__________________________

SECOND YEAR JURIS DOCTOR

9-04-23

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TABLE OF CONTENTS

1. Santiago v. CF Sharp Crew Management, Inc., [G.R. No. 16219, July 10,
2007]
2. Ex-Bataan Veterans Security Agency, Inc. v. The Secretary of Labor
Laguesma, [G.R. No. 152396, November 20, 2007]
3. SSK Paris Corporation v. Camas, [G.R. No. 85934, January 30, 1990]
4. Bay Haven, Inc. v. Abuan, [G.R. No. 160859, July 30, 2008]
5. Red V Coconut Products, Ltd. v. Leogardo, Jr., [G.R. No. 72247, April 10,
1992]
6. Batong Buhay Gold Mines, Inc. v. Sec. Dela Serna [G.R. No. 86963,
August 6, 1999]
7. Land Bank of the Philippines vs. Listana, Sr., [G.R. No. 152611, August 5,
2003]
8. Atlas Farms, Inc. vs. NLRC, [G.R. No. 142244, November 18, 2002]
9. Perpetual Help Credit Cooperative, Inc. vs. Faburada, [G.R. No. 121948,
October 8, 2001]
10. Austria v. Hon. NLRC and Cebu City Central Philippines Union Mission
Corporation of the Seventh Day Adventist, [G.R. No. 124382, August 16,
1999]
11. Lozon vs. NLRC, [G.R. No. 107660, January 2, 1995]
12. Nacpil vs. Intercontinental Broadcasting Corporation, [G.R. No. 144767,
March 21, 2002]
13. Union Motors vs. NLRC, [1999]
14. Tabang vs. NLRC, [1997]
15. Prudential Bank and Trust Company vs. Reyes, [G.R. No. 141093,
February 20, 2001]
16. Rural Bank of Coron [Palawan], Inc. vs. Cortes, [G.R. No. 164888,
December 6, 2006]
17. Mainland Construction Co., Inc. vs. Movilla, [1995]
18. Okol v. Slimmers World International, [G.R. No. 160146, December 11,
2009]
19. Gomez v. PNOC Development and Management Corp., [G.R. No.
174044, November 27, 2009]
20. Atty. Virgilio R. Garcia v. Eastern Telecommunications Philippines, Inc.,
[G.R. No. 173115, April 16, 2009]
21. Department of Foreign Affairs vs. NLRC, et al., [G.R. No. 113191,
September 18, 1996]
22. Lasco, et al. vs. United Nations Revolving Fund for Natural Resources
Exploration [UNRFNRE], et al., G.R. Nos. 109095-109107, February 29,
1995
23. World Health Organization vs. Aquino, [1972]
24. United States vs. Hon. Rodrigo, [G.R. No. 79470, February 26, 1990]
25. The Manila Hotel Corp. vs. NLRC, [G.R. No. 120077, October 13, 2000]
26. Philippine National Bank vs. Cabansag, [G.R. No, 157010, June 21, 2005]
27. Sim vs. NLRC, [G.R. No.157376, October 2, 2007]
28. Pacific Consultants International Asia, Inc. vs. Schonfeld, [G.R. No. 166920,
February 19, 2007]
29. PHILSEC Investment Corporation vs. CA, [G.R. No. 103493, June 19, 1997,
274 SCRA 102]

3
30. Bank of America International, Ltd. vs. Court of Appeals, [448 Phil. 181, 196
(2003)]
31. Bañez v. Valdevilla, [G.R. No. 128024, May 9, 2000]
32. Domondon v. NLRC, [G.R. No.154376, September 30, 2005]
33. Halagueńa, et al. v. Philippine Airlines, Inc., [G.R. No. 172013, October
2, 2009]
34. Santos v. Servier Philippines, Inc., [G.R. No. 166377, November 28, 2008]
35. Intercontinental Broadcasting Corporation [IBC] v. Amarilla, [G.R. No.
162775, Octopber 27. 2006]
36. Basaya, Jr. vs. Militante,
37. Singapore Airlines vs. Hon. Ernani Cruz Pano, [G.R. No. L47739, June
22, 1983]
38. Asian Footwear vs. Soriano,
39. Tolentino vs. Inciong,
40. Philippine Association of Free Labor Unions [PAFLU] vs Salas
41. San Miguel Corporation vs. NLRC
42. Molave Motor Sales, Inc. vs. Laron
43. Sara vs. Agarrado
44. National Housing Corporation vs. Juco
45. Metropolitan Waterworks and Sewerage System vs. Hernandez
46. PNOC-Exploration Corporation vs. NLRC
47. Bulletin Publishing Corporation vs. Sanchez
48. Pepsi-Cola Distributors vs. Galang
49. Grepalife Assurance Corporation vs. NLRC
50. Cosmopolitan Funeral Homes vs. Maalat
51. Insular Life vs. NLRC
52. St. Martin Funeral Home vs. NLRC, et al., [G.R. No. 130866, September
16, 1998]
53. Luzon Development Bank vs. Association of Luzon Development Bank
Employees, et al., [G.R. No. 120319, October 6, 1995]
54. Abbott Laboratories Philippines, Inc. Abbott Laboratories Union, et al.,
[G.R. No. 131374, January 26, 2000]
55. Sea Power Shipping Enterprises, Inc. vs. Court of Appeals, et al., [G.R.
No. 138270, June 28, 2001]
56. Triad Security & Allied Services, Inc. v. Ortega, [G.R. No. 160871,
February 6, 2006]
57. Vir-Jen Shipping and Marine Services, Inc. Vs. National Labor Relations
Commission, Rogelio Bisula Ruben Arroza Juan Gacutno Leonilo Atok, Nilo
Cruz, Alvaro Andrada, Nemesio Adug Simplicio Bautista, Romeo Acosta,
And Jose Encabo [G.R. No. L-58011 & L-58012 November 18, 1983]
58. Cariño vs. NLRC, [G.R. No. 91086, May 8, 1990]
59. Malayang Samahan ng mga Manggagagawa sa M. Greenfield (MSMG-
UWP) vs. Ramos. [G.R. No. 113907, February 28, 2000]
60. Alabang Country Club, Inc. vs. NLRC, [G.R. No. 170287, February 14,
2008]
61. Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills
62. NLRB v. Gamble Enterprises, Inc.
63. Consolidated Theaters, Inc. v. Theatrical Stage Employees Union, (1968)
64.American Newspaper Publishers Association v. NLRB
65. Musicians Union v. Superior Court of Alameda County

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66. International Hod Carriers Bldg. & Common Laborers Union
67. Rabouin v. NLRB
68. National Development Co., vs. NDC Employees and Workers Union
69. Oceaning Phrmacal Employees Union vs. Inciong, [G.R. No. L-50568,
November 7, 1979
70. Philippine Apparel Workers Union vs. NLRC, [G.R. No. L-50320, July
31, 1981]
71. Alhambra Industries, Inc. vs. CIR
72. Benguet Consolidated vs. BCI Employees and Workers Union
73. Alba Patio de Makati, vs. Alba Patio de Makati Employees Association,
[G.R. No. L-37922, March 16, 1984]
74. Standard Chartered Bank Employees Union [NUBE] vs. Confesor, [G.R.
No. 114974, June 16, 2004]
75. General Milling Corporation vs. CA, [G.R. No. 146728, February 11,
2004]
76. Hacienda Fatima vs. National Federation of Sugarcane Workers – Food
and General Trade, [G.R. No. 149440, January 28, 2003]
77. De Leon vs. NLRC and Fortume Tobacco Corporation, [G.R. No.
112661, May 30, 2001]
78. Colegio de San Juan de Letran vs. Association of Employees and Faculty
of Letran, [G.R. No. 141471, September 18, 2000]
79. Cathay Pacific Steel Corp. v. Hon. CA, [G.R. No. 164561, August 30,
2006]
80. St. John Colleges, Inc. v. St. John Academy Faculty and Employees
Union, [G.R. No. 167892, October 27, 2006]
81. Purefoods Corp. v. Nagkakaisang Samahang Manggagawa ng Purefoods
Rank-and-File, [G.R. No. 150896, August 28, 2008]
82. De La Salle University v. De La Salle University Employees Association
(DLSUEA-NAFTEU, [G.R. No. 177283, April 7, 2009]
83. General Milling Corporation vs. CA, [G.R. No. 146728, February 11,
2004]
84. Colegio de San Juan de Letran vs. Association of Employees and Faculty
of Letran, [G.R. No. 141471, Septmber 18, 2000]
85. Standard Chartered Bank Employee Union [NUBE] vs. Confesor, [G.R.
No.114974, June 16, 2004]
86. ABS-CBN Supervisors Employees Union Members v. ABS-CBN Corp., et
al., [G.R. No. 106518, March 11, 1999]
87. Allied Workers' Association of the Philippines v. CIR [G.R. Nos. L-22580
and L-22950, June 6, 1967]
88. Philippine Association of Free Labor Unions (Paflu) v. Judge Gaudencio
Cloribel, [G.R. No. L-25878, March 28, 1969]
89. Alabang Country Club, Inc. v. NLRC, [G.R. No. 170287, February 14,
2008]
90. BPI v. BPI Employees Union-Davao Chapter-Federations of Unions in
BPI Unibank, [G.R. No. 164301, August 10, 2010]
91. Benguet Consolidated, Inc. v. BCI Employees and Workers Union-
PAFLU, [G.R. No. L-24711, April 30, 1968]
92. Associated Labor Unions (ALU) v. Ferrer-Calleja, [G.R. No. L-77282,
May 5, 1989]
93. Kiok Loy v. NLRC, [G.R. No. L-54334, January 22, 1986]
94. Complex Electronics Employees Association v. NLRC, [G.R. No. 121315,
July 19, 1999]
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SECOND DIVISION

G.R. No. 162419 July 10, 2007

PAUL V. SANTIAGO, petitioner,

vs.
CF SHARP CREW MANAGEMENT, INC., respondent.

DECISION

TINGA, J.:

At the heart of this case involving a contract between a seafarer, on one

hand, and the manning agent and the foreign principal, on the other, is this
erstwhile unsettled legal quandary: whether the seafarer, who was prevented
from leaving the port of Manila and refused deployment without valid reason
but whose POEA-approved employment contract provides that the employer-
employee relationship shall commence only upon the seafarer’s actual
departure from the port in the point of hire, is entitled to relief?

This treats of the petition for review filed by Paul V. Santiago (petitioner)
assailing the Decision and Resolution of the Court of Appeals dated 16
October 2003 and 19 February 2004, respectively, in CA-G.R. SP No. 68404.1

Petitioner had been working as a seafarer for Smith Bell Management, Inc.
(respondent) for about five (5) years.2 On 3 February 1998, petitioner signed
a new contract of employment with respondent, with the duration of nine (9)
months. He was assured of a monthly salary of US$515.00, overtime pay and
other benefits. The following day or on 4 February 1998, the contract was
approved by the Philippine Overseas Employment Administration (POEA).
Petitioner was to be deployed on board the "MSV Seaspread" which was
scheduled to leave the port of Manila for Canada on 13 February 1998.

A week before the scheduled date of departure, Capt. Pacifico Fernandez,

respondent’s Vice President, sent a facsimile message to the captain of "MSV
Seaspread," which reads:

I received a phone call today from the wife of Paul Santiago in Masbate
asking me not to send her husband to MSV Seaspread anymore. Other
callers who did not reveal their identity gave me some feedbacks that
Paul Santiago this time if allowed to depart will jump ship in Canada like
his brother Christopher Santiago, O/S who jumped ship from the C.S.
Nexus in Kita-kyushu, Japan last December, 1997.

We do not want this to happen again and have the vessel penalized like
the C.S. Nexus in Japan.

Forewarned is forearmed like his brother when his brother when he was
applying he behaved like a Saint but in his heart he was a serpent. If
you agree with me then we will send his replacement.

Kindly advise.3

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To this message the captain of "MSV Seaspread" replied:

Many thanks for your advice concerning P. Santiago, A/B. Please cancel
plans for him to return to Seaspread.4

On 9 February 1998, petitioner was thus told that he would not be leaving
for Canada anymore, but he was reassured that he might be considered for
deployment at some future date.

Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees
against respondent and its foreign principal, Cable and Wireless (Marine)
Ltd.5 The case was raffled to Labor Arbiter Teresita Castillon-Lora, who ruled
that the employment contract remained valid but had not commenced since
petitioner was not deployed. According to her, respondent violated the rules
and regulations governing overseas employment when it did not deploy
petitioner, causing petitioner to suffer actual damages representing lost
salary income for nine (9) months and fixed overtime fee, all amounting to
US$7, 209.00.

The labor arbiter held respondent liable. The dispositive portion of her
Decision dated 29 January 1999 reads:

WHEREFORE, premises considered, respondent is hereby Ordered to pay

complainant actual damages in the amount of US$7,209.00 plus 10%
attorney's fees, payable in Philippine peso at the rate of exchange
prevailing at the time of payment.

All the other claims are hereby DISMISSED for lack of merit.

SO ORDERED.6

On appeal by respondent, the National Labor Relations Commission (NLRC)

ruled that there is no employer-employee relationship between petitioner and
respondent because under the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean Going Vessels (POEA
Standard Contract), the employment contract shall commence upon actual
departure of the seafarer from the airport or seaport at the point of hire and
with a POEA-approved contract. In the absence of an employer-employee
relationship between the parties, the claims for illegal dismissal, actual
damages, and attorney’s fees should be dismissed.7 On the other hand, the
NLRC found respondent’s decision not to deploy petitioner to be a valid
exercise of its management prerogative.8 The NLRC disposed of the appeal in
this wise:

WHEREFORE, in the light of the foregoing, the assailed Decision dated

January 29, 1999 is hereby AFFIRMED in so far as other claims are
concerned and with MODIFICATION by VACATING the award of actual
damages and attorney’s fees as well as excluding Pacifico Fernandez as
party respondent.

SO ORDERED.9

7
Petitioner moved for the reconsideration of the NLRC’s Decision but his
motion was denied for lack of merit.10 He elevated the case to the Court of
Appeals through a petition for certiorari.

In its Decision11 dated 16 October 2003, the Court of Appeals noted that there
is an ambiguity in the NLRC’s Decision when it affirmed with modification the
labor arbiter’s Decision, because by the very modification introduced by the
Commission (vacating the award of actual damages and attorney’s fees),
there is nothing more left in the labor arbiter’s Decision to affirm.12

According to the appellate court, petitioner is not entitled to actual damages

because damages are not recoverable by a worker who was not deployed by
his agency within the period prescribed in

the POEA Rules.13 It agreed with the NLRC’s finding that petitioner’s non-
deployment was a valid exercise of respondent’s management
prerogative.14 It added that since petitioner had not departed from the Port
of Manila, no employer-employee relationship between the parties arose and
any claim for damages against the so-called employer could have no leg to
stand on.15

Petitioner’s subsequent motion for reconsideration was denied on 19

February 2004.16

The present petition is anchored on two grounds, to wit:

A. The Honorable Court of Appeals committed a serious error of law

when it ignored [S]ection 10 of Republic Act [R.A.] No. 8042 otherwise
known as the Migrant Worker’s Act of 1995 as well as Section 29 of the
Standard Terms and Conditions Governing the Employment of Filipino
Seafarers On-Board Ocean-Going Vessels (which is deemed
incorporated under the petitioner’s POEA approved Employment
Contract) that the claims or disputes of the Overseas Filipino Worker by
virtue of a contract fall within the jurisdiction of the Labor Arbiter of the
NLRC.

B. The Honorable Court of Appeals committed a serious error when it

disregarded the required quantum of proof in labor cases, which is
substantial evidence, thus a total departure from established
jurisprudence on the matter.17

Petitioner maintains that respondent violated the Migrant Workers Act and
the POEA Rules when it failed to deploy him within thirty (30) calendar days
without a valid reason. In doing so, it had unilaterally and arbitrarily
prevented the consummation of the POEA- approved contract. Since it
prevented his deployment without valid basis, said deployment being a
condition to the consummation of the POEA contract, the contract is deemed
consummated, and therefore he should be awarded actual damages,
consisting of the stipulated salary and fixed overtime pay.18 Petitioner adds
that since the contract is deemed consummated, he should be considered an
employee for all intents and purposes, and thus the labor arbiter and/or the
NLRC has jurisdiction to take cognizance of his claims.19
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Petitioner additionally claims that he should be considered a regular
employee, having worked for five (5) years on board the same vessel owned
by the same principal and manned by the same local agent. He argues that
respondent’s act of not deploying him was a scheme designed to prevent him
from attaining the status of a regular employee.20

Petitioner submits that respondent had no valid and sufficient cause to

abandon the employment contract, as it merely relied upon alleged phone
calls from his wife and other unnamed callers in arriving at the conclusion
that he would jump ship like his brother. He points out that his wife had
executed an affidavit21 strongly denying having called respondent, and that
the other alleged callers did not even disclose their identities to
respondent.22 Thus, it was error for the Court of Appeals to adopt the
unfounded conclusion of the NLRC, as the same was not based on substantial
evidence.23

On the other hand, respondent argues that the Labor Arbiter has no
jurisdiction to award petitioner’s monetary claims. His employment with
respondent did not commence because his deployment was withheld for a
valid reason. Consequently, the labor arbiter and/or the NLRC cannot
entertain adjudication of petitioner’s case much less award damages to him.
The controversy involves a breach of contractual obligations and as such is
cognizable by civil courts.24 On another matter, respondent claims that the
second issue posed by petitioner involves a recalibration of facts which is
outside the jurisdiction of this Court.25

There is some merit in the petition.

There is no question that the parties entered into an employment contract on

3 February 1998, whereby petitioner was contracted by respondent to render
services on board "MSV Seaspread" for the consideration of US$515.00 per
month for nine (9) months, plus overtime pay. However, respondent failed
to deploy petitioner from the port of Manila to Canada. Considering that
petitioner was not able to depart from the airport or seaport in the point of
hire, the employment contract did not commence, and no employer-
employee relationship was created between the parties.26

However, a distinction must be made between the perfection of the

employment contract and the commencement of the employer-employee
relationship. The perfection of the contract, which in this case coincided with
the date of execution thereof, occurred when petitioner and respondent
agreed on the object and the cause, as well as the rest of the terms and
conditions therein. The commencement of the employer-employee
relationship, as earlier discussed, would have taken place had petitioner been
actually deployed from the point of hire. Thus, even before the start of any
employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the
breach of which may give rise to a cause of action against the erring party.
Thus, if the reverse had happened, that is the seafarer failed or refused to be
deployed as agreed upon, he would be liable for damages.

9
Moreover, while the POEA Standard Contract must be recognized and
respected, neither the manning agent nor the employer can simply prevent
a seafarer from being deployed without a valid reason.

Respondent’s act of preventing petitioner from departing the port of Manila

and boarding "MSV Seaspread" constitutes a breach of contract, giving rise
to petitioner’s cause of action. Respondent unilaterally and unreasonably
reneged on its obligation to deploy petitioner and must therefore answer for
the actual damages he suffered.

We take exception to the Court of Appeals’ conclusion that damages are not
recoverable by a worker who was not deployed by his agency. The fact that
the POEA Rules27 are silent as to the payment of damages to the affected
seafarer does not mean that the seafarer is precluded from claiming the
same. The sanctions provided for non-deployment do not end with the
suspension or cancellation of license or fine and the return of all documents
at no cost to the worker. They do not forfend a seafarer from instituting an
action for damages against the employer or agency which has failed to deploy
him.

The POEA Rules only provide sanctions which the POEA can impose on erring
agencies. It does not provide for damages and money claims recoverable by
aggrieved employees because it is not the POEA, but the NLRC, which has
jurisdiction over such matters.

Despite the absence of an employer-employee relationship between

petitioner and respondent, the Court rules that the NLRC has jurisdiction over
petitioner’s complaint. The jurisdiction of labor arbiters is not limited to claims
arising from employer-employee relationships. Section 10 of R.A. No. 8042
(Migrant Workers Act), provides that:

Sec. 10. Money Claims. – Notwithstanding any provision of law to the

contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint,
the claims arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other
forms of damages. x x x [Emphasis supplied]

Since the present petition involves the employment contract entered into by
petitioner for overseas employment, his claims are cognizable by the labor
arbiters of the NLRC.

Article 2199 of the Civil Code provides that one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly
proved. Respondent is thus liable to pay petitioner actual damages in the
form of the loss of nine (9) months’ worth of salary as provided in the
contract. He is not, however, entitled to overtime pay. While the contract
indicated a fixed overtime pay, it is not a guarantee that he would receive
said amount regardless of whether or not he rendered overtime work. Even
though petitioner was "prevented without valid reason from rendering regular
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much less overtime service,"28 the fact remains that there is no certainty that
petitioner will perform overtime work had he been allowed to board the
vessel. The amount of US$286.00 stipulated in the contract will be paid only
if and when the employee rendered overtime work. This has been the tenor
of our rulings in the case of Stolt-Nielsen Marine Services (Phils.), Inc. v.
National Labor Relations Commission29 where we discussed the matter in this
light:

The contract provision means that the fixed overtime pay of 30% would
be the basis for computing the overtime pay if and when overtime work
would be rendered. Simply stated, the rendition of overtime work and
the submission of sufficient proof that said work was actually performed
are conditions to be satisfied before a seaman could be entitled to
overtime pay which should be computed on the basis of 30% of the
basic monthly salary. In short, the contract provision guarantees the
right to overtime pay but the entitlement to such benefit must first be
established. Realistically speaking, a seaman, by the very nature of his
job, stays on board a ship or vessel beyond the regular eight-hour work
schedule. For the employer to give him overtime pay for the extra hours
when he might be sleeping or attending to his personal chores or even
just lulling away his time would be extremely unfair and unreasonable.30

The Court also holds that petitioner is entitled to attorney’s fees in the
concept of damages and expenses of litigation. Attorney's fees are
recoverable when the defendant's act or omission has compelled the plaintiff
to incur expenses to protect his interest.31 We note that respondent’s basis
for not deploying petitioner is the belief that he will jump ship just like his
brother, a mere suspicion that is based on alleged phone calls of several
persons whose identities were not even confirmed. Time and again, this Court
has upheld management prerogatives so long as they are exercised in good
faith for the advancement of the employer’s interest and not for the purpose
of defeating or circumventing the rights of the employees under special laws
or under valid agreements.32 Respondent’s failure to deploy petitioner is
unfounded and unreasonable, forcing petitioner to institute the suit below.
The award of attorney’s fees is thus warranted.

However, moral damages cannot be awarded in this case. While respondent’s

failure to deploy petitioner seems baseless and unreasonable, we cannot
qualify such action as being tainted with bad faith, or done deliberately to
defeat petitioner’s rights, as to justify the award of moral damages. At most,
respondent was being overzealous in protecting its interest when it became
too hasty in making its conclusion that petitioner will jump ship like his
brother.

We likewise do not see respondent’s failure to deploy petitioner as an act

designed to prevent the latter from attaining the status of a regular
employee. Even if petitioner was able to depart the port of Manila, he still
cannot be considered a regular employee, regardless of his previous contracts
of employment with respondent. In Millares v. National Labor Relations
Commission,33 the Court ruled that seafarers are considered contractual
employees and cannot be considered as regular employees under the Labor
11
Code. Their employment is governed by the contracts they sign every time
they are rehired and their employment is terminated when the contract
expires. The exigencies of their work necessitates that they be employed on
a contractual basis.34

WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October

2003 and the Resolution dated 19 February 2004 of the Court of Appeals are
REVERSED and SET ASIDE. The Decision of Labor Arbiter Teresita D.
Castillon-Lora dated 29 January 1999 is REINSTATED with the
MODIFICATION that respondent CF Sharp Crew Management, Inc. is ordered
to pay actual or compensatory damages in the amount of US$4,635.00

representing salary for nine (9) months as stated in the contract, and
attorney’s fees at the reasonable rate of 10% of the recoverable amount.

SO ORDERED.

SECOND DIVISION

G.R. No. 152396 November 20, 2007

EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner,

vs.
THE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA, REGIONAL
DIRECTOR BRENDA A. VILLAFUERTE, ALEXANDER POCDING, FIDEL
BALANGAY, BUAGEN CLYDE, DENNIS EPI, DAVID MENDOZA, JR.,
GABRIEL TAMULONG, ANTON PEDRO, FRANCISCO PINEDA, GASTON
DUYAO, HULLARUB, NOLI DIONEDA, ATONG CENON, JR., TOMMY
BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY MINO,
ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO,
and P. C. DINTAN, respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 with prayer for the issuance of a temporary
restraining order or writ of preliminary injunction of the 29 May 2001
Decision2 and the 26 February 2002 Resolution3 of the Court of Appeals in
CA-G.R. SP No. 57653. The 29 May 2001 Decision of the Court of Appeals
affirmed the 4 October 1999 Order of the Secretary of Labor in OS-LS-04-4-
097-280. The 26 February 2002 Resolution denied the motion for
reconsideration.

The Facts

Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of

providing security services while private respondents are EBVSAI's
employees assigned to the National Power Corporation at Ambuklao Hydro
Electric Plant, Bokod, Benguet (Ambuklao Plant).

12
On 20 February 1996, private respondents led by Alexander Pocding
(Pocding) instituted a complaint4 for underpayment of wages against EBVSAI
before the Regional Office of the Department of Labor and Employment
(DOLE).

On 7 March 1996, the Regional Office conducted a complaint inspection at

the Ambuklao Plant where the following violations were noted: (1) non-
presentation of records; (2) non-payment of holiday pay; (3) non-payment
of rest day premium; (4) underpayment of night shift differential pay; (5)
non-payment of service incentive leave; (6) underpayment of 13th month
pay; (7) no registration; (8) no annual medical report; (9) no annual work
accidental report; (10) no safety committee; and (11) no trained first
aider.5 On the same date, the Regional Office issued a notice of
hearing6 requiring EBVSAI and private respondents to attend the hearing on
22 March 1996. Other hearings were set for 8 May 1996, 27 May 1996 and
10 June 1996.

On 19 August 1996, the Director of the Regional Office (Regional Director)

issued an Order, the dispositive portion of which reads:

WHEREFORE, premises considered, respondent EX-BATAAN

VETERANS SECURITY AGENCY is hereby ORDERED to pay the
computed deficiencies owing to the affected employees in the total
amount of SEVEN HUNDRED SIXTY THREE THOUSAND NINE
HUNDRED NINETY SEVEN PESOS and 85/PESOS within ten (10)
calendar days upon receipt hereof. Otherwise, a Writ of Execution shall
be issued to enforce compliance of this Order.

NAME DEFICIENCY
1. ALEXANDER POCDING P 36,380.85
2. FIDEL BALANGAY 36,380.85
3. BUAGEN CLYDE 36,380.85
4. DENNIS EPI 36,380.85
5. DAVID MENDOZA, JR. 36,380.85
6. GABRIEL TAMULONG 36,380.85
7. ANTON PEDRO 36,380.85
8. FRANCISCO PINEDA 36,380.85
9. GASTON DUYAO 36,380.85
10. HULLARUB 36,380.85
11. NOLI D[EO]NIDA 36,380.85
12. ATONG CENON, JR. 36,380.85
13. TOMMY BAUCAS 36,380.85
14. WILIAM PAPSONGAY 36,380.85
15. RICKY DORIA 36,380.85
16. GEOFREY MINO 36,380.85

13
17. ORLANDO R[IL]LASE 36,380.85
18. SIMPLICO TELLO 36,380.85
19. NOCES, M.G. 36,380.85
20. ALEJO, R.D. 36,380.85
21. D[I]NTAN, P.C. 36,380.85
TOTAL P 763,997.85

xxxx

SO ORDERED.7

EBVSAI filed a motion for reconsideration8 and alleged that the Regional
Director does not have jurisdiction over the subject matter of the case
because the money claim of each private respondent exceeded P5,000.
EBVSAI pointed out that the Regional Director should have endorsed the case
to the Labor Arbiter.

In a supplemental motion for reconsideration,9 EBVSAI questioned the

Regional Director's basis for the computation of the deficiencies due to each
private respondent.

In an Order10 dated 16 January 1997, the Regional Director denied EBVSAI's

motion for reconsideration and supplemental motion for reconsideration. The
Regional Director stated that, pursuant to Republic Act No. 7730 (RA
7730),11 the limitations under Articles 12912 and 217(6)13 of the Labor Code
no longer apply to the Secretary of Labor's visitorial and enforcement powers
under Article 128(b).14 The Secretary of Labor or his duly authorized
representatives are now empowered to hear and decide, in a summary
proceeding, any matter involving the recovery of any amount of wages and
other monetary claims arising out of employer-employee relations at the time
of the inspection.

EBVSAI appealed to the Secretary of Labor.

The Ruling of the Secretary of Labor

In an Order15 dated 4 October 1999, the Secretary of Labor affirmed with

modification the Regional Director's 19 August 1996 Order. The Secretary of
Labor ordered that the P1,000 received by private respondents Romeo Alejo,
Atong Cenon, Jr., Geofrey Mino, Dennis Epi, and Ricky Doria be deducted
from their respective claims. The Secretary of Labor ruled that, pursuant to
RA 7730, the Court's decision in the Servando16 case is no longer controlling
insofar as the restrictive effect of Article 129 on the visitorial and enforcement
power of the Secretary of Labor is concerned.

The Secretary of Labor also stated that there was no denial of due process
because EBVSAI was accorded several opportunities to present its side but
EBVSAI failed to present any evidence to controvert the findings of the
Regional Director. Moreover, the Secretary of Labor doubted the veracity and
authenticity of EBVSAI's documentary evidence. The Secretary of Labor noted

14
that these documents were not presented at the initial stage of the hearing
and that the payroll documents did not indicate the periods covered by
EBVSAI's alleged payments.

EVBSAI filed a motion for reconsideration which was denied by the Secretary
of Labor in his 3 January 2000 Order.17

EBVSAI filed a petition for certiorari before the Court of Appeals.

The Ruling of the Court of Appeals

In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and
affirmed the Secretary of Labor's decision. The Court of Appeals adopted the
Secretary of Labor's ruling that RA 7730 repealed the jurisdictional limitation
imposed by Article 129 on Article 128 of the Labor Code. The Court of Appeals
also agreed with the Secretary of Labor's finding that EBVSAI was accorded
due process.

The Court of Appeals also denied EBVSAI's motion for reconsideration in its
26 February 2002 Resolution.

Hence, this petition.

The Issues

This case raises the following issues:

1. Whether the Secretary of Labor or his duly authorized representatives

acquired jurisdiction over EBVSAI; and

2. Whether the Secretary of Labor or his duly authorized representatives

have jurisdiction over the money claims of private respondents which
exceed P5,000.

The Ruling of the Court

The petition has no merit.

On the Regional Director's Jurisdiction over EBVSAI

EBVSAI claims that the Regional Director did not acquire jurisdiction over
EBVSAI because he failed to comply with Section 11, Rule 14 of the 1997
Rules of Civil Procedure.18 EBVSAI points out that the notice of hearing was
served at the Ambuklao Plant, not at EBVSAI's main office in Makati, and that
it was addressed to Leonardo Castro, Jr., EBVSAI's Vice-President.

The Rules on the Disposition of Labor Standards Cases in the Regional

Offices19 (rules) specifically state that notices and copies of orders shall be
served on the parties or their duly authorized representatives at their last
known address or, if they are represented by counsel, through the
latter.20 The rules shall be liberally construed21 and only in the absence of any
applicable provision will the Rules of Court apply in a suppletory character.22

15
In this case, EBVSAI does not deny having received the notices of hearing.
In fact, on 29 March and 13 June 1996, Danilo Burgos and Edwina Manao,
detachment commander and bookkeeper of EBVSAI, respectively, appeared
before the Regional Director. They claimed that the 22 March 1996 notice of
hearing was received late and manifested that the notices should be sent to
the Manila office. Thereafter, the notices of hearing were sent to the Manila
office. They were also informed of EBVSAI's violations and were asked to
present the employment records of the private respondents for verification.
They were, moreover, asked to submit, within 10 days, proof of compliance
or their position paper. The Regional Director validly acquired jurisdiction
over EBVSAI. EBVSAI can no longer question the jurisdiction of the Regional
Director after receiving the notices of hearing and after appearing before the
Regional Director.

On the Regional Director's Jurisdiction over the Money Claims

EBVSAI maintains that under Articles 129 and 217(6) of the Labor Code, the
Labor Arbiter, not the Regional Director, has exclusive and original
jurisdiction over the case because the individual monetary claim of private
respondents exceeds P5,000. EBVSAI also argues that the case falls under
the exception clause in Article 128(b) of the Labor Code. EBVSAI asserts that
the Regional Director should have certified the case to the Arbitration Branch
of the National Labor Relations Commission (NLRC) for a full-blown hearing
on the merits.

In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:

While it is true that under Articles 129 and 217 of the Labor Code, the
Labor Arbiter has jurisdiction to hear and decide cases where the
aggregate money claims of each employee exceeds P5,000.00, said
provisions of law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his duly authorized
representatives.

Rather, said powers are defined and set forth in Article 128 of the Labor
Code (as amended by R.A. No. 7730) thus:

Art. 128 Visitorial and enforcement power. --- x x x

(b) Notwithstanding the provisions of Article[s] 129 and 217 of this

Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to [the labor
standards provisions of this Code and other] labor legislation based
on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs
of execution to the appropriate authority for the enforcement of
their orders, except in cases where the employer contests the
findings of the labor employment and enforcement officer and

16
raises issues supported by documentary proofs which were not
considered in the course of inspection.

xxxx

The aforequoted provision explicitly excludes from its coverage Articles

129 and 217 of the Labor Code by the phrase "(N)otwithstanding the
provisions of Articles 129 and 217of this Code to the contrary x x x"
thereby retaining and further strengthening the power of the Secretary
of Labor or his duly authorized representatives to issue compliance
orders to give effect to the labor standards provisions of said Code and
other labor legislation based on the findings of labor employment and
enforcement officer or industrial safety engineer made in the course of
inspection.23 (Italics in the original)

This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v.
Sensing,24 where we sustained the jurisdiction of the DOLE Regional Director
and held that "the visitorial and enforcement powers of the DOLE
Regional Director to order and enforce compliance with labor
standard laws can be exercised even where the individual claim
exceeds P5,000."

However, if the labor standards case is covered by the exception clause in

Article 128(b) of the Labor Code, then the Regional Director will have to
endorse the case to the appropriate Arbitration Branch of the NLRC. In order
to divest the Regional Director or his representatives of jurisdiction, the
following elements must be present: (a) that the employer contests the
findings of the labor regulations officer and raises issues thereon; (b) that in
order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of
inspection.25 The rules also provide that the employer shall raise such
objections during the hearing of the case or at any time after receipt of the
notice of inspection results.26

In this case, the Regional Director validly assumed jurisdiction over the
money claims of private respondents even if the claims exceeded P5,000
because such jurisdiction was exercised in accordance with Article 128(b) of
the Labor Code and the case does not fall under the exception clause.

The Court notes that EBVSAI did not contest the findings of the labor
regulations officer during the hearing or after receipt of the notice of
inspection results. It was only in its supplemental motion for reconsideration
before the Regional Director that EBVSAI questioned the findings of the labor
regulations officer and presented documentary evidence to controvert the
claims of private respondents. But even if this was the case, the Regional
Director and the Secretary of Labor still looked into and considered EBVSAI's
documentary evidence and found that such did not warrant the reversal of
the Regional Director's order. The Secretary of Labor also doubted the
veracity and authenticity of EBVSAI's documentary evidence. Moreover, the
pieces of evidence presented by EBVSAI were verifiable in the normal course
of inspection because all employment records of the employees should be

17
kept and maintained in or about the premises of the workplace, which in this
case is in Ambuklao Plant, the establishment where private respondents were
regularly assigned.27

WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001

Decision and the 26 February 2002 Resolution of the Court of Appeals in CA-
G.R. SP No. 57653.

SO ORDERED.

FIRST DIVISION

G.R. No. 85934 January 30, 1990

SSK PARTS CORPORATION, petitioner,

vs.
TEODORICO CAMAS and SECRETARY OF LABOR &
EMPLOYMENT, respondents.

G.R. No. 85935 January 30, 1990

SSK PARTS CORPORATION, petitioner,

vs.
SSK-OLALIA and/ or RIC DURAN and SECRETARY OF LABOR &
EMPLOYMENT, respondents.

G.R. No. 85936 January 30, 1990

IN RE: ROUTINE INSPECTION AT SSK PARTS CORP., BGY. PULO

CABUYAO, LAGUNA.

Emiliano S. Samson, R. Balderrama-Samson and Mary Anne B. Sam for

petitioner.
Armamento & Cabana for SSK employees' union.

GRIÑO-AQUINO, J.:

This is a petition for review on certiorari of the decision dated November 16,
1988 of the Department of Labor and Employment, affirming the Order of the
Regional Director dated January 11, 1988 in three consolidated cases filed
against the petitioner: (1) by Teodorico Camas for illegal deductions; (2) for
underpayment of wages, non-payment of legal holiday pay and service
incentive leave filed by the union in behalf of its members; and (3) for non-
payment of employees' service incentive leave, underpayment of allowance,
overtime pay, premium pay, and non-payment of two (2) regular holidays in
December which were discovered upon routine inspection conducted by the
labor regulation officers.

After the parties had submitted their position papers and evidence, the
Regional Director issued an order on January 11, 1988, the dispositve portion
of which reads thus:

WHEREFORE, premises considered, an Order is hereby entered:

18
a) Ordering respondent [herein petitioner] to refund to complainant
Teodorico Camas the amount of Seven Hundred and Seventy Five Pesos
(P775.00) having been illegally deducted from his salaries; and

b) Ordering respondent to pay individual claimants in the second case

their unpaid overtime pay, legal holiday pay, living allowance and
service incentive leave within ten (10) days from receipt hereof,
otherwise a writ of execution shall be issued for the enforcement of this
Order. (p. 92, Rollo.)

Petitioner's appeal to the Secretary of Labor was dismissed by the latter.

Hence, this petition for certiorari in which the petitioner alleges:

1. that the Regional Director has no jurisdiction over its employees'

claims; and

2. that it (petitioner) was denied due process.

The petition is devoid of merit. The jurisdiction of the Regional Director over
claims for violation of labor standards is conferred by Article 128-B of the
Labor Code, as amended by Executive Order No. 111 of March 26,1987 which
provides that:

(b) The Provisions of Article 217 of this Code to the contrary

notwithstanding and in cases where the relationship of employer-
employee still exists, the Minister of Labor and Employment or his duly
authorized representatives shall have the power to order and
administer, after due notice and hearing, compliance with the labor
standards provisions of this Code and other labor legislation based on
the findings of labor regulation officers or industrial safety engineers
made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor regulation
officer and raises issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the normal course of
inspections. (Emphasis supplied.)

The jurisdiction of the Regional Director over employees' claims for wages
and other monetary benefits not exceeding P5,000 has been affirmed by
Republic Act No. 6715, amending Article 129 of the Labor Code as follows:

Art. 129. Recovery of wages, simple money claims and other benefits.
— Upon complaint of any interested party, the Regional Director of the
Department of Labor and Employment or any of the duly authorized
hearing officers of the Department is empowered, through summary
proceeding and after due notice, to hear and decide any matter involving
the recovery of wages and other monetary claims and benefits, including
legal interest, owing to an employee or person employed in domestic or
household service or househelper under this Code, arising from
employer-employee relations: Provided, that such complaint does not
include a claim for reinstatement: Provided, further, That the aggregate
money claims of each employee or househelper do not exceed five
19
thousand pesos (P5,000.00). The Regional Director or hearing officer
shall decide or resolve the complaint within thirty (30) calendar days
from the date of the filing of the same.

Being a curative statute, Republic Act No. 6715 may be given retroactive
effect if, as in this case, no vested rights would be impaired (DBP vs. Court
of Appeals, 96 SCRA 342; Santos vs. Duata, 14 SCRA 1041; Briad-Agro Dev.
Corp. vs. De la Serna, et al., G.R. No. 82805, Nov. 9,1989).

Under the exception clause in Article 128 (b) of the Labor Code, the Regional
Director may not be divested of his jurisdiction over these claims, unless
three (3) elements concur, namely: (a) that the petitioner (employer)
contests the findings of the labor regulation officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary
matters; and (c) that such matters are not verifiable in the normal course of
inspection.

In this case, although the petitioner contested the Regional Director's finding
of violations of labor standards committed by the petitioner, that issue was
resolved by an examination of evidentiary matters which were verifiable in
the ordinary course of inspection. Hence, there was no need to indorse the
case to the appropriate arbitration branch of the National Labor Relations
Commission (NLRC) for adjudication (Sec. 2, Rules Implementing Executive
Order 111).

The petitioner's allegation that it was denied due process is not well taken.
The petitioner actively participated in the proceedings a quo by filing its
answer to the complaint, presenting a position paper to the Regional Director,
submitting evidence in support of its claim, and appealing the decision of the
Regional Director to the Secretary of Labor. Each of those steps was a part
and parcel of its right to due process.1âwphi1 As the petitioner had all those
opportunities to be heard, it may not complain that it was denied due process
(People vs. Retamia, 95 SCRA 201; Divine Word High School vs. NLRC, 143
SCRA 346; Municipality of Daet vs. Hidalgo Enterprises, Inc., 138 SCRA 265).

WHEREFORE, the petition for certiorari is dismissed for lack of merit.

SO ORDERED.

20
[G.R. NO. 160859 : July 30, 2008]

BAY HAVEN, INC., JOHNNY T. CO, and VIVIAN TE-

FERNANDEZ, Petitioners, v. FLORENTINO ABUAN, JOSELITO RAZON,
JERRY ASENSE, HERCULES RICAFUENTE, MARIO GURAY, ROLANDO
NAELGA, JUAN VILLARUZ, MARIO SANTIAGO, ROGELIO MOCORRO,
CALPITO MENDOLES, RENE CORALES, FRANCISCO ABENTAJADO,
BONNIE ESPAÑOLA, ERNESTO DE JESUS and RODRIGO
RUZGAL, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of

Court, seeking a reversal of the Decision1 of the Court of Appeals (CA) dated
July 15, 2003, which denied the Petition for Certiorari filed by Bay Haven,
Inc., Johnny T. Co and Vivian Te-Fernandez (Te) (petitioners) seeking the
annulment of the Resolutions dated April 18, 2000 and September 19, 2001,
issued by Undersecretary Jose M. Español, Jr. (DOLE Undersecretary) and
Secretary Patricia Sto. Tomas (DOLE Secretary), respectively, of the
Department of Labor and Employment (DOLE), as well as the
Resolution2 dated November 5, 2003 of the CA, which denied petitioners'
motion for reconsideration.

The following are the antecedent facts.

Upon complaint of Florentino Abuan, one of herein respondents, the DOLE, in

the exercise of its visitorial, inspection and enforcement powers, through its
Regional Director for the National Capital Region (NCR), issued an Order
dated November 7, 1997 commanding petitioners to pay respondents a total
of P638,187.15 corresponding to the latter's claims for underpayment as
petitioners' workers.3

The Regional Director based his Order on the results of the inspection
conducted on April 23, 1997 by one of its inspectors who found that petitioner
New Bay Haven Restaurant, located at the Army and Navy Club, Kalaw St.,
Manila, under the ownership or management of petitioner Te, committed the
following violations:

Labor Standards Law:

1. Underpayment of minimum wage.

2. Underpayment of thirteenth month pay.

3. Underpayment of regular holiday pay.

4. Underpayment of special holiday pay.

5. Non-payment of night shift differential pay.

Occupational Safety and Health Standards.

21
1. Non-registration of the firm under Rule 1020 of OSHS.4

On December 18, 1997, New Bay-Haven Restaurant and its co-petitioner Te

filed with the DOLE-NCR Regional Office a Motion for Reconsideration of the
November 7, 1997 order, alleging that the office had no jurisdiction over the
case and that the order was issued in denial of petitioners' right to due
process.5 They argued that jurisdiction over the case was lodged with the
National Labor Relations Commission (NLRC), and not the DOLE-NCR, due to
the amount of the claims involved. They added that their right to due process
was also denied because the order was issued without them being furnished
copies of the complaint and the inspection report and without being notified
of the hearings held in the case.6

On June 16, 1998, the DOLE-NCR Assistant Regional Director, acting for the
Regional Director, issued an Order granting petitioners' motion for
reconsideration as he found merit in petitioners' allegation of absence of due
process in the issuance of the first order.7 The order, however, stated that
the DOLE had jurisdiction over the case, pursuant to the Labor Code, as
amended by Republic Act (R.A.) No. 7730, that intends to strengthen the
visitorial and enforcement powers of the Secretary of Labor and
Employment.8 Consequently, another hearing for the case was set.

During the hearing on September 14, 1998, petitioners submitted their

Position Paper attaching thereto payroll sheets and waivers and quitclaims
allegedly signed by the respondents to prove that petitioner properly paid
respondents the amounts due them.9

Respondents Florentino Abuan, Francisco Abentajado, Mario Guray, Juan

Villaruz, Jerry Asense and Joselito Razon, however, outrightly denied the
validity of the payroll sheets and quitclaims. In their Joint Affidavit dated
October 29, 1998, respondents claimed that the actual daily pay they
received was much smaller than the amounts stated in the payroll and they
denied having received the cash amount stated in the quitclaims.10 They
added that they were merely forced to sign the payrolls and quitclaims in
blank and in one sitting after they were accepted as applicants for their
positions.11

On December 29, 1998, the DOLE-NCR Regional Director, giving credence to

the affidavit of the respondents denying the validity of the payroll sheets and
quitclaims, issued an Order denying petitioners' motion for reconsideration of
the Order dated November 7, 1997.12 The Order held petitioners New Bay
Haven Restaurant, Bay Haven, Inc., its President Johnny T. Co, and/or Vivian
Te as the ones liable as employers of respondents. However, the liability of
petitioners was reduced to P468,444.16.13

On January 18, 1999, petitioners filed a Motion for Reconsideration of the

Order dated December 29, 1998.14 In the motion, petitioners insisted that
their documentary evidence proved that their obligations to respondents had
been discharged and that the DOLE had no jurisdiction over the case.15

Treating the motion for reconsideration as an appeal, the DOLE

Undersecretary issued a Resolution dated April 18, 2000, denying the appeal
22
filed by petitioners,16 upholding the Regional Director's finding that the
quitclaims could not be relied upon to deny respondents' claims, and
reiterating that the DOLE had jurisdiction to decide the case.17

On May 12, 2000, petitioners filed a Motion for Reconsideration18 of the April
18, 2000 Resolution which was denied by DOLE Secretary Sto. Tomas in a
Resolution19 dated September 19, 2001.

Aggrieved, petitioners filed a Petition for Certiorari under Rule 65 of the Rules
of Court with the CA, seeking to annul and set aside the April 18, 2000
Resolution and the September 19, 2001 Resolution,20 docketed as CA-G.R.
No. 68397.

On July 15, 2003, the CA rendered its Decision,21 dismissing the petition,
ruling that the DOLE had jurisdiction over the labor standards case and that
petitioners did not present enough evidence to refute the claims made by
respondents.

Petitioners filed a Motion for Reconsideration of the Decision which the CA

denied in its Resolution22 dated November 5, 2003.

Hence, herein petition assigning the following errors of the CA:

1. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND

REVERSIBLE ERROR WHEN IT UPHELD THE JURISDICTION OF THE REGIONAL
DIRECTOR FOR THE NATIONAL CAPITAL REGION OF THE DEPARTMENT OF
LABOR AND EMPLOYMENT IN CASE NO. NCR-00-9703-RI-048-SPL ENTITLED
FLORENTINO ABUAN, ET AL., COMPLAINANTS VERSUS NEW BAY HAVEN
RESTAURANT, ET AL., RESPONDENTS; AND THE APPELLATE JURISDICTION
OF THE OFFICE OF THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT IN CASE NO. OS-LS-005-019-099.

2. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND

REVERSIBLE ERROR WHEN IT SUSTAINED THE RULING OF THE REGIONAL
DIRECTOR OF DOLE-NCR AND THE OFFICE OF THE SECRETARY OF THE DOLE
WHICH DECLARED THAT RESPONDENTS CALPITO MENDOLES AND RENE
CORALES ARE EMPLOYEES OF BAY HAVEN, INC., DESPITE LACK OF
EVIDENCE TO SUPPORT THE RULING ON THE EXISTENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP.

3. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND

REVERSIBLE ERROR WHEN IT UPHELD THE MONETARY AWARD
OF P25,952.83 TO RESPONDENT ROLANDO NAELGA WHO WAS NOT ONE OF
THOSE WHOSE CLAIMS WAS [sic] MADE THE SUBJECT OF THE FINDINGS OF
THE LABOR AND [sic] EMPLOYMENT AND ENFORCEMENT OFFICER OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT.

4. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND

REVERSIBLE ERROR WHEN IT SUSTAINED THE AWARD OF OVERTIME PAY
DESPITE ABSENCE OF EVIDENCE TO SHOW THAT OVERTIME WORK HAD
INDEED BEEN RENDERED.

23
Respondents did not file a comment on the petition, but instead filed a
Memorandum23 simultaneous with petitioners' filing of their Memorandum.24

In their Memorandum, respondents aver that the decision of the DOLE-NCR,

as upheld by the DOLE Secretary, was rendered in the exercise of its
jurisdiction, specifically its visitorial and enforcement powers as conferred by
law.25 They also allege that petitioners were given the opportunity to present
evidence to refute respondents' claims, but failed to do so.26

We summarize the issues as follows: 1) whether the DOLE Secretary and her
authorized representatives have jurisdiction to impose the monetary liability
against petitioners; and 2) whether the DOLE-NCR, as upheld by the DOLE
Secretary and the CA committed an error in awarding the claims of
respondents.

We deny the petition.

The DOLE Secretary and her authorized representatives such as the DOLE-
NCR Regional Director, have jurisdiction to enforce compliance with labor
standards laws under the broad visitorial and enforcement powers conferred
by Article 128 of the Labor Code, and expanded by R.A. No. 7730, to wit:

Art. 128. Visitorial and Enforcement Power. -

(a) The Secretary of Labor and Employment or his duly authorized

representatives, including labor regulation officers, shall have access to
employer's records and premises at any time of the day or night whenever
work is being undertaken therein, and the right to copy therefrom, to
question any employee and investigate any fact, condition or matter which
may be necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this

Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the
findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his
duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proofs which
were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of

Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Secretary of Labor and
24
Employment and Employment in the amount equivalent to the monetary
award in the order appealed from. (Emphasis supplied) cralawlibrary

The Court has held that the visitorial and enforcement powers of the
Secretary, exercised through his representatives, encompass compliance
with all labor standards laws and other labor legislation, regardless of the
amount of the claims filed by workers.27 This has been the rule since R.A. No.
7730 was enacted on June 2, 1994, amending Article 128(b) of the Labor
Code, to expand the visitorial and enforcement powers of the DOLE
Secretary. Under the former rule, the DOLE Secretary had jurisdiction only in
cases where the amount of the claim does not exceed P5,000.00.

Petitioners argue, however, that DOLE-NCR should not have taken

jurisdiction of the case, because in respondent Abuan's complaint, one of the
entries reads as follows:

Is there anything that the Department of Labor and Employment can do to

be of further assistance to you?cralawred

[Answer:] Illegal dismissal, no overtime, no holiday pay.28

Petitioners contend that the complaint's own allegation of illegal dismissal

meant that no more employer-employee relationship existed between
petitioners and respondents, depriving DOLE-NCR and the Secretary of Labor
and Employment of jurisdiction to entertain the complaint.29 This allegedly is
a requirement under Art. 128(b) of the Labor Code, hereinbefore quoted.

Petitioners' contentions are untenable. While it may be true that as far as

respondent Abuan is concerned, his allegation of illegal dismissal had
deprived the DOLE of jurisdiction as per Art. 217 of the Labor Code,30 the
same does not hold for the rest of the respondents, who do not claim to have
been illegally dismissed. For one, petitioners failed to raise this matter with
the Regional Director or even the DOLE Secretary, thus, preventing the issue
from being clarified.

The records also clearly indicate that the Regional Director and the DOLE
Secretary resolved the case based only on the following violations found by
the labor inspection officer, which do not include illegal dismissal, thus:

1. Underpayment of minimum wage.

2. Underpayment of thirteenth month pay.

3. Underpayment of regular holiday pay.

4. Underpayment of special holiday pay.

5. Non-payment of night shift differential pay.

6. Non-registration of the firm under Rule 1020 of OSHS.

The above-mentioned violations are within the jurisdiction of the DOLE

Secretary and his representatives to address. The questioned Orders dated
25
December 29, 1998, April 18, 2000 and September 19, 2001 did not mention
illegal dismissal, and properly so, because there was no such finding in the
inspector's report.31 Being in the nature of compliance orders, said orders,
under Art. 128(b) of the Labor Code, are strictly based on "the findings of
labor employment and enforcement officers x x x made in the course of
inspection," and not on any complaint filed. Though a complaint may initiate
the case or an inspection, its allegations may not necessarily be upheld by
the labor inspector or the Regional Director.

Moreover, Abuan's allegation of illegal dismissal was his personal accusation,

and did not necessarily apply to all the other employees. The records also do
not support a contrary finding. But Abuan's other allegations of
underpayment and other potential violations of labor laws and regulations
were within the obligation of the Regional Director to investigate, especially
insofar as they affect Abuan's remaining co-workers. Under Art. 128, the
Regional Director can conduct inspections and check all violations of labor
laws, and enforce compliance measures for the benefit of all employees,
without being compelled to rely on a complaint that has been filed or its
allegations. In fact, the article is silent on whether the filing of a complaint is
even required to initiate the exercise of the inspection and enforcement
powers.

Petitioners also insinuate that they were effectively denied due process at the
earlier stages of the controversy, as they claim that during the inspection,
the inspector "did not even bother to talk to any them."32 Again, petitioners
are raising serious, factual allegations in this late stage of their appeal. They
never mentioned this alleged infraction in the very first motion they filed or
in their Motion for Reconsideration33 of the Regional Director's Order dated
November 7, 1997. Neither did they raise it in their Position Paper34 dated
September 14, 1998, depriving the concerned officer, that is, the labor
inspector, of the chance to deny or refute such serious allegations.

Petitioners themselves cannot deny that due process was afforded them after
the inspection. For one thing, their motion for reconsideration of the Order
dated November 7, 1997 was granted, which resulted in the re-opening of
the proceedings and the holding of subsequent hearings. In these hearings,
petitioners were given the chance to air their side. Petitioners also submitted
their position paper, in which they summarized all their arguments and
presented their documentary evidence, such as a contract of lease, payroll
sheets and quitclaims, to refute the respondents' claims, as well as the
inspector's findings. In the petition now before us, petitioners themselves
claim that they seasonably contested the findings of the labor
inspector.35 Taking all these into consideration, the ineluctable conclusion is
that the demands of due process were satisfied, as petitioners had been given
all the opportunity to be heard. It has been held that where opportunity to
be heard, either through oral arguments or pleadings, is accorded, there is
no denial of due process.36

Next, petitioners argue that the regional director was divested of jurisdiction
because petitioners contested the findings of the labor inspection officer.

26
This, allegedly, is in accordance with Art. 128(b) of the Labor Code, which
states:

Art. 128. Visitorial and Enforcement Power. -

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give effect
to the labor standards provisions of this Code and other labor legislation
based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection. The Secretary
or his duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor employment
and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.

x x x x (Emphasis supplied) cralawlibrary

Again, petitioners fail to persuade. The mere disagreement by the employer

with the findings of the labor officer, or the simple act of presenting
controverting evidence, does not automatically divest the DOLE Secretary or
any of his authorized representatives such as the regional directors, of
jurisdiction to exercise their visitorial and enforcement powers under the
Labor Code.

Under prevailing jurisprudence, the so-called exception clause in Art. 128(b)

of the Labor Code has the following elements, which must all concur to divest
the regional director of jurisdiction over workers' claims:

(a) that the employer contests the findings of the labor regulations officer
and raises issues thereon;

(b) that in order to resolve such issues, there is a need to examine evidentiary
matters; and cralawlibrary

(c) that such matters are not verifiable in the normal course of inspection.37

Thus, in SSK Parts Corporation v. Camas,38 in which the employer contested

the Regional Director's finding of violations of labor standards, but such issue
was resolved by an examination of evidentiary matters which were verifiable
in the ordinary course of inspection, it was held that there was no more need
to indorse the case to the arbitration branch of the NLRC. In Ex-Bataan
Veterans Security Agency, Inc. v. Secretary of Labor,39 the Court held:

The Court notes that EBVSAI did not contest the findings of the labor
regulations officer during the hearing or after receipt of the notice of
inspection results. It was only in its supplemental motion for reconsideration
before the Regional Director that EBVSAI questioned the findings of the labor
regulations officer and presented documentary evidence to controvert the
claims of private respondents. But even if this was the case, the Regional

27
Director and the Secretary of Labor still looked into and considered
EBVSAI's documentary evidence and found that such did not warrant
the reversal of the Regional Director's order. The Secretary of Labor
also doubted the veracity and authenticity of EBVSAI's documentary
evidence. Moreover, the pieces of evidence presented by EBVSAI
were verifiable in the normal course of inspection because all
employment records of the employees should be kept and maintained in or
about the premises of the workplace, which in this case is in Ambuklao Plant,
the establishment where private respondents were regularly
assigned. (Emphasis supplied)
40
cralawlibrary

Thus, the key requirement for the Regional Director and the DOLE Secretary
to be divested of jurisdiction is that the evidentiary matters are not verifiable
in the course of inspection. Where the evidence presented was verifiable in
the normal course of inspection, even if presented belatedly by the employer,
the Regional Director, and later the DOLE Secretary, may still examine them;
and these officers are not divested of jurisdiction to decide the case.

In the present case, petitioners' pieces of evidence of the alleged contract of

lease, payroll sheets, and quitclaims were all verifiable in the normal course
of inspection and, granting that they were not examined by the labor
inspector, they have nevertheless been thoroughly examined by the Regional
Director and the DOLE Secretary. For these reasons, the exclusion clause of
Art. 128(b) does not apply.

In addition, the findings of the said officers on the invalidity or low probative
value of these documents are findings of a factual nature which this Court
will accord with great respect.41

As to the quitclaims, we need only to reiterate the policy laid down in AFP
Mutual Benefit Association, Inc. v. AFP-MBAI-EU,42 which states:

In labor jurisprudence, it is well established that quitclaims and/or complete

releases executed by the employees do not estop them from pursuing their
claims arising from the unfair labor practice of the employer. The basic reason
for this is that such quitclaims and/or complete releases are against public
policy and, therefore, null and void. The acceptance of termination pay does
not divest a laborer of the right to prosecute his employer for unfair labor
practice acts. (Cariño v. ACCFA, L-19808, September 29, 1966, 18 SCRA
163; Philippine Sugar Institute v. CIR, L-13475, September 29, 1960, 109
Phil. 452; Mercury Drug Co. v. CIR, L-23357, April 30, 1974, 56 SCRA 694,
704)

In the Cariño case, supra, the Supreme Court, speaking thru Justice
Sanchez, said:

Acceptance of those benefits would not amount to estoppel. The reason is

plain. Employer and employee, obviously, do not stand on the same footing.
The employer drove the employee to the wall. The latter must have to get
hold of money. Because, out of job, he had to face the harsh necessities of
life. He thus found himself in no position to resist money proffered. His, then,
is a case of adherence, not of choice. One thing sure, however, is that
28
petitioners did not relent their claim. They pressed it. They are deemed not
to have waived any of their rights. Renuntiatio non praesumitur.

The principle enunciated above, however, should benefit only the

respondents in the present case who outrightly denied the quitclaims'
validity, because it may be supposed that those who did not protest
petitioners' presentation of the quitclaims in evidence have admitted the
same by their silence.43 In such instance, only respondents Francisco
Abentajado, Mario Guray, Juan Villaruz, Jerry Asense and Joselito Razon are
deemed to have blocked the quitclaims' applicability against them.44

Anent the second issue, petitioners contend that the Regional Director and
the DOLE Secretary committed error in their award of the various claims of
respondents, specifically citing the award to certain respondents whom they
deny having worked as their employees. chanrobles virtual law library

Here, there is merit in petitioners' contentions. Although the basic rule is that
questions of facts like this may not be addressed in a Petition for Review,
there are certain exceptions, such as when the judgment is based on a
misapprehension of facts.45 At the earliest possible opportunity, that is, as
early as the position paper filed on September 14, 1998, petitioners already
denied being the employers of the respondents Calpito Mendoles and Rene
Corales. Later, in their Motion for Reconsideration46 dated January 8, 2004,
petitioners also disclaimed liability to Rolando Naelga, who was not in the
labor inspector's and Regional Director's original list of petitioners' workers
and against whom petitioners were not afforded the chance to present
countervailing evidence. Since then, petitioners have consistently denied
liability as employers of these respondents. These respondents, however, not
only failed to controvert this denial by petitioners, they also did not
participate in the proceedings of the case, as shown by the records. Thus,
there was a failure to prove the existence of an employer-employee
relationship between petitioners and these particular respondents.
Respondents could have easily proven their relationship by presenting any of
the following: their appointment letters or employment contracts, payrolls,
organization charts, Social Security System registration, personnel list, as
well as the testimonies of co-employees to confirm their status,47 but failed
to do so. We can only conclude, therefore, that there is no substantial
evidence to prove petitioners' obligations to these respondents.

However, we do not sustain petitioners' allegation that the Regional Director

and the DOLE Secretary erroneously awarded overtime pay to the
respondents, despite the lack of proof that overtime work had been rendered.
Suffice it to state that petitioners' own evidence, which are the payroll sheets
they submitted to the Regional Director,48 show that respondents indeed
rendered overtime work. This amounts to an admission by petitioners, which
may be used in evidence against them.49 Aptly, this then became one of the
bases of the Regional Director's award of overtime pay to respondents.

In summary, we hold that only the awards granted to the following

respondents be affirmed:

29
1. Juan Villaruz

2. Francisco Abentajado

3. Jerry Asense

4. Mario Guray

5. Joselito Razon

The award in favor of Florentino Abuan is deleted, as his claim for illegal
dismissal is within the original and exclusive jurisdiction of the Labor Arbiter,
and outside of the jurisdiction of the DOLE Secretary and the Regional
Director. The awards granted to the rest of the respondents are likewise
deleted for lack of evidence to prove petitioners' liability as to them.

WHEREFORE, the decision appealed from is AFFIRMED, with

the MODIFICATION that only respondents Juan Villaruz, Francisco
Abentajado, Jerry Asense, Mario Guray, and Joselito Razon
be GRANTED their monetary awards while the awards given to the rest of
the respondents are DELETED.

No costs.

SO ORDERED.

30
EN BANC

[G.R. No. 72247. April 10, 1992.]

RED V COCONUT PRODUCTS, LTD., Petitioner, v. HON. VICENTE

LEOGARDO, JR., in his capacity as Deputy Minister of Labor, and
FREE WORKERS OF THE COCONUT INDUSTRY - UNITED LUMBER
AND GENERAL WORKERS OF THE PHILIPPINES (FWCI-
ULGWP), Respondents.

Angara, Abello, Concepcion, Regala & Cruz for Petitioner.

Magbanua, Martelino, Mapili & Associates for Private Respondents.

SYLLABUS

1. LABOR LAWS; JURISDICTIONS OF LABOR ARBITERS AND REGIONAL

DIRECTORS OVER MONEY CLAIMS OF EMPLOYEES AGAINST EMPLOYERS;
RULE. — The Court’s recent resolution in the case of Servando’s Incorporated
v. the Secretary of Labor and Employment, (G.R. No. 85840, June 5, 1991,
198 SCRA 156) reiterated in Aboitiz Shipping Corporation v. de la Serna,
(G.R. No. 88538, July 25, 1991, 199 SCRA 568) is controlling in the present
case, particularly on the issue of jurisdictions of Labor Arbiters and Regional
Directors over money claims of employees against employers. In these said
cases, the Court ruled that the original and exclusive jurisdiction to hear and
decide employee’s money claims arising from employer-employee relations
exceeding the aggregate amount of P5,000 for each employee is vested in
the Labor Arbiter (Art. 217 (a), (b), Labor Code as amended) and this is
confirmed by the provisions of Art. 129 of the same Code, which excludes
from the jurisdiction of the Regional Director or any hearing officer of the
Department of Labor and Employment (DOLE) the power to hear and decide
claims of employees arising from employer-employee relations exceeding the
amount of P5,000.00 for each employee.

2. ID.; ID.; INSTANCE WHEN REGIONAL DIRECTOR DIVESTED OF

JURISDICTION. — The only instance when the Regional Director may be
divested of such jurisdiction is when under Art. 128 (b) of the Labor Code,
the following three (3) circumstances concur, to wit: (a) the petitioner
(employer) contests the findings of the labor regulations officer and raises
issues thereon: (b) that in order to resolve such issue, there is a need to
examine evidentiary matters; and (c) that such matters are not verifiable in
the normal course of inspection. (SSK Parts Corp. v. Camas, G.R. No. 85934,
Jan. 30, 1990, 181 SCRA 675)

3. ID.; ID.; ID.; CASE AT BAR FALLS WITHIN EXCEPTION (ARTICLE 128 (b)
OF THE LABOR CODE). — The case before Us clearly falls within the
exception. (Article 128 (b) of the Labor Code). The issue presented by
petitioner — how Wage Order No. 2 should be interpreted and applied, will

31
necessitate the examination of evidentiary matters not verifiable in the
normal course of inspection.

DECISION

PARAS, J.:

Petitioner is a private corporation duly organized and existing under Philippine

laws. It is engaged in coconut processing. On the other hand, private
respondent Free Workers of the Coconut Industry-United Lumber and General
Workers of the Philippines (FWCI-ULGWP) is a labor organization recognized
by petitioner as the sole bargaining representative of its rank and file
employees at its plant at Talairon, Oroquieta City.

From April 1, 1980 up to October 1, 1983, the rank and file employees of
petitioner received wages and living allowances in the following amounts: 1aw library

DETAIL OF WAGE RATES AND

LIVING ALLOWANCES

Date Wage Rate Ecola Total

Per CBA

April 1, 1980 P13.37 P10.07 P23.44

Per PD #1713 + 2.00 Ecola

August 18/1980 13.37 12.07 25.44

Per PD #1751 + 4.00 on wages & 3.67 on Ecola (integration)

January 1/1981 17.37 8.40 25.77

Wage Order #1 PD #1790 + P2.00 Ecola

March 22/1981 17.37 10.40 27.77

Per CBA + .65 daily wage

April 1/1981 18.02 10.40 28.42

Wage Order #2 phase 1 + 1.50 Ecola & min. wage 18.36

32
July 6/1983 18.36 11.90 30.26

Wage Order #2 phase 2 + 1.00 Ecola

October 1/1983 18.36 12.90 31.26

(p. 88, Record; p. 86, Rollo)

On October 18, 1983, private respondent labor union, through its president,
filed a letter-complaint with the Regional Office No. 10 of the Ministry of Labor
& Employment (MOLE) at Cagayan de Oro City, alleging that petitioner
company had not been complying with Wage Order No. 2 which provided for
wage increases effective on July 6, 1983 and October 1, 1983 and had failed
to provide health and safety devices in its premises as well as to its workers
(pp. 4-5, Record).

Upon order of the Regional Director, the Labor Standards and Welfare Officers
conducted an on-the-spot inspection both of the payrolls and the premises of
petitioner company. Subsequently, said officers submitted their report dated
January 5, 1984, (p. 6. Record) the pertinent portion of which reads: jgc:chanrobles.com.ph

"On the inspection of the workplace, the following safety equipments were
found wanting, to wit: chanrob1es virtual 1aw library

I. Hauler Department: V. Electric Grinder: chanrob1es virtual 1aw library

a) Safety shoes a) Goggles-permanent

b) Gloves.

II. Sheller Department: VI. Paring Dryer Department: chanrob1es virtual 1aw library

a) Goggles a) Blowers

b) Safety shoes.

III. Parker Department: VII. Packing Department: chanrob1es virtual 1aw library

a) Rubber Boots a) Additional Blowers.

IV. Nut Checkers: VIII. Engineering Department: chanrob1es virtual 1aw library

a) Gloves a) Safety Shoes

b) Gloves

c) Goggles

"On the examination of the payrolls, it appears that there was non-
33
compliance of Wage Order No. 2 which took effect on July 6, 1983, partially
or totally. As computed from July 6, 1983 to October 19, 1983 =

As to Wage/Salary P54,591.85

As to COLA 51,436.02

_________ __________

TOTAL P106,027.87

"The management contended that they are not liable to the increase provided
under Wage Order No. 2 because they have been paying their workers the
Minimum Wage of P18.02 prior to the issuance of Wage Order No. 2. As
examined, the worker’s wage ranges from P18.02 and up from July 6, 1983
up to date.

"IN VIEW OF THE FOREGOING, it is respectfully forwarded to the Honorable

Regional Director with the recommendation that an ORDER be issued
directing RED V Coconut Products to pay their workers the total sum of ONE
HUNDRED SIX THOUSAND TWENTY SEVEN and 87/100 (P106,027.87)
representing Wages/Salaries and Emergency Cost of Living Allowances as
reflected in the payrolls of from July 6, 1983 to October 19, 1983, inclusive.
And/or whatever action he may deem legal under the premises." (pp. 87-88,
Rollo).

Thereafter, meetings were called by the Labor Conciliators for possible

conciliation but the parties failed to arrive at a compromise agreement.

In their position papers, respondent labor union claimed that petitioner

company had not complied with Wage Order No. 2, and prayed that petitioner
company be ordered to pay the employees the amount of P106,027.87
representing deficiencies in their wages and ECOLA covering the period from
July 6, 1983 to October 19, 1983 as found by the Labor Standard Inspectors
and to comply with the Labor Inspector’s Report dated January 5, 1984
regarding Health and Safety provisions for the company premises and its
workers. (Position Paper of respondent Labor Union, pp. 76-80, Record). On
the other hand, petitioner company alleged that the Regional Director had no
jurisdiction over the claims for unpaid wages and allowances; that it was not
liable to pay, on across-the-board basis, the P1.00 per day increase in the
statutory minimum wage granted under Wage Order No. 2; that it had
already complied with the P1.00 (as of July 6, 1983) and P1.50 (as of October
1, 1983) increase in the living allowances mandated by the same wage; and
that it was not required by the Occupational Safety and Health Standard to
provide its workers and premises with the safety equipments mentioned in
the report of the Labor Standard Inspectors (Position Paper of petitioner, pp.
89-96), Record).chanrobles law library

On June 4, 1984, Assistant Regional Director Jude T. Bontol, issued an order

directing petitioner company as follows:
34
"PREMISES CONSIDERED, Red V Coconut Products, Lt. is hereby ordered to
provide/pay the following: chanrob1es virtual 1aw library

‘a) to provide the workers and the work place with the safety equipment
above-enumerated;

‘b) to pay the workers/complainants the total sum of FIFTY FOUR THOUSAND
FIVE HUNDRED NINETY ONE PESOS AND 85/100 (P54,591.85) representing
the efficiency in wages; and

‘c) to pay the workers the total sum of FIFTY ONE THOUSAND FOUR
HUNDRED THIRTY-SIX PESOS AND 02/100 (P51,436.02) representing
deficiency in allowances, thru this office within ten (10) days from receipt of
this order.

"SO ORDERED." (pp. 89-90, Rollo)

The said order was affirmed on appeal by public respondent Deputy Minister
of the MOLE, in his Order dated April 18, 1985. The pertinent portion of the
said order reads:

"After a careful review of the entire record of the case, taking into
consideration the points raised by respondent, we find no compelling reason
to warrant a modification or reversal of the disputed Order, it appearing that
the same had been amply passed upon in the said Order.

"WHEREFORE, the Order dated June 4, 1984 should be, as it is hereby,

affirmed and the subject appeal is dismissed for lack of merit.

"SO ORDERED." (p. 90, Rollo)

Petitioner’s motion for reconsideration was denied, hence, the instant petition
with a prayer for the issuance of a writ of preliminary injunction and/or
restraining order. Petitioner contends that: s virtual 1aw library

The public respondent acted without jurisdiction in passing upon the money
claims raised in the instant case, the same being within the original and
exclusive jurisdiction of the National Labor Relations Commission.

II

The public respondent grossly misinterpreted Wage Order No. 2. While

35
admitting that petitioner was already paying wages beyond the minimum
level set by the order, he nonetheless found its payment of the additional
P1.00/day provided therein to be mandatory. Corrollarily, while admitting
that the P1.50 and P1.00 additional daily allowances set by the Order were
paid to petitioner’s employees, he nonetheless directed the payment of an
additional P0.60 daily allegedly pursuant to the Order when the same
nowhere provides therefor.

III

The public respondent committed grave abuse of discretion in arbitrarily

mandating the installation of various equipment and paraphernalia by
petitioner without giving factual nor legal basis therefor, thereby denying
petitioner’s constitutional right to due process and the equal protection of the
laws.(pp. 10-11, Rollo).

The Court’s recent resolution in the case of Servando’s Incorporated v. the

Secretary of Labor and Employment, (G.R. No. 85840, June 5, 1991, 198
SCRA 156) reiterated in Aboitiz Shipping Corporation v. de la Serna, (G.R.
No. 88538, July 25, 1991, 199 SCRA 568) is controlling in the present case,
particularly on the issue of jurisdictions of Labor Arbiters and Regional
Directors over money claims of employees against employers. In these said
cases, the Court ruled that the original and exclusive jurisdiction to hear and
decide employee’s money claims arising from employer-employee relations
exceeding the aggregate amount of P5,000 for each employee is vested in
the Labor Arbiter (Art. 217 (a), (b), Labor Code as amended) and this is
confirmed by the provisions of Art. 129 of the same Code, which excludes
from the jurisdiction of the Regional Director or any hearing officer of the
Department of Labor and Employment (DOLE) the power to hear and decide
claims of employees arising from employer-employee relations exceeding the
amount of (5,000.00 for each employee.

In the case at bar, the aggregate claim of the workers is P106,027.87, but
the claim of each of the more than thirty (30) workers does not exceed
P5,000.00. This being the case, the jurisdiction to decide the claim properly
belongs to the Regional Director. The only instance when the Regional
Director may be divested of such jurisdiction is when under Art. 128 (b) of
the Labor Code, the following three (3) circumstances concur, to wit: library

(a) the petitioner (employer) contests the findings of the labor regulations
officer and raises issues thereon;

(b) that in order to resolve such issue, there is a need to examine evidentiary
matters; and

(c) that such matters are not verifiable in the normal course of inspection.
(SSK Parts Corp. v. Camas, G.R. No. 85934, Jan. 30, 1990, 181 SCRA 675).

The Regional Director required the payment of petitioner of a one peso

(P1.00) across-the-board increase to its employees. Petitioner contended
that in so doing, the Regional Director misinterpreted and misapplied Wage
36
Order No. 2 because even before the passage of the said order, the minimum
wage obtaining in petitioner’s company was already more than the minimum
wage level set by Wage Order No. 2.

On the matter of living allowances, it is admitted that the petitioner did

actually give the required P1.50 and P1.00 cost of living allowance provided
for by Wage Order No. 2. What the Regional Director maintains, however, is
that since the total amount of allowances is less by P0.60 if we compare the
same with the aggregate sum of allowance provided for by the various
Presidential issuances, the proper implementation of Wage Order No. 2 must
require petitioner to grant the difference. For its part, petitioner argues that
what the Wage Order mandate is the grant of an additional P1.50 and P1.00
daily in living allowances effective July 6, 1983 and October 1, 1983,
respectively, and nothing more.

In his Comment to the Petition, the Solicitor General opined that the Regional
Director and public respondent have no jurisdiction over the subject money
claims since petitioner contests the findings of the Labor Standard Inspectors
and presents intricate questions of law (p. 12, Comment; p. 95, Rollo).

We agree with the Solicitor General. The case before Us clearly falls within
the exception. (Article 128 (b) of the Labor Code). The issue presented by
petitioner — how Wage Order No. 2 should be interpreted and applied, will
necessitate the examination of evidentiary matters not verifiable in the
normal course of inspection.

We, however, sustain the action of the Regional Director and the public
respondent in ordering petitioner to provide the safety equipment and
paraphernalia mentioned in the report of the labor inspectors.

The contention of petitioner that there was no finding by the labor inspectors
or the Assistant Regional Director as to the hazardous nature of its business
is untenable.

The labor inspectors conducted an on-the-spot inspection of the premises of

petitioner and actually discovered that various safety equipment as
enumerated in their report are wanting. This implies that the workers are
exposed to hazards necessitating the installation of those equipment and
paraphernalia. This is within the scope of the visitorial and enforcement
power of the MOLE under SEC. 1, Rule X, Book III of the Rules and
Regulations Implementing the labor Code as well as Policy Instruction No. 6.

WHEREFORE, the assailed Order is SET ASIDE in so far as it makes an award

for alleged deficiency in wages and allowances, the Regional Director not
having jurisdiction to make the same, but AFFIRMED insofar as it requires
installation or provision of health and safety devices in petitioner’s premises.
The claim for deficiency in wages and allowances is REFERRED to the Labor
Arbiter for proper proceedings.

SO ORDERED.

37
THIRD DIVISION

G.R. No. 86963 August 6, 1999

BATONG BUHAY GOLD MINES, INC., petitioner,

vs.
HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY AS THE
UNDERSECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO MENDELEBAR, MA.
CONCEPCION Q. REYES, AND THE OTHER COMPLAINANTS* IN CASE
NO. NCR-LSED-CI-2047-87; MFT CORPORATION AND SALTER
HOLDINGS PTY. LTD., respondents.

RESOLUTION

PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court
with a Prayer for Preliminary Injunction and or Restraining Order brought by
Batong Buhay Gold Mines, Inc. (BBGMI for brevity) to annul three orders
issued by respondent Undersecretary Dionisio dela Serna of the Department
of Labor and Employment, dated September 16, 1988, December 14, 1988
and February 13, 1989, respectively.

The Order of September 16, 1988 stated the facts as follows:

. . . on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar,

Ma. Concepcion O. Reyes and 1,247 others filed a complaint against
Batong Buhay Gold Mines, Inc. for: (1) Non-payment of their basic pay
and allowances for the period of 6 July 1983 to 5 July 1984, inclusive,
under Wage Order No. 2; (2) Non-payment of their basic pay and
allowances for the period 16 June 1984 to 5 October 1986, inclusive
under Wage Order No. 5; (3) Non-payment of their salaries for the
period 16 March 1986 to the present; (4) Non-payment of their 13th
month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation
and sick leave, and the compensatory leaves of mine site employees;
and (6) Non-payment of the salaries of employees who were placed on
forced leaves since November, 1985 to the present, if this is not feasible,
the affected employees be awarded corresponding separation pay.

On 9 February 1987, the Regional Director set the case for hearing on
17 February 1987.

On 17 February 1987, the respondent moved for the resetting of the

case to 2 March 1987.

On 27 February 1987, the complainants filed a Motion for the issuance

of an inspection authority.

xxx xxx xxx

38
On 13 July 1987, the Labor Standards and Welfare Officers submitted
their report with the following recommendations:

WHEREFORE, premises considered this case is hereby submitted

with the recommendation that an Order of Compliance be issued
directing respondent Batong Buhay Gold Mines Inc. to pay
complainants' Elsie Rosalina Ty, et al. FOUR MILLION EIGHT
HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-SIX
PESOS AND FORTY CENTAVOS (P4,818,746.40) by way of unpaid
salaries of workers from March 16, 1987 to present, unpaid and
ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th
months pay for 1985 and 1986, and unpaid (sic)
vacation/sick/compensatory leave benefits.

On 31 July 1987, the Regional Director1 adopted the recommendation

of the LSWOs and issued an order directing the respondent to pay the
complainants the sum of P4,818,746.40 representing their unpaid 13th
month pay for 1985 and 1986, wage and ECOLA differentials under wage
order Nos. 2 and 5, unpaid salaries from 16 March 1986 to present and
vacation/sick leave benefits for 1984, 1985 and 1986.

On 19 August 1987, the complainants filed an ex-parte motion for the

issuance of a writ of execution and appointment of special sheriff.

xxx xxx xxx

On 21 August 1987, the Regional Director issued an Order directing the

respondent to put up a cash or surety bond otherwise a writ of execution
will be issued.

xxx xxx xxx

When the respondent failed to post a cash/surety bond, and upon

motion for the issuance of a writ of execution by the complainants, the
Regional Director, on 14 September 1987 issued a writ of execution
appointing Mr. John Espiridion C. Ramos as Special Sheriff and directing
him to do the following:

You are to collect the above-stated amount from the respondent

and deposit the same with Cashier of this Office for appropriate
disposition to herein complainants under the supervision of the
office of the Director. Otherwise, you are to execute this writ by
attaching the goods and chattels of the respondent not exempt
from execution or in case of insufficiency thereof against the real
or immovable property of the respondent.

The Special Sheriff proceeded to execute the appealed Order on 17

September 1987 and seized three (3) units of Peterbuilt trucks and then
sold the same by public auction. Various materials and motor vehicles
were also seized on different dates and sold at public auction by said
sheriff.

39
xxx xxx xxx

On 11 December 1987, the respondent finally posted a supersedeas

bond which prompted this Office to issue an Order dated 26 January
1988, restraining the complainants and sheriff Ramos from enforcing
the writ of execution. . . .2

BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C.
Piezas to respondent Undersecretary Dionisio de la Serna, contending that
the Regional Director had no jurisdiction over the case.

On September 16, 1988, the public respondent issued the first challenged
Order upholding the jurisdiction of the Regional Director and annulling all the
auction sales conducted by Special Sheriff John Ramos. The decretal portion
of the said Order ruled:

WHEREFORE, the Order dated 31 July 1987 of the Regional Director,

National Capital Region, is hereby AFFIRMED. Accordingly, the writ of
execution dated 14 September 1987 issued in connection thereto is
hereby declared VALID.

However, the public auction sales conducted by special sheriff John

Ramos pursuant to the writ of execution dated 14 September 1987 on
24 September 2, 20, 23 and 29 October 1987 are all hereby declared
NULL AND VOID. Furthermore, the personal properties sold and the
proceeds thereof which have been turned over to the complainants thru
their legal counsel are hereby ordered returned to the custody of the
respondent and the buyers respectively.

SO ORDERED.3

On October 13, 1988, a Motion for Reconsideration of the aforesaid order was
presented by the complainants in Case No. NCR-LSED-CI-2047-87 but the
same was denied.

On November 7, 1988, a Motion for Intervention was filed by MFT

Corporation, inviting attention to a Deed of Sale executed in its favor by Fidel
Bermudez, the highest bidder in the auction sale conducted on October 29,
1987.

On December 2, 1988, another Motion for Intervention was filed, this time
by Salter Holdings Pty., Ltd., claiming that MFT Corporation assigned its
rights over the subject properties in favor of movant as evidenced by a Sales
Agreement between MFT Corp. and Salter Holdings Pty., Ltd.

The two Motions for intervention were granted in the second questioned order
dated December 14, 1988, directing the exclusion from annulment of the
properties sold at the October 29, 1987 auction sale and claimed by the
intervenors, including one cluster of junk mining machineries, equipment and
supplies, and disposing thus:

40
WHEREFORE, in view of the foregoing, the motions for reconsideration
filed by intervenors MFT and Salter are hereby granted.
Correspondingly, this Office's Order dated 16 September 1988 is hereby
modified to exclude from annulment "the one lot of junk mining
machineries, equipment and supplies as-is-where-is" sold by Sheriff
John C. Ramos in the auction sale of 29 October 1987.

xxx xxx xxx

Motions for Reconsideration were interposed by Batong Buhay Gold Mining,

Inc. and the respondent employees but to no avail. The same were likewise
denied in the third assailed Order dated February 13, 1989.

Hence, the petition under scrutiny, ascribing grave abuse of discretion

amounting to lack or excess of jurisdiction to the public respondent in issuing
the three Orders under attack.

The questioned Orders aforementioned have given rise to the issues: (1)
whether the Regional Director has jurisdiction over the complaint filed by the
employees of BBGMI; and (2) whether or not the auction sales conducted by
the said Special Sheriff are valid.

Anent the first issue, an affirmative ruling is indicated. The Regional Director
has jurisdiction over the BBGMI employees who are the complainants in Case
Number NCR-LSED-CI-2047-87.

The subject labor standards case of the petition arose from the visitorial and
enforcement powers by the Regional Director of Department of Labor and
Employment (DOLE). Labor standards refers to the minimum requirements
prescribed by existing laws, rules and regulations relating to wages, hours of
work, cost of living allowance and other monetary and welfare benefits,
including occupational, safety and health standards.4 Labor standards cases
are governed by Article 128(b) of the Labor Code.

The pivot of inquiry here is whether the Regional Director has jurisdiction
over subject labor standards case.

As can be gleaned from the records on hand, subject labor standards case
was filed on February 5, 1987 at which time Article 128 (b) read as follows5:

Art. 128 (b) Visitorial and enforcement powers —

(b) The Minister of Labor or his duly authorized representative shall

have the power to order and administer, after due notice and
hearing, compliance with the labor standards provisions of this
Code based on the findings of labor regulation officers or industrial
safety engineers made in the course of inspection, and to issue
writs of execution to the appropriate authority for the enforcement
of their order, except in cases where the employer contests the
findings of the labor regulations officers and raises issues which
cannot be resolved without considering evidentiary matters that
are not verifiable in the ordinary course of inspection.

41
Petitioner theorizes that the Regional Director is without jurisdiction over
subject case, placing reliance on the ruling in Zambales Base Inc. vs. Minister
of Labor6 and Oreshoot Mining Company vs. Arellano.7

Respondent Undersecretary Dionisio C. Dela Serna, on the other hand, upheld

the jurisdiction of Regional Director Luna C. Piezas by relying on E.O. 111, to
quote:

Considering therefore that there still exists an employer-employee

relationship between the parties; that the case involves violations of the
labor standard provisions of the labor code; that the issues therein could
be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection; and, if only to give meaning
and not render nugatory and meaningless the visitorial and enforcement
powers of the Secretary of Labor and Employment as provided by Article
128(b) of the Labor Code, as amended by Section 2 of Executive Order
No. 111 which states:

The provisions of article 217 of this code to the contrary

notwithstanding and in cases where the relationship of employer-
employee still exists, the Minister of Labor and Employment or his
duly authorized representative shall have the power to order and
administer, after due notice and hearing, compliance with the labor
standards provision of this Code based on the findings of the
findings of labor regulation officers or industrial safety engineers
made in the course of inspection, and to issue writs of execution to
the appropriate authority for the enforcement of their order, except
in cases where the employer contests the findings of the labor
regulations officers and raises issues which cannot be resolved
without considering evidentiary matters that are not verifiable in
the ordinary course of inspection.

We agree with the complainants that the regional office a quo has
jurisdiction to hear and decide the instant labor standard case.

xxx xxx x x x8

The Court agrees with the public respondent. In the case of Maternity
Children's Hospital vs. Secretary of Labor (174 SCRA 632), the Court in
upholding the jurisdiction of the Regional Director over the complaint on
underpayment of wages and ECOLAs filed on May 23, 1986, by the employees
of Maternity Children's Hospital, held:

This is a labor standards case and is governed by Art. 128(b) of the

Labor Code, as amended by E.O. 111.

xxx xxx xxx

Prior to the promulgation of E.O. 111 on December 24, 1986, the

Regional Director's authority over money claims was unclear. The
complaint in the present case was filed on May 23, 1986 when E.O. 111
was not yet in effect. . . .
42
We believe, however, that even in the absence of E.O. 111, Regional
Directors already had enforcement powers over money claims, effective
under P.D. 850, issued on December 16, 1975, which transferred labor
standards cases from the arbitration system to the enforcement system.

In the aforecited case, the Court in reinforcing its conclusion that Regional
Director has jurisdiction over labor standards cases, treated E.O. 111 as a
curative statute, ruling as follows:

E.O. No. 111 was issued on December 24, 1986 or three (3) months
after the promulgation of the Secretary of Labor's decision upholding
private respondents' salary differentials and ECOLAs on September 24,
1986. The amendment of the visitorial and enforcement powers of the
Regional Director (Article 128(b)) by said E.O. 111 reflects the intention
enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional
Directors to resolve uncontested money claims in cases where an
employer-employee relationship still exists. This intention must be given
weight and entitled to great respect. As held in Progressive Worker's
Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985,
150 SCRA 429:

. . . The interpretation by officers of laws which are entrusted to

their administration is entitled to great respect. We see no reason
to detract from this rudimentary rule in administrative law,
particularly when later events have proved said interpretation to
be in accord with the legislative intent. . .

The proceedings before the Regional Director must, perforce be upheld

on the basis of Article 128(b) as amended by E.O. No. 111, dated
December 24, 1986, this executive order "to be considered in the nature
of a curative statute with retrospective application." (Progressive
Workers' Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia
vs. Judge A. Martinez, et al. G.R. No. I-47629, may 28, 1979, 90 SCRA
331).

With regard to the petitioner's reliance on the cases of Zambales

Base, Inc. vs. Minister of Labor (supra) and Oreshoot Mining
Company vs. Arellano, (supra), this is misplaced. In the case of Zambales
Base, Inc., the court has already ruled that:

. . ., in view of the promulgation of Executive Order No. 111, Zambales

Base Metals vs. Minister of Labor is no longer good law. (Emphasis
supplied) Executive Order No. 111 is in the character of a curative law,
that is to say, it was intended to remedy a defect that, in the opinion of
the Legislature (the incumbent Chief Executive in this case, in the
exercise of her lawmaking powers under the Freedom Constitution) had
attached to the provision under the amendment.

xxx xxx x x x9

The case of Oreshoot Mining Corporation, on the other hand, involved money
claims of illegally dismissed employees. As the employer-employee
43
relationship has already ceased and reinstatement is sought, jurisdiction
necessarily falls under the Labor Arbiter. Petitioner should not have used this
to support its theory as this petition involves labor standards cases and not
monetary claims of illegally dismissed employees.

The Court would have ruled differently had the petitioner shown that subject
labor standards case is within the purview of the exception clause in Article
128 (b) of the Labor Code. Said provision requires the concurrence of the
following elements in order to divest the Regional Director or his
representatives of jurisdiction, to wit: (a) that the petitioner (employer)
contests the findings of the labor regulations officer and raises issues
thereon; (b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and (c) that such matters are not verifiable in the normal
course of inspection.10

Nowhere in the records does it appear that the petitioner alleged any of the
aforestated grounds. In fact, in its Motion for Reconsideration of the Order of
the Regional Director dated August 20, 1987, the grounds which petitioner
raised were the following:

1. This Honorable Office has no jurisdiction to hear this case and its
Order of 31 October 1987 is therefore null and void;

2. Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole

party respondent, the complaint should have been directed also against
the Asset Privatization Trust.

In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as

the Urgent Omnibus Motion to declare void the Writ of Execution for lack of
jurisdiction and the Oppositions it filed on the Motions for Intervention
questioning the legal personality of the intervenors, questions as to the
amounts complained of by the employees or absence of violation of labor
standards laws were never raised. Raising lack of jurisdiction in a Motion to
Dismiss is not the contest contemplated by the exception clause under Article
128(b) of the Labor Code which would take the case out of the jurisdiction of
the Regional Director and bring it before the Labor Arbiter.

The only instance when there was a semblance of raising the aforestated
grounds, was when they filed an Appeal Memorandum dated January 14,
1988, before the respondent undersecretary. In the said Appeal
Memorandum, petitioner comes up with the defense that the Regional
Director was without jurisdiction, as employer-employee relationship was
absent, since petitioner had ceased doing business since 1985.

Records indicate that the Labor Standards and Welfare Officers, pursuant to
Complaint Inspection Authority No. CI-2-047-87, were not allowed to look
into records, vouchers and other related documents. The officers of the
petitioner alleged that the company is presently under receivership of the
Development Bank of the Philippines.11 In lieu of this, the Regional Director
had ordered that a summary investigation be conducted.12 Despite proper
notices, the petitioner refused to appear before the Regional Director. To give
it another chance, an order to file its position paper was issued to substantiate
44
its defenses. Notwithstanding all these opportunities to be heard, petitioner
chose not to avail of such.

As held in the case of M. Ramirez Industries vs. Sec. of Labor and

Employment, (266 SCRA 111):

. . . Under Art. 128(a) of the Labor Code, the Secretary of Labor of his
duly authorized representatives, such as the Regional Directors, has
visitorial powers which authorize him to inspect the records and
premises of an employer at any time of the day or night whenever work
is being undertaken therein, to question any employee and investigate
any fact, condition or matter, and to determine violations of labor laws,
wage orders or rules and regulations. If the employer refuses to attend
the inspection or conference or to submit any record, such as payrolls
and daily time records, he will be deemed to have waived his right to
present evidence. (emphasis supplied)

Petitioner's refusal to allow the Labor Standards and Welfare Officers to

conduct inspection in the premises of their head office in Makati and the
failure to file their position paper is equivalent to a waiver of its right to
contest the claims of the employees. This Court had occasion to hold there is
no violation of due process where the Regional Director merely required the
submission of position papers and resolved the case summarily
thereafter.13 Furthermore, the issuance of the compliance order was well
within the jurisdiction of the Regional Director, as Section 14 of the Rules on
the Disposition of Labor Standards Cases provides:

Sec. 14. Failure to Appear — Where the employer or the complainant

fails or refuses to appear during the investigation, despite proper notice,
for two (2) consecutive hearings without justifiable reasons, the hearing
officer may recommend to the Regional Director the issuance of a
compliance order based on the evidence at hand or an order of dismissal
of the complaint as the case may be. (Emphasis supplied)

It bears stressing that this petition involves a labor standards case and it is
in keeping with the law that "the worker need not litigate to get what legally
belongs to him, for the whole enforcement machinery of the Department of
Labor exists to insure its expeditious delivery to him free of charge."14

Thus, their claim of closure for business, among other things, are factual
issues which cannot be brought here for the first time. As petitioner refused
to participate in the proceedings below where it could have ventilated the
appropriate defenses, to do so in this petition is unavailing. The reason for
this is that factual issues are not proper subjects of a special civil action
for certiorari to the Supreme Court.15

It is therefore abundantly clear that at the time of the filing of the claims of
petitioner's employees, the Regional Director was already exercising visitorial
and enforcement powers.

45
Regional Director's visitorial and enforcement powers under Art. 128 (b) has
undergone series of amendments which the Court feels to be worth
mentioning.

Confusion was engendered by the promulgation of the decision in the case

of Servando's Inc. vs. Secretary of Labor and Employment and the Regional
Director, Region VI, Department of Labor and Employment.16 In the said
case, the Regional Director took cognizance of the labor standards cases of
the employees of Servando's Inc., but this Court held that:

In the case of Briad Agro Development Corporation vs. Dela

Cerna and Camus Engineering Corp. vs. Sec. Of labor applying E.O. 111
the Court recognized the concurrent jurisdiction of the Secretary of labor
(or Regional Directors) and the labor Arbiters to pass on employees
money claims, including those cases which the labor Arbiters had
previously exercised jurisdiction. However, in a subsequent modificatory
resolution in the Briad Agro Case, dated 9 November 1989, the Court
modified its original decision in view of the enactment of RA 6715, and
upheld the power of the Regional Directors to adjudicate money claims
subject to the conditions set forth in Section 2 of said law (RA 6715).

The power then of the Regional Director (under the present state of law)
to adjudicate employees money claims is subject to the concurrence of
all the requisites provided under Sec. 2 of RA 6715, to wit:

(a) the claim is represented by an employer or person employed in

domestic or household service, or househelper;

(b) the claim arises from employer-employee relationship;

(c) the claimant does not seek reinstatement; and

(d) the aggregate money claim of each employee or househelper

does not exceed P5,000.

xxx xxx x x x17

The Servando ruling, in effect, expanded the jurisdictional limitation provided

for by RA 6715 as to include labor standards cases under Article 128 (b) and
no longer limited to ordinary monetary claims under Article 129.

In fact, in the Motion for Reconsideration18 presented by the private

respondents in the Servando case, the court applied more squarely the
P5,000 limit to the visitorial and enforcement power of the Regional Director,
to wit:

To construe the visitorial power of the Secretary of Labor to order and

enforce compliance with labor laws as including the power to hear and
decide cases involving employee's claims for wages, arising from
employer-employee relations, even if the amount of said claims exceed
P5,000 for each employee, would, in our considered opinion, emasculate
and render meaningless, if not useless, the provisions of Art. 217 (a)

46
and (6) and Article 129 of the Labor Code which, as above-pointed out,
confer exclusive jurisdiction on the Labor Arbiter to hear and decide such
employees' claims, regardless of amount, can be heard and determined
by the Secretary of Labor his visitorial power. This does not, however,
appear to be the legislative intent.

But prevailing law and jurisprudence rendered the Servando ruling

inapplicable. In the recent case of Francisco Guico, Jr. versus The Honorable
Secretary of Labor & Employment Leonardo A. Quisumbing, GR # 131750,
promulgated on November 16, 1998, this Court upheld the jurisdiction of the
Regional Director notwithstanding the fact that the amounts awarded
exceeded P5,000.

Republic Act 7730, the law governing the visitorial and enforcement powers
of the Labor Secretary and his representatives reads:

Art. 128 (b) Notwithstanding the provisions of Articles 129 and 217 of
this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment
or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this
Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers
made in the course of inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the appropriate authority
for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer
and raises issues supported by documentary proofs which were not
considered in the course of inspection.

xxx xxx x x x(emphasis supplied)

The present law, RA 7730, can be considered a curative statute to reinforce

the conclusion that the Regional Director has jurisdiction over the present
labor standards case.

Well-settled is the rule that jurisdiction over the subject matter is determined
by the law in force when the action was commenced, unless a subsequent
statute provides for its retroactive application, as when it is a curative
legislation.19

Curative statutes are intended to supply defects, abridge superfluities in

existing laws and curb certain evils. They are intended to enable persons to
carry into effect that which they have designed and intended, but has failed
of expected legal consequence by reason of some statutory disability or
irregularity in their own action. They make valid that which, before the
enactment of the statute, was invalid.20

In arriving at this conclusion, the case of Briad Agro Development vs. De La

Cerna21 comes to the fore. In the said case, RA 6115 was held to be a curative
statute. There, the Court ruled that RA 6715 is deemed a curative statute
and should be applied to pending cases. The rationale of the ruling of the
47
Court was that prior to RA 6715, Article 217 as amended by E.O. 111, created
a scenario where the Labor Arbiter and the Regional Director of DOLE had
overlapping jurisdiction over money claims. Such a situation was viewed as
a defect in the law so that when RA 6715 was passed, it was treated or
interpreted by the Court as a rectification of the infirmity of the law, and
therefore curative in nature, with retroactive application.

Parenthetically, the same rationale applies in treating RA 7730 as a curative

statute. Explicit in its title22 is the legislative intent to rectify the error brought
about by this Court's ruling that RA 6715 covers even labor standards cases
where the amounts to be awarded by the Regional Director exceed P5,000 as
provided for under RA 6715. Congressional records relative to Republic Act
7730 reveal that, "this bill seeks to do away with the jurisdictional limitations
imposed thru said ruling (referring to Servando) and to finally settle any
lingering doubts on the visitorial and enforcement powers of the Secretary of
Labor and Employment."23

All the foregoing studiedly considered, the ineluctable conclusion is that the
application of RA 7730 to the case under consideration is proper.

Thus, it is decisively clear that the public respondent did not act with grave
abuse of discretion in issuing the Order dated September 16, 1988.

The second issue for resolution is the validity of the auction sales conducted
by Special Sheriff Ramos. It bears stressing that the writ of execution issued
by the Regional Director led to the several auction sales conducted on
September 24, 1987, October 2, 1987, October 23, 1987, October 29, 1987
and October 30, 1987.

In the first Order of public respondent, the five (5) auction sales were
declared null and void. As the public respondent put it, "the scandalously low
price for which the personal properties of the respondent were sold leads us
to no other recourse but to invalidate the auction sales conducted by the
special sheriff."24

In the September 16, 1988 Order25 of public respondent, the personal

properties and corresponding prices for which they were sold were as follows:

Personal properties sold on September 24, 1987:

1. One (1) unit peterbuilt truck Model 1978 with Engine No.
6A4102-65, Chassis No. 139155-P not running condition.

2. One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-
8040, Chassis No. 6A410235, truck with Engine No. (Truck 4) not
running condition.

3. One (1) unit 1978 Model peterbuilt truck with Engine No.
6A410319, Chassis No. 139163-P Truck No. 4 not running
condition.

Proceeds of Sale P178,000.00

48
Personal Properties Sold on October 2, 1987

1. One (1) unit peterbuilt truck model 1978, with Engine No.
6A410347, Chassis No. 1391539-P.

2. One (1) unit peterbuilt truck Model 1978 with Engine No.
6A410325, Chassis No. 139149.

3. One (1) unit payloader (caterpillar with Engine No. (not visible)
966.

4. One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not
visible); and one (1) Lot of scarp irons impounded inside the
Batong Buhay Compound, Calanan, Kalinga Apayao.

5. One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate
No. PBV 386.

Proceeds of Sale P228,750.00

Personal Properties Sold on October 23, 1987:

1. One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340,
Chassis No. 81400500227 Plate No. BAT 353, burned, damage not
running condition, type of body jeep motor not visible.

2. Two (2) units peterbuilts, damaged, burned motor Nos. (not

visible) and Chassis Nos. not visible.

3. One (1) Unit Layland, burned, damaged and Motor No. not
visible.

4. Two (units) air compressor, burned, damaged and one (1)

generator.

5. One (1) Unit Loader Michigan 50, damaged and burned, and

6. One (1) rock crasher, damaged, burned, scrap iron junk.

Proceeds of Sale P98,000.00

Properties sold on October 29, 1987

1. One (1) lot of scrap construction materials.

2. One (1) lot of scrap mining machineries equipments and

supplies.

3. One (1) lot of junk machineries, equipments and supplies.

Proceeds of Sale P1,699,999.99

Personal Properties Sold on October 20, 1987*

49
1. One (1) lot of scrap construction materials.

2. One (1) lot of scrap mining machineries, equipments and

supplies.

Proceeds of Sale P2,185,000.00

Total Proceeds Sale P4,389,749.99

to satisfy the judgment award in the amount of P4,818,746.00.

As a general rule, findings of fact and conclusion of law arrived at by quasi-

judicial agencies are not to be disturbed absent any showing of grave abuse
of discretion tainting the same. But in the case under scrutiny, there was
grave abuse of discretion when the public respondent, without any
evidentiary support, adjudged such prices as "scandalously low". He merely
relied on the self-serving assertion by the petitioner that the value of the
auctioned properties was more than the price bid. Obviously, this
ratiocination did not suffice to set aside the auction sales.

The presumption of regularity in the performance of official function is

applicable here. Conformably, any party alleging irregularity vitiating auction
sales must come forward with clear and convincing proof.

Furthermore, it is a well-settled principle that:

Mere inadequacy of price is not, of itself sufficient ground to set aside

an execution sale where the sale is regular, proper and legal in other
respects, the parties stand on an equal footing, there are no confidential
relation between them, there is no element of fraud, unfairness, or
oppression, and there is no misconduct, accident, mistake or surprise
connected with, and tending to cause, the inadequacy.26

Consequently, in declaring the nullity of the subject auction sales on the

ground of inadequacy of price, the public respondent acted with grave abuse
of discretion amounting to lack or excess of jurisdiction.

But, this is not to declare the questioned auction sales as valid. The same are
null and void since on the properties of petitioner involved was constituted a
mortgage between petitioner and the Development Bank of the Philippines,
as shown by the:

(a) Deed of Mortgage dated December 28, 1973;

(b) Joint Mortgage (Amending Deed of Mortgage) dated August 25,

1975;

(c) Amendment to Joint Mortgage dated October 18, 1976.

(d) Confirmation of Mortgage dated March 27, 1979; and

(e) Additional Joint First Mortgage dated March 31, 1981.27

50
The aforementioned documents were executed between the petitioner and
Development Bank of the Philippines (DBP) even prior to the filing of the
complaint of petitioner's employees. The properties having been mortgaged
to DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3
December 1986, otherwise known as the "The 1986 Revised Charter of the
Development Bank of the Philippines," which exempts the properties of
petitioner mortgaged to DBP from attachment or execution sales. Section 14
of E.O. 81, reads:

Sec. 14. Exemption from Attachment. The provisions of any law to the
contrary notwithstanding, securities on loans and/or other
accommodations granted by the Bank or its predecessor-in-interest
shall not be subject to attachment, execution or any other court process,
nor shall they be included in the property of insolvent persons or
institutions, unless all debts and obligations of the Bank or its
predecessor-in-interest, penalties, collection of expenses, and other
charges, subject to the provisions of paragraphs (e) of Sec. 9 of this
Charter.

In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive
Trustee of the Asset Privatization Trust, to the Office of the Clerk of Court of
the Supreme Court, certified that the petitioner is covered by Proclamation
No. 50 issued on December 8, 1986 by President Corazon C. Aquino.

Quoted hereunder are the pertinent portions of the said letter:28

RE: BBGMI vs. Hon. dela Serna, GR No. 86963

Supreme Court Certiorari

SIR:

xxx xxx xxx

. . . all the assets (real and personal/chattel) of Batong Buhay Gold Mines,
Inc. (BBGMI) have been transferred and entrusted to the Asset Privatization
Trust (APT) by virtue of Proclamation No. 50 dated December 8, 1986 of her
Excellency, President Corazon C. Aquino. All the said assets of BBGMI are
covered by real and chattel mortgages executed in favor of the Philippine
National Bank ("PNB"), the Development Bank of the Philippines ("DBP") and
the National Investment and Development Corporation ("NIDC").

xxx xxx xxx

Sec. 14, Executive Order No. 81:

xxx xxx xxx

Pursuant to the above-quoted provision of law, you are hereby warned that
all the assets (real and personal/chattel) of BBGMI are exempted from writs
of execution, attachment, or any other lien or court processes. The
Government, through APT, shall initiate any administrative measures and

51
remedies against you for any violation of the vested rights of PNB, DBP and
APT.

xxx xxx xxx

(sgd).

JOSE C. SISON

The exemption referred to in the aforecited letter is one of the circumstances

contemplated by Rule 39 of the Revised Rules of Court, to wit:

Sec. 13. Property exempt from execution. — Except as otherwise

expressly provided by law, the following properties, and no other, shall
be exempt from execution:

xxx xxx xxx

(m) Properties specially exempted by law.

xxx xxx xxx

Private respondents contend that even if subject properties were mortgaged

to DBP (now under Asset Privatization Trust), Article 11029 of the Labor Code,
as amended by RA 6715, applies just the same. According to them, the said
provision of law grants preference to money claims of workers over and above
all credits of the petitioner. This contention is untenable. In the case of DBP
vs. NLRC,30 the Supreme Court held that the workers preference regarding
wages and other monetary claims under Article 110 of the Labor Code, as
amended, contemplates bankruptcy or liquidation proceedings of the
employer's business. What is more, it does not disregard the preferential lien
of mortgagees considered as preferred credits under the provisions of the
New Civil Code on the classification, concurrence and preference of credits.

We now come to the issue with respect to the second Order, dated December
14, 1988, which declared as valid the auction sale conducted on October 29,
1987 by Special Sheriff John Ramos. Public respondent had no authority to
validate the said auction sale on the ground that the intervenors, MFT
Corporation and Salter Holdings Pty., Ltd., as purchasers for value, acquired
legal title over subject properties.

It is well to remember that the said properties were transferred to the

intervenors, when Fidel Bermudez, the highest bidder at the auction sale,
sold the properties to MFT Corporation which, in turn, sold the same
properties to Salter Holdings Pty., Ltd. Public respondent opined that the
contract of sale between the intervenors and the highest bidder should be
respected as these sales took place during the interregnum after the auction
sale was conducted on October 29, 1987 and before the issuance of the first
disputed Order declaring all the auction sales null and void.

On this issue, the Court rules otherwise.

52
As regards personal properties, the general rule is that title, like a stream,
cannot rise higher than its source.31 Consequently, a seller without title
cannot transfer a title better than what he holds. MFT Corporation and Salter
Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest
bidder of a void auction sale over properties exempt from execution. Such
being the case, the subsequent sale made by him (Fidel Bermudez) is
incapable of vesting title or ownership in the vendee.

The Order dated December 14, 1988, declaring the October 29, 1987 auction
sale as valid, was issued with grave abuse of discretion amounting to lack or
excess of jurisdiction.

WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated

December 14, 1988 of Undersecretary Dionisio dela Serna is concerned,
which Order is SET ASIDE. The Order of September 16, 1988, upholding the
jurisdiction of the Regional Director, is AFFIRMED. No pronouncement as to
costs.

SO ORDERED.

53
FIRST DIVISION

G.R. No. 152611 August 5, 2003

LAND BANK OF THE PHILIPPINES, petitioner,

vs.
SEVERINO LISTANA, SR., respondent.

YNARES-SANTIAGO, J.:

This is a petition for review of the decision of the Court of Appeals in CA-G.R.
SP No. 65276 dated December 11, 2001,1 which annulled the Orders dated
January 29, 2001 and April 2, 2001 of the Regional Trial Court of Sorsogon,
Sorsogon, Branch 51.2

Respondent Severino Listana is the owner of a parcel of land containing an

area of 246.0561 hectares, located in Inlagadian, Casiguran, Sorsogon,
covered by Transfer Certificate of Title No. T-20193. He voluntarily offered to
sell the said land to the government, through the Department of Agrarian
Reform (DAR),3 under Section 20 of R.A. 6657, also known as the
Comprehensive Agrarian Reform Law of 1988 (CARL). The DAR valued the
property at P5,871,689.03, which was however rejected by the respondent.
Hence, the Department of Agrarian Reform Adjudication Board (DARAB) of
Sorsogon commenced summary administrative proceedings to determine the
just compensation of the land.

On October 14, 1998, the DARAB rendered a Decision, the dispositive portion
of which reads as follows:

WHEREFORE, taking into consideration the foregoing computation, the

prior valuation made by the Land Bank of the Philippines is hereby set
aside and a new valuation in the amount of TEN MILLION NINE
HUNDRED FIFTY SIX THOUSAND NINE HUNDRED SIXTY THREE PESOS
AND 25 CENTAVOS (P10,956,963.25) for the acquired area of 240.9066
hectares. The Land Bank of the Philippines is hereby ordered to pay the
same to the landowner in the manner provided for by law.

SO ORDERED.4

Thereafter, a Writ of Execution was issued by the PARAD directing the

manager of Land Bank to pay the respondent the aforesaid amount as just
compensation in the manner provided by law.5

On September 2, 1999, respondent filed a Motion for Contempt with the

PARAD, alleging that petitioner Land Bank failed to comply with the Writ of
Execution issued on June 18, 1999. He argued that such failure of the
petitioner to comply with the writ of execution constitutes contempt of the
DARAB.

Meanwhile, on September 6, 1999, petitioner Land Bank filed a petition with

the Regional Trial Court of Sorsogon, Branch 52, sitting as a Special Agrarian

54
Court (SAC), for the determination of just compensation, as provided for in
Section 16 (f) of the CARL.6

On August 20, 2000, the PARAD issued an Order granting the Motion for
Contempt, as follows:

WHEREFORE, premises considered, the motion for contempt is hereby

GRANTED, thus ALEX A. LORAYES, as Manager of respondent LAND
BANK, is cited for indirect contempt and hereby ordered to be
imprisoned until he complies with the Decision of the case dated October
14, 1998.

SO ORDERED.7

Petitioner Land Bank filed a Motion for Reconsideration of the aforequoted

Order,8 which was however denied by the PARAD on September 20,
2000.9 Thus, petitioner filed a Notice of Appeal with the PARAD, manifesting
its intention to appeal the decision to the DARAB Central, pursuant to Rule
XI, Section 3 of the 1994 DARAB New Rules of Procedure.10

On the other hand, the Special Agrarian Court dismissed the petition for the
determination of just compensation filed by petitioner Land Bank in an Order
dated October 25, 2000. Petitioner’s Motion for Reconsideration of said
dismissal was likewise denied.

In a Resolution dated November 27, 2000, PARAD Capellan denied due course
to petitioner’s Notice of Appeal and ordered the issuance of an Alias Writ of
Execution for the payment of the adjudged amount of just compensation to
respondent.11 On January 3, 2001, he directed the issuance of an arrest order
against Manager Alex A. Lorayes.12

Petitioner Land Bank filed a petition for injunction before the Regional Trial
Court of Sorsogon, Sorsogon, with application for the issuance of a writ of
preliminary injunction to restrain PARAD Capellan from issuing the order of
arrest.13 The case was raffled to Branch 51 of said court. On January 29,
2001, the trial court issued an Order, the dispositive portion of which reads:

WHEREFORE, premises considered, the respondent Provincial

Adjudicator of the DARAB or anyone acting in its stead is enjoined as it
is hereby enjoined from enforcing its order of arrest against Mr. Alex A.
Lorayes pending the final termination of the case before RTC Branch 52,
Sorsogon upon the posting of a cash bond by the Land Bank.

SO ORDERED.14

Respondent filed a Motion for Reconsideration of the trial court’s order, which
was denied in an Order dated April 2, 2001.15

Thus, respondent filed a special civil action for certiorari with the Court of
Appeals,16 docketed as CA-G.R. SP No. 65276. On December 11, 2001, the
Court of Appeals rendered the assailed decision which nullified the Orders of
the Regional Trial Court of Sorsogon, Sorsogon, Branch 51.

55
Hence, the instant petition for review on the following issues:

I. WHETHER OR NOT THE CA DEPARTED FROM THE ACCEPTED COURSE

OF JUDICIAL PROCEEDINGS IN ENTERTAINING THE RESPONDENT’S
SPECIAL CIVIL ACTION FOR CERTIORARI TO QUESTION THE FINAL
ORDER OF THE RTC WHICH, HOWEVER, WAS SUBJECT TO APPEAL
UNDER THE 1997 RULES OF CIVIL PROCEDURE.

II. WHETHER OR NOT THE CA DECIDED IN A WAY NOT IN ACCORD

WITH LAW AND SUBSTANTIAL JUSTICE IN ANNULLING AND SETTING
ASIDE THE RTC FINAL ORDER OF INJUNCTION, CONSIDERING THAT:

A. THE PARAD DID NOT ACQUIRE COMPETENT JURISDICTION OVER

THE CONTEMPT PROCEEDINGS INASMUCH AS IT WAS INITIATED BY
MERE MOTION FOR CONTEMPT AND NOT BY VERIFIED PETITION, IN
VIOLATION OF SECTION 2, RULE XI OF THE NEW DARAB RULES OF
PROCEDURE AND OF RULE 71 OF THE REVISED RULES OF COURT.

B. THE PARAD CONTEMPT ORDER CANNOT BE CONSIDERED FINAL AND

EXECUTORY, BECAUSE THE PARAD ITSELF DISALLOWED THE
PETITIONER’S APPEAL TO THE DARAB CENTRAL OFFICE, IN DISREGARD
OF THE BASIC RULE THAT THE APPELLATE TRIBUNAL DETERMINES THE
MERITS OF THE APPEAL.

C. THE PARAD ORDER OF ARREST AGAINST LBP MANAGER ALEX

LORAYES WAS IN GROSS AND PATENT VIOLATION OF HIS PERSONAL,
CONSTITUTIONAL AND CIVIL RIGHTS AGAINST UNJUST ARREST AND
IMPRISONMENT, INASMUCH AS, UNDER THE 1987 CONSTITUTION,
ONLY JUDGES CAN ISSUE WARRANTS OF ARREST AGAINST CITIZENS,
AND THE PROPER SUBJECT OF THE CONTEMPT PROCEEDING WAS THE
PETITIONER ITSELF AND NOT THE LBP MANAGER, AND YET THE
CONTEMPT ORDER WAS AGAINST THE LBP MANAGER.

D. THE PARAD ORDER OF CONTEMPT WAS PATENTLY NULL AND VOID,

AS IT ATTEMPTED TO ENFORCE COMPLIANCE WITH THE PARAD
DECISION THAT WAS ADMITTEDLY NOT FINAL AND EXECUTORY, AS
THE MATTER OF JUST COMPENSATION BEFORE THE SPECIAL AGRARIAN
COURT WAS ON APPEAL WITH THE COURT OF APPEALS.17

As regards the first issue, petitioner submits that the special civil action
for certiorari filed by respondent before the Court of Appeals to nullify the
injunction issued by the trial court was improper, considering that the
preliminary injunction issued by the trial court was a final order which is
appealable to the Court of Appeals via a notice of appeal.18

Petitioner’s submission is untenable. Generally, injunction is a preservative

remedy for the protection of one’s substantive right or interest. It is not a
cause of action in itself but merely a provisional remedy, an adjunct to a main
suit. Thus, it has been held that an order granting a writ of preliminary
injunction is an interlocutory order. As distinguished from a final order which
disposes of the subject matter in its entirety or terminates a particular
proceeding or action, leaving nothing else to be done but to enforce by
56
execution what has been determined by the court, an interlocutory order does
not dispose of a case completely, but leaves something more to be
adjudicated upon.19

Clearly, the grant of a writ of preliminary injunction is in the nature of an

interlocutory order, hence, unappealable. Therefore, respondent’s special
civil action for certiorari before the Court of Appeals was the correct remedy
under the circumstances. Certiorari is available where there is no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law.20

The order granting a writ of preliminary injunction is an interlocutory

order; as such, it cannot by itself be subject of an appeal or a petition
for review on certiorari. The proper remedy of a party aggrieved by such
an order is to bring an ordinary appeal from an adverse judgment in the
main case, citing therein the grounds for assailing the interlocutory
order. However, the party concerned may file a petition for certiorari
where the assailed order is patently erroneous and appeal would not
afford adequate and expeditious relief.21

On the substantive issue of whether the order for the arrest of petitioner’s
manager, Mr. Alex Lorayes by the PARAD, was valid, Rule XVIII of the 2003
DARAB Rules reads, in pertinent part:

Section 2. Indirect Contempt. – The Board or any of its members or its

Adjudicator may also cite and punish any person for indirect contempt
on any of the grounds and in the manner prescribed under Rule 71 of
the Revised Rules of Court.

In this connection, Rule 71, Section 4 of the 1997 Rules of Civil Procedure,
which deals with the commencement of indirect contempt proceedings,
provides:

Sec. 4. How proceedings commenced. — Proceedings for indirect

contempt may be initiated motu proprio by the court against which the
contempt was committed by an order or any other formal charge
requiring the respondent to show cause why he should not be punished
for contempt.

In all other cases, charges for indirect contempt shall be commenced by

a verified petition with supporting particulars and certified true copies
of documents or papers involved therein, and upon full compliance with
the requirements for filing initiatory pleadings for civil actions in the
court concerned. If the contempt charges arose out of or are related to
a principal action pending in the court, the petition for contempt shall
allege that fact but said petition shall be docketed, heard and decided
separately, unless the court in its discretion orders the consolidation of
the contempt charge and the principal action for joint hearing and
decision.

xxx xxx xxx

57
The requirement of a verified petition is mandatory. Justice Florenz D.
Regalado, Vice-Chairman of the Revision of the Rules of Court Committee
that drafted the 1997 Rules of Civil Procedure explains this requirement:

1. This new provision clarifies with a regulatory norm the proper

procedure for commencing contempt proceedings. While such
proceeding has been classified as a special civil action under the former
Rules, the heterogeneous practice, tolerated by the courts, has been for
any party to file a mere motion without paying any docket or lawful fees
therefor and without complying with the requirements for initiatory
pleadings, which is now required in the second paragraph of this
amended section.

xxx xxx xxx

Henceforth, except for indirect contempt proceedings initiated motu

proprio by order of or a formal charge by the offended court, all charges
shall be commenced by a verified petition with full compliance with the
requirements therefor and shall be disposed of in accordance with the
second paragraph of this section.22

Therefore, there are only two ways a person can be charged with indirect
contempt, namely, (1) through a verified petition; and (2) by order or formal
charge initiated by the court motu proprio.

In the case at bar, neither of these modes was adopted in charging Mr.
Lorayes with indirect contempt.

More specifically, Rule 71, Section 12 of the 1997 Rules of Civil Procedure,
referring to indirect contempt against quasi-judicial entities, provides:

Sec. 12. Contempt against quasi-judicial entities. — Unless otherwise

provided by law, this Rule shall apply to contempt committed against
persons, entities, bodies or agencies exercising quasi-judicial functions,
or shall have suppletory effect to such rules as they may have adopted
pursuant to authority granted to them by law to punish for contempt.
The Regional Trial Court of the place wherein the contempt has been
committed shall have jurisdiction over such charges as may be filed
therefore. (emphasis supplied)

The foregoing amended provision puts to rest once and for all the questions
regarding the applicability of these rules to quasi-judicial bodies, to wit:

1. This new section was necessitated by the holdings that the former
Rule 71 applied only to superior and inferior courts and did not
comprehend contempt committed against administrative or quasi-
judicial officials or bodies, unless said contempt is clearly considered and
expressly defined as contempt of court, as is done in the second
paragraph of Sec. 580, Revised Administrative Code. The provision
referred to contemplates the situation where a person, without lawful
excuse, fails to appear, make oath, give testimony or produce
documents when required to do so by the official or body exercising such
58
powers. For such violation, said person shall be subject to discipline, as
in the case of contempt of court, upon application of the official or body
with the Regional Trial Court for the corresponding
sanctions. (emphasis in the original)
23

Evidently, quasi-judicial agencies that have the power to cite persons for
indirect contempt pursuant to Rule 71 of the Rules of Court can only do so
by initiating them in the proper Regional Trial Court. It is not within their
jurisdiction and competence to decide the indirect contempt cases. These
matters are still within the province of the Regional Trial Courts. In the
present case, the indirect contempt charge was filed, not with the Regional
Trial Court, but with the PARAD, and it was the PARAD that cited Mr. Lorayes
with indirect contempt.

Hence, the contempt proceedings initiated through an unverified "Motion for

Contempt" filed by the respondent with the PARAD were invalid for the
following reasons:24 First, the Rules of Court clearly require the filing of a
verified petition with the Regional Trial Court, which was not complied with
in this case. The charge was not initiated by the PARAD motu proprio; rather,
it was by a motion filed by respondent. Second, neither the PARAD nor the
DARAB have jurisdiction to decide the contempt charge filed by the
respondent. The issuance of a warrant of arrest was beyond the power of the
PARAD and the DARAB. Consequently, all the proceedings that stemmed from
respondent’s "Motion for Contempt," specifically the Orders of the PARAD
dated August 20, 2000 and January 3, 2001 for the arrest of Alex A. Lorayes,
are null and void.

WHEREFORE, in view of the foregoing, the petition for review is GRANTED.

The Decision of the Court of Appeals in CA-G.R. SP No. 65276, dated
December 11, 2001, is REVERSED and SET ASIDE. The Order of the Regional
Trial Court of Sorsogon, Sorsogon, Branch 51, dated January 29, 2001, which
enjoined the Provincial Adjudicator of the DARAB or anyone acting in its stead
from enforcing its order of arrest against Mr. Alex A. Lorayes pending the
final termination of the case before Regional Trial Court of Sorsogon,
Sorsogon, Branch 52, is REINSTATED.

SO ORDERED.

59
SECOND DIVISION

G.R. No. 142244 November 18, 2002

ATLAS FARMS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION,
JAIME O. DELA PEÑA and MARCIAL I. ABION, respondents.

DECISION

QUISUMBING, J.:

Petitioner seeks the reversal of the decision1 dated January 10, 2000 of the
Court of Appeals in CA-G.R. SP No. 52780, dismissing its petition for certiorari
against the NLRC, as well as the resolution2 dated February 24, 2000, denying
its motion for reconsideration.

The antecedent facts of the case, as found by the Court of Appeals,3 are as
follows:

Private respondent Jaime O. dela Peña was employed as a veterinary aide by

petitioner in December 1975. He was among several employees terminated
in July 1989. On July 8, 1989, he was re-hired by petitioner and given the
additional job of feedmill operator. He was instructed to train selected
workers to operate the feedmill.

On March 13, 1993,4 Peña was allegedly caught urinating and defecating on
company premises not intended for the purpose. The farm manager of
petitioner issued a formal notice directing him to explain within 24 hours why
disciplinary action should not be taken against him for violating company
rules and regulations. Peña refused, however, to receive the formal notice.
He never bothered to explain, either verbally or in writing, according to
petitioner. Thus, on March 20, 1993, a notice of termination with payment of
his monetary benefits was sent to him. He duly acknowledged receipt of his
separation pay of P13,918.67.

From the start of his employment on July 8, 1989, until his termination on
March 20, 1993, Peña had worked for seven days a week, including holidays,
without overtime, holiday, rest day pay and service incentive leave. At the
time of his dismissal from employment, he was receiving P180 pesos daily
wage, or an average monthly salary of P5,402.

Co-respondent Marcial I. Abion5 was a carpenter/mason and a maintenance

man whose employment by petitioner commenced on October 8, 1990.
Allegedly, he caused the clogging of the fishpond drainage resulting in
damages worth several hundred thousand pesos when he improperly
disposed of the cut grass and other waste materials into the pond’s drainage
system. Petitioner sent a written notice to Abion, requiring him to explain
what happened, otherwise, disciplinary action would be taken against him.
He refused to receive the notice and give an explanation, according to
petitioner. Consequently, the company terminated his services on October

60
27, 1992. He acknowledged receipt of a written notice of dismissal, with his
separation pay.

Like Peña, Abion worked seven days a week, including holidays, without
holiday pay, rest day pay, service incentive leave pay and night shift
differential pay. When terminated on October 27, 1992, Abion was receiving
a monthly salary of P4,500.

Peña and Abion filed separate complaints for illegal dismissal that were later
consolidated. Both claimed that their termination from service was due to
petitioner’s suspicion that they were the leaders in a plan to form a union to
compete and replace the existing management-dominated union.

On November 9, 1993, the labor arbiter dismissed their complaints on the

ground that the grievance machinery in the collective bargaining agreement
(CBA) had not yet been exhausted. Private respondents availed of the
grievance process, but later on refiled the case before the NLRC in Region IV.
They alleged "lack of sympathy" on petitioner’s part to engage in conciliation
proceedings.

Their cases were consolidated in the NLRC. At the initial mandatory

conference, petitioner filed a motion to dismiss, on the ground of lack of
jurisdiction, alleging private respondents themselves admitted that they were
members of the employees’ union with which petitioner had an existing CBA.
This being the case, according to petitioner, jurisdiction over the case
belonged to the grievance machinery and thereafter the voluntary arbitrator,
as provided in the CBA.

In a decision dated January 30, 1996, the labor arbiter dismissed the
complaint for lack of merit, finding that the case was one of illegal dismissal
and did not involve the interpretation or implementation of any CBA
provision. He stated that Article 217 (c) of the Labor Code6 was inapplicable
to the case. Further, the labor arbiter found that although both complainants
did not substantiate their claims of illegal dismissal, there was proof that
private respondents voluntarily accepted their separation pay and petitioner’s
financial assistance.

Thus, private respondents brought the case to the NLRC, which reversed the
labor arbiter’s decision. Dissatisfied with the NLRC ruling, petitioner went to
the Court of Appeals by way of a petition for review on certiorari under Rule
65, seeking reinstatement of the labor arbiter’s decision. The appellate court
denied the petition and affirmed the NLRC resolution with some
modifications, thus:

WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520-

96 is AFFIRMED with the following modifications:

1) The private respondents can not be reinstated, due to their

acceptance of the separation pay offered by the petitioner;

2) The private respondents are entitled to their full back wages; and,

61
3) The amount of the separation pay received by private respondents
from petitioner shall not be deducted from their full back wages.

Costs against petitioner.

SO ORDERED.7

Petitioner forthwith filed its motion for reconsideration, which was denied in
a resolution dated February 24, 2000, which reads:

Acting on the Motion for Reconsideration filed by petitioner[s] which drew an

opposition from private respondents, the Court resolved to DENY the
aforesaid motion for reconsideration, as the issues raised therein have been
passed upon by the Court in its questioned decision and no substantial
arguments were presented to warrant its reversal, let alone modification.

SO ORDERED.8

In this petition now before us, petitioner alleges that the appellate court erred
in:

I. … DENYING THE PETITION FOR CERTIORARI AND IN EFFECT AFFIRMING

THE RULINGS OF THE PUBLIC RESPONDENT NLRC THAT THE PRIVATE
RESPONDENTS WERE ILLEGALLY DISMISSED;

II. … RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO

SEPARATION PAY AND FULL BACKWAGES;

III. … RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT.9

Petitioner contends that the dismissal of private respondents was for a just
and valid cause, pursuant to the provisions of the company’s rules and
regulations. It also alleges lack of jurisdiction on the part of the labor arbiter,
claiming that the cases should have been resolved through the grievance
machinery, and eventually referred to voluntary arbitration, as prescribed in
the CBA.

For their part, private respondents contend that they were illegally dismissed
from employment because management discovered that they intended to
form another union, and because they were vocal in asserting their rights. In
any case, according to private respondents, the petition involves factual
issues that cannot be properly raised in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court.10

In fine, there are three issues to be resolved: 1) whether private respondents

were legally and validly dismissed; 2) whether the labor arbiter and the NLRC
had jurisdiction to decide complaints for illegal dismissal; and 3) whether
petitioner is liable for costs of the suit.

The first issue primarily involves questions of fact, which can serve as basis
for the conclusion that private respondents were legally and validly
dismissed. The burden of proving that the dismissal of private respondents
was legal and valid falls upon petitioner. The NLRC found that petitioner failed
62
to substantiate its claim that both private respondents committed certain acts
that violated company rules and regulations,11 hence we find no factual basis
to say that private respondents’ dismissal was in order. We see no compelling
reason to deviate from the NLRC ruling that their dismissal was illegal, absent
a showing that it reached its conclusion arbitrarily.12 Moreover, factual
findings of agencies exercising quasi-judicial functions are accorded not only
respect but even finality, aside from the consideration here that this Court is
not a trier of facts. 13

Anent the second issue, Article 217 of the Labor Code provides that labor
arbiters have original and exclusive jurisdiction over termination disputes. A
possible exception is provided in Article 261 of the Labor Code, which
provides that-

The Voluntary Arbitrator or panel of voluntary arbitrators shall have original

and exclusive jurisdiction to hear and decide all unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article.
Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and or malicious refusal to comply
with the economic provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the grievance Machinery or Arbitration provided
in the Collective Bargaining Agreement.

But as held in Vivero vs. CA,14 "petitioner cannot arrogate into the powers of
Voluntary Arbitrators the original and exclusive jurisdiction of Labor Arbiters
over unfair labor practices, termination disputes, and claims for damages, in
the absence of an express agreement between the parties in order for Article
262 of the Labor Code [Jurisdiction over other labor disputes] to apply in the
case at bar."

Moreover, per Justice Bellosillo:

It may be observed that under Policy Instruction No. 56 of the Secretary of

Labor, dated 6 April 1993, "Clarifying the Jurisdiction Between Voluntary
Arbitrators and Labor Arbiters Over Termination Cases and Providing
Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the
NCMB," termination cases arising in or resulting from the interpretation and
implementation of collective bargaining agreements and interpretation and
enforcement of company personnel policies which were initially processed at
the various steps of the plant-level Grievance Procedures under the parties’
collective bargaining agreements fall within the original and exclusive

63
jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and Art. 261
of the Labor Code; and, if filed before the Labor Arbiter, these cases shall be
dismissed by the Labor Arbiter for lack of jurisdiction and referred to the
concerned NCMB Regional Branch for appropriate action towards and
expeditious selection by the parties of a Voluntary Arbitrator or Panel of
Arbitrators based on the procedures agreed upon in the CBA.

As earlier stated, the instant case is a termination dispute falling under the
original and exclusive jurisdiction of the Labor Arbiter, and does not
specifically involve the application, implementation or enforcement of
company personnel policies contemplated in Policy Instruction No. 56.
Consequently, Policy Instruction No. 56 does not apply in the case at bar.15 x
xx

Records show, however, that private respondents sought without success to

avail of the grievance procedure in their CBA.16 On this point, petitioner
maintains that by so doing, private respondents recognized that their cases
still fell under the grievance machinery. According to petitioner, without
having exhausted said machinery, the private respondents filed their action
before the NLRC, in a clear act of forum-shopping.17 However, it is worth
pointing out that private respondents went to the NLRC only after the labor
arbiter dismissed their original complaint for illegal dismissal. Under these
circumstances private respondents had to find another avenue for redress.
We agree with the NLRC that it was petitioner who failed to show proof that
it took steps to convene the grievance machinery after the labor arbiter first
dismissed the complaints for illegal dismissal and directed the parties to avail
of the grievance procedure under Article VII of the existing CBA. They could
not now be faulted for attempting to find an impartial forum, after petitioner
failed to listen to them and after the intercession of the labor arbiter proved
futile. The NLRC had aptly concluded in part that private respondents had
already exhausted the remedies under the grievance procedure.18 It erred
only in finding that their cause of action was ripe for arbitration.

In the case of Maneja vs. NLRC,19 we held that the dismissal case does not
fall within the phrase "grievances arising from the interpretation or
implementation of the collective bargaining agreement and those
arising from the interpretation or enforcement of company personnel
policies." In Maneja, the hotel employee was dismissed without hearing. We
ruled that her dismissal was unjustified, and her right to due process was
violated, absent the twin requirements of notice and hearing. We also held
that the labor arbiter had original and exclusive jurisdiction over the
termination case, and that it was error to give the voluntary arbitrator
jurisdiction over the illegal dismissal case.

In Vivero vs. CA,20 private respondents attempted to justify the jurisdiction

of the voluntary arbitrator over a termination dispute alleging that the issue
involved the interpretation and implementation of the grievance procedure in
the CBA. There, we held that since what was challenged was the legality of
the employee’s dismissal for lack of cause and lack of due process, the case
was primarily a termination dispute. The issue of whether there was proper
interpretation and implementation of the CBA provisions came into play only
64
because the grievance procedure in the CBA was not observed, after he
sought his union’s assistance. Since the real issue then was whether there
was a valid termination, there was no reason to invoke the need to interpret
nor question an implementation of any CBA provision.

One significant fact in the present petition also needs stressing. Pursuant to
Article 26021 of the Labor Code, the parties to a CBA shall name or designate
their respective representatives to the grievance machinery and if the
grievance is unsettled in that level, it shall automatically be referred to the
voluntary arbitrators designated in advance by the parties to a CBA.
Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. In these
termination cases of private respondents, the union had no participation, it
having failed to object to the dismissal of the employees concerned by the
petitioner. It is obvious that arbitration without the union’s active
participation on behalf of the dismissed employees would be pointless, or
even prejudicial to their cause.

Coming to the merits of the petition, the NLRC found that petitioner did not
comply with the requirements of a valid dismissal. For a dismissal to be valid,
the employer must show that: (1) the employee was accorded due process,
and (2) the dismissal must be for any of the valid causes provided for by
law.22 No evidence was shown that private respondents refused, as alleged,
to receive the notices requiring them to show cause why no disciplinary action
should be taken against them. Without proof of notice, private respondents
who were subsequently dismissed without hearing were also deprived of a
chance to air their side at the level of the grievance machinery. Given the
fact of dismissal, it can be said that the cases were effectively removed from
the jurisdiction of the voluntary arbitrator, thus placing them within the
jurisdiction of the labor arbiter. Where the dispute is just in the interpretation,
implementation or enforcement stage, it may be referred to the grievance
machinery set up in the CBA, or brought to voluntary arbitration. But, where
there was already actual termination, with alleged violation of the employee’s
rights, it is already cognizable by the labor arbiter.23

In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction
over the cases involving private respondents’ dismissal, and no error was
committed by the appellate court in upholding their assumption of
jurisdiction.

However, we find that a modification of the monetary awards is in order. As

a consequence of their illegal dismissal, private respondents are entitled to
reinstatement to their former positions. But since reinstatement is no longer
feasible because petitioner had already closed its shop, separation pay in lieu
of reinstatement shall be awarded.24 A terminated employee’s receipt of his
separation pay and other monetary benefits does not preclude reinstatement
or full benefits under the law, should reinstatement be no longer
possible.25 As held in Cariño vs. ACCFA:26

Acceptance of those benefits would not amount to estoppel. The reason is

plain. Employer and employee, obviously, do not stand on the same footing.

65
The employer drove the employee to the wall. The latter must have to get
hold of the money. Because out of job, he had to face the harsh necessities
of life. He thus found himself in no position to resist money proffered. His,
then, is a case of adherence, not of choice. One thing sure, however, is that
petitioners did not relent their claim. They pressed it. They are deemed not
to have waived their rights. Renuntiato non praesumitur.

Conformably, private respondents are entitled to separation pay equivalent

to one month’s salary for every year of service, in lieu of reinstatement.27 As
regards the award of damages, in order not to further delay the disposition
of this case, we find it necessary to expressly set forth the extent of the
backwages as awarded by the appellate court. Pursuant to R.A. 6715, as
amended, private respondents shall be entitled to full backwages computed
from the time of their illegal dismissal up to the date of promulgation of this
decision without qualification, considering that reinstatement is no longer
practicable under the circumstances.28

Having found private respondents’ dismissal to be illegal, and the labor

arbiter and the NLRC duly vested with jurisdiction to hear and decide their
cases, we agree with the appellate court that petitioner should pay the costs
of suit.

WHEREFORE, the petition is DENIED for lack of merit. The decision of the
Court of Appeals in CA-G.R. SP No. 52780 is AFFIRMED with the
MODIFICATION that petitioner is ordered to pay private respondents (a)
separation pay, in lieu of their reinstatement, equivalent to one month’s
salary for every year of service, (b) full backwages from the date of their
dismissal up to the date of the promulgation of this decision, together with
(c) the costs of suit.

SO ORDERED.

66
THIRD DIVISION

[G.R. No. 121948. October 8, 2001.]

PERPETUAL HELP CREDIT COOPERATIVE, INC., Petitioner, v.

BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO,
HAROLD CATIPAY, and the NATIONAL LABOR RELATIONS
COMMISSION, Fourth Division, Cebu City, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and

Harold Catipay, private respondents, filed a complaint against the Perpetual
Help Credit Cooperative, Inc. (PHCCI), Petitioner, with the Arbitration
Branch, Department of Labor and Employment (DOLE), Dumaguete City, for
illegal dismissal, premium pay on holidays and rest days, separation pay,
wage differential, moral damages, and attorney’s fees.

Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the

ground that there is no employer-employee relationship between them as
private respondents are all members and co-owners of the cooperative.
Furthermore, private respondents have not exhausted the remedies provided
in the cooperative by-laws. chanrob1es virtua1 1aw 1ibrary

On September 3, 1990, petitioner filed a supplemental motion to dismiss

alleging that Article 121 of R.A. No. 6939, otherwise known as the
Cooperative Development Authority Law which took effect on March 26,
1990, requires conciliation or mediation within the cooperative before a resort
to judicial proceeding.

On the same date, the Labor Arbiter denied petitioner’s motion to dismiss,
holding that the case is impressed with employer-employee relationship and
that the law on cooperatives is subservient to the Labor Code.

On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive
portion of which reads: chanrob1es virtual 1aw library

WHEREFORE, premises considered, judgment is hereby rendered declaring

complainants illegally dismissed, thus respondent is directed to pay
Complainants backwages computed from the time they were illegally
dismissed up to the actual reinstatement but subject to the three year
backwages rule, separation pay for one month for every year of service since
reinstatement is evidently not feasible anymore, to pay complainants 13th
month pay, wage differentials and Ten Percent (10%) attorney’s fees from
the aggregate monetary award. However, complainant Benedicto Faburada
shall only be awarded what are due him in proportion to the nine and a half
67
months that he had served the respondent, he being a part-time employee.
All other claims are hereby dismissed for lack of merit.

The computation of the foregoing awards is hereto attached and forms an

integral part of this decision." cralaw virtua1aw library

On appeal, 1 the NLRC affirmed the Labor Arbiter’s decision.

Hence, this petition by the PHCCI.

The issue for our resolution is whether or not respondent judge committed
grave abuse of discretion in ruling that there is an employer-employee
relationship between the parties and that private respondents were illegally
dismissed.

Petitioner PHCCI contends that private respondents are its members and are
working for it as volunteers. Not being regular employees, they cannot sue
petitioner. chanrob1es virtua1 1aw 1ibrary

In determining the existence of an employer-employee relationship, the

following elements are considered: (1) the selection and engagement of the
worker or the power to hire; (2) the power to dismiss; (3) the payment of
wages by whatever means; and (4) the power to control the worker’s
conduct, with the latter assuming primacy in the overall consideration. No
particular form of proof is required to prove the existence of an employer-
employee relationship. Any competent and relevant evidence may show the
relationship. 2

The above elements are present here. Petitioner PHCCI, through Mr. Edilberto
Lantaca, Jr., its Manager, hired private respondents to work for it. They
worked regularly on regular working hours, were assigned specific duties,
were paid regular wages and made to accomplish daily time records just like
any other regular employee. They worked under the supervision of the
cooperative manager. But unfortunately, they were dismissed.

That an employer-employee exists between the parties is shown by the

averments of private respondents in their respective affidavits, carefully
considered by respondent NLRC in affirming the Labor Arbiter’s decision,
thus:chanrob1es virtual 1aw library

Benedicto Faburada —Regular part-time Computer programmer/ operator.

Worked with the Cooperative since June 1, 1988 up to December 29, 1989.
Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and
every Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at
least three (3) hours during Sundays. Monthly salary: P1,000.00 — from June
to December 1988; P1,350.00 - from January to June 1989; and P1,500.00
from July to December 1989. Duties: Among others, — Enter data into the
computer; compute interests on savings deposits, effect mortuary deductions
and dividends on fixed deposits; maintain the masterlist of the cooperative
members; perform various forms for mimeographing; and perform such

68
other duties as may be assigned from time to time.

Sisinita Vilar — Clerk. Worked with the Cooperative since December 1, 1987
up to December 29, 1989. Work schedule: Regular working hours. Monthly
salary: P500.00 — from December 1, 1987 to December 31, 1988; P1,000.00
— from January 1, 1989 to June 30, 1989; and P1,150.00 — from July 1,
1989 to December 31, 1989. Duties: Among others, Prepare summary of
salary advances, journal vouchers, daily summary of disbursements to
respective classifications; schedule loans; prepare checks and cash vouchers
for regular and emergency loans; reconcile bank statements to the daily
summary of disbursements; post the monthly balance of fixed and savings
deposits in preparation for the computation of interests, dividends, mortuary
and patronage funds; disburse checks during regular and emergency loans;
and perform such other bookkeeping and accounting duties as may be
assigned to her from time to time.

Imelda C. Tamayo — Clerk. Worked with the Cooperative since October 19,
1987 up to December 29, 1989. Work schedule: Monday to Friday - 8:00 to
11:30 a.m and 2:00 to 5:30 p.m.; every Saturday — 8:00 to 11:30 a.m and
1:00 to 4:00 p.m; and for one Sunday each month - for at least three (3)
hours. Monthly salary: P60.00 — from October to November 1987; P250.00
for December 1987; P500.00 — from January to December 1988; P950 —
from January to June 1989; and P1,000.00 from July to December 1989.
Duties: Among others, pick up balances for the computation of interests on
savings deposit, mortuary, dividends and patronage funds; prepare cash
vouchers; check petty cash vouchers; take charge of the preparation of new
passbooks and ledgers for new applicants; fill up members logbook of regular
depositors, junior depositors and special accounts; take charge of loan
releases every Monday morning; assist in the posting and preparation of
deposit slips; receive deposits from members; and perform such other
bookkeeping and accounting duties as may be assigned her from time to
time.

Harold D. Catipay — Clerk. Worked with the Cooperative since March 3 to

December 29, 1989. Work schedule: — Monday to Friday — 8:00 to 11:30
a.m. and 2:00 to 5:30 p.m.; Saturday — 8:00 to 11:30 a.m. and 1:00 to
4:00 p.m.; and one Sunday each month — for at least three (3) hours.
Monthly salary: P900.00 — from March to June 1989; P1,050.00 - from July
to December 1989. Duties: Among others, Bookkeeping, accounting and
collecting duties, such as, post daily collections from the two (2) collectors in
the market; reconcile passbooks and ledgers of members in the market; and
assist the other clerks in their duties.

All of them were given a memorandum of termination on January 2, 1990,

effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and
respondent NLRC, the same being supported by substantial evidence, that
quantum of evidence required in quasi judicial proceedings, like this one..

69
Necessarily, this leads us to the issue of whether or not private respondents
are regular employees. Article 280 of the Labor Code provides for three kinds
of employees: (1) regular employees or those who have been engaged to
perform activities which are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed
is seasonal in nature and the employment is for the duration of the season;
and (3) casual employees or those who are neither regular nor project
employees. 3 The employees who are deemed regular are: (a) those who
have been engaged to perform activities which are usually necessary or
desirable in the usual trade or business of the employer; and (b) those casual
employees who have rendered at least one (1) year of service, whether such
service is continuous or broken, with respect to the activity in which they are
employed. 4 Undeniably, private respondents were rendering services
necessary to the day-to-day operations of petitioner PHCCI. This fact alone
qualified them as regular employees. chanrob1es virtua1 1aw 1ibrary

All of them, except Harold D. Catipay, worked with petitioner for more than
one (1) year: Benedicto Faburada, for one and a half (1 1/2) years; Sisinita
Vilar, for two (2) years; and Imelda C. Tamayo, for two (2) years and two
(2) months. That Benedicto Faburada worked only on a part-time basis, does
not mean that he is not a regular employee. One’s regularity of employment
is not determined by the number of hours one works but by the nature and
by the length of time one has been in that particular job. 5 Petitioner’s
contention that private respondents are mere volunteer workers, not regular
employees, must necessarily fail. Its invocation of San Jose City Electric
Cooperative v. Ministry of Labor and Employment (173 SCRA 697, 703 (1989)
is misplaced. The issue in this case is whether or not the employees-members
of a cooperative can organize themselves for purposes of collective
bargaining, not whether or not the members can be employees. Petitioner
missed the point

As regular employees or workers, private respondents are entitled to security

of tenure. Thus, their services may be terminated only for a valid cause, with
observance of due process.

The valid causes are categorized into two groups: the just causes under
Articles 282 of the Labor Code and the authorized causes under Articles 283
and 284 of the same Code. The just causes are: (1) serious misconduct or
willful disobedience of lawful orders in connection with the employee’s work;
(2) gross or habitual neglect of duties; (3) fraud or willful breach of trust; (4)
commission of a crime or an offense against the person of the employer or
his immediate family member or representative; and, analogous cases. The
authorized causes are: (1) the installation of labor-saving devices; (2)
redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation
of operations of the establishment or undertaking, unless the closing is for
the purpose of circumventing the provisions of law. Article 284 provides that
an employer would be authorized to terminate the services of an employee

70
found to be suffering from any disease if the employee’s continued
employment is prohibited by law or is prejudicial to his health or to the health
of his fellow employees 6

Private respondents were dismissed not for any of the above causes. They
were dismissed because petitioner considered them to be mere voluntary
workers, being its members, and as such work at its pleasure. Petitioner thus
vehemently insists that their dismissal is not against the law.

Procedural due process requires that the employer serve the employees to
be dismissed two (2) written notices before the termination of their
employment is effected: (a) the first, to apprise them of the particular acts
or omissions for which their dismissal is sought and (b) the second, to inform
them of the decision of the employer that they are being dismissed. 7 In this
case, only one notice was served upon private respondents by petitioner. It
was in the form of a Memorandum signed by the Manager of the Cooperative
dated January 2, 1990 terminating their services effective December 29,
1989. Clearly, petitioner failed to comply with the twin requisites of a valid
notice.

We hold that private respondents have been illegally dismissed.

Petitioner contends that the labor arbiter has no jurisdiction to take

cognizance of the complaint of private respondents considering that they
failed to submit their dispute to the grievance machinery as required by P.D.
175 (strengthening the Cooperative Movement) 8 and its implementing rules
and regulations under LOI 23. Likewise, the Cooperative Development
Authority did not issue a Certificate of Non-Resolution pursuant to Section 8
of R.A. 6939 or the Cooperative Development Authority Law.

As aptly stated by the Solicitor General in his comment, P.D. 175 does not
provide for a grievance machinery where a dispute or claim may first be
submitted. LOI 23 refers to instructions to the Secretary of Public Works and
Communications to implement immediately the recommendation of the
Postmaster General for the dismissal of some employees of the Bureau of
Post. Obviously, this LOI has no relevance to the instant case.

Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines)
provides the procedure how cooperative disputes are to be resolved, thus:
virtual 1aw
chanrob1es
library

ART. 121. Settlement of Disputes. — Disputes among members, officers,

directors, and committee members, and intra-cooperative disputes shall, as
far as practicable, be settled amicably in accordance with the conciliation or
mediation mechanisms embodied in the by-laws of the cooperative, and in
applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be

settled in a court of competent jurisdiction." cralaw virtua1aw library

Complementing this Article is Section 8 of R.A. No. 6939 (Cooperative

71
Development Authority Law) which reads: chanrob1es virtual 1aw library

SEC. 8 Mediation and Conciliation. — Upon request of either or both parties,

the Authority shall mediate and conciliate disputes within a cooperative or
between cooperatives: Provided, That if no mediation or conciliation succeeds
within three (3) months from request thereof, a certificate of non-resolution
shall be issued by the Commission prior to the filing of appropriate action
before the proper courts.

The above provisions apply to members, officers and directors of the

cooperative involved in disputes within a cooperative or between
cooperatives.

There is no evidence that private respondents are members of petitioner

PHCCI and even if they are, the dispute is about payment of wages, overtime
pay, rest day and termination of employment. Under Art. 217 of the Labor
Code, these disputes are within the original and exclusive jurisdiction of the
Labor Arbiter.

As illegally dismissed employees, private respondents are therefore entitled

to reinstatement without loss of seniority rights and other privileges and to
full backwages, inclusive of allowances, plus other benefits or their monetary
equivalent computed from the time their compensation was withheld from
them up to the time of their actual reinstatement. 9 Since they were
dismissed after March 21, 1989, the effectivity date of R.A. 6715 10 they are
granted full backwages, meaning, without deducting from their backwages
the earnings derived by them elsewhere during the period of their illegal
dismissal. 11 If reinstatement is no longer feasible, as when the relationship
between petitioner and private respondents has become strained, payment
of their separation pay in lieu of reinstatement is in order. 12 chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the petition is hereby DENIED. The decision of respondent

NLRC is AFFIRMED, with modification in the sense that the backwages due
private respondents shall be paid in full, computed from the time they were
illegally dismissed up to the time of the finality of this Decision. 13

SO ORDERED.

72
FIRST DIVISION

[G.R. No. 124382. August 16, 1999]

PASTOR DIONISIO V. AUSTRIA, Petitioner, v. HON. NATIONAL LABOR

RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL
PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY
ADVENTIST, ELDER HECTOR V. GAYARES, PASTORS REUBEN
MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES,
ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE,
PROFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO
GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR.
ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, Respondents.

DECISION

KAPUNAN, J.:

Subject to the instant petition for certiorari under Rule 65 of the Rules of
Court is the Resolution1 of public respondent National Labor Relations
Commission (the NLRC), rendered on 23 January 1996, in NLRC Case No. V-
0120-93, entitled Pastor Dionisio V. Austria v. Central Philippine Union
Mission Corporation of Seventh Day Adventists, et. al., which dismissed the
case for illegal dismissal filed by the petitioner against private respondents
for lack of jurisdiction.

Private Respondent Central Philippine Union Mission Corporation of the

Seventh-Day Adventists (hereinafter referred to as the SDA) is a religious
corporation duly organized and existing under Philippine law and is
represented in this case by the other private respondents, officers of the SDA.
Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991,
when his services were terminated.

The records show that petitioner Pastor Dionisio V. Austria worked with the
SDA for twenty eight (28) years from 1963 to 1991.2 He began his work with
the SDA on 15 July 1963 as a literature evangelist, selling literature of the
SDA over the island of Negros. From then on, petitioner worked his way up
the ladder and got promoted several times. In January, 1968, petitioner
became the Assistant Publishing Director in the West Visayan Mission of the
SDA. In July, 1972, he was elevated to the position of Pastor in the West
Visayan Mission covering the island of Panay, and the provinces of Romblon
and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989,
petitioner was promoted as District Pastor of the Negros Mission of the SDA
and was assigned at Sagay, Balintawak and Toboso, Negros Occidental, with
twelve (12) churches under his jurisdiction. In January, 1991, petitioner was
transferred to Bacolod City. He held the position of district pastor until his
services were terminated on 31 October 1991.

On various occasions from August up to October, 1991, petitioner received

several communications3 from Mr. Eufronio Ibesate, the treasurer of the
Negros Mission asking him to admit accountability and responsibility for the
church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his
73
district which amounted to P15,078.10, and to remit the same to the Negros
Mission.

In his written explanation dated 11 October 1991,4 petitioner reasoned out

that he should not be made accountable for the unremitted collections since
it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who
authorized his wife to collect the tithes and offerings since he was very sick
to do the collecting at that time.

Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the

office of Pastor Buhat, the president of the Negros Mission. During said call,
petitioner tried to persuade Pastor Buhat to convene the Executive
Committee for the purpose of settling the dispute between him and the
private respondent, Pastor David Rodrigo. The dispute between Pastor
Rodrigo and petitioner arose from an incident in which petitioner assisted his
friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for
the repair of the latters motor vehicle which he failed to pay to Diamada.5 Due
to the assistance of petitioner in collecting Pastor Rodrigos debt, the latter
harbored ill-feelings against petitioner. When news reached petitioner that
Pastor Rodrigo was about to file a complaint against him with the Negros
Mission, he immediately proceeded to the office of Pastor Buhat on the date
abovementioned and asked the latter to convene the Executive Committee.
Pastor Buhat denied the request of petitioner since some committee members
were out of town and there was no quorum. Thereafter, the two exchanged
heated arguments. Petitioner then left the office of Pastor Buhat. While on
his way out, petitioner overheard Pastor Buhat saying, Pastor daw inisog na
ina iya (Pastor you are talking tough).6 Irked by such remark, petitioner
returned to the office of Pastor Buhat, and tried to overturn the latters table,
though unsuccessfully, since it was heavy. Thereafter, petitioner banged the
attache case of Pastor Buhat on the table, scattered the books in his office,
and threw the phone.7 Fortunately, private respondents Pastors Yonilo
Leopoldo and Claudio Montao were around and they pacified both Pastor
Buhat and petitioner.

On 17 October 1991, petitioner received a letter8 inviting him and his wife to
attend the Executive Committee meeting at the Negros Mission Conference
Room on 21 October 1991, at nine in the morning. To be discussed in the
meeting were the non-remittance of church collection and the events that
transpired on 16 October 1991. A fact-finding committee was created to
investigate petitioner. For two (2) days, from October 21 and 22, the fact-
finding committee conducted an investigation of petitioner. Sensing that the
result of the investigation might be one-sided, petitioner immediately wrote
Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding
committee, requesting that certain members of the fact-finding committee
be excluded in the investigation and resolution of the case.9 Out of the six
(6) members requested to inhibit themselves from the investigation and
decision-making, only two (2) were actually excluded, namely: Pastor Buhat
and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner received
a letter of dismissal10 citing misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and habitual neglect of duties, and

74
commission of an offense against the person of employers duly authorized
representative, as grounds for the termination of his services.

Reacting against the adverse decision of the SDA, petitioner filed a

complaint11 on 14 November 1991, before the Labor Arbiter for illegal
dismissal against the SDA and its officers and prayed for reinstatement with
backwages and benefits, moral and exemplary damages and other labor law
benefits.

On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in

favor of petitioner, the dispositive portion of which reads thus:

WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE

UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS
(CPUMCSDA) and its officers, respondents herein, are hereby ordered to
immediately reinstate complainant Pastor Dionisio Austria to his former
position as Pastor of Brgy. Taculing, Progreso and Banago, Bacolod City,
without loss of seniority and other rights and backwages in the amount of
ONE HUNDRED FIFTEEN THOUSAND EIGHT HUNDRED THIRTY PESOS
(P115,830.00) without deductions and qualificatioons.

Respondent CPUMCSDA is further ordered to pay complainant the following:

A. 13th month pay - P21,060.00

B. Allowance - P 4,770.83

C. Service Incentive
Leave Pay - P 3,461.85

D. Moral Damages - P50,000.00

E. Exemplary
Damages - P25,000.00

F. Attorneys Fee - P22,012.27

SO ORDERED.12

The SDA, through its officers, appealed the decision of the Labor Arbiter to
the National Labor Relations Commission, Fourth Division, Cebu City. In a
decision, dated 26 August 1994, the NLRC vacated the findings of the Labor
Arbiter. The decretal portion of the NLRC decision states:

WHEREFORE, the Decision appealed from is hereby VACATED and a new one
ENTERED dismissing this case for want of merit.

SO ORDERED.13

Petitioner filed a motion for reconsideration of the above-named decision. On

18 July 1995, the NLRC issued a Resolution reversing its original decision.
The dispositive portion of the resolution reads:

75
WHEREFORE, premises considered, Our decision dated August 26, 1994 is
VACATED and the decision of the Labor Arbiter dated February 15, 1993 is
REINSTATED.

SO ORDERED.14

In view of the reversal of the original decision of the NLRC, the SDA filed a
motion for reconsideration of the above resolution. Notable in the motion for
reconsideration filed by private respondents is their invocation, for the first
time on appeal, that the Labor Arbiter has no jurisdiction over the complaint
filed by petitioner due to the constitutional provision on the separation of
church and state since the case allegedly involved and ecclesiastical affair to
which the State cannot interfere.

The NLRC, without ruling on the merits of the case, reversed itself once again,
sustained the argument posed by private respondents and, accordingly,
dismissed the complaint of petitioner. The dispositive portion of the NLRC
resolution dated 23 January 1996, subject of the present petition, is as
follows:

WHEREFORE, in view of all the foregoing, the instant motion for

reconsideration is hereby granted. Accordingly, this case is hereby
DISMISSED for lack of jurisdiction.

SO ORDERED.15

Hence, the recourse to this Court by petitioner.

After the filing of the petition, the Court ordered the Office of the Solicitor
General (the OSG) to file its comment on behalf of public respondent NLRC.
Interestingly, the OSG filed a manifestation and motion in lieu of
comment16 setting forth its stand that it cannot sustain the resolution of the
NLRC. In its manifestation, the OSG submits that the termination of petitioner
of his employment may be questioned before the NLRC as the same is secular
in nature, not ecclesiastical. After the submission of memoranda of all the
parties, the case was submitted for decision.

The issues to be resolved in this petition are:

1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide
the complaint filed by petitioner against the SDA;

2) Whether or not the termination of the services of petitioner is an

ecclesiastical affair, and, as such, involves the separation of church and state;
and

3) Whether or not such termination is valid.

The first two issues shall be resolved jointly, since they are related.

Private respondents contend that by virtue of the doctrine of separation of

church and state, the Labor Arbiter and the NLRC have no jurisdiction to
entertain the complaint filed by petitioner. Since the matter at bar allegedly
76
involves the discipline of a religious minister, it is to be considered a purely
ecclesiastical affair to which the State has no right to interfere.

The contention of private respondents deserves scant consideration. The

principle of separation of church and state finds no application in this case.

The rationale of the principle of the separation of church and state is summed
up in the familiar saying, Strong fences make good neighbors.17 The idea
advocated by this principle is to delineate the boundaries between the two
institutions and thus avoid encroachments by one against the other because
of a misunderstanding of the limits of their respective exclusive
jurisdictions.18 The demarcation line calls on the entities to render therefore
unto Ceasar the things that are Ceasars and unto God the things that are
Gods.19 While the State is prohibited from interfering in purely ecclesiastical
affairs, the Church is likewise barred from meddling in purely secular
matters.20cräläwvirtualibräry

The case at bar does not concern an ecclesiastical or purely religious affair as
to bar the State from taking cognizance of the same. An ecclesiastical affair
is one that concerns doctrine, creed, or form or worship of the church, or the
adoption and enforcement within a religious association of needful laws and
regulations for the government of the membership, and the power of
excluding from such associations those deemed unworthy of
membership. Based on this definition, an ecclesiastical affair involves the
21

relationship between the church and its members and relate to matters of
faith, religious doctrines, worship and governance of the congregation. To be
concrete, examples of this so-called ecclesiastical affairs to which the State
cannot meddle are proceedings for excommunication, ordinations of religious
ministers, administration of sacraments and other activities with which
attached religious significance. The case at bar does not even remotely
concern any of the abovecited examples. While the matter at hand relates to
the church and its religious minister it does not ipso facto give the case a
religious significance. Simply stated, what is involved here is the relationship
of the church as an employer and the minister as an employee. It is purely
secular and has no relation whatsoever with the practice of faith, worship or
doctrines of the church. In this case, petitioner was not excommunicated or
expelled from the membership of the SDA but was terminated from
employment. Indeed, the matter of terminating an employee, which is purely
secular in nature, is different from the ecclesiastical act of expelling a member
from the religious congregation.

As pointed out by the OSG in its memorandum, the grounds invoked for
petitioners dismissal, namely: misappropriation of denominational funds,
willful breach of trust, serious misconduct, gross and habitual neglect of
duties and commission of an offense against the person of his employers duly
authorize representative, are all based on Article 282 of the Labor Code which
enumerates the just causes for termination of employment.22 By this alone,
it is palpable that the reason for petitioners dismissal from the service is not
religious in nature. Coupled with this is the act of the SDA in furnishing NLRC
with a copy of petitioners letter of termination. As aptly stated by the OSG,
this again is an eloquent admission by private respondents that NLRC has
77
jurisdiction over the case. Aside from these, SDA admitted in a
certification23 issued by its officer, Mr. Ibesate, that petitioner has been its
employee for twenty-eight (28) years. SDA even registered petitioner with
the Social Security System (SSS) as its employee. As a matter of fact, the
workers records of petitioner have been submitted by private respondents as
part of their exhibits. From all of these it is clear that when the SDA
terminated the services of petitioner, it was merely exercising its
management prerogative to fire an employee which it believes to be unfit for
the job. As such, the State, through the Labor Arbiter and the NLRC, has the
right to take cognizance of the case and to determine whether the SDA, as
employer, rightfully exercised its management prerogative to dismiss an
employee. This is in consonance with the mandate of the Constitution to
afford full protection to labor.

Under the Labor Code, the provision which governs the dismissal of
employees, is comprehensive enough to include religious corporations, such
as the SDA, in its coverage. Article 278 of the Labor Code on post-
employment states that the provisions of this Title shall apply to all
establishments or undertakings, whether for profit or not. Obviously, the
cited article does not make any exception in favor of a religious corporation.
This is made more evident by the fact that the Rules Implementing the Labor
Code, particularly, Section 1, Rule 1, Book VI on the Termination of
Employment and Retirement, categorically includes religious institutions in
the coverage of the law, to wit:

Section 1. Coverage. This Rule shall apply to all establishments and

undertakings, whether operated for profit or not, including educational,
medical, charitable and religious institutions and organizations, in cases
of regular employment with the exception of the Government and its political
subdivisions including government-owned or controlled corporations.24

With this clear mandate, the SDA cannot hide behind the mantle of protection
of the doctrine of separation of church and state to avoid its responsibilities
as an employer under the Labor Code.

Finally, as correctly pointed out by petitioner, private respondents are

estopped from raising the issue of lack of jurisdiction for the first time on
appeal. It is already too late in the day for private respondents to question
the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully
participated in the trials and hearings of the case from start to finish. The
Court has already ruled that the active participation of a party against whom
the action was brought, coupled with his failure to object to the jurisdiction
of the court or quasi-judicial body where the action is pending, is tantamount
to an invocation of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from later on impugning the
court or bodys jurisdiction.25 Thus, the active participation of private
respondents in the proceedings before the Labor Arbiter and the NLRC
mooted the question on jurisdiction.

The jurisdictional question now settled, we shall now proceed to determine

whether the dismissal of petitioner was valid.

78
At the outset, we note that as a general rule, findings of fact of administrative
bodies like the NLRC are binding upon this Court. A review of such findings is
justified, however, in instances when the findings of the NLRC differ from
those of the labor arbiter, as in this case.26 When the findings of NLRC do not
agree with those of the Labor Arbiter, this Court must of necessity review the
records to determine which findings should be preferred as more
comformable to the evidentiary facts.27 cräläwvirtualibräry

We turn now to the crux of the matter. In termination cases, the settled rule
is that the burden of proving that the termination was for a valid or authorized
cause rests on the employer.28 Thus, private respondents must not merely
rely on the weaknesses of petitioners evidence but must stand on the merits
of their own defense.

The issue being the legality of petitioners dismissal, the same must be
measured against the requisites for a valid dismissal, namely: (a) the
employee must be afforded due process, i.e., he must be given an
opportunity to be heard and to defend himself, and; (b) the dismissal must
be for a valid cause as provided in Article 282 of the Labor Code.29 Without
the concurrence of this twin requirements, the termination would, in the eyes
of the law, be illegal.30 cräläwvirtualibräry

Before the services of an employee can be validly terminated, Article 277 (b)
of the Labor Code and Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code further require the employer to furnish the
employee with two (2) written notices, to wit: (a) a written notice served on
the employee specifying the ground or grounds for termination, and giving
to said employee reasonable opportunity within which to explain his side;
and, (b) a written notice of termination served on the employee indicating
that upon due consideration of all the circumstances, grounds have been
established to justify his termination.

The first notice, which may be considered as the proper charge, serves to
apprise the employee of the particular acts or omissions for which his
dismissal is sought.31 The second notice on the other hand seeks to inform
the employee of the employers decision to dismiss him.32 This decision,
however, must come only after the employee is given a reasonable period
from receipt of the first notice within which to answer the charge and ample
opportunity to be heard and defend himself with the assistance of a
representative, if he so desires.33 This is in consonance with the express
provision of the law on the protection to labor and the broader dictates of
procedural due process.34 Non-compliance therewith is fatal because these
requirements are conditions sine quo non before dismissal may be validly
effected.35
cräläwvirtualibräry

Private respondent failed to substantially comply with the above

requirements. With regard to the first notice, the letter,36 dated 17 October
1991, which notified petitioner and his wife to attend the meeting on 21
October 1991, cannot be construed as the written charge required by law. A
perusal of the said letter reveals that it never categorically stated the
particular acts or omissions on which petitioners impending termination was

79
grounded. In fact, the letter never even mentioned that petitioner would be
subject to investigation. The letter merely mentioned that petitioner and his
wife were invited to a meeting wherein what would be discussed were the
alleged unremitted church tithes and the events that transpired on 16
October 1991. Thus, petitioner was surprised to find out that the alleged
meeting turned out to be an investigation. From the tenor of the letter, it
cannot be presumed that petitioner was actually on the verge of dismissal.
The alleged grounds for the dismissal of petitioner from the service were only
revealed to him when the actual letter of dismissal was finally issued. For this
reason, it cannot be said that petitioner was given enough opportunity to
properly prepare for his defense. While admittedly, private respondents
complied with the second requirement, the notice of termination, this does
not cure the initial defect of lack of the proper written charge required by law.

In the letter of termination,37 dated 29 October 1991, private respondents

enumerated the following as grounds for the dismissal of petitioner, namely:
misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an
offense against the person of employers duly authorized representative.
Breach of trust and misappropriation of denominational funds refer to the
alleged failure of petitioner to remit to the treasurer of the Negros Mission
tithes, collections and offerings amounting to P15,078.10 which were
collected by his wife, Mrs. Thelma Austria, in the churches under his
jurisdiction. On the other hand, serious misconduct and commission of an
offense against the person of the employers duly authorized representative
pertain to the 16 October 1991 incident wherein petitioner allegedly
committed an act of violence in the office of Pastor Gideon Buhat. The final
ground invoked by private respondents is gross and habitual neglect of duties
allegedly committed by petitioner.

We cannot sustain the validity of dismissal based on the ground of breach of

trust. Private respondents allege that they have lost their confidence in
petitioner for his failure, despite demands, to remit the tithes and offerings
amounting to P15,078.10, which were collected in his district. A careful study
of the voluminous records of the case reveals that there is simply no basis
for the alleged loss of confidence and breach of trust. Settled is the rule that
under Article 282 (c) of the Labor Code, the breach of trust must be willful.
A breach is willful if it is done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.38 It must rest on substantial
grounds and not on the employers arbitrariness, whims, caprices or
suspicion; otherwise, the employee would eternally remain at the mercy of
the employer.39 It should be genuine and not simulated.40 This ground has
never been intended to afford an occasion for abuse, because of its subjective
nature. The records show that there were only six (6) instances when
petitioner personally collected and received from the church treasurers the
tithes, collections, and donations for the church.41 The stenographic notes on
the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a
witness for private respondents, show that Pastor Austria was able to remit
all his collections to the treasurer of the Negros Mission.42cräläwvirtualibräry

80
Though private respondents were able to establish that petitioner collected
and received tithes and donations several times, they were not able to
establish that petitioner failed to remit the same to the Negros Mission, and
that he pocketed the amount and used it for his personal purpose. In fact, as
admitted by their own witness, Naomi Geniebla, petitioner remitted the
amounts which he collected to the Negros Mission for which corresponding
receipts were issued to him. Thus, the allegations of private respondents that
petitioner breached their trust have no leg to stand on.

In a vain attempt to support their claim of breach of trust, private

respondents try to pin on petitioner the alleged non-remittance of the tithes
collected by his wife. This argument deserves little consideration. First of all,
as proven by convincing and substantial evidence consisting of the
testimonies of the witnesses for private respondents who are church
treasurers, it was Mrs. Thelma Austria who actually collected the tithes and
donations from them, and, who failed to remit the same to the treasurer of
the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the
SDA. Hence, in the absence of conspiracy and collusion, which private
respondents failed to demonstrate, between petitioner and his wife,
petitioner cannot be made accountable for the alleged infraction committed
by his wife. After all, they still have separate and distinct personalities. For
this reason, the Labor Arbiter found it difficult to see the basis for the alleged
loss of confidence and breach of trust. The Court does not find any cogent
reason, therefore, to digress from the findings of the Labor Arbiter which is
fully supported by the evidence on record.

With respect to the grounds of serious misconduct and commission of an

offense against the person of the employers duly authorized representative,
we find the same unmeritorious and, as such, do not warrant petitioners
dismissal from the service.

Misconduct has been defined as improper or wrong conduct. It is the

transgression of some established and definite rule of action, a forbidden act,
a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment.43 For misconduct to be considered serious it must
be of such grave and aggravated character and not merely trivial or
unimportant.44 Based on this standard, we believe that the act of petitioner
in banging the attache case on the table, throwing the telephone and
scattering the books in the office of Pastor Buhat, although improper, cannot
be considered as grave enough to be considered as serious misconduct. After
all, as correctly observed by the Labor Arbiter, though petitioner committed
damage to property, he did not physically assault Pastor Buhat or any other
pastor present during the incident of 16 October 1991. In fact, the alleged
offense committed upon the person of the employers representatives was
never really established or proven by private respondents. Hence, there is no
basis for the allegation that petitioners act constituted serious misconduct or
that the same was an offense against the person of the employers duly
authorized representative. As such, the cited actuation of petitioner does not
justify the ultimate penalty of dismissal from employment. While the
Constitution does not condone wrongdoing by the employee, it nevertheless
81
urges a moderation of the sanctions that may be applied to him in light of
the many disadvantages that weigh heavily on him like an albatross on his
neck.45 Where a penalty less punitive would suffice, whatever missteps may
have been committed by the worker ought not be visited with a consequence
so severe such as dismissal from employment.46 For the foregoing reasons,
we believe that the minor infraction committed by petitioner does not merit
the ultimate penalty of dismissal.

The final ground alleged by private respondents in terminating petitioner,

gross and habitual neglect of duties, does not requires an exhaustive
discussion. Suffice it to say that all private respondents had were allegations
but not proof. Aside from merely citing the said ground, private respondents
failed to prove culpability on the part of petitioner. In fact, the evidence on
record shows otherwise. Petitioners rise from the ranks disclose that he was
actually a hard-worker. Private respondents evidence,47 which consisted of
petitioners Workers Reports, revealed how petitioner travelled to different
churches to attend to the faithful under his care. Indeed, he labored hard for
the SDA, but, in return, he was rewarded with a dismissal from the service
for a non-existent cause.

In view of the foregoing, we sustain the finding of the Labor Arbiter that
petitioner was terminated from service without just or lawful cause. Having
been illegally dismissed, petitioner is entitled to reinstatement to his former
position without loss of seniority right48 and the payment of full backwages
without any deduction corresponding to the period from his illegal dismissal
up to actual reinstatement.49cräläwvirtualibräry

WHEREFORE, the petition for certiorari is GRANTED. The challenged

Resolution of public respondent National Labor Relations Commission,
rendered on 23 January 1996, is NULLIFIED and SET ASIDE. The Decision of
the Labor Arbiter, dated 15 February 1993, is reinstated and hereby
AFFIRMED.

SO ORDERED.

82
THIRD DIVISION

G.R. No. 107660 January 2, 1995

RAMON C. LOZON, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and
PHILIPPINE AIRLINES, INC., respondents.

VITUG, J.:

Petitioner Ramon C. Lozon, a certified public accountant, was a Senior

Vice-President-Finance of Private respondent Philippine Airlines, Inc. ("PAL"),
when his services were terminated on 19 December 1990 in the aftermath of
the much-publicized "two-billion-peso PALscam." Lozon started to work for
the national carrier on 23 August 1967 and, for twenty-three years, steadily
climbed the corporate ladder until he became one of its vice-presidents.1

His termination from the service was spawned by a letter sent some time in
June 1990 by a member of PAL's board of directors, then Solicitor General
Francisco Chavez, to PAL President Dante Santos. Chavez demanded an
investigation of twenty-three irregularities allegedly committed by twenty-
two high-ranking PAL officials. Among these officials was petitioner; he had
been administratively charged by Romeo David, Senior Vice-President for
Corporate Services and Logistics Group, for his (Lozon) purported
involvement in four cases, labeled "Goldair," "Autographics," "Big Bang of
1983" and "Middle
East."2 Pending the investigation of these cases by a panel3 constituted by
then President Corazon C. Aquino, petitioner was placed under preventive
suspension.

In the organizational meeting of the PAL board of directors on 19 October

1990 which occasion Feliciano R. Belmonte, Jr., was elected chairman of the
board while Dante G. Santos was designated president and chief executive
officer,4 the board deferred action on the election or appointment of some
senior officers of the company who, like petitioner, had been charged with
various offenses.

On 18 January 1991, the PAL board of directors issued two resolutions

relative to the investigation conducted by the presidential investigating panel
in the "Autographics" and "Goldair" cases. In "Autographics," petitioner was
charged, along with three other officials,5 with "gross inefficiency, negligence,
imprudence, mismanagement, dereliction of duty, failure to observe and/or
implement administrative and executive policies" and with the "concealment,
or cover-up and prevention of the seasonal discovery of the anomalous
transactions" had with Autographics, Inc., resulting in, among other things,
an overpayment by PAL to Autographics in the amount of around P12 million.
Petitioner was forthwith considered "resigned from the service . . . for loss of

83
confidence and for acts inimical to the interests of the company."6 A similar
conclusion was arrived at by the PAL board of directors with regard to
petitioner in the "Goldair" case where he, together with six other PAL
officials,7 were charged with like "offenses" that had caused PAL's
defraudation by Goldair, PAL's general sales agent in Australia, of 14.6 million
Australian dollars.8

Aggrieved by the action taken by the PAL board of directors, petitioner, on

26 June 1991 filed with the National Labor Relations Commission ("NLRC") in
Manila a complaint (docketed NLRC-NCR Case No. 00-06-03684-91) for
illegal dismissal and for reinstatement, with backwages and "fringe benefits
such as Vacation leave, Sick leave, 13th month pay, Christmas Bonus,
Medical Expenses, car expenses, trip pass entitlement, etc., plus moral
damages of P40 Million, exemplary damages of P10 Million and reasonable
attorney's fees."9

On 09 August 1991, 10 the PAL board of directors also held petitioner as

"resigned from the company" for loss of confidence and for acts inimical to
the interests of the company in the "Big Bang of 1983" case for his alleged
role in the irregularities that had precipitated the write-down (write-off) of
assets amounting to P553 million from the books and financial statements of
PAL. 11 In the "Middle East" case, the PAL board of directors, on the
anomalous administration of commercial marketing arrangements in which
PAL had lost an estimated P120 million. 12

PAL defended the validity of petitioner's dismissal before the Labor Arbiter.
It questioned at the same time the jurisdiction of the NLRC, positing the
theory that since the investigating panel was constituted by then President
Aquino, said panel, along with the PAL board of directors, became "a parallel
arbitration unit" which, in legal contemplation, should be deemed to have
substituted for the NLRC. Thus, PAL averred, petitioner's recourse should
have been to appeal his case to the Office of the President. 13 On the other
hand, petitioner questioned the authority of the panel to conduct the
investigation, asseverating that the charges leveled against him were purely
administrative in nature that could have well been ventilated under the
grievance procedure outline in PAL's Code of Discipline.

On 17 March 1992, Labor Arbiter Jose G. de Vera rendered a decision ruling

for petitioner.14 The decretal portion of the decision read:

WHEREFORE, all the foregoing premises being considered,

judgment is hereby rendered ordering the respondent Philippine
Airlines, Inc., to reinstate the complainant to his former position
with all the rights, privileges, and benefits appertaining thereto
plus backwages, which as of March 15, 1992 already amounted to
P2,632,500.00, exclusive of fringes. Further, the respondent
company is ordered to pay complainant as follows: P5,000.00 as
moral damages; P1,000,000.00 as exemplary damages, and
attorney's fees equivalent to ten percent (10%) of all of the
foregoing awards.

84
SO ORDERED. 15

A day after promulgating the decision, the labor arbiter issued a writ of
execution. PAL filed a motion to quash the writ petitioner promptly opposed.
After the labor arbiter had denied the motion to quash, PAL filed a petition
for injunction with the NLRC (docketed NLRC IC Case No. 00261-92). No
decision was rendered by NLRC on this petition. 16

Meanwhile, PAL appealed the decision of the labor arbiter by filing a

memorandum on appeal, 17 assailing, once again, the jurisdiction of the NLRC
but this time on the ground that the issue pertaining to the removal or
dismissal of petitioner, a corporate officer, was within the exclusive and
original jurisdiction of the Securities and Exchange Commission ("SEC").
Petitioner interposed a partial appeal praying for an increase in the amount
of moral and exemplary damages awarded by the labor arbiter. 18

On 24 July 1992, the NLRC rendered a decision (in NLRC NCR Case No. 00-
06-03684-91) 19 dismissing the case on the strength of PAL's new argument
on the issue of jurisdiction. 20 Petitioner's motion for reconsideration was
denied by the NLRC.

The instant petition for certiorari filed with this Court raises these issues: (a)
Whether or not the NLRC has jurisdiction over the illegal dismissal case, and
(b) on the assumption that the SEC has that jurisdiction, whether or not
private respondent is estopped from raising NLRC's lack of jurisdiction over
the controversy.

We sustain NLRC's dismissal of the case.

Presidential Decree No. 902-A confers on the SEC original and exclusive
jurisdiction to hear and decide controversies and cases involving —

a. Intra-corporate and partnership relations between or among the

corporation, officers and stockholders and partners, including their
elections or appointments;

b. State and corporate affairs in relation to the legal existence of

corporations, partnerships and associations or to their franchises;
and

c. Investors and corporate affairs, particularly in respect of devices

and schemes, such as fraudulent practices, employed by directors,
officers, business associates, and/or other stockholders, partners,
or members of registered firms; as well as

d. Petitions for suspension of payments filed by corporations,

partnerships or associations possessing sufficient property to cover
all their debts but which foresee the impossibility of meeting them
when they respectively fall due, or possessing insufficient assets to
cover their liabilities and said entities are upon petition or motu
propio, placed under the management of a Rehabilitation Receiver
or Management Committee.

85
Specifically, in intra-corporate matters concerning the election or
appointment of officers of a corporation, the decree provides:

Sec. 5. In addition to the regulatory and adjudicative functions of

the Securities and Exchange Commission over corporations,
partnerships and other forms of association registered with it as
expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases
involving:

xxx xxx xxx

(c) Controversies in the election or appointments of directors,

trustees, officers or managers of such corporations, partnerships
or association.

Petitioner himself admits that vice presidents are senior members of

management, 21 whose designations are no longer than just by means of
ordinary promotions. In his own case, petitioner has been elected to the
position of Senior Vice-President — Finance Group by PAL's board of directors
at its organizational meeting held on 20 October 1989 pursuant to the By-
laws, 22 under which, he would serve for a term of one year and until his
successor shall have been elected and qualified. 23 Petitioner, for reasons
already mentioned, did not get to be re-elected thereafter. 24

In Fortune Cement Corporation v. NLRC, 25 the Court has quoted with

approval the Solicitor General's contention that "a corporate officer's
dismissal is always a corporate act and/or intra-corporate controversy and
that nature is not altered by the reason or wisdom which the Board of
Directors may have in taking such action." Not the least insignificant in the
case at bench is that petitioner's dismissal is intertwined with still another
intra-corporate affair, earlier so ascribed as the "two-billion-peso PALscam,"
that inevitably places the case under the specialized competence of the SEC
and well beyond the ambit of a labor arbiter's normal jurisdiction under the
general provisions of Article 217 of the Labor Code. 26

Petitioner contends that the jurisdiction of the SEC excludes its cognizance
over claims for vacation and sick leaves, 13th month pay, Christmas bonus,
medical expenses, car expenses, and other benefits, as well as for moral
damages and attorney's fees. 27 Dy v. NLRC28 categorically states that the
question of remuneration being asserted by an officer of a corporation is "not
a simple labor problem but a matter that comes within the area of corporate
affairs and management, and is in fact, a corporate controversy in
contemplation of the Corporation Code." With regard to the matter of
damages, in Andaya v.
Abadia where, in a complaint filed before the Regional Trial Court, the
29

president and general manager of the Armed Forces and Police Savings and
Loan Association ("AFPSLAI") questioned his ouster from the stewardship of
the association, this Court, in dismissing the petition assailing the order of
the trial court which ruled that SEC, not the regular courts, had jurisdiction
over the case, has said:

86
The allegations against herein respondents in the amended
complaint unquestionably reveal intra-corporate controversies
cleverly conceals, although unsuccessfully, by use of civil law terms
and phrases. The amended complaint impleads herein respondents
who, in their capacity as directors of AFPSLAI, allegedly convened
an illegal meeting and voted for the reorganization of management
resulting in petitioner's ouster as corporate officer. While it may be
said that the same corporate acts also give rise to civil liability for
damages, it does not follow that the case is necessarily taken out
of the jurisdiction of the SEC as it may award damages which can
be considered consequential in the exercise of its adjudicative
powers. Besides, incidental issues that properly fall within the
authority of a tribunal may also be considered by it to avoid
multiplicity of actions. Consequently, in intra-corporate matters
such as those affecting the corporation, its directors, trustees,
officers, shareholders, the issue of consequential damages may
just as well be resolved and adjudicated by the SEC. (Emphasis
supplied.)

We here reiterate the above holdings for, indeed, controversies within the
purview of Section 5 of P.D. No. 902-A must not be so constricted as to deny
to the SEC the sound exercise of its expertise and competence in resolving
all closely related aspects of such corporate disputes.

Petitioner maintains that PAL is estopped, nevertheless, from questioning the

jurisdiction of the NLRC considering that PAL did not hold the dispute to be
intra-corporate until after the case had already been brought on appeal to
the NLRC.

In the first place, there would not be much basis to indicate that PAL was
"effectively barred by estoppel." 30 As early as the initial stages of the
controversy PAL had already raised the issue of jurisdiction albeit mistakenly
at first on the ground that petitioner's recourse was an appeal to the Office
of the President. The error could not alter the fact that PAL did question even
then the jurisdiction of both the labor arbiter and the NLRC.

It has long been the established rule, moreover, that jurisdiction over a
subject matter is conferred by law, 31 and the question of lack of jurisdiction
may be raised at anytime even on appeal. 32 In the recent case of La Naval
Drug Corporation vs. Court of Appeals, G.R. No. 103200, 31 August 1994,
this Court said:

Lack of jurisdiction over the subject matter of the suit is yet

another matter. Whenever it appears that the court has no
jurisdiction over the subject matter, the action shall be dismissed
(Section 2, Rule 9, Rules of Court). This defense may be interpose
at any time, during appeal (Roxas vs. Rafferty, 37 Phil. 957) or
even after final judgment (Cruzcosa vs. Judge Concepcion, et al.,
101 Phil. 146). Such is understandable, as this kind of jurisdiction
is conferred by law and not within the courts, let alone the parties,
to themselves determine or conveniently set aside. In People

87
vs. Casiano (111 Phil. 73, 93-94), this Court, on the issue of
estoppel, held:

"The operation of the principle of estoppel on the

question of jurisdiction seemingly depends upon whether
the lower court actually had jurisdiction or not. If it had
no jurisdiction, but the case was tried and decided upon
the theory that it had jurisdiction, the parties are not
barred, on appeal, from assailing such jurisdiction, for
the same "must exist as a matter of law, and may not
be conferred by consent of the parties or by estoppel" (5
C.J.S., 861-863). However, if the lower court had
jurisdiction, and the case was heard and decided upon a
given theory, such, for instance, as that the court had
no jurisdiction, the party who induced it to adopt such
theory will not be permitted, on appeal, to assume a
inconsistent position — that the lower court had
jurisdiction. Here, the principle of estoppel applies. The
rule that jurisdiction is conferred by law, and does not
depend upon the will of the parties, has no bearing
thereon."

Petitioner points to "PAL's scandalous duplicity" in questioning the jurisdiction

of the NLRC in this particular controversy while upholding it (NLRC's
jurisdiction) in "Robin Dui v. Philippine Airlines" (Case No. 00-4-20267)
pending before the Commission. We need not delve into whether or not PAL's
conduct does indeed smack of opportunities; suffice it to say that Robin Dui is
entirely an independent and separate case and, more than that, it is not
before us in this instance.

WHEREFORE, the herein petition for certiorari is DISMISSED, and the

decision appealed from is AFFIRMED, without prejudice to petitioner's
seeking, if circumstances permit, a recourse in the proper forum. No costs.

SO ORDERED.

88
FIRST DIVISION

G.R. No. 144767 March 21, 2002

DILY DANY NACPIL, petitioner,

vs.
INTERNATIONAL BROADCASTING CORPORATION, respondent.

KAPUNAN, J.:

This is a petition for review on certiorari under Rule 45, assailing the Decision
of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No.
527551 and the Resolution dated August 31, 2000 denying petitioner Dily
Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the
decisions promulgated by the Labor Arbiter and the National Labor Relations
Commission (NLRC), which consistently ruled in favor of petitioner.

Petitioner states that he was Assistant General Manager for

Finance/Administration and Comptroller of private respondent
Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997.
According to petitioner, when Emiliano Templo was appointed to replace IBC
President Tomas Gomez III sometime in March 1997, the former told the
Board of Directors that as soon as he assumes the IBC presidency, he would
terminate the services of petitioner. Apparently, Templo blamed petitioner,
along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement
of IBC. Upon his assumption of the IBC presidency, Templo allegedly
harassed, insulted, humiliated and pressured petitioner into resigning until
the latter was forced to retire. However, Templo refused to pay him his
retirement benefits, allegedly because he had not yet secured the clearances
from the Presidential Commission on Good Government and the Commission
on Audit. Furthermore, Templo allegedly refused to recognize petitioner's
employment, claiming that petitioner was not the Assistant General
Manager/Comptroller of IBC but merely usurped the powers of the
Comptroller. Hence, in 1997, petitioner filed with the Labor Arbiter a
complaint for illegal dismissal and non-payment of benefits. 1âwphi1.nêt

Instead of filing its position paper, IBC filed a motion to dismiss alleging that
the Labor Arbiter had no jurisdiction over the case. IBC contended that
petitioner was a corporate officer who was duly elected by the Board of
Directors of IBC; hence, the case qualifies as an intra-corporate dispute
falling within the jurisdiction of the Securities and Exchange Commission
(SEC). However, the motion was denied by the Labor Arbiter in an Order
dated April 22, 1998.2

On August 21, 1998, the Labor Arbiter rendered a Decision stating that
petitioner had been illegally dismissed. The dispositive portion thereof reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered

in favor of the complainant and against all the respondents, jointly and
severally, ordering the latter:

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1. To reinstate complainant to his former position without
diminution of salary or loss of seniority rights, and with full
backwages computed from the time of his illegal dismissal on May
16, 1997 up to the time of his actual reinstatement which is
tentatively computed as of the date of this decision on August 21,
1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a month x
15.16 months = P1,137,000.00 plus 13th month pay equivalent to
1/12 of P 1,137,000.00 = P94,750.00 or the total amount of P
1,231,750.00). Should complainant be not reinstated within ten
(10) days from receipt of this decision, he shall be entitled to
additional backwages until actually reinstated.

2. Likewise, to pay complainant the following:

a) P 2 Million as and for moral damages;

b) P500,000.00 as and for exemplary damages; plus and (sic)

c) Ten (10%) percent thereof as and for attorney's fees.

SO ORDERED.3

IBC appealed to the NLRC, but the same was dismissed in a Resolution dated
March 2, 1999, for its failure to file the required appeal bond in accordance
with Article 223 of the Labor Code.4 IBC then filed a motion for
reconsideration that was likewise denied in a Resolution dated April 26,
1999.5

IBC then filed with the Court of Appeals a petition for certiorari under Rule
65, which petition was granted by the appellate court in its Decision dated
November 23, 1999. The dispositive portion of said decision states:

WHEREFORE, premises considered, the petition for Certiorari is

GRANTED. The assailed decisions of the Labor Arbiter and the NLRC are
REVERSED and SET ASIDE and the complaint is DISMISSED without
prejudice.

SO ORDERED.6

Petitioner then filed a motion for reconsideration, which was denied by the
appellate court in a Resolution dated August 31, 2000.

Hence, this petition.

Petitioner Nacpil submits that:

I.

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS

APPOINTED BY RESPONDENT'S BOARD OF DIRECTORS AS
COMPTROLLER. THIS FINDING IS CONTRARY TO THE COMMON,
CONSISTENT POSITION AND ADMISSION OF BOTH PARTIES. FURTHER,

90
RESPONDENT'S BY-LAWS DOES NOT INCLUDE COMPTROLLER AS ONE
OF ITS CORPORATE OFFICERS.

II.

THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN
IT SUBSTITUTED THE NATIONAL LABOR RELATIONS COMMISSION'S
DECISION TO APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN
THE INSTANT CASE. THE ONLY ISSUE FOR ITS DETERMINATION IS
WHETHER NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DOING
THE SAME.7

The issue to be resolved is whether the Labor Arbiter had jurisdiction over
the case for illegal dismissal and non-payment of benefits filed by petitioner.
The Court finds that the Labor Arbiter had no jurisdiction over the same.

Under Presidential Decree No. 902-A (the Revised Securities Act), the law in
force when the complaint for illegal dismissal was instituted by petitioner in
1997, the following cases fall under the exclusive of the SEC:

a) Devices or schemes employed by or any acts of the board of directors,

business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or
organizations registered with the Commission;

b) Controversies arising out of intra-corporate or partnership relations,

between and among stockholders, members or associates; between any
or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and
between such corporation, partnership or association and the State
insofar as it concerns their individual franchise or right to exist as such
entity;

c) Controversies in the election or appointment of directors,

trustees, officers, or managers of such corporations,
partnerships or associations;

d) Petitions of corporations, partnerships, or associations to be declared

in the state of suspension of payments in cases where the corporation,
partnership or association possesses property to cover all of its debts
but foresees the impossibility of meeting them when they respectively
fall due or in cases where the corporation, partnership or association
has no sufficient assets to cover its liabilities, but is under the
Management Committee created pursuant to this decree. (Emphasis
supplied.)

The Court has consistently held that there are two elements to be considered
in determining whether the SEC has jurisdiction over the controversy, to wit:
(1) the status or relationship of the parties; and (2) the nature of the question
that is the subject of their controversy.8

91
Petitioner argues that he is not a corporate officer of the IBC but an employee
thereof since he had not been elected nor appointed as Comptroller and
Assistant Manager by the IBC's Board of Directors. He points out that he had
actually been appointed as such on January 11, 1995 by the IBC's General
Manager, Ceferino Basilio. In support of his argument, petitioner underscores
the fact that the IBC's By-Laws does not even include the position of
comptroller in its roster of corporate officers.9 He therefore contends that his
dismissal is a controversy falling within the jurisdiction of the labor courts.10

Petitioner's argument is untenable. Even assuming that he was in fact

appointed by the General Manager, such appointment was subsequently
approved by the Board of Directors of the IBC.11 That the position of
Comptroller is not expressly mentioned among the officers of the IBC in the
By-Laws is of no moment, because the IBC's Board of Directors is empowered
under Section 25 of the Corporation Code12 and under the corporation's By-
Laws to appoint such other officers as it may deem necessary. The By-Laws
of the IBC categorically provides:

XII. OFFICERS

The officers of the corporation shall consist of a President, a Vice-

President, a Secretary-Treasurer, a General Manager, and such other
officers as the Board of Directors may from time to time does fit
to provide for. Said officers shall be elected by majority vote of
the Board of Directors and shall have such powers and duties as shall
hereinafter provide (Emphasis supplied).13

The Court has held that in most cases the "by-laws may and usually do
provide for such other officers,"14 and that where a corporate office is not
specifically indicated in the roster of corporate offices in the by-laws of a
corporation, the board of directors may also be empowered under the by-
laws to create additional officers as may be necessary.15

An "office" has been defined as a creation of the charter of a corporation,

while an "officer" as a person elected by the directors or stockholders. On the
other hand, an "employee" occupies no office and is generally employed not
by action of the directors and stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such
employee.16

As petitioner's appointment as comptroller required the approval and formal

action of the IBC's Board of Directors to become valid,17 it is clear therefore
holds that petitioner is a corporate officer whose dismissal may be the subject
of a controversy cognizable by the SEC under Section 5(c) of P.D. 902-A
which includes controversies involving both election and appointment of
corporate directors, trustees, officers, and managers.18 Had petitioner been
an ordinary employee, such board action would not have been required.

Thus, the Court of Appeals correctly held that:

Since complainant's appointment was approved unanimously by the

Board of Directors of the corporation, he is therefore considered a
92
corporate officer and his claim of illegal dismissal is a controversy that
falls under the jurisdiction of the SEC as contemplated by Section 5 of
P.D. 902-A. The rule is that dismissal or non-appointment of a corporate
officer is clearly an intra-corporate matter and jurisdiction over the case
properly belongs to the SEC, not to the NLRC.19

As to petitioner's argument that the nature of his functions is

recommendatory thereby making him a mere managerial officer, the Court
has previously held that the relationship of a person to a corporation, whether
as officer or agent or employee is not determined by the nature of the
services performed, but instead by the incidents of the relationship as they
actually exist.20

It is likewise of no consequence that petitioner's complaint for illegal dismissal

includes money claims, for such claims are actually part of the perquisites of
his position in, and therefore linked with his relations with, the corporation.
The inclusion of such money claims does not convert the issue into a simple
labor problem. Clearly, the issues raised by petitioner against the IBC are
matters that come within the area of corporate affairs and management, and
constitute a corporate controversy in contemplation of the Corporation
Code.21

Petitioner further argues that the IBC failed to perfect its appeal from the
Labor Arbiter's Decision for its non-payment of the appeal bond as required
under Article 223 of the Labor Code, since compliance with the requirement
of posting of a cash or surety bond in an amount equivalent to the monetary
award in the judgment appealed from has been held to be both mandatory
and jurisdictional.22 Hence, the Decision of the Labor Arbiter had long become
final and executory and thus, the Court of Appeals acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in giving due course to
the IBC's petition for certiorari, and in deciding the case on the merits.

The IBC's failure to post an appeal bond within the period mandated under
Article 223 of the Labor Code has been rendered immaterial by the fact that
the Labor Arbiter did not have jurisdiction over the case since as stated
earlier, the same is in the nature of an intra-corporate controversy. The Court
has consistently held that where there is a finding that any decision was
rendered without jurisdiction, the action shall be dismissed. Such defense can
be interposed at any time, during appeal or even after final judgment.23 It is
a well-settled rule that jurisdiction is conferred only by the Constitution or by
law. It cannot be fixed by the will of the parties; it cannot be acquired
through, enlarged or diminished by, any act or omission of the parties.24

Considering the foregoing, the Court holds that no error was committed by
the Court of Appeals in dismissing the case filed before the Labor Arbiter,
without prejudice to the filing of an appropriate action in the proper court. 1âwphi1.nêt

It must be noted that under Section 5.2 of the Securities Regulation Code
(Republic Act No. 8799) which was signed into law by then President Joseph
Ejercito Estrada on July 19, 2000, the SEC's jurisdiction over all cases

93
enumerated in Section 5 of P.D. 902-A has been transferred to the Regional
Trial Courts.25

WHEREFORE, the petition is hereby DISMISSED and the Decision of the

Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED.

SO ORDERED.

SECOND DIVISION

[G.R. No. 125931. September 16, 1999.]

UNION MOTORS CORPORATION, BENITO S. CUA, and CHARLOTTE C.

CUA, Petitioners, v. THE NATIONAL LABOR RELATIONS
COMMISSION and PRISCILLA D. GO, Respondents.

DECISION

QUISUMBING, J.:

This petition for certiorari and prohibition, under Rule 65 of the Rules of
Court, seeks to set aside the decision dated March 29, 1996, of the National
Labor Relations Commission in NLRC NCR CA No. 008119-95. It also assails
the NLRC resolution, dated May 28, 1996, denying petitioners’ motion for
reconsideration. Petitioners also pray that NLRC desist from further
proceedings in said case.
Petitioner Benito S. Cua is the father of Charlotte C. Cua. They are,
respectively, the President and Vice-President/Treasurer of petitioner UMC.
Hereafter, they will be referred to respectively as Mr. Cua and Ms. Cua.
Private respondent Priscilla Go was, originally, the complainant in a case for
illegal dismissal filed against petitioners. Hereafter, she will be referred to as
Ms. Go.

The facts of the case, as culled from the records, are as follows:

On June 17, 1981, UMC hired Ms. Go as its Administrative and Personnel
Manager. On February 13, 1982, she was appointed Treasurer while
concurrently serving as Administrative and Personnel Manager.

Seven-years later, UMC’s Board of Directors effected a top-level corporate

revamp. Ms. Cua was appointed Vice-President/Treasurer. Ms. Go was in turn
appointed Assistant to the President and Administrative and Personnel
Manager by the Board. 1 Ms. Go accepted the appointment on the condition
that she would report solely and directly to the UMC President, Mr. Cua.

On November 2, 1989, however, Mr. Cua issued an inter-office memorandum

advising Ms. Go that she would be under the direct supervision of Ms. Cua,
the Vice-President/Treasurer. 2

94
On July 15, 1991, UMC Service Manager Reymundo M. Varilla requested Ms.
Go for the assignment of one Analyn Aldea to his department for the duration
of her contractual employment. Ms. Go denied the request. The denial was
based on the lack of an official written advice from Ms. Cua. 3

On July 18, 1991, Ms. Cua issued a memorandum-reminder stating that Ms.
Cua was Ms. Go’s immediate superior. The memorandum went on to say that"
[any] verbal, written, taped or any other form of communication advice . . .
will constitute official advice . . ." 4 Ms. Cua further said that Ms. Go had been
given "verbal advice" regarding Aldea’s transfer of assignment.

That memorandum prompted Ms. Go to write Mr. Cua regarding her intention
to "withdraw" given the escalating level of tension between her and Ms. Cua.
5

On July 19, 1991, Ms. Go stopped reporting for work. She claimed she had
gone on leave to avoid further clashes between her and Ms. Cua.

On August 7, 1991, Mr. Cua designated one Nancy T. Borras as

Administrative and Personnel Consultant in the absence of Ms. Go.
Meanwhile, Ms. Go met with Mr. Cua and UMC Chairman Gilbert Dee, Sr. She
was advised to extend her leave until her differences with Ms. Cua could be
resolved.

On September 30, 1991, Ms. Go wrote Mr. Cua requesting him to come up
with a concrete plan to implement his commitment to draw up a workable
arrangement between her and Charlotte Cua.

On November 6, 1991, however, Mr. Cua wrote private respondent a letter

advising her that he was accepting her resignation. 6

Insisting that she did not resign and hence, an acceptance of her resignation
could not be possible, Ms. Go then filed a complaint for constructive/illegal
dismissal with the Labor Arbiter. Her case was docketed as NLRC-NCR Case
No. 00-01-06745-91. She prayed for reinstatement and payment of
backwages, 13th month pay, allowances, and bonuses. She also sought
moral damages in the amount of P3 million, exemplary damages of no less
than P500,000.00, and attorney’s fees equivalent to 10% of the total
monetary claims to be awarded her.

In their reply dated February 24, 1992, petitioners denied that Ms. Go was
illegally dismissed. They countered that she had abandoned her job after she
had expressed her intention to resign on July 18, 1991. This intent was
concretized when she stopped reporting for work the following day.

On November 21, 1994, the Labor Arbiter rendered his decision dismissing
the private respondent’s complaint. The dispositive portion of the decision
reads:

95
"IN THE LIGHT OF THE FOREGOING CONSIDERATIONS, the separation of the
complainant from her service, for whatever cause, must be upheld. The
strained relation existing between the parties does not favor the continuous
stay of the complainant in the respondent corporation. Be that as it may, the
respondents are ordered to extend to the complainant, monetary
considerations, equivalent to her one month salary for every year of service
rendered. The respondents are, likewise, assessed 10% of the financial
considerations awarded as attorney’s fees. The rest of the complaints are
dismissed for lack of merit.

"SO ORDERED." 7

Dissatisfied, Ms. Go seasonably appealed the Labor Arbiter’s decision to the

NLRC. Her appeal was docketed as NLRC NCR CA No. 008119-95. In her
Memorandum of Appeal, she charged the Labor Arbiter with grave error in:
(1) failing to hold that she was constructively/illegally dismissed; and (2)
failing to appreciate the evidence on record. 8

In their Reply/Opposition, petitioners initially argued that she was not

dismissed, but had voluntarily resigned and abandoned her employment. 9
However, in their Supplemental Reply, petitioners switched tracks. They now
contended that she was a corporate officer who had been elected/appointed
to the position of Assistant to the President/Administrative and Personnel
Manager by the UMC Board of Directors. Any issue relating to her removal
from the said posts was therefore an intra-corporate dispute. 10 As such,
jurisdiction over the action did not lie with the NLRC but rather with the
Securities and Exchange Commission (SEC), pursuant to Section 5 of
Presidential Decree No. 902-A which provides:

"SECTION 5. In addition to the regulatory and adjudicative functions of the

Securities and Exchange Commission over corporations, partnerships and
other forms of associations registered with it as expressly granted under
existing laws and decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:

x x x

[c] Controversies in the election or appointments of directors, trustees,

officers, or managers of such corporations, partnerships, or associations."
Petitioners reinforced their arguments by pointing to this Court’s ruling in
Espino v. NLRC. 11 We held in Espino that a corporate officer’s dismissal is
always a corporate act and/or intra-corporate controversy and that nature is
not altered by the reason or wisdom which the Board of Directors may have
in taking such action. 12

Petitioners then prayed for the dismissal of the case before the NLRC.

On March 29, 1996, the Second Division of the NLRC promulgated its decision
in NCR CA No. 008119-95, reversing and setting aside the decision of the
96
Labor Arbiter. The decretal portion of the said decision states:

"WHEREFORE, premises considered, the November 21, 1995 Decision of

Labor Arbiter Manuel F. Asuncion is hereby, Reversed and Set Aside and a
new one entered finding that complainant-appellant was illegally dismissed.
In lieu of reinstatement, respondent Union Motors Corporation is hereby
ordered to pay complainant separation pay equivalent to one (1) month pay
for every year of service and to pay full backwages computed from date of
dismissal (June 19, 1991) up to promulgation of this resolution plus ten
percent (10%) of all amounts awarded by way of attorney’s fees.

"SO ORDERED." 13

Petitioners duly filed a motion for reconsideration. Said motion was denied
by the NLRC in its resolution dated May 28, 1996.

Unhappy with this turn of events, petitioners filed the instant petition
for certiorari and/or prohibition, raising the following issues:

1. Whether or not the public respondent NLRC has jurisdiction over the
instant complaint for an alleged illegal dismissal from a corporate office;

2. Whether or not the public respondent NLRC acted with grave abuse of
discretion in refusing to dismiss the instant case based on lack of jurisdiction
over the subject matter, and instead ordering the petitioners to pay
separation pay plus backwages to the private respondent;

3. Whether or not the public respondent NLRC should cease and desist from
further proceeding with the instant case. 14

The issues shall be jointly discussed because they are inter-related. In the
present case, we once again face the tug-of-war between the jurisdiction of
the NLRC and the SEC. It is the private respondent’s stand that she is but
mere employee of the petitioner corporation. A high-ranking employee, but
an employee nonetheless, who was illegally dismissed. Hence, no grave
abuse of discretion was committed by the NLRC when it assumed jurisdiction
over her case. Petitioners, however, vehemently insist that she was a
corporate officer who had been ousted from office. Thus, private respondent’s
dismissal squarely falls within the jurisdiction of the SEC as an intra-corporate
dispute. A proper resolution of this case thus entails determining whether the
private respondent is a mere employee (albeit high in rank) or a corporate
officer. To determine which body has jurisdiction over this case requires
considering not only the relationship of the parties, but also the nature of the
question that is the subject of their controversy. 15

Section 25 of the Corporation Code provides in part:

"Immediately after their election, the directors of a corporation must formally

organize by the election of a president, who shall be a director, a treasurer
who may or may not be a director, a secretary who shall be a resident and

97
citizen of the Philippines, and such other officers as may be provided for in
the by laws . . ."

Thus, there are specifically three officers which a corporation must have
under the statute: president, secretary, and treasurer. However, the law does
not limit corporate officers to these three. Section 25 gives corporations the
widest latitude to provide for such other offices, as they may deem necessary.
The by-laws may and usually do provide for such other officers, e.g., vice-
president, cashier, auditor, and general manager. The by-laws of petitioner
corporation are no exception. Article V (1) thereof states that one of the
powers vested in the Board of Directors is to "appoint such other officers as
they may deem necessary who shall have such power and shall perform such
duties as may from time to time be prescribed by the Board." 16

The records clearly show that private respondent’s position as Assistant to

the President and Personnel & Administrative Manager is a corporate office
under the by-laws of UMC. The Secretary’s Certificate of February 3, 1989,
lists the position of Assistant to the President and Personnel & Administrative
Manager as a corporate office. 17 We have held that one who is included in
the by-laws of an association in its roster of corporate officers is an officer of
said corporation and not a mere employee. 18 It is also settled that if found
regular on its face, a Secretary’s Certification is sufficient to rely on, and there
is no need to investigate the truth of the facts contained in such certification.
19 No reason has been shown here to doubt the veracity of the said corporate
secretary’s certification. Hence, the inescapable conclusion is that private
respondent was an officer of petitioner UMC.

Section 23 of the Corporation Code provides in part:

"Unless otherwise provided in this Code, the corporate powers of all

corporations formed under this Code shall be exercised, all business
conducted, and all property of such corporations controlled and held by the
board of directors or trustees . . ."

Under Section 23 of the Corporation Code, directors are thus charged with
the control and management of their corporation. It is settled that they may
appoint officers and agents and as incident to this power of appointment,
they may discharge those appointed. 20

From all the foregoing, it becomes clear that the charges filed by Ms. Go
against petitioners partake of the nature of an intra-corporate dispute.
Similarly, the determination of the rights of Ms. Go and the concomitant
liability of the petitioners arising from her ouster as a corporate officer, is an
intra-corporate controversy. For the SEC to take cognizance of a case, the
controversy must pertain to any of the following relationships: (a) between
the corporation, partnership or association and the public; (b) between the
corporation, partnership or association and its stockholders, partners,
members, or officers (italics for emphasis); (c) between the corporation,
partnership, or association and the state so far as its franchise, permit, or
license to operate is concerned; and (d) among the stockholders, partners,

98
or associates themselves. 21 The instant case, in our view, is a dispute
between a corporation and one of its officers. As such, Ms. Go’s complaint is
subject to the jurisdiction of the SEC, and not the NLRC. Interpreting Section
5 of Presidential Decree No. 902-A, we have consistently ruled that it is the
SEC that has exclusive and original jurisdiction over controversies involving
removal from a corporate office. 22

Private respondent now faults petitioners for failing to raise the issue of lack
of jurisdiction by the NLRC at the earliest possible time. She contends that
since the petitioners actively participated in the proceedings before the Labor
Arbiter and the NLRC, they are now estopped from assailing the jurisdiction
of the NLRC. Private respondent’s reliance on the principle of estoppel to
justify the exercise of jurisdiction by the NLRC over her case is misplaced.

The long-established rule is that jurisdiction over a subject matter is

conferred by law. 23 Estoppel does not apply to confer jurisdiction to a
tribunal that has none over a cause of action. 24 Where it appears that the
court or tribunal has no jurisdiction, then the defense may be interposed at
any time, even on appeal 25 or even after final judgment. 26 Moreover, the
principle of estoppel cannot be invoked to prevent this court from taking up
the question of jurisdiction. 27

To conclude, we find that the NLRC erred in assuming jurisdiction over, and
thereafter in failing to dismiss, the private respondent’s complaint for illegal
dismissal against petitioners, because the NLRC is without jurisdiction on the
subject matter of the controversy.

WHEREFORE, the instant petition for certiorari and/or prohibition is hereby

GRANTED. The decision of the National Labor Relations Commission dated
March 29, 1996 and the resolution of May 28, 1996 denying petitioners’
motion for reconsideration are hereby REVERSED and SET ASIDE for having
been rendered without jurisdiction. This ruling is without prejudice to the
private respondent’s seeking relief, if so minded, in the proper forum. No
pronouncement as to costs.

SO ORDERED.

99
SECOND DIVISION

G.R. No. 121143 January 21, 1997

PURIFICACION G. TABANG, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PAMANA GOLDEN
CARE MEDICAL CENTER FOUNDATION, INC., respondents.

REGALADO, J.:

This is a petition for certiorari which seeks to annul the resolution of the
National Labor Relations Commission (NLRC), dated June 26, 1995,
affirming in toto the order of the labor arbiter, dated April 26, 1994, which
dismissed petitioner's complaint for illegal dismissal with money claims for
lack of jurisdiction.

The records show that petitioner Purificacion Tabang was a founding member,
a member of the Board of Trustees, and the corporate secretary of private
respondent Pamana Golden Care Medical Center Foundation, Inc., a non-
stock corporation engaged in extending medical and surgical services.

On October 30, 1990, the Board of Trustees issued a memorandum

appointing petitioner as Medical Director and Hospital Administrator of private
respondent's Pamana Golden Care Medical Center in Calamba, Laguna.

Although the memorandum was silent as to the amount of remuneration for

the position, petitioner claims that she received a monthly retainer fee of five
thousand pesos (P5,000.00) from private respondent, but the payment
thereof was allegedly stopped in November, 1991.

As medical director and hospital administrator, petitioner was tasked to run

the affairs of the aforesaid medical center and perform all acts of
administration relative to its daily operations.

On May 1, 1993, petitioner was allegedly informed personally by Dr. Ernesto

Naval that in a special meeting held on April 30, 1993, the Board of Trustees
passed a resolution relieving her of her position as Medical Director and
Hospital Administrator, and appointing the latter and Dr. Benjamin Donasco
as acting Medical Director and acting Hospital Administrator, respectively.
Petitioner averred that she thereafter received a copy of said board
resolution.

On June 6, 1993, petitioner filled a complaint for illegal dismissal and non-
payment of wages, allowances and 13th month pay before the labor arbiter.

Respondent corporation moved for the dismissal of the complaint on the

ground of lack of jurisdiction over the subject matter. It argued that
petitioner's position as Medical Director and Hospital Administrator was
100
interlinked with her position as member of the Board of Trustees, hence, her
dismissal is an intra-corporate controversy which falls within the exclusive
jurisdiction of the Securities and Exchange Commission (SEC).

Petitioner opposed the motion to dismiss, contending that her position as

Medical Director and Hospital Administrator was separate and distinct from
her position as member of the Board of Trustees. She claimed that there is
no intra-corporate controversy involved since she filed the complaint in her
capacity as Medical Director and Hospital Administrator, or as an employee
of private respondent.

On April 26, 1994, the labor arbiter issued an order dismissing the complaint
for lack of jurisdiction. He ruled that the case falls within the jurisdiction of
the SEC, pursuant to Section 5 of Presidential Decree No.
902-A. 1

Petitioner's motion for reconsideration was treated as an appeal by the labor

arbiter who consequently ordered the elevation of the entire records of the
case to public respondent NLRC for appellate review. 2

On appeal, respondent NLRC affirmed the dismissal of the case on the

additional ground that "the position of a Medical Director and Hospital
Administrator is akin to that of an executive position in a corporate ladder
structure." hence, petitioner's removal from the said position was an intra-
corporate controversy within the original and exclusive jurisdiction of the
SEC. 3

Aggrieved by the decision, petitioner filed the instant petition which we find,
however, to be without merit.

We agree with the findings of the NLRC that it is the SEC which has
jurisdiction over the case at bar. The charges against herein private
respondent partake of the nature of an intra-corporate controversy. Similarly,
the determination of the rights of petitioner and the concomitant liability of
private respondent arising from her ouster as a medical director and/or
hospital administrator, which are corporate offices, is an intra-corporate
controversy subject to the jurisdiction of the SEC.

Contrary to the contention of petitioner, a medical director and a hospital

administrator are considered as corporate officers under the by-laws of
respondent corporation. Section 2(i), Article I thereof states that one of the
powers of the Board of Trustees is "(t)o appoint a Medical Director,
Comptroller/Administrator, Chiefs of Services and such other officers as it
may deem necessary and prescribe their powers and duties."4

The president, vice-president, secretary and treasurer are commonly

regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the
corporation. 5 However, other offices are sometimes created by the charter
or by-laws of a corporation, or the board of directors may be empowered
under the by-laws of a corporation to create additional offices as may be
necessary. 6 It has been held that an "office'' is created by the charter of the
101
corporation and the officer is elected by the directors or stockholders. 7 On
the other hand, an "employee" usually occupies no office and generally is
employed not by action of the directors or stockholders but by the managing
officer of the corporation who also determines the compensation to be paid
to such employee. 8

In the case at bar, considering that herein petitioner, unlike an ordinary

employee, was appointed by respondent corporation's Board of Trustees in
its memorandum of October 30, 1990, 9 she is deemed an officer of the
corporation. Perforce, Section 5(c) of Presidential Decree No. 902-A, which
provides that the SEC exercises exclusive jurisdiction over controversies in
the election appointment of directors, trustees, officers or managers of
corporations, partnerships or associations, applies in the present dispute.
Accordingly, jurisdiction over the same is vested in the SEC, and not in the
Labor Arbiter or the NLRC.

Moreover, the allegation of petitioner that her being a member of the Board
of Trustees was not one of the considerations for her appointment is belied
by the tenor of the memorandum itself. It states: "We hope that you will
uphold and promote the mission of our foundation," 10 and this cannot be
construed other than in reference to her position or capacity as a corporate
trustee.

A corporate officer's dismissal is always a corporate act, or an intra-corporate

controversy, and the nature is not altered by the reason or wisdom with which
the Board of Directors may have in taking such action. 11 Also, an intra-
corporate controversy is one which arises between a stockholder and the
corporation. There is no distinction, qualification, nor any exemption
whatsoever. The provision is broad and covers all kinds of controversies
between stockholders and corporations. 12

With regard to the amount of P5,000,00 formerly received by herein

petitioner every month, the same cannot be considered as compensation for
her services rendered as Medical Director and Hospital Administrator. The
vouchers 13 submitted by petitioner show that the said amount was paid to
her by PAMANA, Inc., a stock corporation which is separate and distinct from
herein private respondent. Although the payments were considered advances
to Pamana Golden Care, Calamba branch, there is no evidence to show that
the Pamana Golden Care stated in the vouchers refers to herein respondent
Pamana Golden Care Medical Center Foundation, Inc.

Pamana Golden Care is a division of Pamana, Inc., while respondent Pamana

Golden Care Medical Center Foundation, Inc. is a non-stock, non-profit
corporation. It is stated in the memorandum of petitioner that Pamana, Inc.
is a stock and profit corporation selling pre-need plan for education, pension
and health care. The health care plan is called Pamana Golden Care Plan and
the holders are called Pamana Golden Care Card Holders or, simply, Pamana
Members. 14

It is an admitted fact that herein petitioner is a retained physician of Pamana,

Inc., whose patients are holders of the Pamana Golden Care Card. In fact, in

102
her complaint 15 filed before the Regional Trial Court of Calamba, herein
petitioner is asking among others, for professional fees and/or retainer fees
earned for her treatment of Pamana Golden Care card holders. 16 Thus, at
most, said vouchers can only be considered as proof of payment of retainer
fees made by Pamana, Inc. to herein petitioner as a retained physician of
Pamana Golden Care.

Moreover, even assuming that the monthly payment of P5,000.00 was a valid
claim against respondent corporation, this would not operate to effectively
remove this case from the jurisdiction of the SEC. In the case of Cagayan de
Oro Coliseum, Inc. vs. Office of the Minister of Labor and Employment,
etc., et al., 17 we ruled that "(a)lthough the reliefs sought by Chavez appear
to fall under the jurisdiction of the labor arbiter as they are claims for unpaid
salaries and other remunerations for services rendered, a close scrutiny
thereof shows that said claims are actually part of the perquisites of his
position in, and therefore interlinked with, his relations with the corporation.
In Dy, et al., vs. NLRC, et al., the Court said: "(t)he question of remuneration
involving as it does, a person who is not a mere employee but a stockholder
and officer, an integral part, it might be said, of the corporation, is not a
simple labor problem but a matter that comes within the area of corporate
affairs and management and is in fact a corporate controversy in
contemplation of the Corporation Code."

WHEREFORE, the questioned resolution of the NLRC is hereby AFFIRMED,

without prejudice to petitioner's taking recourse to and seeking relief through
the appropriate remedy in the proper forum.

SO ORDERED.

THIRD DIVISION

G.R. No. 141093 February 20, 2001

PRUDENTIAL BANK and TRUST COMPANY, petitioner,

vs.
CLARITA T. REYES, respondent.

GONZAGA-REYES, J.:

Before the Court is a petition for review on certiorari of the Decision,1 dated
October 15, 1999 of the Court of Appeals in C.A.-G.R. SP No. 30607 and of
its Resolution, dated December 6, 1999 denying petitioner's motion for
reconsideration of said decision. The Court of Appeals reversed and set aside
the resolution2 of the National Labor Relations Commission (NLRC) in NLRC
NCR CA No.009364-95, reversing and setting aside the labor arbiter's
decision and dismissing for lack of merit private respondent's complaint.3

103
The case stems from NLRC NCR Case No.00-06-03462-92, which is a
complaint for illegal suspension and illegal dismissal with prayer for moral
and exemplary damages, gratuity, fringe benefits and attorney's fees filed by
Clarita Tan Reyes against Prudential Bank and Trust Company (the Bank)
before the labor arbiter. Prior to her dismissal, private respondent Reyes held
the position of Assistant Vice President in the foreign department of the Bank,
tasked with the duties, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of transmittal letters
covering the same.

After proceedings duly undertaken by the parties, judgment was rendered by

labor Arbiter Cornelio L. Linsangan, the dispositive portion of which reads:

"WHEREFORE, finding the dismissal of complainant to be without factual

and legal basis, judgment is hereby rendered ordering the respondent
bank to pay her back wages for three (3) years in the amount of
P540,000.00 (P15,000.00 x 36 mos.). In lieu of reinstatement, the
respondent is also ordered to pay complainant separation pay equivalent
to one month salary for every year of service, in the amount of
P420,000.00 (P15,000 x 28 mos.). In addition, the respondent should.
also pay complainant profit sharing and unpaid fringe benefits.
Attorney's fees equivalent to ten (10%) percent of the total award
should likewise be paid by respondent.

SO ORDERED."4

Not satisfied, the Bank appealed to the NLRC which, as mentioned at the
outset, reversed the Labor Arbiter's decision in its Resolution dated 24 March
1997. Private respondent sought reconsideration which, however, was denied
by the NLRC in its Resolution of 28 July 1998. Aggrieved, private respondent
commenced on October 28, 1998, a petition for certiorari before the Supreme
Court.5 The subject petition was referred to the Court of Appeals for
appropriate action and disposition per resolution of this Court dated
November 25, 1998, in accordance with the ruling in St. Marlin Funeral
Homes vs. NLRC.6

In its assailed decision, the Court of Appeals adopted the following antecedent
facts leading to Reyes's dismissal as summarized by the NLRC:

"The auditors of the Bank discovered that two checks, No.011728-7232-

146, in the amount of US$109,650.00, and No. 011730-7232-146, in
the amount of US$115,000.00, received by the Bank on April 6, 1989,
drawn ,by the Sanford Trading against Hongkong and Shanghai Banking
Corporation, Jurong Branch, Singapore, in favor of Filipinas Tyrom, were
not sent out for collection to Hongkong Shanghai Banking Corporation
on the alleged order of the complainant until the said checks became
stale.

The Bank created a committee to investigate the findings of the auditors

involving the two checks which were not collected and became stale.

104
On March 8, 1991, the president of the Bank issued a memorandum to
the complainant informing her of the findings of the auditors and asked
her to give her side. In reply, complainant requested for an extension
of one week to submit her explanation. In a "subsequent letter, dated
March 14, 1991, to the president, complainant stated that in view of the
refusal of the Bank that she be furnished copies of the pertinent
documents she is requesting and the refusal to grant her a reasonable
period to prepare her answer, she was constrained to make a general
denial of any misfeasance or malfeasance on her part and asked that a
formal investigation be made.

As the complainant failed to attend and participate in the formal

investigation conducted by the Committee on May 24, 1991, despite due
notice, the Committee proceeded with its hearings and heard the
testimonies of several witnesses.

The Committee's findings were:

'a) The two (2) HSBC checks were received by the Foreign
Department on 6 April 1989. On the same day, complainant
authorized the crediting of the account of Filipinas Tyrom in the
amount of P4,780,102.70 corresponding to the face value of the
checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the following
day, a transmittal letter was prepared by Ms. Cecilia Joven, a
remittance clerk then assigned in the Foreign Department, for the
purpose of sending out the two (2) HSBC checks for collection. She
then requested complainant to sign the said transmittal letters
(Exhibits 1, 7 and 25; TSN, 11 March 1993, pp. 42-52), as it is
complainant who gives her instructions directly concerning the
transmittal of foreign bills purchased. All other transmittal letters
are in fact signed by complainant.

b) After Ms. Joven delivered the transmittal letters and the checks
to the Accounting Section of the Foreign Department, complainant
instructed her to withdraw the same for the purpose of changing
the addressee thereon from American Express Bank to Bank of
Hawaii (ibid.) under a special collection scheme (Exhibits 4 and 5
to 5-B).

c) After complying with complainant's instruction, Ms. Joven then

returned to complainant for the latter to sign the new transmittal
letters. However, complainant told Ms. Joven to just hold on to the
letters and checks and await further instructions (ibid.). Thus, the
new transmittal letters remained unsigned. (See Exhibits 5 to 5-
B).

d) In June 1989, Ms. Joven was transferred to another department.

Hence, her duties, responsibilities and functions, including the
responsibility over the two (2) HSBC checks, were turned over to
another remittance clerk, Ms. Analisa Castillo (Exhibit 14; TSN, 4
June 1993, pp. 27-29).

105
e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms.
Joven relayed to the latter complainant's instruction (Exhibit 14;
TSN, 4 June 1993, p. 42).

f) About fifteen (15) months after the HSBC checks were received
by the Bank, the said checks were discovered in the course of an
audit conducted by the Bank's auditors. Atty. Pablo Magno, the
Bank's legal counsel, advised complainant to send the checks for
collection despite the lapse of fifteen (15) months.

g) Complainant, however, deliberately withheld Atty. Magno's

advice from her superior, the Senior Vice-President, Mr. Renato
Santos and falsely informed the latter that Atty . Magno advised
that a demand letter be sent instead, thereby further delaying the
collection of the HSBC checks.

h) On 10 July 1990, the HSBC checks were finally sent for

collection, but were returned on 16 July 1990 for the reason
'account closed' (Exhibits 2-A and 3-A).'

After a review of the Committee's findings, the Board of Directors of the

Bank resolved not to re-elect complainant any longer to the position of
assistant president pursuant to the Bank's By-laws.

On July 19, 1991, complainant was informed of her termination of

employment from the Bank by Senior Vice President Benedicto L.
Santos, in a letter the text of which is quoted in full:

'Dear Mrs. Reyes:

After a thorough investigation and appreciation of the charges

against you as contained in the Memorandum of the President
dated March 8, 1991, the Fact Finding Committee which was
created to investigate the commission and/or omission of the acts
alluded therein, has found the following:

1. You have deliberately held the clearing of Checks Nos. 11728

and 11730 of Hongkong and Shanghai Banking Corporation in the
total amount of US$224,650.00 by giving instructions to the
collection clerk not to send the checks for collection. In view
thereof, when the said checks were finally sent to clearing after the
lapse of 15 months from receipt of said checks, they were returned
for the reason 'Account closed.' To date, the value of said checks
have not been paid by Filipinas Tyrom, which as payee of the
checks, had been credited with their peso equivalent;

2. You tried to influence the decision of Atty. Pablo P. Magno, Bank

legal counsel, by asking him to do something allegedly upon
instructions of a Senior Vice President of the Bank or else lose his
job when in truth and in fact no such instructions was given; and

106
3. You deliberately withheld from Mr. Santos, Senior Vice
President, the advice given by the legal counsel of the Bank which
Mr. Santos had asked you to seek. As a matter of fact, you even
relayed a false advice which delayed further the sending of the two
checks for collection. Likewise, you refused to heed the advice of
the Bank's legal counsel to send the checks for collection.

These findings have given rise to the Bank's loss of trust and
confidence in you, the same being acts of serious misconduct in
the performance of your duties resulting in monetary loss to the
Bank. In view thereof, the Board has resolved not to re-elect you
to the position of Assistant Vice President of the Bank. Accordingly,
your services are terminated effective immediately. In relation
thereto, your monetary and retirement benefits are forfeited
except those that have vested in you.'

In her position paper, complainant alleged that the real reason for her
dismissal was her filing of the criminal cases against the bank president,
the vice president and the auditors of the Bank, such filing not being a
valid ground for her dismissal. Furthermore, she alleged that it would
be self-serving for the respondent to state that she was found guilty of
gross misconduct in deliberately withholding the clearing of the two
dollar checks. She further alleged that she was not afforded due process
as she was not given the chance to refute the charges mentioned in the
letter of dismissal. Hence, she was illegally dismissed.

On the other hand, respondent argues that there were substantial bases
for the bank to lose its trust and confidence on the complainant and,
accordingly, had just cause for terminating her services. Moreover, for
filing the clearly unfounded suit against the respondent's officers,
complainant is liable to pay moral and exemplary damages and
attorney's fees."7

The Court of Appeals found that the NLRC committed grave abuse of
discretion in ruling that the dismissal of Reyes is valid. In effect, the Court of
Appeals reinstated the judgment of the labor arbiter with modification as
follows:

"WHEREFORE, in the light of the foregoing, the decision appealed from

is hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby
rendered ordering respondent Bank as follows:

1. To pay petitioner full backwages and other benefits from July

19, 1991 up to the finality of this judgment;

2. To pay petitioner separation pay equivalent to one (1) month

salary for every year of service in lieu of reinstatement; and

3. To pay attorney's fee equivalent to ten (10%) percent of the

total award.

SO ORDERED."8
107
Hence, the Bank's recourse to this Court contending in its memorandum that:

"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE
RESOLUTION DATED 28 JULY 1998 OF THE NLRC AND REINSTATING
WITH MODIFICATION THE DECISION DATED 20 JULY 1995 OF LABOR
ARBITER CORNELIO L. LINSANGAN, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED, IN VIEW OF THE FOLLOWING:

I.

IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE NLRC
WHICH HAS ORIGINAL AND EXCLUSIVE JURISDICTION OVER CASES
INVOLVING THE REMOVAL FROM OFFICE OF CORPORATE OFFICERS.

II.

EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION,

THERE WAS SUBSTANTIAL EVIDENCE OF RESPONDENT'S MISCONDUCT
JUSTIFYING THE BANK'S LOSS OF TRUST AND CONFIDENCE ON (sic)
HER.

III.

EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO

BACKWAGES, THE HONORABLE COURT OF APPEALS ERRED IN
AWARDING UNLIMITED AND UNQUALIFIED BACKWAGES THEREBY
GOING FAR BEYOND THE LABOR ARBITER'S DECISION LIMITING THE
SAME TO THREE YEARS, WHICH DECISION RESPONDENT HERSELF
SOUGHT TO EXECUTE."9

In sum, the resolution of this petition hinges on (1) whether the NLRC has
jurisdiction over the complaint for illegal dismissal; (2) whether complainant
Reyes was illegally dismissed; and (3) whether the amount of back wages
awarded was proper.

On the first issue, petitioner seeks refuge behind the argument that the
dispute is an intra-corporate controversy concerning as it does the non-
election of private respondent to the position of Assistant Vice-President of
the Bank which falls under the exclusive and original, jurisdiction of the
Securities and Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically, petitioner
contends that complainant is a corporate officer, an elective position under
the corporate by-laws and her non-election is an intra-corporate controversy
cognizable by the SEC invoking lengthily a number of this Court's decisions.10

Petitioner Bank can no longer raise the issue of jurisdiction under the principle
of estoppel. The Bank participated in the proceedings from start to finish. It
filed its position paper with the Labor Arbiter. When the decision of the Labor
Arbiter was adverse to it, the Bank appealed to the NLRC. When the NLRC
decided in its favor, the bank said nothing about jurisdiction. Even before the
Court of Appeals, it never questioned the proceedings on the ground of lack
of jurisdiction. It was only when the Court of Appeals ruled in favor of private

108
respondent did it raise the issue of jurisdiction. The Bank actively participated
in the proceedings before the Labor Arbiter, the NLRC and the Court of
Appeals. While it is true that jurisdiction over the subject matter of a case
may be raised at any time of the proceedings, this rule presupposes that
laches or estoppel has not supervened. In this regard, Bañaga vs.
Commission on the Settlement of Land Problems,11 is most enlightening. The
Court therein stated:

"This Court has time and again frowned upon the undesirable practice
of a party submitting his case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of jurisdiction when
adverse. Here, the principle of estoppel lies. Hence, a party may be
estopped or barred from raising the question of jurisdiction for the first
time in a petition before the Supreme Court when it failed to do so in
the early stages of the proceedings."

Undeterred, the Bank also contends that estoppel cannot lie considering that
"from the beginning, petitioner Bank has consistently asserted in all its
pleadings at all stages of the proceedings that respondent held the position
of Assistant Vice President, an elective position which she held by virtue of
her having been elected as such by the Board of Directors." As far as the
records before this Court reveal however, such an assertion was made only
in the appeal to the NLRC and raised again before the Court of Appeals, not
for purposes of questioning jurisdiction but to establish that private
respondent's tenure was subject to the discretion of the Board of Directors
and that her non-reelection was a mere expiration of her term. The Bank
insists that private respondent was elected Assistant Vice President sometime
in 1990 to serve as such for only one year. This argument will not do either
and must be rejected.

It appears that private respondent was appointed Accounting Clerk by the

Bank on July 14, 1963. From that position she rose to become supervisor.
Then in 1982, she was appointed Assistant Vice-President which she occupied
until her illegal dismissal on July 19, 1991. The bank's contention that she
merely holds an elective position and that in effect she is not a regular
employee is belied by the nature of her work and her length of service with
the Bank. As earlier stated, she rose from the ranks and has been employed
with the Bank since 1963 until the termination of her employment in 1991.
As Assistant Vice President of the foreign department of the Bank, she is
tasked, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters covering the
same. It has been stated that "the primary standard of determining regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the
employer.12 Additionally, "an employee is regular because of the nature of
work and the length of service, not because of the mode or even the reason
for hiring them."13 As Assistant Vice-President of the Foreign Department of
the Bank she performs tasks integral to the operations of the bank and her
length of service with the bank totaling 28 years speaks volumes of her status
as a regular employee of the bank. In fine, as a regular employee, she is
109
entitled to security of tenure; that is, her services may be terminated only
for a just or authorized cause.14 This being in truth a case of illegal dismissal,
it is no wonder then that the Bank endeavored to the very end to establish
loss of trust and confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail.

This brings us to the second issue wherein the Bank insists that it has
presented substantial evidence to prove the breach of trust on the part of
private respondent warranting her dismissal. On this point, the Court of
Appeals disagreed and set aside the findings of the NLRC that Reyes
deliberately withheld the release of the two dollar checks; that she is guilty
of conflict of interest that she waived her right to due process for not
attending the hearing; and that she was dismissed based on loss of trust and
confidence. We quote pertinent portions of the decision, to wit:

"FIRST: Respondent Bank heavily relied on the testimony and affidavit

of Remittance Clerk Joven' in trying to establish loss of confidence.
However, Joven's allegation that petitioner instructed her to hold the
subject two dollar checks amounting to $224,650.00 falls short of the
requisite proof to warrant petitioner's dismissal. Except for Joven's bare
assertion to withhold the dollar checks per petitioner's instruction,
respondent Bank failed to adduce convincing evidence to prove bad faith
and malice. It bears emphasizing that respondent Bank's witnesses
merely corroborate Joven's testimony.

Upon this point, the rule that proof beyond reasonable doubt is not
required to terminate an employee on the charge of loss of confidence
and that it is sufficient that there is some basis for such loss of
confidence, is not absolute. The right of an employer to dismiss
employees on the ground that it has lost its trust and confidence in him
must not be exercised arbitrarily and without just cause. For loss of trust
and confidence to be valid ground for an employee's dismissal, it must
be substantial and not arbitrary, and must be founded on clearly
established facts sufficient to warrant the employee's separation from
work (Labor vs. NLRC, 248 SCRA 183).

SECOND. Respondent Bank's charge of deliberate withholding of the two

dollar checks finds no support in the testimony of Atty. Jocson,
Chairman of the Investigating Committee. On cross examination, Atty.
Jocson testified that the documents themselves do not show any direct
withholding (pp. 186-187, Rollo). There being conflict in the statement
of witnesses, the court must adopt the testimony which it believes to be
true (U.S. vs. Losada, 18 Phil. 90).

THIRD. Settled is the rule that when the conclusions of the Labor Arbiter
are sufficiently substantiated by the evidence on record, the same
should be respected by appellate tribunals since he is in a better position
to assess and evaluate the credibility of the contending parties (Ala
Mode Garments, Inc. vs. NLRC, 268 SCRA 497). In this regard, the
Court quotes with approval the following disquisition of Labor Arbiter
Linsangan, thus:

110
This Office has repeatedly gone over the records of the case and
painstakingly examined the testimonies of respondent bank's
witnesses. One thing was clearly established: that the legality of
complainant's dismissal based on the first ground stated in
respondent's letter of termination (exh. 25-J, supra) will rise or fall
on the credibility of Miss Joven who undisputedly is the star witness
for the bank. It will be observed that the testimonies of the bank's
other witnesses, Analiza Castillo, Dante Castor and Antonio Ragasa
pertaining to the non-release of the dollar checks and their
corresponding transmittal letters were all anchored on what was
told them by Ms. Joven, that is: she was instructed by complainant
to hold the release of subject checks. In a nutshell, therefore, the
issue boils down to who between complainant and Ms. Joven is
more credible.

After painstakingly examining the testimonies of Ms. Joven and

respondent's other witnesses' this Office finds the evidence still
wanting in proof of complainant's guilt. This Office had closely
observed the demeanor of Ms. Joven while testifying on the witness
stand and was not impressed by her assertions. The allegation of
Ms. Joven in that her non-release of the dollar checks was upon
the instruction of complainant Reyes is extremely doubtful. In the
first place, the said instruction constitutes a gross violation of the
bank's standard operating procedure. Moreover, Ms. Joven was
fully aware that the instruction, if carried out, will greatly prejudice
her employer bank. It was incumbent upon Ms. Joven not only to
disobey the instruction but even to report the matter to
management, if same was really given to her by complainant.

Our doubt on the veracity of Ms. Joven's allegation even deepens

as we consider the fact that when the non-release of the checks
was discovered by Ms. Castillo the former contented herself by
continuously not taking any action on the two dollar checks. Worse,
Ms. Joven even impliedly told by Ms. Castillo (sic) to ignore the two
checks and just withhold their release. In her affidavit Ms. Castillo
said:

'4. When I asked Cecille Joven what I was supposed to do with

those checks, she said the same should be held as per
instruction of Mrs. Reyes.' (Exh. "14", supra).

The evidence shows that it was only on 16 May 1990 that Ms. Joven
broke her silence on the matter despite the fact that on 15
November 1989, at about 8:00 p.m. the complainant, accompanied
by driver Celestino Banito, went to her residence and confronted
her regarding the non-release of the dollar checks. It took Ms.
Joven eighteen (18) months before she explained her side on the
controversy. As to what prompted her to make her letter of
explanation was not even mentioned.

111
On the other hand, the actions taken by the complainant were
spontaneous. When complainant was informed by Mr. Castor and
Ms. Castillo regarding the non-release of the checks sometime in
November, 1989 she immediately reported the matter to Vice
President Santos, Head of the Foreign Department. And as earlier
mentioned, complainant went to the residence of Ms. Joven to
confront her. In this regard, Celestino Bonito, complainant's driver,
stated in his affidavit, thus:

'1. Sometime on November 15, 1989 at about 7:00 o'clock in

the evening, Mrs. Clarita Tan Reyes and I were in the
residence of one Ms. Cecille Joven, then a Processing Clerk in
the Foreign Department of Prudential Bank;

2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan
Reyes were seated in the sala when the latter asked the
former, Ms. Cecille Joven, how it came about that the two
dollar checks which she was then holding with the transmittal
letters, were found in a plastic envelope kept day-to-day by
the former;

3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan

Reyes had been intimately called Mother in the Bank) akala
ko bouncing checks yon mga yon.

4. Mrs. Clarita Tan Reyes, upon hearing those words, was

surprised and she said: "Ano, papaano mong alam na
bouncing na hindi mo pa pinadadala:

5. Mrs. Cecille Joven turned pale and was not able to answer.'

There are other factors that constrain this Office to doubt even
more the legality of complainant's dismissal based on the first
ground stated in the letter of dismissal. The non-release of the
dollar checks was reported to top management sometime on 15
November 1989 when complainant, accompanied by Supervisor
Dante Castor and Analiza Castillo, reported the matter to Vice
President Santos. And yet, it was only on 08 March 1991, after a
lapse of sixteen (16) months from the time the non-release of the
checks was reported to the Vice President, that complainant was
issued a memorandum directing her to submit an explanation. And
it took the bank another four (4) months before it dismissed
complainant.

The delayed action taken by respondent against complainant lends

credence to the assertion of the latter that her dismissal was a
mere retaliation to the criminal complaints she filed against the
bank's top officials.

It clearly appears from the foregoing that the complainant herein

has no knowledge of, much less participation in, the non-release
of the dollar checks under discussion. Ms. Joven is solely
112
responsible for the same. Incidentally, she was not even
reprimanded by the bank.

FOURTH. Respondent Bank having failed to furnish petitioner necessary

documents imputing loss of confidence, petitioner was not amply
afforded opportunity to prepare an intelligent answer. The Court finds
nothing confidential in the auditor's report and the affidavit of
Transmittal Clerk Joven. Due process dictates that management accord
the employees every kind of assistance to enable him to prepare
adequately for his defense, including legal representation.

The issue of conflict of interest not having been covered by the

investigation, the Court finds it irrelevant to the charge."15

We uphold the findings of the Court of Appeals that the dismissal of private
respondent on the ground of loss of trust and confidence was without basis.
The charge was predicated on the testimony of Ms. Joven and we defer to
the findings of the Labor Arbiter as confirmed and adopted by the Court of
Appeals on the credibility of said witness. This Court is not a trier of facts and
will not weigh anew the evidence already passed upon by the Court of
Appeals.16

On the third issue, the Bank questions the award of full backwages and other
benefits from July 19, 1991 up to the finality of this judgment; separation
pay equivalent to one (1) month salary for every year of service in lieu of
reinstatement; and attorney's fees equivalent to ten (10%) percent of the
total award. The Bank argues, in the main, that private respondent is not
entitled to full backwages in view of the fact that she did not bother to appeal
that portion of the labor arbiter's judgment awarding back wages limited to
three years. It must be stressed that private respondent filed a special civil
action for certiorari to review the decision of the NLRC17 and not an ordinary
appeal. An ordinary appeal is distinguished from the remedy of certiorari
under Rule 65 of the Revised Rules of Court in that in ordinary appeals it is
settled that a party who did not appeal cannot seek affirmative relief other
than the ones granted in the decision of the court below.18 On the other hand,
resort to a judicial review of the decisions of the National Labor Relations
Commission in a petition for certiorari under Rule 65 of Rules of Court is
confined to issues of want or excess of jurisdiction and grave abuse of
discretion.19 In the instant case, the Court of Appeals found that the NLRC
gravely abused its discretion in finding that the private respondent's dismissal
was valid and so reversed the same. Corollary to the foregoing, the appellate
court awarded backwages in accordance with current jurisprudence.

Indeed, jurisprudence is clear on the amount of backwages recoverable in

cases of illegal dismissal. Employees illegally dismissed prior to the effectivity
of Republic Act No. 6715 on March 21, 1989 are entitled to backwages up to
three (3) years without deduction or qualification, while those illegally
dismissed after are granted full backwages inclusive of allowances and other
benefits or their monetary equivalent from the time their actual compensation
was withheld from them up to the time of their actual
reinstatement. Considering that private respondent was terminated on July
20

113
19, 1991, she is entitled to full backwages from the time her actual
compensation was withheld from her (which, as a rule, is from the time of
her illegal dismissal) up to the finality of this judgment (instead of
reinstatement) considering that reinstatement is no longer feasible as
correctly pointed out by the Court of Appeals on account of the strained
relations brought about by the litigation in this case. Since reinstatement is
no longer viable, she is also entitled to separation pay equivalent to one (1)
month salary for every year of service.21 Lastly, since private respondent was
compelled to file an action for illegal dismissal with the labor arbiter, she is
likewise entitled to attorney's fees22 at the rate above-mentioned. There is no
room to argue, as the Bank does here, that its liability should be mitigated
on account of its good faith and that private respondent is not entirely
blameless. There is no showing that private respondent is partly at fault or
that the Bank acted in good faith in terminating an employee of twenty-eight
years. In any event, Article 279 of Republic Act No. 671523 clearly and plainly
provides for "full backwages" to illegally dismissed employees. 1âwphi1.nêt

WHEREFORE, the instant petition for review on certiorari is DENIED, and

the assailed Decision of the Court of Appeals, dated October 15, 1999,
is AFFIRMED.

SO ORDERED.

114
THIRD DIVISION

G.R. No. 164888 December 6, 2006

RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD STORAGE

AND DEVELOPMENT CORPORATION, CITIZENS DEVELOPMENT
INCOPRORATED, CARIDAD B. GARCIA, SANDRA G. ESCAT, LORNA
GARCIA, and OLGA G. ESCAT, petitioners,
vs.
ANNALISA CORTES, respondent.

DECISION

CARPIO MORALES, J.:

In 1987, Virgilio Garcia, "founder" of petitioner corporations (the

corporations), hired the then still single Annalisa Cortes (respondent) as clerk
of the Rural Bank of Coron (Manila Office).

After Virgilio died, his son Victor took over the management of the
corporations.

Anita Cortes (Anita), the wife of Victor Garcia, was also involved in the
management of the corporations. Respondent later married Anita’s brother
Eduardo Cortes.

Anita soon assumed the position of Vice President of petitioner Citizens

Development Incorporated (CDI) and practically controlled the financial
operations of almost all of the other corporations in the course of which she
allowed some of her relatives and in-laws, including respondent, to hold
several key sensitive positions thereat.

Respondent later became the Financial Assistant, Personnel Officer and

Corporate Secretary of The Rural Bank of Coron, Personnel Officer of CDI,
and also Personnel Officer and Disbursing Officer of The Empire Cold Storage
Development Corporation (ECSDC). She simultaneously received salaries
from these corporations.

On examination of the financial books of the corporations by petitioner

Sandra Garcia Escat, a daughter of Virgilio Garcia who was previously residing
in Spain, she found out that respondent was involved in several
anomalies,1 drawing petitioners to terminate respondent’s services on
November 23, 1998 in petitioner corporations.2

By letter of November 25, 19983 addressed to individual petitioners Caridad

B. Garcia (widow of Virgilio Garcia), Sandra G. Escat, and Olga G. Escat
(another daughter of Virgilio Garcia), respondent’s counsel conveyed
respondent’s willingness to abide by the decision to terminate her but
reminded them that she was entitled to separation pay equivalent to 11
months salary as well as to the other benefits provided by law in her favor.

115
Respondent’s counsel thus demanded the payment of respondent’s unpaid
salary for the months of October and November 1998, separation pay
equivalent to 12 months salary,4 13th month pay and other benefits.

As the demand remained unheeded, respondent filed a complaint5 for illegal

dismissal and non-payment of salaries and other benefits, docketed as NLRC-
NCR Case No. 00-05-05738-99.

Petitioners moved for the dismissal of the complaint on the ground of lack of
jurisdiction, contending that the case was an intra-corporate controversy
involving the removal of a corporate officer, respondent being the Corporate
Secretary of the Rural Bank of Coron, Inc., hence, cognizable by the
Securities and Exchange Commission (SEC) pursuant to Section 5 of PD 902-
A.6

In resolving the issue of jurisdiction, the Labor Arbiter noted as follows:

It is to be noted that complainant, aside from her being Corporate

Secretary of Rural Bank of Coron, complainant was likewise
appointed as Financial Assistant & Personnel Officer of all
respondents herein, whose services w[ere] terminated on 23
November 1998, hence, the instant complaint.

Verily, a Financial Assistant & Personnel Officer is not a

Corporate Officer of the [petitioners’] corporation, thus, pursuant
to Article 217 of the Labor Code, as amended, the instant case falls
within the ambit of original and exclusive jurisdiction of this
Office.7 (Emphasis and underscoring supplied).

Eventually, the Labor Arbiter found for respondent, computing the monetary
award due her as follows:

Backwages P658,000.00
13th Month Pay 63,000.00
for 1998, 1999
& 2000
P721,000.00
Separation Pay 315,000.00
Unpaid Salary 25,900.00
Attorney’s fees 106,190.00
P1,168,090.00

Thus, the Labor Arbiter, by Decision of July 18, 2001, disposed:

WHEREFORE, in view of all the foregoing, respondents are hereby

ordered to jointly and severally pay complainant the total amount of
ONE MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND NINETY
(P1,168,090.00) PESOS as discussed above.8

On August 13, 2001, the tenth or last day of the period of appeal,9 petitioners
filed a Notice of Appeal and Motion for Reduction of Bond10 to which they
116
attached a Memorandum on Appeal.11 In their Motion for Reduction of Bond,
petitioners alleged that the corporations were under financial distress and the
Rural Bank of Coron was under receivership. They thus prayed that the
amount of bond be substantially reduced, preferably to one half thereof or
even lower.12

By Resolution of October 16, 200113, the National Labor Relations

Commission (NLRC), while noting that petitioners timely filed the appeal, held
that the same was not accompanied by an appeal bond, a mandatory
requirement under Article 22314 of the Labor Code and Section 6, Rule VI of
the NLRC New Rules of Procedure. It also noted that the Motion for Reduction
of Bond was "premised on self-serving allegations." It accordingly dismissed
the appeal.

Petitioners’ Motion for Reconsideration15 was denied by the NLRC by

November 26, 2001 Resolution,16 hence, they filed a Petition for
Certiorari17 before the Court of Appeals.

By Decision dated May 26, 200418, the appellate court dismissed the petition
for lack of merit. Petitioners’ motion for reconsideration was also denied by
Resolution of August 13, 2004.19

Hence, this petition,20 petitioners faulting the appellate court for:

. . . FAIL[URE] TO RULE THAT THE NLRC’S RULE OF PROCEDURE WHICH

PROVIDES FOR THE POSTING OF A BOND AS A CONDITION PRECEDENT
FOR PERFECTING AN APPEAL AS A CONDITION PRECEDENT FOR
PERFECTING AN APPEAL IS CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE.

II

. . . DISMISS[ING] PETITIONERS[’] PETITION FOR [CERTIORARI]

BASED ON TECHNICALITY AND FAIL[URE] TO DECIDE THE SAME BASED
ON ITS MERIT.

III

. . . DISMISSING PETITIONERS’ PETITION FOR CERTIORARI FROM THE

DECISION OF THE NLRC FOR NON-PERFECTION THEREOF.

IV

. . . DISMISSING PETITIONERS’ PETITION FOR [CERTIORARI] FROM

THE DECISION OF THE NLRC WITHOUT RESOLVING THE CASE BASED
ON ITS MERITS.

. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL PETITIONERS ARE NOT

SOLIDARY LIABLE TO PAY THE RESPONDENT FOR HER MONETARY
117
CLAIM IN VIEW OF THE ABSENCE OF ANY EVIDENCE SHOWING THAT
THEY WERE MOTIVATED BY ILL-WILL OR MALICE IN SEVERING HER
EMPLOYMENT.

VI

. . . FAIL[URE] TO RESOLVE THE ISSUE OF JURISDICTION.21

While, indeed, respondent was the Corporate Secretary of the Rural Bank of
Coron, she was also its Financial Assistant and the Personnel Officer of the
two other petitioner corporations.22

Mainland Construction Co., Inc. v. Movilla23 instructs that a corporation can

engage its corporate officers to perform services under a circumstance which
would make them employees.24

The Labor Arbiter has thus jurisdiction over respondent’s complaint.

On the first three assigned errors which bear on whether petitioners’ appeal
before the NLRC was perfected:

As before the Court of Appeals, petitioners cite Cosico, Jr. v.

NLRC[25] and Taberrah v. NLRC[26] in support of their contention that their
appeal before the NLRC was perfected. As correctly ruled by the Court of
Appeals, however, the cited cases are not in point.

… The appellant in Taberrah filed a motion to fix appeal bond instead of

posting an appeal bond; and the Supreme Court relaxed the
requirement considering that the labor arbiter’s decision did not contain
a computation of the monetary award. In Cosico, the appeal bond
posted was of insufficient amount but the Supreme Court ruled that
provisions of the Labor Code on requiring a bond on appeal involving
monetary awards must be given liberal interpretation in line with the
desired objective of resolving controversies on their merits. Herein, no
appeal bond, whether sufficient or not, was ever filed by the
petitioners.27 (Italics in the original; emphasis and underscoring
supplied)

Petitioners additionally cite Star Angel Handicraft v. NLRC[28] to support

their position that there is a distinction between the filing of an appeal within
the reglementary period and its perfection. In the parallel case of Computer
Innovations Center v. National Labor Relations Commission,29 this Court
hesitated to reiterate the doctrine in Star Angel in this wise:

Petitioners invoke the aforementioned holding in Star Angel that there

is a distinction between the filing of an appeal within the reglementary
period and its perfection, and that the appeal may be perfected after
the said reglementary period. Indeed, Star Angel held that the filing of
a motion for reduction of appeal bond necessarily stays the
reglementary period for appeal. However, in this case, the motion for
reduction of appeal bond, which was incorporated in the appeal
memorandum, was filed only on the tenth or final day of the

118
reglementary period. Under such circumstance, the motion for
reduction of appeal bond can no longer be deemed to have
stayed the appeal, and the petitioner faces the risk, as had
happened in this case, of summary dismissal of the appeal for
non-perfection.

Moreover, the reference in Star Angel to the distinction between the

period to file the appeal and to perfect the appeal has been pointedly
made only once by this Court in Gensoli v. NLRC thus, it has not
acquired the sheen of venerability reserved for repeatedly-cited cases.
The distinction, if any, is not particularly evident or material in the Labor
Code; hence, the reluctance of the Court to adopt such doctrine.
Moreover, the present provision in the NLRC Rules of
Procedure, that "the filing of a motion to reduce bond shall not stop
the running of the period to perfect appeal" flatly contradicts the
notion expressed in Star Angel that there is a distinction
between the filing an appeal and perfecting an appeal.

Ultimately, the disposition of Star Angel was premised on the ruling that
a motion for reduction of the appeal bond necessarily stays the period
for perfecting the appeal, and that the employer cannot be expected to
perfect the appeal by posting the proper bond until such time the said
motion for reduction is resolved. The unduly stretched-out
distinction between the period to file an appeal and to perfect an
appeal was not material to the resolution of Star Angel, and this
could be properly considered as obiter dictum.30 (Italics in the
original; emphasis and underscoring supplied)

The appellate court did not thus err in dismissing the petition before it. And
contrary to petitioners’ assertion, the appellate court dismissed its petition
not "on a mere technicality." For the non-posting of an appeal bond within
the reglementary period divests the NLRC of its jurisdiction to entertain the
appeal. Thus, in the same case of Computer Innovations Center, this Court
held:

Petitioners also characterize the appeal bond requirement as a technical

rule, and that the dismissal of an appeal on purely technical grounds is
frowned upon. However, Article 223, which prescribes the appeal
bond requirement, is a rule of jurisdiction and not of
procedure. There is a little leeway for condoning a liberal interpretation
thereof, and certainly none premised on the ground that its
requirements are mere technicalities. It must be emphasized that there
is no inherent right to an appeal in a labor case, as it arises solely from
grant of statute, namely the Labor Code.

We have indeed held that the requirement for posting the surety
bond is not merely procedural but jurisdictional and cannot be trifled
with. Non-compliance with such legal requirements is fatal and has the
effect of rendering the judgment final and executory. The petitioners
cannot be allowed to seek refuge in a liberal application of rules for their
act of negligence.31 (Emphasis and underscoring supplied)

119
It bears emphasis that all that is required to perfect the appeal is the posting
of a bond to ensure that the award is eventually paid should the appeal be
dismissed. Petitioners should thus have posted a bond, even if it were only
partial, but they did not. No relaxation of the Rule may thus be considered.32

In the case at bar, petitioner did not post a full or partial appeal bond within
the prescribed period, thus, no appeal was perfected from the decision of the
Labor Arbiter. For this reason, the decision sought to be appealed to the NLRC
had become final and executory and therefore immutable. Clearly then, the
NLRC has no authority to entertain the appeal, much less to reverse the
decision of the Labor Arbiter. Any amendment or alteration made which
substantially affects the final and executory judgment is null and void for lack
of jurisdiction, including the entire proceeding held for that
purpose.33 (Emphasis and underscoring supplied)

As the decision of the Labor Arbiter had become final and executory, a
discussion of the fourth and fifth assigned errors is no longer necessary.

WHEREFORE, the petition is DENIED.

SO ORDERED.

120
a board approval. The president even extended her term in May 1998 also
without such approval. The company's mindset from the beginning,
therefore, was that she was not a corporate officer.

Respondent PDMC of course claims that as administrator petitioner Gomez

performed functions that were similar to those of its vice-president or its
general manager, corporate positions that were mentioned in the company's
by-laws. It points out that Gomez was third in the line of command, next only
to the chairman and president,26 and had been empowered to make major
decisions and manage the affairs of the company.

But the relationship of a person to a corporation, whether as officer or agent

or employee, is not determined by the nature of the services he performs but
by the incidents of his relationship with the corporation as they actually
exist.27 Here, respondent PDMC hired petitioner Gomez as an ordinary
employee without board approval as was proper for a corporate officer. When
the company got her the first time, it agreed to have her retain the
managerial rank that she held with Petron. Her appointment paper said that
she would be entitled to all the rights, privileges, and benefits that regular
PDMC employees enjoyed.28 This is in sharp contrast to what the former
PDMC president's appointment paper stated: he was elected to the position
and his compensation depended on the will of the board of directors.29

What is more, respondent PDMC enrolled petitioner Gomez with the Social
Security System, the Medicare, and the Pag-Ibig Fund. It even issued
certifications dated October 10, 2008,30 stating that Gomez was a permanent
employee and that the company had remitted combined contributions during
her tenure. The company also made her a member of the PDMC's savings
and provident plan31 and its retirement plan.32 It grouped her with the
managers covered by the company's group hospitalization
insurance. Likewise, she underwent regular employee performance
33

appraisals,34 purchased stocks through the employee stock option plan,35 and
was entitled to vacation and emergency leaves.36 PDMC even withheld taxes
on her salary and declared her as an employee in the official Bureau of
Internal Revenue forms.37 These are all indicia of an employer-employee
relationship which respondent PDMC failed to refute.

Estoppel, an equitable principle rooted on natural justice, prevents a person

from rejecting his previous acts and representations to the prejudice of others
who have relied on them.38 This principle of law applies to corporations as
well. The PDMC in this case is estopped from claiming that despite all the
appearances of regular employment that it weaved around petitioner
Gomez's position it must have technically hired her only as a corporate
officer. The board and its officers made her stay on and work with the
company for years under the belief that she held a regular managerial
position.

That petitioner Gomez served concurrently as corporate secretary for a time

is immaterial. A corporation is not prohibited from hiring a corporate officer
to perform services under circumstances which will make him an
employee.39 Indeed, it is possible for one to have a dual role of officer and

121
employee. In Elleccion Vda. De Lecciones v. National Labor Relations
Commission,40 the Court upheld NLRC jurisdiction over a complaint filed by
one who served both as corporate secretary and administrator, finding that
the money claims were made as an employee and not as a corporate officer.

WHEREFORE, the Court GRANTS the petition, REVERSES and SETS ASIDE
the decision dated May 19, 2006 and the resolution dated August 15, 2006
of the Court of Appeals in CA-G.R. SP 88819, and REINSTATES the
resolution dated November 22, 2002 of the National Labor Relations
Commission's Third Division in NLRC NCR 30-12-00856-99. Let the records
of this case be REMANDED to the arbitration branch of origin for the conduct
of further proceedings.

SO ORDERED.

THIRD DIVISION

G.R. No. 173115 April 16, 2009

ATTY. VIRGILIO R. GARCIA, Petitioner,

vs.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and ATTY.
SALVADOR C. HIZON, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 173163-64 April 16, 2009

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and ATTY.

SALVADOR C. HIZON, Petitioners,
vs.
ATTY. VIRGILIO R. GARCIA, Respondent.

DECISION

CHICO-NAZARIO, J.:

Assailed before Us via consolidated petitions for certiorari under Rule 45 of

the Rules of Court is the Decision1 of the Court of Appeals in CA-G.R. SP No.
88887 and No. 89066 dated 24 March 2006, which dismissed the petitions
for certiorari questioning the Decision2 of the National Labor Relations
Commission (NLRC) dated 21 March 2003, docketed as NLRC NCR CA No.
028901-01. The NLRC reversed the decision of the Labor Arbiter dated 30
September 2002, finding the preventive suspension and dismissal of Atty.
Virgilio R. Garcia illegal, and dismissed the case for lack of jurisdiction.

The facts are not disputed.

Atty. Virgilio R. Garcia was the Vice President and Head of Business Support
Services and Human Resource Departments of the Eastern
Telecommunications Philippines, Inc. (ETPI).

122
ETPI is a corporation duly organized and existing under the laws of the
Republic of the Philippines.

Atty. Salvador C. Hizon is the President/Chief Executive Officer of ETPI.

On 16 January 2000, Atty. Garcia was placed under preventive suspension

based on three complaints for sexual harassment filed by Atty. Maria Larrie
Alinsunurin, former manager of ETPI’s Office of the Legal Counsel; Ms. Emma
Valeros-Cruz, Assistant Vice President of ETPI and former secretary of Atty.
Garcia; and Dr. Mercedita M. Macalintal, medical retainer/company physician
of ETPI. In response to the complaints, the Human Resources Department
constituted a Committee on Decorum to investigate the complaints. By
reason of said complaints, Atty. Garcia was placed in preventive suspension.
The committee conducted an investigation where Atty. Garcia was given
copies of affidavits of the witnesses against him and a chance to defend
himself and to submit affidavits of his witnesses. The Committee submitted
a report which recommended his dismissal.3 In a letter dated 14 April 2000,
Atty. Hizon advised Atty. Garcia that his employment with ETPI was, per
recommendation of the Committee, terminated effective 16 April 2000.

A complaint-affidavit for illegal dismissal with prayer for full backwages4 and
recovery of moral and exemplary damages was filed on 11 July 2000 by Atty.
Virgilio R. Garcia against ETPI and Atty. Salvador C. Hizon.5 The case,
docketed as NLRC NCR-30-07-02787-00, was assigned to Labor Arbiter
Patricio P. Libo-on. The parties submitted their respective position
papers,6 reply position papers7 and rejoinders.8 Per agreement of the parties,
ETPI and Atty. Hizon filed a sur-rejoinder on 6 March 2001.9 Atty. Garcia
manifested that he was no longer submitting a sur-rejoinder and was
submitting the case for resolution.

On 15 April 2001, Atty. Garcia filed a Motion to Inhibit, praying that Labor
Arbiter Libo-on inhibit himself from further proceeding with the case, on the
ground that he was a fraternity brother of Atty. Hizon.10 Atty. Garcia
thereafter filed a second Motion to Inhibit11 on 10 May 2001. ETPI and Atty.
Hizon opposed said motion, arguing that the reason on which it was grounded
was not one of those provided by law.12 In an Order dated 13 June 2001, said
motions were denied.13 Atty. Garcia appealed said order before the NLRC via
a Memorandum on Appeal dated 4 July 2001,14 to which ETPI and Atty. Hizon
filed an Answer.15

The NLRC, in its decision dated 20 December 2001, set aside the order of
Labor Arbiter Libo-on and ordered the re-raffling of the case.16 ETPI and Atty.
Hizon moved for the reconsideration17 of the decision, but the same was
denied.18 Consequently, the case was re-raffled to Labor Arbiter Ramon
Valentin C. Reyes.19

The parties were directed to submit their respective memoranda.20 Atty.

Garcia filed his memorandum21 on 9 July 2002 while ETPI and Atty. Hizon
submitted their memorandum22 on 22 July 2002. On 16 August 2002, with
leave of court, ETPI and Atty. Hizon filed a Reply Memorandum, raising for
the first time the issue of lack of jurisdiction.

123
In his decision dated 30 September 2002, Labor Arbiter Reyes found the
preventive suspension and subsequent dismissal of Atty. Garcia illegal. The
dispositive portion of the decision reads:

WHEREFORE, premises all considered, judgment is hereby rendered, finding

the preventive suspension and the dismissal illegal and ordering the
respondents to:

1. Reinstate complainant to his former position without loss of seniority

rights and other benefits appurtenant to the position that complainant
received prior to the illegal dismissal;

2. Pay complainant his backwages which for purpose of appeal is

computed to the amount of ₱4,200,000.00 (₱150,000 x 28);

3. Pay complainant Moral damages in the amount of ₱1,000,000.00 and

Exemplary damages in the amount of ₱500,000.00.23

On 14 November 2002, Atty. Garcia filed an Ex-Parte Motion for the Issuance
of a Writ of Execution.24 On 20 November 2002, Labor Arbiter Reyes issued
a Writ of Execution insofar as the reinstatement aspect of the decision was
concerned.25 ETPI and Atty. Hizon filed a Very Urgent Motion to Lift/Quash
Writ of Execution on 28 November 2002.26 Per Sheriff’s Return on the Writ of
Execution, said writ remained unsatisfied because ETPI and Atty. Hizon
refused to reinstate Atty. Garcia to his former position.27

On 29 November 2002, Atty. Garcia filed an Ex-Parte Motion for the Issuance
of an Alias Writ of Execution praying that said writ be issued ordering the
sheriff to enforce the decision by garnishing the amount of ₱450,000.00
representing his monthly salaries for two months and 13th month pay from
any of ETPI’s bank accounts.28 Atty. Garcia manifested that he was no longer
filing any responsive pleading to the Very Urgent Motion to Lift/Quash Writ
of Execution because the Labor Arbiter lost jurisdiction over the case when
an appeal had been perfected.29 In an Order dated 10 December 2002, Labor
Arbiter Reyes denied the Very Urgent Motion to Lift/Quash Writ of Execution,
explaining that it still had jurisdiction over the reinstatement aspect of the
decision, notwithstanding the appeal taken, and that the grounds relied upon
for the lifting or quashing of the writ were not valid grounds.30 Labor Arbiter
Reyes subsequently issued a 1st Alias Writ of Execution dated 11 December
2002 ordering the sheriff to proceed to the premises of ETPI to reinstate Atty.
Garcia and/or garnish the amounts prayed for.31 Per Sheriff’s Return dated
17 January 2003, the 1st Alias Writ of Execution was satisfied with the
amount of ₱450,000.00 being released for proper disposition to Atty.
Garcia.32

ETPI and Atty. Hizon appealed the decision to the NLRC, filing a Notice of
Appeal and Memorandum of Appeal,33 which appeal was opposed by Atty.
Garcia.34 The appeal was docketed as NLRC NCR CA Case No. 028901-01.
ETPI and Atty. Hizon filed a Supplemental Appeal Memorandum dated 23
January 2003 (With Very Urgent Motion for Issuance of Temporary
Restraining Order).35 In a Manifestation ad Cautelam dated 28 January 2003,
without waiving their right to continue to question the jurisdiction of the Labor
124
Arbiter, they informed the Labor Arbiter that they had filed a Supplemental
Appeal Memorandum before the NLRC and asked that all processes relating
to the implementation of the reinstatement order be held in abeyance so as
not to render moot the reliefs prayed for in said Supplemental Appeal
Memorandum.36 They likewise filed on 31 January 2003 a Very Urgent Motion
to Lift/Quash Order of Garnishment ad Cautelam, praying that the notice of
garnishment on ETPI’s bank account with Metrobank, Dela Costa Branch, or
with other banks with which ETPI maintained an account and which received
said notice of garnishment be immediately lifted/quashed.37 On 12 February
2003, Atty. Garcia filed his Opposition to said Supplemental Appeal
Memorandum.38

On 3 February 2003, Atty. Garcia filed an Ex-Parte Motion for the Issuance
of a 2nd Alias Writ of Execution.39 In an Order dated 5 February 2003, Labor
Arbiter Reyes lifted the notice of garnishment on ETPI’s bank account with
Metrobank, Dela Costa Branch.40 On 10 February 2003, Labor Arbiter Reyes
issued a 2nd Writ of Execution.41

In a Manifestation ad Cautelam42 dated 10 February 2003, ETPI and Atty.

Hizon said that they filed with the NLRC on 7 February 2003 an Urgent
Petition (for Preliminary Injunction With Issuance of Temporary Restraining
Order)43 which prayed, inter alia, for the issuance of a temporary restraining
order to restrain the execution pending appeal of the order of reinstatement
and to enjoin the Labor Arbiter from issuing writs of execution or other
processes implementing the decision dated 30 September 2002. They added
that they also filed on 7 February 2003 a Notice to Withdraw44 their
Supplemental Appeal Memorandum dated 23 January 2003.

ETPI and Atty. Hizon, without waiving their right to continue to question the
jurisdiction of the Labor Arbiter over the case, filed on 18 February 2003 a
Motion to Inhibit, seeking the inhibition of Labor Arbiter Reyes for allegedly
evident partiality in favor of the complainant in issuing writs of execution in
connection with the order of reinstatement contained in his decision dated 30
September 2002, despite the pendency of an Urgent Petition (for Preliminary
Injunction With Prayer for the Issuance of Temporary Restraining Order) with
the NLRC, which sought the restraining of the execution pending appeal of
the order of reinstatement.45 The petition for injunction was docketed as
NLRC NCR IC No. 0001193-02. Atty. Garcia filed an opposition,46 to which
ETPI and Atty. Hizon filed a reply.47 Said motion to inhibit was subsequently
granted by Labor Arbiter Reyes.48 The case was re-raffled to Labor Arbiter
Elias H. Salinas.49

In an Order dated 26 February 2003, the NLRC, in NLRC NCR IC No. 0001193-
02, issued a temporary restraining order (TRO) enjoining Labor Arbiter Reyes
from executing pending appeal the order of reinstatement contained in his
decision dated 30 September 2002, and from issuing similar writs of
execution pending resolution of the petition for preliminary injunction. It
directed ETPI and Atty. Hizon to post a bond in the amount of ₱30,000.00 to
answer for any damage which Atty. Garcia may suffer by reason of the
issuance of the TRO.50

125
On 21 March 2003, the NLRC rendered its decision in NLRC NCR CA Case No.
028901-01 reversing the decision of Labor Arbiter Reyes and dismissing the
case for lack of jurisdiction. The decretal portion of the decision reads:

WHEREFORE, the decision appealed from is REVERSED, and the instant case
DISMISSED for lack of jurisdiction.51

The Commission ruled that the dismissal of Atty. Garcia, being ETPI’s Vice
President, partook of the nature of an intra-corporate dispute cognizable by
Regional Trial Courts and not by Labor Arbiters. It added that ETPI and Atty.
Hizon were not barred by estoppel from challenging the jurisdiction of the
Labor Arbiter over the instant case.

Atty. Garcia moved for the reconsideration52 of the decision, which ETPI and
Atty. Hizon opposed.53 In a resolution dated 16 December 2003, the motion
for reconsideration was denied for lack of merit.54

On 26 March 2003, Atty. Garcia filed a Motion to Inhibit, requesting Associate

Commissioner Angelita A. Gacutan to inhibit herself from further participating
in the deliberation and resolution of the case for manifest bias and partiality
in favor of ETPI and Atty. Hizon. The motion was later withdrawn.55

On 3 April 2003, the NLRC made permanent the TRO it issued pursuant to its
ruling in NLRC NCR CA Case No. 028901-01, that since the Labor Arbiter had
no jurisdiction over the case, the decision of the Labor Arbiter dated 30
September 2002 was void.56

On 6 March 2004, the resolution dated 16 December 2003 became final and
executory. Consequently, on 14 June 2004, an entry of judgment was made
recording said resolution in the Book of Entries of Judgments.57

On 18 June 2004, ETPI and Atty. Hizon filed a Motion to Discharge and/or
Release the Appeal Bond58 in the amount of ₱5,700,000.00 that they had
posted. 59

On 9 July 2004, Atty. Garcia filed a Motion to Set Aside Finality of Judgment
With Opposition to Motion to Discharge Appeal Bond,60 claiming that he did
not receive the resolution dated 16 December 2003 of the NLRC, the same
having been sent to his former address at 9 Isidora St., Don Antonio Heights,
Diliman, Quezon City, and not to his new address at 4 Pele St., Filinvest 2,
Batasan Hills, Quezon City, where he had been receiving all pleadings,
Resolutions, Orders and Decisions pertaining to the instant case since April
2001. On 19 July 2004, ETPI and Atty. Hizon filed their opposition thereto.
On 23 August 2004, the NLRC, admitting that it missent the resolution dated
16 December 2003 denying Atty. Garcia’s motion for reconsideration, issued
an order granting the motion. It recalled and set aside the Entry of Judgment
dated 14 June 2004 and denied the Motion to Discharge and/or Release the
Appeal Bond.61

In its Motion for Reconsideration dated 17 September 2004, ETPI and Atty.
Hizon argued that the NLRC correctly sent the resolution of 16 December
2003 to counsel’s allegedly old address, considering that same was counsel’s
126
address of record, there being no formal notice filed with the NLRC informing
it of a change of address. They contended that the aforesaid resolution had
become final and executory, and that Atty. Garcia should bear the
consequences of his inequitable conduct and/or gross negligence.62 On 10
January 2005, the NLRC denied the motion for reconsideration.63

On 14 March 2005, Atty. Garcia appealed to the Court of Appeals via a

Petition for Certiorari. It prayed that the Decision dated 21 March 2003 and
resolution dated 16 December 2003 of the NLRC be annulled and set aside,
and that the decision of the Labor Arbiter dated 30 September 2002 be
reinstated.64 The appeal was docketed as CA-G.R. SP No. 88887.

On 28 March 2005, ETPI and Atty. Hizon likewise filed a Petition for Certiorari
asking that the Orders dated 23 August 2004 and 10 January 2005 of the
NLRC be set aside; that its resolution dated 16 December 2003 be declared
final and executory; and that the NLRC be directed to discharge and/or
release Supersedeas Bond No. JCL (15) 00823 SICI Bond No. 75069 dated
18 November 2002 posted by them.65 The appeal was docketed as CA-G.R.
SP No. 89066.

Upon motion of Atty. Garcia, the two petitions for certiorari were
consolidated.66

On 24 March 2006, the assailed decision of the Court of Appeals was

rendered, the dispositive portion reading:

UPON THE VIEW WE TAKE OF THIS CASE, THUS, the consolidated petitions
are hereby DISMISSED for lack of merit. Without costs in both instances.67

The appellate court, on ETPI and Atty. Hizon’s argument that Atty. Garcia’s
petition for certiorari was filed out of time, ruled that the NLRC did not commit
grave abuse of discretion in liberally applying the rules regarding changes in
the address of counsel. It likewise ruled that Atty. Garcia, being the Vice
President for Business Support Services and Human Resource Departments
of ETPI, was a corporate officer at the time he was removed. Being a
corporate officer, his removal was a corporate act and/or an intra-corporate
controversy, the jurisdiction of which rested with the Securities and Exchange
Commission (now with the Regional Trial Court), and not the Labor Arbiter
and the NLRC. It added that ETPI and Atty. Hizon were not estopped from
questioning the jurisdiction of the Labor Arbiter before the NLRC on appeal,
inasmuch as said issue was seasonably raised by ETPI and Atty. Hizon in their
reply memorandum before the Labor Arbiter.

On 18 April 2006, Atty. Garcia filed his Motion for Reconsideration.68 On 20

April 2006, ETPI and Atty. Hizon filed a Motion for Partial
Reconsideration.69 The parties filed their respective comments thereon.70 On
14 June 2006, the Court of Appeals denied the motions for reconsideration.71

Atty. Garcia is now before us via a Petition for Review, which he filed on 3
August 2006.72 The petition was docketed as G.R. No. 173115. On 8 August
2006, he filed an Amended Petition for Review.73 He prays that the decision
of the NLRC dated 21 March 2003 and its resolution dated 16 December 2003,
127
and the decision of the Court of Appeals dated 24 March 2006 and its
resolution dated 14 June 2006, be reconsidered and set aside and that the
decision of the Labor Arbiter dated 30 September 2002 be affirmed and
reinstated.

ETPI and Atty. Hizon are also before us by way of a Petition for
Certiorari.74 The petition which was filed on 6 July 2006 was docketed as G.R.
Nos. 173163-64.

In our resolution dated 30 August 2006, G.R. Nos. 173163-64 were

consolidated with G.R. No. 173115, and the parties were required to
comment on the petitions within ten days from notice. 75 Atty. Garcia filed his
comment on 13 November 2006,76 while ETPI and Atty. Hizon filed theirs on
29 November 2006.77

On 15 January 2007, we noted the comments filed by the parties and required
them to file their Replies to said comments.78 ETPI and Atty. Hizon79 filed their
Reply on 26 February 2007, with Atty. Garcia filing his on 2 March 2007.80

On 26 March 2007, we gave due course to the petitions and required the
parties to submit the respective memoranda within 30 days from
notice.81 Atty. Garcia submitted his Memorandum82 on 12 June 2007 and ETPI
and Atty. Hizon filed theirs on 13 July 2007.83 With leave of court, ETPI and
Atty. Hizon filed a reply memorandum.84

Atty. Garcia raises the lone issue:

WHETHER THE QUESTION OF LEGALITY OR ILLEGALITY OF THE REMOVAL

OR TERMINATION OF EMPLOYMENT OF AN OFFICER OF A CORPORATION IS
AN INTRA-CORPORATE CONTROVERSY THAT FALLS UNDER THE ORIGINAL
EXCLUSIVE JURISDICTION OF THE REGIONAL TRIAL COURTS?85

ETPI and Atty. Hizon argue that the Court of Appeals, in ruling that the NLRC
did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing its order dated 23 August 2004 and its resolution dated
10 January 2005, committed grave reversible error and decided questions of
substance in a way not in accordance with law and applicable decisions of the
Honorable Court, and departed from the accepted and usual course of judicial
proceedings, necessitating the Honorable Court’s exercise of its power of
supervision.

THE RESOLUTION DATED 16 DECEMBER 2003 ISSUED BY THE NATIONAL

LABOR RELATIONS COMMISSION (SECOND DIVISION) HAS ALREADY
BECOME FINAL AND EXECUTORY AND HAS VESTED UPON PETITIONERS
ETPI, ET AL. A RIGHT RECOGNIZED AND PROTECTED UNDER THE LAW
CONSIDERING THAT:

A. RESPONDENT’S COPY OF SAID RESOLUTION WAS PROPERLY

SENT TO HIS ADDRESS OF RECORD, AT THE LATEST ON 15
JANUARY 2004, IN ACCORDANCE WITH WELL ESTABLISHED

128
JURISPRUDENCE. HENCE, RESPONDENT GARCIA HAD ONLY UNTIL
15 MARCH 2004 WITHIN WHICH TO FILE HIS PETITION FOR
CERTIORARI WITH THE COURT OF APPEALS. RESPONDENT
GARCIA FAILED TO FILE HIS PETITION FOR CERTIORARI BY SAID
DATE.

B. NOTWITHSTANDING THE FOREGOING, RESPONDENT GARCIA

HAD ACTUAL NOTICE OF THE ISSUANCE OF THE SAME AS OF 24
JUNE 2004. HENCE RESPONDENT GARCIA HAD ONLY UNTIL 23
AUGUST 2004 WITHIN WHICH TO FILE HIS PETITION FOR
CERTIORARI WITH THE COURT OF APPEALS. RESPONDENT
GARCIA FAILED TO FILE HIS PETITION FOR CERTIORARI BY SAID
DATE.

C. EVEN IF THE DATE OF RECEIPT IS RECKONED FROM 15

SEPTEMBER 2005, THE DATE RESPONDENT GARCIA ADMITTED IN
HIS PETITION FOR CERTIORARI TO BE THE DATE OF HIS RECEIPT
OF THE COPY OF THE RESOLUTION DATED 16 DECEMBER 2003 AT
HIS ALLEGED NEW ADDRESS, RESPONDENT GARCIA HAD ONLY
UNTIL 15 NOVEMBER 2005 TO FILE HIS PETITION FOR
CERTIORARI DATED 11 MARCH 2005. RESPONDENT GARCIA
FAILED TO FILE HIS PETITION FOR CERTIORARI BY SAID DATE.

II

THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC’S LIBERAL

APPLICATION OF RULES CONSIDERING THAT A LIBERAL APPLICATION OF
RULES CANNOT BE USED TO DEPRIVE A RIGHT THAT HAS ALREADY IPSO
FACTO VESTED ON PETITIONERS ETPI, ET AL.

III

THE COURT OF APPEALS ERRED IN RULING THAT THE NLRC DID NOT
COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN ISSUING ITS ORDER DATED 23 AUGUST 2004 AND
RESOLUTION DATED 10 JANUARY 2005 CONSIDERING THAT RESPONDENT
GARCIA MAY NOT ASSAIL THE FINALITY OF RESOLUTION DATED 16
DECEMBER 2003 THROUGH A MERE MOTION.

IV

THE COURT OF APPEALS ERRED IN FAILING TO RULE ON PETITIONERS’

COUNTER-MOTION TO CITE RESPONDENT GARCIA IN CONTEMPT OF COURT
DESPITE ITS PREVIOUS RESOLUTION DATED 30 MAY 2005 STATING THAT
IT SHALL ADDRESS THE SAME IN THE DECISION ON THE MERITS OF THE
CASE.86

The issue raised by Atty. Garcia – whether the termination or removal of an

officer of a corporation is an intra-corporate controversy that falls under the
original exclusive jurisdiction of the regional trial courts – is not novel. The
Supreme Court, in a long line of cases, has decreed that a corporate officer’s
dismissal or removal is always a corporate act and/or an intra-corporate
129
controversy, over which the Securities and Exchange Commission [SEC] (now
the Regional Trial Court)87 has original and exclusive jurisdiction.88

We have ruled that an intra-corporate controversy is one which pertains to

any of the following relationships: (1) between the corporation, partnership
or association and the public; (2) between the corporation, partnership or
association and the State insofar as the former’s franchise, permit or license
to operate is concerned; (3) between the corporation, partnership or
association and its stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates themselves.89 In Lozon v.
National Labor Relations Commission,90 we declared that Presidential Decree
No. 902-A confers on the SEC original and exclusive jurisdiction to hear and
decide controversies and cases involving intra-corporate and partnership
relations between or among the corporation, officers and stockholders and
partners, including their elections or appointments x x x.

Before a dismissal or removal could properly fall within the jurisdiction of the
SEC, it has to be first established that the person removed or dismissed was
a corporate officer.91 "Corporate officers" in the context of Presidential Decree
No. 902-A92 are those officers of the corporation who are given that character
by the Corporation Code or by the corporation’s by-laws.93 There are three
specific officers whom a corporation must have under Section 25 of the
Corporation Code.94 These are the president, secretary and the treasurer. The
number of officers is not limited to these three. A corporation may have such
other officers as may be provided for by its by-laws like, but not limited to,
the vice-president, cashier, auditor or general manager. The number of
corporate officers is thus limited by law and by the corporation’s by-laws.

In the case before us, the by-laws of ETPI provide:

ARTICLE V
Officers

Section 1. Number. – The officers of the Company shall be a Chairman of the

Board, a President, one or more Vice-Presidents, a Treasurer, a Secretary,
an Assistant Secretary, and such other officers as may be from time to time
be elected or appointed by the Board of Directors. One person may hold any
two compatible offices.95

Atty. Garcia tries to deny he is an officer of ETPI. Not being a corporate

officer, he argues that the Labor Arbiter has jurisdiction over the case. One
of the corporate officers provided for in the by-laws of ETPI is the Vice-
President. It can be gathered from Atty. Garcia’s complaint-affidavit that he
was Vice President for Business Support Services and Human Resource
Departments of ETPI when his employment was terminated effective 16 April
2000. It is therefore clear from the by-laws and from Atty. Garcia himself
that he is a corporate officer. One who is included in the by-laws of a
corporation in its roster of corporate officers is an officer of said corporation
and not a mere employee.96 Being a corporate officer, his removal is deemed
to be an intra-corporate dispute cognizable by the SEC and not by the Labor
Arbiter.

130
We agree with both the NLRC and the Court of Appeals that Atty. Garcia’s
ouster as Vice-President, who is a corporate officer of ETPI, partakes of the
nature of an intra-corporate controversy, jurisdiction over which is vested in
the SEC (now the RTC). The Labor Arbiter thus erred in assuming jurisdiction
over the case filed by Atty. Garcia, because he had no jurisdiction over the
subject matter of the controversy.

Having ruled which body has jurisdiction over the instant case, we find it
unnecessary, due to mootness, to further discuss and rule on the issues
raised by ETPI and Atty. Hizon regarding the NLRC order dated 23 August
2004 granting Atty. Garcia’s Motion to Set Aside Finality of Judgment with
Opposition to Motion to Discharge Appeal Bond, and its resolution dated 10
January 2005 denying their motion for reconsideration thereon. The decision
of the Labor Arbiter, who had jurisdiction over the case, was properly
dismissed by the NLRC. Consequently, Supersedeas Bond No. JCL (15) 00823
SICI Bond No. 75069 dated 18 November 2002, posted by ETPI as a
requirement for the filing of an appeal before the NLRC, is ordered
discharged.

WHEREFORE, premises considered, the petition for certiorari of Atty. Garcia

in G.R. No. 173115 is hereby DENIED. The petition for review on certiorari of
ETPI and Atty. Hizon in G.R. Nos. 173163-64 is PARTIALLY GRANTED insofar
as the discharge of Supersedeas Bond No. JCL (15) 00823 SICI Bond No.
75069 dated 18 November 2002 is concerned. This ruling is without prejudice
to Atty. Garcia’s taking recourse to and seeking relief through the appropriate
remedy in the proper forum.

SO ORDERED.

131
132
FIRST DIVISION

G.R. No. 113191 September 18, 1996

DEPARTMENT OF FOREIGN AFFAIRS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER
NIEVES V. DE CASTRO and JOSE C. MAGNAYI, respondents.

VITUG, J.:

The questions raised in the petition for certiorari are a few coincidental
matters relative to the diplomatic immunity extended to the Asian
Development Bank ("ADB").

On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-

01-0690-93 for his alleged illegal dismissal by ADB and the latter's violation
of the "labor-only" contracting law. Two summonses were served, one sent
directly to the ADB and the other through the Department of Foreign Affairs
("DFA"), both with a copy of the complaint. Forthwith, the ADB and the DFA
notified respondent Labor Arbiter that the ADB, as well as its President and
Office, were covered by an immunity from legal process except for
borrowings, guaranties or the sale of securities pursuant to Article 50(1) and
Article 55 of the Agreement Establishing the Asian Development Bank (the
"Charter") in relation to Section 5 and Section 44 of the Agreement Between
The Bank And The Government Of The Philippines Regarding The Bank's
Headquarters (the "Headquarters Agreement").

The Labor Arbiter took cognizance of the complaint on the impression that
the ADB had waived its diplomatic immunity from suit. In time, the Labor
Arbiter rendered his decision, dated 31 August 1993, that concluded:

WHEREFORE, above premises considered, judgment is hereby

rendered declaring the complainant as a regular employee of
respondent ADB, and the termination of his services as illegal.
Accordingly, respondent Bank is hereby ordered:

1. To immediately reinstate the complainant to his former position

effective September 16, 1993;

2. To pay complainant full backwages from December 1, 1992 to

September 15, 1993 in the amount of P42,750.00 (P4,500.00 x 9
months);

3. And to pay complainants other benefits and without loss of

seniority rights and other privileges and benefits due a regular
employee of Asian Development Bank from the time he was
terminated on December 31, 1992;

133
4. To pay 10% attorney's fees of the total entitlements.1

The ADB did not appeal the decision. Instead, on 03 November 1993, the
DFA referred the matter to the National Labor Relations Commission
("NLRC"); in its referral, the DFA sought a "formal vacation of the void
judgment." Replying to the letter, the NLRC Chairman. wrote:

The undersigned submits that the request for the "investigation" of

Labor Arbiter Nieves de Castro, by the National Labor Relations
Commission, has been erroneously premised on Art. 218(c) of the
Labor Code, as cited in the letter of Secretary Padilla, considering
that the provision deals with "a question, matter or
controversy within its (the Commission) jurisdiction" obviously
referring to a labor dispute within the ambit of Art. 217 (on
jurisdiction of Labor Arbiters and the Commission over labor
cases).

The procedure, in the adjudication of labor cases, including raising

of defenses, is prescribed by law. The defense of immunity could
have been raised before the Labor Arbiter by a special appearance
which, naturally, may not be considered as a waiver of the very
defense being raised. Any decision thereafter is subject to legal
remedies, including appeals to the appropriate division of the
Commission and/or a petition for certiorari with the Supreme
Court, under Rule 65 of the Rules of Court. Except where an appeal
is seasonably and properly made, neither the Commission nor the
undersigned may review, or even question, the property of any
decision by a Labor Arbiter. Incidentally, the Commission sits en
banc (all fifteen Commissioners) only to promulgate rules of
procedure, or to formulate policies (Art. 213, Labor Code).

On the other hand, while the undersigned exercises "administrative

supervision over the Commission and its regional branches and all
its personnel, including the Executive Labor Arbiters and Labor
Arbiters" (penultimate paragraph, Art. 213, Labor Code), he does
not have the competence to investigate or review any decision of
a Labor Arbiter. However, on the purely administrative aspect of
the decision-making process, he may cause that an misconduct,
malfeasance or misfeasance, upon complaint properly made.

If the Department of Foreign Affairs feels that the action of Labor

Arbiter Nieves de Castro constitutes misconduct, malfeasance or
misfeasance, it is suggested that an appropriate complaint be
lodged with the Office of the Ombudsman.

Thank you for kind attention. 2

Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's
resolution of 31 January 1994, respondents were required to comment.
Petitioner was later constrained to make an application for a restraining order
and/or writ of preliminary injunction following the issuance, on 16 March 199,

134
by the Labor Arbiter of a writ of execution. In a resolution, dated 07 April
1994, the Court issued the temporary restraining order prayed for.

The Office of the Solicitor General ("OSG"), in its comment of 26 May 1994,
initially assailed the claim of immunity by the ADB. Subsequently, however,
it submitted a Manifestation (dated 20 June 1994) stating, among other
things, that "after a thorough review of the case and the records," it became
convinced that ADB, indeed, was correct in invoking its immunity from suit
under the Charter and the Headquarters Agreement.

The Court is of the same view.

Article 50(1) of the Charter provides:

The Bank shall enjoy immunity from every form of legal

process, except in cases arising out of or in connection with the
exercise of its powers to borrow money, to guarantee obligations,
or to buy and sell or underwrite the sale of securities. 3

Under Article 55 thereof —

All Governors, Directors, alternates, officers and employees of the

Bank, including experts performing missions for the Bank:

(1) shall be immune from legal process with respect of acts

performed by them in their official capacity, except when the Bank
waives the immunity. 4

Like provisions are found in the Headquarters Agreement. Thus, its

Section 5 reads:

The Bank shall enjoy immunity from every form of legal process,
except in cases arising out of, or in connection with, the exercise
of its powers to borrow money, to guarantee obligations, or to buy
and sell or underwrite the sale of securities. 5

And, with respect to certain officials of the bank, Section 44 of the

agreement states:

Governors, other representatives of Members, Directors, the

president, Vice-President and executive officers as may be agreed
upon between the Government and the Bank shall enjoy, during
their stay in the Republic of the Philippines in connection with their
official duties with the Bank:

xxx xxx xxx

(b) Immunity from legal process of every kind in respect of words

spoken or written and all acts done by them in their official
capacity. 6

The above stipulations of both the Charter and Headquarters Agreement

should be able, may well enough, to establish that, except in the
135
specified cases of borrowing and guarantee operations, as well as the
purchase, sale and underwriting of securities, the ADB enjoys immunity
from legal process of every form. The Bank's officers, on their part,
enjoy immunity in respect of all acts performed by them in their official
capacity. The Charter and the Headquarters Agreement granting these
immunities and privileges are treaty covenants and commitments
voluntarily assumed by the Philippines government which must be
respected.

In World Health Organization vs. Aquino. 7 we have declared:

It is a recognized principle of international law and under our

system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government . . . it is then the duty of the courts to accept the claim
of immunity upon appropriate suggestion by the principal law
officer of the government, . . . or other officer acting under his
direction. Hence, in adherence to the settled principle that courts
may not so exercise their jurisdiction . . . as to embarrass the
executive arm of the government in conducting foreign relations,
it is accepted doctrine that in "such cases the judicial department
of government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic
jurisdiction." 8

To the same effect is the decision in International Catholic Migration

Commission vs. Calleja, 9 which has similarly deemed the Memoranda of the
Legal Adviser of the Department of Foreign Affairs to be "a categorical
recognition by the Executive Branch of Government that ICMC . . . enjoy(s)
immunities accorded to international organizations" and which determination
must be held "conclusive upon the Courts in order not to embarrass a political
department of Government." In the instant case, the filing of the petition by
the DFA, in behalf of ADB, is itself an affirmance of the government's own
recognition of ADB's immunity.

Being an international organization that has been extended diplomatic status,

the ADB is independent of the municipal law. 10 In Southeast Asian Fisheries
Development Center vs. Acosta. 11 The Court has cited with approval the
opinion 12 of the Minister of justice; thus —

One of the basic immunities of an international organization is

immunity from local jurisdiction, i.e., that it is immune from the
legal writs and processes issued by the tribunals of the country
where it is found. (See Jenks, Id., pp. 37-44). The obvious reason
for this is that the subjection of such an organization to the
authority of the local courts would afford a convenient medium thru
which the host government may interfere in their operations or
even influence or control its policies and decisions of the

136
organization; besides, such subjection to local jurisdiction would
impair the capacity of such body to discharge its responsibilities
impartially behalf of its member-states. 13

Contrary to private respondent's assertion, the claim of immunity is not here

being raised for the first time, it has been invoked before the forum of origin
through communications sent by petitioner and the ADB to the Labor Arbiter,
as well as before the NLRC following the rendition of the questioned judgment
by the Labor Arbiter, but evidently to no avail.

In its communication of 27 May 1993, the DFA, through the Office of legal
Affairs, has advised the NLRC:

Respectfully returned to the Honorable Domingo B. Mabazza, Labor

Arbitration Associate Commission, National Labor Relations
Commission, National Capital Judicial Region, Arbitration Branch,
Associated Bank Bldg., T.M. Kalaw St., Ermita, Manila, the attached
Notice of Hearing addressed to the Asian Development Bank, in
connection with the aforestated case, for the reason stated in the
Department's 1st Indoresment dated 23 March 1993, copy
attached, which is self-explanatory.

In view of the fact that the Asian Development Bank (ADB) invokes
its immunity which is sustained by the Department of Foreign
Affairs, a continuos hearing of this case erodes the credibility of the
Philippine government before the international community, let
alone the negative implication of such a suit on the official
relationship of the Philippine government with the ADB.

For the Secretary of Foreign Affairs

(Sgd.) SIME D. HIDALGO

Assistant Secretary 14

The Office of the President, likewise, has issued on 18 May 1993 a letter
to the Secretary of Labor, viz

Dear Secretary Confesor,

I am writing to draw your attention to a case filed by a certain Jose

C. Magnayi against the Asian Development Bank and its President,
Kimmasa Tarumizu, before the National Labor Relations
Commission, National Capital Region Arbitration Board (NLRC NCR
Case No. 00-01690-93).

Last March 8, the Labor Arbiter charged with the case, Ms. Nieves
V. de Castro, addressed a Notice of Resolution/Order to the Bank
which brought it to the attention of the Department of Foreign
Affairs on the ground that the service of such notice was in violation
of the RP-ADB Headquarters Agreement which provided, inter alia,
for the immunity of the Bank, its President and officers from every

137
form of legal process, except only, in cases of borrowings,
guarantees or the sale of securities.

The Department of Foreign Affairs, in turn, informed Labor Arbiter

Nieves V. de Castro of this fact by letter dated March 22, copied to
you.

Despite this, the labor arbiter in question persited to send

summons, the latest dated May 4, herewith attached, regarding
the Magnayi case.

The Supreme Court has long settled the matter of diplomatic

immunities. In WHO vs. Aquino, SCRA 48, it ruled that courts
should respect diplomatic immunities of foreign officials recognized
by the Supreme Court forms part of the law of the land.

Perhaps you should point out to Labor Arbiter Nieves V. de Castro

that ignorance of the law is a ground for dismissal.

Very truly yours,

(Sgd.) JOSE B.
ALEJANDRINO
Chairman, PCC-ADB 15

Private respondent argues that, by centering into service contracts with

different private companies, ADB has descended to the level of an ordinary
party to a commercial transaction giving rise to a waiver of its immunity from
suit. In the case of Holy See vs. Hon. Rosario, Jr., 16 the Court has held:

There are two conflicting concept of sovereign immunity, each

widely held and firmly established. According to the classical or
absolute theory, a sovereign cannot, without its consent, be made
a respondent in the Courts of another sovereign. According to the
newer or restrictive theory, the immunity of the sovereign is
recognized only with regard to public acts or acts jure imperii of a
state, but not with regard to private act or acts jure gestionis.

xxx xxx xxx

Certainly, the mere entering into a contract by a foreign state with

a private party cannot be the ultimate test. Such an act can only
be the start of the inquiry. The logical question is whether the
foreign state is engaged in the activity in regular course of
business. If the foreign state is not engaged regularly in a business
or trade, the particular act or transaction must then be tested by
its nature. If the act is in pursuit of a sovereign activity, or an
incident thereof, then it is an act jure imperit, especially when it is
not undertaken for gain or profit. 17

138
The service contracts referred to by private respondent have not been
intended by the ADB for profit or gain but are official acts over which a
waiver of immunity would not attack.

With regard to the issue of whether or not the DFA has the legal standing to
file the present petition, and whether or not petitioner has regarded the basic
rule that certiorari can be availed of only when there is no appeal nor plain,
speedy and adequate remedy in the ordinary course of law, we hold both in
the affirmative.

The DFA's function includes, among its other mandates, the determination of
persons and institutions covered by diplomatic immunities, a determination
which, when challenge, entitles it to seek relief from the court so ass not to
seriously impair the conduct of the country's foreign relations. The DFA must
be allowed to plead its case whenever necessary or advisable to enable it to
help keep the credibility of the Philippine government before the international
community. When international agreements are concluded, the parties therto
are deemed to have likewise accepted the responsibility of seeing to it that
their agreements are duly regarded. In our country, this task falls principally
of the DFA as being the highest executive department with the competence
and authority to so act in this aspect of the international arena. 18 In Holy See
vs. Hon. Rosario, Jr., 19 this Court has explained the matter in good
datail; viz:

In Public International Law, when a state or international agency

wishes to plead sovereign or diplomatic immunity in a foreign
court, it requests the Foreign Office of the state where it is sued to
convey to the court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of

"suggestion," where the foreign state or the international
organization sued in an American court requests the Secretary of
State to make a determination as to whether it is entitled to
immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the attorney General to submit
to the court a "suggestion" that the defendant is entitled to
immunity. In England, a similar procedure is followed, only the
Foreign Office issues a certification to the effect instead of
submitting a "suggestion" (O'Connell, In International Law 130
[1965]; Note: Immunity from Suit of Foreign Sovereign
Instrumentalities and Obligations 50 Yale Law Journal 1088
[1941]).

In the Philippines, the practice is for the foreign government or the

international organization to first secure an executive endorsement
of its claim of sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to the courts
varies. In International Catholic Migration Commission vs. Calleja,
190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a
letter directly to the Secretary of Labor and Employment, informing
the latter that the respondent-employer could not be sued because

139
it enjoyed diplomatic immunity. In World Health Organization vs.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent
the trial court a telegram to that effect. In Baer vs. Tizon, 57 SCRA
1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs
to request the Solicitor General to make, in behalf of the
Commander of the United States Naval Base at Olongapo City,
Zambales, a "suggestion" to respondent Judge. The Solicitor
General embodied the "suggestion" in a manifestation and
memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through

the Office of Legal Affairs moved with this Court to be allowed to
intervene on the side of petitioner. The Court allowed the said
Department to file its memorandum in support of petitioner's claim
of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted

directly to the local courts by the respondents through their private
counsels (Raquiza vs. Bradford, 75 Phil. 50 [1945]; Miquiabas vs.
Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States
of America vs. Guinto, 182 SCRA 644 [1990] and companion
cases). In cases where the foreign states bypass the Foreign Office,
the courts can in quire into the facts and make their own
determination as to the nature of the acts and transactions
involved. 20

Relative to the property of the extraordinary remedy of certiorari, the Court

has, under special circumstances, so allowed and entertained such a petition
when (a) the questioned order or decision is issued in excess of or without
jurisdiction, 21 or (b) where the order or decision is a patent nullity, 22 which,
verily, are the circumstances that can be said to obtain in the present case.
When an adjudicator is devoid of jurisdiction on a matter before him, his
action that assumes otherwise would be a clear nullity.

WHEREFORE, the petition for certiorari is GRANTED, and the decision of the
Labor Arbiter, dated 31 August 1993 is VACATED, for being NULL AND VOID.
The temporary restraining order issued by this Court on 07 April 1994 is
hereby made permanent. No costs.

SO ORDERED.

140
141
FIRST DIVISION

G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR,

FLORENTINO ESTOBIO, MARCELINO MATURAN, FRAEN BALIBAG,
CARMELITO GAJOL, DEMOSTHENES MANTO, SATURNINO BACOL,
SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B. ESPINA, all
represented by MARIANO R. ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES
EXPLORATION (UNRFNRE) represented by its operations manager,
DR. KYRIACOS LOUCA, OSCAR N. ABELLA, LEON G. GONZAGA, JR.,
MUSIB M. BUAT, Commissioners of National Labor Relations
Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING
PETILLA, Labor Arbiter of Butuan City, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to
set aside the Resolution dated January 25, 1993 of the National Labor
Relations Commission (NLRC), Fifth Division, Cagayan de Oro City.

We dismiss the petition.

Petitioners were dismissed from their employment with private respondent,

the United Nations Revolving Fund for Natural Resources Exploration
(UNRFNRE), which is a special fund and subsidiary organ of the United
Nations. The UNRFNRE is involved in a joint project of the Philippine
Government and the United Nations for exploration work in Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91

to 10-03-00078-91 and SRAB 10-07-00159-91 for illegal dismissal and
damages.

In its Motion to Dismiss, private respondent alleged that respondent Labor

Arbiter had no jurisdiction over its personality since it enjoyed diplomatic
immunity pursuant to the 1946 Convention on the Privileges and Immunities
of the United Nations. In support thereof, private respondent attached a letter
from the Department of Foreign Affairs dated August 26, 1991, which
acknowledged its immunity from suit. The letter confirmed that private
respondent, being a special fund administered by the United Nations, was
covered by the 1946 Convention on the Privileges and Immunities of the
United Nations of which the Philippine Government was an original signatory
(Rollo, p. 21).

142
On November 25, 1991, respondent Labor Arbiter issued an order dismissing
the complaints on the ground that private respondent was protected by
diplomatic immunity. The dismissal was based on the letter of the Foreign
Office dated September 10, 1991.

Petitioners' motion for reconsideration was denied. Thus, an appeal was filed
with the NLRC, which affirmed the dismissal of the complaints in its
Resolution dated January 25, 1993.

Petitioners filed the instant petition for certiorari without first seeking a
reconsideration of the NLRC resolution.

II

Article 223 of the Labor Code of the Philippines, as amended, provides that
decisions of the NLRC are final and executory. Thus, they may only be
questioned through certiorari as a special civil action under Rule 65 of the
Revised Rules of Court.

Ordinarily, certiorari as a special civil action will not lie unless a motion for
reconsideration is first filed before the respondent tribunal, to allow it an
opportunity to correct its assigned errors (Liberty Insurance Corporation v.
Court of Appeals, 222 SCRA 37 [1993]).

In the case at bench, petitioners' failure to file a motion for reconsideration

is fatal to the instant petition. Moreover, the petition lacks any explanation
for such omission, which may merit its being considered as falling under the
recognized exceptions to the necessity of filing such motion.

Notwithstanding, we deem it wise to give due course to the petition because

of the implications of the issue in our international relations.

Petitioners argued that the acts of mining exploration and exploitation are
outside the official functions of an international agency protected by
diplomatic immunity. Even assuming that private respondent was entitled to
diplomatic immunity, petitioners insisted that private respondent waived it
when it engaged in exploration work and entered into a contract of
employment with petitioners.

Petitioners, likewise, invoked the constitutional mandate that the State shall
afford full protection to labor and promote full employment and equality of
employment opportunities for all (1987 Constitution, Art. XIII, Sec. 3).

The Office of the Solicitor General is of the view that private respondent is
covered by the mantle of diplomatic immunity. Private respondent is a
specialized agency of the United Nations. Under Article 105 of the Charter of
the United Nations:

1. The Organization shall enjoy in the territory of its Members such

privileges and immunities as are necessary for the fulfillment of its
purposes.

143
2. Representatives of the Members of the United Nations and
officials of the Organization shall similarly enjoy such privileges and
immunities as are necessary for the independent exercise of their
functions in connection with the organization.

Corollary to the cited article is the Convention on the Privileges and

Immunities of the Specialized Agencies of the United Nations, to which the
Philippines was a signatory (Vol. 1, Philippine Treaty Series, p. 621). We
quote Sections 4 and 5 of Article III thereof:

Sec. 4. The specialized agencies, their property and assets,

wherever located and by whomsoever held shall enjoy immunity
from every form of legal process except insofar as in any particular
case they have expressly waived their immunity. It is, however,
understood that no waiver of immunity shall extend to any
measure of execution (Emphasis supplied).

Sec. 5. The premises of the specialized agencies shall be

inviolable. The property and assets of the specialized agencies,
wherever located and by whomsoever held, shall be immune from
search, requisition, confiscation, expropriation and any other form
of interference, whether by executive, administrative, judicial or
legislative action (Emphasis supplied).

As a matter of state policy as expressed in the Constitution, the Philippine

Government adopts the generally accepted principles of international law
(1987 Constitution, Art. II, Sec. 2). Being a member of the United Nations
and a party to the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, the Philippine Government
adheres to the doctrine of immunity granted to the United Nations and its
specialized agencies. Both treaties have the force and effect of law.

In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had

occasion to rule that:

It is a recognized principle of international law and under our

system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts
to accept the claim of immunity upon appropriate suggestion by
the principal law officer of the government, the Solicitor General or
other officer acting under his direction. Hence, in adherence to the
settled principle that courts may not so exercise their jurisdiction
by seizure and detention of property, as to embarrass the
executive arm of the government in conducting foreign relations,
it is accepted doctrine that "in such cases the judicial department
of (this) government follows the action of the political branch and

144
will not embarrass the latter by assuming an antagonistic
jurisdiction (Emphasis supplied).

We recognize the growth of international organizations dedicated to specific

universal endeavors, such as health, agriculture, science and technology and
environment. It is not surprising that their existence has evolved into the
concept of international immunities. The reason behind the grant of privileges
and immunities to international organizations, its officials and functionaries
is to secure them legal and practical independence in fulfilling their duties
(Jenks, International Immunities 17 [1961]).

Immunity is necessary to assure unimpeded performance of their functions.

The purpose is "to shield the affairs of international organizations, in
accordance with international practice, from political pressure or control by
the host country to the prejudice of member States of the organization, and
to ensure the unhampered performance of their functions" (International
Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).

In the International Catholic Migration Commission case, we held that there

is no conflict between the constitutional duty of the State to protect the rights
of workers and to promote their welfare, and the grant of immunity to
international organizations. Clauses on jurisdictional immunity are now
standard in the charters of the international organizations to guarantee the
smooth discharge of their functions.

The diplomatic immunity of private respondent was sufficiently established

by the letter of the Department of Foreign Affairs, recognizing and confirming
the immunity of UNRFNRE in accordance with the 1946 Convention on
Privileges and Immunities of the United Nations where the Philippine
Government was a party. The issue whether an international organization is
entitled to diplomatic immunity is a "political question" and such
determination by the executive branch is conclusive on the courts and quasi-
judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No.
101949, Dec. 1, 1994; International Catholic Migration Commission v.
Calleja, supra).

Our courts can only assume jurisdiction over private respondent if it expressly
waived its immunity, which is not so in the case at bench (Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations,
Art. III, Sec. 4).

Private respondent is not engaged in a commercial venture in the Philippines.

Its presence here is by virtue of a joint project entered into by the Philippine
Government and the United Nations for mineral exploration in Dinagat Island.
Its mission is not to exploit our natural resources and gain pecuniarily thereby
but to help improve the quality of life of the people, including that of
petitioners.

This is not to say that petitioner have no recourse. Section 31 of the

Convention on the Privileges and Immunities of the Specialized Agencies of
the United Nations states that "each specialized agency shall make a
provision for appropriate modes of settlement of: (a) disputes arising out of
145
contracts or other disputes of private character to which the specialized
agency is a party."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

146
EN BANC

G.R. No. L-35131 November 29, 1972

THE WORLD HEALTH ORGANIZATION and DR. LEONCE

VERSTUYFT, petitioners,
vs.
HON. BENJAMIN H. AQUINO, as Presiding Judge of Branch VIII,
Court of First Instance of Rizal, MAJOR WILFREDO CRUZ, MAJOR
ANTONIO G. RELLEVE, and CAPTAIN PEDRO S. NAVARRO of the
Constabulary Offshore Action Center (COSAC), respondents.

Sycip, Salazar, Luna, Manalo and Feliciano for petitioners.

Emilio L. Baldia for respondents.

TEEHANKEE, J.:p

An original action for certiorari and prohibition to set aside respondent

judge's refusal to quash a search warrant issued by him at the instance of
respondents COSAC (Constabulary Offshore Action Center) officers for the
search and seizure of the personal effects of petitioner official of the WHO
(World Health Organization) notwithstanding his being entitled to diplomatic
immunity, as duly recognized by the executive branch of the Philippine
Government and to prohibit respondent judge from further proceedings in
the matter.

Upon filing of the petition, the Court issued on June 6, 1972 a restraining
order enjoining respondents from executing the search warrant in question.

Respondents COSAC officers filed their answer joining issue against

petitioners and seeking to justify their act of applying for and securing from
respondent judge the warrant for the search and seizure of ten crates
consigned to petitioner Verstuyft and stored at the Eternit Corporation
warehouse on the ground that they "contain large quantities of highly dutiable
goods" beyond the official needs of said petitioner "and the only lawful way
to reach these articles and effects for purposes of taxation is through a search
warrant." 1

The Court thereafter called for the parties' memoranda in lieu of oral
argument, which were filed on August 3, 1972 by respondents and on August
21, 1972 by petitioners, and the case was thereafter deemed submitted for
decision.

It is undisputed in the record that petitioner Dr. Leonce Verstuyft, who was
assigned on December 6, 1971 by the WHO from his last station in Taipei to
the Regional Office in Manila as Acting Assistant Director of Health Services,
is entitled to diplomatic immunity, pursuant to the Host Agreement executed
on July 22, 1951 between the Philippine Government and the World Health
Organization.

147
Such diplomatic immunity carries with it, among other diplomatic privileges
and immunities, personal inviolability, inviolability of the official's properties,
exemption from local jurisdiction, and exemption from taxation and customs
duties.

When petitioner Verstuyft's personal effects contained in twelve (12) crates

entered the Philippines as unaccompanied baggage on January 10, 1972,
they were accordingly allowed free entry from duties and taxes. The crates
were directly stored at the Eternit Corporation's warehouse at Mandaluyong,
Rizal, "pending his relocation into permanent quarters upon the offer of Mr.
Berg, Vice President of Eternit who was once a patient of Dr. Verstuyft in the
Congo." 2

Nevertheless, as above stated, respondent judge issued on March 3, 1972

upon application on the same date of respondents COSAC officers search
warrant No. 72-138 for alleged violation of Republic Act 4712 amending
section 3601 of the Tariff and Customs Code 3 directing the search and
seizure of the dutiable items in said crates.

Upon protest of March 6, 1972 of Dr. Francisco Dy, WHO Regional Director
for the Western Pacific with station in Manila, Secretary of Foreign Affairs
Carlos P. Romulo, personally wired on the same date respondent Judge
advising that "Dr. Verstuyft is entitled to immunity from search in respect of
his personal baggage as accorded to members of diplomatic missions"
pursuant to the Host Agreement and requesting suspension of the search
warrant order "pending clarification of the matter from the ASAC."

Respondent judge set the Foreign Secretary's request for hearing and heard
the same on March 16, 1972, but notwithstanding the official plea of
diplomatic immunity interposed by a duly authorized representative of the
Department of Foreign Affairs who furnished the respondent judge with a list
of the articles brought in by petitioner Verstuyft, respondent judge issued his
order of the same date maintaining the effectivity of the search warrant
issued by him, unless restrained by a higher court. 4

Petitioner Verstuyft's special appearance on March 24, 1972 for the limited
purpose of pleading his diplomatic immunity and motion to quash search
warrant of April 12, 1972 failed to move respondent judge.

At the hearing thereof held on May 8, 1972, the Office of the Solicitor General
appeared and filed an extended comment stating the official position of the
executive branch of the Philippine Government that petitioner Verstuyft is
entitled to diplomatic immunity, he did not abuse his diplomatic
immunity, 5 and that court proceedings in the receiving or host State are not
the proper remedy in the case of abuse of diplomatic immunity. 6

The Solicitor General accordingly joined petitioner Verstuyft's prayer for the
quashal of the search warrant. Respondent judge nevertheless summarily
denied quashal of the search warrant per his order of May 9, 1972 "for the
same reasons already stated in (his) aforesaid order of March 16, 1972"
disregarding Foreign Secretary Romulo's plea of diplomatic immunity on
behalf of Dr. Verstuyft.
148
Hence, the petition at bar. Petitioner Verstuyft has in this Court been joined
by the World Health Organization (WHO) itself in full assertion of petitioner
Verstuyft's being entitled "to all privileges and immunities, exemptions and
facilities accorded to diplomatic envoys in accordance with international law"
under section 24 of the Host Agreement.

The writs of certiorari and prohibition should issue as prayed for.

1. The executive branch of the Philippine Government

has expressly recognized that petitioner Verstuyft is entitled to diplomatic
immunity, pursuant to the provisions of the Host Agreement. The Department
of Foreign Affairs formally advised respondent judge of the Philippine
Government's official position that accordingly "Dr. Verstuyft cannot be the
subject of a Philippine court summons without violating an obligation in
international law of the Philippine Government" and asked for the quashal of
the search warrant, since his personal effects and baggages after having been
allowed free entry from all customs duties and taxes, may not be baselessly
claimed to have been "unlawfully imported" in violation of the tariff and
customs code as claimed by respondents COSAC officers. The Solicitor-
General, as principal law officer of the Government, 7 likewise expressly
affirmed said petitioner's right to diplomatic immunity and asked for the
quashal of the search warrant.

It is a recognized principle of international law and under our system of

separation of powers that diplomatic immunity is essentially a political
question and courts should refuse to look beyond a determination by the
executive branch of the government, 8 and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law officer
of the government, the Solicitor General in this case, or other officer acting
under his direction.9 Hence, in adherence to the settled principle that courts
may not so exercise their jurisdiction by seizure and detention of property,
as to embarrass the executive arm of the government in conducting foreign
relations, it is accepted doctrine that "in such cases the judicial department
of (this) government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic jurisdiction." 10

2. The unfortunate fact that respondent judge chose to rely on the suspicion
of respondents COSAC officers "that the other remaining crates unopened
contain contraband items" 11 rather than on the categorical assurance of the
Solicitor-General that petitioner Verstuyft did not abuse his diplomatic
immunity, 12 which was based in turn on the official positions taken by the
highest executive officials with competence and authority to act on the
matter, namely, the Secretaries of Foreign Affairs and of Finance, could not
justify respondent judge's denial of the quashal of the search warrant.

As already stated above, and brought to respondent court's attention, 13 the

Philippine Government is bound by the procedure laid down in Article VII of
the Convention on the Privileges and Immunities of the Specialized Agencies
of the United Nations 14 for consultations between the Host State and the

149
United Nations agency concerned to determine, in the first instance the fact
of occurrence of the abuse alleged, and if so, to ensure that no repetition
occurs and for other recourses. This is a treaty commitment voluntarily
assumed by the Philippine Government and as such, has the force and effect
of law.

Hence, even assuming arguendo as against the categorical assurance of the

executive branch of government that respondent judge had some ground to
prefer respondents COSAC officers' suspicion that there had been an abuse
of diplomatic immunity, the continuation of the search warrant proceedings
before him was not the proper remedy. He should, nevertheless, in deference
to the exclusive competence and jurisdiction of the executive branch of
government to act on the matter, have acceded to the quashal of the search
warrant, and forwarded his findings or grounds to believe that there had been
such abuse of diplomatic immunity to the Department of Foreign Affairs for
it to deal with, in accordance with the aforementioned Convention, if so
warranted.

3. Finally, the Court has noted with concern the apparent lack of coordination
between the various departments involved in the subject-matter of the case
at bar, which made it possible for a small unit, the COSAC, to which
respondents officers belong, seemingly to disregard and go against the
authoritative determination and pronouncements of both the Secretaries of
Foreign Affairs and of Finance that petitioner Verstuyft is entitled to
diplomatic immunity, as confirmed by the Solicitor-General as the principal
law officer of the Government. Such executive determination properly
implemented should have normally constrained respondents officers
themselves to obtain the quashal of the search warrant secured by them
rather than oppose such quashal up to this Court, to the embarrassment of
said department heads, if not of the Philippine Government itself vis a vis the
petitioners. 15

The seriousness of the matter is underscored when the provisions of Republic

Act 75 enacted since October 21, 1946 to safeguard the jurisdictional
immunity of diplomatic officials in the Philippines are taken into account. Said
Act declares as null and void writs or processes sued out or prosecuted
whereby inter alia the person of an ambassador or public minister is arrested
or imprisoned or his goods or chattels are seized or attached and makes it a
penal offense for "every person by whom the same is obtained or prosecuted,
whether as party or as attorney, and every officer concerned in executing it"
to obtain or enforce such writ or process. 16

The Court, therefore, holds that respondent judge acted without jurisdiction
and with grave abuse of discretion in not ordering the quashal of the search
warrant issued by him in disregard of the diplomatic immunity of petitioner
Verstuyft.

ACCORDINGLY, the writs of certiorari and prohibition prayed for are hereby
granted, and the temporary restraining order heretofore issued against
execution or enforcement of the questioned search warrant, which is hereby
declared null and void, is hereby made permanent. The respondent court is

150
hereby commanded to desist from further proceedings in the matter. No
costs, none having been prayed for.

The clerk of court is hereby directed to furnish a copy of this decision to the
Secretary of Justice for such action as he may find appropriate with regard
to the matters mentioned in paragraph 3 hereof.

SO ORDERED.

151
EN BANC

G.R. No. 76607 February 26, 1990

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE

REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional
Trial Court, Angeles City, ROBERTO T. VALENCIA, EMERENCIANA C.
TANGLAO, AND PABLO C. DEL PILAR, respondents.

G.R. No. 79470 February 26, 1990

UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF,

WILFREDO BELSA, PETER ORASCION AND ROSE
CARTALLA, petitioners,
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7,
Regional Trial Court (BAGUIO CITY), La Trinidad, Benguet and
FABIAN GENOVE, respondents.

G.R. No. 80018 February 26, 1990

UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and

STEVEN F. BOSTICK, petitioners,
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial
Court, Branch 66, Capas, Tarlac, and LUIS BAUTISTA, respondents.

G.R. No. 80258 February 26, 1990

UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C.

CARNS, AIC ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT.
NOEL A. GONZALES, SGT. THOMAS MITCHELL, SGT. WAYNE L.
BENJAMIN, ET AL., petitioners,
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge,
Branch 62 REGIONAL TRIAL COURT, Angeles City, and RICKY
SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN
MARIANO, AKA JESSIE DOLORES SANGALANG, ET AL., respondents.

Luna, Sison & Manas Law Office for petitioners.

CRUZ, J.:

These cases have been consolidated because they all involve the
doctrine of state immunity. The United States of America was not
impleaded in the complaints below but has moved to dismiss on the
ground that they are in effect suits against it to which it has not

152
consented. It is now contesting the denial of its motions by the
respondent judges.

In G.R. No. 76607, the private respondents are suing several officers
of the U.S. Air Force stationed in Clark Air Base in connection with
the bidding conducted by them for contracts for barber services in
the said base.

On February 24, 1986, the Western Pacific Contracting Office,

Okinawa Area Exchange, U.S. Air Force, solicited bids for such
contracts through its contracting officer, James F. Shaw. Among
those who submitted their bids were private respondents Roberto T.
Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia
had been a concessionaire inside Clark for 34 years; del Pilar for 12
years; and Tanglao for 50 years.

The bidding was won by Ramon Dizon, over the objection of the
private respondents, who claimed that he had made a bid for four
facilities, including the Civil Engineering Area, which was not
included in the invitation to bid.

The private respondents complained to the Philippine Area Exchange

(PHAX). The latter, through its representatives, petitioners Yvonne
Reeves and Frederic M. Smouse explained that the Civil Engineering
concession had not been awarded to Dizon as a result of the February
24, 1986 solicitation. Dizon was already operating this concession,
then known as the NCO club concession, and the expiration of the
contract had been extended from June 30, 1986 to August 31, 1986.
They further explained that the solicitation of the CE barbershop
would be available only by the end of June and the private
respondents would be notified.

On June 30, 1986, the private respondents filed a complaint in the

court below to compel PHAX and the individual petitioners to cancel
the award to defendant Dizon, to conduct a rebidding for the
barbershop concessions and to allow the private respondents by a
writ of preliminary injunction to continue operating the concessions
pending litigation. 1

Upon the filing of the complaint, the respondent court issued an ex

parte order directing the individual petitioners to maintain the status
quo.

On July 22, 1986, the petitioners filed a motion to dismiss and

opposition to the petition for preliminary injunction on the ground
that the action was in effect a suit against the United States of
America, which had not waived its non-suability. The individual
defendants, as official employees of the U.S. Air Force, were also
immune from suit.

On the same date, July 22, 1986, the trial court denied the application
for a writ of preliminary injunction.
153
On October 10, 1988, the trial court denied the petitioners' motion to
dismiss, holding in part as follows:

From the pleadings thus far presented to this Court by the

parties, the Court's attention is called by the relationship
between the plaintiffs as well as the defendants, including
the US Government, in that prior to the bidding or
solicitation in question, there was a binding contract
between the plaintiffs as well as the defendants, including
the US Government. By virtue of said contract of concession
it is the Court's understanding that neither the US
Government nor the herein principal defendants would
become the employer/s of the plaintiffs but that the latter
are the employers themselves of the barbers, etc. with the
employer, the plaintiffs herein, remitting the stipulated
percentage of commissions to the Philippine Area Exchange.
The same circumstance would become in effect when the
Philippine Area Exchange opened for bidding or solicitation
the questioned barber shop concessions. To this extent,
therefore, indeed a commercial transaction has been
entered, and for purposes of the said solicitation, would
necessarily be entered between the plaintiffs as well as the
defendants.

The Court, further, is of the view that Article XVIII of the

RP-US Bases Agreement does not cover such kind of
services falling under the concessionaireship, such as a
barber shop concession. 2

On December 11, 1986, following the filing of the herein petition

for certiorari and prohibition with preliminary injunction, we issued a
temporary restraining order against further proceedings in the court below. 3

In G.R. No. 79470, Fabian Genove filed a complaint for damages against
petitioners Anthony Lamachia, Wilfredo Belsa, Rose Cartalla and Peter
Orascion for his dismissal as cook in the U.S. Air Force Recreation Center at
the John Hay Air Station in Baguio City. It had been ascertained after
investigation, from the testimony of Belsa Cartalla and Orascion, that Genove
had poured urine into the soup stock used in cooking the vegetables served
to the club customers. Lamachia, as club manager, suspended him and
thereafter referred the case to a board of arbitrators conformably to the
collective bargaining agreement between the Center and its employees. The
board unanimously found him guilty and recommended his dismissal. This
was effected on March 5, 1986, by Col. David C. Kimball, Commander of the
3rd Combat Support Group, PACAF Clark Air Force Base. Genove's reaction
was to file Ms complaint in the Regional Trial Court of Baguio City against the
individual petitioners. 4

On March 13, 1987, the defendants, joined by the United States of America,
moved to dismiss the complaint, alleging that Lamachia, as an officer of the
U.S. Air Force stationed at John Hay Air Station, was immune from suit for

154
the acts done by him in his official capacity. They argued that the suit was in
effect against the United States, which had not given its consent to be sued.

This motion was denied by the respondent judge on June 4, 1987, in an order
which read in part:

It is the understanding of the Court, based on the allegations of

the complaint — which have been hypothetically admitted by
defendants upon the filing of their motion to dismiss — that
although defendants acted initially in their official capacities, their
going beyond what their functions called for brought them out of
the protective mantle of whatever immunities they may have had
in the beginning. Thus, the allegation that the acts complained of
were illegal, done. with extreme bad faith and with pre-conceived
sinister plan to harass and finally dismiss the plaintiff, gains
significance. 5

The petitioners then came to this Court seeking certiorari and prohibition with
preliminary injunction.

In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in
Camp O' Donnell, an extension of Clark Air Base, was arrested following a
buy-bust operation conducted by the individual petitioners herein, namely,
Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air
Force and special agents of the Air Force Office of Special Investigators
(AFOSI). On the basis of the sworn statements made by them, an information
for violation of R.A. 6425, otherwise known as the Dangerous Drugs Act, was
filed against Bautista in the Regional Trial Court of Tarlac. The above-named
officers testified against him at his trial. As a result of the filing of the charge,
Bautista was dismissed from his employment. He then filed a complaint for
damages against the individual petitioners herein claiming that it was
because of their acts that he was removed. 6

During the period for filing of the answer, Mariano Y. Navarro a special
counsel assigned to the International Law Division, Office of the Staff Judge
Advocate of Clark Air Base, entered a special appearance for the defendants
and moved for an extension within which to file an "answer and/or other
pleadings." His reason was that the Attorney General of the United States
had not yet designated counsel to represent the defendants, who were being
sued for their official acts. Within the extended period, the defendants,
without the assistance of counsel or authority from the U.S. Department of
Justice, filed their answer. They alleged therein as affirmative defenses that
they had only done their duty in the enforcement of the laws of the Philippines
inside the American bases pursuant to the RP-US Military Bases Agreement.

On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained
to represent the defendants, filed with leave of court a motion to withdraw
the answer and dismiss the complaint. The ground invoked was that the
defendants were acting in their official capacity when they did the acts
complained of and that the complaint against them was in effect a suit against
the United States without its consent.

155
The motion was denied by the respondent judge in his order dated September
11, 1987, which held that the claimed immunity under the Military Bases
Agreement covered only criminal and not civil cases. Moreover, the
defendants had come under the jurisdiction of the court when they submitted
their answer.7

Following the filing of the herein petition for certiorari and prohibition with
preliminary injunction, we issued on October 14, 1987, a temporary
restraining order. 8

In G.R. No. 80258, a complaint for damages was filed by the private
respondents against the herein petitioners (except the United States of
America), for injuries allegedly sustained by the plaintiffs as a result of the
acts of the defendants. 9 There is a conflict of factual allegations here.
According to the plaintiffs, the defendants beat them up, handcuffed them
and unleashed dogs on them which bit them in several parts of their bodies
and caused extensive injuries to them. The defendants deny this and claim
the plaintiffs were arrested for theft and were bitten by the dogs because
they were struggling and resisting arrest, The defendants stress that the dogs
were called off and the plaintiffs were immediately taken to the medical
center for treatment of their wounds.

In a motion to dismiss the complaint, the United States of America and the
individually named defendants argued that the suit was in effect a suit against
the United States, which had not given its consent to be sued. The defendants
were also immune from suit under the RP-US Bases Treaty for acts done by
them in the performance of their official functions.

The motion to dismiss was denied by the trial court in its order dated August
10, 1987, reading in part as follows:

The defendants certainly cannot correctly argue that they are

immune from suit. The allegations, of the complaint which is
sought to be dismissed, had to be hypothetically admitted and
whatever ground the defendants may have, had to be ventilated
during the trial of the case on the merits. The complaint alleged
criminal acts against the individually-named defendants and from
the nature of said acts it could not be said that they are Acts of
State, for which immunity should be invoked. If the Filipinos
themselves are duty bound to respect, obey and submit
themselves to the laws of the country, with more reason, the
members of the United States Armed Forces who are being treated
as guests of this country should respect, obey and submit
themselves to its laws. 10

and so was the motion for reconsideration. The defendants submitted their
answer as required but subsequently filed their petition for certiorari and
prohibition with preliminary injunction with this Court. We issued a temporary
restraining order on October 27, 1987. 11

II

156
The rule that a state may not be sued without its consent, now expressed in
Article XVI, Section 3, of the 1987 Constitution, is one of the generally
accepted principles of international law that we have adopted as part of the
law of our land under Article II, Section 2. This latter provision merely
reiterates a policy earlier embodied in the 1935 and 1973 Constitutions and
also intended to manifest our resolve to abide by the rules of the international
community.

Even without such affirmation, we would still be bound by the generally

accepted principles of international law under the doctrine of incorporation.
Under this doctrine, as accepted by the majority of states, such principles are
deemed incorporated in the law of every civilized state as a condition and
consequence of its membership in the society of nations. Upon its admission
to such society, the state is automatically obligated to comply with these
principles in its relations with other states.

As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that "there can be no legal right against
the authority which makes the law on which the right depends." 12 There are
other practical reasons for the enforcement of the doctrine. In the case of the
foreign state sought to be impleaded in the local jurisdiction, the added
inhibition is expressed in the maxim par in parem, non habet imperium. All
states are sovereign equals and cannot assert jurisdiction over one another.
A contrary disposition would, in the language of a celebrated case, "unduly
vex the peace of nations." 13

While the doctrine appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state
for acts allegedly performed by them in the discharge of their duties. The rule
is that if the judgment against such officials will require the state itself to
perform an affirmative act to satisfy the same, such as the appropriation of
the amount needed to pay the damages awarded against them, the suit must
be regarded as against the state itself although it has not been formally
impleaded. 14 In such a situation, the state may move to dismiss the
complaint on the ground that it has been filed without its consent.

The doctrine is sometimes derisively called "the royal prerogative of

dishonesty" because of the privilege it grants the state to defeat any
legitimate claim against it by simply invoking its non-suability. That is hardly
fair, at least in democratic societies, for the state is not an unfeeling tyrant
unmoved by the valid claims of its citizens. In fact, the doctrine is not
absolute and does not say the state may not be sued under any circumstance.
On the contrary, the rule says that the state may not be sued without its
consent, which clearly imports that it may be sued if it consents.

The consent of the state to be sued may be manifested expressly or impliedly.

Express consent may be embodied in a general law or a special law. Consent
is implied when the state enters into a contract or it itself commences
litigation.

157
The general law waiving the immunity of the state from suit is found in Act
No. 3083, under which the Philippine government "consents and submits to
be sued upon any moneyed claim involving liability arising from contract,
express or implied, which could serve as a basis of civil action between private
parties." In Merritt v. Government of the Philippine Islands, 15 a special law
was passed to enable a person to sue the government for an alleged tort.
When the government enters into a contract, it is deemed to have descended
to the level of the other contracting party and divested of its sovereign
immunity from suit with its implied consent. 16 Waiver is also implied when
the government files a complaint, thus opening itself to a counterclaim. 17

The above rules are subject to qualification. Express consent is effected only
by the will of the legislature through the medium of a duly enacted
statute. 18 We have held that not all contracts entered into by the government
will operate as a waiver of its non-suability; distinction must be made
between its sovereign and proprietary acts. 19 As for the filing of a complaint
by the government, suability will result only where the government is
claiming affirmative relief from the defendant. 20

In the case of the United States of America, the customary rule of

international law on state immunity is expressed with more specificity in the
RP-US Bases Treaty. Article III thereof provides as follows:

It is mutually agreed that the United States shall have the rights,
power and authority within the bases which are necessary for the
establishment, use, operation and defense thereof or appropriate
for the control thereof and all the rights, power and authority within
the limits of the territorial waters and air space adjacent to, or in
the vicinity of, the bases which are necessary to provide access to
them or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, 21 along with several other
decisions, to support their position that they are not suable in the cases
below, the United States not having waived its sovereign immunity from suit.
It is emphasized that in Baer, the Court held:

The invocation of the doctrine of immunity from suit of a foreign

state without its consent is appropriate. More specifically, insofar
as alien armed forces is concerned, the starting point is Raquiza v.
Bradford, a 1945 decision. In dismissing a habeas corpus petition
for the release of petitioners confined by American army
authorities, Justice Hilado speaking for the Court, cited Coleman v.
Tennessee, where it was explicitly declared: 'It is well settled that
a foreign army, permitted to march through a friendly country or
to be stationed in it, by permission of its government or sovereign,
is exempt from the civil and criminal jurisdiction of the place.' Two
years later, in Tubb and Tedrow v. Griess, this Court relied on the
ruling in Raquiza v. Bradford and cited in support thereof excerpts
from the works of the following authoritative writers: Vattel,
Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair
and Lauterpacht. Accuracy demands the clarification that after the

158
conclusion of the Philippine-American Military Bases Agreement,
the treaty provisions should control on such matter, the
assumption being that there was a manifestation of the submission
to jurisdiction on the part of the foreign power whenever
appropriate. More to the point is Syquia v. Almeda Lopez, where
plaintiffs as lessors sued the Commanding General of the United
States Army in the Philippines, seeking the restoration to them of
the apartment buildings they owned leased to the United States
armed forces stationed in the Manila area. A motion to dismiss on
the ground of non-suability was filed and upheld by respondent
Judge. The matter was taken to this Court in a mandamus
proceeding. It failed. It was the ruling that respondent Judge acted
correctly considering that the 4 action must be considered as one
against the U.S. Government. The opinion of Justice Montemayor
continued: 'It is clear that the courts of the Philippines including
the Municipal Court of Manila have no jurisdiction over the present
case for unlawful detainer. The question of lack of jurisdiction was
raised and interposed at the very beginning of the action. The U.S.
Government has not given its consent to the filing of this suit which
is essentially against her, though not in name. Moreover, this is
not only a case of a citizen filing a suit against his own Government
without the latter's consent but it is of a citizen firing an action
against a foreign government without said government's consent,
which renders more obvious the lack of jurisdiction of the courts of
his country. The principles of law behind this rule are so elementary
and of such general acceptance that we deem it unnecessary to
cite authorities in support thereof then came Marvel Building
Corporation v. Philippine War Damage Commission, where
respondent, a United States Agency established to compensate
damages suffered by the Philippines during World War II was held
as falling within the above doctrine as the suit against it would
eventually be a charge against or financial liability of the United
States Government because ... , the Commission has no funds of
its own for the purpose of paying money judgments.' The Syquia
ruling was again explicitly relied upon in Marquez Lim v. Nelson,
involving a complaint for the recovery of a motor launch, plus
damages, the special defense interposed being 'that the vessel
belonged to the United States Government, that the defendants
merely acted as agents of said Government, and that the United
States Government is therefore the real party in interest.' So it was
in Philippine Alien Property Administration v. Castelo, where it was
held that a suit against Alien Property Custodian and the Attorney
General of the United States involving vested property under the
Trading with the Enemy Act is in substance a suit against the United
States. To the same effect is Parreno v. McGranery, as the
following excerpt from the opinion of justice Tuazon clearly shows:
'It is a widely accepted principle of international law, which is made
a part of the law of the land (Article II, Section 3 of the
Constitution), that a foreign state may not be brought to suit before
the courts of another state or its own courts without its consent.'

159
Finally, there is Johnson v. Turner, an appeal by the defendant,
then Commanding General, Philippine Command (Air Force, with
office at Clark Field) from a decision ordering the return to plaintiff
of the confiscated military payment certificates known as scrip
money. In reversing the lower court decision, this Tribunal,
through Justice Montemayor, relied on Syquia v. Almeda Lopez,
explaining why it could not be sustained.

It bears stressing at this point that the above observations do not confer on
the United States of America a blanket immunity for all acts done by it or its
agents in the Philippines. Neither may the other petitioners claim that they
are also insulated from suit in this country merely because they have acted
as agents of the United States in the discharge of their official functions.

There is no question that the United States of America, like any other state,
will be deemed to have impliedly waived its non-suability if it has entered
into a contract in its proprietary or private capacity. It is only when the
contract involves its sovereign or governmental capacity that no such waiver
may be implied. This was our ruling in United States of America v.
Ruiz, 22 where the transaction in question dealt with the improvement of the
wharves in the naval installation at Subic Bay. As this was a clearly
governmental function, we held that the contract did not operate to divest
the United States of its sovereign immunity from suit. In the words of Justice
Vicente Abad Santos:

The traditional rule of immunity exempts a State from being sued

in the courts of another State without its consent or waiver. This
rule is a necessary consequence of the principles of independence
and equality of States. However, the rules of International Law are
not petrified; they are constantly developing and evolving. And
because the activities of states have multiplied, it has been
necessary to distinguish them — between sovereign and
governmental acts (jure imperii) and private, commercial and
proprietary acts (jure gestionis). The result is that State immunity
now extends only to acts jure imperii The restrictive application of
State immunity is now the rule in the United States, the United
kingdom and other states in Western Europe.

xxx xxx xxx

The restrictive application of State immunity is proper only when

the proceedings arise out of commercial transactions of the foreign
sovereign, its commercial activities or economic affairs. Stated
differently, a State may be said to have descended to the level of
an individual and can thus be deemed to have tacitly given its
consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its
sovereign functions. In this case the projects are an integral part
of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the

160
government of the highest order; they are not utilized for nor
dedicated to commercial or business purposes.

The other petitioners in the cases before us all aver they have acted in the
discharge of their official functions as officers or agents of the United States.
However, this is a matter of evidence. The charges against them may not be
summarily dismissed on their mere assertion that their acts are imputable to
the United States of America, which has not given its consent to be sued. In
fact, the defendants are sought to be held answerable for personal torts in
which the United States itself is not involved. If found liable, they and they
alone must satisfy the judgment.

In Festejo v. Fernando, 23 a bureau director, acting without any authority

whatsoever, appropriated private land and converted it into public irrigation
ditches. Sued for the value of the lots invalidly taken by him, he moved to
dismiss the complaint on the ground that the suit was in effect against the
Philippine government, which had not given its consent to be sued. This Court
sustained the denial of the motion and held that the doctrine of state
immunity was not applicable. The director was being sued in his private
capacity for a personal tort.

With these considerations in mind, we now proceed to resolve the cases at

hand.

III

It is clear from a study of the records of G.R. No. 80018 that the individually-
named petitioners therein were acting in the exercise of their official functions
when they conducted the buy-bust operation against the complainant and
thereafter testified against him at his trial. The said petitioners were in fact
connected with the Air Force Office of Special Investigators and were charged
precisely with the function of preventing the distribution, possession and use
of prohibited drugs and prosecuting those guilty of such acts. It cannot for a
moment be imagined that they were acting in their private or unofficial
capacity when they apprehended and later testified against the complainant.
It follows that for discharging their duties as agents of the United States, they
cannot be directly impleaded for acts imputable to their principal, which has
not given its consent to be sued. As we observed in Sanders v. Veridiano: 24

Given the official character of the above-described letters, we have

to conclude that the petitioners were, legally speaking, being sued
as officers of the United States government. As they have acted on
behalf of that government, and within the scope of their authority,
it is that government, and not the petitioners personally, that is
responsible for their acts.

The private respondent invokes Article 2180 of the Civil Code which holds the
government liable if it acts through a special agent. The argument, it would
seem, is premised on the ground that since the officers are designated
"special agents," the United States government should be liable for their
torts.

161
There seems to be a failure to distinguish between suability and liability and
a misconception that the two terms are synonymous. Suability depends on
the consent of the state to be sued, liability on the applicable law and the
established facts. The circumstance that a state is suable does not necessarily
mean that it is liable; on the other hand, it can never be held liable if it does
not first consent to be sued. Liability is not conceded by the mere fact that
the state has allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance to prove, if it
can, that the defendant is liable.

The said article establishes a rule of liability, not suability. The government
may be held liable under this rule only if it first allows itself to be sued through
any of the accepted forms of consent.

Moreover, the agent performing his regular functions is not a special agent
even if he is so denominated, as in the case at bar. No less important, the
said provision appears to regulate only the relations of the local state with its
inhabitants and, hence, applies only to the Philippine government and not to
foreign governments impleaded in our courts.

We reject the conclusion of the trial court that the answer filed by the special
counsel of the Office of the Sheriff Judge Advocate of Clark Air Base was a
submission by the United States government to its jurisdiction. As we noted
in Republic v. Purisima, 25 express waiver of immunity cannot be made by a
mere counsel of the government but must be effected through a duly-enacted
statute. Neither does such answer come under the implied forms of consent
as earlier discussed.

But even as we are certain that the individual petitioners in G.R. No. 80018
were acting in the discharge of their official functions, we hesitate to make
the same conclusion in G.R. No. 80258. The contradictory factual allegations
in this case deserve in our view a closer study of what actually happened to
the plaintiffs. The record is too meager to indicate if the defendants were
really discharging their official duties or had actually exceeded their authority
when the incident in question occurred. Lacking this information, this Court
cannot directly decide this case. The needed inquiry must first be made by
the lower court so it may assess and resolve the conflicting claims of the
parties on the basis of the evidence that has yet to be presented at the trial.
Only after it shall have determined in what capacity the petitioners were
acting at the time of the incident in question will this Court determine, if still
necessary, if the doctrine of state immunity is applicable.

In G.R. No. 79470, private respondent Genove was employed as a cook in

the Main Club located at the U.S. Air Force Recreation Center, also known as
the Open Mess Complex, at John Hay Air Station. As manager of this complex,
petitioner Lamachia is responsible for eleven diversified activities generating
an annual income of $2 million. Under his executive management are three
service restaurants, a cafeteria, a bakery, a Class VI store, a coffee and
pantry shop, a main cashier cage, an administrative office, and a
decentralized warehouse which maintains a stock level of $200,000.00 per
month in resale items. He supervises 167 employees, one of whom was

162
Genove, with whom the United States government has concluded a collective
bargaining agreement.

From these circumstances, the Court can assume that the restaurant services
offered at the John Hay Air Station partake of the nature of a business
enterprise undertaken by the United States government in its proprietary
capacity. Such services are not extended to the American servicemen for free
as a perquisite of membership in the Armed Forces of the United States.
Neither does it appear that they are exclusively offered to these servicemen;
on the contrary, it is well known that they are available to the general public
as well, including the tourists in Baguio City, many of whom make it a point
to visit John Hay for this reason. All persons availing themselves of this facility
pay for the privilege like all other customers as in ordinary restaurants.
Although the prices are concededly reasonable and relatively low, such
services are undoubtedly operated for profit, as a commercial and not a
governmental activity.

The consequence of this finding is that the petitioners cannot invoke the
doctrine of state immunity to justify the dismissal of the damage suit against
them by Genove. Such defense will not prosper even if it be established that
they were acting as agents of the United States when they investigated and
later dismissed Genove. For that matter, not even the United States
government itself can claim such immunity. The reason is that by entering
into the employment contract with Genove in the discharge of its proprietary
functions, it impliedly divested itself of its sovereign immunity from suit.

But these considerations notwithstanding, we hold that the complaint against

the petitioners in the court below must still be dismissed. While suable, the
petitioners are nevertheless not liable. It is obvious that the claim for
damages cannot be allowed on the strength of the evidence before us, which
we have carefully examined.

The dismissal of the private respondent was decided upon only after a
thorough investigation where it was established beyond doubt that he had
polluted the soup stock with urine. The investigation, in fact, did not stop
there. Despite the definitive finding of Genove's guilt, the case was still
referred to the board of arbitrators provided for in the collective bargaining
agreement. This board unanimously affirmed the findings of the investigators
and recommended Genove's dismissal. There was nothing arbitrary about the
proceedings. The petitioners acted quite properly in terminating the private
respondent's employment for his unbelievably nauseating act. It is surprising
that he should still have the temerity to file his complaint for damages after
committing his utterly disgusting offense.

Concerning G.R. No. 76607, we also find that the barbershops subject of the
concessions granted by the United States government are commercial
enterprises operated by private person's. They are not agencies of the United
States Armed Forces nor are their facilities demandable as a matter of right
by the American servicemen. These establishments provide for the grooming
needs of their customers and offer not only the basic haircut and shave (as
required in most military organizations) but such other amenities as

163
shampoo, massage, manicure and other similar indulgences. And all for a
fee. Interestingly, one of the concessionaires, private respondent Valencia,
was even sent abroad to improve his tonsorial business, presumably for the
benefit of his customers. No less significantly, if not more so, all the
barbershop concessionaires are under the terms of their contracts, required
to remit to the United States government fixed commissions in consideration
of the exclusive concessions granted to them in their respective areas.

This being the case, the petitioners cannot plead any immunity from the
complaint filed by the private respondents in the court below. The contracts
in question being decidedly commercial, the conclusion reached in the United
States of America v. Ruiz case cannot be applied here.

The Court would have directly resolved the claims against the defendants as
we have done in G.R. No. 79470, except for the paucity of the record in the
case at hand. The evidence of the alleged irregularity in the grant of the
barbershop concessions is not before us. This means that, as in G.R. No.
80258, the respondent court will have to receive that evidence first, so it can
later determine on the basis thereof if the plaintiffs are entitled to the relief
they seek. Accordingly, this case must also be remanded to the court below
for further proceedings.

IV

There are a number of other cases now pending before us which also involve
the question of the immunity of the United States from the jurisdiction of the
Philippines. This is cause for regret, indeed, as they mar the traditional
friendship between two countries long allied in the cause of democracy. It is
hoped that the so-called "irritants" in their relations will be resolved in a spirit
of mutual accommodation and respect, without the inconvenience and
asperity of litigation and always with justice to both parties.

WHEREFORE, after considering all the above premises, the Court hereby
renders judgment as follows:

1. In G.R. No. 76607, the petition is DISMISSED and the

respondent judge is directed to proceed with the hearing and
decision of Civil Case No. 4772. The temporary restraining order
dated December 11, 1986, is LIFTED.

2. In G.R. No. 79470, the petition is GRANTED and Civil Case No.
829-R(298) is DISMISSED.

3. In G.R. No. 80018, the petition is GRANTED and Civil Case No.
115-C-87 is DISMISSED. The temporary restraining order dated
October 14, 1987, is made permanent.

4. In G.R. No. 80258, the petition is DISMISSED and the

respondent court is directed to proceed with the hearing and
decision of Civil Case No. 4996. The temporary restraining order
dated October 27, 1987, is LIFTED.

164
All without any pronouncement as to costs.

SO ORDERED.

165
FIRST DIVISION

G.R. No. 120077 October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.

LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J.
DIOSANA AND MARCELO G. SANTOS, respondents.

PARDO, J.:

The case before the Court is a petition for certiorari1 to annul the following
orders of the National Labor Relations Commission (hereinafter referred to as
"NLRC") for having been issued without or with excess jurisdiction and with
grave abuse of discretion:2

(1) Order of May 31, 1993.3 Reversing and setting aside its earlier
resolution of August 28, 1992.4 The questioned order declared that the
NLRC, not the Philippine Overseas Employment Administration
(hereinafter referred to as "POEA"), had jurisdiction over private
respondent's complaint;

(2) Decision of December 15, 1994.5 Directing petitioners to jointly and

severally pay private respondent twelve thousand and six hundred
dollars (US$ 12,600.00) representing salaries for the unexpired portion
of his contract; three thousand six hundred dollars (US$3,600.00) as
extra four months salary for the two (2) year period of his contract,
three thousand six hundred dollars (US$3,600.00) as "14th month pay"
or a total of nineteen thousand and eight hundred dollars
(US$19,800.00) or its peso equivalent and attorney's fees amounting to
ten percent (10%) of the total award; and

(3) Order of March 30, 1995.6 Denying the motion for reconsideration of
the petitioners.

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as

"Santos") was an overseas worker employed as a printer at the Mazoon
Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was
directly hired by the Palace Hotel, Beijing, People's Republic of China and
later terminated due to retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to as

"MHC") and the Manila Hotel International Company, Limited (hereinafter
referred to as "MHICL").

When the case was filed in 1990, MHC was still a government-owned and
controlled corporation duly organized and existing under the laws of the
Philippines.

MHICL is a corporation duly organized and existing under the laws of Hong
Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital stock.8

166
By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu
Company Limited), MHICL10 trained the personnel and staff of the Palace Hotel
at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press in the Sultanate of
Oman, respondent Santos received a letter dated May 2, 1988 from Mr.
Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.

Mr. Shmidt offered respondent Santos the same position as printer, but with
a higher monthly salary and increased benefits. The position was slated to
open on October 1, 1988.11

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his
acceptance of the offer.

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready
to sign employment contract to respondent Santos. Mr. Henk advised
respondent Santos that if the contract was acceptable, to return the same to
Mr. Henk in Manila, together with his passport and two additional pictures for
his visa to China.

On May 30, 1988, respondent Santos resigned from the Mazoon Printing
Press, effective June 30, 1988, under the pretext that he was needed at home
to help with the family's piggery and poultry business.

On June 4, 1988, respondent Santos wrote the Palace Hotel and

acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4) signed
copies of the employment contract (dated June 4, 1988) and notified them
that he was going to arrive in Manila during the first week of July 1988.

The employment contract of June 4, 1988 stated that his employment would
commence September 1, 1988 for a period of two years.12 It provided for a
monthly salary of nine hundred dollars (US$900.00) net of taxes, payable
fourteen (14) times a year.13

On June 30, 1988, respondent Santos was deemed resigned from the Mazoon
Printing Press.

On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started

to work at the Palace Hotel.14

Subsequently, respondent Santos signed an amended "employment

agreement" with the Palace Hotel, effective November 5, 1988. In the
contract, Mr. Shmidt represented the Palace Hotel. The Vice President
(Operations and Development) of petitioner MHICL Miguel D. Cergueda
signed the employment agreement under the word "noted".

167
From June 8 to 29, 1989, respondent Santos was in the Philippines on
vacation leave. He returned to China and reassumed his post on July 17,
1989.

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna

suggested in a handwritten note that respondent Santos be given one (1)
month notice of his release from employment.

On August 10, 1989, the Palace Hotel informed respondent Santos by letter
signed by Mr. Shmidt that his employment at the Palace Hotel print shop
would be terminated due to business reverses brought about by the political
upheaval in China.15 We quote the letter:16

"After the unfortunate happenings in China and especially Beijing

(referring to Tiannamen Square incidents), our business has been
severely affected. To reduce expenses, we will not open/operate
printshop for the time being.

"We sincerely regret that a decision like this has to be made, but rest
assured this does in no way reflect your past performance which we
found up to our expectations."

"Should a turnaround in the business happen, we will contact you

directly and give you priority on future assignment."

On September 5, 1989, the Palace Hotel terminated the employment of

respondent Santos and paid all benefits due him, including his plane fare back
to the Philippines.

On October 3, 1989, respondent Santos was repatriated to the Philippines.

On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave
wrote Mr. Shmidt, demanding full compensation pursuant to the employment
agreement.

On November 11, 1989, Mr. Shmidt replied, to wit:17

His service with the Palace Hotel, Beijing was not abruptly terminated
but we followed the one-month notice clause and Mr. Santos received
all benefits due him.

"For your information the Print Shop at the Palace Hotel is still not
operational and with a low business outlook, retrenchment in various
departments of the hotel is going on which is a normal management
practice to control costs.

"When going through the latest performance ratings, please also be

advised that his performance was below average and a Chinese National
who is doing his job now shows a better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly
showed up for work but still enjoyed free accommodation/laundry/meals
up to the day of his departure."
168
On February 20, 1990, respondent Santos filed a complaint for illegal
dismissal with the Arbitration Branch, National Capital Region, National Labor
Relations Commission (NLRC). He prayed for an award of nineteen thousand
nine hundred and twenty three dollars (US$19,923.00) as actual damages,
forty thousand pesos (P40,000.00) as exemplary damages and attorney's
fees equivalent to 20% of the damages prayed for. The complaint named
MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.

The Palace Hotel and Mr. Shmidt were not served with summons and neither
participated in the proceedings before the Labor Arbiter.18

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against
petitioners, thus:19

"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant jointly and

severally;

"a) $20,820 US dollars or its equivalent in Philippine currency as

unearned salaries;

"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and

"d) Ten (10) percent of the total award as attorney's fees.

"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA,
not the NLRC had jurisdiction over the case.

On August 28, 1992, the NLRC promulgated a resolution, stating:20

"WHEREFORE, let the appealed Decision be, as it is hereby, declared

null and void for want of jurisdiction. Complainant is hereby enjoined to
file his complaint with the POEA.

"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the

afore-quoted resolution. He argued that the case was not cognizable by the
POEA as he was not an "overseas contract worker."21

On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC
directed Labor Arbiter Emerson Tumanon to hear the case on the question of
whether private respondent was retrenched or dismissed.22

On January 13, 1994, Labor Arbiter Tumanon completed the proceedings

based on the testimonial and documentary evidence presented to and heard
by him.23

169
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the
National Capital Region, Arbitration Branch, and the case was transferred to
Labor Arbiter Jose G. de Vera.24

On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He

found that respondent Santos was illegally dismissed from employment and
recommended that he be paid actual damages equivalent to his salaries for
the unexpired portion of his contract.26

On December 15, 1994, the NLRC ruled in favor of private respondent, to

wit:27

"WHEREFORE, finding that the report and recommendations of Arbiter

de Vera are supported by substantial evidence, judgment is hereby
rendered, directing the respondents to jointly and severally pay
complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the unexpired portion of the parties'
contract; (2) US$3,600.00 as extra four (4) months salary for the two
(2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th
month pay" for the aforesaid two (2) years contract stipulated by the
parties or a total of US$19,800.00 or its peso equivalent, plus (4)
attorney's fees of 10% of complainant's total award.

"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing

that Labor Arbiter de Vera's recommendation had no basis in law and in fact.28

On March 30, 1995, the NLRC denied the motion for reconsideration.29

Hence, this petition.30

On October 9, 1995, petitioners filed with this Court an urgent motion for the
issuance of a temporary restraining order and/or writ of preliminary
injunction and a motion for the annulment of the entry of judgment of the
NLRC dated July 31, 1995.31

On November 20, 1995, the Court denied petitioner's urgent motion. The
Court required respondents to file their respective comments, without giving
due course to the petition.32

On March 8, 1996, the Solicitor General filed a manifestation stating that

after going over the petition and its annexes, they can not defend and sustain
the position taken by the NLRC in its assailed decision and orders. The
Solicitor General prayed that he be excused from filing a comment on behalf
of the NLRC33

On April 30,1996, private respondent Santos filed his comment.34

On June 26, 1996, the Court granted the manifestation of the Solicitor
General and required the NLRC to file its own comment to the petition.35

On January 7, 1997, the NLRC filed its comment.

170
The petition is meritorious.

I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign
jurisdictions and the case involves purely foreign elements. The only link that
the Philippines has with the case is that respondent Santos is a Filipino citizen.
The Palace Hotel and MHICL are foreign corporations. Not all cases involving
our citizens can be tried here.

The employment contract. — Respondent Santos was hired directly by the

Palace Hotel, a foreign employer, through correspondence sent to the
Sultanate of Oman, where respondent Santos was then employed. He was
hired without the intervention of the POEA or any authorized recruitment
agency of the government.36

Under the rule of forum non conveniens, a Philippine court or agency may
assume jurisdiction over the case if it chooses to do so provided: (1) that the
Philippine court is one to which the parties may conveniently resort to; (2)
that the Philippine court is in a position to make an intelligent decision as to
the law and the facts; and (3) that the Philippine court has or is likely to have
power to enforce its decision.37 The conditions are unavailing in the case at
bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given
that all the incidents of the case — from the time of recruitment, to
employment to dismissal occurred outside the Philippines. The inconvenience
is compounded by the fact that the proper defendants, the Palace Hotel and
MHICL are not nationals of the Philippines. Neither .are they "doing business
in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk
are non-residents of the Philippines.

No power to determine applicable law. — Neither can an intelligent decision

be made as to the law governing the employment contract as such was
perfected in foreign soil. This calls to fore the application of the principle of
lex loci contractus (the law of the place where the contract was made).38

The employment contract was not perfected in the Philippines. Respondent

Santos signified his acceptance by writing a letter while he was in the Republic
of Oman. This letter was sent to the Palace Hotel in the People's Republic of
China.

No power to determine the facts. — Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all acts complained of took place
in Beijing, People's Republic of China. The NLRC was not in a position to
determine whether the Tiannamen Square incident truly adversely affected
operations of the Palace Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming

that a proper decision could be reached by the NLRC, such would not have

171
any binding effect against the employer, the Palace Hotel. The Palace Hotel
is a corporation incorporated under the laws of China and was not even
served with summons. Jurisdiction over its person was not acquired.

This is not to say that Philippine courts and agencies have no power to solve
controversies involving foreign employers. Neither are we saying that we do
not have power over an employment contract executed in a foreign country.
If Santos were an "overseas contract worker", a Philippine forum, specifically
the POEA, not the NLRC, would protect him.39 He is not an "overseas contract
worker" a fact which he admits with conviction.40

Even assuming that the NLRC was the proper forum, even on the merits, the
NLRC's decision cannot be sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the
case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a
separate and distinct juridical entity cannot be held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its
capital stock. However, this is not enough to pierce the veil of corporate
fiction between MHICL and MHC.

Piercing the veil of corporate entity is an equitable remedy. It is resorted to

when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud or defend a crime. 41 It is done only when a corporation is a
mere alter ego or business conduit of a person or another corporation.

In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership
by a single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself a sufficient reason for
disregarding the fiction of separate corporate personalities."

The tests in determining whether the corporate veil may be pierced are: First,
the defendant must have control or complete domination of the other
corporation's finances, policy and business practices with regard to the
transaction attacked. There must be proof that the other corporation had no
separate mind, will or existence with respect the act complained of. Second,
control must be used by the defendant to commit fraud or wrong. Third, the
aforesaid control or breach of duty must be the proximate cause of the injury
or loss complained of. The absence of any of the elements prevents the
piercing of the corporate veil.43

It is basic that a corporation has a personality separate and distinct from

those composing it as well as from that of any other legal entity to which it
may be related.44 Clear and convincing evidence is needed to pierce the veil
of corporate fiction.45 In this case, we find no evidence to show that MHICL
and MHC are one and the same entity.

III. MHICL not Liable

172
Respondent Santos predicates MHICL's liability on the fact that MHICL
"signed" his employment contract with the Palace Hotel. This fact fails to
persuade us.

First, we note that the Vice President (Operations and Development) of

MHICL, Miguel D. Cergueda signed the employment contract as a mere
witness. He merely signed under the word "noted".

When one "notes" a contract, one is not expressing his agreement or

approval, as a party would.46 In Sichangco v. Board of Commissioners of
Immigration,47 the Court recognized that the term "noted" means that the
person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a decision
on the matter.

Mr. Cergueda merely signed the "witnessing part" of the document. The
"witnessing part" of the document is that which, "in a deed or other formal
instrument is that part which comes after the recitals, or where there are no
recitals, after the parties (emphasis ours)."48 As opposed to a party to a
contract, a witness is simply one who, "being present, personally sees or
perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes"
something just makes a "brief written statement"50 a memorandum or
observation.

Second, and more importantly, there was no existing employer-employee

relationship between Santos and MHICL. In determining the existence of an
employer-employee relationship, the following elements are considered:51

"(1) the selection and engagement of the employee;

"(2) the payment of wages;

"(3) the power to dismiss; and

"(4) the power to control employee's conduct."

MHICL did not have and did not exercise any of the aforementioned powers.
It did not select respondent Santos as an employee for the Palace Hotel. He
was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not
engage respondent Santos to work. The terms of employment were
negotiated and finalized through correspondence between respondent
Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of
the Palace Hotel and not MHICL. Neither did respondent Santos adduce any
proof that MHICL had the power to control his conduct. Finally, it was the
Palace Hotel, through Mr. Schmidt and not MHICL that terminated
respondent Santos' services.

Neither is there evidence to suggest that MHICL was a "labor-only

contractor."52 There is no proof that MHICL "supplied" respondent Santos or
even referred him for employment to the Palace Hotel.

173
Likewise, there is no evidence to show that the Palace Hotel and MHICL are
one and the same entity. The fact that the Palace Hotel is a member of the
"Manila Hotel Group" is not enough to pierce the corporate veil between
MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering

further that no employer-employee relationship existed between MHICL, MHC
and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.

Labor Arbiters have exclusive and original jurisdiction only over the
following:53

"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;

"4. Claims for actual, moral, exemplary and other forms of damages
arising from employer-employee relations;

"5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and

"6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for
reinstatement."

In all these cases, an employer-employee relationship is an indispensable

jurisdictional requirement.

The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor
Code is limited to disputes arising from an employer-employee relationship
which can be resolved by reference to the Labor Code, or other labor statutes,
or their collective bargaining agreements.54

"To determine which body has jurisdiction over the present controversy, we
rely on the sound judicial principle that jurisdiction over the subject matter
is conferred by law and is determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims
asserted therein."55

The lack of jurisdiction of the Labor Arbiter was obvious from the allegations
of the complaint. His failure to dismiss the case amounts to grave abuse of
discretion.56
174
V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and
ANNULS the orders and resolutions of the National Labor Relations
Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in
NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).

No costs.

SO ORDERED.

175
THIRD DIVISION

[G.R. NO. 157010 : June 21, 2005]

PHILIPPINE NATIONAL BANK, Petitioner, v. FLORENCE O.

CABANSAG, Respondent.

DECISION

PANGANIBAN, J.:

The Court reiterates the basic policy that all Filipino workers, whether
employed locally or overseas, enjoy the protective mantle of Philippine labor
and social legislations. Our labor statutes may not be rendered ineffective by
laws or judgments promulgated, or stipulations agreed upon, in a foreign
country.

The Case

Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of

Court, seeking to reverse and set aside the July 16, 2002 Decision2 and the
January 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No.
68403. The assailed Decision dismissed the CA Petition (filed by herein
petitioner), which had sought to reverse the National Labor Relations
Commission (NLRC)'s June 29, 2001 Resolution,4 affirming Labor Arbiter Joel
S. Lustria's January 18, 2000 Decision.5

The assailed CA Resolution denied herein petitioner's Motion for

Reconsideration.

The Facts

The facts are narrated by the Court of Appeals as follows:

"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore

as a tourist. She applied for employment, with the Singapore Branch of the
Philippine National Bank, a private banking corporation organized and
existing under the laws of the Philippines, with principal offices at the PNB
Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB
Branch was under the helm of Ruben C. Tobias, a lawyer, as General
Manager, with the rank of Vice-President of the Bank. At the time, too, the
Branch Office had two (2) types of employees: (a) expatriates or the regular
employees, hired in Manila and assigned abroad including Singapore, and (b)
locally (direct) hired. She applied for employment as Branch Credit Officer,
at a total monthly package of $SG4,500.00, effective upon assumption of
duties after approval. Ruben C. Tobias found her eminently qualified and
wrote on October 26, 1998, a letter to the President of the Bank in Manila,
recommending the appointment of Florence O. Cabansag, for the position.

xxx

"The President of the Bank was impressed with the credentials of Florence O.
Cabansag that he approved the recommendation of Ruben C. Tobias. She
then filed an 'Application,' with the Ministry of Manpower of the Government

176
of Singapore, for the issuance of an 'Employment Pass' as an employee of
the Singapore PNB Branch. Her application was approved for a period of two
(2) years.

"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O.

Cabansag offering her a temporary appointment, as Credit Officer, at a basic
salary of Singapore Dollars 4,500.00, a month and, upon her successful
completion of her probation to be determined solely, by the Bank, she may
be extended at the discretion of the Bank, a permanent appointment and that
her temporary appointment was subject to the following terms and
conditions:

'1. You will be on probation for a period of three (3) consecutive months from
the date of your assumption of duty.

'2. You will observe the Bank's rules and regulations and those that may be
adopted from time to time.

'3. You will keep in strictest confidence all matters related to transactions
between the Bank and its clients.

'4. You will devote your full time during business hours in promoting the
business and interest of the Bank.

'5. You will not, without prior written consent of the Bank, be employed in
anyway for any purpose whatsoever outside business hours by any person,
firm or company.

'6. Termination of your employment with the Bank may be made by either
party after notice of one (1) day in writing during probation, one month notice
upon confirmation or the equivalent of one (1) day's or month's salary in lieu
of notice. '

"Florence O. Cabansag accepted the position and assumed office. In the

meantime, the Philippine Embassy in Singapore processed the employment
contract of Florence O. Cabansag and, on March 8, 1999, she was issued by
the Philippine Overseas Employment Administration, an 'Overseas
Employment Certificate,' certifying that she was a bona fide contract worker
for Singapore.

xxx

"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben

C. Tobias, on March 9, 1999, her initial 'Performance Report. 'Ruben C. Tobias
was so impressed with the 'Report' that he made a notation and, on said
'Report' : 'GOOD WORK. 'However, in the evening of April 14, 1999, while
Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the
Assistant Vice-President and Deputy General Manager of the Branch and
Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was told
by the two (2) that Ruben C. Tobias has asked them to tell Florence O.
Cabansag to resign from her job. Florence O. Cabansag was perplexed at the
sudden turn of events and the runabout way Ruben C. Tobias procured her
177
resignation from the Bank. The next day, Florence O. Cabansag talked to
Ruben C. Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento
had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a
'cost-cutting measure' of the Bank. Ruben C. Tobias, likewise, told Florence
O. Cabansag that the PNB Singapore Branch will be sold or transformed into
a remittance office and that, in either way, Florence O. Cabansag had to
resign from her employment. The more Florence O. Cabansag was perplexed.
She then asked Ruben C. Tobias that she be furnished with a 'Formal
Advice' from the PNB Head Office in Manila. However, Ruben C. Tobias flatly
refused. Florence O. Cabansag did not submit any letter of resignation.

"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag
to his office and demanded that she submit her letter of resignation, with the
pretext that he needed a Chinese-speaking Credit Officer to penetrate the
local market, with the information that a Chinese-speaking Credit Officer had
already been hired and will be reporting for work soon. She was warned that,
unless she submitted her letter of resignation, her employment record will be
blemished with the notation 'DISMISSED' spread thereon. Without giving any
definitive answer, Florence O. Cabansag asked Ruben C. Tobias that she be
given sufficient time to look for another job. Ruben C. Tobias told her that
she should be 'out' of her employment by May 15, 1999.

"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O.

Cabansag and adamantly ordered her to submit her letter of resignation. She
refused. On April 20, 1999, she received a letter from Ruben C. Tobias
terminating her employment with the Bank.

xxx

"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the
Complainant and against the Respondents, the decretal portion of which
reads as follows:

'WHEREFORE, considering the foregoing premises, judgment is hereby

rendered finding respondents guilty of Illegal dismissal and devoid of due
process, and are hereby ordered:

1. To reinstate complainant to her former or substantially equivalent position

without loss of seniority rights, benefits and privileges;

2. Solidarily liable to pay complainant as follows:

a) To pay complainant her backwages from 16 April 1999 up to her actual

reinstatement. Her backwages as of the date of the promulgation of this
decision amounted to SGD 40,500.00 or its equivalent in Philippine Currency
at the time of payment;

b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in

Philippine Currency at the time of payment;

178
c) Allowance for Sunday banking in the amount of SGD 120.00 or its
equivalent in Philippine Currency at the time of payment;

d) Monetary equivalent of leave credits earned on Sunday banking in the

amount of SGD 1,557.67 or its equivalent in Philippine Currency at the time
of payment;

e) Monetary equivalent of unused sick leave benefits in the amount of SGD

1,150.60 or its equivalent in Philippine Currency at the time of payment.

f) Monetary equivalent of unused vacation leave benefits in the amount of

SGD 319.85 or its equivalent in Philippine Currency at the time of payment.

g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in

Philippine Currency at the time of payment;

3. Solidarily to pay complainant actual damages in the amount of SGD

1,978.00 or its equivalent in Philippine Currency at the time of payment, and
moral damages in the amount of PhP 200,000.00, exemplary damages in the
amount of PhP 100,000.00;

4. To pay complainant the amount of SGD 5,039.81 or its equivalent in

Philippine Currency at the time of payment, representing attorney's fees.

SO ORDERED." 6
[Emphasis in the original.]

PNB appealed the labor arbiter's Decision to the NLRC. In a Resolution dated
June 29, 2001, the Commission affirmed that Decision, but reduced the moral
damages to P100,000 and the exemplary damages to P50,000. In a
subsequent Resolution, the NLRC denied PNB's Motion for Reconsideration.

Ruling of the Court of Appeals

In disposing of the Petition for Certiorari, the CA noted that petitioner bank
had failed to adduce in evidence the Singaporean law supposedly governing
the latter's employment Contract with respondent. The appellate court found
that the Contract had actually been processed by the Philippine Embassy in
Singapore and approved by the Philippine Overseas Employment
Administration (POEA), which then used that Contract as a basis for issuing
an Overseas Employment Certificate in favor of respondent.

According to the CA, even though respondent secured an employment pass

from the Singapore Ministry of Employment, she did not thereby waive
Philippine labor laws, or the jurisdiction of the labor arbiter or the NLRC over
her Complaint for illegal dismissal. In so doing, neither did she submit herself
solely to the Ministry of Manpower of Singapore's jurisdiction over disputes
arising from her employment. The appellate court further noted that a cursory
reading of the Ministry's letter will readily show that no such waiver or
submission is stated or implied.

Finally, the CA held that petitioner had failed to establish a just cause for the
dismissal of respondent. The bank had also failed to give her sufficient notice

179
and an opportunity to be heard and to defend herself. The CA ruled that she
was consequently entitled to reinstatement and back wages, computed from
the time of her dismissal up to the time of her reinstatement.

Hence, this Petition.7

Issues

Petitioner submits the following issues for our consideration:

"1. Whether or not the arbitration branch of the NLRC in the National Capital
Region has jurisdiction over the instant controversy;

"2. Whether or not the arbitration of the NLRC in the National Capital Region
is the most convenient venue or forum to hear and decide the instant
controversy; and cralawlibrary

"3. Whether or not the respondent was illegally dismissed, and therefore,
entitled to recover moral and exemplary damages and attorney's fees."8

In addition, respondent assails, in her Comment,9 the propriety of Rule 45 as

the procedural mode for seeking a review of the CA Decision affirming the
NLRC Resolution. Such issue deserves scant consideration. Respondent
miscomprehends the Court's discourse in St. Martin Funeral Home v.
NLRC,10 which has indeed affirmed that the proper mode of review of NLRC
decisions, resolutions or orders is by a special civil action for certiorari under
Rule 65 of the Rules of Court. The Supreme Court and the Court of Appeals
have concurrent original jurisdiction over such petitions for certiorari. Thus,
in observance of the doctrine on the hierarchy of courts, these petitions
should be initially filed with the CA.11

Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition
for Certiorari. In seeking a review by this Court of the CA Decision - - on
questions of jurisdiction, venue and validity of employment termination - -
petitioner is likewise correct in invoking Rule 45.12

It is true, however, that in a Petition for Review on Certiorari, the scope of

the Supreme Court's judicial review of decisions of the Court of Appeals is
generally confined only to errors of law. It does not extend to questions of
fact. This doctrine applies with greater force in labor cases. Factual questions
are for the labor tribunals to resolve.13 In the present case, the labor arbiter
and the NLRC have already determined the factual issues. Their findings,
which are supported by substantial evidence, were affirmed by the CA. Thus,
they are entitled to great respect and are rendered conclusive upon this
Court, absent a clear showing of palpable error or arbitrary disregard of
evidence.14

The Court's Ruling

The Petition has no merit.

First Issue:

180
Jurisdiction

The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of
the Labor Code as follows:

"ART. 217. Jurisdiction of Labor Arbiters and the Commission. '(a) Except as
otherwise provided under this Code the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers

may file involving wage, rates of pay, hours of work and other terms and
conditions of employment

4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and cralawlibrary

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount of exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.

(b) The commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.

x x x x x x x x x."

More specifically, Section 10 of RA 8042 reads in part:

"SECTION 10. Money Claims. - Notwithstanding any provision of law to the

contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.

x x x x x x x x x"

Based on the foregoing provisions, labor arbiters clearly have original and
exclusive jurisdiction over claims arising from employer-employee relations,
including termination disputes involving all workers, among whom are
overseas Filipino workers (OFW).15
181
We are not unmindful of the fact that respondent was directly hired, while on
a tourist status in Singapore, by the PNB branch in that city state. Prior to
employing respondent, petitioner had to obtain an employment pass for her
from the Singapore Ministry of Manpower. Securing the pass was a regulatory
requirement pursuant to the immigration regulations of that country.16

Similarly, the Philippine government requires non-Filipinos working in the

country to first obtain a local work permit in order to be legally employed
here. That permit, however, does not automatically mean that the non-citizen
is thereby bound by local laws only, as averred by petitioner. It does not at
all imply a waiver of one's national laws on labor. Absent any clear and
convincing evidence to the contrary, such permit simply means that its holder
has a legal status as a worker in the issuing country. ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

Noteworthy is the fact that respondent likewise applied for and secured an
Overseas Employment Certificate from the POEA through the Philippine
Embassy in Singapore. The Certificate, issued on March 8, 1999, declared her
a bona fide contract worker for Singapore. Under Philippine law, this
document authorized her working status in a foreign country and entitled her
to all benefits and processes under our statutes. Thus, even
assuming arguendo that she was considered at the start of her employment
as a "direct hire" governed by and subject to the laws, common practices and
customs prevailing in Singapore17 she subsequently became a contract
worker or an OFW who was covered by Philippine labor laws and policies upon
certification by the POEA. At the time her employment was illegally
terminated, she already possessed the POEA employment Certificate.

Moreover, petitioner admits that it is a Philippine corporation doing business

through a branch office in Singapore.18 Significantly, respondent's
employment by the Singapore branch office had to be approved by Benjamin
P. Palma Gil,19 the president of the bank whose principal offices were in
Manila. This circumstance militates against petitioner's contention that
respondent was "locally hired"; and totally "governed by and subject to the
laws, common practices and customs" of Singapore, not of the Philippines.
Instead, with more reason does this fact reinforce the presumption that
respondent falls under the legal definition of migrant worker, in this case one
deployed in Singapore. Hence, petitioner cannot escape the application of
Philippine laws or the jurisdiction of the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court

in Royal Crown Internationale v. NLRC:20

"x x x. Whether employed locally or overseas, all Filipino workers enjoy the
protective mantle of Philippine labor and social legislation, contract
stipulations to the contrary notwithstanding. This pronouncement is in
keeping with the basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex,
race or creed, and regulate the relations between workers and
employers. ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

For the State assures the basic rights of all workers to self-organization,
collective bargaining, security of tenure, and just and humane conditions of

182
work [Article 3 of the Labor Code of the Philippines; See also Section 18,
Article II and Section 3, Article XIII, 1987 Constitution]. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which states that laws
'which have for their object public order, public policy and good customs shall
not be rendered ineffective by laws or judgments promulgated, or by
determination or conventions agreed upon in a foreign country. '"

Second Issue:

Proper Venue

Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

"Section 1. Venue - (a) All cases which Labor Arbiters have authority to hear
and decide may be filed in the Regional Arbitration Branch having jurisdiction
over the workplace of the complainant/petitioner; Provided, however that
cases of Overseas Filipino Worker (OFW) shall be filed before the Regional
Arbitration Branch where the complainant resides or where the principal office
of the respondent/employer is situated, at the option of the complainant.

"For purposes of venue, workplace shall be understood as the place or locality

where the employee is regularly assigned when the cause of action arose. It
shall include the place where the employee is supposed to report back after
a temporary detail, assignment or travel. In the case of field employees, as
well as ambulant or itinerant workers, their workplace is where they are
regularly assigned, or where they are supposed to regularly receive their
salaries/wages or work instructions from, and report the results of their
assignment to their employers."

Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042),
a migrant worker "refers to a person who is to be engaged, is engaged or has
been engaged in a remunerated activity in a state of which he or she is not
a legal resident; to be used interchangeably with overseas Filipino
worker."21 Undeniably, respondent was employed by petitioner in its branch
office in Singapore. Admittedly, she is a Filipino and not a legal resident of
that state. She thus falls within the category of "migrant worker" or "overseas
Filipino worker."

As such, it is her option to choose the venue of her Complaint against

petitioner for illegal dismissal. The law gives her two choices: (1) at the
Regional Arbitration Branch (RAB) where she resides or (2) at the RAB where
the principal office of her employer is situated. Since her dismissal by
petitioner, respondent has returned to the Philippines - - specifically to her
residence at Filinvest II, Quezon City. Thus, in filing her Complaint before the
RAB office in Quezon City, she has made a valid choice of proper venue.

Third Issue:

Illegal Dismissal

The appellate court was correct in holding that respondent was already a
regular employee at the time of her dismissal, because her three-month
probationary period of employment had already ended. This ruling is in

183
accordance with Article 281 of the Labor Code: "An employee who is allowed
to work after a probationary period shall be considered a regular employee."
Indeed, petitioner recognized respondent as such at the time it dismissed
her, by giving her one month's salary in lieu of a one-month notice, consistent
with provision No. 6 of her employment Contract.

Notice and Hearing Not Complied With

As a regular employee, respondent was entitled to all rights, benefits and

privileges provided under our labor laws. One of her fundamental rights is
that she may not be dismissed without due process of law. The twin
requirements of notice and hearing constitute the essential elements of
procedural due process, and neither of these elements can be eliminated
without running afoul of the constitutional guarantee.22

In dismissing employees, the employer must furnish them two written

notices: 1) one to apprise them of the particular acts or omissions for which
their dismissal is sought; and 2) the other to inform them of the decision to
dismiss them. As to the requirement of a hearing, its essence lies simply in
the opportunity to be heard.23

The evidence in this case is crystal-clear. Respondent was not notified of the
specific act or omission for which her dismissal was being sought. Neither
was she given any chance to be heard, as required by law. At any rate, even
if she were given the opportunity to be heard, she could not have defended
herself effectively, for she knew no cause to answer to.

All that petitioner tendered to respondent was a notice of her employment

termination effective the very same day, together with the equivalent of a
one-month pay. This Court has already held that nothing in the law gives an
employer the option to substitute the required prior notice and opportunity
to be heard with the mere payment of 30 days' salary.24

Well-settled is the rule that the employer shall be sanctioned for

noncompliance with the requirements of, or for failure to observe, due
process that must be observed in dismissing an employee.25

No Valid Cause for Dismissal

Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid
grounds or causes for an employee's dismissal. The employer has the burden
of proving that it was done for any of those just or authorized causes. The
failure to discharge this burden means that the dismissal was not justified,
and that the employee is entitled to reinstatement and back wages.29

Notably, petitioner has not asserted any of the grounds provided by law as a
valid reason for terminating the employment of respondent. It merely insists
that her dismissal was validly effected pursuant to the provisions of her
employment Contract, which she had voluntarily agreed to be bound to.

Truly, the contracting parties may establish such stipulations, clauses, terms
and conditions as they want, and their agreement would have the force of
law between them. However, petitioner overlooks the qualification that those

184
terms and conditions agreed upon must not be contrary to law, morals,
customs, public policy or public order.30 As explained earlier, the employment
Contract between petitioner and respondent is governed by Philippine labor
laws. Hence, the stipulations, clauses, and terms and conditions of the
Contract must not contravene our labor law provisions.

Moreover, a contract of employment is imbued with public interest. The Court

has time and time again reminded parties that they "are not at liberty to
insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other."31 Also, while a contract is
the law between the parties, the provisions of positive law that regulate such
contracts are deemed included and shall limit and govern the relations
between the parties.32

Basic in our jurisprudence is the principle that when there is no showing of

any clear, valid, and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal.33

Awards for Damages Justified

Finally, moral damages are recoverable when the dismissal of an employee

is attended by bad faith or constitutes an act oppressive to labor or is done
in a manner contrary to morals, good customs or public policy.34 Awards for
moral and exemplary damages would be proper if the employee was harassed
and arbitrarily dismissed by the employer.35

In affirming the awards of moral and exemplary damages, we quote with

approval the following ratiocination of the labor arbiter:

"The records also show that [respondent's] dismissal was effected by

[petitioners'] capricious and high-handed manner, anti-social and oppressive,
fraudulent and in bad faith, and contrary to morals, good customs and public
policy. Bad faith and fraud are shown in the acts committed by [petitioners]
before, during and after [respondent's] dismissal in addition to the manner
by which she was dismissed. First, [respondent] was pressured to resign for
two different and contradictory reasons, namely, cost-cutting and the need
for a Chinese[-]speaking credit officer, for which no written advice was given
despite complainant's request. Such wavering stance or vacillating position
indicates bad faith and a dishonest purpose. Second, she was employed on
account of her qualifications, experience and readiness for the position of
credit officer and pressured to resign a month after she was commended for
her good work. Third, the demand for [respondent's] instant resignation on
19 April 1999 to give way to her replacement who was allegedly reporting
soonest, is whimsical, fraudulent and in bad faith, because on 16 April 1999
she was given a period of [sic] until 15 May 1999 within which to leave.
Fourth, the pressures made on her to resign were highly oppressive, anti-
social and caused her absolute torture, as [petitioners] disregarded her
situation as an overseas worker away from home and family, with no prospect
for another job. She was not even provided with a return trip fare. Fifth, the
notice of termination is an utter manifestation of bad faith and whim as it
totally disregards [respondent's] right to security of tenure and due process.
Such notice together with the demands for [respondent's] resignation

185
contravenes the fundamental guarantee and public policy of the Philippine
government on security of tenure.

"[Respondent] likewise established that as a proximate result of her dismissal

and prior demands for resignation, she suffered and continues to suffer
mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock and social humiliation. Her standing in the social and
business community as well as prospects for employment with other entities
have been adversely affected by her dismissal. [Petitioners] are thus liable
for moral damages under Article 2217 of the Civil Code.

xxx

"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner

in terminating [respondent's] employment and are therefore liable for
exemplary damages. This should served [sic] as protection to other
employees of [petitioner] company, and by way of example or correction for
the public good so that persons similarly minded as [petitioners] would be
deterred from committing the same acts."36

The Court also affirms the award of attorney's fees. It is settled that when an
action is instituted for the recovery of wages, or when employees are forced
to litigate and consequently incur expenses to protect their rights and
interests, the grant of attorney's fees is legally justifiable.37

WHEREFORE, the Petition is DENIED and the assailed Decision and

Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

186
187
THIRD DIVISION

G.R. No. 157376 October 2, 2007

CORAZON C. SIM, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and EQUITABLE PCI-
BANK, respondents*.

DECISION

AUSTRIA-MARTINEZ, J.:

Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor
Arbiter, alleging that she was initially employed by Equitable PCI-Bank
(respondent) in 1990 as Italian Remittance Marketing Consultant to the
Frankfurt Representative Office. Eventually, she was promoted to Manager
position, until September 1999, when she received a letter from Remegio
David -- the Senior Officer, European Head of PCIBank, and Managing
Director of PCIB- Europe -- informing her that she was being dismissed due
to loss of trust and confidence based on alleged mismanagement and
misappropriation of funds.

Respondent denied any employer-employee relationship between them, and

sought the dismissal of the complaint.

On September 3, 2001, the Labor Arbiter rendered its Decision dismissing

the case for want of jurisdiction and/or lack of merit.1 According to the Labor
Arbiter:

It should be stressed at this juncture that the labor relations system in

the Philippines has no extra-territorial jurisdiction. It is limited to the
relationship between labor and capital within the Philippines. Since
complainant was hired and assigned in a foreign land, although by a
Philippine Corporation, it follows that the law that govern their
relationship is the law of the place where the employment was executed
and her place of work or assignment. On this premise, the Italian law
allegedly provides severance pay which was applied and extended to
herein complainant (Annex "P", respondent's position paper).

As can be gleaned from the foregoing, a further elucidation on the

matter would be an exercise in futility. Hence, this case should be
dismissed for want of jurisdiction.

Assuming for the sake of argument that this Office has jurisdiction over
this case, still, this Office is inclined to rule in favor of the respondent.

Complainant, as General Manager is an employee whom the respondent

company reposed its trust and confidence. In other words, she held a
position of trust. It is well-settled doctrine that the basic premise for
dismissal on the ground of loss of confidence is that the employee

188
concerned holds a position of trust and confidence. (National Sugar
Refineries Corporation vs. NLRC, 286 SCRA 478.)

xxx

In this case, the respondent company had strong reason to believe that
the complainant was guilty of the offense charged against her.2

On appeal, the National Labor Relations Commission (NLRC) affirmed the

Labor Arbiter's Decision and dismissed petitioner's appeal for lack of merit.3

Without filing a motion for reconsideration with the NLRC, petitioner went to
the Court of Appeals (CA) via a petition for certiorari under Rule 65 of the
Rules of Court.

In a Resolution dated October 29, 2002, the CA4 dismissed the petition due
to petitioner's non-filing of a motion for reconsideration with the NLRC.5

Petitioner filed a motion for reconsideration but it was nonetheless denied by

the CA per Resolution dated February 26, 2003.

Hence, the present recourse under Rule 45 of the Rules of Court.

Petitioner alleges that:

I. The Court of Appeals departed from the accepted and usual concepts
of remedial law when it ruled that the petitioner should have first filed
a Motion for Reconsideration with the National Labor Relations
Commission.

II. The National Labor Relations Commission decided a question of

jurisdiction heretofore not yet determined by the Court and decided the
same in a manner not in accord with law when it ruled that it had no
jurisdiction over a labor dispute between a Philippine corporation and its
employee which it assigned to work for a foreign land.6

The pivotal question that needs to be resolved is whether or not a prior

motion for reconsideration is indispensable for the filing of a petition
for certiorari under Rule 65 of the Rules of Court with the CA.

Under Rule 65, the remedy of filing a special civil action for certiorari is
available only when there is no appeal; or any plain, speedy, and adequate
remedy in the ordinary course of law.7 A "plain" and "adequate remedy" is a
motion for reconsideration of the assailed order or resolution, the filing of
which is an indispensable condition to the filing of a special civil action
for certiorari.8 This is to give the lower court the opportunity to correct itself.9

There are, of course, exceptions to the foregoing rule, to wit:

(a) where the order is a patent nullity, as where the court a quo has no
jurisdiction;

189
(b) where the questions raised in the certiorari proceedings have been
duly raised and passed upon by the lower court, or are the same as
those raised and passed upon in the lower court;

(c) where there is an urgent necessity for the resolution of the question
and any further delay would prejudice the interests of the Government
or of the petitioner or the subject matter of the action is perishable;

(d) where, under the circumstances, a motion for reconsideration would

be useless;

(e) where petitioner was deprived of due process and there is extreme
urgency for relief;

(f) where, in a criminal case, relief from an order of arrest is urgent and
the granting of such relief by the trial court is improbable;

(g) where the proceedings in the lower court are a nullity for lack of due
process;

(h) where the proceeding was ex parte or in which the petitioner had no
opportunity to object; and

(i) where the issue raised is one purely of law or public interest is
involved.10

Petitioner, however, failed to qualify her case as among the few exceptions.
In fact, the Court notes that the petition filed before the CA failed to allege
any reason why a motion for reconsideration was dispensed with by
petitioner. It was only in her motion for reconsideration of the CA's resolution
of dismissal and in the petition filed in this case that petitioner justified her
non-filing of a motion for reconsideration.

Petitioner argues that filing a motion for reconsideration with the NLRC would
be merely an exercise in futility and useless. But it is not for petitioner to
determine whether it is so. As stressed in Cervantes v. Court of Appeals:

It must be emphasized that a writ of certiorari is a prerogative writ,

never demandable as a matter of right, never issued except in the
exercise of judicial discretion. Hence, he who seeks a writ
of certiorari must apply for it only in the manner and strictly in
accordance with the provisions of the law and the Rules. Petitioner
may not arrogate to himself the determination of whether a
motion for reconsideration is necessary or not. To dispense with
the requirement of filing a motion for reconsideration, petitioner
must show a concrete, compelling, and valid reason for doing so,
which petitioner failed to do. Thus, the Court of Appeals correctly
dismissed the petition.11 (Emphasis supplied)

Petitioner also contends that the issue at bench is purely a question of law,
hence, an exception to the rule. A reading of the petition filed with the CA
shows otherwise. The issues raised in this case are mixed questions of fact

190
and law. There is a question of fact when doubt or difference arises as to the
truth or falsehood of the alleged facts, and there is a question of law where
the doubt or difference arises as to what the law is on a certain state of
facts.12

Petitioner, aside from questioning the ruling of the NLRC sustaining the Labor
Arbiter's view that it does not have any jurisdiction over the case, also
questions the NLRC's ruling affirming the Labor Arbiter's conclusion that she
was validly dismissed by respondent. The legality of petitioner's dismissal
hinges on the question of whether there was an employer-employee
relationship, which was denied by respondent; and, if in the affirmative,
whether petitioner, indeed, committed a breach of trust and confidence
justifying her dismissal. These are mixed questions of fact and law and, as
such, do not fall within the exception from the filing of a motion for
reconsideration.

Consequently, the CA was not in error when it dismissed the petition. More
so since petitioner failed to show any error on the part of the Labor Arbiter
and the NLRC in ruling that she was dismissed for cause.

The rule is that the Court is bound by the findings of facts of the Labor Arbiter
or the NLRC, unless it is shown that grave abuse of discretion or lack or
excess of jurisdiction has been committed by said quasi-judicial bodies.13 The
Court will not deviate from said doctrine without any clear showing that the
findings of the Labor Arbiter, as affirmed by the NLRC, are bereft of sufficient
substantiation.

Petitioner does not deny having withdrawn the amount of P3,000,000.00 lire
from the bank's account. What petitioner submits is that she used said
amount for the Radio Pilipinas sa Roma radio program of the company.
Respondent, however, countered that at the time she withdrew said amount,
the radio program was already off the air. Respondent is a managerial
employee. Thus, loss of trust and confidence is a valid ground for her
dismissal.14 The mere existence of a basis for believing that a managerial
employee has breached the trust of the employer would suffice for his/her
dismissal.15

[w]hen an employee accepts a promotion to a managerial position or to

an office requiring full trust and confidence, she gives up some of the
rigid guaranties available to ordinary workers. Infractions which if
committed by others would be overlooked or condoned or penalties
mitigated may be visited with more severe disciplinary action. A
company's resort to acts of self-defense would be more easily justified.16

The Court notes, however, a palpable error in the Labor Arbiter's disposition
of the case, which was affirmed by the NLRC, with regard to the issue on
jurisdiction. It was wrong for the Labor Arbiter to rule that "labor relations
system in the Philippines has no extra-territorial jurisdiction."17

Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter
and the National Labor Relations Commission, viz.:

191
ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a)
Except as otherwise provided under this Code the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wage, rates of pay, hours of work and
other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages

arising from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code,

including questions involving the legality of strikes and lockouts;
and

6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount of exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.

(b) The commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.

Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers
and Overseas Filipinos Act of 1995,18 provides:

SECTION 10. Money Claims. — Notwithstanding any provision of law to

the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship
or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other
forms of damages.

Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A.

No. 804219 provides that the Labor Arbiters of the NLRC shall have the original
and exclusive jurisdiction to hear and decide all claims arising out of
employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral,
exemplary and other forms of damages, subject to the rules and procedures
of the NLRC.

192
Under these provisions, it is clear that labor arbiters have original and
exclusive jurisdiction over claims arising from employer-employee relations,
including termination disputes involving all workers, among whom are
overseas Filipino workers.20 In Philippine National Bank v. Cabansag, the
Court pronounced:

x x x Whether employed locally or overseas, all Filipino workers

enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the basic
public policy of the State to afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or
creed, and regulate the relations between workers and employers. For
the State assures the basic rights of all workers to self-organization,
collective bargaining, security of tenure, and just and humane
conditions of work [Article 3 of the Labor Code of the Philippines; See
also Section 18, Article II and Section 3, Article XIII, 1987 Constitution].
This ruling is likewise rendered imperative by Article 17 of the Civil Code
which states that laws "which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determination or conventions agreed
upon in a foreign country."21 (Emphasis supplied)

In any event, since the CA did not commit any error in dismissing the petition
before it for failure to file a prior motion for reconsideration with the NLRC,
and considering that the Labor Arbiter and the NLRC's factual findings as
regards the validity of petitioner's dismissal are accorded great weight and
respect and even finality when the same are supported by substantial
evidence, the Court finds no compelling reason to relax the rule on the filing
of a motion for reconsideration prior to the filing of a petition for certiorari.

WHEREFORE, the petition is DENIED.

Costs against petitioner.

SO ORDERED.

193
194
THIRD DIVISION

G.R. No. 166920 February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS

PETER HENRICHSEN, Petitioners,
vs.
KLAUS K. SCHONFELD, Respondent.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised

Rules of Court of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 76563. The CA decision reversed the Resolution of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn,
affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-
04787-00 dismissing the complaint of respondent Klaus K. Schonfeld.

The antecedent facts are as follows:

Respondent is a Canadian citizen and was a resident of New Westminster,

British Columbia, Canada. He had been a consultant in the field of
environmental engineering and water supply and sanitation. Pacicon
Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI was
to engage in the business of providing specialty and technical services both
in and out of the Philippines.2 It is a subsidiary of Pacific Consultants
International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen,
who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen
commuted from Japan to Manila and vice versa, as well as in other countries
where PCIJ had business.

In 1997, PCIJ decided to engage in consultancy services for water and

sanitation in the Philippines. In October 1997, respondent was employed by
PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and
Sanitation Department. However, PCIJ assigned him as PPI sector manager
in the Philippines. His salary was to be paid partly by PPI and PCIJ.

On January 7, 1998, Henrichsen transmitted a letter of employment to

respondent in Canada, requesting him to accept the same and affix his
conformity thereto. Respondent made some revisions in the letter of
employment and signed the contract.3 He then sent a copy to Henrichsen.
The letter of employment reads:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7

195
January 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of

Employment constitutes the agreement under which you will be engaged by
our Company on the terms and conditions defined hereunder. In case of any
discrepancies or contradictions between this Letter of Employment and the
General Conditions of Employment, this Letter of Employment will prevail.

You will, from the date of commencement, be ["seconded"] to our subsidiary

Pacicon Philippines, Inc. in Manila, hereinafter referred as Pacicon. Pacicon
will provide you with a separate contract, which will define that part of the
present terms and conditions for which Pacicon is responsible. In case of any
discrepancies or contradictions between the present Letter of Employment
and the contract with Pacicon Philippines, Inc. or in the case that Pacicon
should not live up to its obligations, this Letter of Employment will prevail.

1. Project Country: The Philippines with possible short-term

assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager, Water and Sanitation.

5. Commencement: 1st October 1997.

6. Remuneration: US$7,000.00 per month. The amount will be paid

partly as a local salary (US$2,100.00 per month) by Pacicon and partly
as an offshore salary (US$4,900.00) by PCI to bank accounts to be
nominated by you.

A performance related component corresponding to 17.6% of the total

annual remuneration, subject to satisfactory performance against
agreed tasks and targets, paid offshore.

7. Accommodation: The company will provide partly furnished

accommodation to a rent including association fees, taxes and VAT not
exceeding the Pesos equivalent of US$2,900.00 per month.

8. Transportation: Included for in the remuneration.

9. Leave Travels: You are entitled to two leave travels per year.

10. Shipment of Personal

Effects: The maximum allowance is US$4,000.00.

11. Mobilization

196
Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and
return one copy to us.

Yours sincerely,

Pacific Consultants International

Jens Peter Henrichsen

Above terms and conditions accepted

Date: 2 March 1998

(Sgd.)
Klaus Schonfeld

as annotated and initialed4

Section 21 of the General Conditions of Employment appended to the letter

of employment reads:

21 Arbitration

Any question of interpretation, understanding or fulfillment of the conditions

of employment, as well as any question arising between the Employee and
the Company which is in consequence of or connected with his employment
with the Company and which can not be settled amicably, is to be finally
settled, binding to both parties through written submissions, by the Court of
Arbitration in London.5

Respondent arrived in the Philippines and assumed his position as PPI Sector
Manager. He was accorded the status of a resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules

Implementing the Labor Code, PPI applied for an Alien Employment Permit
(Permit) for respondent before the Department of Labor and Employment
(DOLE). It appended respondent’s contract of employment to the
application.1awphi1.net

On February 26, 1999, the DOLE granted the application and issued the
Permit to respondent. It reads:

Republic of the Philippines

Department of Labor & Employment
National Capital Region

ALIEN EMPLOYMENT PERMIT

ISSUED TO: SCHONFELD, KLAUS KURT

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian

197
POSITION: VP – WATER & SANITATION

EMPLOYER: PACICON PHILIPPINES, INC.

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City

PERMIT

ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:

VALID UNTIL: January 7, 2000 (Sgd.)

APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITO

REGIONAL DIRECTOR

(Emphasis supplied)6

Respondent received his compensation from PPI for the following periods:
February to June 1998, November to December 1998, and January to August
1999. He was also reimbursed by PPI for the expenses he incurred in
connection with his work as sector manager. He reported for work in Manila
except for occasional assignments abroad, and received instructions from
Henrichsen.7

On May 5, 1999, respondent received a letter from Henrichsen informing him

that his employment had been terminated effective August 4, 1999 for the
reason that PCIJ and PPI had not been successful in the water and sanitation
sector in the Philippines.8 However, on July 24, 1999, Henrichsen, by
electronic mail,9 requested respondent to stay put in his job after August 5,
1999, until such time that he would be able to report on certain projects and
discuss all the opportunities he had developed.10 Respondent continued his
work with PPI until the end of business hours on October 1, 1999.

Respondent filed with PPI several money claims, including unpaid salary,
leave pay, air fare from Manila to Canada, and cost of shipment of goods to
Canada. PPI partially settled some of his claims (US$5,635.99), but refused
to pay the rest.

On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal

against petitioners PPI and Henrichsen with the Labor Arbiter. It was
docketed as NLRC-NCR Case No. 30-12-04787-00.

In his Complaint, respondent alleged that he was illegally dismissed; PPI had
not notified the DOLE of its decision to close one of its departments, which
resulted in his dismissal; and they failed to notify him that his employment
was terminated after August 4, 1999. Respondent also claimed for separation
pay and other unpaid benefits. He alleged that the company acted in bad
faith and disregarded his rights. He prayed for the following reliefs:

1. Judgment be rendered in his favor ordering the respondents to

reinstate complainant to his former position without loss of seniority and
198
other privileges and benefits, and to pay his full backwages from the
time compensation was with held (sic) from him up to the time of his
actual reinstatement. In the alternative, if reinstatement is no longer
feasible, respondents must pay the complainant full backwages, and
separation pay equivalent to one month pay for every year of service,
or in the amount of US$16,400.00 as separation pay;

2. Judgment be rendered ordering the respondents to pay the

outstanding monetary obligation to complainant in the amount of
US$10,131.76 representing the balance of unpaid salaries, leave pay,
cost of his air travel and shipment of goods from Manila to Canada; and

3. Judgment be rendered ordering the respondent company to pay the

complainant damages in the amount of no less than US $10,000.00 and
to pay 10% of the total monetary award as attorney’s fees, and costs.

Other reliefs just and equitable under the premises are, likewise, prayed
for.12
1awphi1.net

Petitioners filed a Motion to Dismiss the complaint on the following grounds:

(1) the Labor Arbiter had no jurisdiction over the subject matter; and (2)
venue was improperly laid. It averred that respondent was a Canadian
citizen, a transient expatriate who had left the Philippines. He was employed
and dismissed by PCIJ, a foreign corporation with principal office in Tokyo,
Japan. Since respondent’s cause of action was based on his letter of
employment executed in Tokyo, Japan dated January 7, 1998, under the
principle of lex loci contractus, the complaint should have been filed in Tokyo,
Japan. Petitioners claimed that respondent did not offer any justification for
filing his complaint against PPI before the NLRC in the Philippines. Moreover,
under Section 12 of the General Conditions of Employment appended to the
letter of employment dated January 7, 1998, complainant and PCIJ had
agreed that any employment-related dispute should be brought before the
London Court of Arbitration. Since even the Supreme Court had already ruled
that such an agreement on venue is valid, Philippine courts have no
jurisdiction.13

Respondent opposed the Motion, contending that he was employed by PPI to

work in the Philippines under contract separate from his January 7, 1998
contract of employment with PCIJ. He insisted that his employer was PPI, a
Philippine-registered corporation; it is inconsequential that PPI is a wholly-
owned subsidiary of PCIJ because the two corporations have separate and
distinct personalities; and he received orders and instructions from
Henrichsen who was the president of PPI. He further insisted that the
principles of forum non conveniens and lex loci contractus do not apply, and
that although he is a Canadian citizen, Philippine Labor Laws apply in this
case.

Respondent adduced in evidence the following contract of employment dated

January 9, 1998 which he had entered into with Henrichsen:

Mr. Klaus K. Schonfeld

199
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5

Manila 9 January, 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of

Employment constitutes the agreement, under which you will be engaged by
Pacicon Philippines, Inc. on the terms and conditions defined hereunder.

1. Project Country: The Philippines with possible assignments in other

countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager – Water and Sanitation Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to

be nominated by you.

7. Accommodation: The company will provide partly furnished

accommodation to a rent including association fees, taxes and VAT not
exceeding the Pesos equivalent of US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00 in

Effects: connection with initial shipment of personal effects from
Canada.

10. Mobilization Travel: Mobilization travel will be from New

Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and
return one copy to us.

Yours sincerely,

Pacicon Philippines, Inc.

Jens Peter Henrichsen
President14

According to respondent, the material allegations of the complaint, not

petitioners’ defenses, determine which quasi-judicial body has jurisdiction.
Section 21 of the Arbitration Clause in the General Conditions of Employment

200
does not provide for an exclusive venue where the complaint against PPI for
violation of the Philippine Labor Laws may be filed. Respondent pointed out
that PPI had adopted two inconsistent positions: it was first alleged that he
should have filed his complaint in Tokyo, Japan; and it later insisted that the
complaint should have been filed in the London Court of Arbitration.15

In their reply, petitioners claimed that respondent’s employer was PCIJ,

which had exercised supervision and control over him, and not PPI.
Respondent was dismissed by PPI via a letter of Henrichsen under the
letterhead of PCIJ in Japan.16 The letter of employment dated January 9, 1998
which respondent relies upon did not bear his (respondent’s) signature nor
that of Henrichsen.

On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners’

Motion to Dismiss. The dispositive portion reads:

WHEREFORE, finding merit in respondents’ Motion to Dismiss, the same is

hereby granted. The instant complaint filed by the complainant is dismissed
for lack of merit.

SO ORDERED.17

The Labor Arbiter found, among others, that the January 7, 1998 contract of
employment between respondent and PCIJ was controlling; the Philippines
was only the "duty station" where Schonfeld was required to work under the
General Conditions of Employment. PCIJ remained respondent’s employer
despite his having been sent to the Philippines. Since the parties had agreed
that any differences regarding employer-employee relationship should be
submitted to the jurisdiction of the court of arbitration in London, this
agreement is controlling.

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and
affirmed the latter’s decision in toto.18

Respondent then filed a petition for certiorari under Rule 65 with the CA
where he raised the following arguments:

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS

COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT AFFIRMED THE LABOR ARBITER’S
DECISION CONSIDERING THAT:

A. PETITIONER’S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS

INTERNATIONAL OF JAPAN BUT RESPONDENT COMPANY, AND THEREFORE,
THE LABOR ARBITER HAS JURISDICTION OVER THE INSTANT CASE; AND

B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION

BRANCH OF THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.

II

201
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS
COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF THE
COMPLAINT CONSIDERING THAT PETITIONER’S TERMINATION FROM
EMPLOYMENT IS ILLEGAL:

A. THE CLOSURE OF RESPONDENT COMPANY’S WATER AND

SANITATION SECTOR WAS NOT BONA FIDE.

B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT

COMPANY’S WATER AND SANITATION SECTOR WAS JUSTIFIABLE,
PETITIONER’S DISMISSAL WAS INEFFECTUAL AS THE DEPARTMENT OF
LABOR AND EMPLOYMENT (DOLE) AND PETITIONER WAS NOT
NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED CLOSURE.19

Respondent averred that the absence or existence of a written contract of

employment is not decisive of whether he is an employee of PPI. He
maintained that PPI, through its president Henrichsen, directed his
work/duties as Sector Manager of PPI; proof of this was his letter-proposal
to the Development Bank of the Philippines for PPI to provide consultancy
services for the Construction Supervision of the Water Supply and Sanitation
component of the World Bank-Assisted LGU Urban Water and Sanitation
Project.20 He emphasized that as gleaned from Alien Employment Permit
(AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he
is an employee of PPI. It was PPI president Henrichsen who terminated his
employment; PPI also paid his salary and reimbursed his expenses related to
transactions abroad. That PPI is a wholly-owned subsidiary of PCIJ is of no
moment because the two corporations have separate and distinct
personalities.

The CA found the petition meritorious. Applying the four-fold test21 of

determining an employer-employee relationship, the CA declared that
respondent was an employee of PPI. On the issue of venue, the appellate
court declared that, even under the January 7, 1998 contract of employment,
the parties were not precluded from bringing a case related thereto in other
venues. While there was, indeed, an agreement that issues between the
parties were to be resolved in the London Court of Arbitration, the venue is
not exclusive, since there is no stipulation that the complaint cannot be filed
in any other forum other than in the Philippines.

On November 25, 2004, the CA rendered its decision granting the petition,
the decretal portion of which reads:

WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the

NLRC are hereby REVERSED and SET ASIDE. Let this case be REMANDED to
the Labor Arbiter a quo for disposition of the case on the merits.

SO ORDERED.22

A motion for the reconsideration of the above decision was filed by PPI and
Henrichsen, which the appellate court denied for lack of merit.23

202
In the present recourse, PPI and Henrichsen, as petitioners, raise the
following issues:

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT

RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT
DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN
NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED
HIS EMPLOYMENT CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO
PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR

ARBITER A QUO HAS JURISDICTION OVER RESPONDENT’S CLAIM DESPITE
THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS
HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE BETWEEN THEM
"SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN
LONDON."24

Petitioners fault the CA for reversing the findings of the Labor Arbiter and the
NLRC. Petitioners aver that the findings of the Labor Arbiter, as affirmed by
the NLRC, are conclusive on the CA. They maintain that it is not within the
province of the appellate court in a petition for certiorari to review the facts
and evidence on record since there was no conflict in the factual findings and
conclusions of the lower tribunals. Petitioners assert that such findings and
conclusions, having been made by agencies with expertise on the subject
matter, should be deemed binding and conclusive. They contend that it was
the PCIJ which employed respondent as an employee; it merely seconded
him to petitioner PPI in the Philippines, and assigned him to work in Manila
as Sector Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ,
was never the employer of respondent.

Petitioners assert that the January 9, 1998 letter of employment which

respondent presented to prove his employment with petitioner PPI is of
doubtful authenticity since it was unsigned by the purported parties. They
insist that PCIJ paid respondent’s salaries and only coursed the same through
petitioner PPI. PPI, being its subsidiary, had supervision and control over
respondent’s work, and had the responsibilities of monitoring the "daily
administration" of respondent. Respondent cannot rely on the pay slips,
expenses claim forms, and reimbursement memoranda to prove that he was
an employee of petitioner PPI because these documents are of doubtful
authenticity.

Petitioners further contend that, although Henrichsen was both a director of

PCIJ and president of PPI, it was he who signed the termination letter of
respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ’s
letterhead was used to inform him that his employment was terminated.
Petitioners further assert that all work instructions came from PCIJ and that
petitioner PPI only served as a "conduit." Respondent’s Alien Employment
203
Permit stating that petitioner PPI was his employer is but a necessary
consequence of his being "seconded" thereto. It is not sufficient proof that
petitioner PPI is respondent’s employer. The entry was only made to comply
with the DOLE requirements.

There being no evidence that petitioner PPI is the employer of respondent,

the Labor Arbiter has no jurisdiction over respondent’s complaint.

Petitioners aver that since respondent is a Canadian citizen, the CA erred in

ignoring their claim that the principlesof forum non conveniens and lex loci
contractus are applicable. They also point out that the principal office, officers
and staff of PCIJ are stationed in Tokyo, Japan; and the contract of
employment of respondent was executed in Tokyo, Japan.

Moreover, under Section 21 of the General Conditions for Employment

incorporated in respondent’s January 7, 1998 letter of employment, the
dispute between respondent and PCIJ should be settled by the court of
arbitration of London. Petitioners claim that the words used therein are
sufficient to show the exclusive and restrictive nature of the stipulation on
venue.

Petitioners insist that the U.S. Labor-Management Act applies only to U.S.
workers and employers, while the Labor Code of the Philippines applies only
to Filipino employers and Philippine-based employers and their employees,
not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not
extend to foreign workers who executed employment agreements with
foreign employers abroad, although "seconded" to the Philippines.25

In his Comment,26 respondent maintains that petitioners raised factual issues

in their petition which are proscribed under Section 1, Rule 45 of the Rules
of Court. The finding of the CA that he had been an employee of petitioner
PPI and not of PCIJ is buttressed by his documentary evidence which both
the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss
his complaint on the basis of the letter of employment and Section 21 of the
General Conditions of Employment. In contrast, the CA took into account the
evidence on record and applied case law correctly.

The petition is denied for lack of merit.

It must be stressed that in resolving a petition for certiorari, the CA is not

proscribed from reviewing the evidence on record. Under Section 9 of Batas
Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to
pass upon the evidence, if and when necessary, to resolve factual issues.27 If
it appears that the Labor Arbiter and the NLRC misappreciated the evidence
to such an extent as to compel a contrary conclusion if such evidence had
been properly appreciated, the factual findings of such tribunals cannot be
given great respect and finality.28

Inexplicably, the Labor Arbiter and the NLRC ignored the documentary
evidence which respondent appended to his pleadings showing that he was
an employee of petitioner PPI; they merely focused on the January 7, 1998

204
letter of employment and Section 21 of the General Conditions of
Employment.

Petitioner PPI applied for the issuance of an AEP to respondent before the
DOLE. In said application, PPI averred that respondent is its employee. To
show that this was the case, PPI appended a copy of respondent’s
employment contract. The DOLE then granted the application of PPI and
issued the permit.

It bears stressing that under the Omnibus Rules Implementing the Labor
Code, one of the requirements for the issuance of an employment permit is
the employment contract. Section 5, Rule XIV (Employment of Aliens) of the
Omnibus Rules provides:

SECTION 1. Coverage. – This rule shall apply to all aliens employed or seeking
employment in the Philippines and the present or prospective employers.

SECTION 2. Submission of list. – All employers employing foreign nationals,

whether resident or non-resident, shall submit a list of nationals to the
Bureau indicating their names, citizenship, foreign and local address, nature
of employment and status of stay in the Philippines.

SECTION 3. Registration of resident aliens. – All employed resident aliens

shall register with the Bureau under such guidelines as may be issued by it.

SECTION 4. Employment permit required for entry. – No alien seeking

employment, whether as a resident or non-resident, may enter the
Philippines without first securing an employment permit from the Ministry. If
an alien enters the country under a non-working visa and wishes to be
employed thereafter, he may only be allowed to be employed upon
presentation of a duly approved employment permit.

SECTION 5. Requirements for employment permit applicants. – The

application for an employment permit shall be accompanied by the following:

(a) Curriculum vitae duly signed by the applicant indicating his

educational background, his work experience and other data showing
that he possesses technical skills in his trade or profession.

(b) Contract of employment between the employer and the principal

which shall embody the following, among others:

1. That the non-resident alien worker shall comply with all

applicable laws and rules and regulations of the Philippines;

2. That the non-resident alien worker and the employer shall bind
themselves to train at least two (2) Filipino understudies for a
period to be determined by the Minister; and

3. That he shall not engage in any gainful employment other than

that for which he was issued a permit.

205
(c) A designation by the employer of at least two (2) understudies for
every alien worker. Such understudies must be the most ranking regular
employees in the section or department for which the expatriates are
being hired to insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment permit
based only on the following:

(a) Compliance by the applicant and his employer with the requirements
of Section 2 hereof;

(b) Report of the Bureau Director as to the availability or non-availability

of any person in the Philippines who is competent and willing to do the
job for which the services of the applicant are desired;

(c) His assessment as to whether or not the employment of the applicant

will redound to the national interest;

(d) Admissibility of the alien as certified by the Commission on

Immigration and Deportation;

(e) The recommendation of the Board of Investments or other

appropriate government agencies if the applicant will be employed in
preferred areas of investments or in accordance with the imperative of
economic development.

Thus, as claimed by respondent, he had an employment contract with

petitioner PPI; otherwise, petitioner PPI would not have filed an application
for a Permit with the DOLE. Petitioners are thus estopped from alleging that
the PCIJ, not petitioner PPI, had been the employer of respondent all along.

We agree with the conclusion of the CA that there was an employer-employee

relationship between petitioner PPI and respondent using the four-fold test.
Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a)
the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer’s power to control the
employee’s conduct. It is the so-called "control test" which constitutes the
most important index of the existence of the employer-employee
relationship–that is, whether the employer controls or has reserved the right
to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished.
Stated otherwise, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not
only the end to be achieved but also the means to be used in reaching such
end.29 We quote with approval the following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any
doubt that the respondent company is the true employer of petitioner. In the
case at bar, the power to control and supervise petitioner’s work performance
devolved upon the respondent company. Likewise, the power to terminate
the employment relationship was exercised by the President of the
206
respondent company. It is not the letterhead used by the company in the
termination letter which controls, but the person who exercised the power to
terminate the employee. It is also inconsequential if the second letter of
employment executed in the Philippines was not signed by the petitioner. An
employer-employee relationship may indeed exist even in the absence of a
written contract, so long as the four elements mentioned in the Mafinco case
are all present.30

The settled rule on stipulations regarding venue, as held by this Court in the
vintage case of Philippine Banking Corporation v. Tensuan,31 is that while they
are considered valid and enforceable, venue stipulations in a contract do not,
as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules
of Court in the absence of qualifying or restrictive words. They should be
considered merely as an agreement or additional forum, not as limiting venue
to the specified place. They are not exclusive but, rather permissive. If the
intention of the parties were to restrict venue, there must be accompanying
language clearly and categorically expressing their purpose and design that
actions between them be litigated only at the place named by them.32

In the instant case, no restrictive words like "only," "solely," "exclusively in

this court," "in no other court save —," "particularly," "nowhere else
but/except —," or words of equal import were stated in the contract.33 It
cannot be said that the court of arbitration in London is an exclusive venue
to bring forth any complaint arising out of the employment contract.

Petitioners contend that respondent should have filed his Complaint in his
place of permanent residence, or where the PCIJ holds its principal office, at
the place where the contract of employment was signed, in London as stated
in their contract. By enumerating possible venues where respondent could
have filed his complaint, however, petitioners themselves admitted that the
provision on venue in the employment contract is indeed merely permissive.

Petitioners’ insistence on the application of the principle of forum non

conveniens must be rejected. The bare fact that respondent is a Canadian
citizen and was a repatriate does not warrant the application of the principle
for the following reasons:

First. The Labor Code of the Philippines does not include forum non
conveniens as a ground for the dismissal of the complaint.34

Second. The propriety of dismissing a case based on this principle

requires a factual determination; hence, it is properly considered as
defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd.

v. Court of Appeals,36 this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it chooses
to do so; provided, that the following requisites are met: (1) that the
Philippine Court is one to which the parties may conveniently resort to; (2)
that the Philippine Court is in a position to make an intelligent decision as to

207
the law and the facts; and, (3) that the Philippine Court has or is likely to
have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals

in CA-G.R. SP No. 76563 is AFFIRMED. This case is REMANDED to the Labor
Arbiter for disposition of the case on the merits. Cost against petitioners.

SO ORDERED.

208
SECOND DIVISION

G.R. No. 103493 June 19, 1997

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL

FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC,
VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H.
CRAIG, respondents.

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign

judgment upon the rights of the parties under the same cause of action
asserted in a case in our local court. Petitioners brought this case in the
Regional Trial Court of Makati, Branch 56, which, in view of the pendency at
the time of the foreign action, dismissed Civil Case No. 16563 on the ground
of litis pendentia, in addition to forum non conveniens. On appeal, the Court
of Appeals affirmed. Hence this petition for review on certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate

loans from petitioners Ayala International Finance Limited (hereafter called
AYALA) 1 and Philsec Investment Corporation (hereafter called PHILSEC) in
the sum of US$2,500,000.00, secured by shares of stock owned by Ducat
with a market value of P14,088,995.00. In order to facilitate the payment of
the loans, private respondent 1488, Inc., through its president, private
respondent Drago Daic, assumed Ducat's obligation under an Agreement,
dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with
Vendor's Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter
called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for
US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in
the amount of US$2,500,000.00 as initial payment of the purchase price. The
balance of US$307,209.02 was to be paid by means of a promissory note
executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt
of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat
from his indebtedness and delivered to 1488, Inc. all the shares of stock in
their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the

entire amount covered by the note became due and demandable.
Accordingly, on October 17, 1985, private respondent 1488, Inc. sued
petitioners PHILSEC, AYALA, and ATHONA in the United States for payment
of the balance of US$307,209.02 and for damages for breach of contract and
for fraud allegedly perpetrated by petitioners in misrepresenting the
marketability of the shares of stock delivered to 1488, Inc. under the
209
Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the
venue of the action was later transferred to the United States District Court
for the Southern District of Texas, where 1488, Inc. filed an amended
complaint, reiterating its allegations in the original complaint. ATHONA filed
an answer with counterclaim, impleading private respondents herein as
counterdefendants, for allegedly conspiring in selling the property at a price
over its market value. Private respondent Perlas, who had allegedly appraised
the property, was later dropped as counterdefendant. ATHONA sought the
recovery of damages and excess payment allegedly made to 1488, Inc. and,
in the alternative, the rescission of sale of the property. For their part,
PHILSEC and AYALA filed a motion to dismiss on the ground of lack of
jurisdiction over their person, but, as their motion was denied, they later filed
a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSEC's own former president, for the rescission of the sale on
the ground that the property had been overvalued. On March 13, 1990, the
United States District Court for the Southern District of Texas dismissed the
counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and embarrass
him." For this reason, the U.S. court imposed so-called Rule 11 sanctions on
PHILSEC and AYALA and ordered them to pay damages to Guevarra.

On April 10, 1987, while Civil Case No. H-86-440 was pending in the United
States, petitioners filed a complaint "For Sum of Money with Damages and
Writ of Preliminary Attachment" against private respondents in the Regional
Trial Court of Makati, where it was docketed as Civil Case No. 16563. The
complaint reiterated the allegation of petitioners in their respective
counterclaims in Civil Action No. H-86-440 of the United States District Court
of Southern Texas that private respondents committed fraud by selling the
property at a price 400 percent more than its true value of US$800,000.00.
Petitioners claimed that, as a result of private respondents' fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter
into the Agreement and to purchase the Houston property. Petitioners prayed
that private respondents be ordered to return to ATHONA the excess payment
of US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court
issued a writ of preliminary attachment against the real and personal
properties of private respondents. 2

Private respondent Ducat moved to dismiss Civil Case No. 16563 on the
grounds of (1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by
1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of
petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat contended
that the alleged overpricing of the property prejudiced only petitioner
ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to
the sale and whose only participation was to extend financial accommodation
to ATHONA under a separate loan agreement. On the other hand, private
respondents 1488, Inc. and its president Daic filed a joint "Special
Appearance and Qualified Motion to Dismiss," contending that the action
being in personam, extraterritorial service of summons by publication was
ineffectual and did not vest the court with jurisdiction over 1488, Inc., which
is a non-resident foreign corporation, and Daic, who is a non-resident alien.
210
On January 26, 1988, the trial court granted Ducat's motion to dismiss,
stating that "the evidentiary requirements of the controversy may be more
suitably tried before the forum of the litis pendentia in the U.S., under the
principle in private international law of forum non conveniens," even as it
noted that Ducat was not a party in the U.S. case.

A separate hearing was held with regard to 1488, Inc. and Daic's motion to
dismiss. On March 9, 1988, the trial court 3 granted the motion to dismiss
filed by 1488, Inc. and Daic on the ground of litis pendentia considering that

the "main factual element" of the cause of action in this case which
is the validity of the sale of real property in the United States
between defendant 1488 and plaintiff ATHONA is the subject
matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better
(if not exclusive) forum to litigate matters needed to determine the
assessment and/or fluctuations of the fair market value of real
estate situated in Houston, Texas, U.S.A. from the date of the
transaction in 1983 up to the present and verily, . . . (emphasis by
trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and
Daic because they were non-residents and the action was not an
action in rem or quasi in rem, so that extraterritorial service of
summons was ineffective. The trial court subsequently lifted the writ of
attachment it had earlier issued against the shares of stocks of 1488,
Inc. and Daic.

Petitioners appealed to the Court of Appeals, arguing that the trial court erred
in applying the principle of litis pendentia and forum non conveniens and in
ruling that it had no jurisdiction over the defendants, despite the previous
attachment of shares of stocks belonging to 1488, Inc. and Daic.

On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil

Case No. 16563 against Ducat, 1488, Inc., and Daic on the ground of litis
pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic,
while the defendants are Philsec, the Ayala International Finance
Ltd. (BPI-IFL's former name) and the Athona Holdings, NV. The
case at bar involves the same parties. The transaction sued upon
by the parties, in both cases is the Warranty Deed executed by and
between Athona Holdings and 1488 Inc. In the U.S. case, breach
of contract and the promissory note are sued upon by 1488 Inc.,
which likewise alleges fraud employed by herein appellants, on the
marketability of Ducat's securities given in exchange for the Texas
property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land,
constitute the action before the Philippine court, which likewise
stems from the same Warranty Deed.

211
The Court of Appeals also held that Civil Case No. 16563 was an action
in personam for the recovery of a sum of money for alleged tortious
acts, so that service of summons by publication did not vest the trial
court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of
Civil Case No. 16563 on the ground of forum non conveniens was
likewise affirmed by the Court of Appeals on the ground that the case
can be better tried and decided by the U.S. court:

The U.S. case and the case at bar arose from only one main
transaction, and involve foreign elements, to wit: 1) the property
subject matter of the sale is situated in Texas, U.S.A.; 2) the seller,
1488 Inc. is a non-resident foreign corporation; 3) although the
buyer, Athona Holdings, a foreign corporation which does not claim
to be doing business in the Philippines, is wholly owned by Philsec,
a domestic corporation, Athona Holdings is also owned by BPI-IFL,
also a foreign corporation; 4) the Warranty Deed was executed in
Texas, U.S.A.

In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN

THE SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA)
RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE
TRIAL COURT'S DISMISSAL OF THE CIVIL ACTION IS NOT
APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED

UPON BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL
BY THE TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT
APPLICABLE.

3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT

OF APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC
POLICY REQUIRED THE ASSUMPTION, NOT THE
RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL
JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY
REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS)
INFLICTED UPON THEM HERE IN THE PHILIPPINES.

We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while the
present case was pending in the Court of Appeals, the United States District
Court for the Southern District of Texas rendered judgment 5 in the case
before it. The judgment, which was in favor of private respondents, was
affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue
to be resolved in this case is whether Civil Case No. 16536 is barred by the
judgment of the U.S. court.

212
Private respondents contend that for a foreign judgment to be pleaded as res
judicata, a judgment admitting the foreign decision is not necessary. On the
other hand, petitioners argue that the foreign judgment cannot be given the
effect of res judicata without giving them an opportunity to impeach it on
grounds stated in Rule 39, §50 of the Rules of Court, to wit: "want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of
law or fact."

Petitioners' contention is meritorious. While this Court has given the effect of
res judicata to foreign judgments in several cases, 7 it was after the parties
opposed to the judgment had been given ample opportunity to repel them on
grounds allowed under the law. 8 It is not necessary for this purpose to initiate
a separate action or proceeding for enforcement of the foreign judgment.
What is essential is that there is opportunity to challenge the foreign
judgment, in order for the court to properly determine its efficacy. This is
because in this jurisdiction, with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely
constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the
contrary. 9 Rule 39, §50 provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment

of a tribunal of a foreign country, having jurisdiction to pronounce
the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is

conclusive upon the title to the thing;

(b) In case of a judgment against a person, the judgment is

presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment may
be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.

Thus, in the case of General Corporation of the Philippines v. Union Insurance

Society of Canton, Ltd., 10 which private respondents invoke for claiming
conclusive effect for the foreign judgment in their favor, the foreign judgment
was considered res judicata because this Court found "from the evidence as
well as from appellant's own pleadings" 11 that the foreign court did not make
a "clear mistake of law or fact" or that its judgment was void for want of
jurisdiction or because of fraud or collusion by the defendants. Trial had been
previously held in the lower court and only afterward was a decision rendered,
declaring the judgment of the Supreme Court of the State of Washington to
have the effect of res judicata in the case before the lower court. In the same
vein, in Philippines International Shipping Corp. v. Court of Appeals, 12 this
Court held that the foreign judgment was valid and enforceable in the
Philippines there being no showing that it was vitiated by want of notice to
the party, collusion, fraud or clear mistake of law or fact. The prima
facie presumption under the Rule had not been rebutted.

213
In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for declaring
it res judicata or conclusive of the rights of private respondents. The
proceedings in the trial court were summary. Neither the trial court nor the
appellate court was even furnished copies of the pleadings in the U.S. court
or apprised of the evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in the U.S. court
were exactly the issues raised in this case such that the judgment that might
be rendered would constitute res judicata. As the trial court stated in its
disputed order dated March 9, 1988.

On the plaintiff's claim in its Opposition that the causes of action

of this case and the pending case in the United States are not
identical, precisely the Order of January 26, 1988 never found that
the causes of action of this case and the case pending before the
USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that
petitioners' action is barred by the principle of res judicata. Petitioners
in fact questioned the jurisdiction of the U.S. court over their persons,
but their claim was brushed aside by both the trial court and the Court
of Appeals. 13

Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a
petition for the enforcement of judgment in the Regional Trial Court of Makati,
where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134,
although the proceedings were suspended because of the pendency of this
case. To sustain the appellate court's ruling that the foreign judgment
constitutes res judicata and is a bar to the claim of petitioners would
effectively preclude petitioners from repelling the judgment in the case for
enforcement. An absurdity could then arise: a foreign judgment is not subject
to challenge by the plaintiff against whom it is invoked, if it is pleaded to
resist a claim as in this case, but it may be opposed by the defendant if the
foreign judgment is sought to be enforced against him in a separate
proceeding. This is plainly untenable. It has been held therefore that:

[A] foreign judgment may not be enforced if it is not recognized in

the jurisdiction where affirmative relief is being sought. Hence, in
the interest of justice, the complaint should be considered as a
petition for the recognition of the Hongkong judgment under
Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of
lack of jurisdiction, notice, collusion, fraud or clear mistake of fact
and law, if applicable. 14

Accordingly, to insure the orderly administration of justice, this case and Civil
Case No. 92-1070 should be consolidated. 15 After all, the two have been filed
in the Regional Trial Court of Makati, albeit in different salas, this case being
assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-
1070 is pending in Branch 134 of Judge Ignacio Capulong. In such
proceedings, petitioners should have the burden of impeaching the foreign

214
judgment and only in the event they succeed in doing so may they proceed
with their action against private respondents.

Second. Nor is the trial court's refusal to take cognizance of the case
justifiable under the principle of forum non conveniens. First, a motion to
dismiss is limited to the grounds under Rule 16, §1, which does not
include forum non conveniens. 16 The propriety of dismissing a case based on
this principle requires a factual determination, hence, it is more properly
considered a matter of defense. Second, while it is within the discretion of
the trial court to abstain from assuming jurisdiction on this ground, it should
do so only after "vital facts are established, to determine whether special
circumstances" require the court's desistance. 17

In this case, the trial court abstained from taking jurisdiction solely on the
basis of the pleadings filed by private respondents in connection with the
motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is
a domestic corporation and one of the defendants (Ventura Ducat) is a
Filipino, and that it was the extinguishment of the latter's debt which was the
object of the transaction under litigation. The trial court arbitrarily dismissed
the case even after finding that Ducat was not a party in the U.S. case.

Third. It was error we think for the Court of Appeals and the trial court to
hold that jurisdiction over 1488, Inc. and Daic could not be obtained because
this is an action in personam and summons were served by extraterritorial
service. Rule 14, §17 on extraterritorial service provides that service of
summons on a non-resident defendant may be effected out of the Philippines
by leave of Court where, among others, "the property of the defendant has
been attached within the Philippines." 18 It is not disputed that the properties,
real and personal, of the private respondents had been attached prior to
service of summons under the Order of the trial court dated April 20, 1987. 19

Fourth. As for the temporary restraining order issued by the Court on June
29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by
Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the
petitioners by the U.S. court, the Court finds that the judgment sought to be
enforced is severable from the main judgment under consideration in Civil
Case No. 16563. The separability of Guevara's claim is not only admitted by
petitioners, 20 it appears from the pleadings that petitioners only belatedly
impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence, the TRO
should be lifted and Civil Case No. 92-1445 allowed to proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil

Case No. 16563 is REMANDED to the Regional Trial Court of Makati for
consolidation with Civil Case No. 92-1070 and for further proceedings in
accordance with this decision. The temporary restraining order issued on June
29, 1994 is hereby LIFTED.

SO ORDERED.

215
216
SECOND DIVISION

G.R. No. 120135 March 31, 2003

BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL,

LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO
LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.

AUSTRIA-MARTINEZ, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the November 29, 1994 decision of the Court of Appeals1 and the
April 28, 1995 resolution denying petitioners' motion for reconsideration.

The factual background of the case is as follows:

On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas,
for brevity) filed a Complaint2 before the Regional Trial Court of Pasig against
the Bank of America NT&SA and Bank of America International, Ltd.
(defendant banks for brevity) alleging that: they were engaged in the
shipping business; they owned two vessels: Don Aurelio and El Champion,
through their wholly-owned corporations; they deposited their revenues from
said business together with other funds with the branches of said banks in
the United Kingdom and Hongkong up to 1979; with their business doing
well, the defendant banks induced them to increase the number of their ships
in operation, offering them easy loans to acquire said vessels;3 thereafter,
the defendant banks acquired, through their (Litonjuas') corporations as the
borrowers: (a) El Carrier4; (b) El General5; (c) El Challenger6; and (d) El
Conqueror7; the vessels were registered in the names of their corporations;
the operation and the funds derived therefrom were placed under the
complete and exclusive control and disposition of the petitioners;8 and the
possession the vessels was also placed by defendant banks in the hands of
persons selected and designated by them (defendant banks).9

The Litonjuas claimed that defendant banks as trustees did not fully render
an account of all the income derived from the operation of the vessels as well
as of the proceeds of the subsequent foreclosure sale;10 because of the
breach of their fiduciary duties and/or negligence of the petitioners and/or
the persons designated by them in the operation of private respondents' six
vessels, the revenues derived from the operation of all the vessels declined
drastically; the loans acquired for the purchase of the four additional vessels
then matured and remained unpaid, prompting defendant banks to have all
the six vessels, including the two vessels originally owned by the private
respondents, foreclosed and sold at public auction to answer for the
obligations incurred for and in behalf of the operation of the vessels; they
(Litonjuas) lost sizeable amounts of their own personal funds equivalent to
ten percent (10%) of the acquisition cost of the four vessels and were left
with the unpaid balance of their loans with defendant banks.11 The Litonjuas
prayed for the accounting of the revenues derived in the operation of the six
vessels and of the proceeds of the sale thereof at the foreclosure proceedings
217
instituted by petitioners; damages for breach of trust; exemplary damages
and attorney's fees.12

Defendant banks filed a Motion to Dismiss on grounds of forum non

conveniens and lack of cause of action against them.13

On December 3, 1993, the trial court issued an Order denying the Motion to
Dismiss, thus:

"WHEREFORE, and in view of the foregoing consideration, the Motion to

Dismiss is hereby DENIED. The defendant is therefore, given a period of
ten (10) days to file its Answer to the complaint.

"SO ORDERED."14

Instead of filing an answer the defendant banks went to the Court of Appeals
on a "Petition for Review on Certiorari"15 which was aptly treated by the
appellate court as a petition for certiorari. They assailed the above-quoted
order as well as the subsequent denial of their Motion for
Reconsideration.16 The appellate court dismissed the petition and denied
petitioners' Motion for Reconsideration.17

Hence, herein petition anchored on the following grounds:

"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT

THAT THE SEPARATE PERSONALITIES OF THE PRIVATE RESPONDENTS
(MERE STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL
BORROWERS) CLEARLY SUPPORT, BEYOND ANY DOUBT, THE
PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO
PERSONALITIES TO SUE.

"2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT

WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS NOT
MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO FOLLOW
IN DETERMINING WHETHER THE CHOICE OF FORUM SHOULD BE
DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE
INSTANT CASE, DISMISSAL OF THE COMPLAINT ON THE GROUND
OF FORUM NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.

"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL

JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN
ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL OF THE
COMPLAINT FILED BY THE PRIVATE RESPONDENT. COROLLARY TO
THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE
FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF FORUM
SHOPPING." 18

As to the first assigned error: Petitioners argue that the borrowers and the
registered owners of the vessels are the foreign corporations and not private
respondents Litonjuas who are mere stockholders; and that the revenues
derived from the operations of all the vessels are deposited in the accounts
of the corporations. Hence, petitioners maintain that these foreign

218
corporations are the legal entities that have the personalities to sue and not
herein private respondents; that private respondents, being mere
shareholders, have no claim on the vessels as owners since they merely have
an inchoate right to whatever may remain upon the dissolution of the said
foreign corporations and after all creditors have been fully paid and
satisfied;19 and that while private respondents may have allegedly spent
amounts equal to 10% of the acquisition costs of the vessels in question,
their 10% however represents their investments as stockholders in the
foreign corporations.20

Anent the second assigned error, petitioners posit that while the application
of the principle of forum non conveniens is discretionary on the part of the
Court, said discretion is limited by the guidelines pertaining to the private as
well as public interest factors in determining whether plaintiffs' choice of
forum should be disturbed, as elucidated in Gulf Oil Corp. vs.
Gilbert21 and Piper Aircraft Co. vs. Reyno,22 to wit:

"Private interest factors include: (a) the relative ease of access to

sources of proof; (b) the availability of compulsory process for the
attendance of unwilling witnesses; (c) the cost of obtaining attendance
of willing witnesses; or (d) all other practical problems that make trial
of a case easy, expeditious and inexpensive. Public interest factors
include: (a) the administrative difficulties flowing from court congestion;
(b) the local interest in having localized controversies decided at home;
(c) the avoidance of unnecessary problems in conflict of laws or in the
application of foreign law; or (d) the unfairness of burdening citizens in
an unrelated forum with jury duty."23

In support of their claim that the local court is not the proper forum,
petitioners allege the following:

"i) The Bank of America Branches involved, as clearly mentioned in the

Complaint, are based in Hongkong and England. As such, the evidence
and the witnesses are not readily available in the Philippines;

"ii) The loan transactions were obtained, perfected, performed,

consummated and partially paid outside the Philippines;

"iii) The monies were advanced outside the Philippines. Furthermore,

the mortgaged vessels were part of an offshore fleet, not based in the
Philippines;

"iv) All the loans involved were granted to the Private Respondents'
foreign CORPORATIONS;

"v) The Restructuring Agreements were ALL governed by the laws of

England;

"vi) The subsequent sales of the mortgaged vessels and

the application of the sales proceeds occurred and transpired outside
the Philippines, and the deliveries of the sold mortgaged vessels were
likewise made outside the Philippines;
219
"vii) The revenues of the vessels and the proceeds of the sales of these
vessels were ALL deposited to the Accounts of the
foreign CORPORATIONS abroad; and

"viii) Bank of America International Ltd. is not licensed nor engaged in

trade or business in the Philippines."24

Petitioners argue further that the loan agreements, security documentation

and all subsequent restructuring agreements uniformly, unconditionally and
expressly provided that they will be governed by the laws of England;25 that
Philippine Courts would then have to apply English law in resolving whatever
issues may be presented to it in the event it recognizes and accepts herein
case; that it would then be imposing a significant and unnecessary expense
and burden not only upon the parties to the transaction but also to the local
court. Petitioners insist that the inconvenience and difficulty of applying
English law with respect to a wholly foreign transaction in a case pending in
the Philippines may be avoided by its dismissal on the ground of forum non
conveniens. 26

Finally, petitioners claim that private respondents have already waived their
alleged causes of action in the case at bar for their refusal to contest the
foreign civil cases earlier filed by the petitioners against them in Hongkong
and England, to wit:

"1.) Civil action in England in its High Court of Justice, Queen's Bench
Division Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN
TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA.,
(c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC
NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g)
EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA.

"2.) Civil action in England in its High Court of Justice, Queen's Bench
Division, Commercial Court (1992-Folio No. 2245) against (a) EL
CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c)
EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN
LITONJUA.

"3.) Civil action in the Supreme Court of Hongkong High Court (Action
No. 4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b)
EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d)
PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC.,
(g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN
LITONJUA.

"4.) A civil action in the Supreme Court of Hong Kong High Court (Action
No. 4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b)
EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d)
PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC.,
(g) AURELIO KATIPUNAN LITONJUA, RJ., and (h) EDUARDO KATIPUNAN
LITONJUA."
220
and that private respondents' alleged cause of action is already barred by the
pendency of another action or by litis pendentia as shown above.27

On the other hand, private respondents contend that certain material facts
and pleadings are omitted and/or misrepresented in the present petition for
certiorari; that the prefatory statement failed to state that part of the security
of the foreign loans were mortgages on a 39-hectare piece of real estate
located in the Philippines;28 that while the complaint was filed only by the
stockholders of the corporate borrowers, the latter are wholly-owned by the
private respondents who are Filipinos and therefore under Philippine laws,
aside from the said corporate borrowers being but their alter-egos, they have
interests of their own in the vessels.29 Private respondents also argue that
the dismissal by the Court of Appeals of the petition for certiorari was justified
because there was neither allegation nor any showing whatsoever by the
petitioners that they had no appeal, nor any plain, speedy, and adequate
remedy in the ordinary course of law from the Order of the trial judge denying
their Motion to Dismiss; that the remedy available to the petitioners after
their Motion to Dismiss was denied was to file an Answer to the
complaint;30 that as upheld by the Court of Appeals, the decision of the trial
court in not applying the principle of forum non conveniens is in the lawful
exercise of its discretion.31 Finally, private respondents aver that the
statement of petitioners that the doctrine of res judicata also applies to
foreign judgment is merely an opinion advanced by them and not based on
a categorical ruling of this Court;32 and that herein private respondents did
not actually participate in the proceedings in the foreign courts.33

We deny the petition for lack of merit.

It is a well-settled rule that the order denying the motion to dismiss cannot
be the subject of petition for certiorari. Petitioners should have filed an
answer to the complaint, proceed to trial and await judgment before making
an appeal. As repeatedly held by this Court:

"An order denying a motion to dismiss is interlocutory and cannot be

the subject of the extraordinary petition for certiorari or mandamus. The
remedy of the aggrieved party is to file an answer and to interpose as
defenses the objections raised in his motion to dismiss, proceed to trial,
and in case of an adverse decision, to elevate the entire case by appeal
in due course. xxx Under certain situations, recourse to certiorari or
mandamus is considered appropriate, i.e., (a) when the trial court
issued the order without or in excess of jurisdiction; (b) where there is
patent grave abuse of discretion by the trial court; or (c) appeal would
not prove to be a speedy and adequate remedy as when an appeal would
not promptly relieve a defendant from the injurious effects of the
patently mistaken order maintaining the plaintiff's baseless action and
compelling the defendant needlessly to go through a protracted trial and
clogging the court dockets by another futile case."34

Records show that the trial court acted within its jurisdiction when it issued
the assailed Order denying petitioners' motion to dismiss. Does the denial of
the motion to dismiss constitute a patent grave abuse of discretion? Would

221
appeal, under the circumstances, not prove to be a speedy and adequate
remedy? We will resolve said questions in conjunction with the issues raised
by the parties.

First issue. Did the trial court commit grave abuse of discretion in refusing to
dismiss the complaint on the ground that plaintiffs have no cause of action
against defendants since plaintiffs are merely stockholders of the
corporations which are the registered owners of the vessels and the
borrowers of petitioners?

No. Petitioners' argument that private respondents, being mere stockholders

of the foreign corporations, have no personalities to sue, and therefore, the
complaint should be dismissed, is untenable. A case is dismissible for lack of
personality to sue upon proof that the plaintiff is not the real party-in-
interest. Lack of personality to sue can be used as a ground for a Motion to
Dismiss based on the fact that the complaint, on the face thereof, evidently
states no cause of action.35 In San Lorenzo Village Association, Inc. vs. Court
of Appeals,36 this Court clarified that a complaint states a cause of action
where it contains three essential elements of a cause of action, namely: (1)
the legal right of the plaintiff, (2) the correlative obligation of the defendant,
and (3) the act or omission of the defendant in violation of said legal right. If
these elements are absent, the complaint becomes vulnerable to a motion to
dismiss on the ground of failure to state a cause of action.37 To emphasize, it
is not the lack or absence of cause of action that is a ground for dismissal of
the complaint but rather the fact that the complaint states no cause of
action.38 "Failure to state a cause of action" refers to the insufficiency of
allegation in the pleading, unlike "lack of cause of action" which refers to the
insufficiency of factual basis for the action. "Failure to state a cause of action"
may be raised at the earliest stages of an action through a motion to dismiss
the complaint, while "lack of cause of action" may be raised any time after
the questions of fact have been resolved on the basis of stipulations,
admissions or evidence presented.39

In the case at bar, the complaint contains the three elements of a cause of
action. It alleges that: (1) plaintiffs, herein private respondents, have the
right to demand for an accounting from defendants (herein petitioners), as
trustees by reason of the fiduciary relationship that was created between the
parties involving the vessels in question; (2) petitioners have the obligation,
as trustees, to render such an accounting; and (3) petitioners failed to do the
same.

Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that the
corporate entities have juridical personalities separate and distinct from those
of the private respondents. Private respondents maintain that the
corporations are wholly owned by them and prior to the incorporation of such
entities, they were clients of petitioners which induced them to acquire loans
from said petitioners to invest on the additional ships.

We agree with private respondents. As held in the San Lorenzo case,40

222
"xxx assuming that the allegation of facts constituting plaintiffs' cause
of action is not as clear and categorical as would otherwise be desired,
any uncertainty thereby arising should be so resolved as to enable a full
inquiry into the merits of the action."

As this Court has explained in the San Lorenzo case, such a course, would
preclude multiplicity of suits which the law abhors, and conduce to the
definitive determination and termination of the dispute. To do otherwise, that
is, to abort the action on account of the alleged fatal flaws of the complaint
would obviously be indecisive and would not end the controversy, since the
institution of another action upon a revised complaint would not be
foreclosed.41

Second Issue. Should the complaint be dismissed on the ground of forum

non-conveniens?

No. The doctrine of forum non-conveniens, literally meaning 'the forum is

inconvenient', emerged in private international law to deter the practice of
global forum shopping,42 that is to prevent non-resident litigants from
choosing the forum or place wherein to bring their suit for malicious reasons,
such as to secure procedural advantages, to annoy and harass the defendant,
to avoid overcrowded dockets, or to select a more friendly venue. Under this
doctrine, a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere.43

Whether a suit should be entertained or dismissed on the basis of said

doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.44 In the case
of Communication Materials and Design, Inc. vs. Court of Appeals,45 this
Court held that "xxx [a Philippine Court may assume jurisdiction over the
case if it chooses to do so; provided, that the following requisites are met:
(1) that the Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make an intelligent
decision as to the law and the facts; and, (3) that the Philippine Court has or
is likely to have power to enforce its decision."46 Evidently, all these requisites
are present in the instant case.

Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court

of Appeals,47 that the doctrine of forum non conveniens should not be used
as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of
Court does not include said doctrine as a ground. This Court further ruled
that while it is within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only after vital facts are
established, to determine whether special circumstances require the court's
desistance; and that the propriety of dismissing a case based on this principle
of forum non conveniens requires a factual determination, hence it is more
properly considered a matter of defense.48

Third issue. Are private respondents guilty of forum shopping because of the
pendency of foreign action?

223
No. Forum shopping exists where the elements of litis pendentia are present
and where a final judgment in one case will amount to res judicata in the
other.49 Parenthetically, for litis pendentia to be a ground for the dismissal of
an action there must be: (a) identity of the parties or at least such as to
represent the same interest in both actions; (b) identity of rights asserted
and relief prayed for, the relief being founded on the same acts; and (c) the
identity in the two cases should be such that the judgment which may be
rendered in one would, regardless of which party is successful, amount to res
judicata in the other.50

In case at bar, not all the requirements for litis pendentia are present. While
there may be identity of parties, notwithstanding the presence of other
respondents,51 as well as the reversal in positions of plaintiffs and
defendants52, still the other requirements necessary for litis pendentia were
not shown by petitioner. It merely mentioned that civil cases were filed in
Hongkong and England without however showing the identity of rights
asserted and the reliefs sought for as well as the presence of the elements
of res judicata should one of the cases be adjudged.

As the Court of Appeals aptly observed:

"xxx [T]he petitioners, by simply enumerating the civil actions instituted

abroad involving the parties herein xxx, failed to provide this Court with
relevant and clear specifications that would show the presence of the
above-quoted elements or requisites for res judicata. While it is true
that the petitioners in their motion for reconsideration (CA Rollo, p. 72),
after enumerating the various civil actions instituted abroad, did aver
that "Copies of the foreign judgments are hereto attached and made
integral parts hereof as Annexes 'B', 'C', 'D' and 'E'", they failed,
wittingly or inadvertently, to include a single foreign judgment in their
pleadings submitted to this Court as annexes to their petition. How then
could We have been expected to rule on this issue even if We were to
hold that foreign judgments could be the basis for the application of the
aforementioned principle of res judicata?"53

Consequently, both courts correctly denied the dismissal of herein subject

complaint.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioners.

SO ORDERED.

224
225
THIRD DIVISION

[G.R. No. 128024. May 9, 2000.]

BEBIANO M. BAÑEZ, Petitioner, v. HON. DOWNEY C. VALDEVILLA

and ORO MARKETING, INC., Respondents.

DECISION

GONZAGA-REYES, J.:

The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996,
taking jurisdiction over an action for damages filed by an employer against
its dismissed employee, are assailed in this petition for certiorari under Rule
65 of the Rules of Court for having been issued in grave abuse of discretion.

Petitioner was the sales operations manager of private respondent in its

branch in Iligan City. In 1993, private respondent "indefinitely suspended"
petitioner and the latter filed a complaint for illegal dismissal with the National
Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July
7, 1994, Labor Arbiter Nicodemus G. Palangan found petitioner to have been
illegally dismissed and ordered the payment of separation pay in lieu of
reinstatement, and of backwages and attorney’s fees. The decision was
appealed to the NLRC, which dismissed the same for having been filed out of
time. 2 Elevated by petition for certiorari before this Court, the case was
dismissed on technical grounds 3; however, the Court also pointed out that
even if all the procedural requirements for the filing of the petition were met,
it would still be dismissed for failure to show grave abuse of discretion on the
part of the NLRC.

On November 13, 1995, private respondent filed a complaint for damages

before the Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil
Case No. 95-554, which prayed for the payment of the following:

a. P709,217.97 plus 12% interest as loss of profit and/or unearned income

of three years;

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities,

properties, space, etc. for three years;

c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney’s fees. 4

226
On January 30, 1996, petitioner filed a motion to dismiss the above
complaint. He interposed in the court below that the action for damages,
having arisen from an employer-employee relationship, was squarely under
the exclusive original jurisdiction of the NLRC under Article 217(a), paragraph
4 of the Labor Code and is barred by reason of the final judgment in the labor
case. He accused private respondent of splitting causes of action, stating that
the latter could very well have included the instant claim for damages in its
counterclaim before the Labor Arbiter. He also pointed out that the civil action
of private respondent is an act of forum-shopping and was merely resorted
to after a failure to obtain a favorable decision with the NLRC.

Ruling upon the motion to dismiss, respondent judge issued the herein
questioned Order, which summarized the basis for private respondent’s
action for damages in this manner:

Paragraph 5 of the complaint alleged that the defendant violated the

plaintiff’s policy re: His business in his branch at Iligan City wherein defendant
was the Sales Operations Manager, and paragraph 7 of the same complaint
briefly narrated the modus operandi of defendant, quoted herein: Defendant
canvassed customers personally or through salesmen of plaintiff which were
hired or recruited by him. If said customer decided to buy items from plaintiff
on installment basis, defendant, without the knowledge of said customer and
plaintiff, would buy the items on cash basis at ex-factory price, a privilege
not given to customers, and thereafter required the customer to sign
promissory notes and other documents using the name and property of
plaintiff, purporting that said customer purchased the items from plaintiff on
installment basis. Thereafter, defendant collected the installment payments
either personally or through Venus Lozano, a Group Sales Manager of plaintiff
but also utilized by him as secretary in his own business for collecting and
receiving of installments, purportedly for the plaintiff but in reality on his own
account or business. The collection and receipt of payments were made inside
the Iligan City branch using plaintiff’s facilities, property and manpower. That
accordingly plaintiff’s sales decreased and reduced to a considerable extent
the profits which it would have earned. 5

In declaring itself as having jurisdiction over the subject matter of the instant
controversy, respondent court stated:

A perusal of the complaint which is for damages does not ask for any relief
under the Labor Code of the Philippines. It seeks to recover damages as
redress for defendant’s breach of his contractual obligation to plaintiff who
was damaged and prejudiced. The Court believes such cause of action is
within the realm of civil law, and jurisdiction over the controversy belongs to
the regular courts.

While seemingly the cause of action arose from employer- employee

227
relations, the employer’s claim for damages is grounded on the nefarious
activities of defendant causing damage and prejudice to plaintiff as alleged
in paragraph 7 of the complaint. The Court believes that there was a breach
of a contractual obligation, which is intrinsically a civil dispute. The averments
in the complaint removed the controversy from the coverage of the Labor
Code of the Philippines and brought it within the purview of civil law.
(Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) . . . 6

Petitioner’s motion for reconsideration of the above Order was denied for lack
of merit on October 16, 1996. Hence, this petition.

Acting on petitioner’s prayer, the Second Division of this Court issued a

Temporary Restraining Order ("TRO") on March 5, 1997, enjoining
respondents from further proceeding with Civil Case No. 95-554 until further
orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in

the Motion to Dismiss dated January 30, 1996, namely, lack of jurisdiction
over the subject matter of the action, res judicata, splitting of causes of
action, and forum-shopping. The determining issue, however, is the issue of
jurisdiction.

Article 217(a), paragraph 4 of the Labor Code, which was already in effect at
the time of the filing of this case, reads:

ARTICLE 217. Jurisdiction of Labor Arbiters and the Commission. — (a)

Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:

x x x

4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;

x x x

The above provisions are a result of the amendment by Section 9 of Republic

Act ("R.A.") No. 6715, which took effect on March 21, 1989, and which put
to rest the earlier confusion as to who between Labor Arbiters and regular
courts had jurisdiction over claims for damages as between employers and
employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money
claims of workers, including claims for damages, was originally lodged with
the Labor Arbiters and the NLRC by Article 217 of the Labor Code. 7 On May
1, 1979, however, Presidential Decree ("P.D.") No. 1367 amended said Article

228
217 to the effect that "Regional Directors shall not indorse and Labor Arbiters
shall not entertain claims for moral or other forms of damages." 8 This
limitation in jurisdiction, however, lasted only briefly since on May 1, 1980,
P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor
Code almost to its original form. Presently, and as amended by R.A. 6715,
the jurisdiction of Labor Arbiters and the NLRC in Article 217 is
comprehensive enough to include claims for all forms of damages "arising
from the employer-employee relations”.

Whereas this Court in a number of occasions had applied the jurisdictional

provisions of Article 217 to claims for damages filed by employees, 9 we hold
that by the designating clause "arising from the employer-employee
relations" Article 217 should apply with equal force to the claim of an
employer for actual damages against its dismissed employee, where the basis
for the claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the illegal dismissal
case.

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely
superseded by the Labor Code), jurisprudence was settled that where the
plaintiff’s cause of action for damages arose out of, or was necessarily
intertwined with, an alleged unfair labor practice committed by the union, the
jurisdiction is exclusively with the (now defunct) Court of Industrial Relations,
and the assumption of jurisdiction of regular courts over the same is a nullity.
10 To allow otherwise would be "to sanction split jurisdiction, which is
prejudicial to the orderly administration of justice." 11 Thus, even after the
enactment of the Labor Code, where the damages separately claimed by the
employer were allegedly incurred as a consequence of strike or picketing of
the union, such complaint for damages is deeply rooted from the labor
dispute between the parties, and should be dismissed by ordinary courts for
lack of jurisdiction. As held by this Court in National Federation of Labor v.
Eisma, 127 SCRA 419:

Certainly, the present Labor Code is even more committed to the view that
on policy grounds, and equally so in the interest of greater promptness in the
disposition of labor matters, a court is spared the often onerous task of
determining what essentially is a factual matter, namely, the damages that
may be incurred by either labor or management as a result of disputes or
controversies arising from employer-employee relations.

There is no mistaking the fact that in the case before us, private respondent’s
claim against petitioner for actual damages arose from a prior employer-
employee relationship. In the first place, private respondent would not have
taken issue with petitioner’s "doing business of his own" had the latter not
been concurrently its employee. Thus, the damages alleged in the complaint
below are: first, those amounting to lost profits and earnings due to
petitioner’s abandonment or neglect of his duties as sales manager, having
been otherwise preoccupied by his unauthorized installment sale scheme;
and second, those equivalent to the value of private respondent’s property
and supplies which petitioner used in conducting his "business”.

229
Second, and more importantly, to allow respondent court to proceed with the
instant action for damages would be to open anew the factual issue of
whether petitioner’s installment sale scheme resulted in business losses and
the dissipation of private respondent’s property. This issue has been duly
raised and ruled upon in the illegal dismissal case, where private respondent
brought up as a defense the same allegations now embodied in his complaint,
and presented evidence in support thereof. The Labor Arbiter, however, found
to the contrary — that no business losses may be attributed to petitioner as
in fact, it was by reason of petitioner’s installment plan that the sales of the
Iligan branch of private respondent (where petitioner was employed) reached
its highest record level to the extent that petitioner was awarded the 1989
Field Sales Achievement Award in recognition of his exceptional sales
performance, and that the installment scheme was in fact with the knowledge
of the management of the Iligan branch of private Respondent. 12 In other
words, the issue of actual damages has been settled in the labor case, which
is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor
court, it may help to refer to that period from 1979 to 1980 when jurisdiction
over employment-predicated actions for damages vacillated from labor
tribunals to regular courts, and back to labor tribunals. In Ebon v. de Guzman,
113 SCRA 52, 13 this Court discussed:

The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to
award moral and other forms of damages in labor cases could have assumed
that the Labor Arbiters’ position-paper procedure of ascertaining the facts in
dispute might not be an adequate tool for arriving at a just and accurate
assessment of damages, as distinguished from backwages and separation
pay, and that the trial procedure in the Court of First Instance would be a
more effective means of determining such damages. . .

Evidently, the lawmaking authority had second thoughts about depriving the
Labor Arbiters and the NLRC of the jurisdiction to award damages in labor
cases because that setup would mean duplicity of suits, splitting the cause of
action and possible conflicting findings and conclusions by two tribunals on
one and the same claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially

reenacted Article 217 in its original form) nullified Presidential Decree No.
1367 and restored to the Labor Arbiter and the NLRC their jurisdiction to
award all kinds of damages in cases arising from employer-employee
relations . . . (Emphasis supplied)

Clearly, respondent court’s taking jurisdiction over the instant case would
bring about precisely the harm that the lawmakers sought to avoid in
amending the Labor Code to restore jurisdiction over claims for damages of
this nature to the NLRC.

This is, of course, to distinguish from cases of actions for damages where the

230
employer-employee relationship is merely incidental and the cause of action
proceeds from a different source of obligation. Thus, the jurisdiction of
regular courts was upheld where the damages, claimed for were based on
tort 14, malicious prosecution 15, or breach of contract, as when the claimant
seeks to recover a debt from a former employee 16 or seeks liquidated
damages in enforcement of a prior employment contract. 17

Neither can we uphold the reasoning of respondent court that because the
resolution of the issues presented by the complaint does not entail application
of the Labor Code or other labor laws, the dispute is intrinsically civil. Article
217(a) of the Labor Code, as amended, clearly bestows upon the Labor
Arbiter original and exclusive jurisdiction over claims for damages arising
from employer-employee relations — in other words, the Labor Arbiter has
jurisdiction to award not only the reliefs provided by labor laws, but also
damages governed by the Civil Code. 18

Thus, it is obvious that private respondent’s remedy is not in the filing of this
separate action for damages, but in properly perfecting an appeal from the
Labor Arbiter’s decision. Having lost the right to appeal on grounds of
untimeliness, the decision in the labor case stands as a final judgment on the
merits, and the instant action for damages cannot take the place of such lost
appeal.

Respondent court clearly having no jurisdiction over private respondent’s

complaint for damages, we will no longer pass upon petitioner’s other
assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No.
95-554 before Branch 39 of the Regional Trial Court of Misamis Oriental is
hereby DISMISSED. No pronouncement as to costs.

SO ORDERED.

231
232
SECOND DIVISION

ROBERTO T. DOMONDON, Petitioner, - versus - ' Callejo, Sr., Respondents. '

September 30, 2005 G.R. No. 154376

x----------------------------------------------------------------------------------------x

DECISION

PUNO, J.:

This is a petition for review on certiorari seeking the reversal of the

February 28, 2002 Decision [1] of the Court of Appeals in CA-G.R. SP No.
65130 and its July 17, 2002 Resolution, [2] denying petitioner's motion for
reconsideration. The assailed Decision affirmed the rulings of the National
Labor Relations Commission (NLRC) and the Labor Arbiter, which held that
petitioner was not illegally dismissed but voluntarily resigned.

On November 20, 1998, petitioner Roberto T. Domondon filed a complaint

before the Regional Arbitration Branch of the NLRC, Quezon City, against
private respondent Van Melle Phils., Inc. (VMPI) and its President and General
Manager, private respondent Niels H.B. Have. He claimed illegal dismissal
and prayed for reinstatement, payment of full backwages inclusive of
allowances, 14th month pay, sick and vacation leaves, share in the profits,
moral and exemplary damages and attorney's fees. [3]

Petitioner alleged that on January 8, 1997, private respondent VMPI, a

manufacturing company engaged in the production and distribution of
confectionaries and related products, hired him as Materials Manager through
its then President and General Manager Victor M. Endaya. He was tasked to
supervise the Inventory Control, Purchasing, and Warehouse and Distribution
Sections of the company. He was given a guaranteed monthly salary of
ninety-eight thousand (P98,000.00) pesos for fourteen (14) months with
annual merit adjustment, profit sharing bonus from 0-2 months based on
individual, company and corporate performance, [4] and a brand new
1600cc Honda VTEC [5] with 300 liters monthly gas allowance. [6]

Petitioner claimed that things worked out well for him in the beginning until
Endaya was transferred to China in August 1997 and was replaced by private
respondent Have, a Dutch national. According to petitioner, private
respondent Have immediately set a one-on-one meeting with him and
requested his courtesy resignation. Alleging that the decision came from the
Asia Regional Office, private respondent Have wanted to reorganize and put
his people in management. Petitioner refused to resign and life got difficult
for him. His decisions were always questioned by private respondent Have.
He was subjected to verbal abuse. His competence was undermined by
baseless and derogatory memos, which lay the bases for his removal from
the company. He also did not receive his 14th month pay. [7]

Petitioner further stated that the final straw came on June 10, 1998, in
another one-on-one meeting with private respondent Have. Private
respondent Have informed petitioner that things would get more difficult for
233
him if he does not resign. Private respondent Have threw a veiled threat at
petitioner to the effect that a dignified resignation would be infinitely better
than being fired for a fabricated lawful cause. Private respondent Have
offered financial assistance if petitioner would leave peacefully but the offer
must be accepted immediately or it would be withdrawn. Thus, petitioner
signed a 'ready-made resignation letter without deliberation and evaluation
of the consequences. His main concern then was to prevent the 'end of his
professional career. [8]

Petitioner stated that on the same day that he handed in his resignation
letter, private respondent VMPI posted a memorandum with information of
his replacement. He claimed that to lend a semblance of credibility to his
forced resignation, private respondents released to him a portion of the
offered financial package. [9]

On their part, private respondents admitted hiring petitioner under the

circumstances set forth by him but denied illegally dismissing him. They
maintained that with his educational and professional background, petitioner
could not have been coerced and intimidated into resigning from the
company. Instead, they claimed that he voluntarily resigned 'to embark on
management consultancy in the field of strategic planning and
import/export. [10] They stated that petitioner informed them about his
intention to resign and requested a 'soft landing financial support in the
amount of three hundred thousand (P300,000.00) pesos on top of accrued
benefits due him upon resignation. Private respondents granted the request.
Subsequently, however, petitioner proposed the transfer of ownership of the
car assigned to him in lieu of the financial assistance from the company. Since
company policy prohibits disposition of assets without valuable consideration,
the parties agreed that petitioner shall pay for the car with the P300,000.00
'soft landing financial assistance from private respondent VMPI.

Private respondents averred that petitioner, who was then in charge of the
disposition of the assets of the company, effected the registration of the car
in his name. [11] Joannes Cornelis Kuiten, then Vice-President for Finance,
signed for the company. [12] On July 30, 1998, P300,000.00 was credited
to petitioner's payroll account [13] but he did not use it to pay for the car as
agreed upon. Repeated demands for payment were unheeded. In its letter of
demand dated October 28, 1998, private respondent VMPI gave petitioner an
option to apply the P169,368.32 total cash conversion of his sick and vacation
leave credits, 13th and 14th months' pay less taxes as partial
payment for the car and pay the balance of P130,631.68, or return the car
to the company. [14] Petitioner did not exercise either option. Instead, on
November 20, 1998, he filed a complaint for illegal dismissal against private
respondents.

On June 14, 1999, the Labor Arbiter [15] ruled for private respondents, viz:

WHEREFORE, premises considered, the complaint for illegal

dismissal is hereby dismissed for lack of merit, and the claim for
damages and attorney's fees denied.

234
The complainant has the option to reconvey to respondents the car
sold to him and thus retain full credit of the P300,000.00 'soft
landing assistance, or retain ownership of the car by paying
respondents the purchase price of P300,000.00 minus any amount
due him corresponding to his accrued benefits that has been
applied by respondents as partial payment for the car.

The NLRC affirmed the Decision of the Labor Arbiter [16] on January 26,
2001 and denied petitioner's motion for reconsideration on March 5, 2001.
Petitioner went to the Court of Appeals on a special civil action
for certiorari but failed for the third time. The appellate court dismissed the
petition on February 28, 2002 and denied petitioner's motion for
reconsideration on July 17, 2002; hence, this petition for review on certiorari.

Petitioner raises as error the failure of the appellate court to apply the rule in
termination of employment that the burden rests upon the employer to prove
by substantial evidence that the employee was removed for lawful or
authorized cause. He also questions the jurisdiction of the Labor Arbiter to
resolve the issue of the transfer of car-ownership by private respondents.

I.

The first issue raises factual matters which may not be reviewed by the Court.
Our jurisdiction is limited to reviewing errors of law. Not being a trier of facts,
the Court cannot re-examine and re-evaluate the probative value of evidence
presented to the Labor Arbiter, the NLRC and the Court of Appeals, which
formed the basis of the questioned decision and resolution. [17] Indeed,
their findings when in absolute agreement are accorded not only respect but
even finality as long as they are supported by substantial evidence. [18]

In any event, we combed the records of the case at bar and found no
compelling reason to disturb the uniform findings and conclusions of the
Court of Appeals, the NLRC and the Labor Arbiter. There was no arbitrary
disregard or misapprehension of evidence of such nature as to compel a
contrary conclusion if properly appreciated. Petitioner's letter of
resignation, his educational attainment, and the circumstances
antecedent and contemporaneous to the filing of the complaint for
illegal dismissal are substantial proof of petitioner's voluntary
resignation.

Petitioner's letter of resignation was categorical that he was resigning 'to

embark on management consultancy in the field of strategic planning and
import/export. [19] Petitioner was holding a managerial position at private
respondent VMPI and he was previously Vice-President for strategic planning
at LG Collins Electronics. Thus, 'management consultancy in the field of
strategic planning was a logical reason for the resignation, which either
petitioner or private respondents may provide.

Import/export, whether inclusive or exclusive of the clause 'managerial

consultancy, on the other hand, could neither be inferred from petitioner's
nature of work with private respondent VMPI nor from his past work
235
experiences. Thus, even if petitioner was correct in arguing that he could not
have considered it given the state of the country's economy, anyone may
provide it as reason for the resignation, including him and private
respondents.

But assuming that private respondents prepared the letter of resignation for
petitioner to sign as claimed, the Court is not convinced that petitioner was
coerced and intimidated into signing it. Petitioner is no ordinary employee
with limited education. He has a Bachelor of Arts Degree in Economics from
the University of Santo Tomas, has completed academic requirements for
Masters of Business Economics from the University of Asia and the Pacific,
and studied law for two (2) years at Adamson University. He also has a good
professional record, which highlights his marketability. Thus, his reliance on
the case of Molave Tours Corporation v. NLRC, [20] where the employee
found to have been forced to resign was a mere garage custodian, is clearly
misplaced.

In termination cases, the employer decides for the employee. It is different

in resignation cases for resignation is a formal pronouncement of
relinquishment of an office. It is made with the intention of relinquishing the
office accompanied by an act of relinquishment. [21] In the instant case,
petitioner relinquished his position when he submitted his letter of
resignation. His subsequent act of receiving and keeping his requested 'soft
landing financial assistance of P300,000.00, and his retention and use of the
car subject of his arrangement with private respondents showed his resolve
to relinquish his post.

Thus, we affirm the findings of the Labor Arbiter, the NLRC and the Court of
Appeals that private respondents were able to prove through substantial
evidence that petitioner was not illegally dismissed. [22]

II.

The next issue involves the jurisdiction of the Labor Arbiter to hear and decide
the question on the transfer of ownership of the car assigned to petitioner.
He contends that it is the regular courts that have jurisdiction over the
question and not the Labor Arbiter.

This is not an issue of first impression. The jurisdiction of Labor Arbiters is

provided under Article 217(a) of the Labor Code, as amended, viz:

(a) Except as otherwise provided under this Code the Labor

Arbiters shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

236
2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of

damages arising from employer-employee relations;

5 Cases arising from any violation of Article 264 of this Code,

including questions involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.

In all these instances, the matrix is the existence of an employer-employee

relationship. In the case at bar, there is no dispute that petitioner is an
employee of the respondents. In Baez v. Valdevilla, [23] we held:

x x x Presently, and as amended by R.A. 6715, the jurisdiction of Labor

Arbiters and the NLRC in Article 217 is comprehensive enough to include
claims for all forms of damages arising from the employer-employee
relations.

Whereas this Court in a number of occasions had applied the

jurisdictional provisions of Article 217 to claims of damages filed
by employees, [24] we hold that by the designating clause
'arising from the employer-employee relations' Article 217 should
apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counterclaim in the
illegal dismissal case.

Baez is in accord with paragraph 6 of Article 217(a), which covers 'all other
claims, arising from employer-employee relations, viz:

6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.

In the case at bar, petitioner claims illegal dismissal and prays for
reinstatement, payment of full backwages inclusive of allowances, 14th month
pay, sick and vacation leaves, share in the profits, moral and exemplary
237
damages and attorney's fees. [25] These causes of action clearly fall within
the jurisdiction of the Labor Arbiter, specifically under paragraphs 2, 3, and
4 of Article 217(a). On the other hand, private respondents made a
counterclaim involving the transfer of ownership of a company car to
petitioner. They maintain that he failed to pay for the car in accordance with
their agreement. 'The issue is whether this claim of private respondents arose
from the employer-employee relationship of the parties pursuant to
paragraph 6 of Article 217(a) under the general clause as quoted above.

The records show that the initial agreement of the parties was that petitioner
would be extended a 'soft-landing financial assistance in the amount
of P300,000.00 on top of his accrued benefits at the time of the effectivity of
his resignation. However, petitioner later changed his mind. He requested
that he be allowed to keep the car assigned to him in lieu of the financial
assistance. However, company policy prohibits transfer of ownership of
property without valuable consideration. Thus, the parties agreed that
petitioner shall still be extended the P300,000.00 financial support, which he
shall use to pay for the subject car. On July 30, 1998, private respondent
VMPI deposited the agreed amount in petitioner's account. [26] Despite
having registered the car in his name and repeated demands from private
respondents, petitioner failed to pay for it as agreed upon. Petitioner did not
also return the car. Without doubt, the transfer of the ownership of the
company car to petitioner is connected with his resignation and arose out of
the parties' employer-employee relations. Accordingly, private respondents'
claim for damages falls within the jurisdiction of the Labor Arbiter.

III.

Petitioner was not illegally dismissed but voluntarily resigned. His claims for
reinstatement, payment of full backwages inclusive of allowances, moral and
exemplary damages and attorney's fees must necessarily fail. However, he
is entitled to his 14th month pay, cash conversion of accrued sick and vacation
leaves and profit share in the aggregate amount of P169,368.32, the total of
which is not disputed. The amount shall be applied to his obligation to
pay P300,000.00 for the company car, which ownership was transferred to
him. The return of the company car to private respondents, given the period
that has lapsed from the offer, ceased to be an option open to petitioner.

IN VIEW WHEREOF, the decision of the Court of Appeals is AFFIRMED with

MODIFICATION. Petitioner Roberto T. Domondon is ORDERED to pay private
respondent Van Melle Phils., Inc. the amount of P130,631.68, representing
the balance of the purchase price of the car in his custody after deducting his
entitlement to 14th month pay, cash conversion of accrued sick and vacation
leaves and profit share in the total amount of P169,368.32 from
the P300,000.00 'soft-landing financial assistance he received from private
respondent.

SO ORDERED.

238
239
THIRD DIVISION

G.R. No. 172013 October 2, 2009

PATRICIA HALAGUEÑA, MA. ANGELITA L. PULIDO, MA. TERESITA P.

SANTIAGO, MARIANNE V. KATINDIG, BERNADETTE A.
CABALQUINTO, LORNA B. TUGAS, MARY CHRISTINE A. VILLARETE,
CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI R.
CRESENCIO, and other flight attendants of PHILIPPINE
AIRLINES, Petitioners,
vs.
PHILIPPINE AIRLINES INCORPORATED, Respondent.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to annul and set aside the Decision1 and the
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 86813.

Petitioners were employed as female flight attendants of respondent

Philippine Airlines (PAL) on different dates prior to November 22, 1996. They
are members of the Flight Attendants and Stewards Association of the
Philippines (FASAP), a labor organization certified as the sole and exclusive
certified as the sole and exclusive bargaining representative of the flight
attendants, flight stewards and pursers of respondent.

On July 11, 2001, respondent and FASAP entered into a Collective Bargaining
Agreement3 incorporating the terms and conditions of their agreement for the
years 2000 to 2005, hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:

xxxx

3. Compulsory Retirement

Subject to the grooming standards provisions of this Agreement, compulsory

retirement shall be fifty-five (55) for females and sixty (60) for males. x x x.

In a letter dated July 22, 2003,4 petitioners and several female cabin crews
manifested that the aforementioned CBA provision on compulsory retirement
is discriminatory, and demanded for an equal treatment with their male
counterparts. This demand was reiterated in a letter5 by petitioners' counsel
addressed to respondent demanding the removal of gender discrimination
provisions in the coming re-negotiations of the PAL-FASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their

2004-2005 CBA proposals6 and manifested their willingness to commence the

240
collective bargaining negotiations between the management and the
association, at the soonest possible time.

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief
with Prayer for the Issuance of Temporary Restraining Order and Writ of
Preliminary Injunction7 with the Regional Trial Court (RTC) of Makati City,
Branch 147, docketed as Civil Case No. 04-886, against respondent for the
invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing
on petitioners' application for a TRO and, thereafter, required the parties to
submit their respective memoranda.

On August 9, 2004, the RTC issued an Order8 upholding its jurisdiction over
the present case. The RTC reasoned that:

In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA
which is allegedly discriminatory as it discriminates against female flight
attendants, in violation of the Constitution, the Labor Code, and the CEDAW.
The allegations in the Petition do not make out a labor dispute arising from
employer-employee relationship as none is shown to exist. This case is not
directed specifically against respondent arising from any act of the latter, nor
does it involve a claim against the respondent. Rather, this case seeks a
declaration of the nullity of the questioned provision of the CBA, which is
within the Court's competence, with the allegations in the Petition
constituting the bases for such relief sought.

The RTC issued a TRO on August 10, 2004,9 enjoining the respondent for
implementing Section 144, Part A of the PAL-FASAP CBA.

The respondent filed an omnibus motion10 seeking reconsideration of the

order overruling its objection to the jurisdiction of the RTC the lifting of the
TRO. It further prayed that the (1) petitioners' application for the issuance of
a writ of preliminary injunction be denied; and (2) the petition be dismissed
or the proceedings in this case be suspended.

On September 27, 2004, the RTC issued an Order11 directing the issuance of
a writ of preliminary injunction enjoining the respondent or any of its agents
and representatives from further implementing Sec. 144, Part A of the PAL-
FASAP CBA pending the resolution of the case.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and

Prohibition with Prayer for a Temporary Restraining Order and Writ of
Preliminary Injunction12 with the Court of Appeals (CA) praying that the order
of the RTC, which denied its objection to its jurisdiction, be annuled and set
aside for having been issued without and/or with grave abuse of discretion
amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the

respondent's petition, and ruled that:

WHEREFORE, the respondent court is by us declared to have NO

JURISDICTION OVER THE CASE BELOW and, consequently, all the
proceedings, orders and processes it has so far issued therein are ANNULED
241
and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No.
04-886.

SO ORDERED.

Petitioner filed a motion for reconsideration,13 which was denied by the CA in

its Resolution dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A

LABOR DISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND
JURISPRUDENCE.

The main issue in this case is whether the RTC has jurisdiction over the
petitioners' action challenging the legality or constitutionality of the
provisions on the compulsory retirement age contained in the CBA between
respondent PAL and FASAP.

Petitioners submit that the RTC has jurisdiction in all civil actions in which the
subject of the litigation is incapable of pecuniary estimation and in all cases
not within the exclusive jurisdiction of any court, tribunal, person or body
exercising judicial or quasi-judicial functions. The RTC has the power to
adjudicate all controversies except those expressly witheld from the plenary
powers of the court. Accordingly, it has the power to decide issues of
constitutionality or legality of the provisions of Section 144, Part A of the PAL-
FASAP CBA. As the issue involved is constitutional in character, the labor
arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction
over the case and, thus, the petitioners pray that judgment be rendered on
the merits declaring Section 144, Part A of the PAL-FASAP CBA null and void.

Respondent, on the other hand, alleges that the labor tribunals have
jurisdiction over the present case, as the controversy partakes of a labor
dispute. The dispute concerns the terms and conditions of petitioners'
employment in PAL, specifically their retirement age. The RTC has no
jurisdiction over the subject matter of petitioners' petition for declaratory
relief because the Voluntary Arbitrator or panel of Voluntary Arbitrators have
original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the CBA.
Regular courts have no power to set and fix the terms and conditions of
employment. Finally, respondent alleged that petitioners' prayer before this
Court to resolve their petition for declaratory relief on the merits is
procedurally improper and baseless.

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the material allegations

of the complaint and the character of the relief prayed for irrespective of
whether plaintiff is entitled to such relief.14

242
In the case at bar, the allegations in the petition for declaratory relief plainly
show that petitioners' cause of action is the annulment of Section 144, Part
A of the PAL-FASAP CBA. The pertinent portion of the petition recites:

CAUSE OF ACTION

24. Petitioners have the constitutional right to fundamental equality with

men under Section 14, Article II, 1987 of the Constitution and, within
the specific context of this case, with the male cabin attendants of
Philippine Airlines.

26. Petitioners have the statutory right to equal work and employment
opportunities with men under Article 3, Presidential Decree No. 442, The
Labor Code and, within the specific context of this case, with the male
cabin attendants of Philippine Airlines.

27. It is unlawful, even criminal, for an employer to discriminate against

women employees with respect to terms and conditions of employment
solely on account of their sex under Article 135 of the Labor Code as
amended by Republic Act No. 6725 or the Act Strengthening Prohibition
on Discrimination Against Women.

28. This discrimination against Petitioners is likewise against the

Convention on the Elimination of All Forms of Discrimination Against
Women (hereafter, "CEDAW"), a multilateral convention that the
Philippines ratified in 1981. The Government and its agents, including
our courts, not only must condemn all forms of discrimination against
women, but must also implement measures towards its elimination.

29. This case is a matter of public interest not only because of Philippine
Airlines' violation of the Constitution and existing laws, but also because
it highlights the fact that twenty-three years after the Philippine Senate
ratified the CEDAW, discrimination against women continues.

31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on

compulsory retirement from service is invidiously discriminatory against
and manifestly prejudicial to Petitioners because, they are compelled to
retire at a lower age (fifty-five (55) relative to their male counterparts
(sixty (60).

33. There is no reasonable, much less lawful, basis for Philippine Airlines
to distinguish, differentiate or classify cabin attendants on the basis of
sex and thereby arbitrarily set a lower compulsory retirement age of 55
for Petitioners for the sole reason that they are women.

37. For being patently unconstitutional and unlawful, Section 114, Part
A of the PAL-FASAP 2000-2005 CBA must be declared invalid and
stricken down to the extent that it discriminates against petitioner.

38. Accordingly, consistent with the constitutional and statutory

guarantee of equality between men and women, Petitioners should be

243
adjudged and declared entitled, like their male counterparts, to work
until they are sixty (60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the Honorable Court:

c. after trial on the merits:

(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID,
NULL and VOID to the extent that it discriminates against Petitioners; x x x
x

From the petitioners' allegations and relief prayed for in its petition, it is clear
that the issue raised is whether Section 144, Part A of the PAL-FASAP CBA is
unlawful and unconstitutional. Here, the petitioners' primary relief in Civil
Case No. 04-886 is the annulment of Section 144, Part A of the PAL-FASAP
CBA, which allegedly discriminates against them for being female flight
attendants. The subject of litigation is incapable of pecuniary estimation,
exclusively cognizable by the RTC, pursuant to Section 19 (1) of Batas
Pambansa Blg. 129, as amended.15 Being an ordinary civil action, the same
is beyond the jurisdiction of labor tribunals.

The said issue cannot be resolved solely by applying the Labor Code. Rather,
it requires the application of the Constitution, labor statutes, law on contracts
and the Convention on the Elimination of All Forms of Discrimination Against
Women,16 and the power to apply and interpret the constitution and CEDAW
is within the jurisdiction of trial courts, a court of general jurisdiction.
In Georg Grotjahn GMBH & Co. v. Isnani,17 this Court held that not every
dispute between an employer and employee involves matters that only labor
arbiters and the NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under
Article 217 of the Labor Code is limited to disputes arising from an employer-
employee relationship which can only be resolved by reference to the Labor
Code, other labor statutes, or their collective bargaining agreement.

Not every controversy or money claim by an employee against the employer

or vice-versa is within the exclusive jurisdiction of the labor arbiter. Actions
between employees and employer where the employer-employee relationship
is merely incidental and the cause of action precedes from a different source
of obligation is within the exclusive jurisdiction of the regular court.18 Here,
the employer-employee relationship between the parties is merely incidental
and the cause of action ultimately arose from different sources of obligation,
i.e., the Constitution and CEDAW.

Thus, where the principal relief sought is to be resolved not by reference to

the Labor Code or other labor relations statute or a collective bargaining
agreement but by the general civil law, the jurisdiction over the dispute
belongs to the regular courts of justice and not to the labor arbiter and the
NLRC. In such situations, resolution of the dispute requires expertise, not in
labor management relations nor in wage structures and other terms and
conditions of employment, but rather in the application of the general civil
244
law. Clearly, such claims fall outside the area of competence or expertise
ordinarily ascribed to labor arbiters and the NLRC and the rationale for
granting jurisdiction over such claims to these agencies disappears.19

If We divest the regular courts of jurisdiction over the case, then which
tribunal or forum shall determine the constitutionality or legality of the
assailed CBA provision?

This Court holds that the grievance machinery and voluntary arbitrators do
not have the power to determine and settle the issues at hand. They have no
jurisdiction and competence to decide constitutional issues relative to the
questioned compulsory retirement age. Their exercise of jurisdiction is futile,
as it is like vesting power to someone who cannot wield it.

In Gonzales v. Climax Mining Ltd.,20 this Court affirmed the jurisdiction of

courts over questions on constitutionality of contracts, as the same involves
the exercise of judicial power. The Court said:

Whether the case involves void or voidable contracts is still a judicial

question. It may, in some instances, involve questions of fact especially with
regard to the determination of the circumstances of the execution of the
contracts. But the resolution of the validity or voidness of the contracts
remains a legal or judicial question as it requires the exercise of judicial
function. It requires the ascertainment of what laws are applicable to the
dispute, the interpretation and application of those laws, and the rendering
of a judgment based thereon. Clearly, the dispute is not a mining conflict. It
is essentially judicial. The complaint was not merely for the determination of
rights under the mining contracts since the very validity of those contracts is
put in issue.

In Saura v. Saura, Jr.,21 this Court emphasized the primacy of the regular
court's judicial power enshrined in the Constitution that is true that the trend
is towards vesting administrative bodies like the SEC with the power to
adjudicate matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to them. This would
also relieve the regular courts of a substantial number of cases that would
otherwise swell their already clogged dockets. But as expedient as this
policy may be, it should not deprive the courts of justice of their
power to decide ordinary cases in accordance with the general laws
that do not require any particular expertise or training to interpret
and apply. Otherwise, the creeping take-over by the administrative
agencies of the judicial power vested in the courts would render the
judiciary virtually impotent in the discharge of the duties assigned to
it by the Constitution.

To be sure, in Rivera v. Espiritu,22 after Philippine Airlines (PAL) and PAL

Employees Association (PALEA) entered into an agreement, which includes
the provision to suspend the PAL-PALEA CBA for 10 years, several employees
questioned its validity via a petition for certiorari directly to the Supreme
Court. They said that the suspension was unconstitutional and contrary to
public policy. Petitioners submit that the suspension was inordinately long,

245
way beyond the maximum statutory life of 5 years for a CBA provided for in
Article 253-A of the Labor Code. By agreeing to a 10-year suspension, PALEA,
in effect, abdicated the workers' constitutional right to bargain for another
CBA at the mandated time.

In that case, this Court denied the petition for certiorari, ruling that there is
available to petitioners a plain, speedy, and adequate remedy in the ordinary
course of law. The Court said that while the petition was denominated as one
for certiorari and prohibition, its object was actually the nullification of the
PAL-PALEA agreement. As such, petitioners' proper remedy is an ordinary
civil action for annulment of contract, an action which properly falls under the
jurisdiction of the regional trial courts.

The change in the terms and conditions of employment, should Section 144
of the CBA be held invalid, is but a necessary and unavoidable consequence
of the principal relief sought, i.e., nullification of the alleged discriminatory
provision in the CBA. Thus, it does not necessarily follow that a resolution of
controversy that would bring about a change in the terms and conditions of
employment is a labor dispute, cognizable by labor tribunals. It is unfair to
preclude petitioners from invoking the trial court's jurisdiction merely
because it may eventually result into a change of the terms and conditions of
employment. Along that line, the trial court is not asked to set and fix the
terms and conditions of employment, but is called upon to determine whether
CBA is consistent with the laws.

Although the CBA provides for a procedure for the adjustment of grievances,
such referral to the grievance machinery and thereafter to voluntary
arbitration would be inappropriate to the petitioners, because the union and
the management have unanimously agreed to the terms of the CBA and their
interest is unified.

In Pantranco North Express, Inc., v. NLRC,23 this Court held that:

x x x Hence, only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators.

In the instant case, both the union and the company are united or have come
to an agreement regarding the dismissal of private respondents. No grievance
between them exists which could be brought to a grievance machinery. The
problem or dispute in the present case is between the union and the company
on the one hand and some union and non-union members who were
dismissed, on the other hand. The dispute has to be settled before an
impartial body. The grievance machinery with members designated by the
union and the company cannot be expected to be impartial against the
dismissed employees. Due process demands that the dismissed workers’
grievances be ventilated before an impartial body. x x x .

Applying the same rationale to the case at bar, it cannot be said that the
"dispute" is between the union and petitioner company because both have
previously agreed upon the provision on "compulsory retirement" as
embodied in the CBA. Also, it was only private respondent on his own who
questioned the compulsory retirement. x x x.
246
In the same vein, the dispute in the case at bar is not between FASAP and
respondent PAL, who have both previously agreed upon the provision on the
compulsory retirement of female flight attendants as embodied in the CBA.
The dispute is between respondent PAL and several female flight attendants
who questioned the provision on compulsory retirement of female flight
attendants. Thus, applying the principle in the aforementioned case cited,
referral to the grievance machinery and voluntary arbitration would not serve
the interest of the petitioners.

Besides, a referral of the case to the grievance machinery and to the

voluntary arbitrator under the CBA would be futile because respondent
already implemented Section 114, Part A of PAL-FASAP CBA when several of
its female flight attendants reached the compulsory retirement age of 55.

Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted
its association's bargaining proposal for the remaining period of 2004-2005
of the PAL-FASAP CBA, which includes the renegotiation of the subject
Section 144. However, FASAP's attempt to change the questioned provision
was shallow and superficial, to say the least, because it exerted no further
efforts to pursue its proposal. When petitioners in their individual capacities
questioned the legality of the compulsory retirement in the CBA before the
trial court, there was no showing that FASAP, as their representative,
endeavored to adjust, settle or negotiate with PAL for the removal of the
difference in compulsory age retirement between its female and male flight
attendants, particularly those employed before November 22, 1996. Without
FASAP's active participation on behalf of its female flight attendants, the
utilization of the grievance machinery or voluntary arbitration would be
pointless.

The trial court in this case is not asked to interpret Section 144, Part A of the
PAL-FASAP CBA. Interpretation, as defined in Black's Law Dictionary, is the
art of or process of discovering and ascertaining the meaning of a statute,
will, contract, or other written document.24 The provision regarding the
compulsory retirement of flight attendants is not ambiguous and does not
require interpretation. Neither is there any question regarding the
implementation of the subject CBA provision, because the manner of
implementing the same is clear in itself. The only controversy lies in its
intrinsic validity.

Although it is a rule that a contract freely entered between the parties should
be respected, since a contract is the law between the parties, said rule is not
absolute.

In Pakistan International Airlines Corporation v. Ople,25 this Court held that:

The principle of party autonomy in contracts is not, however, an absolute

principle. The rule in Article 1306, of our Civil Code is that the contracting
parties may establish such stipulations as they may deem convenient,
"provided they are not contrary to law, morals, good customs, public order
or public policy." Thus, counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable

247
law, especially provisions relating to matters affected with public policy, are
deemed written into the contract. Put a little differently, the governing
principle is that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with
public interest. The law relating to labor and employment is clearly such an
area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply
contracting with each other.

Moreover, the relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to
the common good.x x x 26 The supremacy of the law over contracts is
explained by the fact that labor contracts are not ordinary contracts; these
are imbued with public interest and therefore are subject to the police power
of the state.27 It should not be taken to mean that retirement provisions
agreed upon in the CBA are absolutely beyond the ambit of judicial review
and nullification. A CBA, as a labor contract, is not merely contractual in
nature but impressed with public interest. If the retirement provisions in the
CBA run contrary to law, public morals, or public policy, such provisions may
very well be voided.28

Finally, the issue in the petition for certiorari brought before the CA by the
respondent was the alleged exercise of grave abuse of discretion of the RTC
in taking cognizance of the case for declaratory relief. When the CA annuled
and set aside the RTC's order, petitioners sought relief before this Court
through the instant petition for review under Rule 45. A perusal of the petition
before Us, petitioners pray for the declaration of the alleged discriminatory
provision in the CBA against its female flight attendants.

This Court is not persuaded. The rule is settled that pure questions of fact
may not be the proper subject of an appeal by certiorari under Rule 45 of the
Revised Rules of Court. This mode of appeal is generally limited only to
questions of law which must be distinctly set forth in the petition. The
Supreme Court is not a trier of facts.29

The question as to whether said Section 114, Part A of the PAL-FASAP CBA is
discriminatory or not is a question of fact. This would require the presentation
and reception of evidence by the parties in order for the trial court to
ascertain the facts of the case and whether said provision violates the
Constitution, statutes and treaties. A full-blown trial is necessary, which
jurisdiction to hear the same is properly lodged with the the RTC. Therefore,
a remand of this case to the RTC for the proper determination of the merits
of the petition for declaratory relief is just and proper.
1avvphi1

WHEREFORE, the petition is PARTLY GRANTED. The Decision and

Resolution of the Court of Appeals, dated August 31, 2005 and March 7, 2006,
respectively, in CA-G.R. SP. No. 86813 are REVERSED and SET ASIDE. The
Regional Trial Court of Makati City, Branch 147 is DIRECTED to continue the
proceedings in Civil Case No. 04-886 with deliberate dispatch.

SO ORDERED.

248
249
THIRD DIVISION

G.R. No. 166377 November 28, 2008

MA. ISABEL T. SANTOS, represented by ANTONIO P.

SANTOS,petitioner,
vs.
SERVIER PHILIPPINES, INC. and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, seeking to set aside the Court of Appeals (CA)
Decision,1 dated August 12, 2004 and its Resolution2 dated December 17,
2004, in CA-G.R. SP No. 75706.

The facts, as culled from the records, are as follows:

Petitioner Ma. Isabel T. Santos was the Human Resource Manager of

respondent Servier Philippines, Inc. since 1991 until her termination from
service in 1999. On March 26 and 27, 1998, petitioner attended a meeting3 of
all human resource managers of respondent, held in Paris, France. Since the
last day of the meeting coincided with the graduation of petitioner’s only
child, she arranged for a European vacation with her family right after the
meeting. She, thus, filed a vacation leave effective March 30, 1998.4

On March 29, 1998, petitioner, together with her husband Antonio P. Santos,
her son, and some friends, had dinner at Leon des Bruxelles, a Paris
restaurant known for mussels5 as their specialty. While having dinner,
petitioner complained of stomach pain, then vomited. Eventually, she was
brought to the hospital known as Centre Chirurgical de L’Quest where she fell
into coma for 21 days; and later stayed at the Intensive Care Unit (ICU) for
52 days. The hospital found that the probable cause of her sudden attack was
"alimentary allergy," as she had recently ingested a meal of mussels which
resulted in a concomitant uticarial eruption.6

During the time that petitioner was confined at the hospital, her husband and
son stayed with her in Paris. Petitioner’s hospitalization expenses, as well as
those of her husband and son, were paid by respondent.7

In June 1998, petitioner’s attending physicians gave a prognosis of the

former’s condition; and, with the consent of her family, allowed her to go
back to the Philippines for the continuation of her medical treatment. She
was then confined at the St. Luke’s Medical Center for rehabilitation.8 During
the period of petitioner’s rehabilitation, respondent continued to pay the
former’s salaries; and to assist her in paying her hospital bills.

In a letter dated May 14, 1999, respondent informed the petitioner that the
former had requested the latter’s physician to conduct a thorough physical

250
and psychological evaluation of her condition, to determine her fitness to
resume her work at the company. Petitioner’s physician concluded that the
former had not fully recovered mentally and physically. Hence, respondent
was constrained to terminate petitioner’s services effective August 31, 1999.9

As a consequence of petitioner’s termination from employment, respondent

offered a retirement package which consists of:

Retirement Plan
Benefits: P 1,063,841.76
Insurance Pension at
20,000.00/month for 60
months from company-
sponsored group life
policy: P 1,200,000.00
Educational assistance: P 465,000.00
Medical and Health
Care: P 200,000.0010

Of the promised retirement benefits amounting to P1,063,841.76,

only P701,454.89 was released to petitioner’s husband, the balance11 thereof
was withheld allegedly for taxation purposes. Respondent also failed to give
the other benefits listed above.12

Petitioner, represented by her husband, instituted the instant case for unpaid
salaries; unpaid separation pay; unpaid balance of retirement package plus
interest; insurance pension for permanent disability; educational assistance
for her son; medical assistance; reimbursement of medical and rehabilitation
expenses; moral, exemplary, and actual damages, plus attorney’s fees. The
case was docketed as NLRC-NCR (SOUTH) Case No. 30-06-02520-01.

On September 28, 2001, Labor Arbiter Aliman D. Mangandog rendered a

Decision13 dismissing petitioner’s complaint. The Labor Arbiter stressed that
respondent had been generous in giving financial assistance to the
petitioner.14 He likewise noted that there was a retirement plan for the benefit
of the employees. In denying petitioner’s claim for separation pay, the Labor
Arbiter ratiocinated that the same had already been integrated in the
retirement plan established by respondent. Thus, petitioner could no longer
collect separation pay over and above her retirement benefits.15 The arbiter
refused to rule on the legality of the deductions made by respondent from
petitioner’s total retirement benefits for taxation purposes, as the issue was
beyond the jurisdiction of the NLRC.16 On the matter of educational
assistance, the Labor Arbiter found that the same may be granted only upon
the submission of a certificate of enrollment.17 Lastly, as to petitioner’s claim
for damages and attorney’s fees, the Labor Arbiter denied the same as the
former’s dismissal was not tainted with bad faith.18

On appeal to the National Labor Relations Commission (NLRC), the tribunal

set aside the Labor Arbiter’s decision, ruling that:
251
WHEREFORE, premises considered, Complainant’s appeal is partly
GRANTED. The Labor Arbiter’s decision in the above-entitled case is
hereby SET ASIDE. Respondent is ordered to pay Complainant’s portion
of her separation pay covering the following: 1) P200,000.00 for medical
and health care from September 1999 to April 2001; and 2) P35,000.00
per year for her son’s high school (second year to fourth year) education
and P45,000.00 per semester for the latter’s four-year college
education, upon presentation of any applicable certificate of enrollment.

SO ORDERED.19

The NLRC emphasized that petitioner was not retired from the service
pursuant to law, collective bargaining agreement (CBA) or other employment
contract; rather, she was dismissed from employment due to a
disease/disability under Article 28420 of the Labor Code.21 In view of her non-
entitlement to retirement benefits, the amounts received by petitioner should
then be treated as her separation pay.22 Though not legally obliged to give
the other benefits, i.e., educational assistance, respondent volunteered to
grant them, for humanitarian consideration. The NLRC therefore ordered the
payment of the other benefits promised by the respondent.23 Lastly, it
sustained the denial of petitioner’s claim for damages for the latter’s failure
to substantiate the same.24

Unsatisfied, petitioner elevated the matter to the Court of Appeals which

affirmed the NLRC decision.25

Hence, the instant petition.

At the outset, the Court notes that initially, petitioner raised the issue of
whether she was entitled to separation pay, retirement benefits, and
damages. In support of her claim for separation pay, she cited Article 284 of
the Labor Code, as amended. However, in coming to this Court via a petition
for review on certiorari, she abandoned her original position and alleged that
she was, in fact, not dismissed from employment based on the above
provision. She argued that her situation could not be characterized as a
disease; rather, she became disabled. In short, in her petition before us, she
now changes her theory by saying that she is not entitled to separation pay
but to retirement pay pursuant to Section 4,26 Article V of the Retirement
Plan, on disability retirement. She, thus, prayed for the full payment of her
retirement benefits by giving back to her the amount deducted for taxation
purposes.

In our Resolution27 dated November 23, 2005 requiring the parties to submit
their respective memoranda, we specifically stated:

No new issues may be raised by a party in the Memorandum and the

issues raised in the pleadings but not included in the Memorandum shall
be deemed waived or abandoned.

Being summations of the parties’ previous pleadings, the Court may

consider the Memoranda alone in deciding or resolving this petition.

252
Pursuant to the above resolution, any argument raised in her petition, but
not raised in her Memorandum,28 is deemed abandoned.29 Hence, the only
issue proper for determination is the propriety of deducting P362,386.87
from her total benefits, for taxation purposes. Nevertheless, in order to
resolve the legality of the deduction, it is imperative that we settle, once and
for all, the ground relied upon by respondent in terminating the services of
the petitioner, as well as the nature of the benefits given to her after such
termination. Only then can we decide whether the amount deducted by the
respondent should be paid to the petitioner.

Respondent dismissed the petitioner from her employment based on Article

284 of the Labor Code, as amended, which reads:

Art. 284. DISEASE AS GROUND FOR TERMINATION

An employer may terminate the services of an employee who has been

found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as
to the health of his co-employees: Provided, That he is paid separation
pay equivalent to at least one (1) month salary or to one-half (1/2)
month salary for every year of service, whichever is greater, a fraction
of at least six (6) months being considered as one (1) whole year.

As she was dismissed on the abovementioned ground, the law gives the
petitioner the right to demand separation pay. However, respondent
established a retirement plan in favor of all its employees which specifically
provides for "disability retirement," to wit:

Sec. 4. DISABILITY RETIREMENT

In the event that a Member is retired by the Company due to permanent

total incapacity or disability, as determined by a competent physician
appointed by the Company, his disability retirement benefit shall be the
Full Member’s Account Balance determined as of the last valuation date.
x x x.30

On the basis of the above-mentioned retirement plan, respondent offered the

petitioner a retirement package which consists of retirement plan benefits,
insurance pension, and educational assistance.31 The amount
of P1,063,841.76 represented the disability retirement benefit provided for
in the plan; while the insurance pension was to be paid by their insurer; and
the educational assistance was voluntarily undertaken by the respondent as
a gesture of compassion to the petitioner.32

We have declared in Aquino v. National Labor Relations Commission33 that

the receipt of retirement benefits does not bar the retiree from receiving
separation pay. Separation pay is a statutory right designed to provide the
employee with the wherewithal during the period that he/she is looking for
another employment. On the other hand, retirement benefits are intended to
help the employee enjoy the remaining years of his life, lessening the burden
of worrying about his financial support, and are a form of reward for his
loyalty and service to the employer.34 Hence, they are not mutually exclusive.
253
However, this is only true if there is no specific prohibition against the
payment of both benefits in the retirement plan and/or in the Collective
Bargaining Agreement (CBA).35

In the instant case, the Retirement Plan bars the petitioner from claiming
additional benefits on top of that provided for in the Plan. Section 2, Article
XII of the Retirement Plan provides:

Section 2. NO DUPLICATION OF BENEFITS

No other benefits other than those provided under this Plan shall be
payable from the Fund. Further, in the event the Member receives
benefits under the Plan, he shall be precluded from receiving any other
benefits under the Labor Code or under any present or future legislation
under any other contract or Collective Bargaining Agreement with the
Company.36

There being such a provision, as held in Cruz v. Philippine Global

Communications, Inc.,37 petitioner is entitled only to either the separation
pay under the law or retirement benefits under the Plan, and not both.

Clearly, the benefits received by petitioner from the respondent represent

her retirement benefits under the Plan. The question that now confronts us
is whether these benefits are taxable. If so, respondent correctly made the
deduction for tax purposes. Otherwise, the deduction was illegal and
respondent is still liable for the completion of petitioner’s retirement benefits.

Respondent argues that the legality of the deduction from petitioner’s total
benefits cannot be taken cognizance of by this Court since the issue was not
raised during the early stage of the proceedings.38

We do not agree.

Records reveal that as early as in petitioner’s position paper filed with the
Labor Arbiter, she already raised the legality of said
deduction, albeit designated as "unpaid balance of the retirement package."
Petitioner specifically averred that P362,386.87 was not given to her by
respondent as it was allegedly a part of the former’s taxable income.39 This
is likewise evident in the Labor Arbiter and the NLRC’s decisions although
they ruled that the issue was beyond the tribunal’s jurisdiction. They even
suggested that petitioner’s claim for illegal deduction could be addressed by
filing a tax refund with the Bureau of Internal Revenue.40

Contrary to the Labor Arbiter and NLRC’s conclusions, petitioner’s claim for
illegal deduction falls within the tribunal’s jurisdiction. It is noteworthy that
petitioner demanded the completion of her retirement benefits, including the
amount withheld by respondent for taxation purposes. The issue of deduction
for tax purposes is intertwined with the main issue of whether or not
petitioner’s benefits have been fully given her. It is, therefore, a money claim
arising from the employer-employee relationship, which clearly falls within
the jurisdiction41 of the Labor Arbiter and the NLRC.

254
This is not the first time that the labor tribunal is faced with the issue of illegal
deduction. In Intercontinental Broadcasting Corporation (IBC) v.
Amarilla, IBC withheld the salary differentials due its retired employees to
42

offset the tax due on their retirement benefits. The retirees thus lodged a
complaint with the NLRC questioning said withholding. They averred that
their retirement benefits were exempt from income tax; and IBC had no
authority to withhold their salary differentials. The Labor Arbiter took
cognizance of the case, and this Court made a definitive ruling that retirement
benefits are exempt from income tax, provided that certain requirements are
met.

Nothing, therefore, prevents us from deciding this main issue of whether the
retirement benefits are taxable.

We answer in the affirmative.

Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC)
provides for the exclusion of retirement benefits from gross income, thus:

(6) Retirement Benefits, Pensions, Gratuities, etc. –

a) Retirement benefits received under Republic Act 7641 and those

received by officials and employees of private firms, whether individual
or corporate, in accordance with a reasonable private benefit plan
maintained by the employer: Provided, That the retiring official or
employee has been in the service of the same employer for at least ten
(10) years and is not less than fifty (50) years of age at the time of his
retirement: Provided further, That the benefits granted under this
subparagraph shall be availed of by an official or employee only once. x
x x.

Thus, for the retirement benefits to be exempt from the withholding tax, the
taxpayer is burdened to prove the concurrence of the following elements: (1)
a reasonable private benefit plan is maintained by the employer; (2) the
retiring official or employee has been in the service of the same employer for
at least ten (10) years; (3) the retiring official or employee is not less than
fifty (50) years of age at the time of his retirement; and (4) the benefit had
been availed of only once.43

As discussed above, petitioner was qualified for disability retirement. At the

time of such retirement, petitioner was only 41 years of age; and had been
in the service for more or less eight (8) years. As such, the above provision
is not applicable for failure to comply with the age and length of service
requirements. Therefore, respondent cannot be faulted for deducting from
petitioner’s total retirement benefits the amount of P362,386.87, for taxation
purposes.

WHEREFORE, the petition is DENIED for lack of merit. The Court of Appeals
Decision dated August 12, 2004 and its Resolution dated December 17, 2004,
in CA-G.R. SP No. 75706 are AFFIRMED.

SO ORDERED.
255
256
G.R. No. 162775 October 27, 2006

INTERCONTINENTAL BROADCASTING CORPORATION (IBC),

represented by ATTY. RENATOQ. BELLO, in his capacity as CEO and
President, petitioner,
vs.
NOEMI B. AMARILLA, CORSINI R. LAGAHIT, ANATOLIO G. OTADOY,
and CANDIDO C. QUIÑONES, JR., respondents.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari filed by petitioner

Intercontinental Broadcasting Corporation (IBC) assailing the Decision1 of the
Court of Appeals in CA-G.R. SP No. 72414, which in turn affirmed the
Decision2 of the National Labor Relations Commission (NLRC) in NLRC Case
No. V-000660-2000.

On various dates, petitioner employed the following persons at its Cebu

station: Candido C. Quiñones, Jr.; on February 1, 1975;3 Corsini R. Lagahit,
as Studio Technician, also on February 1, 1975;4 Anatolio G. Otadoy, as
Collector, on April 1, 1975;5 and Noemi Amarilla, as Traffic Clerk, on July 1,
1975.6 On March 1, 1986, the government sequestered the station, including
its properties, funds and other assets, and took over its management and
operations from its owner, Roberto Benedicto.7 However, in December 1986,
the government and Benedicto entered into a temporary agreement under
which the latter would retain its management and operation. On November
3, 1990, the Presidential Commission on Good Government (PCGG) and
Benedicto executed a Compromise Agreement,8 where Benedicto transferred
and assigned all his rights, shares and interests in petitioner station to the
government. The PCGG submitted the Agreement to the Sandiganbayan in
Civil Case No. 0034 entitled "Republic of the Philippines v. Roberto S.
Benedicto, et al."9

In the meantime, the four (4) employees retired from the company and
received, on staggered basis, their retirement benefits under the 1993
Collective Bargaining Agreement (CBA) between petitioner and the
bargaining unit of its employees.

Name of Date of Retirement

Employee Retirement Benefit
Candido C. October 16, P 766,532.97
Quiñones, Jr. 1995
Noemi B. Amarilla April 16, 1998 P 1,134,239.47

257
Corsini R. Lagahit April 16, 1998 P 1,298,879.50
Anatolio G. February 29, P 751,914.30
Otadoy 1996

In the meantime, a P1,500.00 salary increase was given to all employees of

the company, current and retired, effective July 1994. However, when the
four retirees demanded theirs, petitioner refused and instead informed them
via a letter that their differentials would be used to offset the tax due on their
retirement benefits in accordance with the National Internal Revenue Code
(NIRC). Amarilla was informed that the P71,480.00 of the amount due to her
would be used to offset her tax liability of P340,641.42.10 Otadoy was also
informed in a letter dated July 5, 1999, that his salary differential
of P170,250.61 would be used to pay his tax liability which amounted
to P127,987.57. Since no tax liability was withheld from his retirement
benefits, he even owed the company P17,727.26 after the offsetting.
Quiñones was informed that he should have retired compulsorily in 1992 at
age 55 as provided in the CBA, and that since he was already 58 when he
retired, he was no longer entitled to receive salary increases from 1992 to
1995. Consequently, he was overpaid by P137,932.22 for the "extension" of
his employment from 1992 to 1995, which amount he was obliged to return
to the company. In any event, his claim for salary differentials had expired
pursuant to Article 291 of the Labor Code of the Philippines.11 Lagahit’s claim
for salary differential of P73,165.23 was rejected by petitioner in a letter
dated July 6, 1999, on the ground that he had a tax liability of P396,619.03;
since the amount would be used as partial payment for his tax liability, he
still owed the company P323,453.80.12

The four (4) retirees filed separate complaints13 against IBC TV-13 Cebu and
Station Manager Louella F. Cabañero for unfair labor practice and non-
payment of backwages before the NLRC, Regional Arbitration Branch VII. As
all of the complainants had the same causes of action, their complaints were
docketed as NLRC RAB-VII Case No. 10-1625-99.

The complainants averred that their retirement benefits are exempt from
income tax under Article 32 of the NIRC. Sections 28 and 72 of the NIRC,
which petitioner relied upon in withholding their differentials, do not apply to
them since these provisions deal with the applicable income tax rates on
foreign corporations and suits to recover taxes based on false or fraudulent
returns. They pointed out that, under Article VIII of the CBA, only those
employees who reached the age of 60 were considered retired, and those
under 60 had the option to retire, like Quiñones and Otadoy who retired at
ages 58 and 51, respectively. They prayed that they be paid their salary
differentials, as follows:

Otadoy P 170,250.61
Quiñones P 170,250.61
Lagahit P 73,165.23
Amarilla P 71,480.0014

258
For its part, petitioner averred that under Section 21 of the NIRC, the
retirement benefits received by employees from their employers constitute
taxable income. While retirement benefits are exempt from taxes under
Section 28(b) of said Code, the law requires that such benefits received
should be in accord with a reasonable retirement plan duly registered with
the Bureau of Internal Revenue (BIR) after compliance with the requirements
therein enumerated. Since its retirement plan in the 1993 CBA was not
approved by the BIR, complainants were liable for income tax on their
retirement benefits. Petitioner claimed that it was mandated to withhold the
income tax due from the retirement benefits of said complainants. It was not
estopped from correcting the mistakes of its former officers. Under the law,
complainants are obliged to return what had been mistakenly delivered to
them.15

In reply, complainants averred that the claims for the retirement salary
differentials of Quiñones and Otadoy had not prescribed because the said CBA
was implemented only in 1997. They pointed out that they filed their claims
with petitioner on April 3, 1999. They maintained that they availed of the
optional retirement because of petitioner’s inducement that there would be
no tax deductions. Petitioner IBC did not commit any mistake in not
withholding the taxes due on their retirement benefits as shown by the fact
that the PCCG, the Commission on Audit (COA) and the Bureau of Internal
Revenue (BIR) did not even require them to explain such mistake. They
pointed out that petitioner paid their retirement benefits on a staggered
basis, and nonetheless failed to deduct any amount as taxes.16

Petitioner countered that the retirement benefits received by the

complainants were based on the CBA between it and its bargaining units.
Under Sections 72 and 73 of the NIRC, it is obliged to deduct and withhold
taxes determined in accordance with the rules and regulations to be prepared
by the Secretary of Finance. It was its duty to withhold the taxes on
complainants’ retirement benefits, otherwise, it would be held civilly and
criminally liable under Sections 251, 254 and 255 of the NIRC.

On February 14, 2000, the Labor Arbiter rendered judgment in favor of the
retirees. The fallo of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered

ordering the respondent Intercontinental Broadcasting Corporation (IBC
TV-13 Cebu) to pay the complainants Noemi Amarilla and Corsini
Lagahit as follows:

1. Noemi E. - P26,423.00
Amarilla
2. Corsino R. - P26,423.00
Lagahit
Total - P52,846.00

259
The claim of complainants Anatolio Otadoy and Candido Quiñones and
the case against respondent Louella F. Cabañero are dismissed for lack
of merit.

SO ORDERED.17

The Labor Arbiter ruled that the claims of Quiñones and Otadoy had
prescribed. The retirement benefits of complainants Lagahit and Amarilla, on
the other hand, were exempt from income tax under Section 28(b) of the
NIRC. However, the differentials due to the two complainants were computed
three years backwards due to the law on prescription.

Petitioner appealed the decision of the Labor Arbiter to the NLRC, arguing
that the retirement benefits of Amarilla and Lagahit are not tax exempt. It
insisted that the Labor Arbiter erred in declaring as unlawful the act of
withholding the employees’ salary differentials as payment for the latter’s tax
liabilities.

Otadoy and Quiñones no longer appealed the decision.

On May 21, 2002, the NLRC rendered its decision dismissing the appeal and
affirming that of the Labor Arbiter. The fallo of the decision reads:

WHEREFORE, the Decision of the Labor Arbiter dated February 14, 2000
is hereby AFFIRMED. Respondents’ appeal is dismissed for lack of merit.

SO ORDERED.18

The NLRC held that the benefits of the retirement plan under the CBAs
between petitioner and its union members were subject to tax as the scheme
was not approved by the BIR. However, it had also been the practice of
petitioner to give retiring employees their retirement pay without tax
deductions and there was no justifiable reason for the respondent to deviate
from such practice. The NLRC concluded that petitioner was deemed to have
assumed the tax liabilities of the complainants on their retirement benefits,
hence, had no right to deduct taxes from their salary differentials. The NLRC
thus ratiocinated:

The sole concern of the law is that tax shall be imposed on retirement
benefits. The employer assuming the payment of tax on behalf of the
retiring employee to make the retirement attractive, does not
contravene the tax law, because it is not contrary to the law or public
policy, morals and good customs. It is significant to note that
respondent did not refute the complainants’ allegations in their Position
Papers, to wit:

"Complainants Amarilla and Lagahit availed themselves of the offer

of the respondent company when they were induced and were
made to believe that respondent company’s employees who avail
of such early retirement can avail of that exemption on their
retirement benefits. Were it not for the offer of no tax liability,

260
complainants would not have availed of such optional or early
retirement."

It is worthy to note that the retirement benefits of the complainants did

not suffer any tax deductions when they were given at the first instance.
It is only after they claimed the salary differentials when the respondent
withheld the backwages for the payment of tax liabilities.

"From the facts it can be shown that the disbursement of

retirement benefits of the complainants were made on staggered
basis, three (3) and four (4) times. So, if the company, as it
claimed, is really vent on deducting the alleged taxes due the
complainants, they have three or four opportunities to do so."

The respondent’s history reveals that it was paying retirement pays to

its retiring employees without tax deductions as a matter of practice.
There is no justifiable reason for the respondent to deviate from that
practice now. It is deemed to have assumed the tax liabilities of the
complainants.19

Aggrieved, petitioner elevated the decision before the CA on the following

grounds:

1. THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION

TANTAMOUNT TO LACK OF JURISDICTION WHEN IT RULED THAT WHILE
PETITIONER MAY NOT HAVE A RETIREMENT PLAN WHOSE BENEFITS
THEREFROM ARE EXEMPTED FROM TAXES UNDER SECTION 28 OF THE
NIRC, BY VIRTUE OF ITS PREVIOUS PRACTICE THAT IT ASSUMED THE
PAYMENT OF TAX LIABILITES, IT IS DEEMED TO HAVE ANSWERED FOR
THE TAX LIABILITES OF THE COMPLAINANTS, WHICH ULTIMATE
CONSEQUENCE, IF NOT RECTIFIED, SHALL CAUSE IRREPARABLE
DAMAGE AND INJURY TO THE PETITIONER CORPORATION.

2. THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING
THE DECISION RENDERED BY THE LABOR ARBITER ON FEBRUARY 14,
2000 WHICH GRANTED RETIREMENT DIFFERENTIAL TO RESPONDENTS
AMARILLA AND LAGAHIT AS THESE ARE CONTRARY TO THE FACTS AND
RETIREMENT LAWS PARTICULARLY THE PROVISIONS EMBODIED IN
SECTIONS 21, 27, 28 OF THE NATIONAL INTERNAL REVENUE CODE
AND R.A. 7641 IMPLEMENTING ARTICLE 287 OF THE LABOR CODE AS
WELL AS SECTION 6 OF THE IMPLEMENTING RULES OF RA 7641.

3. CONSEQUENT TO NLRC’S RULING GRANTING RETIREMENT

DIFFERENTIAL TO RESPONDENTS AMARILLA AND LAGAHIT, THE
HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION TANTAMOUNT
TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT
PETITIONER’S ACT OF WITHHOLDING COMPLAINANTS’ BACKWAGES AS
PAYMENT OF THEIR TAX LIABILITIES IS ILLEGAL.20

On December 3, 2003, the CA rendered judgment dismissing the

petition for lack of merit.
261
The appellate court declared that the salary differentials of the
respondents are part of their taxable gross income, considering that the
CBA was not approved, much less submitted to the BIR. However,
petitioner could not withhold the corresponding tax liabilities of
respondents due to the then existing CBA, providing that such
retirement benefits would not be subjected to any tax deduction, and
that any such taxes would be for its account. The appellate court relied
on the allegations of respondents in their Position Paper before the Labor
Arbiter which petitioner failed to refute.

Petitioner filed a motion for reconsideration, which the appellate court

denied. Hence, the present petition, where petitioner avers that:

WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED

REVERSIBLE ERROR WHEN IT RULED THAT SINCE IT HAS BEEN THE
PURPORTED PRACTICE OF PETITIONER IBC-13 NOT TO WITHHOLD
TAXES DUE ON THE SALARY DIFFERENTIAL AND THE RETIREMENT
BENEFITS, PETITIONER IBC-13 NECESSARILY ASSUMED PAYMENT OF
THE TAXES AND COULD NOT THEREFORE WITHHOLD THE SAME
NOTWITHSTANDING THE SUBSEQUENT DISCOVERY THAT THE FAILURE
TO WITHHOLD THE TAXES WAS DONE DUE TO THE OMISSION,
MISTAKE, FRAUD OR IRREGULARITY COMMITTED BY PREVIOUS
MANAGEMENT.

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS

GLOSSED OVER THE FACT AND COMMITTED REVERSIBLE ERROR WHEN
IT AFFIRMED THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION DATED MAY 21, 2002 WHICH ORDERED PETITIONER IBC-
13 TO PAY RETIREMENT DIFFERENTIAL TO RESPONDENTS AMARILLA
AND LAGAHIT AS THESE ARE CONTRARY TO THE FACTS AND
RETIREMENT LAWS PARTICULARLY THE PROVISIONS EMBODIED IN
SECTIONS 21, 27, 28 OF THE NATIONAL INTERNAL REVENUE CODE (AS
AMENDED BY PRESIDENTIAL DECREE NO. 1994)21

Petitioner insists that respondents are liable for taxes on their retirement
benefits because the retirement plan under the CBA was not approved by the
BIR. It insisted that it failed to comply with the requisites of Section 32 of the
NIRC and Rule II, Section 6 of the Rules Implementing the New Retirement
Law which provides that retirement pay shall be tax exempt upon compliance
with the requirements under Section 2(b) of Revenue Regulation No. 12-86
dated August 1, 1986.

Petitioner maintains that respondents failed to present any document as

proof that petitioner bound and obliged itself to pay the withholding taxes on
their retirement benefits. In fact, the Labor Arbiter did not make any finding
that petitioner had obliged itself to pay the withholding taxes on respondents’
retirement benefits. The NLRC’s reliance on the statements in its Position
Paper that it undertook to pay for respondents’ withholding taxes is
misplaced.

262
While petitioner admits that its "previous directors" had paid the withholding
taxes on the retirement benefits of respondents, it explains that this practice
was stopped when the new management took over. The new management
could not be expected to enforce and follow through the illegal policy of the
old management which is adverse to the interests of the petitioner; hence,
the decisions of the NLRC and the CA affirming such undertaking should be
reversed. It points out that it is a government corporation, and as such, its
officials and employees may be held liable for violation of Section 3(a) of
Republic Act Nos. 3019, and 6713.22 Moreover, its officers and employees are
mandated to preserve the company’s assets, and may, likewise be held liable
for failure to do so under Section 31 of the Corporation Code.

The issues are (1) whether the retirement benefits of respondents are part
of their gross income; and (2) whether petitioner is estopped from reneging
on its agreement with respondent to pay for the taxes on said retirement
benefits.

We agree with petitioner’s contention that, under the CBA, it is not obliged
to pay for the taxes on the respondents’ retirement benefits. We have
carefully reviewed the CBA and find no provision where petitioner obliged
itself to pay the taxes on the retirement benefits of its employees.

We also agree with petitioner’s contention that, under the NIRC, the
retirement benefits of respondents are part of their gross income subject to
taxes. Section 28 (b) (7) (A) of the NIRC of 198623 provides:

Sec. 28. Gross Income. –

xxxx

(b) Exclusions from gross income. - The following items shall not be
included in gross income and shall be exempt from taxation under this
Title:

xxxx

(7) Retirement benefits, pensions, gratuities, etc. - (A) Retirement

benefits received by officials and employees of private firms whether
individuals or corporate, in accordance with a reasonable private benefit
plan maintained by the employer: Provided, That the retiring official or
employee has been in the service of the same employer for at least ten
(10) years and is not less than fifty years of age at the time of his
retirement: Provided, further, That the benefits granted under this
subparagraph shall be availed of by an official or employee only once.
For purposes of this subsection, the term "reasonable private benefit
plan" means a pension, gratuity, stock bonus or profit-sharing plan
maintained by an employer for the benefit of some or all of his officials
or employees, where contributions are made by such employer for
officials or employees, or both, for the purpose of distributing to such
officials and employees the earnings and principal of the fund thus
accumulated, and wherein it is provided in said plan that at no time shall
any part of the corpus or income of the fund be used for, or be diverted
263
to, any purpose other than for the exclusive benefit of the said official
and employees.

Revenue Regulation No. 12-86, the implementing rules of the foregoing

provisions, provides:

(b) Pensions, retirements and separation pay. – Pensions, retirement

and separation pay constitute compensation subject to withholding tax,
except the following:

(1) Retirement benefit received by official and employees of private

firms under a reasonable private benefit plan maintained by the
employer, if the following requirements are met:

(i) The retirement plan must be approved by the Bureau of Internal

Revenue;

(ii) The retiring official or employees must have been in the service
of the same employer for at least ten (10) years and is not less
than fifty (50) years of age at the time of retirement; and

(iii) The retiring official or employee shall not have previously

availed of the privilege under the retirement benefit plan of the
same or another employer.

Thus, for the retirement benefits to be exempt from the withholding tax, the
taxpayer is burdened to prove the concurrence of the following elements: (1)
a reasonable private benefit plan is maintained by the employer; (2) the
retiring official or employee has been in the service of the same employer for
at least 10 years; (3) the retiring official or employee is not less than 50
years of age at the time of his retirement; and (4) the benefit had been
availed of only once.

Article VIII of the 1993 CBA provides for two kinds of retirement plans -
compulsory and optional. Thus:

ARTICLE VIII
RETIREMENT

Section 1: Compulsory Retirement – Any employee who has reached the age
of Fifty Five (55) years shall be retired from the COMPANY and shall be paid
a retirement pay in accordance with the following schedule:

LENGTH OF SERVICE RETIREMENT BENEFITS

1 year – below 5 yrs. 15 days for every year
of service
5 years – 9 years 30 days for every year
of service
10 years – 14 years 50 days for every year
of service

264
15 years – 19 years 65 days for every year
of service
20 years or more 80 days for every year
of service

A supervisor who reached the age of Fifty (50) may at his/her option retire
with the same retirement benefits provided above.

Section 2: Optional Retirement – Any covered employee, regardless of age,

who has rendered at least five (5) years of service to the COMPANY may
voluntarily retire and the COMPANY agrees to pay Long Service Pay to said
covered employee in accordance with the following schedule:

LENGTH OF SERVICE RETIREMENT BENEFITS

5 – 9 years 15 days for every year
of service
10 – 14 years 30 days for every year
of service
15 – 19 years 50 days for every year
of service
20 years and above 60 days for every year
of service

Section 3: Fraction of a Year – In computing the retirement under Section 1

and 2 of this Article, a fraction of at least six (6) months shall be considered
as one whole year. Moreover, the COMPANY may exercise the option of
extending the employment of an employee.

Section 4: Severance of Employment Due to Illness – When a supervisor

suffers from disease and/or permanent disability and her/his continued
employment is prohibited by law or prejudicial to her/his health of the health
of his co-employees, the COMPANY shall not terminate the employment of
the subject supervisor unless there is a certification by a competent public
health authority that the disease is of such a nature or at such stage that it
can not be cured within a period of six (6) months even with proper medical
treatment. The supervisor may be separated upon payment by the COMPANY
of separation pay pursuant to law, unless the supervisor falls within the
purview of either Sections 1 or 2 hereof. In which case, the retirement
benefits indicated therein shall apply, whichever is higher.

Section 5: Loyalty Recognition – The COMPANY shall recognize the services

of the supervisor/director who have reached the following number of years
upon retirement by granting him/her a plaque of appreciation and any lasting
gift:

10 years but below – (P 3,000.00)

15 years worth
265
15 years but below – (P 7,000.00)
20 years worth
20 years and more – (P10,000.00)
worth

Respondents were qualified to retire optionally from their employment with

petitioner. However, there is no evidence on record that the 1993 CBA had
been approved or was ever presented to the BIR; hence, the retirement
benefits of respondents are taxable.

Under Section 80 of the NIRC, petitioner, as employer, was obliged to

withhold the taxes on said benefits and remit the same to the BIR.

Section 80. Liability for Tax. –

(A) Employer. – The employer shall be liable for the withholding and
remittance of the correct amount of tax required to be deducted and
withheld under this Chapter. If the employer fails to withhold and remit
the correct amount of tax as required to be withheld under the provision
of this Chapter, such tax shall be collected from the employer together
with the penalties or additions to the tax otherwise applicable in respect
to such failure to withhold and remit.

However, we agree with respondents’ contention that petitioner did not

withhold the taxes due on their retirement benefits because it had obliged
itself to pay the taxes due thereon. This was done to induce respondents to
agree to avail of the optional retirement scheme. Thus, in its petition in this
case, petitioner averred that:

While it may indeed be conceded that the previous dispensation of

petitioner IBC-13 footed the bill for the withholding taxes, upon
discovery by the new management, this was stopped altogether as this
was grossly prejudicial to the interest of the petitioner IBC-13. The
policy of withholding the taxes due on the differentials as a remedial
measure was a matter of sound business judgment and dictates of good
governance aimed at protecting the interests of the government.
Necessarily, the newly-appointed board and officers of the petitioner,
who learned about this grossly disadvantageous mistake committed by
the former management of petitioner IBC-13 cannot be expected to just
follow suit blindly. An illegal act simply cannot give rise to an obligation.
Accordingly, the new officers were correct in not honoring this highly
suspect practice and it is now their duty to rectify this anomalous
occurrence, otherwise, they become remiss in the performance of their
sworn responsibilities.

It need not be stressed that as board members and officers of the

acquired asset of the government, they are committed to preserve the
assets thereof. Their concomitant obligations spring not only from their
fiduciary responsibility as corporate officers but as well as public
officers.24

266
Respondents received their retirement benefits from the petitioner in three
staggered installments without any tax deduction for the simple reason that
petitioner had remitted the same to the BIR with the use of its own funds
conformably with its agreement with the retirees. It was only when
respondents demanded the payment of their salary differentials that
petitioner alleged, for the first time, that it had failed to present the 1993
CBA to the BIR for approval, rendering such retirement benefits not exempt
from taxes; consequently, they were obliged to refund to it the amounts it
had remitted to the BIR in payment of their taxes. Petitioner used this
"failure" as an afterthought, as an excuse for its refusal to remit to the
respondents their salary differentials. Patently, petitioner is estopped from
doing so. It cannot renege on its commitment to pay the taxes on
respondents’ retirement benefits on the pretext that the "new management"
had found the policy disadvantageous.

It must be stressed that the parties are free to enter into any contract
stipulation provided it is not illegal or contrary to public morals. When such
agreement freely and voluntarily entered into turns out to be advantageous
to a party, the courts cannot "rescue" the other party without violating the
constitutional right to contract. Courts are not authorized to extricate the
parties from the consequences of their acts. Thus, the fact that the contract
stipulations of the parties may turn out to be financially disadvantageous to
them will not relieve them of their obligation under the agreement.25

An agreement to pay the taxes on the retirement benefits as an incentive to

prospective retirees and for them to avail of the optional retirement scheme
is not contrary to law or to public morals. Petitioner had agreed to shoulder
such taxes to entice them to voluntarily retire early, on its belief that this
would prove advantageous to it. Respondents agreed and relied on the
commitment of petitioner. For petitioner to renege on its contract with
respondents simply because its new management had found the same
disadvantageous would amount to a breach of contract. There is even no
evidence that any "new management" was ever installed by petitioner after
respondents’ retirement; nor is there evidence that the Board of Directors of
petitioner resolved to renege on its contract with respondents and demand
the reimbursement for the amounts remitted by it to the BIR.

The well-entrenched rule is that estoppel may arise from a making of a

promise if it was intended that the promise should be relied upon and, in fact,
was relied upon, and if a refusal to sanction the perpetration of fraud would
result to injustice. The mere omission by the promisor to do whatever he
promises to do is sufficient forbearance to give rise to a promissory
estoppel.26

Petitioner cannot hide behind the fact that, under the compromise agreement
between the PCGG and Benedicto, the latter had assigned and conveyed to
the Republic of the Philippines his shares, interests and rights in petitioner.
Respondents retired only after the Court affirmed the validity of the
Compromise Agreement27 and the execution by petitioner and the union of
their 1993 CBA while Civil Case No. 0034 was still pending in
the Sandiganbayan. There is no showing that before respondents demanded
267
the payment of their salary differentials, petitioner had rejected its
commitment to shoulder the taxes on respondents’ retirement benefits and
sought its nullification before the court; nor is there any showing that
petitioner’s "new management" filed any criminal or administrative charges
against the former officers/board of directors comprising the "old
management" relative to the payment of the taxes on respondents’
retirement benefits.

IN VIEW OF ALL THE FOREGOING, the petition is DENIED for lack of

merit. The Decision of the Court of Appeals in CA-G.R. SP No. 72414
is AFFIRMED. Costs against the petitioner.

SO ORDERED.

268
SECOND DIVISION

G.R. No. 75837 December 11, 1987

DOMINADOR BASAYA JR., FLORENCIO ABELLA, DOMINADOR

ORDINEZA, FLORO ROSALEJOS, PABLO PADILLA, ELVIN ELISORIO
PATRICIO GUTIB, JOSE LEOPOLDO, HONORATO SININA, EFREMIO
CATUBAY, RAUL DE REAL, VIRGINIO ALEGRIA, EDUARDO BULAK,
BALTAZAR DACARA, DIOSDADO REAL, MICHAEL DUMALAGAN,
RAMON FLORES, WILFREDO BACATAN, PEDRO CANAZARES,
LUCIFERO PESQUERA, FLORENTINO DURAN, CATALINO TIENGCO,
EDUARDO CABRERA, and RENATO ANTONINO, Petitioners, vs. HON.
FRANCIS MILITANTE, President Judge, Regional Trial Court, 7th
Judicial Region, Branch XII, Cebu City, and PHILIPPINE TUNA
VENTURES, INC., Respondents. chanrobles virtual law library

MELENCIO-HERRERA, J.:

In this Petition for Review on Certiorari, petitioners challenge the assumption

of jurisdiction by Respondent Judge of the Regional Trial Court of Cebu City,
Branch XI 1, over a complaint for Replevin filed by private respondent,
Philippine Tuna Ventures, Inc. against petitioners, upon the allegation that it
is intertwined with a labor dispute so that exclusive jurisdiction belongs to
the National Labor Relations Commission (NLRC). chanroblesvirtualawlibrary chanrobles virtual law library

Respondent Philippine Tuna Ventures, Inc. (TUNA, Inc., for short), is the
charterer of the fishing vessel, the F/B Caribbean (hereinafter referred to
simply as the Vessel). TUNA, Inc. has been operating this Vessel in its deep-
sea fishing business since 1977 together with eight (8) other fishing boats.
Sometime in 1985, TUNA, Inc. transferred the operation of the Vessel to a
sister corporation, the Eastship Fishing Corporation (Eastship, for brevity).
Petitioners, twenty-four (24) in all, constitute the crew of the Vessel, with
petitioner Dominador Basaya Jr., as its Captain. chanroblesvirtualawlibrary chanrobles virtual law library

On 9 July 1986, TUNA, Inc. sought the remedy of Replevin (the Replevin
Case) against petitioners before the Regional Trial Court presided over by
Respondent Judge, praying that petitioners (defendants in that case) be
ordered to deliver to it the possession of its Vessel, which petitioners were
allegedly possessing in violation of its rights. chanroblesvirtualawlibrary chanrobles virtual law library

In their defense below petitioners maintained that they were in possession of

the Vessel as its crew; that their possession is "an extension of the possession
of the plaintiff over the Vessel" and that to deprive them of its possession by
a Writ of Replevin would amount to an illegal termination of their
employment. chanroblesvirtualawlibrary chanrobles virtual law library

On 10 July 1986, the Writ of Replevin was ordered issued upon TUNA, Inc.'s
filing of a bond in the amount of P2M. The Sheriff served the Writ on
petitioners on 12 July 1986 and they disembarked from the Vessel in the
evening of that day. However, after about an hour, they re-embarked and
re-took possession. chanroblesvirtualawlibrary chanrobles virtual law library

269
On 29 August 1986 judgment was rendered in the Replevin Case declaring
TUNA, Inc. to have a better right to the possession of the Vessel and ordering
petitioners to immediately deliver possession thereof. chanroblesvirtualawlibrary chanrobles virtual law library

On 15 September 1986 petitioners resorted to this appeal by certiorari on a

question of law with a prayer for a restraining order. chanroblesvirtualawlibrary chanrobles virtual law library

On 17 September 1986 we issued a Temporary Restraining Order enjoining

respondents from enforcing the judgment in the Replevin Case or any Writ of
Execution issued therein. chanroblesvirtualawlibrary chanrobles virtual law library

The only issue for resolution is whether or not the Trial Court had jurisdiction
to hear and decide the Replevin Case. chanroblesvirtualawlibrary chanrobles virtual law library

Said Court upheld its jurisdiction and ruled, as heretofore stated, that the
charterer, TUNA, Inc., has a better right to the possession of the Vessel and
ordered petitioners to immediately deliver possession. chanroblesvirtualawlibrary chanrobles virtual law library

In this Petition, petitioners argue that the Trial Court erred in:

I. ... assuming a split jurisdiction over the civil rights of the respondent
corporation to possess the vessel F/B Caribbean and oust the petitioners-
appellants separately from the labor rights of the petitioners-appellants to be
protected from their sudden arbitrary ouster from their positions in the said
vessel as crew members and officers thereof. chanroblesvirtualawlibrarychanrobles virtual law library

II. ... holding that the legal responsibility of the respondent, Philippine Tuna
Ventures, Inc. as the employer of the petitioners-appellants has been
transferred to Eastship Fishing Corporation. chanroblesvirtualawlibrarychanrobles virtual law library

III. ... assuming jurisdiction over this case which involves the labor violation
of unfair labor practice committed by the respondent Phil. Tuna Ventures,
Inc. and which, therefore, appertains to the exclusive jurisdiction of the
National Labor Relations Commission.

It appears that on 26 June 1986, petitioners had presented to the

management of TUNA, Inc., a set of labor demands; that on 28 June 1986
they had informed Eastship that they would not move the Vessel to any
destination until their demands were met; that on 2 July 1986 TUNA, Inc.,
had applied for a "shut-down" or closure allegedly due to business losses;
that on 8 July 1986 Eastship filed with the National Labor Relations
Commission, Regional Office No. 7, Cebu City, a Petition to declare
petitioners' strike illegal; and that on 8 August 1986, petitioners instituted a
Complaint for Unfair Labor Practice against TUNA, Inc. and Eastship.
Incidentally, petitioners allege that they are not on strike, chanrobles virtual law library

Developments subsequent to the judgment in the Replevin Case also disclose

that on 18 November 1986, in NLRC Injunction Case No. 1270
entitled Eastship Fishing Corporation vs. Concerned Seamen of the
Philippines, the NLRC issued an Injunction Writ enjoining petitioners from
blocking the free ingress and egress to the Vessel and seven (7) other fishing
boats and to disembark from and vacate the Vessel without prejudice to the

270
exercise of their right to lawful and peaceful picketing; that on 28 November
1986, the NLRC Sheriffs attempted to enforce the Injunction but petitioners
refused to comply thereby compelling the NLRC on the same date to seek the
assistance of the Philippine Constabulary and the Philippine Coast Guard; that
it was only on 11 December 1986, after a series of refusals, that petitioners
left the Vessel peacefully only to retake possession on 16 December
1986. chanroblesvirtualawlibrary chanrobles virtual law library

An ocular inspection on 10 January 1987 by Eastship disclosed that

petitioners were still in possession. chanroblesvirtualawlibrary chanrobles virtual law library

Upon the facts and issue involved, we uphold the jurisdiction of the Civil
Court. chanroblesvirtualawlibrary chanrobles virtual law library

Replevin is a possessory action, the gist of which is the right of possession in

the plaintiff. The primary relief sought therein is the return of the property in
specie wrongfully detained by another person. It is an ordinary statutory
proceeding to adjudicate rights to the title or possession of personal property
(Francisco, The Revised Rules of Court, Provisional Remedies, 1985, p. 386,
citing 46 Am. Jur. 7). The question of whether or not a party has the right of
possession over the property involved and if so, whether or not the adverse
party has wrongfully taken and detained said property as to require its return
to plaintiff, is outside the pale of competence of a labor tribunal; it is beyond
the field of specialization of Labor Arbiters. chanroblesvirtualawlibrary chanrobles virtual law library

The Trial Court, therefore, rightfully assumed jurisdiction over the Replevin
Case and aptly held that, as charterer of the Vessel, TUNA, Inc. has the better
right of possession and that petitioners' alleged right to possess the Vessel
as the crew thereof is not in any way superior to the right of TUNA, Inc. as
such charterer or lessee. chanroblesvirtualawlibrary chanrobles virtual law library

The labor dispute involved is not intertwined with the issue in the Replevin
Case. The respective issues raised in each forum can be resolved
independently of the other. In fact, on 18 November 1986, the NLRC in the
case before it had issued an Injunctive Writ enjoining petitioners from
blocking the free ingress and egress to the Vessel and ordering petitioners to
disembark and vacate. That aspect of the controversy is properly settled
under the Labor Code. So also with petitioners' right to picket. But the
determination of the question of who has the better right to take possession
of the Vessel and whether petitioners can deprive the Charterer, as the legal
possessor of the Vessel, of that right to possess is addressed to the
competence of Civil Courts. chanroblesvirtualawlibrary chanrobles virtual law library

In thus ruling, this Court is not sanctioning split jurisdiction but defining
avenues of jurisdiction as laid down by pertinent laws. chanroblesvirtualawlibrary chanrobles virtual law library

The Court takes note that petitioners have defied not only the Writ of Replevin
issued by the Civil Court but also the Injunction ordered by the NLRC.
Petitioners must be reminded that rights are not their exclusive prerogative
but are enjoyed by others as well. They must yield to the rule of law and not
rely on the law of force, specially where adjudicative bodies and Courts have

271
ruled upon the merits of their claims although adversely to them. chanroblesvirtualawlibrary chanrobles
virtual law library

WHEREFORE, the judgment under review is hereby AFFIRMED and petitioners

are hereby ORDERED to disembark from the F/B Caribbean and to turn over
possession of said vessel to private respondent Philippine Tuna Ventures,
Inc., without prejudice to the continued prosecution of their demands for
labor benefits before the labor tribunal, which will surely be protective of their
just deserts. The Temporary Restraining Order issued by this Court on 17
September 1986 is hereby LIFTED. Treble costs against
petitioners. chanroblesvirtualawlibrary chanrobles virtual law library

This judgment is immediately executory. chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.

272
FIRST DIVISION

G.R. No. L-47739 June 22, 1983

SINGAPORE AIRLINES LIMITED, petitioner,

vs.
HON. ERNANI CRUZ PAÑO as Presiding Judge of Branch XVIII, Court
of First Instance of Rizal, CARLOS E. CRUZ and B. E.
VILLANUEVA, respondents.

Bengzon, Zarraga, Narciso, Cudala Pecson, Azucena & Bengzon Law Offices
for petitioner.

Celso P. Mariano Law Office for private respondent Carlos Cruz.

Romeo Comia for private respondent B. E. Villanueva.

MELENCIO-HERRERA, J.:

On the basic issue of lack of jurisdiction, petitioner company has elevated to

us for review the two Orders of respondent Judge dated October 28, 1977
and January 24, 1978 dismissing petitioner's complaint for damages in the
first Order, and denying its Motion for Reconsideration in the second.

On August 21, 1974, private respondent Carlos E. Cruz was offered

employment by petitioner as Engineer Officer with the opportunity to undergo
a B-707 I conversion training course," which he accepted on August 30, 1974.
An express stipulation in the letter-offer read:

3. BONDING. As you win be provided with conversion training you

are required to enter into a bond with SIA for a period of 5 years.
For this purpose, please inform me of the names and addresses of
your sureties as soon as possible.

Twenty six days thereafter, or on October 26, 1974, Cruz entered into an
"Agreement for a Course of Conversion Training at the Expense of Singapore
Airlines Limited" wherein it was stipulated among others:

4. The Engineer Officer shall agree to remain in the service of the

Company for a period of five years from the date of
commencement of such aforesaid conversion training if so required
by the Company.

5. In the event of the Engineer Officer:

1. Leaving the service of the company during

the period of five years referred to in Clause 4
above, or

2. Being dismissed or having his services

terminated by the company for misconduct,
273
the Engineer Officer and the Sureties hereby bind themselves
jointly and severally to pay to the Company as liquidated damages
such sums of money as are set out hereunder:

(a) during the first year of the period of five years

referred to in Clause 4 above
.............................................................................
......... $ 67,460/

(b) during the second year of the period of five years

referred to in Clause 4 above
.............................................................................
.... $ 53,968/

(c) during the third year of the period of five years

referred to in Clause 4 above
.............................................................................
......... $ 40,476/

(d) during the fourth year of the period of five years

referred to in Clause 4 above
.............................................................................
..... $ 26,984/

(e) during the fifth year of the period of five years

referred to in Clause 4 above
.............................................................................
.......... $ 13,492/

6. The provisions of Clause 5 above shall not apply in a case where

an Engineer Officer has his training terminated by the Company for
reasons other than misconduct or where, subsequent to the
completion of training, he -

1. loses his license to operate as a Flight Engineer due

to medical reasons which can in no way be attributable
to any act or omission on his part;

2. is unable to continue in employment with the

Company because his employment pass or work permit,
as the case may be, has been withdrawn or has not been
renewed due to no act or omission on his part;

3. has his services terminated by the Company as a

result of being replaced by a national Flight Engineer;

4. has to leave the service of the Company on valid

compassionate grounds stated to and accepted by the
Company in writing. 1

Cruz signed the Agreement with his co-respondent, B. E. Villanueva, as

surety.

274
Claiming that Cruz had applied for "leave without pay" and had gone on leave
without approval of the application during the second year of the Period of
five years, petitioner filed suit for damages against Cruz and his surety,
Villanueva, for violation of the terms and conditions of the aforesaid
Agreement. Petitioner sought the payment of the following sums: liquidated
damages of $53,968.00 or its equivalent of P161,904.00 (lst cause of action);
$883.91 or about P2,651.73 as overpayment in salary (2nd clause of action);
$61.00 or about P183.00 for cost of uniforms and accessories supplied by the
company plus $230.00, or roughly P690.00, for the cost of a flight manual
(3rd cause of action); and $1,533.71, or approximately P4,601.13
corresponding to the vacation leave he had availed of but to which he was no
longer entitled (4th cause Of action); exemplary damages attorney's fees;
and costs.

In his Answer, Cruz denied any breach of contract contending that at no time
had he been required by petitioner to agree to a straight service of five years
under Clause 4 of the Agreement (supra) and that he left the service on "valid
compassionate grounds stated to and accepted by the company so that no
damages may be awarded against him. And because of petitioner-plaintiff's
alleged ungrounded causes of action, Cruz counterclaimed for attorney's fees
of P7,000.00.

The surety, Villanueva, in his own Answer, contended that his undertaking
was merely that of one of two guarantors not that of surety and claimed the
benefit of excussion, if at an found liable. He then filed a cross-claim against
Cruz for damages and for whatever amount he may be held liable to
petitioner-plaintiff, and a counterclaim for actual, exemplary, moral and other
damages plus attorney's fees and litigation expenses against petitioner-
plaintiff.

The issue of jurisdiction having been raised at the pre-trial conference, the
parties were directed to submit their respective memoranda on that question,
which they complied with in due time. On October 28, 1977, respondent
Judge issued the assailed Order dismissing the complaint, counterclaim and
cross-claim for lack of jurisdiction stating.

2. The present case therefore involves a money claim arising from

an employer-employee relation or at the very least a case arising
from employer-employee relations, which under Art. 216 of the
Labor Code is vested exclusively with the Labor Arbiters of the
National Labor Relations Commission. 2

Reconsideration thereof having been denied in the Order of January 24, 1978,
petitioner availed of the present recourse. We gave due course.

We are here confronted with the issue of whether or not this case is properly
cognizable by Courts of justice or by the Labor Arbiters of the National Labor
Relations Commission.

Upon the facts and issues involved, jurisdiction over the present controversy
must be held to belong to the civil Courts. While seemingly petitioner's claim
for damages arises from employer-employee relations, and the latest
275
amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg.
130 provides that all other claims arising from employer-employee
relationship are cognizable by Labor Arbiters, 3 in essence, petitioner's claim
for damages is grounded on the "wanton failure and refusal" without just
cause of private respondent Cruz to report for duty despite repeated notices
served upon him of the disapproval of his application for leave of absence
without pay. This, coupled with the further averment that Cruz "maliciously
and with bad faith" violated the terms and conditions of the conversion
training course agreement to the damage of petitioner removes the present
controversy from the coverage of the Labor Code and brings it within the
purview of Civil Law.

Clearly, the complaint was anchored not on the abandonment per se by

private respondent Cruz of his job as the latter was not required in the
Complaint to report back to work but on the manner and consequent
effects of such abandonment of work translated in terms of the damages
which petitioner had to suffer.

Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines
Melale Veneer & Plywood, Inc.4 the pertinent portion of which reads:

Although the acts complied of seemingly appear to constitute

"matter involving employee employer" relations as Quisaba's
dismiss was the severance of a pre-existing employee-employer
relations, his complaint is grounded not on his dismissal per se, as
in fact he does not ask for reinstatement or backwages, but on the
manner of his dismiss and the consequent effects of such

Civil law consists of that 'mass of precepts that determine or

regulate the relations ... that exist between members of a society
for the protection of private interest (1 Sanchez Roman 3).

The "right" of the respondents to dismiss Quisaba should not be

confused with the manner in which the right was exercised and the
effects flowing therefrom. If the dismiss was done anti-socially or
oppressively, as the complaint alleges, then the respondents
violated article 1701 of the Civil Code which prohibits acts of
oppression by either capital or labor against the other, and article
21, which makers a person liable for damages if he wilfully causes
loss or injury to another in a manner that is contrary to morals,
good customs or public policy, the sanction for which, by way of
moral damages, is provided in article 2219, No. 10 (Cf, Philippine
Refining Co. vs. Garcia, L-21962, Sept. 27, 1966, 18 SCRA 107).

Stated differently, petitioner seeks protection under the civil laws and claims
no benefits under the labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded
are not labor benefits demanded by workers generally taken cognizance of in
labor disputes, such as payment of wages, overtime compensation or
separation pay. The items claimed are the natural consequences flowing from
breach of an obligation, intrinsically a civil dispute.

276
Additionally, there is a secondary issue involved that is outside the pale of
competence of Labor Arbiters. Is the liability of Villanueva one of suretyship
or one of guaranty? Unquestionably, this question is beyond the field of
specialization of Labor Arbiters.

WHEREFORE, the assailed Orders of respondent Judge are hereby set aside.
The records are hereby ordered remanded to the proper Branch of the
Regional Trial Court of Quezon City, to which this case belongs, for further
proceedings. No costs.

SO ORDERED.

277
FIRST DIVISION

[G.R. Nos. 71695-703. May 20, 1986.]

ASIAN FOOTWEAR & RUBBER CORPORATION, Petitioner, v.

ANTONIO P. SORIANO, in his capacity as Deputy Sheriff of the
Arbitration Branch, National Capital Region, National Labor
Relations Commission, HON. BENIGNO L. VIVAR, JR., in his capacity
as Executive Labor Arbiter, Arbitration Branch, National Capital
Region, National Labor Relations Commission, and JACINTO
RUBBER FREE WORKERS ASSOCIATION, Respondents.

Francisco B. Bayona for Petitioner.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; WRIT OF EXECUTION;

UNAVAILING TO AN ENTITY NOT PARTY TO THE CASE. — The petition recites
that it had "been operating business operations peacefully until May 16,
1985, when surprisingly, respondent Deputy Sheriff Antonio P. Soriano,
together with some policemen and other persons went to the premises of
petitioner Asian Footwear & Rubber Corporation to enforce an Alias Writ of
Execution issued by the respondent Hon. Benigno L. Vivar, Jr., Executive
Labor Arbiter, in NLRC — NCR case no. AB-9-8414-80; 8415-80; AB-12-
9286-80; 9287-80; 9288-80; 9289-80; 9290-80; 9291-80; and AB-9-
10596-80, entitled ‘Jacinto Rubber Free Workers Association — versus —
Jacinto Rubber & Plastics Co. Inc.,’ carbon copy of said Alias Writ of Execution
is hereto attached as Annex F." (Rollo, p. 5.) Annex F is a writ of execution
issued by respondent Vivar on May 8, 1985, commanding the Acting Sheriff
of the National Labor Relations Commission, National Capital Region, "to
proceed to the premises of respondent Jacinto Rubber and Plastics Company,
Inc., located at 5th Avenue, Grace Park, Caloocan City or c/o Hermogenes
Jacinto, Jr. of No. 34 Valle Verde Gate 2, Pasig, Metro Manila, and collect the
amount of seven hundred sixty five thousand nine hundred ninety eight pesos
and ninety nine centavos (P765,998.99) representing complainants’ gratuity
pay. If you fail to collect the said amount in cash, you may cause the full
satisfaction of this writ out of the movable goods and chattel, or in the
absence thereof, the immovable properties of the respondent not exempt
from execution." (Rollo, p. 54.) ASIAN resisted the writ of execution issued
on May 8, 1985 on the ground that the properties sought to be levied were
its own and not JACINTO’s. The sheriff reported ASIAN’s posture to Vivar and
in a conference with ASIAN he verbally intimated that ASIAN was a purchaser
in bad faith so that the writ of execution could be enforced against it. Hence,
the instant petition. The record shows that when ASIAN bought JACINTO
properties, the latter had already stopped its business operations. In fact, it
had applied with the Ministry of Labor for clearance for a total shotdown.
Moreover, at the time of the sale the only lien annotated on the certificates
of title was the mortgage in favor of the Philippine Banking Corporation
executed by JACINTO. Finally, there is nothing to show that ASIAN is JACINTO
278
by another name. If there is nonetheless suspicion that the sale of the
JACINTO properties to ASIAN was not in good faith, i.e. was made in fraud of
creditors, a government functionary like the respondent labor arbiter is
incompetent to make a determination. The task is judicial and the
proceedings must be adversary.

DECISION

ABAD SANTOS, J.:

This is a petition to review the actuations of respondent Benigno L. Vivar, Jr.,

in his capacity as Executive Labor Arbiter of the National Capital Region. It is
alleged that he "acted without jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction in imprudently and indiscriminately
enforcing the aforesaid Alias Writ of Execution against the petitioner who has
no obligation whatsoever to the private Respondent." (Rollo, p. 13.) We
issued a temporary restraining order on September 25, 1985, which must
now be made permanent because the petition is impressed with merit.

Asian Footwear and Rubber Corporation (ASIAN), the petitioner, is engaged

in the manufacture of footwear. Its work force consists of about 500 persons.

On November 10, 1980, ASIAN bought from Jacinto Rubber and Plastics Co.,
Inc. (JACINTO) eight (8) parcels of land together with the permanent
improvements thereon. The purchase price was P450.00 per square meter
plus assumption by ASIAN of JACINTO’s obligation to the Philippine Banking
Corporation in the amount of P2,284,932.11. (Annex A.) By November 28,
1980, ASIAN had obtained transfer certificates of title to the lands which it
had bought.

The petition recites that it had "been operating business operations peacefully
until May 16, 1985, when surprisingly, respondent Deputy Sheriff Antonio P.
Soriano, together with some policemen and other persons went to the
premises of petitioner Asian Footwear & Rubber Corporation to enforce an
Alias Writ of Execution issued by the respondent Hon. Benigno L. Vivar, Jr.,
Executive Labor Arbiter, in NLRC — NCR case No. AB-9-8414-80; 8415-80;
AB-12-9286-80; 9287-80, 9288-80; 9289-80; 9290-80; 9291-80; and AB-
9-10596-80, entitled ‘Jacinto Rubber Free Workers Association — versus —
Jacinto Rubber & Plastics Co., Inc.,’ carbon copy of said Alias Writ of Execution
is hereto attached as Annex F." (Rollo, p. 5.) Annex F is a writ of execution
issued by respondent Vivar on May 8, 1985, commanding the Acting Sheriff
of the National Labor Relations Commission, National Capital Region, "to
proceed to the premises of respondent Jacinto Rubber and Plastics Company,
Inc., located at 5th Avenue, Grace Park, Caloocan City or c/o Hermogenes
Jacinto, Jr. of No. 34 Valle Verde Gate 2, Pasig, Metro Manila, and collect the
amount of seven hundred sixty five thousand nine hundred ninety eight pesos

279
and ninety nine centavos (P765,998.99) representing complainants’ gratuity
pay. If you fail to collect the said amount in cash, you may cause the full
satisfaction of this writ out of the movable goods and chattel, or in the
absence thereof, the immovable properties of the respondent not exempt
from execution." (Rollo, p. 54.)

ASIAN resisted the execution on the ground that the properties sought to be
levied were its own and not JACINTO’s. The sheriff reported ASIAN’s posture
to Vivar and in a conference with ASIAN he verbally intimated that ASIAN
was a purchaser in bad faith so that the writ of execution could be enforced
against it. Hence, the instant petition.

The record shows that when ASIAN bought the JACINTO properties, the latter
had already stopped its business operations. In fact, it had applied with the
Ministry of Labor for clearance for a total shotdown. Moreover, at the time of
the sale the only lien annotated on the certificates of title was the mortgage
in favor of the Philippine Banking Corporation executed by JACINTO. Finally,
there is nothing to show that ASIAN is JACINTO by another name.

In the light of the foregoing, if there is nonetheless suspicion that the sale of
the JACINTO properties to ASIAN was not in good faith, i.e. was made in
fraud of creditors, a government functionary like the respondent labor arbiter
is incompetent to make a determination. The task is judicial and the
proceedings must be adversary.

WHEREFORE, the petition is granted and the respondents are directed to

desist from enforcing the alias writ of execution against the properties of the
petitioner. Costs against the private respondents.

SO ORDERED.

280
281
SECOND DIVISION

G.R. No. L-36385 July 25, 1979

ARCADIO R. TOLENTINO, petitioner,

vs.
HON. AMADO INCIONG, as Chairman of the National Labor Relations
Commission and DOMINGO CINCO, respondents.

Pedro N. Belmi for petitioner.

Porfirio E. Villanueva & Julio F. Andres, Jr. for the Public respondent.

Domingo Cinco for himself as private respondent.

FERNANDO, C.J.:

The facts of this suit for prohibition with preliminary injunction speak for
themselves. They demonstrate beyond doubt that the remedy prayed for
must be granted. This litigation started with private respondent Domingo
Cinco filing a verified complaint on December 12, 1972 with the then National
Labor Relations Commission, charging petitioner Arcadio R. Tolentino with
violating the constitution of the Batangas Labor Union by refusing, as its
president, to call for the election of officers in the month of November, 1972,
and praying that such election be conducted immediately. 1 Upon receipt of
such verified complaint on January 9, 1973, petitioner on the same date sent
an urgent telegram to the respondent National Labor Relations Commission
for the cancellation of the hearing of such complaint set for January 12, 1973
as he had to appear on that very day before the then Court of Industrial
Relations, a formal motion to such effect being filed on January 11,
1973. 2 Petitioner was not informed of the action taken on such motion;
instead, he was notified that on January 30, 1973, respondent National Labor
Relations Commission issued an order directing the Batangas Labor Union "to
hold its election of officers within twenty (20) days from receipt" thereof "in
accordance with its constitution and by-laws under the supervision of the
Registrar of Labor Relations who shall thereafter report the result to the said
respondent National Labor Relations Commission." 3 Petitioner received on
February 5, 1973 a copy of such order and on February 8, 1973, filed a motion
for reconsideration, alleging that as the Batangas Labor Union, which has a
separate and distinct personality from the herein' petitioner was not a party
in the case before respondent Commission, the due process guarantee was
not observed in the issuance thereof and that the subject matter of such
complaint is not one of those enumerated under the Rules of the respondent
National Labor Relations Commission. 4 As such motion for reconsideration
was not acted upon despite repeated requests, petitioner filed a notice of
appeal on February 20, 1973 with the Secretary of Labor, praying at the same
time that the pre-election conference set on February 22, 1973 and the
election scheduled for March 3, 1973 be suspended in the
meanwhile. 5 Respondent National Labor Relations Commission, thru its then
Chairman, Amado G. Inciong, informed the herein petitioner that the
282
elections of officers of the Batangas Labor Union would proceed as scheduled
on March 3, 1973, and, as a matter of fact, notices of the said elections for
March 3, 1979 were posted in different places within the premises of the
Central Azucarera Don Pedro Lumbangan, Nasugbu, Batangas. the place of
employment. 6

Subsequently, on February 26, 1973, the Batangas Labor Union filed a

petition with the Court of First Instance of Batangas, Branch No. VII, Balayan,
Batangas, docketed as Civil Case No. 942 for prohibition with a writ of
preliminary injunction, against the respondent Domingo Cinco and the
National Labor Relations Commission and the Secretary of Labor, seeking to
annul the order of January 30, 1973 and to prohibit the respondent National
Labor Relations Commission and the Secretary of Labor from enforcing
it. 7 The court of first instance then presided by Judge Jaime delos Angeles,
now retired, did not grant the writ of preliminary injunction ex parte as
prayed for in the petition but instead set the application thereof for hearing
on March 1, 1973 with due notice to all the parties, with neither the
Commission nor the then Secretary of Labor appearing through counsel,
although petitioner did. 8 After such hearing, Judge Jaime delos Angeles
reserved his resolution on the matter at issue in view of the intricate legal
questions raised therein. 9 On the same date, shortly before noon and within
the court premises, petitioner was served with a copy of a subpoena dated
February 28, 1973 issued by respondent Amado Inciong, Chairman of the
then National Labor Relations Commission, requiring him to appear at the
National Labor Relations Commission, Department of Labor, 3rd Floor,
Phoenix Building, Intramuros, Manila, on March 2, 1973, at 2:00 o'clock in
the afternoon to explain why he should not be held in contempt for trying to
use old society tactics to prevent a union election duly ordered by the
Commission under Presidential Decree 21 and, with Judge Jaime delos
Angeles, at the same time and date, more or less, being served with a copy
of the subpoena also requiring him to appear likewise before the respondent
National Labor Relations Commission, to explain why he should not be held
in contempt for trying to use old society tactics to prevent a union election
duly ordered by the Commission under the aforesaid Presidential Decree
21. 10

The case was filed on. March 2, 1973 and on March 6, 1973, this Court issued
this resolution: "Considering the allegations contained, the issues raised and
the arguments adduced in the petition for prohibition with preliminary
injunction, the Court Resolved: (a) to require the respondents to file an
[answer] thereto within ten (10) days from notice hereof, and not to move
to dismiss the petition; and (b) to have a [temporary restraining order
issued], effective immediately until further orders from this Court." 11 There
was a letter from respondent Inciong dated March 14, 1973, received in the
Supreme Court on March 15 which, to say the least, is impressed with
unorthodoxy. It reads in fun as follows: "This refers to your summons in
connection with G. R. No. L-3638.5 requiring me to file an answer to the
petition for prohibition of the preliminary injunction within ten (10) days from
notice. First of all the issue is not [sic] academic since we do not intend to
continue with the contempt proceedings against petitioner Arcadio Tolentino.
The union election has been held in accordance with our order and the winner
283
duly proclaimed. Second, the Supreme Court has no jurisdiction over us.
Enclosed is a copy of Presidential Decree 21 for your information and
guidance. Third, under the New Society, we are evolving a de-legalized labor
management system in this country, and we expect the fullest cooperation
of the Supreme Court in this endeavor." 12 Accordingly, the Supreme Court,
in March 22, 1973, took him to task in this resolution: "Considering the letter
of Chairman Amado G. Inciong of the National Labor Relations Commission,
filed with reference to the resolution of March 6, 1973, requiring the
respondents to answer the petition herein, stating in chief that the issue
evolved in this case is now academic and that the Court has no jurisdiction
over the Commission in view of the Presidential Decree No. 21, the Court
Resolved: (a) to [expunge] said letter from the records of this case; and (b)
to require said respondent to [comply] with this Court's resolution of March
6, 1973, within five (5) days from notice hereof. Let the Secretary of Labor
be [furnished] with a copy of the letter of Chairman Amado Inciong and the
resolution of March 6, 1973." 13 An answer was filed on April 2, 1973, counsel
for respondent Inciong reiterating that the case had become moot and
academic as he had no intention of enforcing the contempt citation and
alleging that the power to punish for contempt was provided for under
Sections 7 and 10 of Presidential Decree No. 21. 14 Both petitioner and
respondents were required to submit their respective memoranda, but as
neither did so, the case was deemed submitted for decision.

As set forth at the outset, prohibition lies.

1. Ordinarily, the plea that a case had become moot and academic would be
granted. Had respondent Inciong made clear that he would quash the
contempt citation, then this litigation could have been terminated. Instead,
what was set forth by him in the letter had to be expunged, not so much
because of its offensive tone but much more so by its lack of appreciation for
what the law ordains. There was no retreat from his indefensible position. All
that was alleged was that he would not enforce the contempt citation. The
answer filed by him was of the same tenor. It is understandable then why
this Court in the resolution above-cited, as wen as in the resolution requiring
that memoranda be submitted by the parties, was of the belief that the legal
issues presented should be decided.

2. We start with a fundamental postulate. As set forth in Villegas v.

Subido: 15 "Nothing is better settled in the law than that a public official
exercises power, not rights. The government itself is merely an agency
through which the will of the State is express and enforced. Its officers
therefore are likewise agents entrusted with the responsibility of discharging
its functions. As such there is no presumption that they are empowered to
act. There must be a delegation of such authority, either express or implied.
In the absence of a valid grant, they are devoid of power. What they do
suffers from a fatal infirmity. That principle cannot be sufficiently stressed.
... Neither the high dignity of the office nor the righteousness of the motive
then is an acceptable substitute. Otherwise the rule of law becomes a myth.
Such an eventuality, we must take all pains to avoid." 16 The undeniable
concern of respondent Inciong that the objectives of Presidential Decree No.
21 be attained thus afforded no warrant for exercising a power not conferred
284
by such decree. He ought to have known that the competence, "to hold any
person in contempt for refusal to comply" 17 certainly cannot extend to a
judge of the court of first instance. Correctly construed, it cannot cover the
case likewise of a party to a controversy who took the necessary steps to
avail himself of a judicial remedy. It must ever be borne in mind by an
administrative official that courts exist precisely to assure that there be
compliance with the law. That is the very essence of a judicial power. So the
rule of law requires. It is true that courts, like any other governmental
agencies, must observe the limits of its jurisdiction. In this particular case, it
is admitted that the then Judge Jaime delos Angeles, after hearing the
arguments on the propriety of issuing the writ of preliminary injunction
prayed for, reserved his resolution in view of the intricacies of the legal
questions raised. 18 The proper step for an administrative official then is to
seek a dismissal of the case before the court precisely on the ground that the
matter did not fall within the domain of the powers conferred on it. Instead,
respondent Inciong took the precipitate step of citing him for contempt. That
was an affront to reason as well as a disregard of well-settled rules. Neither
was there any contumacious act committed by petitioner in seeking judicial
remedy. It would be a reproach to any legal system if an individual is denied
access to the courts under these circumstances. The resort of respondent
Inciong to what has been derisively referred to as epithetical jurisprudence,
seeking shelter in the opprobrious term "old society tactics," is an implied
admission of his actuation being devoid of support in law. As was so well
stated by Chief Justice Hughes: "It must be conceded that departmental zeal
may not be permitted to outrun the authority conferred by statute." 19

3. WHEREFORE, the writ of prohibition is granted and the assailed order of

February 28, 1973, citing the then Judge Jaime delos Angeles, as well as
petitioner Arcadio R. Tolentino for contempt, declared void and of no force or
effect, both orders having been issued beyond the power of respondent
Amado Inciong to issue. The temporary restraining order issued by this Court
on March 6, 1973 is hereby made permanent.

285
286
FIRST DIVISION

G.R. No. L-39084 February 23, 1988

PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS

(PAFLU), petitioner,
vs.
EMILIO V. SALAS, Judge of the Court of First Instance of Rizal,
Seventh Judicial District, Branch I, Pasig, Rizal and WONG KING
YUEN, respondents.

GANCAYCO, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court.

The record of the case discloses that the herein petitioner Philippine
Association of Free Labor Unions (PAFLU) is a labor organization registered
with the Department of Labor and Employment. Sometime in 1963, the
petitioner filed a Complaint for unfair labor practice with the then Court of
Industrial Relations (CIR) against the Northwest manufacturing Corporation
and a certain Gan Hun. The suit was docketed as Case No. 3901-ULP.

On September 25, 1972, the CIR rendered a Decision in favor of the petitioner
labor organization. Pursuant to a writ of execution issued by the CIR, the
provincial sheriff of Rizal commenced levying the personal properties of the
said Gan Hun, particularly the properties found in his residential apartment
unit in San Juan, then a town of Rizal province.

The herein private respondent Wong King Yuen however, claims that Gan
Hun is his boarder in the apartment unit mentioned earlier and that the
properties inside the apartment unit levied by the provincial sheriff belong to
him and not to Gan Hun.

Thus, on October 18, 1973, the private respondent filed a Complaint for
damages with the then Court of First Instance (CFI) of Rizal against the
provincial sheriff. The suit was docketed as Civil Case No. 18460. The amount
of money involved in the said case is about P24,680.00.

As sought by the private respondent, the CFI, with the herein respondent
Judge Emilio V. Salas presiding therein, issued an injunctive writ restraining
the provincial sheriff from proceeding with the sale of the properties in
question.

After having been allowed by the CFI to intervene in Civil Case No. 18460,
the petitioner labor organization sought to dismiss the Complaint on the
ground that the said court had no jurisdiction over the case filed by the
private respondent.1 The petitioner argued that Civil Case No. 18460 relates
to an existing labor dispute and as such the proper forum for the same is the
industrial court.

In an Order dated July 9, 1974, the CFI denied the Motion to Dismiss filed by
the petitioner. 2 The petitioner sought a reconsideration of the said case but
did not succeed in doing so. 3
287
On August 8, 1974, the petitioner elevated the case to this Court by way of
the instant Petition.4 The petitioner maintains its stand that the CFI has no
jurisdiction over Civil Case No. 18460.

In an Answer filed with this Court on August 29, 1974, the private respondent
contends that Civil Case No. 18460 is not a labor dispute recognizable by the
industrial court. The private respondent points out that Civil Case No. 18460
is an ordinary civil action for damages against the provincial sheriff and
directed against the sheriffs bond required under Section 17, Rule 39 of the
Rules of Court. The private respondent adds that it is an entirely separate
proceeding distinct from the labor case filed with the CIR and that,
accordingly, it is the Court of First Instance which has jurisdiction over the
same.5

After a careful examination of the entire record of the case, We find that
instant Petition to be devoid of merit.

The sole issue in this case is whether or not the CFI has the jurisdiction to
issue the injunctive relief questioned by the petitioner. We rule in the
affirmative.

It is clear that Civil Case No. 18460 is an ordinary civil action for damages,
not a labor dispute. The case is directed against the provincial sheriff and the
recovery of damages is sought against the bond provided for Section 17, Rule
39 of the Rules of Court governing execution and satisfaction of judgments.

Even if the act complained of by the private respondent arose from a labor
dispute between the petitioner and another party, the inevitable conclusion
remains the same — there is no labor dispute between the petitioner and the
private respondent. Civil Case No. 18460 has no direct bearing with the case
flied with the industrial court. The civil case remains distinct from the labor
dispute pending with the CIR.

Under Commonwealth Act No. 103, the law creating the Court of Industrial
Relations, the jurisdiction of the industrial court is limited to labor
disputes. i.e., problems and controversies pertaining to the relationship
between employer and employee. Section I thereof provides as follows —

Sec. 1. Jurisdiction. — There is created a Court of Industrial

Relations hereinafter called the court, which shall have jurisdiction
over the entire Philippines to consider, investigate, decide and
settle all questions, matters, controversies, or disputes arising
between, and/or affecting employers and employees or
laborers, and regulate the relations between them, . . . . (Emphasis
supplied.)

From the foregoing, it is clear that the jurisdiction of the CIR can be invoked
only when there is a dispute arising between or affecting employers and
employees, or when an employer-employee relationship exists between the
parties.

288
There being no labor dispute between the petitioner and the private
respondent, the Court of First Instance 6 has the jurisdiction to issue the
injunctive relief sought by the private respondent in Civil Case No.
18460.7 The latter case can proceed independently of the case pending in the
Court of Industrial Relations. 8

Accordingly, the writ of certiorari sought by the petitioner cannot issue.

WHEREFORE, in view of the foregoing, the instant Petition for certiorari is

hereby DISMISSED for lack of merit. We make no pronouncement as to costs:

SO ORDERED.

289
SECOND DIVISION

G.R. No. 172584 November 28, 2008

EDMUNDO Y. TORRES, JR. and MANUEL C. CASTELLANO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION,
and SAN MIGUEL CORPORATION, respondents.

DECISION

TINGA, J.:

Petitioners assail the Decision1 of the Court of Appeals in CA-G.R. SP No.

77489 dated July 5, 2005, which affirmed the Decision2 and Resolution3 of
the National Labor Relations Commission (NLRC) in NLRC Case No. V-
000593-2000, and its Resolution4 dated April 11, 2006, denying
reconsideration.

The undisputed facts are narrated by the Court of Appeals as follows:

The petitioners Edmundo Y. Torres and Manuel C. Castellano are former

Regional Sales Manager and District Sales Supervisor, respectively, of
private respondent San Miguel Corporation (SMC), Bacolod Beer Region,
Sum-ag, Bacolod City.

The petitioners were among the many employees of the private

respondent who retired from employment effective on April 15, 1984
pursuant to private respondent SMC’s Retirement Plan. Believing that
they were constructively forced to retire from employment and that their
separation from employment was illegal, on March 14, 1984, the
petitioners, along with other separated employees, filed a complaint for
illegal dismissal against SMC with the National Labor Relations
Commission (NLRC), Regional Arbitration Branch No. VI, Bacolod City.
The case was docketed as RAB-VI Case No. 0372-84. It was assigned to
then Labor Arbiter Oscar S. Uy for the proper disposition thereof.
Proceedings were conducted by the said labor arbiter.

After the petitioners and private respondent SMC had presented their
evidence and position papers, the case was considered as submitted for
decision.

On September 16, 1988, Labor Arbiter Oscar S. Uy rendered a Decision

in RAB-VI Case No. 0372-84 dismissing all the claims of the petitioners
against the respondent SMC, ratiocinating as follows:

xxx

WHEREFORE, premises considered, judgment is hereby rendered

DISMISSING all the claims of the complainants’ against the
respondent for lack of merit.

SO ORDERED.
290
On October 21, 1988, petitioners (complainants in RAB-VI-Case No.
0372-84) appealed from the aforesaid Decision to public respondent
NLRC, Fourth Division in Cebu City which, on August 21, 1992, handed
down a Decision reversing in part that of the Labor Arbiter, disposing as
follows:

WHEREFORE, in view of the foregoing, the appealed Decision is

hereby SET ASIDE, and another one entered declaring the
complainants Gabriel Z. Abad, George A. Teddy, Jr. and Manuel J.
Chua to have been validly retired. Respondent San Miguel
Corporation is hereby ordered to immediately reinstate
complainants Manuel C. Castellano and Edmundo Y. Torres, Jr. to
their former or equivalent positions without loss of seniority rights
and to pay complainants Manuel C. Castellano the amount
of P73,905.84 and Edmundo Y. Torres, Jr. the
amount P108,915.00 representing their back salaries for three (3)
years after deducting the sum of P47,954.16 and P75,255.00 they
received as retirement pay.

SO ORDERED.

Not satisfied with the above-quoted Decision of the NLRC, private

respondent SMC filed a Motion for Reconsideration, but the same was
denied by the NLRC in its Resolution dated October 19, 1992.
Consequently, it appealed from the same through a petition for certiorari
to the Supreme Court which, on July 23, 1998, rendered a Decision
affirming in toto that of the NLRC. The dispositive portion of the
Supreme Court Decision reads as follows:

WHEREFORE, for lack of merit, the petition is hereby DISMISSED

and the assailed Decision of the NLRC dated August 21, 1992 is
affirmed in its entirety. No pronouncement as to cost.

SO ORDERED.

Subsequently, the aforesaid Decision of the Supreme Court became final

and executory on March 22, 1999, as evidenced by the Entry of
Judgment issued by it. So, on August 11, 1999, the petitioners filed a
Motion for Execution of the Decision in their favor at the Regional
Arbitration Branch VI, Bacolod City.

As a consequence, private respondent SMC partially complied with the

Decision by paying the monetary awards in favor of the petitioners
Torres and Castellano in the amounts of P108,915.00 and P73,905.84,
respectively, representing their back salaries for three (3) years after
deducting the sums of P75,255.00 and P47,954.16 that they received,
respectively, from SMC as Retirement Pay.

Then, the petitioners, in an effort to cause the amendment of the 1992

NLRC Decision, filed a Motion for Computation and Satisfaction of Back
Salaries, praying for the issuance of an Order directing the private
respondent SMC to pay them the sums of P9,218,205.00
291
and P5,268,455.50 respectively, representing purportedly their back
salaries and other benefits from September 9, 1992 up to November
1999 with the corresponding prayer for the issuance of a Writ of
Execution for the satisfaction thereof, invoking the Supreme Court ruling
in Pioner Texturizing Corporation v. NLRC, G.R. No. 118651, October
16, 1997, granting full back wages to illegally dismissed employees.

On November 23, 1999, the private respondent SMC filed its Opposition
to petitioners’ Motion for Computation and Satisfaction of Back Salaries
by arguing, among others, that the petitioners’ claim has no legal basis
considering that, in the final and executory Decision of public respondent
NLRC, dated August 21, 1992, which was already affirmed by the
Supreme Court, petitioner Castellano was merely awarded the amount
of P73,905.84, while petitioner Torres, Jr. was awarded the mount
of P108,915.00, representing their back salaries for three (3) years after
deducting the sums of P47,954.16 and P75,255.00 respectively, that
they received as retirement pay from SMC.

Surprisingly, on December 27, 1999, the Executive Labor Arbiter Oscar

S. Uy, thinking that he had the corresponding authority, issued an Order
granting the petitioners’ Motion for Computation of Back Salaries, the
dispositive portion of which reads:

PREMISES CONSIDERED, respondent San Miguel Corporation thru

its authorized agent/s and/or personnel is hereby ordered to pay
complainants EDMUNDO Y. TORRES, JR. and MANUEL
CASTELLANO the sum of P9,218,205.00 and P5,268,455.00
respectively within ten (10) days from receipt of this Order.

SO ORDERED.

Aggrieved, private respondent SMC appealed from the aforesaid Order

of the Executive Labor Arbiter to the public respondent NLRC, Fourth
Division in Cebu City.

But again, on February 2, 2000, the petitioners filed another Motion to

direct the private respondent SMC to comply strictly with the 1992 NLRC
Decision relative to their reinstatement with the Executive Labor Arbiter
granted in his Order dated March 15, 2000. The dispositive portion of
the said Order reads as follows:

PREMISES CONSIDERED, the respondent corporation is hereby

ordered to pay Edmundo Y. Torres, Jr. and Manuel C. Castellano
effective January 2000 their monthly basic salary of P60,000.00
and P45,000.00 respectively, within ten (10) days after receipt
hereof.

SO ORDERED.

Private respondent SMC again timely appealed from the aforecited Order
to the public respondent NLRC.

292
On May 18, 2000, the petitioners filed with the Executive Labor Arbiter
Oscar S. Uy a Motion for Execution to enforce or satisfy the latter’s Order
dated March 15, 2000 which the latter granted in his Order dated June
16, 2000, pursuant to which a Writ of Execution was issued at even
date.

On September 12, 2001, public respondent NLRC promulgated a

Decision in two appealed cases filed with it by the private respondent
SMC relative to the 1999 and March 15, 2000. The dispositive portion of
the said Decision reads as follows:

WHEREFORE, the questioned Orders are SET ASIDE and a new one
entered declaring that complainants are NOT entitled to
backwages.

SO ORDERED.

Aggrieved thereby, on October 29, 2001, the petitioners filed a Motion

for Reconsideration of the said Decision. On March 20, 2003, public
respondent NLRC promulgated a Resolution denying the petitioners’
Motion for Reconsideration.

Not satisfied with the foregoing Decision and Resolution promulgated by

the respondent NLRC, the petitioners are assailing them for having been
purportedly promulgated by the said respondent with grave abuse of
discretion.5

The Court of Appeals upheld the decision and resolution of the NLRC.
According to the appellate court, although the NLRC ordered the immediate
reinstatement of petitioners in its August 21, 1992 decision, the order was
not self-executory because the rule decreeing an order for reinstatement
immediately executory was only enunciated by the Court in its decision
in Pioneer Texturizing Corp. v. NLRC6 dated October 16, 1997. Petitioners
should have moved for the issuance of a writ of execution of the NLRC
decision. However, petitioners only moved for the execution of the NLRC
decision on August 11, 1999.

The appellate court further ruled that San Miguel Corporation’s (SMC’s)
retirement plan, under which it has the prerogative to retire its employees
after 20 years of service or upon reaching the age of 60, binds petitioners.
Accordingly, petitioners may no longer be reinstated having already reached
retirement age.

The appellate court denied reconsideration.

Unsurprisingly, petitioners filed the instant Petition for Review on

Certiorari7 dated June 1, 2006, arguing that the Pioneer case has a curative
effect such that upon SMC’s receipt of the August 21, 1992 NLRC decision on
September 9, 1992, it should have informed petitioners whether it would re-
admit them to work under the same terms and conditions prevailing prior to
their dismissal or reinstate them in its payroll. SMC’s failure to so inform them
allegedly entitled them to back salaries from September 9, 1992 until they
293
are effectively reinstated to their previous employment without loss of
seniority rights. Petitioners thus came up with the amounts of P9,218,205.00
and P5,268,455.00 representing their back salaries from September 9, 1992
up to November 8, 1999 when they were reinstated in SMC’s payroll.

Petitioners further aver that they have not been actually or effectively retired
by SMC and are still entitled to reinstatement pursuant to the August 21,
1992 NLRC decision.

SMC, in its Comment8 dated September 1, 2006, argues that petitioners are
effectually seeking the amendment of the Court’s final Decision in San Miguel
Corporation v. NLRC9 which effectively limited their backwages to three (3)
years pursuant to the then prevailing law and jurisprudence. It insists that
Republic Act No. 6715 (R.A. No. 6715), which declared the reinstatement of
illegally dismissed employees to be immediately executory, has no
retroactive effect and cannot benefit petitioners who were dismissed on
March 14, 1984, three years before R.A. No. 6715 took effect on March 21,
1989.

The company also asserts that its retirement plan was acknowledged by this
Court as a valid management prerogative. Petitioners allegedly misled the
Court by their assertion that the retirement plan does not apply to them as
supervisory and sales employees. What the Court clarified as applicable only
to rank and file employees was the reduction of the length of service from 20
years to 15 years.

Petitioners’ Reply10 dated September 8, 2006 is a reiteration of their

arguments.

Art. 223 of the Labor Code, as amended by R.A. No. 6715, provides:

Art. 223. Appeal.–Decisions, awards, or orders of the Labor Arbiter are

final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained only on any of the
following grounds:

..,

In any event, the decision of the Labor Arbiter reinstating a dismissed

or separated employee, insofar as the reinstatement aspect is
concerned, shall immediately be executory, even pending appeal. The
employee shall either be admitted back to work under the same terms
and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement
provided herein.

In its assailed decision, the Court of Appeals ruled that at the time petitioners
were dismissed in 1984, R.A. No. 6715 had not yet been enacted. Further,

294
the Court’s ruling in Maranaw Hotel Resort Corp. v. NLRC,11 holding that in
the absence of an order for the issuance of a writ of execution on the
reinstatement aspect, the employer is under no legal obligation to admit its
illegally dismissed employee back to work, was declared by the appellate
court as still controlling.

The review of jurisprudence outlined in the Pioneer case easily bears out the
appellate court’s decision. In Inciong v. NLRC,12 the Court declared that in
the absence of a provision giving it retroactive effect, the amendment
introduced in the aforequoted provision cannot be applied to the decision of
the labor arbiter rendered three (3) months before R.A. No. 6715 had become
a law. It was under this jurisprudential setting that the August 21, 1992
decision of the NLRC ordering the reinstatement of petitioners was
promulgated.

In the line of cases13 following Inciong, the Court consistently held that
immediate reinstatement is mandated and is not stayed by the fact that the
employer has appealed or posted a cash or surety bond pending appeal.
However, in the Maranaw case, the Court declared that although the
reinstatement aspect of the (labor arbiter’s) decision is immediately
executory, it does not follow that it is self-executory. There must be a writ of
execution which may be issued motu proprio or on motion of an interested
party.

The Court made a complete turn-around in the Pioneer case and declared
that henceforth, an award or order of reinstatement shall be considered self-
executory, such that, after receipt of the decision or resolution ordering the
employee’s reinstatement, the employer has the right to choose whether to
re-admit the employee to work under the same terms and conditions
prevailing prior to his dismissal or to reinstate the employee in the payroll.

It is clear from the foregoing that at the time the August 21, 1992 NLRC
decision was promulgated, the rule commonly adhered to was for a writ of
execution to be issued, either motu proprio or on motion of an interested
party, before the employer may be compelled to admit the employee back to
work or to reinstate him in the payroll, on pain of being liable for the
employee’s salaries. However, at the time the Court’s Decision in San Miguel
Corporation v. NLRC was promulgated on July 23, 1998, the Pioneer case was
already the prevailing rule on the matter and should have been read into the
case. Thus, upon its receipt of our July 23, 1998 Decision affirming the NLRC
decision, SMC should have immediately opted either to re-admit petitioners
or merely reinstate them in the payroll.

Be that as it may, the retirement age of 60 years already attained by

petitioners as early as 1989 for Edmundo Torres, Jr. and 1990 for Manuel
Castellano had set in motion the provisions of SMC’s Retirement Plan which,
we acknowledge, is a valid management prerogative. Ultimately, therefore,
the Court of Appeals was correct in ruling that the reinstatement of
petitioners is no longer feasible. SMC should accordingly take formal steps,
in accordance with its Retirement Plan, to effect petitioners’ retirement.

295
Even so, petitioners should not be compelled to return the salaries and
benefits already received by them on account of the order for reinstatement
adjudged by the NLRC and affirmed by the Court. In Air Philippines
Corporation v. Zamora,14 we held that if an employee was reinstated during
the appeal period but such reinstatement was reversed with finality, the
employee is not required to reimburse whatever salary he received from the
employer. Justice and equity require that we apply the same doctrine to this
case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in

CA-G.R. SP No. 77489 dated July 5, 2005 and its Resolution dated April 11,
2006 are AFFIRMED with the MODIFICATION that petitioners are not required
to refund the amounts received by them from respondent San Miguel
Corporation on account of the reinstatement order of the National Labor
Relations Commission as affirmed by the Court in its Decision dated July 23,
1998. No pronouncement as to costs.

SO ORDERED.

296
297
FIRST DIVISION

G.R. No. L-65377 May 28, 1984

MOLAVE MOTOR SALES, INC., petitioner,

vs.
HON. CRISPIN C. LARON, Presiding Judge of the Regional Trial
Court of Pangasinan, Branch XLIV and PEDRO
GEMENIANO, respondents.

Nuelino B. Ranchez for petitioner.

Santos Areola for private respondent.

MELENCIO-HERRERA, J.:

Respondent Judge, presiding Branch XLIV of the Regional Trial Court in

Dagupan City, had dismissed the case below for lack of jurisdiction and had
denied reconsideration for lack of merit.

Petitioner, PLAINTIFF in the case below, is a corporation engaged in the sale

and repair of motor vehicles in Dagupan City. Private respondent, the
DEFENDANT in the case below, was, or is, the sales manager of PLAINTIFF.
Whether or not there was still a relationship of employer and employee
between the parties when the complaint was filed is an unsettled question
which need not be resolved in this instance.

Alleging that DEFENDANT was a former employee, PLAINTIFF had sued him,
on March 22, 1983, for payment of accounts pleaded as follows:

That during his incumbency as such the defendant caused and

without authority from the plaintiff incurred accounts with the
remaining balances in the total sum of P33,890.38 excluding
interests, arising from

the purchases of vehicles and parts,

repair jobs of his personal cars and

cash advances,

faithful reproductions of the Vehicle Invoice, Debit Memos, Deed of

Absolute Sale, Repair Orders, Charge Invoices, Vouchers,
Promissory Notes, Acknowledgement Letter and Statement of
Account, hereto attached and marked as Annexes "A", "B", "C",
"D", "E", "F", "G", "H", "I", "J", "K", "L", "M", and "N" respectively
and the contents of which being herein additionally pleaded and
made integral parts hereof; (Emphasis supplied)

In his Answer, DEFENDANT denied

298
... that he incurred any unpaid unauthorized accounts with the
plaintiff in the total sum of P33,890.38 excluding interests therefor,
and,

specifically denies under oath that the annexed Vehicle Invoice,

Debits Memos Deed of Absolute Sale, Repair Orders, Charge
Invoices, Vouchers, Promissory Notes, Acknowledgement Letter
and Statement of Account

have remained unpaid as in fact the truth of the matter is as

follows, to wit: (Emphasis supplied)

DEFENDANT further alleged in a counterclaim that he should still be

considered an employee of PLAINTIFF inasmuch as there has been no
application for clearance in regards to his separation.

At the pre-trial conference, the DEFENDANT raised the question of jurisdiction

of the Court stating that PLAINTIFF's complaint arose out of employer-
employee relationship, and he subsequently moved for dismissal. It was then
when respondent Judge dismissed the case finding that the sum of money
and damages sued upon arose from employer-employee relationship and that
jurisdiction belonged to the Labor Arbiter and the NLRC.

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under
paragraph 5 of Article 217 of the Labor Code had jurisdiction over "all other
cases arising from employer-employee relation, unless expressly excluded by
this Code." Even then, the principle followed by this Court was that, although
a controversy is between an employer and an employee, the Labor Arbiters
have no jurisdiction if the Labor Code is not involved. In Medina vs. Castro-
Bartolome, 116 SCRA 597, 604, in negating jurisdiction of the Labor Arbiter,
although the parties were an employer and two employees, Mr. Justice Abad
Santos stated:

The pivotal question to Our mind is whether or not the Labor Code
has any relevance to the reliefs sought by the plaintiffs. For if the
Labor Code has no relevance, any discussion concerning the
statutes amending it and whether or not they have retroactive
effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not alleged
any unfair labor practice. Theirs is a simple action for damages for
tortious acts allegedly committed by the defendants. Such being
the case, the governing statute is the Civil Code and not the Labor
Code. It results that the orders under review are based on a wrong
premise.

And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the following
was said:

Stated differently, petitioner seeks protection under the civil laws

and claims no benefits under the Labor Code. The primary relief
sought is for liquidated damages for breach of a contractual
299
obligation. The other items demanded are not labor benefits
demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or
separation pay. The items claimed are the natural consequences
flowing from breach of an obligation, intrinsically a civil dispute.

In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT,
the cost of repair jobs made on his personal cars, and for the purchase price
of vehicles and parts sold to him. Those accounts have no relevance to the
Labor Code. The cause of action was one under the civil laws, and it does not
breach any provision of the Labor Code or the contract of employment of
DEFENDANT. Hence, the civil courts, not the Labor Arbiters and the NLRC,
should have jurisdiction.

BP Blg. 227 has amended Article 217 of the Labor Code to read as follows:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a)

The Labor Arbiters shall have the original and exclusive jurisdiction
to hear and decide within thirty (30) working days after submission
of the case by the parties for decision, the following cases involving
all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that ( involve) WORKERS MAY FILE INVOLVING wages,

hours of work and other terms and conditions of employment;

3. All money claims of workers, including those based on non-

payment or underpayment of wages, overtime compensation,
separation pay and other benefits provided by law or appropriate
agreement, except claims for employees compensation, social
security, and maternity benefits;

4. Cases involving household services; and

5. CASES ARISING FROM ANY VIOLATION OF ARTICLE 265 OF

THIS CODE, INCLUDING QUESTIONS INVOLVING THE LEGALITY
OF STRIKES AND LOCKOUTS.

6. All other claims arising from employer-employee relations,

unless expressly excluded by this Code]. (Italics and bracketed
portions indicate the deletions, while the amendments introduced
are capitalized).

The dismissal of the case below on the ground that the sum of money and
damages sued upon arose from employer-employee relationship was
erroneous. Claims arising from employer-employee relations are now limited
to those mentioned in paragraphs 2 and 3 of Article 217. There is no difficulty
on our part in stating that those in the case below should not be faulted for
not being aware of the last amendment to the frequently changing Labor
Code.

300
The claim of DEFENDANT that he should still be considered an employee of
PLAINTIFF, because the latter has not sought clearance for his separation
from the service, will not affect the jurisdiction of respondent Judge to resolve
the complaint of PLAINTIFF. DEFENDANT could still be liable to PLAINTIFF for
payment of the accounts sued for even if he remains an employee of
PLAINTIFF.

WHEREFORE, the Petition is granted, and respondent Judge is hereby ordered

to take cognizance of the case below and to render judgment therein
accordingly.

No costs.

SO ORDERED.

301
THIRD DIVISION

G.R. No. 73199 October 26, 1988

DR. RENATO SARA and/or ROMEO ARANA petitioners,

vs.
CERILA AGARRADO and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Amparo & Barcelona Law Offices for petitioners.

The Solicitor General for public respondent. Nicanor A. Magno for private
respondent.

FERNAN, C.J.:
Challenged in this petition for certiorari is the jurisdiction of the Labor Tribunal over Case No. LRD-ROXII-
006-82, a claim for unpaid commissions and reimbursement of certain sums of money filed by herein private
respondent Cerila Agarrado against herein petitioners Dr. Renato Sara and Romeo Arabia.

Private respondent Cerila Agarrado was an attendant in the clinic of petitioner

Dr. Renato Sara She quit her job in 1973. Four years later, petitioners Dr.
Sara and Romeo Arabia, being owners of a rice mill and having begun to
engage in the buy and sell of palay and rice, entered into a verbal agreement
with private respondent Agarrado whereby it was agreed that the latter would
be paid P2.00 commission per sack of milled rice sold as well as a commission
of 10% per kilo of palay purchased. It was further agreed that private
respondent would spend her own money for the undertaking, but to enable
her to carry out the agreement more effectively, she was authorized to
borrow money from other persons, as in fact she did, subject to
reimbursement by petitioners. 1

In 1982, private respondent filed with the National Labor Relations

Commission (NLRC) Regional Arbitration Branch No. XI, Cotabato City, a
complaint against petitioners for unpaid commission of P4,598.00 on milled
rice sold, P2,982.80 on palay sold, reimbursement of P17,500.00 which she
had borrowed from various persons and Pl,749.00 of her own money which
petitioners allegedly had not reimbursed (LRD-ROXII-006- 82).

By way of defense, petitioners raised the issue of lack of jurisdiction on the

part of the Labor Arbiter to take cognizance of the case, there being no
employer-employee relationship between the parties. They averred that the
claim for alleged unpaid commission and certain sums of money is governed
by the law on agency under the Civil Code and hence a purely civil obligation
cognizable by the regular courts.

On January 17, 1973, Labor Arbiter Magno C. Cruz rendered a decision in

favor of private respondent ordering petitioners to pay all the claims
amounting to P26,397.80. 2

302
Petitioner appealed the decision to the NLRC, which in a resolution dated June
25, 1986 affirmed the Labor Arbiter's decision and dismissed the appeal. 3

Their motion for reconsideration having been denied, petitioners took the
present recourse, maintaining lack of jurisdiction on the part of the Labor
Tribunal as well as grave abuse of discretion on its part in finding them liable
to private respondent.

In his comment, the Solicitor General agreed with petitioners that there was
no employer-employee relationship between the parties and that by reason
thereof the Labor Arbiter had no jurisdiction over the case. The Solicitor
General's comment was accompanied by a manifestation and motion stating
that he was filing the comment on his own behalf and that the public
respondent NLRC had been informed about his contrary stand. 4

The primordial issue in this case is whether an employer-employee

relationship exists between petitioners and private respondent as to warrant
cognizance by the Labor Arbiter of LRD-ROXII-006-82.

To determine the existence of an employer-employee relationship, this Court

in a long line of decisions 5 has invariably applied the following four-fold test:
[1] the selection and engagement of the employee; [2] the payment of
wages; [3] the power of dismissal; and [4] the power to control the
employee's conduct.

In the case at bar, we find that although there was a selection and
engagement of private respondent in 1977, the verbal agreement between
the parties negated the existence of the other requisites.

As to the payment of wages, the verbal agreement entered into by the parties
stipulated that private respondent would be paid a commission of P2.00 per
sack of milled rice sold as well as a 10% commission on palay purchase. The
arrangement thus was explicitly on a commission basis dependent on the
volume of sale or purchase. Private respondent was not guaranteed any
minimum compensation nor was she allowed any drawing account or advance
of any kind against unearned commissions. Her right to compensation
depended upon and was measured by the tangible results she produced the
quantity of rice sold and the quantity of palay purchased.

The power to terminate the relationship was mutually vested upon the
parties. Either may terminate the business arrangement at will, with or
without cause.

Finally, noticeably absent from the agreement between the parties is the
element of control. Among the four (4) requisites, control is deemed the most
important that the other requisites may even be disregarded. 6 Under the
control test, an employer-employee relationship exists if the "employer" has
reserved the right to control the "employee" not only as to the result of the
work done but also as to the means and methods by which the same is to be
accomplished. 7 Otherwise, no such relationship exists.

303
We observe that the means and methods of purchasing and selling rice or
palay by private respondent were totally independent of petitioners' control.
As established by the NLRC:

... Sometime in June 1977, respondent re-engaged the services of

herein complainant to sell milled rice to the customers of the
former, as well as to buy palay for and in behalf of Dr. Renato Sara,
with the verbal agreement that to carry out effectively the said
task, complainant was duly authorized by respondent, Dr. Sara to
spend her own money, if necessary but subject to reimbursment
and if that would not be sufficient, to borrow money from other
sources with further understanding that Dr. Sala will repay the ill
thru the complainant; ... ([Emphasis supplied], p. 21, Rollo)

Note that private respondent was never given capital by his supposed
employer but relied on her own resources and if insufficient, she borrowed
money from others. Petitioners did not supply private respondent with tools
and appliances needed to enable her to carry her undertaking, except to
authorize her to borrow money from others, subject to reimbursement.

The absence of control is made more evident by the fact that private
respondent was not even obliged to sell the palay she purchased to
petitioners. She was at liberty to sell the palay to any trader offering higher
buying rates. She was thus free to sell it to anybody whom she pleased.

Moreover, private respondent worked for petitioners at her own pleasure and
was not subject to definite hours or conditions of work. She could even
delegate the task of buying and selling to others, if she so desired, or
simultaneously engaged in other means of livelihood while selling and
purchasing rice or palay.

Under the conditions set forth in their agreement, private respondent was an
independent contractor, who exercising independent employment,
contracted to do a piece of work according to her own method and without
being subject to the control of her employer except as to the result of her
work. She was paid for the result of her labor, unlike an employee who is
paid for the labor he performs. 8

The verbal agreement devoid as it was of any stipulations indicative of control

leaves no doubt that private respondent was not an employee of petitioners
but was rather an independent contractor.

The Labor Tribunal's jurisdiction being primarily predicated upon the

existence of an employer-employee relationship between the parties, the
absence of such element, as in the case at bar, removes the controversy from
the scope of its limited jurisdiction.

WHEREFORE, the instant petition for certiorari is granted. Case No. LRD-
ROXII-006-82 of the National Labor Relations Commission is hereby ordered
DISMISSED for lack of jurisdiction.

SO ORDERED.
304
305
EN BANC

G.R. No. L-64313 January 17, 1985

NATIONAL HOUSING CORPORATION, petitioner,

vs.
BENJAMIN JUCO AND THE NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Government Corporate Counsel for petitioner.

Amante A. Pimentel for respondents.

GUTIERREZ, JR., J.:

Are employees of the National Housing Corporation (NHC) covered by the

Labor Code or by laws and regulations governing the civil service?

The background facts of this case are stated in the respondent-appellee's

brief as follows:

The records reveal that private respondent (Benjamin C. Juco) was

a project engineer of the National Housing Corporation (NHC) from
November 16, 1970 to May 14, 1975. For having been implicated
in a crime of theft and/or malversation of public funds involving
214 pieces of scrap G.I. pipes owned by the corporation which was
allegedly committed on March 5, 1975. Juco's services were
terminated by (NHC) effective as of the close of working hours on
May 14, 1975. On March 25, 1977 he filed a complaint for illegal
dismissal against petitioner (NHC) with Regional Office No. 4,
Department of Labor (now Ministry of Labor and Employment)
docketed as R04-3-3309-77 (Annex A, Petition). The said
complaint was certified by Regional Branch No. IV of the NLRC for
compulsory arbitration where it was docketed as Case No. RB-IV-
12038-77 and assigned to Labor Arbiter Ernilo V. Peñalosa. The
latter conducted the hearing. By agreement of the parties, the case
was submitted for resolution upon submission of their respective
position papers. Private respondent (Juco) submitted his position
paper on July 15, 1977. He professed innocence of the criminal
acts imputed against him contending "that he was dismissed based
on purely fabricated charges purposely to harass him because he
stood as a witness in the theft case filed against certain high
officials of the respondent's establishment" (NHC) and prayed for
'his immediate reinstatement to his former position in the (NHC)
without loss of seniority rights and the consequent payment of his
will back wages plus all the benefits appertaining thereto. On July
28, 1977, the NHC also filed its position paper alleging that the
Regional Office Branch IV, Manila, NLRC, "is without authority to
entertain the case for lack of jurisdiction, considering that the NHC
is a government owned and controlled corporation; that even
306
assuming that this case falls within the jurisdiction of this Office,
respondent firm (now petitioner) maintains that respondent (Juco),
now private respondent, was separated from the service for valid
and justified reasons, i.e., for having sold company properties
consisting of 214 pieces of scrap G.I. pipes at a junk shop in
Alabang, Muntinlupa, Metro Manila, and thereafter appropriating
the proceeds thereof to his own benefit."

The pertinent portion of the decision of respondent National Labor Relations

Commission (NLRC) reads:

The fact that in the early case of Fernandez v. Cedro (NLRC Case
No. 201165-74, May 19, 1975) the Commission, (Second Division)
ruled that the respondent National Housing Corporation is a
government-owned or controlled corporation does not preclude us
from later taking a contrary stand if by doing so the ends of justice
could better be served.

For although adherence to precedents (stare decisis) is a sum

formula for achieving uniformity of action and conducive to the
smooth operation of an office, Idolatrous reverence for precedents
which have outlived their validity and usefulness retards progress
and should therefore be avoided. In fact, even courts do reverse
themselves for reasons of justice and equity. This Commission as
an Administrative body performing quasi judicial function is no
exception.

WHEREFORE, in the light of the foregoing, the decision appealed

from is hereby, set aside. In view, however, of the fact that the
Labor Arbiter did not resolve the issue of illegal dismissal we have
opted to remand this case to the Labor Arbiter a quo for resolution
of the aforementioned issue.

The NHC is a one hundred percent (100%) government-owned corporation

organized in accordance with Executive Order No. 399, the Uniform Charter
of Government Corporations, dated January 5, 1951. Its shares of stock are
owned by the Government Service Insurance System the Social Security
System, the Development Bank of the Philippines, the National Investment
and Development Corporation, and the People's Homesite and Housing
Corporation. Pursuant to Letter of Instruction No. 118, the capital stock of
NHC was increased from P100 million to P250 million with the five
government institutions above mentioned subscribing in equal proportion to
the increased capital stock. The NHC has never had any private stockholders.
The government has been the only stockholder from its creation to the
present.

There should no longer be any question at this time that employees of

government-owned or controlled corporations are governed by the civil
service law and civil service rules and regulations.

Section 1, Article XII-B of the Constitution specifically provides:

307
The Civil Service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-
owned or controlled corporation. ...

The 1935 Constitution had a similar provision in its Section 1, Article XI I

which stated:

A Civil Service embracing all branches and subdivisions of the

Government shall be provided by law.

The inclusion of "government-owned or controlled corporations" within the

embrace of the civil service shows a deliberate effort of the framers to plug
an earlier loophole which allowed government-owned or controlled
corporations to avoid the full consequences of the an encompassing coverage
of the civil service system. The same explicit intent is shown by the addition
of "agency" and "instrumentality" to branches and subdivisions of the
Government. All offices and firms of the government are covered.

The amendments introduced in 1973 are not Idle exercises or a meaningless

gestures. They carry the strong message that t civil service coverage is broad
and an- embracing insofar as employment in the government in any of its
governmental or corporate arms is concerned.

The constitutional provision has been implemented by statute. Presidential

Decree No. 807 is unequivocal that personnel of government-owned or
controlled corporations belong to the civil service and are subject to civil
service requirements.

It provides:

SEC. 56. Government-owned or Controlled Corporations

Personnel. — All permanent personnel of government-owned or
controlled corporations whose positions are now embraced in the
civil service shall continue in the service until they have been given
a chance to qualify in an appropriate examination, but in the
meantime, those who do not possess the appropriate civil service
eligibility shag not be promoted until they qualify in an appropriate
civil service examination. Services of temporary personnel may be
terminated any time.

The very Labor Code, P. D. No. 442 as amended, which the respondent NLRC
wants to apply in its entirety to the private respondent provides:

ART. 277. Government employees. — The terms and conditions of

employment of all government employees, including employees of
government-owned and controlled corporations shall be governed
by the Civil Service Law, rules and regulations. Their salaries shall
be standardized by the National Assembly as provided for in the
New Constitution. However, there shall be reduction of existing
wages, benefits and other terms and conditions of employment
being enjoyed by them at the time of the adoption of the Code.

308
Our decision in Alliance of Government Workers, et al v. Honorable Minister
of Labor and Employment et all. (124 SCRA 1) gives the background of the
amendment which includes government-owned or controlled corporations in
the embrace of the civil service.

We stated:

Records of the 1971 Constitutional Convention show that in the

deliberation held relative to what is now Section 1(1), Article XII-
B, supra, the issue of the inclusion of government-owned or
controlled corporations figured prominently.

The late delegate Roberto S. Oca, a recognized labor leader,

vehemently objected to the inclusion of government-owned or
controlled corporations in the Civil Service. He argued that such
inclusion would put asunder the right of workers in government
corporations, recognized in jurisprudence under the 1935
Constitution, to form and join labor unions for purposes of
collective bargaining with their employers in the same manner as
in the private section (see: records of 1971 Constitutional
Convention).

In contrast, other labor experts and delegates to the 1971

Constitutional Convention enlightened the members of the
Committee on Labor on the divergent situation of government
workers under the 1935 Constitution, and called for its rectification.
Thus, in a Position Paper dated November 22, 197 1, submitted to
the Committee on Labor, 1971 Constitutional Convention, then
Acting Commissioner of Civil Service Epi Rey Pangramuyen
declared:

It is the stand, therefore, of this Commission that by

reason of the nature of the public employer and the
peculiar character of the public service, it must
necessary regard the right to strike given to unions in
private industry as not applying to public employees and
civil service employees. It has been stated that the
Government, in contrast to the private employer,
protects the interests of all people in the public service,
and that accordingly, such conflicting interests as are
present in private labor relations could not exist in the
relations between government and those whom they
employ.

Moreover, determination of employment conditions as

well as supervision of the management of the public
service is in the hands of legislative bodies. It is further
emphasized that government agencies in the
performance of their duties have a right to demand
undivided allegiance from their workers and must always
maintain a pronounced esprit de corps or firm discipline

309
among their staff members. It would be highly
incompatible with these requirements of the public
service, if personnel took orders from union leaders or
put solidarity with members of the working class above
solidarity with the Government. This would be inimical to
the public interest.

Moreover, it is asserted that public employees by joining

labor unions may be compelled to support objectives
which are political in nature and thus jeopardize the
fundamental principle that the governmental machinery
must be impartial and non-political in the sense of party
politics. (See: Records of 1971 Constitutional
Convention).

Similar, Delegate Leandro P. Garcia, expressing for the inclusion of

government-owned or controlled corporations in the Civil Service,
argued:

It is meretricious to contend that because Government-

owned or controlled corporations yield profits, their
employees are entitled to better wages and fringe
benefits than employees of Government other than
Government-owned and controlled corporations which
are not making profits. There is no gainsaying the fact
that the capital they use is the people's money. (see:
Records of the 1971 Constitutional Convention).

Summarizing the deliberations of the 1971 Constitutional

Convention on the inclusion of Government-owned or controlled
corporation Dean Joaquin G. Bernas, SJ., of the Ateneo de Manila
University Professional School of Law, stated that government-
owned corporations came under attack as g cows of a privileged
few enjoying salaries far higher than their counterparts in the
various branches of government, while the capital of these
corporations belongs to the Government and government money
is pumped into them whenever on the brink of disaster, and they
should therefore come under the strict surveillance of the Civil
Service System. (Bernas, The 1973 Philippine Constitution, Notes
and Cases, 1974 ed., p. 524).

Applying the pertinent provisions of the Constitution, the Labor Code as

amended, and the Civil Service Decree as amended and the precedent in
the Alliance of Government Workers decision, it is clear that the petitioner
National Housing Corporation comes under the jurisdiction of the Civil Service
Commission, not the Ministry of Labor and Employment.

This becomes more apparent if we consider the fact that the NHC performs
governmental functions and not proprietary ones.

The NHC was organized for the governmental objectives stated in its
amended articles of incorporation as follows:
310
SECOND: That the purpose for which the corporation is organized
is to assist and carry out the coordinated massive housing program
of the government, principally but not limited to low-cost housing
with the integration cooperation and assistance of all governmental
agencies concerned, through the carrying on of any or all the
following activities:

l) The acquisition, development or reclamation of lands for the

purpose of construction and building therein preferably low-cost
housing so as to provide decent and durable dwelling for the
greatest number of inhabitants in the country;

2) The promotion and development of physical social and economic

community growth through the establishment of general physical
plans for urban, suburban and metropolitan areas to be
characterized by efficient land use patterns;

3) The coordination and implementation of all projects of the

government for the establishment of nationwide and massive low
cost housing;

4) The undertaking and conducting of research and technical

studies of the development and promotion of construction of
houses and buildings of sound standards of design liability,
durability, safety, comfort and size for improvement of the
architectural and engineering designs and utility of houses and
buildings with the utilization of new and/or native materials
economics in material and construction, distribution, assembly and
construction and of applying advanced housing and building
technology.

5) Construction and installation in these projects of low-cost

housing privately or cooperatively owned water and sewerage
system or waste disposal facilities, and the formulations of a unified
or officially coordinated urban transportation system as a part of a
comprehensive development plan in these areas.

The petitioner points out that it was established as an instrumentality of the

government to accomplish governmental policies and objectives and extend
essential services to the people. It would be incongruous if employees
discharging essentially governmental functions are not covered by the same
law and rules which govern those performing other governmental functions.
If government corporations discharging proprietary functions now belong to
the civil service with more reason should those performing governmental
functions be governed by civil service law.

The respondent NLRC cites a 1976 opinion of the Secretary of Justice which
holds that the phrase "government-owned or controlled corporations" in
Section 1, Article XII-B of the Constitution contemplates only those
government-owned or controlled corporations created by special law. The
opinion states that since the Constitution provides for the organization or
regulation of private corporations only by "general law", expressly excluding
311
government-owned or controlled corporations, it follows that whenever the
Constitution mentions government-owned or controlled corporations, it must
refer to those created by special law. P.D. No. 868 which repeals all charters,
laws, decrees, rules, and provisions exempting any branch, agency,
subdivision, or instrumentality of the government, including government-
owned or controlled corporations from the civil service law and rules is also
cited to show that corporations not governed by special charters or laws are
not to be brought within civil service coverage. The discussions in the
Constitutional Convention are also mentioned. It appears that at the time the
Convention discussed government-owned or controlled corporations, all such
corporations were organized only under special laws or charters.

The fact that "private" corporations owned or controlled by the government

may be created by special charter does not mean that such corporations not
created by special law are not covered by the civil service. Nor does the
decree repealing all charters and special laws granting exemption from the
civil service law imply that government corporations not created by special
law are exempt from civil service coverage. These charters and statutes are
the only laws granting such exemption and, therefore, they are the only ones
which could be repealed. There was no similar exempting provision in the
general law which called for repeal. And finally, the fact that the
Constitutional Convention discussed only corporations created by special law
or charter cannot be an argument to exclude petitioner NHC from civil service
coverage. As stated in the cited speech delivered during the convention
sessions of March 9, 1972, all government corporations then in existence
were organized under special laws or charters. The convention delegates
could not possibly discuss government-owned or controlled corporations
which were still non-existent or about whose existence they were unaware.

Section I of Article XII-B, Constitution uses the word "every" to modify the
phrase "government-owned or controlled corporation."

"Every" means each one of a group, without exception It means all possible
and all taken one by one. Of course, our decision in this case refers to a
corporation created as a government-owned or controlled entity. It does not
cover cases involving private firms taken over by the government in
foreclosure or similar proceedings. We reserve judgment on these latter cases
when the appropriate controversy is brought to this Court.

The infirmity of the respondents' position lies in its permitting a circumvention

or emasculation of Section 1, Article XII-B of the Constitution It would be
possible for a regular ministry of government to create a host of subsidiary
corporations under the Corporation Code funded by a willing legislature. A
government-owned corporation could create several subsidiary corporations.
These subsidiary corporations would enjoy the best of two worlds. Their
officials and employees would be privileged individuals, free from the strict
accountability required by the Civil Service Decree and the regulations of the
Commission on Audit. Their incomes would not be subject to the competitive
restraints of the open market nor to the terms and conditions of civil service
employment. Conceivably, all government-owned or controlled corporations
could be created, no longer by special charters, but through incorporation
312
under the general law. The constitutional amendment including such
corporations in the embrace of the civil service would cease to have
application. Certainly, such a situation cannot be allowed to exist.

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the

respondent National Labor Relations Commission is SET ASIDE. The decision
of the Labor Arbiter dismissing the case before it for lack of jurisdiction is
REINSTATED.

SO ORDERED.

313
314
EN BANC

G.R. No. 71818 August 19, 1986

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

(MWSS), petitioner,
vs.
HON. BIENVENIDO S. HERNANDEZ, Labor Arbiter, NATIONAL LABOR
RELATIONS COMMISSION, LEMUEL B. ALEGADO, DANILO S. LOPEZ,
FORTUNATO L. MADRONA, ETC., ET AL., respondents.

Ariel F. Aguirre for petitioner.

Celso A. Fernandez for private respondents.

NARVASA, J.:

Petitioner Metropolitan Waterworks and Sewerage System (MWSS) was haled

before the Arbitration Branch, National Capital Region of the National Labor
Relations Commission on charges of willfull failure to pay wage differentials,
allowances and other monetary benefits to its contractual employees
numbering 2,500 or so.1 In answer, MWSS assessed that:

(1) it "is a government-owned and controlled corporation and

therefore ... (the NLRC) has no jurisdiction over the ... case", and
(2) assuming the contrary arguendo, "the terms and conditions of
the complainants who are all contractual employees are governed
by their respective contracts. 2

On June 5, 1985, judgment was rendered by the labor Arbiter to whom the
case was assigned, adverse to MWSS. As regards the claim of MWSS of lack
of jurisdiction in the NLRC over the case, the Arbiter made the following
observations:

... This Commission agree (sic) with the respondent that if the
complainants are regular employees of MWSS, it being a
government owned and controlled corporation, said employees are
within the mantle of the civil service rules and regulations, their
salaries are standardized by the National Assembly, then this
Commission has no jurisdiction in the case. 3 ... (But an
examination of the records shows) ... that complainants are not a
regular employee of the respondent MWSS, but one of a hired
workers or employees for limited period, that is upon completion
of the project for which they were hired, they can be removed by
the respondent, because there is no more work or the contract has
already been terminated (Sic). 4

The proferred deduction: while controversies respecting terms and conditions

of employment between MWSS and its regular employees are not within the

315
jurisdiction of the NLRC, said controversies do fall within the competence of
the NLRC if they involve non-regular or contractual employees of the MWSS.

Anent the second argument of MWSS which the Arbiter understands to be

"that the contract of employment by the complainants ... is governed by their
contract, (and) it is therefore incumbent for the respondent 5 to be governed
and to comply with their contract, 6 he has this to say:

Respondent (MWSS) is citing Article 277 of the Labor Code to

vouchsafe (sic) its contention about the lack of jurisdiction of the
NLRC. The provision, however, refers to the governance of the Civil
Service Law vis-a-vis the terms and conditions of government
employees, those of government corporations included. The
complaint is not such a case as it is for monetary claims about
which the Civil Service Decree, PD 807 does not provide. In fact,
the last provision of Article 277 shows the ever protection (sic) by
the State through the Code of the workers' right to due wages and
other benefits by enjoining not to reduce the privileges being
enjoyed by workers at the time of the adoption of the Code. 7

The propounded deduction: The Civil Service Decree applies to employees in

government corporations in all matters except "monetary claims"; as regards
the latter, it is the Labor Code that governs.

It is to invalidate the decision of the Labor Arbiter as well as a subsequent

order directing execution thereof 8 and all other proceedings in the case 9 that
MWSS has come to this Court on certiorari and prohibition.

Evidently, the case turns upon the question: Are employees of the MWSS
covered by the Labor Code or by laws and regulations governing the civil
service?

That question, framed in Identical terms save only that it had reference to
another entity, the National Housing Corporation, has already been answered
by this Court. In National Housing Corporation vs. Juco, 10 this Court ruled
that —

1) "The NHC is a one hundred percent (100%) government-owned

corporation ...; 11

2) "There should no longer be any question at this time that

employees of goverment-owned or controlled corporations are
governed by the civil service law and civil service rules and
regulation "; 12 and

3) "The decision of the Labor Arbiter dismissing the case (filed

against the NHC by an employee) for lack of jurisdiction" was
correct. 13

Now, the character of the MWSS as a government-owned or controlled

corporation is not contested; it is, in any case, a proposition that cannot be
gainsaid. Republic Act No. 6234 created it as a "government corporation to

316
be known as the Metropolitan Waterworks and Sewerage System." As in the
case of the National Housing Authority, therefore, employment in the MWSS
is governed not by the Labor Code but by the civil service law, rules and
regulations; and controversies arising from or connected with that
employment are not cognizable by the National Labor Relations Commission.

The argument of the Labor Arbiter that it is only disputes between the MWSS
and its regular employees that are beyond the jurisdiction of the NLRC, not
those between it and its "non-regular or contractual" employees, is
sophistical. There is no legal or logical justification for such a distinction.
Indeed, it is ruled out by the fact that positions in the civil service are
classified into career and non-career service, 14 and that the non-career
service includes inter alia-

... Contractual personnel or those whose employment in the

government is in accordance with a special contract to undertake
a specific work or job, requiring special or technical skin not
available in the employing agency, to be accomplished within a
specific period, which in no case shall exceed one year, and
performs or accomplishes the specific work or job, under his own
responsibility with a minimum of direction and supervision from the
hiring agency. 15

The Labor Arbiter's other postulation, that the Civil Service Law governs
employment in the MWSS in all aspect except "monetary claims," and that
as to the latter, it is the Labor Code that applies, is even more patently
illogical and deserves no confutation.

But even more fallacious, almost unintelligible, is private respondents'

contention that they "are not employees of Metropolitan Waterworks and
Sewerage System (MWSS)"; 16 and "not being employees of the petitioner ...
(MWSS) ... this case therefore lies within the National Labor Relations
Commission (NLRC) through Arbiter Bienvenido Hernandez." 17 Such a
contention also does not merit refutation As absurd and as undeserving of
response, too, is the claim that "Existence of employer-employee relationship
(between the MWSS and an individual) is not per se equivalent to being a
government employee." 18

Arguments such as these, and the fractured syntax by which they are
tendered, should really have no place in a judicial record. They cannot
persuade; they do but irritate. What is worse, they produce much waste of
valuable time. They are symptomatic of defects in the training and appointing
processes which must be remedied.

WHEREFORE, the Decision of the Labor Arbiter dated June 5, 1985 and his
Order of July 8, 1985, having been rendered without jurisdiction, are hereby
declared void and set aside. Said Labor Arbiter is enjoined to take no further
action on Case No. NCR-9-3164-84 save to dismiss the same. Costs against
private respondents.

SO ORDERED.

317
318
SECOND DIVISION

G.R. No. 79182 September 11, 1991

PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and
DANILO MERCADO, respondents.

Bacorro & Associates for petitioner.

Alberto L. Dalmacion for private respondent.

PARAS, J.:

This is a petition for certiorari to set aside the Resolution * dated July 3, 1987
of respondent National Labor Relations Commission (NLRC for brevity) which
affirmed the decision dated April 30, 1986 of Labor Arbiter Vito J. Minoria of
the NLRC, Regional Arbitration Branch No. VII at Cebu City in Case No. RAB-
VII-0556-85 entitled "Danilo Mercado, Complainant, vs. Philippine National
Oil Company-Energy Development Corporation, Respondent", ordering the
reinstatement of complainant Danilo Mercado and the award of various
monetary claims.

The factual background of this case is as follows:

Private respondent Danilo Mercado was first employed by herein petitioner

Philippine National Oil Company-Energy Development Corporation (PNOC-
EDC for brevity) on August 13, 1979. He held various positions ranging from
clerk, general clerk to shipping clerk during his employment at its Cebu office
until his transfer to its establishment at Palimpinon, Dumaguete, Oriental
Negros on September 5, 1984. On June 30, 1985, private respondent
Mercado was dismissed. His last salary was P1,585.00 a month basic pay plus
P800.00 living allowance (Labor Arbiter's Decision, Annex "E" of Petition,
Rollo, p. 52).

The grounds for the dismissal of Mercado are allegedly serious acts of
dishonesty committed as follows:

1. On ApriI 12, 1985, Danilo Mercado was ordered to purchase 1,400

pieces of nipa shingles from Mrs. Leonardo Nodado of Banilad,
Dumaguete City, for the total purchase price of Pl,680.00. Against
company policy, regulations and specific orders, Danilo Mercado
withdrew the nipa shingles from the supplier but paid the amount of
P1,000.00 only. Danilo Mercado appropriated the balance of P680.00 for
his personal use;

319
2. In the same transaction stated above, the supplier agreed to give the
company a discount of P70.00 which Danilo Mercado did not report to
the company;

3. On March 28, 1985, Danilo Mercado was instructed to contract the

services of Fred R. Melon of Dumaguete City, for the fabrication of
rubber stamps, for the total amount of P28.66. Danilo Mercado paid the
amount of P20.00 to Fred R. Melon and appropriated for his personal
use the balance of P8.66.

In addition, private respondent, Danilo Mercado violated company rules

and regulations in the following instances:

1. On June 5, 1985, Danilo Mercado was absent from work without

leave, without proper turn-over of his work, causing disruption and
delay of company work activities;

2. On June 15, 1985, Danilo Mercado went on vacation leave without

prior leave, against company policy, rules and regulations. (Petitioner's
Memorandum, Rollo, p. 195).

On September 23, 1985, private respondent Mercado filed a complaint for

illegal dismissal, retirement benefits, separation pay, unpaid wages, etc.
against petitioner PNOC-EDC before the NLRC Regional Arbitration Branch
No. VII docketed as Case No. RAB-VII-0556-85.

After private respondent Mercado filed his position paper on December 16,
1985 (Annex "B" of the Petition, Rollo, pp. 28-40), petitioner PNOC-EDC filed
its Position Paper/Motion to Dismiss on January 15, 1986, praying for the
dismissal of the case on the ground that the Labor Arbiter and/or the NLRC
had no jurisdiction over the case (Annex "C" of the Petition, Rollo, pp. 41-
45), which was assailed by private respondent Mercado in his Opposition to
the Position Paper/Motion to Dismiss dated March 12, 1986 (Annex "D" of the
Petition, Rollo, pp. 46-50).

The Labor Arbiter ruled in favor of private respondent Mercado. The

dispositive onion of said decision reads as follows:

WHEREFORE, in view of the foregoing, respondents are hereby ordered:

1) To reinstate complainant to his former position with full back wages

from the date of his dismissal up to the time of his actual reinstatement
without loss of seniority rights and other privileges;

2) To pay complainant the amount of P10,000.00 representing his

personal share of his savings account with the respondents;

3) To pay complainants the amount of P30,000.00 moral damages;

P20,000.00 exemplary damages and P5,000.00 attorney's fees;

4) To pay complainant the amount of P792.50 as his proportionate 13th

month pay for 1985.

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Respondents are hereby further ordered to deposit the aforementioned
amounts with this Office within ten days from receipt of a copy of this
decision for further disposition.

SO ORDERED.
(Labor Arbiter's Decision, Rollo, p. 56)

The appeal to the NLRC was dismissed for lack of merit on July 3, 1987 and
the assailed decision was affirmed.

Hence, this petition.

The issues raised by petitioner in this instant petition are:

1. Whether or not matters of employment affecting the PNOC-EDC, a

government-owned and controlled corporation, are within the
jurisdiction of the Labor Arbiter and the NLRC.

2. Assuming the affirmative, whether or not the Labor Arbiter and the
NLRC are justified in ordering the reinstatement of private respondent,
payment of his savings, and proportionate 13th month pay and payment
of damages as well as attorney's fee.

Petitioner PNOC-EDC alleges that it is a corporation wholly owned and

controlled by the government; that the Energy Development Corporation is
a subsidiary of the Philippine National Oil Company which is a government
entity created under Presidential Decree No. 334, as amended; that being a
government-owned and controlled corporation, it is governed by the Civil
Service Law as provided for in Section 1, Article XII-B of the 1973
Constitution, Section 56 of Presidential Decree No. 807 (Civil Service Decree)
and Article 277 of Presidential Decree No. 442, as amended (Labor Code).

The 1973 Constitution provides:

The Civil Service embraces every branch, agency, subdivision and

instrumentality of the government including government-owned or
controlled corporations.

Petitioner PNOC-EDC argued that since Labor Arbiter Minoria rendered the
decision at the time when the 1973 Constitution was in force, said decision is
null and void because under the 1973 Constitution, government-owned and
controlled corporations were governed by the Civil Service Law. Even
assuming that PNOC-EDC has no original or special charter and Section 2(i),
Article IX-B of the 1987 Constitution provides that:

The Civil Service embraces all branches, subdivision, instrumentalities

and agencies of the Government, including government-owned or
controlled corporations with original charters.

such circumstances cannot give validity to the decision of the Labor Arbiter
(Ibid., pp. 192-193).

321
This issue has already been laid to rest in the case of PNOC-EDC vs.
Leogardo, 175 SCRA 26 (July 5, 1989), involving the same petitioner and the
same issue, where this Court ruled that the doctrine that employees of
government-owned and/or con controlled corporations, whether created by
special law or formed as subsidiaries under the General Corporation law are
governed by the Civil Service Law and not by the Labor Code, has been
supplanted by the present Constitution. "Thus, under the present state of the
law, the test in determining whether a government-owned or controlled
corporation is subject to the Civil Service Law are the manner of its creation,
such that government corporations created by special charter are subject to
its provisions while those incorporated under the General Corporation Law
are not within its coverage."

Specifically, the PNOC-EDC having been incorporated under the General

Corporation Law was held to be a government owned or controlled
corporation whose employees are subject to the provisions of the Labor Code
(Ibid.).

The fact that the case arose at the time when the 1973 Constitution was still
in effect, does not deprive the NLRC of jurisdiction on the premise that it is
the 1987 Constitution that governs because it is the Constitution in place at
the time of the decision (NASECO v. NLRC, G.R. No. 69870, 168 SCRA 122
[1988]).

In the case at bar, the decision of the NLRC was promulgated on July 3, 1987.
Accordingly, this case falls squarely under the rulings of the aforementioned
cases.

As regards the second issue, the record shows that PNOC-EDC's accusations
of dishonesty and violations of company rules are not supported by evidence.
Nonetheless, while acknowledging the rule that administrative bodies are not
governed by the strict rules of evidence, petitioner PNOC-EDC alleges that
the labor arbiter's propensity to decide the case through the position papers
submitted by the parties is violative of due process thereby rendering the
decision null and void (Ibid., p. 196).

On the other hand, private respondent contends that as can be seen from
petitioner's Motion for Reconsideration and/or Appeal dated July 28, 1986
(Annex "F" of the Petition, Rollo, pp. 57- 64), the latter never questioned the
findings of facts of the Labor Arbiter but simply limited its objection to the
lack of legal basis in view of its stand that the NLRC had no jurisdiction over
the case (Private Respondent's Memorandum, Rollo, p. 104).

Petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss dated January

15, 1986 (Annex "C" of the Petition Rollo, pp. 41-45) before the Regional
Arbitration Branch No. VII of Cebu City and its Motion for Reconsideration
and/or Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo, pp. 57-
64) before the NLRC of Cebu City. Indisputably, the requirements of due
process are satisfied when the parties are given an opportunity to submit
position papers. What the fundamental law abhors is not the absence of
previous notice but rather the absolute lack of opportunity to ventilate a

322
party's side. There is no denial of due process where the party submitted its
position paper and flied its motion for reconsideration (Odin Security Agency
vs. De la Serna, 182 SCRA 472 [February 21, 1990]). Petitioner's subsequent
Motion for Reconsideration and/or Appeal has the effect of curing whatever
irregularity might have been committed in the proceedings below (T.H.
Valderama and Sons, Inc. vs. Drilon, 181 SCRA 308 [January 22, 1990]).

Furthermore, it has been consistently held that findings of administrative

agencies which have acquired expertise because their jurisdiction is confined
to specific matters are accorded not only respect but even finality (Asian
Construction and Development Corporation vs. NLRC, 187 SCRA 784 [July
27, 1990]; Lopez Sugar Corporation vs. Federation of Free Workers, 189
SCRA 179 [August 30, 1990]). Judicial review by this Court does not go so
far as to evaluate the sufficiency of the evidence but is limited to issues of
jurisdiction or grave abuse of discretion (Filipinas Manufacturers Bank vs.
NLRC, 182 SCRA 848 [February 28, 1990]). A careful study of the records
shows no substantive reason to depart from these established principles.

While it is true that loss of trust or breach of confidence is a valid ground for
dismissing an employee, such loss or breach of trust must have some basis
(Gubac v. NLRC, 187 SCRA 412 [July 13, 1990]). As found by the Labor
Arbiter, the accusations of petitioner PNOC-EDC against private respondent
Mercado have no basis. Mrs. Leonardo Nodado, from whom the nipa shingles
were purchased, sufficiently explained in her affidavit (Rollo, p. 36) that the
total purchase price of P1,680.00 was paid by respondent Mercado as agreed
upon. The alleged discount given by Mrs. Nodado is not supported by
evidence as well as the alleged appropriation of P8.66 from the cost of
fabrication of rubber stamps. The Labor Arbiter, likewise, found no evidence
to support the alleged violation of company rules. On the contrary, he found
respondent Mercado's explanation in his affidavit (Rollo, pp. 38-40) as to the
alleged violations to be satisfactory. Moreover, these findings were never
contradicted by petitioner petitioner PNOC-EDC.

PREMISES CONSIDERED, the petition is DENIED and the resolution of

respondent NLRC dated July 3, 1987 is AFFIRMED with the modification that
the moral damages are reduced to Ten Thousand (P10,000.00) Pesos, and
the exemplary damages reduced to Five Thousand (P5,000.00) Pesos.

SO ORDERED.

323
324
SECOND DIVISION

G.R. No. 74425 October 7, 1986

BULLETIN PUBLISHING CORPORATION, petitioner,

vs.
HON. AUGUSTO S. SANCHEZ, CRESENCIANO B. TRAJANO,
PRIMITIVA C. BATERBONIA, ROLANDO G. OLALIA, ISIDRO S.
MOLINA, EDUARDO C. MORALES, ZACARIAS F. FLORES, JR., PEDRO
M. GALLO, LORETO F. MIJARES, LUIS B. ILAGAN, ERNESTO O.
VALDEZ, EUGENIO L. RIVERA, BENJAMIN B. BERNAS, LORETO D. DE
LOS REYES, BONIFACIO A. SOTELO, FE F. ARRE, FELIPE R. OLARTE,
RAYMOND T. RIVERA, STEWART C. CACHO, DOMINADOR V. CURAY,
FERNANDO S. LAZARO, ERNESTO L. BAUTISTA, VICENTE O.
ABANILLA, JOSE B. BERNAL, RAMIRO A. NEBRES, ALCANTARA S. DE
LA PAZ and LUIS F. GARCIA, respondents.

Guillermo S. Santos for petitioner.

Mildred Ramos for respondent Bulletin Publishing Corporation Supervisors

Union.

Olalia, Dimapilis & Associates for private respondents.

ALAMPAY, J.:

Petitioner Bulletin Publishing Corporation invokes the equity jurisdiction of

this Court in this case for certiorari, prohibition, and for preliminary
injunction, with a plea for the issuance of an ex-parte restraining order
prohibiting private respondents from declaring a strike. The purpose of
Petitioner is to prevent the private respondents, members of the Bulletin
Publishing Corporation Supervisors Union (BSU), from staging a strike
against the said publishing company.

Petitioner also prays that this Court declare null and void Registration
Certificate No. 10547 issued by the Ministry of Labor and Employment to the
aforestated Supervisors Union or BSU.

The crux of the dispute in the present case is whether or not supervisors in
petitioner company may, for purposes of collective bargaining, form a union
separate and distinct from the existing union organized by the rank-and-file
employees of the same company.

Petitioner corporation has been engaged in the business of newspaper and

magazine publishing for over half a century. its current publications include
the national daily "Bulletin Today" (now Manila Daily Bulletin), the tabloid
"Tempo", and a weekly magazine called "Panorama". The total number of the
personnel complement of the said firm (exclusive of the editorial staff,
contract workers and casuals, etc.), constituting the rank-and-file regular
members, is said to be over three hundred persons. The supervisory
employees number forty-eight. About three hundred employees belonging to
325
the rank-and-file had previously formed the Bulletin Employees Union. This
labor organization (BEU) presently administers their current Collective
Bargaining Agreement which began on July 15, 1984 and remain effective up
to July 15, 1987. Ever since, there has been only one bargaining unit in the
petitioner company and this is the BEU - the union of the rank-and-file
employees. Supervisory employees were never included in said bargaining
unit nor had they ever sought inclusion in the said BEU labor union, much
less registered any protest or challenged to their non-inclusion therein.

On March 12, 1986, 25 out of 48 supervisors in the Bulletin Publishing

Corporation formed a labor union and adopted a charter therefor, calling
themselves members of the "Bulletin Publishing Corporation Supervisors
Union" or BSU. A petition for registration of BSU, was filed with the Ministry
of Labor and Employment. On March 26, 1986, Registration Certificate No.
10547-LC was issued. On March 31, 1986, a letter was sent to the
management of petitioner corporation by BSU giving notice of the registration
of the BSU and demanding its recognition as the sole bargaining agent of all
the supervisors in the company. BSU supervisors union, is, at present, an
affiliate of the National Federation of Labor Unions (NAFLU) and the Kilusang
Mayo Union (KMU). BSU is alleged to be supported in its strike move by the
said groups. (Petition, p. 13, Rollo, p. 10).

On April 8, 1986, a petition for direct certification was filed by the BSU as the
bargaining representative of the supervisors. On April 12, 1986, a notice of
strike by BSU was filed with the Ministry of Labor due to certain acts allegedly
performed by petitioner which BSU claims, in effect, to be union busting and
unfair labor practices. Refusing to recognize the BSU, the Bulletin Publishing
Corporation filed a petition dated April 25, 1986, seeking cancellation of the
registration of the BSU on the ground that Article 246 of the Labor Code and
Section 11 of Rule II, Book V of the Implementing Rules thereof, prohibit
supervisors from forming labor organizations.

As the supervisors threatened to strike on May 12, 1986, following the

expiration of the fifteen-day cooling-off period, petitioner was prompted to
file a petition with the Ministry of Labor, urging therein that said office assume
jurisdiction in the matter of the impending strike. When the Minister of Labor
failed to exercise his jurisdiction or act on the matter, petitioner then felt that
the remedy it seeks should be sought from this Court because, further resort
to the Ministry of Labor may be construed as a tacit recognition by petitioner
of the supervisors union (BSU) which would be inconsistent with petitioner's
challenge to the assertion of BSU to exist as a legitimate labor union.

Petitioner invokes the equity jurisdiction of this Court, claiming that a strike
by the BSU which it considers a bogus union and whose registration and
operation is challenged as against public policy and legal prohibitions, will
cause untold harm on herein petitioner which is engaged in publishing daily
periodicals.

In accordance with our Resolution dated May 12, 1986, a hearing of

petitioner's motion for preliminary injunction was scheduled for May 14,
1986, with a temporary restraining order being then issued. This Court

326
enjoined the private respondents from proceeding with their contemplated
strike. Respondents were likewise required to comment on the petition. The
corresponding separate Comment of the public and private respondents were
later timely submitted to the Court.

Considering the allegations contained in the petition, the issues raised, and
the arguments adduced by the parties, the Court resolves to give due course
to the petition, and to consider the separate Comment of both private and
public respondents as their Answer to the petition.

In the light of the factual background of this case, We are constrained to hold
that the supervisory employees of petitioner firm may not, under the law,
form a supervisors union, separate and distinct from the existing bargaining
unit (BEU), composed of the rank-and-file employees of the Bulletin
Publishing Corporation. It is evident that most of the private respondents are
considered managerial employees. Also it is distinctly stated in Section 11,
Rule I I, of the Ommibus Rules Implementing the Labor Code, that
supervisory unions are presently no longer recognized nor allowed to exist
and operate as such.

Article 246 of the Labor Code explicitly excludes managerial employees from
the right of self-organization, the right to form, join and assist labor
organizations. A perusal of the job descriptions corresponding to the private
respondents as outlined in the petition, clearly reveals the private
respondents to be managers, purchasing officers, personnel officers,
property officers, supervisors, cashiers, heads of various sections and the
like. The nature of their duties gives rise to the irresistible conclusion that
most of the herein private respondents are performing managerial functions
(Petition, pp. 5-6; Rollo, pp. 6-7). Their responsibilities inherently require the
exercise' of discretion and independent judgment as supervisors. They
possess the power and authority to lay down or exercise management
policies. Managerial employees are those vested with powers or prerogatives
to lay down and execute management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees, or to
effectively recommend such managerial actions. All employees not falling
within this definition are considered rank-and file employees (Article 212 (k),
Labor Code). We further find very plainly stressed in Section 11, Rule II, Book
V of the Omnibus Rules implementing the same Labor Code, that "All
existing supervisory unions and unions of security guards shall, upon the
effectivity of the Code, cease to operate as such and their registration
certificates shall be deemed automatically cancelled ... Members of
supervisory unions who do not fall within the definition of managerial
employees shall become eligible to join or assist the rank-and- file labor
organization and if none exists, to form or assist in the forming of such rank-
and-file organizations." (Emphasis supplied).

It is, therefore, evident that while mention is made of supervisors unions with
reference to those existing before the enactment of the Labor Code, greater
significance must attach to the fact that under the present Labor Code all
these supervisory unions should, after the effectivity of the Labor Code on
January 1, 1975, cease to operate and that the registration certificate of any
327
such supervisors union should even be deemed to be automatically cancelled.
It is also clear that such of those supervisory employees who do not assume
any managerial function may join or assist an existing rank-and-file union or
if none exists, to join or assist in the formation of such rank-and-file
organization.

It follows as a logical conclusion that the members of the Bulletin Supervisory

Union, wholly composed of supervisors employed by petitioner corporation,
are not QUALIFIED to organize a Labor Union of their own. Aside from this
reason, is the fact that there is already an existing legitimate labor union, the
BEU, which enjoys a current collective bargaining agreement with the
petitioner publishing company.

What is pointed out under the law, is that employees who discharge
managerial functions, as well as the supervisory employees who do not yet
fall within the definition of managerial employees, are prohibited from
organizing themselves into a labor union constituted for the purpose of acting
as a collective bargaining unit. To sanction the recognition of the Supervisors
Union of private respondents, which paradoxically or inadvertently received
a registration certificate from the Ministry of Labor, would be for this Court
to accept and tolerate a manifest violation of the Labor Code. The rationale
for this inhibition has been stated to be, because if these managerial
employees would belong to or be affiliated with a Union, the latter might not
be assured of their loyalty to the Union in view of evident conflict of interests.
The Union can also become company- dominated with the presence of
managerial employees in Union membership.

The submission of the private respondents that they do not actually perform
duties which are managerial in character is untenable. Firstly, the status of
respondents as "managerial employees" is readily reflected by their long
years of acquiescence to their exclusion: (a) from the rank-and-file unit of
employees and from membership in the Bulletin Publishing Corporation
Employees Union; and (b) from their coverage in the current and past
Collective Bargaining Agreements.

Acquiescence by private respondents to a classification and situation far

different from the rank-and-file employees for a long and unceasing period
of time obviously indicates that their exclusion from the rank-and-file union
was upon their awareness that their duties place them in a category different
from those to which the rank-and-file employees pertain. It is significant that
only 25 of the 48 employees who are said to be managers and/or
supervisors, belatedly insist in forming a new and separate union.

Petitioner surmises that the motivation behind this belated move is possibly
because private respondents herein are apprehensive that they might be
adversely affected by policies which the new management of petitioner
corporation introduced to streamline its business operation and eliminates
weaknesses in the corporate structure affecting revenue and profitability.
Understandably, the purpose behind the formation of the Union would be to
gain leverage to pressure Management to desist from the contemplated
measures.

328
Private respondents are incorrect when they manifest in their comment to
the petition that they "could be appropriately classified as supervisory
employees and, therefore, are eligible to organize their own union but are
ineligible to join the union of their subordinates", citing Adamson and
Adamson versus CIR, L-35120, January 31, 1984, 127 SCRA 268 (Private
Respondents' Comment to the Petition, p. 2, dated May 23, 1986, Rollo, p.
83).

The reference made by private respondents to said case of Adamson and

Adamson versus CIR (supra), and the pronouncements made therein that
"supervisory employees of an employer cannot join any labor organization of
employees under their supervision but may validly form a separate
organization of their own" no longer can be invoked for the benefit of private
respondents. As aptly countered by the petitioner in its manifestation dated
June 2, 1986, submitted through its counsel:

2. Adamson & Adamson vs. CIR, 127 SCRA 268. In quoting from
this decision of this Honorable Court, private respondents
intentionally deleted the phrase "under the Industrial Peace Act"
obviously to mislead this Honorable Court into believing that up to
now supervisors still have the right to form unions. This right has
been disallowed, disauthorized and discontinued under Article 246
of the New Labor Code and Section 11, Rule II. Book Five of the
Implementing Rules. (Rollo, p. 106)

Indeed, the Industrial Peace Act or Republic Act 875, referred to in

said Adamson, et al. vs. CIR case, became effective on January 17, 1953. It
has, however, been superseded and supplanted by the present Labor Code
which took effect on January 1, 1975. What should be applied now are the
specific provisi•ns of the Omnibus Rules Implementing the Labor Code which
have been already above-quoted (supra). In fact, no less than the public
respondents herein, represented by the present Solicitor General, in this
regard, even state in their Comment to the Petition, the following:

The only issue determinative of the present controversy is whether

or not the supervisors in petitioner company may form a union for
purposes of collective bargaining separate and distinct from that of
the rank-and-file unit.

It is our submission that they may not. The New Labor Code
recognizes two principal groups of employees, namely, managerial
and the rank-and- file group. Thus, Art. 212 (k) provides:

Managerial employee' is one who is vested with powers or

prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall,, discharge, assign or
discipline employees, or to effectively recommend such managerial
actions. All employees not falling within this definition are
considered rank and file employees for purposes of this Book.
(Emphasis supplied)

329
In amplification of the aforequoted provisions of the law, Sec. 11
of Rule II, Book V of the Omnibus Rules Implementing the Labor
Code did away with existing Supervisors Union, classifying the
members thereof as neither managerial or rank-and-file employees
depending on the work they perform. If they discharge managerial
functions they are prohibited from forming or joining any labor
organization. If they do not perform managerial work, they may
join or assist the rank- and-file union and, if none exists, they may
form one such rank-and-file organization. From these, one can
readily infer that the law no longer recognizes supervisory Unions.

A perusal of the job descriptions of private respondents as outlined

in the petition shows that most of them do not perform managerial
work. Hence, although not qualified to organize a labor union of
their own, they may join the certified rank-and-file organization in
the Company, which has a current collective bargaining agreement
to expire on July 15, 1987.

On the query of this Honorable Court regarding the new policy of

the MOLE, if any, with respect to Supervisory Unions, the BLR
Director in his reply letter dated May 21, 1986 to our letter of May
14, 1986 (copy of said letter is hereto attached as Annex
"A") supports the view that under the Labor Code and its
implementing rules, supervisory unions cannot organize as a labor
unit separate from that of the rank-and-file
organization. (Emphasis supplied)

However, he points out that on a number of occasions, the Bureau

has allowed the registration of certain categories of non-
managerial employees which include supervisors who are not
performing managerial functions similar to that of the non-
managerial members of the Bulletin Publishing Corporation
Supervisors Union (BPCSU) At any rate, he states that "there is as
yet no decree, executive order or issuance, whether draft or in
force, which expressly modified the provision of the Labor Code on
supervisory unions. (Rollo, pp. 89-91)

The foregoing discussion of public respondents will reflect and emphasize the
lack of any legal basis of the assumption made by private respondents that
they may organize a supervisory union of their own, distinct and separate
from the existing union of the rank-and-file employees of the Bulletin
Publishing Corporation.

In view of these premises, and considering the stand taken no less by

respondent director Cresenciano B. Trajano, in his aforestated reply-letter to
Assistant Solicitor General Amado D. Aquino, dated May 21, 1986 (Rollo, pp.
93-' 95), as disclosed to this Court, the petition for cancellation of Certificate
No. 10547, issued on March 26, 1986 by the Ministry of Labor and
Employment, said to be still pending in that office, ought therefore to be now
acted upon thereat.

330
Finally, it is averred by petitioner that the resort to strike by private
respondents is untimely and premature because of the pendency of a case
with the Ministry of Labor docketed as NCR-LRD-4-166-88 which private
respondents themselves filed and which is for direct certification of said
supervisors union as the bargaining representative of the supervisors. This
assertion of petitioner should be up held. Article 265, paragraph 2 of the
Labor Code expressly provides that "no stake or lock-out shall be declared ...
during the pendency of cases involving the same grounds for the strike or
lock-out." (Emphasis supplied).

Private respondents declare that the primary reasons which prompted their
filing of a notice of strike on April 8, 1986, are the arbitrary and discriminatory
retirement of four (4) members of the supervisors union effective April 17,
1986, namely: Jose B. Bernal, Ramiro A. Nebres, Alcantara S. de la Paz and
Luis F. Garcia, who were among those who initiated the formation of their
union; as well as the immediate promotion of some members of the union to
executive positions in order to remove the said persons promoted from the
coverage of, or membership from the supervisory union. Private respondents
charge that these acts are tantamount to union busting tactics and constitute
unfair labor practices that warrant a strike.

Furthermore, private respondents claim that petitioner does not have any
definite policy governing the retirement of supervisory employees as
distinguished from rank-and-file employees. Under the Collective Bargaining
Agreement currently in effect, rank-and- file employees may be retired upon
reaching 25 years of service or 60 years of age, at the management's option.
It is claimed that this policy cannot or has never been applied to supervisors
who are not members of the rank-and-file Bulletin Employees union.

We are not persuaded by private respondents' submissions. The main issues

in this case are the legality of a supervisory union and the certificate of
registration issued therefor, and the validity of a threatened strike by
members of such union. The matter of the retirement of the four retirees is
only an incident to the case. It may not be used to skirt the real question of
the legality of the organization of a supervisors union. Parenthetically, it is
said that three out of the retirees, Messrs. Garcia, de la Paz and Bernal
collected their retirement benefits (Rollo, p. 65), rendering the alleged ill-
motives behind their retirement untenable. This matter cannot be invoked by
private respondents herein as an indication of union busting practice of
petitioner, absent any showing of protest by the said retirees themselves.

Respondents make much ado that petitioner does not have a definite policy
regarding the retirement of supervisory employees. Petitioner has
satisfactorily shown to this Court that it has been management policy to
likewise apply the provisions of the Collective Bargaining Agreement (CBA)
between petitioner and the rank-and-file union (BEU), also to supervisors.
According to the uncontroverted submission of petitioner, the provisions of
Section 4 in relation to Section 1 of Article X of the said CBA, have been
repeatedly applied to supervisory personnel even if they are not included in
the scope of the CBA. The pertinent. provisions on retirement are as follows:

331
Section 4. — The COMPANY, at its option retire an employee or
worker who has rendered 25 years of service or who has reached
the age of 60 years in his last birthday by paying him full benefits
provided in Section 1 of this Article.

Section 1. — Any employee in the active service of the COMPANY

as of the date of signing of this Agreement whose service with the
COMPANY is terminated for any reason other than those
enumerated in A article 283 of Presidential Decree No. 442 as
amended, shall be entitled to gratuity pay in an amount equivalent
to one month's pay for every year of continuous service based on
the salary as of the date of termination. Such gratuity shall not be
in addition to, but shall be in lieu of, the termination pay benefits
to which the employee or worker is entitled under the Labor Code
of the Philippines, or any similar legislation, provided that if the
benefits to which the employee or worker may be entitled under
such statute are greater than that provided in the Article, the
employee or worker shall receive the greater amount. (Emphasis
ours).

The aforestated sections explicitly declare, in no uncertain terms, that

retirement of an employee may be done upon initiative and option of the
management. And where there are cases of voluntary retirement, the same
is effective only upon the approval of management. The fact that there are
some supervisory employees who have not yet been retired after 25 years
with the company or have reached the age of sixty merely confirms that it is
the singular prerogative of management, at its option, to retired supervisors
or rank-and-file members when it deems fit. There should be no unfair labor
practice committed by management if the retirement of private respondents
were made in accord with the agreed option. That there were numerous
instances wherein management exercised its option to retire employees
pursuant to the aforementioned provisions, appears to be a fact which private
respondents have not controverted. It seems only now when the question of
the legality of a supervisors union has arisen that private respondents
attempt to inject the dubious theory that the private respondents are entitled
to form a union or go on strike because there is allegedly no retirement policy
provided for their benefit. As above noted, this assertion does not appear to
have any factual basis.

It is even more untenable for private respondents to suggest that the "sudden
promotion" of the supervisors union members to executive positions was
intended to remove them from the coverage of or from membership in the
supervisory union. The promotion of employees to managerial or executive
positions rests upon the discretion of management. Managerial positions are
offices which can only be held by persons who have the trust of the
corporation and its officers. It is the prerogative of management to promote
any individual working within the company to a higher position. It should not
be inhibited or prevented from doing so. A promotion which is manifestely
beneficial to an employee should not give rise to a gratuitous speculation that
such a promotion was made simply to deprive the union of the membership

332
of the promoted employee, who after all appears to have accepted his
promotion.

We find nothing improper in the promotions made by the petitioner company.

These were but in implementation of petitioner's well-considered policy on
retirement and promotions intended to improve the morale of lower and
middle management ranks by promoting those specially deserving before
they are eventually retired. This then would allow subsequent promotions of
their replacements from lower ranks. As petitioner explains, these
retirements and promotions were but in accord with a carefully studied and
pre-established policy which had been implemented during the past years
and unrelated to and without connection with the organization of private
respondents' Union, BSU.

In sum, where concerted activities are aimed at compelling an employer to

ignore the clear mandate of the Labor Code, as in the instant case, grounds
based on equity may be invoked from the courts in order to restrain the
questioned activities. We cannot remain oblivious to the fact that a strike, as
that contemplated by the supervisors union against petitioner can cause
irreparable injury to its publications, diminish goodwill and seriously affect its
continuity with its regular readers.

Trade unionism and strikes are legitimate weapons of labor granted by our
statutes. But when these instruments are utilized by managerial/supervisory
employees in violation of existing labor laws, the misuse of these tactics can
be the subject of judicial intervention to forestall grave injury to a business
enterprise.

WHEREFORE, the temporary restraining order issued by this Court, dated May
12, 1986, enjoining the private respondents from declaring or staging a strike
against the petitioner herein, in all its forms, including walk-out, mass leave,
or any kind of activity that will lead to a work stoppage, is hereby made
permanent. The public respondents are also directed to act upon and resolve,
at the earliest possible time and in the light of the discussion and
pronouncements made by the Court in this case, the petition dated April 25,
1986, submitted by the petitioner herein for the cancellation of Bulletin
Publishing Corporation Supervisors Union Registration Certificate No. 105-
47-LC.

SO ORDERED.

333
334
FIRST DIVISION

G.R. No. 89621 September 24, 1991

PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC.,

represented by its Plant General Manager ANTHONY B. SIAN,
ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, petitioners,
vs.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO
OLIVA, WILFREDO CABAÑAS & FULGENCIO LEGO, respondents.

Aurelio D. Menzon for petitioners.

Mario P. Nicolasora co-counsel for petitioners.
Papiano L. Santo for private respondents.

CRUZ, J.:

The question now before us has been categorically resolved in earlier

decisions of the Court that a little more diligent research would have disclosed
to the petitioners. On the basis of those cases and the facts now before us,
the petition must be denied.

The private respondents were employees of the petitioner who were

suspected of complicity in the irregular disposition of empty Pepsi Cola
bottles. On July 16, 1987, the petitioners filed a criminal complaint for theft
against them but this was later withdrawn and substituted with a criminal
complaint for falsification of private documents. On November 26, 1987, after
a preliminary investigation conducted by the Municipal Trial Court of
Tanauan, Leyte, the complaint was dismissed. The dismissal was affirmed on
April 8, 1988, by the Office of the Provincial Prosecutor.

Meantime, allegedly after an administrative investigation, the private

respondents were dismissed by the petitioner company on November 23,
1987. As a result, they lodged a complaint for illegal dismissal with the
Regional Arbitration Branch of the NLRC in Tacloban City on December 1,
1987, and decisions manded reinstatement with damages. In addition, they
instituted in the Regional Trial Court of Leyte, on April 4, 1988, a separate
civil complaint against the petitioners for damages arising from what they
claimed to be their malicious prosecution.

The petitioners moved to dismiss the civil complaint on the ground that the
trial court had no jurisdiction over the case because it involved employee-
employer relations that were exclusively cognizable by the labor arbiter. The
motion was granted on February 6, 1989. On July 6, 1989, however, the
respondent judge, acting on the motion for reconsideration, reinstated the
complaint, saying it was "distinct from the labor case for damages now
pending before the labor courts." The petitioners then came to this Court for
relief.

335
The petitioners invoke Article 217 of the Labor Code and a number of
decisions of this Court to support their position that the private respondents
civil complaint for damages falls under the jurisdiction of the labor arbiter.
They particularly cite the case of Getz Corporation v. Court of Appeals,1 where
it was held that a court of first instance had no jurisdiction over the complaint
filed by a dismissed employee "for unpaid salary and other employment
benefits, termination pay and moral and exemplary damages."

We hold at the outset that the case is not in point because what was involved
there was a claim arising from the alleged illegal dismissal of an employee,
who chose to complain to the regular court and not to the labor arbiter.
Obviously, the claim arose from employee-employer relations and so came
under Article 217 of the Labor Code which then provided as follows:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The
Labor Arbiters shall have the original and exclusive jurisdiction to hear
and decide within thirty (30) working days after submission of the case
by the parties for decision, the following cases involving all workers,
whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that workers may file involving wages, hours of work and other
terms and conditions of employment;

3. All money claims of workers, including those based on non-payment

or underpayment of wages, overtime compensation, separation pay and
other benefits provided by law or appropriate agreement, except claims
for employees' compensation, social security, medicare and maternity
benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code, including
questions involving the legality of strikes and lockouts.

(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by labor Arbiters.2

It must be stressed that not every controversy involving workers and their
employers can be resolved only by the labor arbiters. This will be so only if
there is a "reasonable causal connection" between the claim asserted and
employee-employer relations to put the case under the provisions of Article
217. Absent such a link, the complaint will be cognizable by the regular courts
of justice in the exercise of their civil and criminal jurisdiction.

In Medina v. Castro-Bartolome,3 two employees filed in the Court of First

Instance of Rizal a civil complaint for damages against their employer for
slanderous remarks made against them by the company president. On the
order dismissing the case because it came under the jurisdiction of the labor
arbiters, Justice Vicente Abad Santos said for the Court:

336
It is obvious from the complaint that the plaintiffs have not alleged any
unfair labor practice. Theirs is a simple action for damages for tortious
acts allegedly committed by the defendants. Such being the case, the
governing statute is the Civil Code and not the Labor Code. It results
that the orders under review are based on a wrong premise.

In Singapore Airlines Ltd. v. Paño,4 where the plaintiff was suing for damages
for alleged violation by the defendant of an "Agreement for a Course of
Conversion Training at the Expense of Singapore Airlines Limited," the
jurisdiction of the Court of First Instance of Rizal over the case was
questioned. The Court, citing the earlier case of Quisaba v. Sta. Ines Melale
Veneer and Plywood, Inc.,5 declared through Justice Herrera:

Stated differently, petitioner seeks protection under the civil laws and
claims no benefits under the Labor Code. The primary relief sought is
for liquidated damages for breach of a contractual obligation. The other
items demanded are not labor benefits demanded by workers generally
taken cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are the
natural consequences flowing from breach of an obligation, intrinsically
a civil dispute.

In Molave Sales, Inc. v. Laron,6 the same Justice held for the Court that the
claim of the plaintiff against its sales manager for payment of certain
accounts pertaining to his purchase of vehicles and automotive parts, repairs
of such vehicles, and cash advances from the corporation was properly
cognizable by the Regional Trial Court of Dagupan City and not the labor
arbiter, because "although a controversy is between an employer and an
employee, the Labor Arbiters have nojurisdiction if the Labor Code is not
involved."

The latest ruling on this issue is found in San Miguel Corporation v.

NLRC,7 where the above cases are cited and the changes in Article 217 are
recounted. That case involved a claim of an employee for a P60,000.00 prize
for a proposal made by him which he alleged had been accepted and
implemented by the defendant corporation in the processing of one of its beer
products. The claim was filed with the labor arbiter, who dismissed it for lack
of jurisdiction but was reversed by the NLRC on appeal. In setting aside the
appealed decision and dismissing the complaint, the Court observed through
Justice Feliciano:

It is the character of the principal relief sought that appears essential,

in this connection. Where such principal relief is to be granted under
labor legislation or a collective bargaining agreement, the case should
fall within the jurisdiction of the Labor Arbiter and the NLRC, even
though a claim for damages might be asserted as an incident to such
claim.

xxx xxx xxx

Where the claim to the principal relief sought is to be resolved not by

reference to the Labor Code or other labor relations statute or a
337
collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and
not to the Labor Arbiter and the NLRC. In such situations, resolution of
the dispute requires expertise, not in labor management relations nor
in wage structures and other terms and conditions of employment, but
rather in the application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed to Labor
Arbiters and the NLRC and the rationale for granting jurisdiction over
such claims to these agencies disappears.

xxx xxx xxx

While paragraph 3 above refers to "all money claims of workers," it is

not necessary to suppose that the entire universe of money claims that
might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters.

xxx xxx xxx

For it cannot be presumed that money claims of workers which do not

arise out of or in connection with their employer-employee relationship,
and which would therefore fall within the general jurisdiction of the
regular courts of justice, were intended by the legislative authority to
be taken away from the jurisdiction of the courts and lodged with Labor
Arbiters on an exclusive basis. The Court, therefore, believes and so
holds that the 'money claims of workers" referred to in paragraph 3 of
Article 217 embraces money claims which arise out of or in connection
with the employer- employee relationship, or some aspect or incident of
such relationship. Put a little differently, that money claims of workers
which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship (Ibid.).

The case now before the Court involves a complaint for damages for malicious
prosecution which was filed with the Regional Trial Court of Leyte by the
employees of the defendant company. It does not appear that there is a
"reasonable causal connection" between the complaint and the relations of
the parties as employer and employees. The complaint did not arise from
such relations and in fact could have arisen independently of an employment
relationship between the parties. No such relationship or any unfair labor
practice is asserted. What the employees are alleging is that the petitioners
acted with bad faith when they filed the criminal complaint which the
Municipal Trial Court said was intended "to harass the poor employees" and
the dismissal of which was affirmed by the Provincial Prosecutor "for lack of
evidence to establish even a slightest probability that all the respondents
herein have committed the crime imputed against them." This is a matter
which the labor arbiter has no competence to resolve as the applicable law is
not the Labor Code but the Revised Penal Code.

"Talents differ, all is well and wisely put," so observed the philosopher-
poet.8 So it must be in the case we here decide.

338
WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition
DENIED, with costs against the petitioner.

SO ORDERED.

339
FIRST DIVISION

G.R. No. 88011 July 30, 1990

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ROSA
ALLADO, respondents.

G.A. Fortun & Associates for petitioner.

Carlito A. Corpuz for private respondent.

MEDIALDEA, J.:
The main issue, in this petition is whether private respondent, Rosa Allado voluntarily resigned from her
work at petitioner corporation, Great Pacific Life Assurance Corporation, or whether the corporation
constructively dismissed her or forced her to resign.

Ms. Rosa Allado alleged that she was hired by GREPALIFE as clerk in its
regional office in Laoag, Ilocos Norte sometime in January, 1969. After only
three (3) months on the job, she was promoted to Regional Cashier at the
same station. In 1971, she was transferred to Baguio City, following the
transfer of the corporation's regional office to that city, where she remained
with the company until May 25, 1984. At the time of her separation she was
receiving P2,230.00 a month.

She further alleged that on April 4, 1984, Ms. Rosa Y. Choa, the corporation's
Assistant Vice President, issued an inter-office memorandum to Ms. Ana
Marie Barredo, head of the Human Resources Administration Department,
instructing the latter to implement the decision taken by the company to
transfer Allado to "IL Accounting Department-Premium Section" at Metro
Manila to take the place of one Ms. Paz Francisco who resigned March 30,
1984. The reason given for the transfer, as stated in the memorandum, was
for the company to cut down on its expenses at its Baguio office the function
of Allado as Regional Cashier to be assumed by the Regional Administrator.

Barredo notified Allado of the foregoing stating that though the corporation
was "well aware of [her] reservation about relocating to Manila" "present
circumstances leave the company no other recourse," and informed her that
she was entitled to a "relocation expense" of P1,000.00 subject to liquidation.
Allado wrote the president of the corporation requesting reconsideration of
the decision of her transfer. She reasoned that with the salary she was
receiving she could not afford to live in a highly urbanized area as Metro
Manila. and "more importantly," she wrote, she has "'dependents who are
studying in Baguio City whom she cannot simply leave" behind.

The corporation's president, through Barredo, denied reconsideration

explaining that management has decided to abolished her item since the
volume of the business in her station "can more than adequately be handled
by the Regional Administrator." It was emphasized that "the only existing

340
vacancy in the company suitable at present to [her] qualification will be one
at the IL Accounting Department" and that there "will be no demotion in rank
or pay." She was urged to "please understand that [the corporation has] no
other recourse but to assign [her] to [the] vacancy since there [was] no other
suitable position where [the corporation] can accomodate [her] at present."
She was assured that "once a vacancy for a regional cashier arises in the
future [she] will be given first priority." There was no mention of what
position Allado was to assume but was told merely that "the duties and
functions [she] will be performing will be discussed with her in detail by [her]
manager on the day [she] report[s] for work." Her "relocation expense
moreover, was increased to P1,500.00. She was given until May 16, 1984 to
report to her new assignment on the pain of being terminated from the
service.

Upon receiving the letter of denial, Allado repaired to the corporation's head
office in Makati to plead her case to Barredo and Mr. Carmelo Valera, an
attorney in the corporation's legal department, but to no avail. On May 15,
1984 she tendered her resignation effective May 25, 1984. She also signed a
quitclaim and release in favor of GREPALIFE renouncing any claim or action
she might have against the corporation. Thereafter, she was paid gratuity
pay and other employee benefits.

On November 29, 1984, Allado instituted a complaint with the Sub- Regional
Arbitration Branch of the NLRC in Baguio City against the corporation
docketed as NLRC Case No. RAB-1-0307-84, charging illegal dismissal. Allado
contends that during her meeting with Barredo she was told that her new
position is two grades lower than her present status although there would be
no decrease in her salary. She continued that Valera advised her to accept
her new assignment even if it be lower in rank, but if she was not amenable
to this, that she resign. Valera supposedly told Allado that should she choose
to resign he would work it out for her to receive one-month pay for every
year of service as her separation pay provided she makes it appear that her
resignation was voluntary. As it turned out she was only given one-half month
pay for every year of service. She concluded that she was "waylaid" or
"trapped," her transfer being an elaborate scheme for her to resign.

To this, the corporation answered that the termination of Allado was not a
result of her dismissal but rather of her own voluntary act of resigning, as in
fact she signed a quitclaim in its favor.

On July 28, 1986 the labor arbiter promulgated his decision finding that Rosa
Allado was illegally dismissed and ordered her reinstatement to her former
position in Baguio City without loss of seniority rights and for the payment to
her of backwages equivalent to one year pay minus the amount she already
received from the corporation as a consequence of her "resignation." The
labor arbiter found that the transfer of Allado would cause her and her family
"financial dislocation" and, therefore, "such transfer ... amounts to
constructive dismissal." The contention of GREPALIFE that Allado voluntarily
resigned was rejected, the labor arbiter reasoning that Allado wanted to
continue to work for the company, as shown by her repeated pleas, but,
forced to accept a position two-grades lower than her present status and at
341
a place inconvenient for her, and presented with Valero's representation that
he could work it out for Allado to receive one month pay for every year of
service as her separation pay. This, to the mind of the labor arbiter, gave
Allado no choice but to resign and sign the quitclaim for her to receive her
separation pay.

From this decision both parties appealed, Allado asking for full back wages
while the corporation disputed the ruling that complainant was constructively
dismissed. On January 18, 1989, the NLRC affirmed the decision of the labor
arbiter agreeing that:

Under the circumstances, [Allado] had no choice. Hers was one of

adherence. She had no better alternative. Faced by the harsh
realities of being rendered jobless, she had to accept the token
gratuity being proferred to her even if it was much less than what
was expected by her earlier. She had to make something under the
circumstances or else she would have nothing at hand and with
dependents to support at that. Payment of her severance pay was
conditional, hence, she had to sign the release and quitclaim
papers and thereafter her services were terminated by respondent
on account of "resignation."

xxx xxx xxx

When an employee is being transferred, amounting to a demotion

in rank or grade compared with his actual position and on the
pretext that his present position is abolished, this is certainly an
arbitrary exercise of management prerogative, [Allado's] quitting
her job is of no moment because under the circumstances, she had
no choice since her present position was deleted or abolished even
before she could accept or object to her transfer to the head office
of respondent company. Hence the Labor Arbiter was perfectly
correct in ruling that complainant was constructively dismissed.
(pp. 33-34, Rollo)

The NLRC modified, however, the award given by the labor arbiter in this
wise:

... with modification by hereby ordering and directing respondent

company to pay complainant full backwages without qualification
effective from her date of separation from the service on May 24,
1984 up to her actual reinstatement to her former position or to an
equivalent or comparable position without loss of seniority rights,
subject to the three (3) years limitation. In the event that
complainant's reinstatement becomes impractical due to a lawful
supervening event, ... complainant is entitled to one (1) month
separation pay based on her latest salary, in addition to her
backwages as herein decreed, but deducting therefrom the benefits
she had earlier received as decreed by the Labor Arbiter, ... (p. 39,
Rollo)

342
GREPALIFE moved for reconsideration pointing out, inter a alia, that there is
nothing in the records which would show that the abolition of the position of
Regional Cashier was contrived to ease or force Allado out of employment,
but this was denied. Hence, this petition for certiorari.

For initial consideration is the question of whether the decision of the NLRC
had matured into finality considering that, as private respondent Allado points
out, GREPALIFE received the order of the NLRC denying its motion for
reconsideration on March 13, 1989 whereas the instant petition was filed only
after fifty-seven (57) days therefrom or only on May 9, 1989. It is basic,
however, that a special civil action of certiorari may be filed within a
reasonable time and there is no time frame fixed by Rule 65 of the Rules of
Court (Cubar v. Mendoza, No. 55035, February 23,1983,120 SCRA 768;
Magna Rubber Manufacturing Corporation v. Drilon, G.R. No. 81771,
December 29, 1988, 168 SCRA 726). Thus, in Santos V. NLRC, G.R. No.
76991, October 28, 1988, 166 SCRA 759, We entertained a petition for
certiorari notwithstanding the fact that it was filed only after seven (7)
months from the promulgation of the NLRC decision considering that it has
not yet been executed and the substantial issues raised merited this Court's
attention. And after a careful reading of this case, We are of the opinion that
the instant petition has merit.

Much has been said regarding the transfer of Allado to Makati, Metro Manila
disregarding the reason for such transfer which is the abolition of Allado's
position of Regional Cashier in Baguio City. That it has in fact been abolished
is not disputed. It is also not disputed that the Regional Administrator had
assumed the function of Regional Cashier and GREPALIFE had not hired
anyone in Allado's stead. In fact, there is no serious challenge at all to the
decision of GREPALIFE deleting Allado's item. It is, of course, a management
prerogative to abolish a position which it deems no longer necessary and this
Court, absent any findings of malice on the part of management, cannot
erase that initiative simply to protect the person holding that office. And We
do not see anything that would indicate that Allado's position was abolished
to ease her out of employment. The deletion of Allado's office, therefore,
should be accepted as a valid exercise of management prerogative.

But GREPALIFE sought to accommodate Allado by ordering her to transfer to

a position recently vacated. Whether that position is two grades lower than a
Regional Cashier is immaterial because GREPALIFE could have then
terminated Allado's services when it abolished her position. Her proposed
transfer was merely an accommodation. It is erroneous, therefore, to
conclude that a situation was created by GREPALIFE to force Allado to resign.

Based on his premise, however, that Allado's services could have been
terminated after her position as Regional Cashier was abolished, We adopt
by analogy Article 283 of the Labor Code which provides that in case of
termination of employment due to installation of labor-saving devices or
redundancy, the worker affected shall be entitled to a separation pay of at
least one (1) month pay or to at least one (1) month pay for every year of
service whichever is higher. We took consideration of the fact that Allado's
proposed transfer to Makati, Metro Manila would indeed entail much sacrifice
343
on her part and the finding of the NLRC that the position Allado was to assume
is two grades lower than a Regional Cashier so much so that GREPALIFE's
accommodation to her is almost illusory. Thus, in the interest of justice,
Allado should be entitled to receive one (1) month pay for every year of
service as her separation pay. Since Allado was already paid one-half (½)
month pay for every year of service she is only entitled to the balance.

ACCORDINGLY, the decision of the NLRC, dated January 18, 1989, and its
order, dated February 28, 1989, are SET ASIDE and a new one entered
finding no case of illegal dismissal on the part of petitioner GREPALIFE but
holding it liable for the balance of Rosa Allado's separation pay as above
decreed.

SO ORDERED.

344
345
THIRD DIVISION

G.R. No. 86693 July 2, 1990

COSMOPOLITAN FUNERAL HOMES, INC., petitioner,

vs.
NOLI MAALAT and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

Castro, Enriquez, Carpio, Guillen & Associates for petitioner.

Castro B. Dorado for private respondent.

GUTIERREZ, JR., J.:

The nature of the work of a "funeraria" supervisor, whether employee or commission agent, is the issue
raised in this petition.

Sometime in 1962, petitioner Cosmopolitan Funeral Homes, Inc. engaged the

services of private respondent Noli Maalat as a "supervisor" to handle the
solicitation of mortuary arrangements, sales and collections. The funeral
services which he sold refer to the taking of the corpse, embalming,
casketing, viewing and delivery. The private respondent was paid on a
commission basis of 3.5% of the amounts actually collected and remitted.

On January 15, 1987, respondent Maalat was dismissed by the petitioner for
commission of the following violations despite previous warnings:

(a) Understatement of the reported contract price against the

actual contract price charged to and paid by the customers;

(b) Misappropriation of funds or collections by non-remittance of

collections and non-issuance of Official Receipt;

(c) Charging customers additional amount and pocketing the same

for the cost of medicines, linen, and security services without
issuing Official Receipt;

(d) Non-reporting of some embalming and re-embalming charges

and pocketing the same and non-issuance of Official Receipt;

(e) Engaging in tomb making and inclusion of the price of the tomb
in the package price without prior knowledge of the customers and
the company. (At p. 16, Records)

Maalat filed a complaint for illegal dismissal and non-payment of

commissions.

On the basis of the parties' position papers, Labor Arbiter Newton R. Sancho
rendered a decision declaring Maalat's dismissal illegal and ordering the
petitioner to pay separation pay, commission, interests and attorney's fee in
the total amount of P205,571.52.
346
In an appeal from the decision, the National Labor Relations Commission
(NLRC), on May 31, 1988, reversed the Arbiter's action and rendered a new
decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the decision dated November

27, 1987, is hereby SET ASIDE and VACATED and a New
One ENTERED, ordering as follows:

1. Judgment is hereby rendered declaring the dismissal of

complainant Noli Maalat by respondent-appellant as justified and
with lawful cause. By way of equitable relief and in the interest of
social and compassionate justice, We hereby order and direct
respondent Cosmopolitan Funeral Homes, Inc. to pay complainant
Maalat his separation pay equivalent to one-half (1/2%) month
average income for every year of service to appellant, computed
on his last year of service immediately preceding his separation
from respondent, subject to allowable set-offs and deductions of
the counter-claims of respondent company, after due notice and
hearing.

2. The claims for accrued commissions by complainant may be

admitted, subject to proofs thereof, and allowable set-offs and
deductions credited to the account of respondent-appellant by way
of counterclaims, after due notice and hearing.

3. All the evidence adduced by the parties are hereby admitted,

subject to rebuttal and/or controvertion by either party during the
hearing and the hearings hereafter.

4. The Attorney's fee in favor of complainant's counsel is hereby

fixed at two (2%) percent, assessable over whatever final money
award complainant may be entitled on the aggregate sums thereof,
after proper hearing on the same.

All other claims and counter-claims are hereby dismissed for lack
of merit, except those specified above.

Finally, this case is remanded to the Regional Arbitration Branch of

origin for further proceedings in accordance with the above
judgment. No findings as to costs. (At pp. 66-67, Rollo)

The petitioner's motion for reconsideration was denied, hence, this petition
for review before this Court.

The issues raised in this petition are:

I. Whether or not the NLRC erred in ruling that an employment relationship

existed between the parties; and

II. Whether or not there was equitable basis for the award of 1/2 month
separation pay for every year of service.

347
I

In determining whether a person who performs work for another is the latter's
employee or an independent contractor, the prevailing test is the "right of
control" test. Under this test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to
control not only the end to be achieved, but also the manner and means to
be used in reaching that end.

The petitioner argues that Maalat was never its employee for he was only a
commission agent whose work was not subject to its control.
Citing Investment Planning Corporation of the Philippines v. Social Security
System (21 SCRA 924 [1967]), the petitioner states that the work of its
agents approximates that of an independent contractor since the agent is not
under control by the latter with respect to the means and methods employed
in the performance of the work, but only as to the results.

The NLRC, after its perusal of the facts and evidence on record, stated that
there exists an employment relationship between the parties. The petitioner
has failed to overcome this factual finding.

The fact that the petitioner imposed and applied its rule prohibiting superiors
from engaging in other funeral business which it considered inimical to
company interests proves that it had the right of control and actually
exercised its control over the private respondent. In other words, Maalat
worked exclusively for the petitioner.

Moreover, the private respondent was prohibited from engaging in part-time

embalming business outside of the company and a violation thereof was
cause for dismissal. Incurring absences without leave was likewise subject to
disciplinary action: a reprimand for the first offense, one week suspension for
the second offense, and dismissal for the third offense.

The petitioner admits that these prohibitive rules bound the private
respondent but states that these rules have no bearing on the means and
methods ordinarily required of a supervisor. The overall picture is one of
employment. The petitioner failed to prove that the contract with private
respondent was but a mere agency, which indicates that a "supervisor" is
free to accomplish his work on his own terms and may engage in other means
of livelihood.

In Investment Planning Corporation, supra, cited by the petitioner, the

majority of the "commission agents" are regularly employed elsewhere. Such
a circumstance is absent in Maalat's case. Moreover, the private respondent's
job description states that ". . . he attends to the needs of the clientele and
arranges the kind of casket and funeral services the customers would like to
avail themselves of" and indicates that he must always be on the job or at
least most of time.

Likewise, the private respondent was not allowed to issue his own receipts,
nor was he allowed to directly deduct his commission as truly independent
salesmen practice.
348
Worthy of note too are two other company rules which provide that
"negotiation and making of contract with customers shall be done inside the
office" and "signing of contract should be made immediately before the
cadaver or deceased is place in the casket." (Annex 10-B, Petitioner's Position
Paper, Records) Said rules belie the petitioner's stand that it does not have
control over the means and methods by which the work is accomplished. The
control test has been satisfied. (Social Security System v. Court of Appeals,
156 SCRA 383 [1987])

The finding by the public respondent that the petitioner has reported private
respondent to the Social Security System as a covered employee adds
strength to the conclusion that Maalat is an employee.

There is no reversible error in the findings of facts by the NLRC which are
supported by substantial evidence and which we, therefore, do not disturb on
appeal.

The payment of compensation by way of commission does not militate

against the conclusion that private respondent was an employee. Under
Article 97 of the Labor Code, "wage" shall mean "the renumeration of
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, pace or commission
basis . . .".

The non-observance of regular office hours does not sufficiently show that
Maalat is a "supervisor on commission basis" nor does the same indicate that
he is an independent salesman. As a supervisor, although compensated on
commission basis, he is exempt from the observance of normal hours of work
for his compensation is measured by the number of sales he makes. He may
not have had the usual fixed time for starting and ending his work as in other
types of employment but he had to spend most of his working hours at his
job. People die at all times of the day or night.

All considered, we rule that private respondent is an employee of petitioner

corporation.

II

The petitioner impugns the award of separation pay equivalent to one-half

(1/2) month average income for every year of service to private respondent.
The NLRC ruled that:

However, mindful of the fact the complainant Noli Maalat has

served respondent company for the last twenty four (24) years,
more or less, it is but proper to afford him some equitable relief,
consistent with the recent rulings of the Supreme Court, due to his
past services with no known previous record, and the ends of social
and compassionate justice will thus be served if he is paid a portion
of his separation pay, equivalent to one-half (1/2) month every
year of his service to said company. (See Soco v. Mercantile
Corporation, G.R. No. 53364-65, March 16, 1987; and Firestone,
et al, v. Lariosa et al., G.R. No. 70479, February 27, 1987). We are
349
not inclined to grant complainant his full month termination pay for
every year of his service because, unlike in the former Soco case,
the misconduct of the employee merely involves infraction of
company rules while in the latter Firestone case it involves
misconduct of a rank-and-file employee, although similarly
involving acts of dishonesty. (At pp. 65-66, Rollo)

This Court will not disturb the finding by the NLRC that private respondent
Maalat was dishonest in the discharge of his functions. The finding is
sufficiently supported by the evidence on record.

Additionally, the private respondent did not appeal from the NLRC decision,
thereby impliedly accepting the validity of his dismissal.

We take exception, therefore, to the grant of separation pay to private

respondent.

In Philippine Long Distance Telephone Company (PLDT) v. NLRC, (164 SCRA

671 [1988]), this Court re-examined, the doctrine in the
aforecited Firestone and Soco cases and other previous cases that
employees dismissed for cause are nevertheless entitled to separation pay
on the ground of social and compassionate justice. In abandoning this
doctrine, the Court held, and we quote:

. . . We hold that henceforth separation pay shall be allowed as a

measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the
reason for the valid dismissal is, for example, habitual intoxication
or an offense involving moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may not be required
to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of
social justice.

A contrary rule would, as the petitioner correctly argues, have the

effect of rewarding rather than punishing the erring employee for
his offense. . . .

The policy of social justice is not intended to countenance

wrongdoing simply because it is committed by the underprivileged.
At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every
humane society but only when the recipient is not a rascal claiming
an undeserved privilege. . . .

Subsequent decisions have abided by this pronouncement. (See Philippine

National Construction Corporation v. National Labor Relations Commission,
170 SCRA 207 [1989]; Eastern Paper Mills, Inc. v. National Labor Relations
Commission, 170 SCRA 597 [1989]; Osias Academy v. National Labor
Relations Commission, G.R. No. 83234, April 18, 1989; and Nasipit Lumber

350
Co., Inc. v. National Labor Relations Commission, G.R. No. 54424, August
31, 1989.)

Conformably with the above cited PLDT ruling, this Court pronounces that the
grant of separation pay to private respondent Maalat, who was validly
terminated for dishonesty, is not justified.

Parenthetically, it may be mentioned that the Labor Arbiter, apparently

unaware of the petition for review pending before this Court, conducted
further proceedings to compute private respondent's separation pay,
unclaimed commission and 2% attorney's fees, in compliance with the NLRC
decision of May 31, 1988. After hearing, the Labor Arbiter rendered a decision
on May 10, 1989, the pertinent portion of which reads:

In sum, the sustainable claims of complainant are as follows:

(1) Separation Pay : P 76,064.40

(2) Unpaid Commissions : 39,344.80
——————
Sub-total : P 115,409.20
(3) 2% Attorney's Fees : 2,308.18
——————
P 117, 717.38

WHEREFORE, judgment is hereby rendered ordering respondent

Cosmopolitan Funeral Homes, Inc., to pay complainant Noli Maalat
his claims above set forth in the total amount of P117,717.38 only.

Neither party appealed from said decision.

For being in conflict with our holding that the private respondent is not
entitled to separation pay, this Court sets aside the Labor Arbiter's
computation of separation pay. However, we uphold his computation of
unclaimed commissions amounting to P39,344.80. The amount of attorney's
fee should consequently be recomputed at 2% of P39,344.80 or P786.89.

WHEREFORE, the judgment of the National Labor Relations Commission is

AFFIRMED except for the grant of separation pay which is hereby disallowed.
Private respondent Maalat is entitled to unclaimed commissions of
P39,344.80 and 2% attorney's fees of P786.89, said amounts being
considered final.

SO ORDERED.

351
352
FIRST DIVISION

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO,
respondents.

Tirol & Tirol for petitioner.

Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.:

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called
the Company) and Melecio T. Basiao entered into a contract 1 by which:

1. Basiao was "authorized to solicit within the Philippines

applications for insurance policies and annuities in accordance with
the existing rules and regulations" of the Company;

2. he would receive "compensation, in the form of commissions ...

as provided in the Schedule of Commissions" of the contract to
"constitute a part of the consideration of ... (said) agreement;" and

3. the "rules in ... (the Company's) Rate Book and its Agent's
Manual, as well as all its circulars ... and those which may from
time to time be promulgated by it, ..." were made part of said
contract.

The contract also contained, among others, provisions governing the

relations of the parties, the duties of the Agent, the acts prohibited to him,
and the modes of termination of the agreement, viz.:

RELATION WITH THE COMPANY. The Agent shall be free to exercise

his own judgment as to time, place and means of soliciting
insurance. Nothing herein contained shall therefore be construed
to create the relationship of employee and employer between the
Agent and the Company. However, the Agent shall observe and
conform to all rules and regulations which the Company may from
time to time prescribe.

ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited

from giving, directly or indirectly, rebates in any form, or from
making any misrepresentation or over-selling, and, in general,
from doing or committing acts prohibited in the Agent's Manual and
in circulars of the Office of the Insurance Commissioner.

353
TERMINATION. The Company may terminate the contract at will,
without any previous notice to the Agent, for or on account of ...
(explicitly specified causes). ...

Either party may terminate this contract by giving to the other

notice in writing to that effect. It shall become ipso facto cancelled
if the Insurance Commissioner should revoke a Certificate of
Authority previously issued or should the Agent fail to renew his
existing Certificate of Authority upon its expiration. The Agent shall
not have any right to any commission on renewal of premiums that
may be paid after the termination of this agreement for any cause
whatsoever, except when the termination is due to disability or
death in line of service. As to commission corresponding to any
balance of the first year's premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if
the balance of the first year premium is paid, less actual cost of
collection, unless the termination is due to a violation of this
contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of

commissions or other compensations shall be valid without the
prior consent in writing of the Company. ...

Some four years later, in April 1972, the parties entered into another contract
— an Agency Manager's Contract — and to implement his end of it Basiao
organized an agency or office to which he gave the name M. Basiao and
Associates, while concurrently fulfilling his commitments under the first
contract with the Company. 2

In May, 1979, the Company terminated the Agency Manager's Contract. After
vainly seeking a reconsideration, Basiao sued the Company in a civil action
and this, he was later to claim, prompted the latter to terminate also his
engagement under the first contract and to stop payment of his commissions
starting April 1, 1980. 3

Basiao thereafter filed with the then Ministry of Labor a complaint 4 against
the Company and its president. Without contesting the termination of the
first contract, the complaint sought to recover commissions allegedly unpaid
thereunder, plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the Company's
employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of
his contract. 5

The Labor Arbiter to whom the case was assigned found for Basiao. He ruled
that the underwriting agreement had established an employer-employee
relationship between him and the Company, and this conferred jurisdiction
on the Ministry of Labor to adjudicate his claim. Said official's decision
directed payment of his unpaid commissions "... equivalent to the balance of
the first year's premium remaining unpaid, at the time of his termination, of

354
all the insurance policies solicited by ... (him) in favor of the respondent
company ..." plus 10% attorney's fees. 6

This decision was, on appeal by the Company, affirmed by the National Labor
Relations Commission. 7 Hence, the present petition for certiorari and
prohibition.

The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had
become the Company's employee by virtue of the contract invoked by him,
thereby placing his claim for unpaid commissions within the original and
exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217
of the Labor Code, 8 or, contrarily, as the Company would have it, that under
said contract Basiao's status was that of an independent contractor whose
claim was thus cognizable, not by the Labor Arbiter in a labor case, but by
the regular courts in an ordinary civil action.

The Company's thesis, that no employer-employee relation in the legal and

generally accepted sense existed between it and Basiao, is drawn from the
terms of the contract they had entered into, which, either expressly or by
necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting
insurance, set no accomplishment quotas and compensated him on the basis
of results obtained. He was not bound to observe any schedule of working
hours or report to any regular station; he could seek and work on his
prospects anywhere and at anytime he chose to, and was free to adopt the
selling methods he deemed most effective.

Without denying that the above were indeed the expressed implicit conditions
of Basiao's contract with the Company, the respondents contend that they do
not constitute the decisive determinant of the nature of his engagement,
invoking precedents to the effect that the critical feature distinguishing the
status of an employee from that of an independent contractor is control, that
is, whether or not the party who engages the services of another has the
power to control the latter's conduct in rendering such services. Pursuing the
argument, the respondents draw attention to the provisions of Basiao's
contract obliging him to "... observe and conform to all rules and regulations
which the Company may from time to time prescribe ...," as well as to the
fact that the Company prescribed the qualifications of applicants for
insurance, processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control, which made Basiao,
in legal contemplation, an employee of the Company. 9

It is true that the "control test" expressed in the following pronouncement of

the Court in the 1956 case of Viana vs. Alejo Al-Lagadan10

... In determining the existence of employer-employee

relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the
power to control the employees' conduct — although the latter is
the most important element (35 Am. Jur. 445). ...

355
has been followed and applied in later cases, some fairly recent. 11 Indeed, it
is without question a valid test of the character of a contract or agreement
to render service. It should, however, be obvious that not every form of
control that the hiring party reserves to himself over the conduct of the party
hired in relation to the services rendered may be accorded the effect of
establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is
not to vanish altogether. Realistically, it would be a rare contract of service
that gives untrammelled freedom to the party hired and eschews any
intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the
result and the means used to achieve it. The distinction acquires particular
relevance in the case of an enterprise affected with public interest, as is the
business of insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer and insured but
also to the internal affairs of the insurance company. 12 Rules and regulations
governing the conduct of the business are provided for in the Insurance Code
and enforced by the Insurance Commissioner. It is, therefore, usual and
expected for an insurance company to promulgate a set of rules to guide its
commission agents in selling its policies that they may not run afoul of the
law and what it requires or prohibits. Of such a character are the rules which
prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to
the Company the determination of the premiums to be paid and the schedules
of payment. None of these really invades the agent's contractual prerogative
to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-
employee relationship between him and the company.

There is no dearth of authority holding persons similarly placed as respondent

Basiao to be independent contractors, instead of employees of the parties for
whom they worked. In Mafinco Trading Corporation vs. Ople, 13 the Court
ruled that a person engaged to sell soft drinks for another, using a truck
supplied by the latter, but with the right to employ his own workers, sell
according to his own methods subject only to prearranged routes, observing
no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a
peddler's discount given by the other party for at least 250 cases of soft
drinks sold daily, was not an employee but an independent contractor.

In Investment Planning Corporation of the Philippines us. Social Security

System 14 a case almost on all fours with the present one, this Court held that
there was no employer-employee relationship between a commission agent
and an investment company, but that the former was an independent
356
contractor where said agent and others similarly placed were: (a) paid
compensation in the form of commissions based on percentages of their
sales, any balance of commissions earned being payable to their legal
representatives in the event of death or registration; (b) required to put up
performance bonds; (c) subject to a set of rules and regulations governing
the performance of their duties under the agreement with the company and
termination of their services for certain causes; (d) not required to report for
work at any time, nor to devote their time exclusively to working for the
company nor to submit a record of their activities, and who, finally,
shouldered their own selling and transportation expenses.

More recently, in Sara vs. NLRC, 15 it was held that one who had been
engaged by a rice miller to buy and sell rice and palay without compensation
except a certain percentage of what he was able to buy or sell, did work at
his own pleasure without any supervision or control on the part of his principal
and relied on his own resources in the performance of his work, was a plain
commission agent, an independent contractor and not an employee.

The respondents limit themselves to pointing out that Basiao's contract with
the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has
been made that any such rules or regulations were in fact promulgated, much
less that any rules existed or were issued which effectively controlled or
restricted his choice of methods — or the methods themselves — of selling
insurance. Absent such showing, the Court will not speculate that any
exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao "... free to exercise his own judgment as to the time,
place and means of soliciting insurance."

The Labor Arbiter's decision makes reference to Basiao's claim of having been
connected with the Company for twenty-five years. Whatever this is meant
to imply, the obvious reply would be that what is germane here is Basiao's
status under the contract of July 2, 1968, not the length of his relationship
with the Company.

The Court, therefore, rules that under the contract invoked by him, Basiao
was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have
been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do
so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim
for commissions on its merits.

WHEREFORE, the appealed Resolution of the National Labor Relations

Commission is set aside, and that complaint of private respondent Melecio T.
Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to
costs.

SO ORDERED.

357
358
EN BANC

G.R. No. 130866 September 16, 1998

ST. MARTIN FUNERAL HOME, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and BIENVENIDO
ARICAYOS, respondents.

REGALADO, J.:

The present petition for certiorari stemmed from a complaint for illegal
dismissal filed by herein private respondent before the National Labor
Relations Commission (NLRC), Regional Arbitration Branch No. III, in San
Fernando, Pampanga. Private respondent alleges that he started working as
Operations Manager of petitioner St. Martin Funeral Home on February 6,
1995. However, there was no contract of employment executed between him
and petitioner nor was his name included in the semi-monthly payroll. On
January 22, 1996, he was dismissed from his employment for allegedly
misappropriating P38,000.00 which was intended for payment by petitioner
of its value added tax (VAT) to the Bureau of Internal Revenue (BIR). 1

Petitioner on the other hand claims that private respondent was not its
employee but only the uncle of Amelita Malabed, the owner of petitioner St.
Martin's Funeral Home. Sometime in 1995, private respondent, who was
formerly working as an overseas contract worker, asked for financial
assistance from the mother of Amelita. Since then, as an indication of
gratitude, private respondent voluntarily helped the mother of Amelita in
overseeing the business.

In January 1996, the mother of Amelita passed away, so the latter then took
over the management of the business. She then discovered that there were
arrears in the payment of taxes and other government fees, although the
records purported to show that the same were already paid. Amelita then
made some changes in the business operation and private respondent and
his wife were no longer allowed to participate in the management thereof. As
a consequence, the latter filed a complaint charging that petitioner had
illegally terminated his employment.2

Based on the position papers of the parties, the labor arbiter rendered a
decision in favor of petitioner on October 25, 1996 declaring that no
employer-employee relationship existed between the parties and, therefore,
his office had no jurisdiction over the case. 3

Not satisfied with the said decision, private respondent appealed to the NLRC
contending that the labor arbiter erred (1) in not giving credence to the
evidence submitted by him; (2) in holding that he worked as a "volunteer"
359
and not as an employee of St. Martin Funeral Home from February 6, 1995
to January 23, 1996, or a period of about one year; and (3) in ruling that
there was no employer-employee relationship between him and petitioner.4

On June 13, 1997, the NLRC rendered a resolution setting aside the
questioned decision and remanding the case to the labor arbiter for
immediate appropriate proceedings.5 Petitioner then filed a motion for
reconsideration which was denied by the NLRC in its resolution dated August
18, 1997 for lack of merit,6 hence the present petition alleging that the NLRC
committed grave abuse of discretion.7

Before proceeding further into the merits of the case at bar, the Court feels
that it is now exigent and opportune to reexamine the functional validity and
systemic practicability of the mode of judicial review it has long adopted and
still follows with respect to decisions of the NLRC. The increasing number of
labor disputes that find their way to this Court and the legislative changes
introduced over the years into the provisions of Presidential Decree (P.D.)
No. 442 (The Labor Code of the Philippines and Batas Pambansa Blg. (B.P.
No.) 129 (The Judiciary Reorganization Act of 1980) now stridently call for
and warrant a reassessment of that procedural aspect.

We prefatorily delve into the legal history of the NLRC. It was first established
in the Department of Labor by P.D. No. 21 on October 14, 1972, and its
decisions were expressly declared to be appealable to the Secretary of Labor
and, ultimately, to the President of the Philippines.

On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the
same to take effect six months after its promulgation. 8 Created and
regulated therein is the present NLRC which was attached to the Department
of Labor and Employment for program and policy coordination only.9 Initially,
Article 302 (now, Article 223) thereof also granted an aggrieved party the
remedy of appeal from the decision of the NLRC to the Secretary of Labor,
but P.D. No. 1391 subsequently amended said provision and abolished such
appeals. No appellate review has since then been provided for.

Thus, to repeat, under the present state of the law, there is no provision for
appeals from the decision of the NLRC. 10 The present Section 223, as last
amended by Section 12 of R.A. No. 6715, instead merely provides that the
Commission shall decide all cases within twenty days from receipt of the
answer of the appellee, and that such decision shall be final and executory
after ten calendar days from receipt thereof by the parties.

When the issue was raised in an early case on the argument that this Court
has no jurisdiction to review the decisions of the NLRC, and formerly of the
Secretary of Labor, since there is no legal provision for appellate review
thereof, the Court nevertheless rejected that thesis. It held that there is an
underlying power of the courts to scrutinize the acts of such agencies on
questions of law and jurisdiction even though no right of review is given by
statute; that the purpose of judicial review is to keep the administrative
agency within its jurisdiction and protect the substantial rights of the parties;

360
and that it is that part of the checks and balances which restricts the
separation of powers and forestalls arbitrary and unjust adjudications. 11

Pursuant to such ruling, and as sanctioned by subsequent decisions of this

Court, the remedy of the aggrieved party is to timely file a motion for
reconsideration as a precondition for any further or subsequent
remedy, 12 and then seasonably avail of the special civil action
of certiorari under Rule 65, 13 for which said Rule has now fixed the
reglementary period of sixty days from notice of the decision. Curiously,
although the 10-day period for finality of the decision of the NLRC may
already have lapsed as contemplated in Section 223 of the Labor Code, it has
been held that this Court may still take cognizance of the petition
for certiorari on jurisdictional and due process considerations if filed within
the reglementary period under Rule 65. 14

Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129
originally provided as follows:

Sec. 9. Jurisdiction. — The Intermediate Appellate Court shall

exercise:

(1) Original jurisdiction to issue writs of mandamus,

prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate
jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of

judgments of Regional Trial Courts; and

(3) Exclusive appellate jurisdiction over all final judgments,

decisions, resolutions, orders, or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards, or
commissions, except those falling within the appellate jurisdiction
of the Supreme Court in accordance with the Constitution, the
provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section
17 of the Judiciary Act of 1948.

The Intermediate Appellate Court shall have the power to try cases
and conduct hearings, receive evidence and perform any and all
acts necessary to resolve factual issues raised in cases falling
within its original and appellate jurisdiction, including the power to
grant and conduct new trials or further proceedings.

These provisions shall not apply to decisions and interlocutory

orders issued under the Labor Code of the Philippines and by the
Central Board of Assessment Appeals. 15

Subsequently, and as it presently reads, this provision was amended by R.A.

No. 7902 effective March 18, 1995, to wit:

Sec. 9. Jurisdiction. — The Court of Appeals shall exercise:

361
(1) Original jurisdiction to issue writs of mandamus,
prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate
jurisdiction;

(2) Exclusive original jurisdiction over actions for annulment of

judgments of Regional Trial Courts; and

(3) Exclusive appellate jurisdiction over all final judgments,

decisions, resolutions, orders or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission,
the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission, except those falling
within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines
under Presidential Decree No. 442, as amended, the provisions of
this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948.

The Court of Appeals shall have the power to try cases and conduct
hearings, receive evidence and perform any and all acts necessary
to resolve factual issues raised in cases falling within its original
and appellate jurisdiction, including the power to grant and conduct
new trials or further proceedings. Trials or hearings in the Court of
Appeals must be continuous and must be completed within, three
(3) months, unless extended by the Chief Justice.

It will readily be observed that, aside from the change in the name of the
lower appellate court, 16 the following amendments of the original provisions
of Section 9 of B.P. No. 129 were effected by R.A. No. 7902, viz.:

1. The last paragraph which excluded its application to the Labor Code of the
Philippines and the Central Board of Assessment Appeals was deleted and
replaced by a new paragraph granting the Court of Appeals limited powers to
conduct trials and hearings in cases within its jurisdiction.

2. The reference to the Labor Code in that last paragraph was transposed to
paragraph (3) of the section, such that the original exclusionary clause
therein now provides "except those falling within the appellate jurisdiction of
the Supreme Court in accordance with the Constitution, the Labor Code of
the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act
of 1948." (Emphasis supplied).

3. Contrarily, however, specifically added to and included among the quasi-

judicial agencies over which the Court of Appeals shall have exclusive
appellate jurisdiction are the Securities and Exchange Commission, the Social
Security Commission, the Employees Compensation Commission and the Civil
Service Commission.
362
This, then, brings us to a somewhat perplexing impassè, both in point of
purpose and terminology. As earlier explained, our mode of judicial review
over decisions of the NLRC has for some time now been understood to be by
a petition for certiorari under Rule 65 of the Rules of Court. This is, of course,
a special original action limited to the resolution of jurisdictional issues, that
is, lack or excess of jurisdiction and, in almost all cases that have been
brought to us, grave abuse of discretion amounting to lack of jurisdiction.

It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now
grants exclusive appellate jurisdiction to the Court of Appeals over all final
adjudications of the Regional Trial Courts and the quasi-judicial agencies
generally or specifically referred to therein except, among others, "those
falling within the appellate jurisdiction of the Supreme Court in accordance
with . . . the Labor Code of the Philippines under Presidential Decree No. 442,
as amended, . . . ." This would necessarily contradict what has been ruled
and said all along that appeal does not lie from decisions of the NLRC. 17 Yet,
under such excepting clause literally construed, the appeal from the NLRC
cannot be brought to the Court of Appeals, but to this Court by necessary
implication.

The same exceptive clause further confuses the situation by declaring that
the Court of Appeals has no appellate jurisdiction over decisions falling within
the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of B.P. No. 129, and those specified cases in
Section 17 of the Judiciary Act of 1948. These cases can, of course, be
properly excluded from the exclusive appellate jurisdiction of the Court of
Appeals. However, because of the aforementioned amendment by
transposition, also supposedly excluded are cases falling within the appellate
jurisdiction of the Supreme Court in accordance with the Labor Code. This is
illogical and impracticable, and Congress could not have intended that
procedural gaffe, since there are no cases in the Labor Code the decisions,
resolutions, orders or awards wherein are within the appellate jurisdiction of
the Supreme Court or of any other court for that matter.

A review of the legislative records on the antecedents of R.A. No. 7902

persuades us that there may have been an oversight in the course of the
deliberations on the said Act or an imprecision in the terminology used
therein. In fine, Congress did intend to provide for judicial review of the
adjudications of the NLRC in labor cases by the Supreme Court, but there
was an inaccuracy in the term used for the intended mode of review. This
conclusion which we have reluctantly but prudently arrived at has been drawn
from the considerations extant in the records of Congress, more particularly
on Senate Bill No. 1495 and the Reference Committee Report on S. No.
1495/H. No. 10452. 18

In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his
sponsorship speech 19 from which we reproduce the following excerpts:

The Judiciary Reorganization Act, Mr. President, Batas Pambansa

Blg. 129, reorganized the Court of Appeals and at the same time
expanded its jurisdiction and powers. Among others, its appellate

363
jurisdiction was expanded to cover not only final judgment of
Regional Trial Courts, but also all final judgment(s), decisions,
resolutions, orders or awards of quasi-judicial agencies,
instrumentalities, boards and commissions, except those falling
within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the provisions of BP Blg. 129 and
of subparagraph 1 of the third paragraph and subparagraph 4 of
Section 17 of the Judiciary Act of 1948.

Mr. President, the purpose of the law is to ease the workload of the
Supreme Court by the transfer of some of its burden of review of
factual issues to the Court of Appeals. However, whatever benefits
that can be derived from the expansion of the appellate jurisdiction
of the Court of Appeals was cut short by the last paragraph of
Section 9 of Batas Pambansa Blg. 129 which excludes from its
coverage the "decisions and interlocutory orders issued under the
Labor Code of the Philippines and by the Central Board of
Assessment Appeals.

Among the highest number of cases that are brought up to the

Supreme Court are labor cases. Hence, Senate Bill No. 1495
seeks to eliminate the exceptions enumerated in Section 9 and,
additionally, extends the coverage of appellate review of the Court
of Appeals in the decision(s) of the Securities and Exchange
Commission, the Social Security Commission, and the Employees
Compensation Commission to reduce the number of cases elevated
to the Supreme Court. (Emphases and corrections ours)

xxx xxx xxx

Senate Bill No. 1495 authored by our distinguished Colleague from

Laguna provides the ideal situation of drastically reducing the
workload of the Supreme Court without depriving the litigants of
the privilege of review by an appellate tribunal.

In closing, allow me to quote the observations of former Chief

Justice Teehankee in 1986 in the Annual Report of the Supreme
Court:

. . . Amendatory legislation is suggested so as to relieve

the Supreme Court of the burden of reviewing these
cases which present no important issues involved
beyond the particular fact and the parties involved, so
that the Supreme Court may wholly devote its time to
cases of public interest in the discharge of its mandated
task as the guardian of the Constitution and the
guarantor of the people's basic rights and additional task
expressly vested on it now "to determine whether or not
there has been a grave abuse of discretion amounting to
lack of jurisdiction on the part of any branch or
instrumentality of the Government.

364
We used to have 500,000 cases pending all over the land, Mr.
President. It has been cut down to 300,000 cases some five years
ago. I understand we are now back to 400,000 cases. Unless we
distribute the work of the appellate courts, we shall continue to
mount and add to the number of cases pending.

In view of the foregoing, Mr. President, and by virtue of all the

reasons we have submitted, the Committee on Justice and Human
Rights requests the support and collegial approval of our Chamber.

xxx xxx xxx

Surprisingly, however, in a subsequent session, the following Committee

Amendment was introduced by the said sponsor and the following
proceedings transpired: 20

Senator Roco. On page 2, line 5, after the line "Supreme Court in

accordance with the Constitution," add the phrase "THE LABOR
CODE OF THE PHILIPPINES UNDER P.D. 442, AS AMENDED." So
that it becomes clear, Mr. President, that issues arising from the
Labor Code will still be appealable to the Supreme Court.

The President. Is there any objection? (Silence) Hearing none, the

amendment is approved.

Senator Roco. On the same page, we move that lines 25 to 30 be

deleted. This was also discussed with our Colleagues in the House
of Representatives and as we understand it, as approved in the
House, this was also deleted, Mr. President.

The President. Is there any objection? (Silence) Hearing none, the

amendment is approved.

Senator Roco. There are no further Committee amendments, Mr.

President.

Senator Romulo. Mr. President, I move that we close the period of

Committee amendments.

The President. Is there any objection? (Silence) Hearing none, the

amendment is approved. (Emphasis supplied).

xxx xxx xxx

Thereafter, since there were no individual amendments, Senate Bill No. 1495
was passed on second reading and being a certified bill, its unanimous
approval on third reading followed. 21 The Conference Committee Report on
Senate Bill No. 1495 and House Bill No. 10452, having theretofore been
approved by the House of Representatives, the same was likewise approved
by the Senate on February 20, 1995, 22 inclusive of the dubious formulation
on appeals to the Supreme Court earlier discussed.

365
The Court is, therefore, of the considered opinion that ever since appeals
from the NLRC to the Supreme Court were eliminated, the legislative
intendment was that the special civil action of certiorari was and still is the
proper vehicle for judicial review of decisions of the NLRC. The use of the
word "appeal" in relation thereto and in the instances we have noted could
have been a lapsus plumae because appeals by certiorari and the original
action for certiorari are both modes of judicial review addressed to the
appellate courts. The important distinction between them, however, and with
which the Court is particularly concerned here is that the special civil action
of certiorari is within the concurrent original jurisdiction of this Court and the
Court of Appeals; 23 whereas to indulge in the assumption that appeals
by certiorari to the Supreme Court are allowed would not subserve, but would
subvert, the intention of Congress as expressed in the sponsorship speech on
Senate Bill No. 1495.

Incidentally, it was noted by the sponsor therein that some quarters were of
the opinion that recourse from the NLRC to the Court of Appeals as an initial
step in the process of judicial review would be circuitous and would prolong
the proceedings. On the contrary, as he commendably and realistically
emphasized, that procedure would be advantageous to the aggrieved party
on this reasoning:

On the other hand, Mr. President, to allow these cases to be

appealed to the Court of Appeals would give litigants the advantage
to have all the evidence on record be reexamined and reweighed
after which the findings of facts and conclusions of said bodies are
correspondingly affirmed, modified or reversed.

Under such guarantee, the Supreme Court can then apply strictly
the axiom that factual findings of the Court of Appeals are final and
may not be reversed on appeal to the Supreme Court. A perusal of
the records will reveal appeals which are factual in nature and may,
therefore, be dismissed outright by minute resolutions. 24

While we do not wish to intrude into the Congressional sphere on the matter
of the wisdom of a law, on this score we add the further observations that
there is a growing number of labor cases being elevated to this Court which,
not being a trier of fact, has at times been constrained to remand the case
to the NLRC for resolution of unclear or ambiguous factual findings; that the
Court of Appeals is procedurally equipped for that purpose, aside from the
increased number of its component divisions; and that there is undeniably an
imperative need for expeditious action on labor cases as a major aspect of
constitutional protection to labor.

Therefore, all references in the amended Section 9 of B.P. No. 129 to

supposed appeals from the NLRC to the Supreme Court are interpreted and
hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should hence forth be initially filed in the
Court of Appeals in strict observance of the doctrine on the hierarchy of courts
as the appropriate forum for the relief desired.

366
Apropos to this directive that resort to the higher courts should be made in
accordance with their hierarchical order, this pronouncement in Santiago vs.
Vasquez, et al. 25 should be taken into account:

One final observation. We discern in the proceedings in this case a

propensity on the part of petitioner, and, for that matter, the same
may be said of a number of litigants who initiate recourses before
us, to disregard the hierarchy of courts in our judicial system by
seeking relief directly from this Court despite the fact that the same
is available in the lower courts in the exercise of their original or
concurrent jurisdiction, or is even mandated by law to be sought
therein. This practice must be stopped, not only because of the
imposition upon the precious time of this Court but also because of
the inevitable and resultant delay, intended or otherwise, in the
adjudication of the case which often has to be remanded or referred
to the lower court as the proper forum under the rules of
procedure, or as better equipped to resolve the issues since this
Court is not a trier of facts. We, therefore, reiterate the judicial
policy that this Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify availment
of a remedy within and calling for the exercise of our primary
jurisdiction.

WHEREFORE, under the foregoing premises, the instant petition

for certiorari is hereby REMANDED, and all pertinent records thereof ordered
to be FORWARDED, to the Court of Appeals for appropriate action and
disposition consistent with the views and ruling herein set forth, without
pronouncement as to costs.

SO ORDERED.

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368
369