Managers in Metro North. I will
hold you solely responsible for meeting the objectives of these remaining groups.

x x x x
The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that meeting
corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.[6]

Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001,
terminating Tongko's services:

It would appear, however, that despite the series of meetings and communications,
both one-on-one meetings between yourself and SVP Kevin O'Connor, some of
them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Management's avowed
agency growth policy.

x x x x

On account thereof, Management is exercising its prerogative under Section 14 of

your Agents Contract as we are now issuing this notice of termination of your
Agency Agreement with us effective fifteen days from the date of this letter.[7]

Tongko responded by filing an illegal dismissal complaint with the National Labor
Relations Commission (NLRC) Arbitration Branch. He essentially alleged - despite
the clear terms of the letter terminating his Agency Agreement - that he was
Manulife's employee before he was illegally dismissed.[8]

Thus, the threshold issue is the existence of an employment relationship. A

finding that none exists renders the question of illegal dismissal moot; a finding
that an employment relationship exists, on the other hand, necessarily leads to the
need to determine the validity of the termination of the relationship.

A. Tongko's Case for Employment Relationship

Tongko asserted that as Unit Manager, he was paid an annual over-rider not
exceeding P50,000.00, regardless of production levels attained and exclusive of
commissions and bonuses. He also claimed that as Regional Sales Manager, he was
given a travel and entertainment allowance of P36,000.00 per year in addition to
his overriding commissions; he was tasked with numerous administrative functions
and supervisory authority over Manulife's employees, aside from merely selling
policies and recruiting agents for Manulife; and he recommended and recruited
insurance agents subject to vetting and approval by Manulife. He further alleges
that he was assigned a definite place in the Manulife offices when he was not in the
field - at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts.,
Salcedo Village, Makati City - for which he never paid any rental. Manulife provided
the office equipment he used, including tables, chairs, computers and printers (and
even office stationery), and paid for the electricity, water and telephone bills. As
Regional Sales Manager, Tongko additionally asserts that he was required to follow
at least three codes of conduct.[9]

B. Manulife's Case - Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the Agreement,
Tongko was paid commissions of varying amounts, computed based on the
premium paid in full and actually received by Manulife on policies obtained through
an agent. As sales manager, Tongko was paid overriding sales commission derived
from sales made by agents under his unit/structure/branch/region. Manulife also
points out that it deducted and withheld a 10% tax from all commissions Tongko
received; Tongko even declared himself to be self-employed and consistently paid
taxes as such--i.e., he availed of tax deductions such as ordinary and necessary
trade, business and professional expenses to which a business is entitled.

Manulife asserts that the labor tribunals have no jurisdiction over Tongko's claim as
he was not its employee as characterized in the four-fold test and our ruling
in Carungcong v. National Labor Relations Commission.[10]

The Conflicting Rulings of the Lower Tribunals

The labor arbiter decreed that no employer-employee relationship existed between
the parties. However, the NLRC reversed the labor arbiter's decision on appeal; it
found the existence of an employer-employee relationship and concluded that
Tongko had been illegally dismissed. In the petition for certiorari with the Court of
Appeals (CA), the appellate court found that the NLRC gravely abused its discretion
in its ruling and reverted to the labor arbiter's decision that no employer-employee
relationship existed between Tongko and Manulife.

Our Decision of November 7, 2008

In our Decision of November 7, 2008, we reversed the CA ruling and found that an
employment relationship existed between Tongko and Manulife. We concluded that
Tongko is Manulife's employee for the following reasons:

1. Our ruling in the first Insular[11] case did not foreclose the possibility of an
insurance agent becoming an employee of an insurance company; if evidence
exists showing that the company promulgated rules or regulations that
effectively controlled or restricted an insurance agent's choice of methods or
the methods themselves in selling insurance, an employer-employee
relationship would be present. The determination of the existence of an
employer-employee relationship is thus on a case-to-case basis depending on
the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to characterize him
as an employee, as shown by the following indicators:

2.1 Tongko undertook to comply with Manulife's rules, regulations and other
requirements, i.e., the different codes of conduct such as the Agent Code of
Conduct, the Manulife Financial Code of Conduct, and the Financial Code of
Conduct Agreement;

2.2 The various affidavits of Manulife's insurance agents and managers, who
occupied similar positions as Tongko, showed that they performed
administrative duties that established employment with Manulife;[12] and

2.3 Tongko was tasked to recruit some agents in addition to his other
administrative functions. De Dios' letter harped on the direction Manulife
intended to take, viz., greater agency recruitment as the primary means to
sell more policies; Tongko's alleged failure to follow this directive led to the
termination of his employment with Manulife.

The Motion for Reconsideration

Manulife disagreed with our Decision and filed the present motion for
reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife's right to due process by: (a)
confining the review only to the issue of "control" and utterly disregarding all the
other issues that had been joined in this case; (b) mischaracterizing the divergence
of conclusions between the CA and the NLRC decisions as confined only to that on
"control"; (c) grossly failing to consider the findings and conclusions of the CA on
the majority of the material evidence, especially [Tongko's] declaration in his
income tax returns that he was a "business person" or "self-employed"; and (d)
allowing [Tongko] to repudiate his sworn statement in a public document.

2. The November 7[, 2008] Decision contravenes settled rules in contract law and
agency, distorts not only the legal relationships of agencies to sell but also
distributorship and franchising, and ignores the constitutional and policy context of
contract law vis-ו-vis labor law.

3. The November 7[, 2008] Decision ignores the findings of the CA on the three
elements of the four-fold test other than the "control" test, reverses well-settled
doctrines of law on employer-employee relationships, and grossly misapplies the
"control test," by selecting, without basis, a few items of evidence to the exclusion
of more material evidence to support its conclusion that there is "control."

4. The November 7[, 2008] Decision is judicial legislation, beyond the scope
authorized by Articles 8 and 9 of the Civil Code, beyond the powers granted to this
Court under Article VIII, Section 1 of the Constitution and contravenes through
judicial legislation, the constitutional prohibition against impairment of contracts
under Article III, Section 10 of the Constitution.

5. For all the above reasons, the November 7[, 2008] Decision made unsustainable
and reversible errors, which should be corrected, in concluding that Respondent
Manulife and Petitioner had an employer-employee relationship, that Respondent
Manulife illegally dismissed Petitioner, and for consequently ordering Respondent
Manulife to pay Petitioner backwages, separation pay, nominal damages and
attorney's fees.[13]

THE COURT'S RULING

A. The Insurance and the Civil Codes;

the Parties' Intent and Established
Industry Practices

We cannot consider the present case purely from a labor law perspective, oblivious
that the factual antecedents were set in the insurance industry so that the
Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted
to "Insurance Agents and Brokers" and specifically defines the agents and brokers
relationship with the insurance company and how they are governed by the Code
and regulated by the Insurance Commission.

The Insurance Code, of course, does not wholly regulate the "agency" that it speaks
of, as agency is a civil law matter governed by the Civil Code. Thus, at the very
least, three sets of laws - namely, the Insurance Code, the Labor Code and the Civil
Code - have to be considered in looking at the present case. Not to be forgotten,
too, is the Agreement (partly reproduced on page 2 of this Dissent and which no
one disputes) that the parties adopted to govern their relationship for purposes of
selling the insurance the company offers. To forget these other laws is to take a
myopic view of the present case and to add to the uncertainties that now exist in
considering the legal relationship between the insurance company and its "agents."

The main issue of whether an agency or an employment relationship exists depends

on the incidents of the relationship. The Labor Code concept of "control" has to be
compared and distinguished with the "control" that must necessarily exist in a
principal-agent relationship. The principal cannot but also have his or her say in
directing the course of the principal-agent relationship, especially in cases where
the company-representative relationship in the insurance industry is an agency.

a. The laws on insurance and agency

The business of insurance is a highly regulated commercial activity in the country,

in terms particularly of who can be in the insurance business, who can act for and
in behalf of an insurer, and how these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance Code provides that "No person,
partnership, or association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do the business
of insurance in the Philippines." Sections 299 and 300 of the Insurance Code on
Insurance Agents and Brokers, among other provisions, provide:

Section 299. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any
person for services in obtaining insurance, unless such person shall have first
procured from the Commissioner a license to act as an insurance agent of such
company or as an insurance broker as hereinafter provided.

No person shall act as an insurance agent or as an insurance broker in the

solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first
procuring a license so to act from the Commissioner x x x The Commissioner shall
satisfy himself as to the competence and trustworthiness of the applicant and shall
have the right to refuse to issue or renew and to suspend or revoke any such
license in his discretion.

Section 300. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself an
application for a policy or contract of insurance to or from such company or offers
or assumes to act in the negotiating of such insurance shall be an insurance agent
within the intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent's license requires a written examination, and
the applicant must be of good moral character and must not have been convicted of
a crime involving moral turpitude.[14] The insurance agent who collects premiums
from an insured person for remittance to the insurance company does so in a
fiduciary capacity, and an insurance company which delivers an insurance policy or
contract to an authorized agent is deemed to have authorized the agent to receive
payment on the company's behalf.[15] Section 361 further prohibits the offer,
negotiation, or collection of any amount other than that specified in the policy and
this covers any rebate from the premium or any special favor or advantage in the
dividends or benefit accruing from the policy.

Thus, under the Insurance Code, the agent must, as a matter of qualification, be
licensed and must also act within the parameters of the authority granted under the
license and under the contract with the principal. Other than the need for a license,
the agent is limited in the way he offers and negotiates for the sale of the
company's insurance products, in his collection activities, and in the delivery of the
insurance contract or policy. Rules regarding the desired results (e.g., the required
volume to continue to qualify as a company agent, rules to check on the
parameters on the authority given to the agent, and rules to ensure that industry,
legal and ethical rules are followed) are built-in elements of control specific to an
insurance agency and should not and cannot be read as elements of control that
attend an employment relationship governed by the Labor Code.

On the other hand, the Civil Code defines an agent as a "person [who] binds
himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter."[16] While this is a very broad
definition that on its face may even encompass an employment relationship, the
distinctions between agency and employment are sufficiently established by law
and jurisprudence.

Generally, the determinative element is the control exercised over the one
rendering service. The employer controls the employee both in the results and in
the means and manner of achieving this result. The principal in an agency
relationship, on the other hand, also has the prerogative to exercise control over
the agent in undertaking the assigned task based on the parameters outlined in the
pertinent laws.

Under the general law on agency as applied to insurance, an agency must be

express in light of the need for a license and for the designation by the insurance
company. In the present case, the Agreement fully serves as grant of authority to
Tongko as Manulife's insurance agent.[17] This agreement is supplemented by the
company's agency practices and usages, duly accepted by the agent in carrying out
the agency.[18] By authority of the Insurance Code, an insurance agency is for
compensation,[19] a matter the Civil Code Rules on Agency presumes in the absence
of proof to the contrary.[20] Other than the compensation, the principal is bound to
advance to, or to reimburse, the agent the agreed sums necessary for the
execution of the agency.[21] By implication at least under Article 1994 of the Civil
Code, the principal can appoint two or more agents to carry out the same assigned
tasks,[22] based necessarily on the specific instructions and directives given to them.

With particular relevance to the present case is the provision that "In the execution
of the agency, the agent shall act in accordance with the instructions of the
principal."[23] This provision is pertinent for purposes of the necessary control that
the principal exercises over the agent in undertaking the assigned task, and is an
area where the instructions can intrude into the labor law concept of control so that
minute consideration of the facts is necessary. A related article is Article 1891 of
the Civil Code which binds the agent to render an account of his transactions to the
principal.

B. The Cited Case

The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to
establish that the company rules and regulations that an agent has to comply with
are indicative of an employer-employee relationship.[24] The Dissenting Opinions of
Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular
Life Assurance Co. v. National Labor Relations Commission (second Insular
case)[25] to support the view that Tongko is Manulife's employee. On the other
hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc.
v. National Labor Relations Commission (AFPMBAI case)[26] to support its allegation
that Tongko was not its employee.

A caveat has been given above with respect to the use of the rulings in the cited
cases because none of them is on all fours with the present case; the uniqueness of
the factual situation of the present case prevents it from being directly and readily
cast in the mold of the cited cases. These cited cases are themselves different from
one another; this difference underscores the need to read and quote them in the
context of their own factual situations.

The present case at first glance appears aligned with the facts in the Carungcong,
the Grepalife, and the second Insular Life cases. A critical difference, however,
exists as these cited cases dealt with the proper legal characterization of
a subsequent management contract that superseded the original agency
contract between the insurance company and its agent. Carungcong dealt
with a subsequent Agreement making Carungcong a New Business Manager that
clearly superseded the Agreement designating Carungcong as an agent empowered
to solicit applications for insurance. The Grepalife case, on the other hand, dealt
with the proper legal characterization of the appointment of the Ruiz brothers to
positions higher than their original position as insurance agents. Thus, after
analyzing the duties and functions of the Ruiz brothers, as these were
enumerated in their contracts, we concluded that the company practically
dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally,
the second Insular Life case dealt with the implications of de los Reyes'
appointment as acting unit manager which, like the subsequent contracts in
the Carungcong and the Grepalife cases, was clearly defined under a subsequent
contract. In all these cited cases, a determination of the presence of the
Labor Code element of control was made on the basis of the stipulations of
the subsequent contracts.

In stark contrast with the Carungcong, the Grepalife, and the second Insular
Life cases, the only contract or document extant and submitted as evidence in
the present case is the Agreement - a pure agency agreement in the Civil Code
context similar to the original contract in the first Insular Life case and the contract
in the AFPMBAI case. And while Tongko was later on designated unit manager in
1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal
contract regarding these undertakings appears in the records of the case. Any such
contract or agreement, had there been any, could have at the very least provided
the bases for properly ascertaining the juridical relationship established between
the parties.

These critical differences, particularly between the present case

and the Grepalife and the second Insular Life cases, should therefore immediately
drive us to be more prudent and cautious in applying the rulings in these cases.

C. Analysis of the Evidence

c.1. The Agreement

The primary evidence in the present case is the July 1, 1977 Agreement that
governed and defined the parties' relations until the Agreement's termination in
2001. This Agreement stood for more than two decades and, based on the
records of the case, was never modified or novated. It assumes primacy because
it directly dealt with the nature of the parties' relationship up to the very end;
moreover, both parties never disputed its authenticity or the accuracy of its terms.

By the Agreement's express terms, Tongko served as an "insurance agent" for

Manulife, not as an employee. To be sure, the Agreement's legal characterization
of the nature of the relationship cannot be conclusive and binding on the courts; as
the dissent clearly stated, the characterization of the juridical relationship the
Agreement embodied is a matter of law that is for the courts to determine. At the
same time, though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their intent at the
time they entered the Agreement, and they were governed by this understanding
throughout their relationship. At the very least, the provision on the absence of
employer-employee relationship between the parties can be an aid in considering
the Agreement and its implementation, and in appreciating the other evidence on
record.

The parties' legal characterization of their intent, although not conclusive, is critical
in this case because this intent is not illegal or outside the contemplation of law,
particularly of the Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this Code (as heretofore
already noted) expressly envisions a principal-agent relationship between the
insurance company and the insurance agent in the sale of insurance to the
public. For this reason, we can take judicial notice that as a matter of
Insurance Code-based business practice, an agency relationship prevails in
the insurance industry for the purpose of selling insurance. The Agreement,
by its express terms, is in accordance with the Insurance Code model when it
provided for a principal-agent relationship, and thus cannot lightly be set aside nor
simply be considered as an agreement that does not reflect the parties' true intent.
This intent, incidentally, is reinforced by the system of compensation the
Agreement provides, which likewise is in accordance with the production-based
sales commissions the Insurance Code provides.

Significantly, evidence shows that Tongko's role as an insurance agent never

changed during his relationship with Manulife. If changes occurred at all, the
changes did not appear to be in the nature of their core relationship. Tongko
essentially remained an agent, but moved up in this role through Manulife's
recognition that he could use other agents approved by Manulife, but operating
under his guidance and in whose commissions he had a share. For want of a better
term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing
other Manulife agents similarly tasked with the selling of Manulife insurance.

Like Tongko, the evidence suggests that these other agents operated under their
own agency agreements. Thus, if Tongko's compensation scheme changed at all
during his relationship with Manulife, the change was solely for purposes of
crediting him with his share in the commissions the agents under his wing
generated. As an agent who was recruiting and guiding other insurance agents,
Tongko likewise moved up in terms of the reimbursement of expenses he incurred
in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912
of the Civil Code. Thus, Tongko received greater reimbursements for his expenses
and was even allowed to use Manulife facilities in his interactions with the agents,
all of whom were, in the strict sense, Manulife agents approved and certified as
such by Manulife with the Insurance Commission.

That Tongko assumed a leadership role but nevertheless wholly remained an agent
is the inevitable conclusion that results from the reading of the Agreement (the only
agreement on record in this case) and his continuing role thereunder as sales
agent, from the perspective of the Insurance and the Civil Codes and in light of
what Tongko himself attested to as his role as Regional Sales Manager. To be sure,
this interpretation could have been contradicted if other agreements had been
submitted as evidence of the relationship between Manulife and Tongko on the
latter's expanded undertakings. In the absence of any such evidence, however,
this reading - based on the available evidence and the applicable insurance and civil
law provisions - must stand, subject only to objective and evidentiary Labor Code
tests on the existence of an employer-employee relationship.

In applying such Labor Code tests, however, the enforcement of the Agreement
during the course of the parties' relationship should be noted. From 1977 until the
termination of the Agreement, Tongko's occupation was to sell Manulife's insurance
policies and products. Both parties acquiesced with the terms and conditions of the
Agreement. Tongko, for his part, accepted all the benefits flowing from the
Agreement, particularly the generous commissions.

Evidence indicates that Tongko consistently clung to the view that he was an
independent agent selling Manulife insurance products since he invariably declared
himself a business or self-employed person in his income tax returns. This
consistency with, and action made pursuant to the Agreement were pieces
of evidence that were never mentioned nor considered in our Decision of
November 7, 2008. Had they been considered, they could, at the very least,
serve as Tongko's admissions against his interest. Strictly speaking, Tongko's tax
returns cannot but be legally significant because he certified under oath the amount
he earned as gross business income, claimed business deductions, leading to his
net taxable income. This should be evidence of the first order that cannot be
brushed aside by a mere denial. Even on a layman's view that is devoid of legal
considerations, the extent of his annual income alone renders his claimed
employment status doubtful.[27]

Hand in hand with the concept of admission against interest in considering the tax
returns, the concept of estoppel - a legal and equitable concept[28] - necessarily
must come into play. Tongko's previous admissions in several years of tax returns
as an independent agent, as against his belated claim that he was all along an
employee, are too diametrically opposed to be simply dismissed or
ignored. Interestingly, Justice Velasco's dissenting opinion states that Tongko was
forced to declare himself a business or self-employed person by Manulife's
persistent refusal to recognize him as its employee.[29] Regrettably, the dissent
has shown no basis for this conclusion, an understandable omission since
no evidence in fact exists on this point in the records of the case. In fact,
what the evidence shows is Tongko's full conformity with, and action as, an
independent agent until his relationship with Manulife took a bad turn.

Another interesting point the dissent raised with respect to the Agreement is its
conclusion that the Agreement negated any employment relationship between
Tongko and Manulife so that the commissions he earned as a sales agent should
not be considered in the determination of the backwages and separation pay that
should be given to him. This part of the dissent is correct although it went on to
twist this conclusion by asserting that Tongko had dual roles in his relationship with
Manulife; he was an agent, not an employee, in so far as he sold insurance for
Manulife, but was an employee in his capacity as a manager. Thus, the dissent
concluded that Tongko's backwages should only be with respect to his role as
Manulife's manager.

The conclusion with respect to Tongko's employment as a manager is, of course,

unacceptable for the legal, factual and practical reasons discussed in this
Resolution. In brief, the factual reason is grounded on the lack of evidentiary
support of the conclusion that Manulife exercised control over Tongko in the sense
understood in the Labor Code. The legal reason, partly based on the lack of
factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and
was thus its employee. The practical reason, on the other hand, is the havoc that
the dissent's unwarranted conclusion would cause the insurance industry that, by
the law's own design, operated along the lines of principal-agent relationship in the
sale of insurance.

c.2. Other Evidence of Alleged Control

A glaring evidentiary gap for Tongko in this case is the lack of evidence on record
showing that Manulife ever exercised means-and-manner control, even to a limited
extent, over Tongko during his ascent in Manulife's sales ladder. In 1983, Tongko
was appointed unit manager. Inexplicably, Tongko never bothered to present any
evidence at all on what this designation meant. This also holds true for Tongko's
appointment as branch manager in 1990, and as Regional Sales Manager in 1996.
The best evidence of control - the agreement or directive relating to Tongko's
duties and responsibilities - was never introduced as part of the records of the
case. The reality is, prior to de Dios' letter, Manulife had practically left Tongko
alone not only in doing the business of selling insurance, but also in guiding the
agents under his wing. As discussed below, the alleged directives covered by de
Dios' letter, heretofore quoted in full, were policy directions and targeted results
that the company wanted Tongko and the other sales groups to realign with in their
own selling activities. This is the reality that the parties' presented evidence
consistently tells us.

What, to Tongko, serve as evidence of labor law control are the codes of conduct
that Manulife imposes on its agents in the sale of insurance. The mere presentation
of codes or of rules and regulations, however, is not per se indicative of labor law
control as the law and jurisprudence teach us.

As already recited above, the Insurance Code imposes obligations on both the
insurance company and its agents in the performance of their respective obligations
under the Code, particularly on licenses and their renewals, on the representations
to be made to potential customers, the collection of premiums, on the delivery of
insurance policies, on the matter of compensation, and on measures to ensure
ethical business practice in the industry.

The general law on agency, on the other hand, expressly allows the principal an
element of control over the agent in a manner consistent with an agency
relationship. In this sense, these control measures cannot be read as indicative of
labor law control. Foremost among these are the directives that the principal may
impose on the agent to achieve the assigned tasks, to the extent that they do not
involve the means and manner of undertaking these tasks. The law likewise
obligates the agent to render an account; in this sense, the principal may impose
on the agent specific instructions on how an account shall be made, particularly on
the matter of expenses and reimbursements. To these extents, control can be
imposed through rules and regulations without intruding into the labor law concept
of control for purposes of employment.

From jurisprudence, an important lesson that the first Insular Life case teaches us
is that a commitment to abide by the rules and regulations of an insurance
company does not ipso facto make the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agent's conduct necessarily indicate
"control" as this term is defined in jurisprudence. Guidelines indicative of labor
law "control," as the first Insular Life case tells us, should not merely
relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or methods
to be employed in attaining the result, or of fixing the methodology and of
binding or restricting the party hired to the use of these means. In fact,
results-wise, the principal can impose production quotas and can determine how
many agents, with specific territories, ought to be employed to achieve the
company's objectives. These are management policy decisions that the labor law
element of control cannot reach. Our ruling in these respects in the first Insular
Life case was practically reiterated in Carungcong. Thus, as will be shown more fully
below, Manulife's codes of conduct,[30] all of which do not intrude into the insurance
agents' means and manner of conducting their sales and only control them as to
the desired results and Insurance Code norms, cannot be used as basis for a finding
that the labor law concept of control existed between Manulife and Tongko.

The dissent considers the imposition of administrative and managerial functions on

Tongko as indicative of labor law control; thus, Tongko as manager, but not as
insurance agent, became Manulife's employee. It drew this conclusion from what
the other Manulife managers disclosed in their affidavits (i.e., their enumerated
administrative and managerial functions) and after comparing these statements
with the managers in Grepalife. The dissent compared the control exercised by
Manulife over its managers in the present case with the control the managers in
the Grepalife case exercised over their employees by presenting the following
matrix:[31]

Duties of Manulife's Manager Duties of Grepalife's Managers/Supervisors

- to render or recommend prospective agents to - train understudies for the position of district
be licensed, trained and contracted to sell manager
Manulife products and who will be part of my
Unit
- to coordinate activities of the agents under - properly account, record and document the
[the managers'] Unit in [the agents'] daily, company's funds, spot-check and audit the
weekly and monthly selling activities, making work of the zone supervisors, x x x follow up
sure that their respective sales targets are met; - the submission of weekly remittance reports of
to conduct periodic training sessions for [the] the debit agents and zone supervisors - direct
agents to further enhance their sales skill; and - and supervise the sales activities of the debit
to assist [the] agents with their sales activities agents under him, x x x undertake and
by way of joint fieldwork, consultations and discharge the functions of absentee debit
one-on-one evaluation and analysis of agents, spot-check the record of debit agents,
particular accounts and insure proper documentation of sales and
collections of debit agents.

Aside from these affidavits however, no other evidence exists regarding the effects
of Tongko's additional roles in Manulife's sales operations on the contractual
relationship between them.

To the dissent, Tongko's administrative functions as recruiter, trainer, or supervisor

of other sales agents constituted a substantive alteration of Manulife's authority
over Tongko and the performance of his end of the relationship with Manulife. We
could not deny though that Tongko remained, first and foremost, an insurance
agent, and that his additional role as Branch Manager did not lessen his main and
dominant role as insurance agent; this role continued to dominate the relations
between Tongko and Manulife even after Tongko assumed his leadership role
among agents. This conclusion cannot be denied because it proceeds from the
undisputed fact that Tongko and Manulife never altered their July 1, 1977
Agreement, a distinction the present case has with the contractual changes made in
the second Insular Life case. Tongko's results-based commissions, too, attest to the
primacy he gave to his role as insurance sales agent.

The dissent apparently did not also properly analyze and appreciate the great
qualitative difference that exists between:

· the Manulife managers' role is to coordinate activities of the agents under the
managers' Unit in the agents' daily, weekly, and monthly selling activities, making
sure that their respective sales targets are met.

· the District Manager's duty in Grepalife is to properly account, record, and

document the company's funds, spot-check and audit the work of the zone
supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the
debit agents and zone supervisors, preserve company property in good condition,
train understudies for the position of district managers, and maintain his quota of
sales (the failure of which is a ground for termination).

· the Zone Supervisor's (also in Grepalife) has the duty to direct and supervise
the sales activities of the debit agents under him, conserve company property
through "reinstatements," undertake and discharge the functions of absentee debit
agents, spot-check the records of debit agents, and insure proper documentation of
sales and collections by the debit agents.

These job contents are worlds apart in terms of "control." In Grepalife, the details
of how to do the job are specified and pre-determined; in the present case, the
operative words are the "sales target," the methodology being left undefined except
to the extent of being "coordinative." To be sure, a "coordinative" standard for a
manager cannot be indicative of control; the standard only essentially describes
what a Branch Manager is - the person in the lead who orchestrates activities within
the group. To "coordinate," and thereby to lead and to orchestrate, is not so much
a matter of control by Manulife; it is simply a statement of a branch manager's
role in relation with his agents from the point of view of Manulife whose business
Tongko's sales group carries.

A disturbing note, with respect to the presented affidavits and Tongko's alleged
administrative functions, is the selective citation of the portions supportive of an
employment relationship and the consequent omission of portions leading to the
contrary conclusion. For example, the following portions of the affidavit of Regional
Sales Manager John Chua, with counterparts in the other affidavits, were not
brought out in the Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the following portions of
the affidavits were not brought out:[32]

1.a. I have no fixed wages or salary since my services are compensated by way of
commissions based on the computed premiums paid in full on the policies obtained
thereat;

1.b. I have no fixed working hours and employ my own method in soliticing
insurance at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my
business of selling insurance;

x x x x

6. I have my own staff that handles the day to day operations of my office;

7. My staff are my own employees and received salaries from me;

x x x x

9. My commission and incentives are all reported to the Bureau of Internal

Revenue (BIR) as income by a self-employed individual or professional with a ten
(10) percent creditable withholding tax. I also remit monthly for professionals.

These statements, read with the above comparative analysis of the Manulife and
the Grepalife cases, would have readily yielded the conclusion that no employer-
employee relationship existed between Manulife and Tongko.

Even de Dios' letter is not determinative of control as it indicates the least amount
of intrusion into Tongko's exercise of his role as manager in guiding the sales
agents. Strictly viewed, de Dios' directives are merely operational guidelines on
how Tongko could align his operations with Manulife's re-directed goal of being a
"big league player." The method is to expand coverage through the use of more
agents. This requirement for the recruitment of more agents is not a means-and-
method control as it relates, more than anything else, and is directly relevant, to
Manulife's objective of expanded business operations through the use of a bigger
sales force whose members are all on a principal-agent relationship. An
important point to note here is that Tongko was not supervising regular
full-time employees of Manulife engaged in the running of the insurance
business; Tongko was effectively guiding his corps of sales agents, who
are bound to Manulife through the same Agreement that he had with
Manulife, all the while sharing in these agents' commissions through his
overrides. This is the lead agent concept mentioned above for want of a more
appropriate term, since the title of Branch Manager used by the parties is really a
misnomer given that what is involved is not a specific regular branch of the
company but a corps of non-employed agents, defined in terms of covered
territory, through which the company sells insurance. Still another point to
consider is that Tongko was not even setting policies in the way a regular company
manager does; company aims and objectives were simply relayed to him with
suggestions on how these objectives can be reached through the expansion of a
non-employee sales force.

Interestingly, a large part of de Dios' letter focused on income, which Manulife

demonstrated, in Tongko's case, to be unaffected by the new goal and direction the
company had set. Income in insurance agency, of course, is dependent on results,
not on the means and manner of selling - a matter for Tongko and his agents to
determine and an area into which Manulife had not waded. Undeniably, de Dios'
letter contained a directive to secure a competent assistant at Tongko's own
expense. While couched in terms of a directive, it cannot strictly be understood as
an intrusion into Tongko's method of operating and supervising the group of agents
within his delineated territory. More than anything else, the "directive" was a signal
to Tongko that his results were unsatisfactory, and was a suggestion on how
Tongko's perceived weakness in delivering results could be remedied. It was a
solution, with an eye on results, for a consistently underperforming group; its
obvious intent was to save Tongko from the result that he then failed to grasp -
that he could lose even his own status as an agent, as he in fact eventually did.

The present case must be distinguished from the second Insular Life case that
showed the hallmarks of an employer-employee relationship in the management
system established. These were: exclusivity of service, control of assignments and
removal of agents under the private respondent's unit, and furnishing of company
facilities and materials as well as capital described as Unit Development Fund. All
these are obviously absent in the present case. If there is a commonality in these
cases, it is in the collection of premiums which is a basic authority that can be
delegated to agents under the Insurance Code.

As previously discussed, what simply happened in Tongko's case was the grant of
an expanded sales agency role that recognized him as leader amongst agents in an
area that Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be answered by concrete
evidence that corresponds to the following questions:

· as lead agent, what were Tongko's specific functions and the terms of his
additional engagement;

· was he paid additional compensation as a so-called Area Sales Manager, apart

from the commissions he received from the insurance sales he generated;
· what can be Manulife's basis to terminate his status as lead agent;

· can Manulife terminate his role as lead agent separately from his agency contract;
and

· to what extent does Manulife control the means and methods of Tongko's role as
lead agent?

The answers to these questions may, to some extent, be deduced from the
evidence at hand, as partly discussed above. But strictly speaking, the questions
cannot definitively and concretely be answered through the evidence on
record. The concrete evidence required to settle these questions is simply
not there, since only the Agreement and the anecdotal affidavits have been
marked and submitted as evidence.

Given this anemic state of the evidence, particularly on the requisite confluence of
the factors determinative of the existence of employer-employee relationship, the
Court cannot conclusively find that the relationship exists in the present case, even
if such relationship only refers to Tongko's additional functions. While a rough
deduction can be made, the answer will not be fully supported by the substantial
evidence needed.

Under this legal situation, the only conclusion that can be made is that the absence
of evidence showing Manulife's control over Tongko's contractual duties points to
the absence of any employer-employee relationship between Tongko and
Manulife. In the context of the established evidence, Tongko remained an agent all
along; although his subsequent duties made him a lead agent with leadership role,
he was nevertheless only an agent whose basic contract yields no evidence of
means-and-manner control.

This conclusion renders unnecessary any further discussion of the question of

whether an agent may simultaneously assume conflicting dual personalities. But to
set the record straight, the concept of a single person having the dual role of agent
and employee while doing the same task is a novel one in our jurisprudence, which
must be viewed with caution especially when it is devoid of any jurisprudential
support or precedent. The quoted portions in Justice Carpio-Morales'
dissent,[33] borrowed from both the Grepalife and the second Insular Life cases, to
support the duality approach of the Decision of November 7, 2008, are regrettably
far removed from their context - i.e., the cases' factual situations, the issues they
decided and the totality of the rulings in these cases - and cannot yield the
conclusions that the dissenting opinions drew.

The Grepalife case dealt with the sole issue of whether the Ruiz brothers'
appointment as zone supervisor and district manager made them employees
of Grepalife. Indeed, because of the presence of the element of control in their
contract of engagements, they were considered Grepalife's employees. This did not
mean, however, that they were simultaneously considered agents as well as
employees of Grepalife; the Court's ruling never implied that this situation existed
insofar as the Ruiz brothers were concerned. The Court's statement - the
Insurance Code may govern the licensing requirements and other particular duties
of insurance agents, but it does not bar the application of the Labor Code with
regard to labor standards and labor relations - simply means that when an
insurance company has exercised control over its agents so as to make them their
employees, the relationship between the parties, which was otherwise one for
agency governed by the Civil Code and the Insurance Code, will now be governed
by the Labor Code. The reason for this is simple - the contract of agency has been
transformed into an employer-employee relationship.

The second Insular Life case, on the other hand, involved the issue of whether the
labor bodies have jurisdiction over an illegal termination dispute involving parties
who had two contracts - first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract that in turn
designated the agent acting unit manager (a management contract). Both the
Insular Life and the labor arbiter were one in the position that both were agency
contracts. The Court disagreed with this conclusion and held that insofar as the
management contract is concerned, the labor arbiter has jurisdiction. It is in this
light that we remanded the case to the labor arbiter for further proceedings. We
never said in this case though that the insurance agent had effectively assumed
dual personalities for the simple reason that the agency contract has been
effectively superseded by the management contract. The management contract
provided that if the appointment was terminated for any reason other than for
cause, the acting unit manager would be reverted to agent status and assigned to
any unit.

The dissent pointed out, as an argument to support its employment relationship

conclusion, that any doubt in the existence of an employer-employee relationship
should be resolved in favor of the existence of the relationship.[34] This
observation, apparently drawn from Article 4 of the Labor Code, is misplaced, as
Article 4 applies only when a doubt exists in the "implementation and application"
of the Labor Code and its implementing rules; it does not apply where no doubt
exists as in a situation where the claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence the Labor Code requires.

On the dissent's last point regarding the lack of jurisprudential value of our
November 7, 2008 Decision, suffice it to state that, as discussed above, the
Decision was not supported by the evidence adduced and was not in accordance
with controlling jurisprudence. It should, therefore, be reconsidered and
abandoned, but not in the manner the dissent suggests as the dissenting opinions
are as factually and as legally erroneous as the Decision under reconsideration.

In light of these conclusions, the sufficiency of Tongko's failure to comply with the
guidelines of de Dios' letter, as a ground for termination of Tongko's agency, is a
matter that the labor tribunals cannot rule upon in the absence of an employer-
employee relationship. Jurisdiction over the matter belongs to the courts applying
the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of
November 7, 2008, GRANT Manulife's motion for reconsideration and,
accordingly, DISMISS Tongko's petition. No costs.

SO ORDERED.

Corona, C.J., Carpio, Brion, Peralta, Del Castillo, Abad, Perez, and Mendoza, JJ.,
concur.
Carpio Morales, J., please see separate dissenting opinion.
Velasco, Jr., J., please see dissenting opinion.
Nachura, Leonardo-De Castro, and Bersamin, JJ., joins the dissent of J. Velasco.
Villarama, Jr., J., no part.