Facts:

The case centers around AFP Mutual Benefit Association, Inc. (herein referred to as "petitioner") and Eutiquio Bustamante (herein referred to as "private respondent"). The events unfolded as follows: Eutiquio Bustamante had worked as an insurance underwriter for AFP Mutual Benefit Association since 1975. They had an agreement called the Sales Agent's Agreement, which explicitly stated that there was no employer-employee relationship between the two and characterized Bustamante as an independent contractor. This agreement articulated his obligations, including soliciting exclusively for AFP and receiving commissions based on premiums paid for the insurance policies he sold.

On July 5, 1989, Bustamante was dismissed for misrepresentation and for selling insurance for another company, which violated the terms of their agreement. At the time of his termination, he was entitled to accrued commissions totaling P438,835.00, but had only received P78,039.89 thus

...

Facts:

Background of the Parties and the Contract

• AFP Mutual Benefit Association, Inc. (petitioner) entered into a Sales Agent’s Agreement with private respondent, Eutiquio Bustamante, who had been an insurance underwriter with the petitioner since 1975.
• The Sales Agent’s Agreement expressly stated that the respondent was engaged solely as a commission agent and expressly declared there was no employer-employee relationship, designating him as an independent contractor.
• Key provisions in the Agreement included:
• Duties and Obligations – The respondent was required to solicit insurance exclusively for the petitioner and to follow the petitioner’s policies, memo circulars, and rules and regulations.
• Territorial Limitations – Although the respondent was required to confine his solicitation activities within specified areas (such as military camps or installations), there was no formal assignment of a particular territory.
• Commission – The respondent’s compensation was based on a multi-tiered commission scheme on premiums paid: 30% for the first year, 10% for the second year, 5% for the third year, 3% for the fourth year, and 1% for each year from the fifth up to the tenth year.
• General Provisions – The Agreement underscored that no employer-employee relationship existed between the parties.

Dispute Over Commissions and Termination

• Dismissal of the Respondent
• On July 5, 1989, the petitioner dismissed Bustamante for alleged misrepresentation and for selling insurance for another company in violation of the Agreement.
• At the time of dismissal, Bustamante was entitled to accrued commissions equivalent to 24 months, as shown in the account summary approved by the petitioner’s marketing manager, backed by an endorsement from a company executive.
• Discrepancies in Commission Computation
• The account summary initially recorded a total commission receivable of P438,835.00 with partial payment amounting to P78,039.89, leaving a net commission of P354,796.09.
• Despite this detailed computation, only P35,000.00 was disbursed to Bustamante.
• Subsequent Actions and Correspondence
• Bustamante filed a complaint initially with the Office of the Insurance Commissioner, only to be advised that jurisdiction fell under the Department of Labor and Employment.
• Consequently, on February 26, 1990, he filed a complaint with the Department of Labor seeking:
• Payment of commissions for two years from his termination computed at 30% of premiums remitted during his employment.
• The computed commission of P354,796.00 from renewals and old business since 1983.
• P100,000.00 as moral damages.
• P100,000.00 as exemplary damages.

Proceedings in the Labor Tribunal and Commission

• Labor Arbiter’s Decision (August 24, 1990)
• The labor arbiter declared the dismissal just and valid.
• On the money claim, the labor arbiter ordered petitioner to pay Bustamante P319,796.00 plus attorney’s fees of P31,976.60.
• The decision was based on an interpretation of the Agreement’s terms suggesting an element of control typically found in an employer-employee relationship.
• Commission’s Affirmation
• The Second Division of the National Labor Relations Commission affirmed the labor arbiter’s ruling.
• The Commission’s ruling relied on the existence of provisions within the Sales Agent’s Agreement that allowed petitioner to assign specific areas and production quotas—interpreted as an exercise of control indicative of an employer-employee relationship.
• Petition for Certiorari
• Petitioner elevated the case by filing a petition for certiorari under Rule 65, seeking annulment of the NLRC resolution.
• The petition asserted that the labor arbiter and the NLRC lacked jurisdiction due to the absence of an employer-employee relationship between the parties.

Issue:

Existence of an Employer-Employee Relationship

• Whether the proscriptions in the Sales Agent’s Agreement (such as exclusivity in soliciting business, adherence to company policies, and possible territorial assignments) transform the contractual relationship into one of employer and employee.
• Whether the element of control, as suggested by the petitioner’s ability to assign areas and production quotas, is sufficient to establish an employment relationship.

Jurisdiction of the Labor Tribunal and the National Labor Relations Commission

• Whether the labor arbiter and the NLRC had jurisdiction to hear and decide on a monetary claim arising from a dispute over unpaid commissions when no employer-employee relationship exists.
• Whether the grant of jurisdiction, despite the contractual nature of the dispute (being essentially a civil claim for unpaid commissions under an independent contractor relationship), constituted grave abuse of discretion.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)