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10. Villamaria, Jr. v. CA, 521 Phil.
682 (2006)
Facts: Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged
in assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat
route. By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he
operated by employing drivers on a "boundary basis."
One of those drivers was respondent Bustamante. Villamaria verbally agreed to sell the jeepney to
Bustamante under the "boundary-hulog scheme," where Bustamante would remit to Villarama P550.00 a
day for a period of four years; Bustamante would then become the owner of the vehicle and continue to
drive the same under Villamaria’s franchise. It was also agreed that Bustamante would make a
downpayment of P10,000.00.
They executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-

Hulog. The parties agreed that if Bustamante failed to pay the boundary-hulog for three days, Villamaria
Motors would hold on to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a
day. In case Bustamante failed to remit the daily boundary-hulog for a period of one week, the Kasunduan
would cease to have legal effect and Bustamante would have to return the vehicle to Villamaria Motors.
Bustamante continued driving the jeepney under the supervision and control of Villamaria. But later he
failed to comply with his obligations so that notice of compliance and warning were ensued. This
prompted Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure to pay the
daily boundary-hulog for one week, would mean their respective jeepneys would be returned to him
without any complaints. He warned the drivers that the Kasunduan would h Until in 2000, Villamaria took
back the jeepney driven by Bustamante and barred the latter from driving the vehicle. Hence, Bustamante
filed a complaint for Illegal Dismissal.
Spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed on
August 7, 1997 transformed the employer-employee relationship into that of vendor-vendee. Hence, the
spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed that the
case be dismissed for lack of jurisdiction and patent lack of merit.
In his reply, Bustamante claimed that Villamaria exercised control and supervision over the
conduct of his employment.
Labor Arbiter rendered judgment in favor of the spouses Villamaria and ordered the complaint
dismissed. Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not
extinguish the employer-employee relationship between him and Villamaria. While he did not receive
fixed wages, he kept only the excess of the boundary-hulog which he was required to remit daily to
Villamaria under the agreement. Bustamante maintained that he remained an employee because he was
engaged to perform activities which were necessary or desirable to Villamaria’s trade or business. The
NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and
Villamaria was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the
complaint.
However, the CA reversed and set aside the NLRC decision. The appellate court ruled that the Labor
Arbiter had jurisdiction over Bustamante’s complaint. Under the Kasunduan, the relationship between
him and Villamaria was dual: that of vendor-vendee and employer-employee. The CA ratiocinated that
Villamaria’s exercise of control over Bustamante’s conduct in operating the jeepney is inconsistent with
the former’s claim that he was not engaged in
the transportation business. There was no evidence that petitioner was allowed to let some other person
drive the jeepney.
CA affirmed the LA on the ground that the relationship between Villamaria and Bustamante was dual:
that of vendor-vendee and employer-employee. Villamaria averred that their contract was a combination
of vendor-vendee and employer-employee because they had clearly entered into a conditional deed of sale
over the jeepney so that their employer-employee relationship had been transformed into that of vendor-
vendee. Hence, this petition.
Issue: whether the existence of a boundary-hulog agreement negates the employer-employee relationship
between the vendor and vendee?
Ruling: No.
Under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical relationship was
created between petitioner and respondent: that of employer-employee and vendor-vendee. The
Kasunduan did not extinguish the employer-employee relationship of the parties extant before the
execution of said deed.
The boundary system is a scheme by an owner/operator engaged in transporting passengers as a

common carrier to primarily govern the compensation of the driver, that is, the latter’s daily
earnings are remitted to the owner/operator less the excess of the boundary which represents the
driver’s compensation. Under this system, the owner/operator exercises control and supervision over the
driver. It is unlike in lease of chattels where the lessor loses complete control over the chattel leased but
the lessee is still ultimately responsible for the consequences of its use. The management of the business
is still in the hands of the owner/operator, who, being the holder of the certificate of public convenience,
must see to it that the driver follows the route prescribed by the franchising and
regulatory authority, and the rules promulgated with regard to the business operations.
The fact that the driver does not receive fixed wages but only the excess of the "boundary" given to
the owner/operator is not sufficient to change the relationship between them. Indubitably, the
driver performs activities which are usually necessary or desirable in the usual business or trade of
the owner/operator.
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount
which represented the boundary of petitioner as well as respondent’s partial payment (hulog) of the
purchase price of the jeepney. Respondent was entitled to keep the excess of his daily earnings as his
daily wage. Thus, the daily remittances also had a dual purpose: that of petitioner’s boundary and
respondent’s partial payment (hulog) for the vehicle. This dual purpose was expressly stated in the
Kasunduan. The well-settled rule is that an obligation is not novated by an instrument that expressly
recognizes the old one, changes only the terms of payment, and adds other obligations not incompatible
with the old provisions or where the new contract merely supplements the previous one. The two
obligations of the respondent to remit to petitioner the boundary-hulog can stand together.
The juridical relationship of employer-employee between petitioner and respondent was not
negated by the foregoing stipulation in the Kasunduan, considering that petitioner retained control
of respondent’s conduct as driver of the vehicle
Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to
don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors
about the fact that the unit would be going out to the province for two days of more, or to drive the unit
carefully, etc. necessarily related to control over the means by which the petitioner was to go about his
work; that the ruling applicable here is not Singer Sewing Machine but National Labor Union since the
latter case involved jeepney owners/operators and jeepney drivers, and that the fact that the "boundary"
here represented installment payment of the purchase price on the jeepney did not withdraw the
relationship from that of employer-employee, in view of the overt presence of supervision and control by
the employer.56
Neither is such juridical relationship negated by petitioner’s claim that the terms and conditions in the
Kasunduan relative to respondent’s behavior and deportment as driver was for his and respondent’s
benefit: to insure that respondent would be able to pay the requisite daily installment of P550.00, and that
the vehicle would still be in good condition despite the lapse of four years. What is primordial is that
petitioner retained control over the conduct of the respondent as driver of the jeepney.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals
in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.

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10. Villamaria, Jr. v. CA, 521 Phil.

They executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary-

The boundary system is a scheme by an owner/operator engaged in transporting passengers as a

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