Case Summary (G.R. No. 232070)
Key Dates
1995 – Villamaria ceased assembling jeepneys; retained nine units, four on boundary basis.
August 7 1997 – Execution of Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog over jeepney PVU-660 (Chassis No. EVER95-38168-C).
August 27 1999 – “Paalala” served to drivers, warning of contract forfeiture upon one-week nonpayment.
July 24 2000 – Jeepney reclaimed by Villamaria; Bustamante barred from driving.
August 15 2000 – Bustamante filed Complaint for Illegal Dismissal before the Labor Arbiter.
March 15 2002 – Labor Arbiter dismissed Bustamante’s complaint.
May 30 2003 – NLRC denied Bustamante’s motion for reconsideration, dismissing appeal for lack of jurisdiction.
August 30 2004 – CA reversed NLRC, ordered separation pay and back wages for Bustamante.
November 2 2004 – CA denied Villamaria’s motion for reconsideration.
Applicable Law
• 1987 Philippine Constitution (Decision rendered April 19 2006).
• Labor Code of the Philippines, as amended (especially Article 217 on jurisdiction of Labor Arbiters).
• Rules of Court, Rule 45 (petition for review on certiorari) and Rule 65 (special civil action of certiorari).
• Relevant jurisprudence: National Labor Union v. Dinglasan (1956), Magboo v. Bernardo (1963), Jardin v. NLRC (2000), and related boundary-system cases.
Formation and Terms of the Boundary-Hulog Agreement
• Downpayment: P 10,000.00. Daily remittance of P 550.00 for four years constitutes both boundary fee (employer’s share) and installment payment (hulog) of purchase price.
• Default clauses: three-day nonpayment permits Villamaria Motors to retain the vehicle until arrears plus P 50.00/day penalty are paid; one-week nonpayment voids the agreement and requires automatic return of the jeepney.
• Control and supervision provisions: Bustamante prohibited from driving without authorization; required to display an ID card; wear proper attire; maintain politeness; comply with route and operational rules; secure prior approval for provincial trips; attend company meetings.
• Maintenance obligations: Bustamante to pay for replacement of lost or damaged parts due to negligence; to notify Villamaria Motors prior to any major repair; to pay annual registration and comprehensive insurance premiums.
Factual Developments and Paalala
• 1999: Several drivers, including Bustamante, defaulted on their boundary-hulog payments.
• August 27 1999: Villamaria issued a written “Paalala” reiterating paragraph 13 of the Kasunduan, warning that one-week default would trigger forfeiture of the vehicle without further recourse.
• July 24 2000: Villamaria retook custody of the jeepney and effectively terminated Bustamante’s driving privileges.
Labor Arbiter and NLRC Proceedings
• Bustamante’s Position: Maintained employer-employee relationship under boundary system; alleged verbal assurances of eventual ownership; claimed removal of engine with stolen parts led to license confiscation; contended he was dismissed without just cause or due notice.
• Villamaria’s Position: Argued that the Kasunduan transformed the relationship into vendor-vendee; Bustamante defaulted on downpayment, boundary-hulog, and registration fees; neglected and abandoned the vehicle in a gas station; cited jurisprudence distinguishing boundary-hulog from boundary system.
• Labor Arbiter (March 15 2002): Dismissed the complaint, finding Bustamante failed to prove illegal dismissal; treated the agreement as a vendor-vendee contract beyond Labor Arbiter’s jurisdiction.
• NLRC (May 30 2003): Dismissed appeal for lack of jurisdiction, holding the boundary-hulog agreement created a vendor-vendee relationship.
Court of Appeals Decision
• Dual Relationship: Recognized both vendor-vendee and employer-employee status under the Kasunduan.
• Control Element: Emphasized Villamaria’s supervision over driving conduct, attire, identification, routes, and vehicle maintenance as indicia of employment.
• Jurisdiction and Merits: Held that the Labor Arbiter had jurisdiction over an illegal dismissal claim; found dismissal illegal because Villamaria neither adequately enforced default provisions nor proved just cause; ordered separation pay and back wages based on prevailing minimum wage.
Supreme Court Analysis and Ruling
Procedural Issue
• Appropriate Remedy: Villamaria should have filed a petition for review under Rule 45, not Rule 65; yet, petition deemed within reglementary period and meritorious issues warranted resolution on the merits.
Jurisdictional Framework
• Article 217, Labor Code: Labor Arbiters possess exclusive jurisdiction over termination disputes and related claims arising from an employer-employee relationship. Non-labor courts have jurisdiction where such a relationship is merely incidental.
Nature of the Boundary-Hulog Scheme
• Boundary System Jurisprudence: Under Dinglasan and successors, jeepney boundary arrangements create employer-employee relationships rather than lessor-lessee or vendor-vendee, given the owner’s retained control and supervision.
• D
Case Syllabus (G.R. No. 232070)
Facts of the Case
- Oscar Villamaria, Jr. owned Villamaria Motors, a sole proprietorship assembling and franchising passenger jeepneys on the Baclaran–Sucat route.
- By 1995, Villamaria ceased assembly operations and retained nine jeepneys, four of which were operated under a “boundary basis” arrangement.
- Jerry V. Bustamante was one of the boundary drivers, paying P450.00 daily to Villamaria and keeping the excess as compensation.
- In August 1997, Villamaria and Bustamante agreed verbally to a “boundary-hulog” sale: P550.00 daily for four years plus a P10,000.00 downpayment, after which title would pass to Bustamante.
- On August 7, 1997, they executed a written “Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-Hulog” covering jeepney Plate No. PVU-660.
- Under the Kasunduan, failure to pay three days’ boundary-hulog allowed Villamaria Motors to hold the vehicle; failure for one week rendered the contract void and triggered return of the jeepney.
- The Kasunduan imposed extensive rules on Bustamante’s operation: prior authorization, proper attire, display of ID, maintenance obligations, insurance and registration fees, repair notifications, attendance at meetings, route limitations, and penalties for non-compliance.
- Bustamante continued remitting P550.00 daily but defaulted on annual registration fees; Villamaria nonetheless allowed him to drive.
- In 1999, Bustamante and other drivers defaulted; Villamaria served a written “Paalala” reminding them of the one-week default provision.
- On July 24, 2000, Villamaria repossessed the jeepney and barred Bustamante from driving.
- On August 15, 2000, Bustamante filed a complaint for illegal dismissal before the Labor Arbiter, claiming employer-employee relationship and unlawful termination.
Contract Terms in the Kasunduan
- Subject vehicle: Jeepney Plate No. PVU-660, Chassis EVER95-38168-C, Motor SL-26647.
- Sale price payable by P550.00 daily installments for four years; P10,000.00 downpayment required.
- Default after three days: Villamaria Motors’ custody of vehicle until arrears plus P50.00 daily penalty paid.
- Default after one week: contract void; immediate return of vehicle by Bustamante.
- Bustamante prohibited from unauthorized use, required to display identification card; fines charged to his account.
- Obliged to replace lost/damaged parts due to negligence; heavy damage repairs subject to Villamaria Motors’ approval.
- Dress code restrictions: no slippers, short pants, or undershirts; mandated polite conduct to passengers.
- Required to notify Villamaria Motors of provincial trips exceeding two days and attend company meetings.
- Responsible for annual registration and comprehensive insurance premiums.
- Compliance with