DCWD, ZCWD et al vs. CIVIL SERVICE COMMISSION, and COMMISSION ON AUDIT G.R. No.

95237-38 September 13, 1991 MEDIALDEA, J.:p Whether or not the Local Water Districts formed and created pursuant to the provisions of Presidential Decree No. 198, as amended, are government-owned or controlled corporations with original charter falling under the Civil Service Law and/or covered by the visitorial power of the Commission on Audit is the issue which the petitioners entreat this Court, en banc, to shed light on. Petitioners are among the more than five hundred (500) water districts existing throughout the country formed pursuant to the provisions of Presidential Decree No. 198, as amended by Presidential Decrees Nos. 768 and 1479, otherwise known as the "Provincial Water Utilities Act of 1973." Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of his legislative power under Proclamation No. 1081. It authorized the different local legislative bodies to form and create their respective water districts through a resolution they will pass subject to the guidelines, rules and regulations therein laid down. The decree further created and formed the "Local Water Utilities Administration" (LWUA), a national agency attached to the National Economic and Development Authority (NEDA), and granted with regulatory power necessary to optimize public service from water utilities operations. The respondents, on the other hand, are the Civil Service Commission (CSC) and the Commission on Audit (COA), both government agencies and represented in this case by the Solicitor General. On April 17, 1989, this Court ruled in the case of Tanjay Water District v. Gabaton, et al. (G.R. No. 63742, 172 SCRA 253): Significantly, Article IX (B), Section 2(1) of the 1987 Constitution provides that the Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned and controlled corporations with original charters. Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they come under the coverage of the Civil Service Law, rules and regulations. (Sec. 35, Art. VIII and Sec. 37, Art. IX of PD No. 807). As an offshoot of the immediately cited ruling, the CSC. issued Resolution No. 90-575, the dispositive portion of which reads: NOW THEREFORE, in view of all the foregoing, the Commission resolved, as it hereby resolves to rule that Local Water Districts, being quasi-public corporations created by law to perform public services and supply public wants, the matter of hiring and firing of its officers and employees should be governed by the Civil Service Law, rules and regulations. Henceforth, all appointments of personnel of the different local water districts in the country shall be submitted to the Commission for appropriate action. (Rollo. p. 22).

However, on May 16, 1990, in G.R. No. 85760, entitled "Metro Iloilo Water District v. National Labor Relations Commission, et al.," the Third Division of this Court ruled in a minute resolution: xxx xxx xxx Considering that PD 198 is a general legislation empowering and/or authorizing government agencies and entities to create water districts, said PD 198 cannot be considered as the charter itself creating the Water District. Public respondent NLRC did not commit any grave abuse of discretion in holding that the operative act, that created the Metro Iloilo Water District was the resolution of the Sangguniang Panglunsod of Iloilo City. Hence, the employees of Water Districts are not covered by Civil Service Laws as the latter do (sic) not have original charters. In adherence to the just cited ruling, the CSC suspended the implementation of Resolution No. 90575 by issuing Resolution No. 90-770 which reads: xxx xxx xxx NOW, THEREFORE, in view of all the foregoing, the Commission resolved to rule, as it hereby rules, that the implementation of CSC. Resolution No. 575 dated June 27, 1990 be deferred in the meantime pending clarification from the Supreme Court are regards its conflicting decisions in the cases of Tanjay Water

District v. Gabaton and Metro Iloilo Water District v. National Labor Relations Commission. (p. 26, Rollo)
In the meanwhile, there exists a divergence of opinions between COA on one hand, and the (LWUA), on the other hand, with respect to the authority of COA to audit the different water districts.

COA opined that the audit of the water districts is simply an act of discharging the visitorial power vested in them by law (letter of COA to LWUA dated August 13, 1985, pp. 29-30, Rollo). On the other hand, LWUA maintained that only those water districts with subsidies from the government fall within the COA's jurisdiction and only to the extent of the amount of such subsidies, pursuant to the provision of the Government Auditing Code of the Phils. It is to be observed that just like the question of whether the employees of the water districts falls under the coverage of the Civil Service Law, the conflict between the water districts and the COA is also dependent on the final determination of whether or not water districts are government-owned or controlled corporations with original charter. The reason behind this is Sec. 2(1), Article IX-D of the 1987 constitution which reads: Sec. 2(1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government, or any of its subdivisions, agencies or instrumentalities, including government-owned or controlled corporations with original charters, and on a post audit basis. (emphasis supplied)

Petitioners' main argument is that they are private corporations without original charter, hence they are outside the jurisdiction of respondents CSC and COA. Reliance is made on the Metro Iloilo case which declared petitioners as quasi-public corporations created by virtue of PD 198, a general legislation which cannot be considered as the charter itself creating the water districts. Holding on to this ruling, petitioners contend that they are private corporations which are only regarded as quasipublic or semi-public because they serve public interest and convenience and that since PD 198 is a general legislation, the operative act which created a water district is not the said decree but the resolution of the sanggunian concerned. After a fair consideration of the parties' arguments coupled with a careful study of the applicable laws as well as the constitutional provisions involved, We rule against the petitioners and reiterate Our ruling in Tanjay case declaring water districts government-owned or controlled corporations with original charter. As early as Baguio Water District v. Trajano, et al., (G.R. No. 65428, February 20, 1984, 127 SCRA 730), We already ruled that a water district is a corporation created pursuant to a special law P.D. No. 198, as amended, and as such its officers and employees are covered by the Civil Service Law. In another case (Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, 165 SCRA 272), We ruled once again that local water districts are quasi-public corporations whose employees belong to the Civil Service. The Court's pronoucement in this case, as extensively quoted in the Tanjay case, supra, partly reads: "The only question here is whether or not local water districts are governmkent owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential decree No. 198, known as the Provincial Water Utilities Act of 1973" which went onto effect in 25 May 1973, and which provides as follows:

Exemption from Civil Service. The district and its employees,

being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels:Provided, however, That the total of all salaries, wages emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthy revenue. Said net revenue representing income from water sales and sewerage service charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year. The Labor Arbiter failed to take into accout the provisions of Presidential Decree No. 1479, which went into effect on 11 June 1978, P.D. No. 1479, wiped away Section 25 of PD 198 quoted above, and Section 26 of PD 198 was renumbered as Section 25 in the following manner: Section 26 of the same decree PD 198 is hereby amended to read as Section 25 as follows:

Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration. Thus, Section 25 of PD 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books: xxx xxx xxx We grant the petition for the following reasons: 1. Section 25 of PD No. 198 was repealed by Section 3 of PD No. 1479; Section 26 of PD No. 198 was amended ro read as Sec. 25 by Sec. 4 of PD No. 1479. The amendatory decree took effect on June 11, 1978. xxx xxx xxx 3. The BWD is a corporation created pursuant to a special law PD No. 198, as amended. As such its officers and employees are part of the Civil Service (Sec. 1, Art. XII-B, [1973] Constitution; PD No. 868). Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to the different water districts created pursuant thereto. In all its essential terms, it is obvious that it pertains to a special purpose which is intended to meet a particular set of conditions and cirmcumstances. The fact that said decree generally applies to all water districts throughout the country does not change the fact that PD 198 is a special law. Accordingly, this Court's resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby abandoned. By "government-owned or controlled corporation with original charter," We mean government owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines. Thus, in the case ofLumanta v. NLRC (G.R. No. 82819, February 8, 1989, 170 SCRA 79, 82), We held: The Court, in National Service Corporation (NASECO) v. National Labor Relations Commission, G.R. No 69870, promulgated on 29 November 1988, quoting extensively from the deliberations of 1986 Constitutional Commission in respect of the intent and meaning of the new phrase "with original character," in effect held that government-owned and controlled corporations with original charter

refer to corporations chartered by special law as distinguished from corporations organized under our general incorporation statute the Corporations Code. In

NASECO, the company involved had been organized under the general incorporation statute and was a sbusidiary of the National Investment Development Corporation (NIDC) which in turn was a subsidiary of the Philippine National Bank, a bank chartered by a special statute. Thus, government-owned or controlled corporations like NASECO are effectively, excluded from the scope of the Civil Service. (emphasis supplied)

From the foregoing pronouncement, it is clear that what has been excluded from the coverage of the CSC are those corporations created pursuant to the Corporation Code. Significantly, petitioners are not created under the said code, but on the contrary, they were created pursuant to a special law and are governed primarily by its provision. No consideration may thus be given to petitioners' contention that the operative act which created the water districts are the resolutions of the respective local sanggunians and that consequently, PD 198, as amended, cannot be considered as their charter. It is to be noted that PD 198, as amended is the source of authorization and power to form and maintain a district. Section 6 of said decree provides: Sec. 6. Formation of District. This Act is the source of authorization and power to form and maintain a district. Once formed, a district is subject to the provisions of this Act and not under the jurisdiction of any political subdivision, . . .. Moreover, it must be observed that PD 198, contains all the essential terms necessary to constitute a charter creating a juridical person. For example, Section 6(a) provides for the name that will be used by a water district, thus: Sec. 6. . . . To form a district, the legislative body of any city, municipality or province shall enact a resolution containing the following: a) The name of the local water district, which shall include the name of the city, municipality, or province, or region thereof, served by said system, followed by the words "Water District." It also prescribes for the numbers and qualifications of the members of the Board of Directors: Sec. 8. Number and Qualification. The Board of Directors of a district shall be composed of five citizens of the Philippines who are of voting age and residents within the district. One member shall be a representative of civic-oriented service clubs, one member of representative of professional associations, one member a representative of business, commercial or financial organizations, one member a representative of educational institutions and one member a representative of women's organization. No public official shall serve as director. Provided, however, that if the district has availed of the financial assistance of the Administration, the Administration may appoint any of its personnel to sit in the board of directors with all the rights and privileges appertaining to a regular member for such period as the indebtedness remains unpaid in which case the board shall be composed of six members; (as amended by PDs Nos. 768 and 1479). the manner of their appointment and nominations; Sec. 9. Appointment. Board members shall be appointed by the appointing authority. Said appointments shall be made from a list of nominees, if any, submitted pursuant to Section 10. If no nominations are submitted, the

appointing authority shall appoint any qualified person of the category to the vacant position; Sec.10. Nominations. On or before October 1 of each even numbered year, the secretary of the district shall contact each known organization, association, or institution being represented by the director whose term will expire on December 31 and solicit nominations from these organizations to fill the position for the ensuing term. One nomination may be submitted in writing by each such organization to the Secretary of the district on or before November 1 of such year: This list of nominees shall be transmitted by the Secretary of the district to the office of the appointing authority on or before November 15 of such year and he shall make his appointment from the list submitted on or before December 15. In the event the appointing authority fails to make his appointments on or before December 15, selection shall be made from said list of nominees by majority vote of the seated directors of the district constituting a quorum. Initial nominations for all five seats of the board shall be solicited by the legislative body or bodies at the time of adoption of the resolution forming the district. Thirty days thereafter, a list of nominees shall be submitted to the provincial governor in the event the resolution forming the district is by a provincial board, or the mayor of the city or municipality in the event the resolution forming the adoption of the district is by the city or municipal board of councilors, who shall select the initial directors therefrom within 15 days after receipt of such nominations; their terms of office: Sec. 11. Term of Office. Of the five initial directors of each newly formed district, two shall be appointed for a maximum term of two years, two for a maximum term of four years, and one for a maximum term of six years. Terms of office of all directors in a given district shall be such that the term of at least one director, but not more then two, shall expire on December 31 of each evennumbered year. Regular terms of office after the initial terms shall be for six years commencing on January 1 of odd-numbered years. Directors may be removed for cause only, subject to review and approval of the Administration; (as amended by PD 768). the manner of filling up vacancies: Sec. 12. Vacancies. In the event of a vacancy in the board of directors occurring more than six months before expiration of any director's term, the remaining directors shall within 30 days, serve notice to or request the secretary of the district for nominations and within 30 days, thereafter a list of nominees shall be submitted to the appointing authority for his appointment of a replacement director from the list of nominees. In the absence of such nominations, the appointing authority shall make such appointment. If within 30 days after submission to him of a list of nominees the appointing authority fails to make an appointment, the vacancy shall be filled from such list by a majority vote of the remaining members of the Board of Directors constituting a quorum. Vacancies occurring within the last six months of an unexpired term shall also be

filled by the Board in the above manner. The director thus appointed shall serve the unexpired term only; (as amended by PD 768). and the compensation and personal liability of the members of the Board of Directors: Sec. 13. Compensation. Each director shall receive a per diem, to be determined by the board, for each meeting of the board actually attended by him, but no director shag receive per diems in any given month in excess of the equivalent of the total per diems of four meetings in any given month. No director shall receive other compensation for services to the district. Any per diem in excess of P50.00 shall be subject to approval of the Administration (as amended by PD 768). Sec. 14. Personal Liability. No director may be held to be personally liable for any action of the district. Noteworthy, the above quoted provisions of PD 198, as amended, are similar to those which are actually contained in other corporate charters. The conclusion is inescapable that the said decree is in truth and in fact the charter of the different water districts for it clearly defines the latter's primary purpose and its basic organizational set-up. In other words, PD 198, as amended, is the very law which gives a water district juridical personality. While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district, this Court is of the opinion that said resolution cannot be considered as its charter, the same being intended only to implement the provisions of said decree. In passing a resolution forming a water district, the local sanggunian is entrusted with no authority or discretion to grant a charter for the creation of a private corporation. It is merely given the authority for the formation of a water district, on a local option basis, to be exercised under and in pursuance of PD 198. More than the aforequoted provisions, what is of important interest in the case at bar is Section 3, par. (b) of the same decree which reads: Sec. 3(b). Appointing authority. The person empowered to appoint the members of the Board of Directors of a local water district, depending upon the geographic coverage and population make-up of the particular district. In the event that more than seventy-five percent of the total active water service connections of a local water districts are within the boundary of any city or municipality, the appointing authority shall be the mayor of that city or municipality, as the case may be; otherwise, the appointing authority shall be the governor of the province within which the district is located:Provided, That if the existing waterworks system in the city or municipality established as a water district under this Decree is operated and managed by the province, initial appointment shall be extended by the governor of the province. Subsequent appointments shall be as specified herein. If portions of more than one province are included within the boundary of the district, and the appointing authority is to be the governors then the power to appoint shall rotate between the governors involved with the initial appointments

made by the governor in whose province the greatest number of service connections exists (as amended by PD 768). The above-quoted section definitely sets to naught petitioners' contention that they are private corporations. It is clear therefrom that the power to appoint the members who will comprise the Board of Directors belongs to the local executives of the local subdivision units where such districts are located. In contrast, the members of the Board of Directors or trustees of a private corporation are elected from among the members and stockholders thereof. It would not be amiss to emphasize at this point that a private corporation is created for the private purpose, benefit, aim and end of its members or stockholders. Necessarily, said members or stockholders should be given a free hand to choose those who will compose the governing body of their corporation. But this is not the case here and this clearly indicates that petitioners are definitely not private corporations. The foregoing disquisition notwithstanding, We are, however, not unaware of the serious repercussion this may bring to the thousands of water districts' employees throughout the country who stand to be affected because they do not have the necessary civil service eligibilities. As these employees are equally protected by the constitutional guarantee to security of tenure, We find it necessary to rule for the protection of such right which cannot be impaired by a subsequent ruling of this Court. Thus, those employees who have already acquired their permanent employment status at the time of the promulgation of this decision cannot be removed by the mere reason that they lack the necessary civil service eligibilities. ACCORDINGLY, the petition is hereby DISMISSED. Petitioners are declared "government-owned or controlled corporations with original charter" which fall under the jurisdiction of the public respondents CSC and COA. VICTORIANO ZAMORAS vs. ROQUE SU, JR., ANITA SU HORTELLANO and NLRC G.R. No. 85611 April 6, 1990 GRIO-AQUINO, J.: The issue in this petition is whether, upon the established facts, the petitioner was an employee or tenant of the private respondents. The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957 as overseer of his coconut land in Asenario, Dapitan City. Zamoras was charged with the task of having the land titled in Su's name, and of assigning portions to be worked by tenants, supervising the cleaning, planting, care and cultivation of the land, the harvesting of coconuts and selling of the copra. As compensation, Su paid Zamoras a salary of P2,400 per month plus one-third (1/3) of the proceeds of the sales of copra which normally occurred every two months. Another one-third of the proceeds went to the tenants and the other third to Su. This system of sharing was regularly observed up to September, 1981. As the coconut plantation yielded an average harvest of 21,000 nuts worth P18,900, based on the current market price of P3 per kilo, Zamoras' share amounted to P6,300 every two months. In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other respondent, Anita Su Hortellano, and that he authorized her to harvest the coconuts from his property "while the loan was outstanding" (p. 8, Rollo). Su sent Zamoras a letter dated May 29, 1981 informing him that

he was being laid-off temporarily until Su could obtain a loan from the Development Bank of the Philippines with which to pay Anita. However, Zamoras was not allowed anymore to work as overseer of the plantation. Without his knowledge and consent, Hortellano harvested the coconuts without giving him his one-third share of the copra sales. On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor and Employment in Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano for illegal termination and breach of contract with damages of not less than P75,600 as his uncollected share of the copra sales from September 15, 1981 to August 1983. The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case submitted the following findings which were adopted by the Labor Arbiter The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo Avenue Extension, Lahug, Cebu City and at the same time an employee in the government up to the present, while the land wherein the complainant herein was employed by the respondent as overseer of the land since 1957 up to and until his termination from the service sometime in September 1981 without just cause or causes duly authorized by law and after due process. That to prove that complainant was the overseer of the land owned by the respondent are the sworn declaration of the three witnesses, namely: Vicente Amor, Narcisa Arocha, and Wilfredo Bernaldes who are presently working as tenants of the respondent. That the three witnesses testified that they knew the complainant personally who has been working as overseer of the land because it was through him, the complainant, that they were allowed to work and/or occupy the land as tenants ever since up to the present. In fact, they further declared that they do not know personally the owner of the land and besides, they have not seen personally the said owner as their dealing were directly done thru the complainant. That they always received their share of the produce from the complainant for every two months up to 1981. xxx xxx xxx It is very clear in the evidence of record that complainant was an employee of the respondent. This fact is even admitted by the respondent in his answer by way of controverting the claim of the complainant. (pp. 44-45, Rollo.) On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of the respondent's plantation, was a regular employee whose services were necessary and desirable to the usual trade or business of his employer. The Labor Arbiter held that the dismissal of Zamoras was without just cause, hence, illegal. The private respondents were ordered to reinstate him to his former position as overseer of the plantation and to pay him backwages equivalent to P31,975.83 in the event that he opted not to be reinstated or that his reinstatement was not feasible. The private respondents appealed to the National Labor Relations Commission, alleging that the Labor Arbiter erred:

1. in disregarding respondents' evidence (a financial report showing the yearly copra sales from 1973 to 1977), proving that complainant's one-third share of the copra sales amounted to P5,985.16 only and not P6,300 per harvest; 2. in not holding that the complainant can no longer be reinstated for he is already dead; and 3. in not finding that no employer-employee relationship existed between the parties. On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that "the right to control test used in determining the existence of an employer-employee relationship is unavailing in the instant case and that what exists between the parties is a landlord-tenant relationship" (p. 32, Rollo), because such functions as introducing permanent improvements on the land, assigning portions to tenants, supervising the cleaning, planting, care and cultivation of the plants, and deciding where and to whom to sell the copra are attributes of a landlord-tenant relationship, hence, jurisdiction over the case rests with the Court of Agrarian Relations. Zamoras filed this petition, assailing the NLRC's decision. There is merit in the petition. The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is not supported by the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of his coconut plantation. As overseer, Zamoras hired the tenants and assigned their respective portions which they cultivated under Zamoras' supervision. The tenants dealt directly with Zamoras and received their one-third share of the copra produce from him. The evidence also shows that Zamoras, aside from doing administrative work for Su, regularly managed the sale of copra processed by the tenants. There is no evidence that Zamoras cultivated any portion of Su's land personally or with the aid of his immediate farm household. In fact the respondents never raised the issue of tenancy in their answer. Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from within his immediate household, cultivates the land belonging to or possessed by another, with the latter's consent for purposes of production, sharing the produce with the landholder or for a price certain or ascertainable in produce or in money or both, under the leasehold tenancy system" (Matienzo vs. Servidad, 107 SCRA 276). Agricultural tenancy is defined as "the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm household in consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, whether in produce or in money, or both" (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56; Miguel Carag vs. CA, et al., 151 SCRA 44). The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant; (2) the subject is the agricultural holding; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of harvests between landlord and tenant (Antonio Castro vs. CA and De la Cruz, G.R. L34613, January 26, 1989; Tiongson vs. CA, 130 SCRA 482; Guerrero vs. CA, 142 SCRA 138). The element of personal cultivation of the land, or with the aid of his farm household, essential in establishing a landlord-tenant or a lessor-lessee relationship, is absent in the relationship between Su

and Zamoras (Co vs. IAC, 162 SCRA 390; Graza vs. CA, 163 SCRA 39), for Zamoras did not cultivate any part of Su's plantation either by himself or with the help of his household. On the other hand, the following circumstances are indicative of an employer-employee relationship between them: 1. Zamoras was selected and hired by Su as overseer of the coconut plantation. 2. His duties were specified by Su. 3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras should sell the copra produced from the plantation. 4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two months as compensation for managing the plantation. Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian Relations, that has jurisdiction to try and decide Zamora's complaint for illegal dismissal (Art. 217, Labor Code; Manila Mandarin Employees Union vs. NLRC, 154 SCRA 368; Jacqueline Industries Dunhill Bags Industries, et al. vs. NLRC, et al., 69 SCRA 242). WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to be an employee of respondent Roque Su, Jr. and that his dismissal was illegal and without lawful cause. He is entitled to reinstatement with backwages, but because he is dead and may no longer be reinstated, the private respondents are ordered to pay to his heirs the backwages due him, as well as his share of the copra sales from the plantation for a period of three (3) years from his illegal dismissal in September, 1981, plus separation pay in lieu of reinstatement. Costs against the private respondents. SO ORDERED. FORTUNE CEMENT CORPORATION vs. NLRC (First Division) and ANTONIO M. LAGDAMEO G.R. No. 79762 January 24, 1991 GRIO-AQUINO, J.:p This is a petition for certiorari with prayer to annul the resolution dated May 29, 1987 of respondent National Labor Relations Commission (NLRC) reversing the order dated December 3, 1985 of the Labor Arbiter which dismissed private respondent Antonio M. Lagdameo's (Lagdameo for brevity) complaint for Illegal Dismissal (NLRC NCR Case No. 1-228-85) against petitioner Fortune Cement Corporation (FCC for brevity) for lack of jurisdiction. Lagdameo is a registered stockholder of FCC. On October 14, 1975, at the FCC Board of Directors' regular monthly meeting, he was elected Executive Vice-President of FCC effective November 1, 1975 (p. 3, Rollo). Some eight (8) years later, or on February 10, 1983, during a regular meeting, the FCC Board resolved that all of its incumbent corporate officers, including Lagdameo, would be "deemed"

retained in their respective positions without necessity of yearly reappointments, unless they resigned or were terminated by the Board (p. 4, Rollo). At subsequent regular meetings held on June 14 and 21, 1983, the FCC Board approved and adopted a resolution dismissing Lagdameo as Executive Vice-President of the company, effective immediately, for loss of trust and confidence (p. 4, Rollo). On June 21, 1983, Lagdameo filed with the National Labor Relations Commission (NLRC), National Capital Region, a complaint for illegal dismissal against FCC (NLRC-NCR Case No. 1-228-85) alleging that his dismissal was done without a formal hearing and investigation and, therefore, without due process (p. 63, Rollo). On August 5, 1985, FCC moved to dismiss Lagdameo's complaint on the ground that his dismiss as a corporate officer is a purely intra-corporate controversy over which the Securities and Exchange Commission (SEC) has original and exclusive jurisdiction. The Labor Arbiter granted the motion to dismiss (p. 22, Rollo). On appeal, however, the NLRC set aside the Labor Arbiter's order and remanded the case to the Arbitration Branch "for appropriate proceedings" (NLRC Resolution dated April 30, 1987). The NLRC denied FCC's motion for reconsideration (p. 5, Rollo). Dissatisfied, FCC filed this petition for certiorari. We find merit in the petition. The sole issue to be resolved is whether or not the NLRC has jurisdiction over a complaint filed by a corporate executive vice-president for illegal dismissal, resulting from a board resolution dismissing him as such officer. Section 5 of Presidential Decree No. 902-A vests in the SEC original and exclusive jurisdiction over this controversy: Sec. 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: a) Devices and 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 stockholders, partners, members of associations or organization 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 appointments of directors, trustees , officers or managers of such corporations, partnership or associations." (Section 5, P.D. 902-A; Emphasis supplied.) In reversing the decision of Labor Arbiter Porfirio E. Villanueva, respondent NLRC held:

. . . . It is not disputed that complainant Lagdameo was an employee of respondent Fortune Cement Corporation, being then the Executive Vice-President. For having been dismissed for alleged loss of trust and confidence, complainant questioned his dismissal on such ground and the manner in which he was dismissed, claiming that no investigation was conducted, hence, there was and is denial of due process. Predicated on the above facts, it is clear to Us that a labor dispute had arisen between the appellant and the respondent corporation, a dispute which falls within the original and exclusive jurisdiction of the NLRC. A labor dispute as defined in the Labor Code includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment regardless of whether or not the disputants stand in the proximate relations of employers and employees." (pp. 1617, Rollo). The Solicitor General, declining to defend public respondent in its pleading entitled "Manifestation in Lieu of Comment," aptly observed: The position of "Executive Vice-President," from which private respondent Lagdameo claims to have been illegally dismissed, is an elective corporate office. He himself acquired that position through election by the corporation's Board of Directors, although he also lost the same as a consequence of the latter's resolution. Indeed the election, appointment and/or removal of an executive vice-president is a prerogative vested upon a corporate board. And it must be, not only because it is a practice observed in petitioner Fortune Cement Corporation, but more so, because of an express mandate of law. (p. 65, Rollo.) The Solicitor General pointed out 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." The dispute between petitioner and Lagdameo is of the class described in Section 5, par. (c) of Presidential Decree No. 902-A, hence, within the original and exclusive jurisdiction of the SEC. The Solicitor General recommended that the petition be granted and NLRC-NCR Case No. 1-228-85 be dismissed by respondent NLRC for lack of jurisdiction (p. 95, Rollo). In PSBA vs. Leao (127 SCRA 778), this Court, confronted with a similar controversy, ruled that the SEC, not the NLRC, has jurisdiction: This is not a case of dismissal. The situation is that of a corporate office having been declared vacant, and of Tan's not having been elected thereafter. The matter of whom to elect is a prerogative that belongs to the Board, and involves the exercise of deliberate choice and the faculty of discriminative selection. Generally speaking, the relationship of a person to a corporation, whether as officer or as agent or employee is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exist. Lagdameo claims that his dismissal was wrongful, illegal, and arbitrary, because the "irregularities" charged against him were not investigated (p. 85, Rollo); that the case of PSBA vs. Leao (supra) cited by the Labor Arbiter finds no application to his case because it is not a matter of corporate office having been declared vacant but one where a corporate officer was dismissed without legal and factual basis and without due process; that the power of dismissal should not be confused with the manner of exercising the same; that even a corporate officer enjoys security of tenure regardless

of his rank (p. 97, Rollo); and that the SEC is without power to grant the reliefs prayed for in his complaint (p. 106, Rollo). The issue of the SEC's power or jurisdiction is decisive and renders unnecessary a consideration of the other questions raised by Lagdameo. Thus did this Court rule in the case of Dy vs. National Labor Relations Commission (145 SCRA 211) which involved a similar situation: It is of no moment that Vailoces, in his amended complaint, seeks other reliefs which would seemingly fall under the jurisdiction of the Labor Arbiter, because a closer look at these underpayment of salary and non-payment of living allowance shows that they are actually part of the perquisites of his elective position, hence, intimately linked with his relations with the corporation. The 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. (Emphasis ours.)

WHEREFORE, the questioned Resolution of the NLRC reversing the decision of the Labor Arbiter, having been rendered without jurisdiction, is hereby reversed and set aside. The decision of the Labor Arbiter dated December 3, 1985 dismissing NLRC-NCR Case No. 1-228-85 is affirmed, without prejudice to private respondent Antonio M. Lagdameo's seeking recourse in the appropriate forum. No costs. SO ORDERED.

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDECAQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES (FINANCE OFFICER) vs. NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA G.R. No. 86773 NOCON, J.: This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits, and the resolution denying the petitioners' motion for reconsideration of said decision dated January 9, 1989. February 14, 1992

The antecedent facts of the case are as follows: SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the SEAFDEC). On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of Professional III and designated as Head of External Affairs Office with the same pay and benefits. On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to private respondent informing him that due to the financial constraints being experienced by the department, his services shall be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153). Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari). Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as the SEAFDEC-AQD is an international organization and that private respondent must first secure clearances from the proper departments for property or money accountability before any claim for separation pay will be paid, and which clearances had not yet been obtained by the private respondent. A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by the petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private respondent has property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is not entitled to accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of the same during his employment with the SEAFDEC-AQD (Annex "D",Id.). On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered ordering respondents: 1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits; 2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees.

All other claims are hereby dismissed. SO ORDERED. (Rollo, p. 51, Annex "E") On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.) On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international character and the complaint is in effect a suit against the State which cannot be maintained without its consent. The petition is impressed with merit. Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an international agency beyond the jurisdiction of public respondent NLRC. It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam (Annex "H", Petition). The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968. Its purpose is as follows: The purpose of the Center is to contribute to the promotion of the fisheries development in Southeast Asia by mutual co-operation among the member governments of the Center, hereinafter called the "Members", and through collaboration with international organizations and governments external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H" Petition) (p.310,Rollo) SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates: 1. The Council shall be the supreme organ of the Center and all powers of the Center shall be vested in the Council. Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional independence and freedom from control of the state in whose territory its office is located. As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public International Law (p. 83, 1956 ed.): Permanent international commissions and administrative bodies have been created by the agreement of a considerable number of States for a variety of international purposes, economic or social and mainly non-political. Among the notable instances are the International Labor Organization, the International

Institute of Agriculture, the International Danube Commission. In so far as they are autonomous and beyond the control of any one State, they have a distinct juridical personality independent of the municipal law of the State where they are situated. As such, according to one leading authority "they must be deemed to possess a species of international personality of their own." (Salonga and Yap, Public International Law, 83 [1956 ed.]) Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be represented by one Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H",ibid.) and that its national laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and immovable property and services necessary for the establishment and operation of the Center" are concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292). The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDECAQD in Opinion No. 139, Series of 1984 4. 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 there operations or even influence or control its policies and decisions of the organization; besides, such subjection to local jurisdiction would impair the capacity of such body to discharge its responsibilities impartially on behalf of its member-states. In the case at bar, for instance, the entertainment by the National Labor Relations Commission of Mr. Madamba's reinstatement cases would amount to interference by the Philippine Government in the management decisions of the SEARCA governing board; even worse, it could compromise the desired impartiality of the organization since it will have to suit its actuations to the requirements of Philippine law, which may not necessarily coincide with the interests of the other member-states. It is precisely to forestall these possibilities that in cases where the extent of the immunity is specified in the enabling instruments of international organizations, jurisdictional immunity from the host country is invariably among the first accorded. (See Jenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285). Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can provide one. Settled is the rule that the decision of a tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held: A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any

stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which it stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the timehonored principle that the issue of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982]) Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it took cognizance of the case. Said the Court: We would note, finally, that the present petition relates to a controversy between two claimants to the same position; this is not a controversy between the us no question involving immunity from the jurisdiction of the Court, there being no plea for such immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied).

SEAFDEC on the one hand, and an officer or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the other hand. There is before

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without jurisdiction. No costs. SO ORDERED. INSULAR LIFE ASSURANCE CO., LTD., vs. NLRC and MELECIO BASIAO G.R. No. 84484 November 15, 1989 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. 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 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-Lagadan 10 ... 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). ... 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 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.

Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur.

ILAW AT BUKLOD NG MANGGAGAWA (IBM) vs. NLRC, LABOR ARBITER MANUEL P. ASUNCION, ABUNDIO IBASCO, ANTONIO MAGSIPOC, CARLOS VILLARANTE and BIENVENIDO RAMIREZ G.R. Nos. 81852-53 MELO, J.: Before us is a petition for certiorari seeking the annulment of the order dated February 4, 1987, of respondent Labor Arbiter, the decision dated May 29, 1987 rendered by said respondent, and the resolutions dated October 12, 1987, and January 11, 1988, of the respondent National Labor Relations Commission. The relevant facts as established by the record are as follows: March 5, 1993

Petitioner, a duly-registered labor union, is the sole and exclusive bargaining representative of all daily-paid workers of the Metro Manila plants of San Miguel Corporation, hereinafter referred to as SMC. On December 3, 1986, petitioner and SMB entered into a Memorandum of Agreement on Collective Bargaining Agreement (CBA). The National Council of petitioner called a general meeting on December 7, 1986 for the ratification of the CBA. On the morning of December 7, 1986, the National Council held a special meeting wherein the members present unanimously passed "Resolusyon Blg. 265, Serye 1986" (Annex G, Petition, p. 52, Rollo). It was agreed at said meeting to submit the resolution to the general membership for approval. Two thousand two hundred forty three (2,243) members attended the general meeting. Said Resolusyon Blg. 265 was submitted to the general assembly for approval. Two Thousand one hundred seven (2,107) members voted in favor and thirty six (36) voted against the resolution. In said general membership meeting the 1986 CBA was ratified by the members. Under said resolution, each member of the union was assessed P1,098.00 to be deducted from the lump sum of P10,980.00 which each employee was to receive under the CBA. Private respondents protested the deduction and refused to sign the authorization slip for the deduction. Petitioner passed a resolution on January 6, 1987, (Annex 9, Private Respondents' Comment, p. 169, Rollo) expelling private respondents from the union. SMB held in trust the amount of P1,098.00 pertaining to each private respondent. On January 8, 1987, private respondents Antonio Magsipoc and Abundio Ibasco filed a complaint (Annex I, Petition, p. 59, Rollo) docketed as NLRC-NCR Case No. 1-092-87, before the Arbitration Branch, National Capital Region, National Labor Relations Commission for illegal and exorbitant deduction and illegal expulsion from the union. In February, 1987, a similar complaint docketed as NLRC Case No. 00-02-00731-87 was filed by private respondents Carlos Villarante and Bienvenido Ramirez. On January 29, 1987, petitioner filed a motion to dismiss (Annex A, Petition, pp. 34-35, Rollo) Case No. 1-092-87 on the ground of lack of jurisdiction of NLRC. On February 4, 1987, respondent Labor Arbiter Manuel Asuncion issued an order (Annex B, Petition, pp. 36-37, Rollo) denying the motion to dismiss. It appears that the two cases were consolidated, and respondent Labor Arbiter proceeded to take cognizance of the cases and directed the parties to file their position papers. Only private respondents filed their position paper with petitioner continuing to refuse to submit to the jurisdiction of the Labor Arbiter. On May 29, 1987, respondent Labor Arbiter rendered a decision (Annex C, Petition, pp. 39-43, Rollo) finding the questioned assessment illegal and ordering petitioner and SMB to return the amount of P1,098.00 to each of private respondents; declaring the expulsion of private respondents from the union null and void; and ordering petitioner to desist from expelling the members who objected to the deduction of the questioned assessment from their CBA differentials. Petitioner seasonably filed a notice of appeal (Annex K, Petition, p. 61, Rollo) with respondent National Labor Relations Commission. On October 12, 1987, the NLRC issued a resolution (Annex D, Petition, pp. 44-46, Rollo) affirming the decision of respondent Labor Arbiter and dismissing the appeal. Petitioner filed a motion for reconsideration but the same was denied in a resolution dated January 11, 1988. (Annex E, Petition, p. 47,Rollo).

Hence, the instant recourse under the following assigned errors: 1. The NLRC committed reversible error in assuming jurisdiction over the person of petitioner union; 2. The NLRC committed a reversible error in assuming jurisdiction over the nature of the action; 3. The NLRC committed reversible error in declaring the sum from which the special assessment is made, is a wage, that it is a deduction from a wage and that it is an attorney's fee. (pp. 12-13, Rollo) The second assigned error raising as it does the central issue of jurisdiction, attention must be focused on the same. It is fundamental that jurisdiction over the subject matter is conferred by law (Tijam vs. Sibonghanoy, 23 SCRA 29 [1968]) and is determined by the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein (Serrano vs. Muoz (Hi) Motors, Inc., 21 SCRA 1085 [1967]). A perusal of the complaint (Annex I, Petition, p. 59, Rollo) clearly shows that the subject-matter concerns: (a) the assessment and deduction of 10% from private respondents' CBA differential pay which were denounced by private respondents as illegal and exorbitant and made against their will, and (b) private respondents' expulsion from the union. The assessment and deduction of 10% from each employee's differential pay were imposed by petitioner through Resolusyon Blg. 265 and the expulsion was adopted by petitioner through Resolusyon Blg. 15, dated January 6, 1987, both of which were denounced by private respondents as illegal and violative of their rights as union members. Clearly this is an intra-union dispute a dispute between a labor union and its members. "Internal Union Dispute" includes all disputes or grievances arising from any violation of or disagreement over any provision of the constitution and by-laws of a union, including any violation of the rights and conditions of union membership provided for in the Code (Book V, Rule I, Section l(a), Omnibus Rules Implementing The Labor Code). Article 226 of the Labor Code of the Philippines vests on the Bureau of Labor Relations and the Labor Relations Divisions jurisdiction to act on all inter-union or intra-union conflicts. Said Article thus provides: Art. 226. Bureau of Labor Relations The Bureau of Labor Relations and the Labor Relations Division in the regional offices of the Department of Labor shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all work places whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be subject of grievance procedure and/or voluntary arbitration. Unquestionably, therefore, NLRC Case No. 1-092-87 and Case No. 00-02-00731-87, the subject of which is an intra-union dispute, fall under the original and exclusive jurisdiction of the Bureau of Labor Relations, and respondent Labor Arbiter and NLRC have no jurisdiction over said cases.

In view of the foregoing conclusion, there is no further need to discuss the other errors assigned by petitioner. WHEREFORE, the order dated February 4, 1987 issued by respondent Labor Arbiter, the decision rendered on May 29, 1987, by said respondent, the resolution dated October 12, 1987, of respondent NLRC affirming the decision of respondent Labor Arbiter and the resolution dated January 11, 1988, of respondent NLRC are hereby ANNULLED and SET ASIDE. Respondent Labor Arbiter is hereby ordered to dismiss NLRC Case No. 1-072-87 and NLRC Case No. 00-02-00731-87, without prejudice to private respondents' filing the same with the Bureau of Labor Relations. SO ORDERED. PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, vs. HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS & FULGENCIO LEGO G.R. No. 89621 CRUZ, J.:p 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. 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 September 24, 1991

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: 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. Pao, 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 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. case we here decide.
8

So it must be in the

WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against the petitioner. SO ORDERED.

Narvasa (Chairman), Grio-Aquino and Medialdea, JJ., concur.

EVELYN TOLOSA vs. NLRC, QWANA KAIUN (through its resident-agent, FUMIO NAKAGAWA), ASIA BULK TRANSPORT PHILS. INC., PEDRO GARATE and MARIO ASIS G.R. No. 149578 April 10, 2003 PANGANIBAN, J.: As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to grant reliefs from claims that do not arise from employer-employee relations. They have no jurisdiction over torts that have no reasonable causal connection to any of the claims provided for in the Labor Code, other labor statutes, or collective bargaining agreements.

The Case
The Petition for Review before us assails the April 18, 2001 Decision 1 of the Court of Appeals (CA) in CA-GR SP No. 57660, as well as the April 17, 2001 CA Resolution 2 denying petitioner's Motion for Reconsideration. The dispositive portion of the challenged Decision reads as follows: "WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED and accordingly DISMISSED, without prejudice to the right of herein petitioner to file a suit before the proper court, if she so desires. No pronouncement as to costs."3

The Facts
The appellate court narrated the facts of the case in this manner: "Evelyn Tolosa (hereafter EVELYN), was the widow of Captain Virgilio Tolosa (hereafter CAPT. TOLOSA) who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk Transport Phils. Inc., (ASIA BULK for brevity), to be the master of the Vessel named M/V Lady Dona. CAPT. TOLOSA had a monthly compensation of US$1700, plus US$400.00 monthly overtime allowance. His contract officially began on November 1, 1992, as supported by his contract of employment when he assumed command of the vessel in Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in the middle of the voyage. At the time of embarkation, CAPT. TOLOSA was allegedly shown to be in good health. "During 'channeling activities' upon the vessel's departure from Yokohama sometime on November 6, 1992, CAPT. TOLOSA was drenched with rainwater. The following day, November 7, 1992, he had a slight fever and in the succeeding twelve (12) days, his health rapidly deteriorated resulting in his death on November 18, 1992. "According to Pedro Garate, Chief Mate of the Vessel, in his statement submitted to the U.S. Coast Guard on November 23, 1992 upon arrival in Long Beach, California CAPT. TOLOSA experienced high fever between November 11-15, 1992 and suffered from loose bowel movement (LBM) beginning November 9, 1992. By November 11, 1992, his temperature was 39.5 although his LBM had 'slightly' stopped. The next day, his temperature rose to 39.8 and had lost his appetite. In the evening of that day, November 13, 1992, he slipped in the toilet and suffered scratches at the back of his waist. First aid was applied and CAPT. TOLOSA was henceforth confined to his quarters with an able seaman to watch him 24 hours a day until November 15, 1992, when his conditioned worsened. "On the same day, November 15, 1992, the Chief Engineer initiated the move and contacted ASIA BULK which left CAPT. TOLOSA's fate in the hands of Pedro Garate and Mario Asis, Second Mate of the same vessel who was in-charge of the primary medical care of its officers and crew. Contact with the U.S. Coast Guard in Honolulu, Hawaii (USCGHH) was likewise initiated to seek medical advice. "On November 17, 1992, CAPT. TOLOSA was 'losing resistance' and his 'condition was getting serious.' At 2215 GMT, a telex was sent to ASIA BULK requesting for the immediate evacuation of CAPT. TOLOSA and thereafter an airlift was set on November 19, 1992. However, on November 18, 1992, at 0753 GMT, CAPT. TOLOSA was officially recorded as having breathed his last. "Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a Complaint/Position Paper before the POEA (POEA Case No. 93-06-1080) against Qwana-Kaiun, thru its resident-agent, Mr. Fumio Nakagawa, ASIA BULK, Pedro Garate and Mario Asis, as respondents. "After initial hearings and submissions of pleadings, the case was however transferred to the Department of Labor and Employment, National Labor Relations Commission (NLRC), when the amendatory legislation expanding its jurisdiction, and removing overseas employment related claims from the ambit of POEA jurisdiction. The case was then raffled to Labor Arbiter, Vladimir Sampang. xxx xxx xxx "After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter Vladimir P. L. Sampang, in conformity with petitioner's plea to hold respondents solidarily liable, granted

all the damages, (plus legal interest), as prayed for by the petitioner. The dispositive portion of his Decision reads: 'WHEREFORE, premises considered, the respondents are hereby ordered to jointly and solidarily pay complainants the following: 1. US$176,400.00 (US$2,100.00 x 12 months x 7 years) or P4,586,400.00 (at P26.00 per US$1.00) by way of lost income; 2. interest at the legal rate of six percent (6%) per annum or P1,238,328.00 (from November 1992 to May 1997 or 4 years); 3. moral damages of P200,000.00; 4. exemplary damages of P100,000.00; and 5. 10% of the total award, or P612,472.80, as attorney's fees.' xxx xxx xxx "On appeal, private respondents raised before the National Labor Relations Commission (NLRC) the following grounds: (a) the action before the Arbiter, as he himself concedes, is a complaint based on torts due to negligence. It is the regular courts of law which have jurisdiction over the action; (b) Labor Arbiters have jurisdiction over claims for damages arising from employeremployee relationship (Art. 217, Section (a) (3)); (c) In this case, gross negligence is imputed to respondents Garate and Asis, who have no employer-employee relationship with the late Capt. Virgilio Tolosa; (d) The labor arbiter has no jurisdiction over the controversy; xxx xxx xxx "Despite other peripheral issues raised by the parties in their respective pleadings, the NLRC on September 10, 1998, vacated the appealed decision dated July 8, 1997 of the Labor Arbiter and dismissed petitioner's case for lack of jurisdiction over the subject matter of the action pursuant to the provisions of the Labor Code, as amended."4 (Citations omitted)

Ruling of the Court of Appeals

Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the subject matter of the action filed by petitioner. Her cause did not arise from an employer-employee relation, but from a quasi delict or tort. Further, there is no reasonable causal connection between her suit for damages and her claim under Article 217 (a)(4) of the Labor Code, which allows an award of damages incident to an employer-employee relation. Hence, this Petition.5

Issues
Petitioner raises the following issues for our consideration: "I "Whether or not the NLRC has jurisdiction over the case. "II

"Whether or not Evelyn is entitled to the monetary awards granted by the labor arbiter."6 After reviewing petitioner's Memorandum, we find that we are specifically being asked to determine 1) whether the labor arbiter and the NLRC had jurisdiction over petitioner's action, and 2) whether the monetary award granted by the labor arbiter has already reached finality.

The Court's Ruling

The Petition has no merit.

First Jurisdiction over the Action

Issue:

Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of private respondents -- as employers of her husband (Captain Tolosa) -- to provide him with timely, adequate and competent medical services under Article 161 of the Labor Code: "ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency." Likewise, she contends that Article 217 (a) (4)7 of the Labor Code vests labor arbiters and the NLRC with jurisdiction to award all kinds of damages in cases arising from employer-employee relations. Petitioner also alleges that the "reasonable causal connection" rule should be applied in her favor. Citing San Miguel Corporation v. Etcuban,8 she insists that a reasonable causal connection between the claim asserted and the employer-employee relation confers jurisdiction upon labor tribunals. She adds that she has satisfied the required conditions: 1) the dispute arose from an employer-employee relation, considering that the claim was for damages based on the failure of private respondents to comply with their obligation under Article 161 of the Labor Code; and 2) the dispute can be resolved by reference to the Labor Code, because the material issue is whether private respondents complied with their legal obligation to provide timely, adequate and competent medical services to guarantee Captain Tolosa's occupational safety.9 We disagree. We affirm the CA's ruling that the NLRC and the labor arbiter had no jurisdiction over petitioner's claim for damages, because that ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.10 Time and time again, we have held that the allegations in the complaint determine the nature of the action and, consequently, the jurisdiction of the courts.11 After carefully examining the complaint/position paper of petitioner, we are convinced that the allegations therein are in the nature of an action based on a quasi delict or tort. It is evident that she sued Pedro Garate and Mario Asis for gross negligence. Petitioner's complaint/position paper refers to and extensively discusses the negligent acts of shipmates Garate and Asis, who had no employer-employee relation with Captain Tolosa. Specifically, the paper alleges the following tortious acts: "x x x [R]espondent Asis was the medical officer of the Vessel, who failed to regularly monitor Capt. Tolosa's condition, and who needed the USCG to prod him to take the latter's vital signs.

In fact, he failed to keep a medical record, like a patient's card or folder, of Capt. Tolosa's illness."12 "Respondents, however, failed Capt. Tolosa because Garate never initiated actions to save him. x x x In fact, Garate rarely checked personally on Capt. Tolosa's condition, to wit:"13 "x x x Noticeably, the History (Annex "D") fails to mention any instance when Garate consulted the other officers, much less Capt. Tolosa, regarding the possibility of deviation. To save Capt. Tolosa's life was surely a just cause for the change in course, which the other officers would have concurred in had they been consulted by respondent Garate which he grossly neglected to do. "Garate's poor judgement, since he was the officer effectively in command of the vessel, prevented him from undertaking these emergency measures, the neglect of which resulted in Capt. Tolosa's untimely demise."14 The labor arbiter himself classified petitioner's case as "a complaint for damages, blacklisting and watchlisting (pending inquiry) for gross negligence resulting in the death of complainant's husband, Capt. Virgilio Tolosa."15 We stress that the case does not involve the adjudication of a labor dispute, but the recovery of damages based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from employer-employee relations, as we ruled in Georg Grotjahn GMBH & Co. v. Isnani:16 "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."17 The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner. From her paper, it is evident that the primary reliefs she seeks are as follows: (a) loss of earning capacity denominated therein as "actual damages" or "lost income" and (b) blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his earning capacity based on a life expectancy of 65 years. This amount is recoverable if the action is based on a quasi delict as provided for in Article 2206 of the Civil Code,18 but not in the Labor Code. While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by labor laws, but also damages governed by the Civil Code,19 these reliefs must still he based on an action that has a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining agreements.20 The central issue is determined essentially from the relief sought in the complaint. In San Miguel Corporation v. NLRC,21 this Court held: "It is the character of the principal relief sought that appears essential in this connection. Where suchprincipal 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."22

The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa, who died at age 58, could expect to live up to 65 years and to have an earning capacity of US$176,400. It must be noted that a worker's loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or separation pay, and other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi delict or a similar cause within the realm of civil law. "Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with any of the claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is such a connection with the other claims can the claim for damages be considered as arising from employer-employee relations."23 In the present case, petitioner's claim for damages is not related to any other claim under Article 217, other labor statutes, or collective bargaining agreements. Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief. This provision is only a safety and health standard under Book IV of the same Code. The enforcement of this labor standard rests with the labor secretary. 24 Thus, claims for an employer's violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor standard provided for in Article 161 by suing for damages before the labor arbiter. It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the employer-employee relation is merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort.25 Since petitioner's claim for damages is predicated on a quasi delict or tort that has no reasonable causal connection with any of the claims provided for in Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts26 -- not with the NLRC or the labor arbiters.

Second Issue: Finality of the Monetary Award

Petitioner contends that the labor arbiter's monetary award has already reached finality, since private respondents were not able to file a timely appeal before the NLRC. This argument cannot be passed upon in this appeal, because it was not raised in the tribunals a quo. Well-settled is the rule that issues not raised below cannot be raised for the first time on appeal. Thus, points of law, theories, and arguments not brought to the attention of the Court of Appeals need not -- and ordinarily will not -- be considered by this Court.27 Petitioner's allegation cannot be accepted by this Court on its face; to do so would be tantamount to a denial of respondents' right to due process.28 Furthermore, whether respondents were able to appeal on time is a question of fact that cannot be entertained in a petition for review under Rule 45 of the Rules of Court. In general, the jurisdiction of this Court in cases brought before it from the Court of Appeals is limited to a review of errors of law allegedly committed by the court a quo.29 WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

PASTOR DIONISIO V. AUSTRIA vs. HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA G.R. No. 124382 KAPUNAN, J.: Subject of 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 vs. 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.1wphi1.nt 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 August 16, 1999

accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his 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 latter's motor vehicle which he failed to pay to Diamada.5 Due to the assistance of petitioner in collecting Pastor Rodrigo's 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 (Pador you are talking tough)."6 Irked by such remark, petitioner returned to the office of Pastor Buhat, and tried to overturn the latter's table, though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attach 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 dismissal 10 citing 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 employer's 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 P 21,060.00 B. Allowance P 4,770.83 C. Service Incentive Leave Pay P 3,461.85 D. Moral Damages P 50,000.00 E. Exemplary Damages P 25,000.00 F. Attorney's Fee P 22,012.27 SO ORDERED.12 The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor 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: 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 an 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 from 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 Labor Arbiter and the NLRC have no jurisdiction to the matter at bar allegedly involves the discipline purely ecclesiastical affair to which the State has no doctrine of separation of church and state, the entertain the complaint filed by petitioner. Since of a religious minister, it is to be considered a 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 Ceasar's and unto God the things that are God's."19 While the state is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters.20 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 of 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.21 Based on this definition, an ecclesiastical affair involves the 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 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 ex-communicated 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 petitioner's 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 employer's duly authorized 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 petitioner's 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 petitioner's letter of termination. As aptly stated by the OSG, this again is an eloquent admission by private respondents that NLRC has 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 worker's 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: Sec. 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 war 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 body's 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. 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 comfortable to the evidentiary facts. 27 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 petitioner's evidence but must stand on the merits of their own defense. The issue being the legality of petitioner's 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 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 employer's 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 Noncompliance therewith is fatal because these requirements are conditions sine quanon before dismissal may be validly effected.35 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 petitioner's impending termination was 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 employer's 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 employer's 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 employer's 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.42 Though private respondents were able to establish that petitioner collected and received tithes and donations several times, they were notable 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 employer's duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioner's 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 attach 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 employer's representatives was never really established or proven by private respondents. Hence, there is no basis for the allegation that petitioner's act constituted serious misconduct or that the same was an offense against the person of the employer's duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While the Constitution does condone wrongdoing by the employee, it nevertheless 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 require 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. Petitioner's rise from the ranks disclose that he was actually a hard-worker. Private respondents' evidence,47 which consisted of petitioner's Worker's 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.46 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.1wphi1.nt SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.

TERESITA MONTOYA vs. TERESITA ESCAYO, JOY ESCAYO, AIDA GANANCIAL, MARY ANN CAPE, CECILIA CORREJADO, ERLINDA PAYPON and ROSALIE VERDE, AND NATIONAL LABOR RELATIONS COMMISSION G.R. No. 82211-12 March 21, 1989 SARMIENTO, J.: This petition for certiorari seeks the annullment and setting aside of the resolution 1 9dated August 20, 1987 of the National Labor Relations Commission (NLRC), Third Division, which reversed and set aside the order dated September 27, 1985 of Labor Arbiter Ethelwoldo R. Ovejera of the NLRC's Regional Arbitration Branch No. VI, Bacolod City, dismissing the complaint filed by the private respondents against the petitioner. This petition raises a singular issue, i.e., the applicability of Presidential Decree (P.D.) No. 1508, more commonly known as the Katarungang Pambarangay Law, to labor disputes. The chronology of events leading to the present controversy is as follows: The private respondents were all formerly employed as salesgirls in the petitioner's store, the "Terry's Dry Goods Store," in Bacolod City. On different dates, they separately filed complaints for the collection of sums of money against the petitioner for alleged unpaid overtime pay, holiday pay, 13th month pay, ECOLA, and service leave pay: for violation of the minimum wage law, illegal dismissal, and attorney's fees. The complaints, which were originally treated as separate cases, were subsequently consolidated on account of the similarity in their nature. On August 1, 1984, the petitioner-employer moved (Annex "C" of Petition) for the dismissal of the complaints, claiming that among others, the private respondents failed to refer the dispute to the Lupong Tagapayapa for possible settlement and to secure the certification required from the Lupon Chairman prior to the filing of the cases with the Labor Arbiter. These actions were allegedly violative of the provisions of P.D. No. 1508, which apply to the parties who are all residents of Bacolod City. Acting favorably on the petitioner's motion, Labor Arbiter Ethelwoldo R. Ovejera, on September 27, 1985, ordered the dismissal of the complaints. The private respondents sought the reversal of the Labor Arbiter's order before the respondent NLRC. On August 20, 1987, the public respondent rendered the assailed resolution reversing the order of Ovejera, and remanded the case to the Labor Arbiter for further proceedings. A motion for reconsideration was filed by the petitioner but this was denied for lack of merit on October 28, 1987. Hence, this petition.

It is the petitioner's contention that the provisions of the Katarungang Pambarangay Law (P.D. No. 1508) relative to the prior amicable settlement proceedings before the Lupong Tagapayapa as a jurisdictional requirement at the trial level apply to labor cases. More particularly, the petitioner insists that the failure of the private respondents to first submit their complaints for possible conciliation and amicable settlement in the proper barangay court in Bacolod City and to secure a certification from the Lupon Chairman prior to their filing with the Labor Arbiter, divests the Labor Arbiter, as well as the respondent Commission itself, of jurisdiction over these labor controversies and renders their judgments thereon null and void. On the other hand, the Solicitor General, as counsel for the public respondent NLRC, in his comment, strongly argues and convincingly against the applicability of P.D. No. 1508 to labor cases. We dismiss the petition for lack of merit, there being no satisfactory showing of any grave abuse of discretion committed by the public respondent. The provisions of P.D. No. 1508 requiring the submission of disputes before the barangay Lupong Tagapayapa prior to their filing with the court or other government offices are not applicable to labor cases. For a better understanding of the issue in this case, the provisions of P.D. No. 1508 invoked by the petitioner are quoted: SEC. 6. Conciliation pre-condition to filing of complaint. No complaint, petition, action or proceeding involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or instituted in court or any other government office for adjudication unless there has been a confrontation of the parties before the Lupon Chairman or the Pangkat and no conciliation or settlement has been reached as certified by the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or unless the settlement has been repudiated. However, the parties may go directly to court in the following cases: (1) Where the accused is under detention; (2) Where a person has otherwise been deprived of per sonal liberty calling for habeas corpus proceedings; (3) Actions coupled with provisional remedies such as preliminary injunction, attachment, delivery of personal property and support pendente lite; and (4) Where the action may otherwise be barred by the Statute of Limitations. As correctly pointed out by the Solicitor General in his comment to the petition, even from the three "WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the decree's intended applicability only to courts of justice, and not to labor relations commissions or labor arbitrators' offices. The express reference to "judicial resources", to "courts of justice", "court dockets", or simply to "courts" are significant. On the other band, there is no mention at all of labor relations or controversies and labor arbiters or commissions in the clauses involved. These "WHEREAS" clauses state: WHEREAS, the perpetuation and official recognition of the time-honored tradition of amicably settling disputes among family and barangay members at the barangay level without judicial resourceswould promote the speedy administration of justice and

implement the constitutional mandate to preserve and develop Filipino culture and to strengthen the family as a basic social institution; WHEREAS, the indiscriminate filing of cases in the courts of justice contributes heavily and unjustifiably to the congestion of court dockets, thus causing a deterioration in the quality of justice; WHEREAS, in order to help relieve the courts of such docket congestion and thereby enhance the quality of Justice dispensed by the courts, it is deemed desirable to formally organize and institutionalize a system of amicably settling disputes at the barangay level; (Emphasis supplied.) In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105, both issued on November 12, 1979 by the former President in connection with the implementation of the Katarungang Pambarangay Law, affirm this conclusion. These Letters were addressed only to the following officials: all judges of the Courts of first Instance, Circuit Criminal Courts, Juvenile and

Domestic Relations Courts, Courts of Agrarian Relations, City Courts and Municipal Courts, and all Fiscals and other Prosecuting Officers. These presidential issuances make clear that the only official

directed to oversee the implementation of the provisions of the Katarungang Pambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then Minister of Local Governments and Community Development, and the Chief Justice of the Supreme Court. If the contention of the petitioner were correct, the then Minister (now Secretary) of Labor and Employment would have been included in the list, and the two presidential issuances also would have been addressed to the labor relations officers, labor arbiters, and the members of the National Labor Relations Commission. Expressio

unius est exclusio alterius.

Nor can we accept the petitioner's contention that the "other government office" referred to in Section 6 of P.D. No. 1508 includes the Office of the Labor Arbiter and the Med-Arbiter. The declared concern of the Katarungan Pambarangay Law is "to help relieve the courts of such docket congestion and thereby enhance the quality of justice dispensed by the courts." Thus, the" other government office" mentioned in Section 6 of P.D. No. 1508 refers only to such offices as the Fiscal's Office or, in localities where there is no fiscal, the Municipal Trial Courts, where complaints for crimes (such as those punishable by imprisonment of not more than 30 days or a, fine of not more than P 200.00) falling under the jurisdiction of the barangay court but which are not amicably settled, are subsequently filed for proper disposition. But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the contrary notwithstanding, all doubts on this score are dispelled by The Labor Code Of The Philippines (Presidential Decree No. 442, as amended) itself. Article 226 thereof grants original and exclusive jurisdiction over the conciliation and mediation of disputes, grievances, or problems in the regional offices of the Department of Labor and Employ- ment. It is the said Bureau and its divisions, and not the barangay Lupong Tagapayapa, which are vested by law with originaland exclusive authority to conduct conciliation and mediation proceedings on labor controversies before their endorsement to the appropriate Labor Arbiter for adjudication. Article 226, previously adverted to is clear on this regard. It provides: ART. 226. Bureau of Labor Relations.- The Bureau of Labor Relations and the Labor relations divisions in the regional officer of the Department of Labor shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all workplaces

whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary arbitration. The Bureau shall have fifteen (15) working days to act on all labor cases, subject to extension by agreement of the parties, after which the Bureau shall certify the cases to the appropriate Labor Arbiters. The 15-working day deadline, however, shall not apply to cases involving deadlocks in collective bargaining which the Bureau shall certify to the appropriate Labor Arbiters only after all possibilities of voluntary settlement shall have been tried. Requiring conciliation of labor disputes before the barangay courts would defeat the very salutary purposes of the law. Instead of simplifying labor proceedings designed at expeditious settlement or referral to the proper court or office to decide it finally, the position taken by the petitioner would only duplicate the conciliation proceedings and unduly delay the disposition of the labor case. The fallacy of the petitioner's submission can readily be seen by following it to its logical conclusion. For then, if the procedure suggested is complied with, the private respondent would have to lodge first their complaint with the barangay court, and then if not settled there, they would have to go to the labor relations division at the Regional Office of Region VI of the Department of Labor and Employment, in Bacolod City, for another round of conciliation proceedings. Failing there, their long travail would continue to the Office of the Labor Arbiter, then to the NLRC, and finally to us. This suggested procedure would destroy the salutary purposes of P.D. 1508 and of The Labor Code Of The Philippines. And labor would then be given another unnecessary obstacle to hurdle. We reject the petitioner's submission. It does violence to the constitutionally mandated policy of the State to afford full protection to labor. 2 Finally, it is already well-settled that the ordinary rules on procedure are merely suppletory in character vis-a-vis labor disputes which are primarily governed by labor laws. 3 And "(A)ll doubts in the implementation and interpretation of this Code (Labor), including its implementing rules and regulations, shall be resolved in favor of labor. 4 WHEREFORE, the petition is DISMISSED. Costs against the petitioner. SO ORDERED. DCWD, ZCWD et al vs. CIVIL SERVICE COMMISSION, and COMMISSION ON AUDIT G.R. No. 95237-38 September 13, 1991 MEDIALDEA, J.:p Whether or not the Local Water Districts formed and created pursuant to the provisions of Presidential Decree No. 198, as amended, are government-owned or controlled corporations with original charter falling under the Civil Service Law and/or covered by the visitorial power of the Commission on Audit is the issue which the petitioners entreat this Court, en banc, to shed light on. Petitioners are among the more than five hundred (500) water districts existing throughout the country formed pursuant to the provisions of Presidential Decree No. 198, as amended by Presidential Decrees Nos. 768 and 1479, otherwise known as the "Provincial Water Utilities Act of 1973."

Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of his legislative power under Proclamation No. 1081. It authorized the different local legislative bodies to form and create their respective water districts through a resolution they will pass subject to the guidelines, rules and regulations therein laid down. The decree further created and formed the "Local Water Utilities Administration" (LWUA), a national agency attached to the National Economic and Development Authority (NEDA), and granted with regulatory power necessary to optimize public service from water utilities operations. The respondents, on the other hand, are the Civil Service Commission (CSC) and the Commission on Audit (COA), both government agencies and represented in this case by the Solicitor General. On April 17, 1989, this Court ruled in the case of Tanjay Water District v. Gabaton, et al. (G.R. No. 63742, 172 SCRA 253): Significantly, Article IX (B), Section 2(1) of the 1987 Constitution provides that the Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned and controlled corporations with original charters. Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they come under the coverage of the Civil Service Law, rules and regulations. (Sec. 35, Art. VIII and Sec. 37, Art. IX of PD No. 807). As an offshoot of the immediately cited ruling, the CSC. issued Resolution No. 90-575, the dispositive portion of which reads: NOW THEREFORE, in view of all the foregoing, the Commission resolved, as it hereby resolves to rule that Local Water Districts, being quasi-public corporations created by law to perform public services and supply public wants, the matter of hiring and firing of its officers and employees should be governed by the Civil Service Law, rules and regulations. Henceforth, all appointments of personnel of the different local water districts in the country shall be submitted to the Commission for appropriate action. (Rollo. p. 22). However, on May 16, 1990, in G.R. No. 85760, entitled "Metro Iloilo Water District v. National Labor Relations Commission, et al.," the Third Division of this Court ruled in a minute resolution: xxx xxx xxx Considering that PD 198 is a general legislation empowering and/or authorizing government agencies and entities to create water districts, said PD 198 cannot be considered as the charter itself creating the Water District. Public respondent NLRC did not commit any grave abuse of discretion in holding that the operative act, that created the Metro Iloilo Water District was the resolution of the Sangguniang Panglunsod of Iloilo City. Hence, the employees of Water Districts are not covered by Civil Service Laws as the latter do (sic) not have original charters.

In adherence to the just cited ruling, the CSC suspended the implementation of Resolution No. 90575 by issuing Resolution No. 90-770 which reads: xxx xxx xxx NOW, THEREFORE, in view of all the foregoing, the Commission resolved to rule, as it hereby rules, that the implementation of CSC. Resolution No. 575 dated June 27, 1990 be deferred in the meantime pending clarification from the Supreme Court are regards its conflicting decisions in the cases of Tanjay Water

District v. Gabaton and Metro Iloilo Water District v. National Labor Relations Commission. (p. 26, Rollo)
In the meanwhile, there exists a divergence of opinions between COA on one hand, and the (LWUA), on the other hand, with respect to the authority of COA to audit the different water districts. COA opined that the audit of the water districts is simply an act of discharging the visitorial power vested in them by law (letter of COA to LWUA dated August 13, 1985, pp. 29-30, Rollo).

On the other hand, LWUA maintained that only those water districts with subsidies from the government fall within the COA's jurisdiction and only to the extent of the amount of such subsidies, pursuant to the provision of the Government Auditing Code of the Phils. It is to be observed that just like the question of whether the employees of the water districts falls under the coverage of the Civil Service Law, the conflict between the water districts and the COA is also dependent on the final determination of whether or not water districts are government-owned or controlled corporations with original charter. The reason behind this is Sec. 2(1), Article IX-D of the 1987 constitution which reads: Sec. 2(1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government, or any of its subdivisions, agencies or instrumentalities, including government-owned or controlled corporations with original charters, and on a post audit basis. (emphasis supplied) Petitioners' main argument is that they are private corporations without original charter, hence they are outside the jurisdiction of respondents CSC and COA. Reliance is made on the Metro Iloilo case which declared petitioners as quasi-public corporations created by virtue of PD 198, a general legislation which cannot be considered as the charter itself creating the water districts. Holding on to this ruling, petitioners contend that they are private corporations which are only regarded as quasipublic or semi-public because they serve public interest and convenience and that since PD 198 is a general legislation, the operative act which created a water district is not the said decree but the resolution of the sanggunian concerned. After a fair consideration of the parties' arguments coupled with a careful study of the applicable laws as well as the constitutional provisions involved, We rule against the petitioners and reiterate Our ruling in Tanjay case declaring water districts government-owned or controlled corporations with original charter.

As early as Baguio Water District v. Trajano, et al., (G.R. No. 65428, February 20, 1984, 127 SCRA 730), We already ruled that a water district is a corporation created pursuant to a special law P.D. No. 198, as amended, and as such its officers and employees are covered by the Civil Service Law. In another case (Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, 165 SCRA 272), We ruled once again that local water districts are quasi-public corporations whose employees belong to the Civil Service. The Court's pronoucement in this case, as extensively quoted in the Tanjay case, supra, partly reads: "The only question here is whether or not local water districts are governmkent owned or controlled corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential decree No. 198, known as the Provincial Water Utilities Act of 1973" which went onto effect in 25 May 1973, and which provides as follows:

Exemption from Civil Service. The district and its employees,

being engaged in a proprietary function, are hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below supervisory levels:Provided, however, That the total of all salaries, wages emoluments, benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthy revenue. Said net revenue representing income from water sales and sewerage service charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding fiscal year. The Labor Arbiter failed to take into accout the provisions of Presidential Decree No. 1479, which went into effect on 11 June 1978, P.D. No. 1479, wiped away Section 25 of PD 198 quoted above, and Section 26 of PD 198 was renumbered as Section 25 in the following manner: Section 26 of the same decree PD 198 is hereby amended to read as Section 25 as follows: Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration. Thus, Section 25 of PD 198 exempting the employees of water districts from the application of the Civil Service Law was removed from the statute books: xxx xxx xxx We grant the petition for the following reasons:

1. Section 25 of PD No. 198 was repealed by Section 3 of PD No. 1479; Section 26 of PD No. 198 was amended ro read as Sec. 25 by Sec. 4 of PD No. 1479. The amendatory decree took effect on June 11, 1978. xxx xxx xxx 3. The BWD is a corporation created pursuant to a special law PD No. 198, as amended. As such its officers and employees are part of the Civil Service (Sec. 1, Art. XII-B, [1973] Constitution; PD No. 868). Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to the different water districts created pursuant thereto. In all its essential terms, it is obvious that it pertains to a special purpose which is intended to meet a particular set of conditions and cirmcumstances. The fact that said decree generally applies to all water districts throughout the country does not change the fact that PD 198 is a special law. Accordingly, this Court's resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby abandoned. By "government-owned or controlled corporation with original charter," We mean government owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines. Thus, in the case ofLumanta v. NLRC (G.R. No. 82819, February 8, 1989, 170 SCRA 79, 82), We held: The Court, in National Service Corporation (NASECO) v. National Labor Relations Commission, G.R. No 69870, promulgated on 29 November 1988, quoting extensively from the deliberations of 1986 Constitutional Commission in respect of the intent and meaning of the new phrase "with original character," in effect held that government-owned and controlled corporations with original charter

refer to corporations chartered by special law as distinguished from corporations organized under our general incorporation statute the Corporations Code. In

NASECO, the company involved had been organized under the general incorporation statute and was a sbusidiary of the National Investment Development Corporation (NIDC) which in turn was a subsidiary of the Philippine National Bank, a bank chartered by a special statute. Thus, government-owned or controlled corporations like NASECO are effectively, excluded from the scope of the Civil Service. (emphasis supplied) From the foregoing pronouncement, it is clear that what has been excluded from the coverage of the CSC are those corporations created pursuant to the Corporation Code. Significantly, petitioners are not created under the said code, but on the contrary, they were created pursuant to a special law and are governed primarily by its provision. No consideration may thus be given to petitioners' contention that the operative act which created the water districts are the resolutions of the respective local sanggunians and that consequently, PD 198, as amended, cannot be considered as their charter. It is to be noted that PD 198, as amended is the source of authorization and power to form and maintain a district. Section 6 of said decree provides: Sec. 6. Formation of District. This Act is the source of authorization and power to form and maintain a district. Once formed, a district is subject to the

provisions of this Act and not under the jurisdiction of any political subdivision, . . .. Moreover, it must be observed that PD 198, contains all the essential terms necessary to constitute a charter creating a juridical person. For example, Section 6(a) provides for the name that will be used by a water district, thus: Sec. 6. . . . To form a district, the legislative body of any city, municipality or province shall enact a resolution containing the following: a) The name of the local water district, which shall include the name of the city, municipality, or province, or region thereof, served by said system, followed by the words "Water District." It also prescribes for the numbers and qualifications of the members of the Board of Directors: Sec. 8. Number and Qualification. The Board of Directors of a district shall be composed of five citizens of the Philippines who are of voting age and residents within the district. One member shall be a representative of civic-oriented service clubs, one member of representative of professional associations, one member a representative of business, commercial or financial organizations, one member a representative of educational institutions and one member a representative of women's organization. No public official shall serve as director. Provided, however, that if the district has availed of the financial assistance of the Administration, the Administration may appoint any of its personnel to sit in the board of directors with all the rights and privileges appertaining to a regular member for such period as the indebtedness remains unpaid in which case the board shall be composed of six members; (as amended by PDs Nos. 768 and 1479). the manner of their appointment and nominations; Sec. 9. Appointment. Board members shall be appointed by the appointing authority. Said appointments shall be made from a list of nominees, if any, submitted pursuant to Section 10. If no nominations are submitted, the appointing authority shall appoint any qualified person of the category to the vacant position; Sec.10. Nominations. On or before October 1 of each even numbered year, the secretary of the district shall contact each known organization, association, or institution being represented by the director whose term will expire on December 31 and solicit nominations from these organizations to fill the position for the ensuing term. One nomination may be submitted in writing by each such organization to the Secretary of the district on or before November 1 of such year: This list of nominees shall be transmitted by the Secretary of the district to the office of the appointing authority on or before November 15 of such year and he shall make his appointment from the list submitted on or before December 15. In the event the appointing authority fails to make his appointments on or before December 15, selection shall be made from said list of nominees by

majority vote of the seated directors of the district constituting a quorum. Initial nominations for all five seats of the board shall be solicited by the legislative body or bodies at the time of adoption of the resolution forming the district. Thirty days thereafter, a list of nominees shall be submitted to the provincial governor in the event the resolution forming the district is by a provincial board, or the mayor of the city or municipality in the event the resolution forming the adoption of the district is by the city or municipal board of councilors, who shall select the initial directors therefrom within 15 days after receipt of such nominations; their terms of office: Sec. 11. Term of Office. Of the five initial directors of each newly formed district, two shall be appointed for a maximum term of two years, two for a maximum term of four years, and one for a maximum term of six years. Terms of office of all directors in a given district shall be such that the term of at least one director, but not more then two, shall expire on December 31 of each evennumbered year. Regular terms of office after the initial terms shall be for six years commencing on January 1 of odd-numbered years. Directors may be removed for cause only, subject to review and approval of the Administration; (as amended by PD 768). the manner of filling up vacancies: Sec. 12. Vacancies. In the event of a vacancy in the board of directors occurring more than six months before expiration of any director's term, the remaining directors shall within 30 days, serve notice to or request the secretary of the district for nominations and within 30 days, thereafter a list of nominees shall be submitted to the appointing authority for his appointment of a replacement director from the list of nominees. In the absence of such nominations, the appointing authority shall make such appointment. If within 30 days after submission to him of a list of nominees the appointing authority fails to make an appointment, the vacancy shall be filled from such list by a majority vote of the remaining members of the Board of Directors constituting a quorum. Vacancies occurring within the last six months of an unexpired term shall also be filled by the Board in the above manner. The director thus appointed shall serve the unexpired term only; (as amended by PD 768). and the compensation and personal liability of the members of the Board of Directors: Sec. 13. Compensation. Each director shall receive a per diem, to be determined by the board, for each meeting of the board actually attended by him, but no director shag receive per diems in any given month in excess of the equivalent of the total per diems of four meetings in any given month. No director shall receive other compensation for services to the district. Any per diem in excess of P50.00 shall be subject to approval of the Administration (as amended by PD 768).

Sec. 14. Personal Liability. No director may be held to be personally liable for any action of the district. Noteworthy, the above quoted provisions of PD 198, as amended, are similar to those which are actually contained in other corporate charters. The conclusion is inescapable that the said decree is in truth and in fact the charter of the different water districts for it clearly defines the latter's primary purpose and its basic organizational set-up. In other words, PD 198, as amended, is the very law which gives a water district juridical personality. While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district, this Court is of the opinion that said resolution cannot be considered as its charter, the same being intended only to implement the provisions of said decree. In passing a resolution forming a water district, the local sanggunian is entrusted with no authority or discretion to grant a charter for the creation of a private corporation. It is merely given the authority for the formation of a water district, on a local option basis, to be exercised under and in pursuance of PD 198. More than the aforequoted provisions, what is of important interest in the case at bar is Section 3, par. (b) of the same decree which reads: Sec. 3(b). Appointing authority. The person empowered to appoint the members of the Board of Directors of a local water district, depending upon the geographic coverage and population make-up of the particular district. In the event that more than seventy-five percent of the total active water service connections of a local water districts are within the boundary of any city or municipality, the appointing authority shall be the mayor of that city or municipality, as the case may be; otherwise, the appointing authority shall be the governor of the province within which the district is located:Provided, That if the existing waterworks system in the city or municipality established as a water district under this Decree is operated and managed by the province, initial appointment shall be extended by the governor of the province. Subsequent appointments shall be as specified herein. If portions of more than one province are included within the boundary of the district, and the appointing authority is to be the governors then the power to appoint shall rotate between the governors involved with the initial appointments made by the governor in whose province the greatest number of service connections exists (as amended by PD 768). The above-quoted section definitely sets to naught petitioners' contention that they are private corporations. It is clear therefrom that the power to appoint the members who will comprise the Board of Directors belongs to the local executives of the local subdivision units where such districts are located. In contrast, the members of the Board of Directors or trustees of a private corporation are elected from among the members and stockholders thereof. It would not be amiss to emphasize at this point that a private corporation is created for the private purpose, benefit, aim and end of its members or stockholders. Necessarily, said members or stockholders should be given a free hand to choose those who will compose the governing body of their corporation. But this is not the case here and this clearly indicates that petitioners are definitely not private corporations. The foregoing disquisition notwithstanding, We are, however, not unaware of the serious repercussion this may bring to the thousands of water districts' employees throughout the country

who stand to be affected because they do not have the necessary civil service eligibilities. As these employees are equally protected by the constitutional guarantee to security of tenure, We find it necessary to rule for the protection of such right which cannot be impaired by a subsequent ruling of this Court. Thus, those employees who have already acquired their permanent employment status at the time of the promulgation of this decision cannot be removed by the mere reason that they lack the necessary civil service eligibilities. ACCORDINGLY, the petition is hereby DISMISSED. Petitioners are declared "government-owned or controlled corporations with original charter" which fall under the jurisdiction of the public respondents CSC and COA. VICTORIANO ZAMORAS vs. ROQUE SU, JR., ANITA SU HORTELLANO and NLRC G.R. No. 85611 April 6, 1990 GRIO-AQUINO, J.: The issue in this petition is whether, upon the established facts, the petitioner was an employee or tenant of the private respondents. The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957 as overseer of his coconut land in Asenario, Dapitan City. Zamoras was charged with the task of having the land titled in Su's name, and of assigning portions to be worked by tenants, supervising the cleaning, planting, care and cultivation of the land, the harvesting of coconuts and selling of the copra. As compensation, Su paid Zamoras a salary of P2,400 per month plus one-third (1/3) of the proceeds of the sales of copra which normally occurred every two months. Another one-third of the proceeds went to the tenants and the other third to Su. This system of sharing was regularly observed up to September, 1981. As the coconut plantation yielded an average harvest of 21,000 nuts worth P18,900, based on the current market price of P3 per kilo, Zamoras' share amounted to P6,300 every two months. In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other respondent, Anita Su Hortellano, and that he authorized her to harvest the coconuts from his property "while the loan was outstanding" (p. 8, Rollo). Su sent Zamoras a letter dated May 29, 1981 informing him that he was being laid-off temporarily until Su could obtain a loan from the Development Bank of the Philippines with which to pay Anita. However, Zamoras was not allowed anymore to work as overseer of the plantation. Without his knowledge and consent, Hortellano harvested the coconuts without giving him his one-third share of the copra sales. On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor and Employment in Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano for illegal termination and breach of contract with damages of not less than P75,600 as his uncollected share of the copra sales from September 15, 1981 to August 1983. The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case submitted the following findings which were adopted by the Labor Arbiter The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo Avenue Extension, Lahug, Cebu City and at the same time an

employee in the government up to the present, while the land wherein the complainant herein was employed by the respondent as overseer of the land since 1957 up to and until his termination from the service sometime in September 1981 without just cause or causes duly authorized by law and after due process. That to prove that complainant was the overseer of the land owned by the respondent are the sworn declaration of the three witnesses, namely: Vicente Amor, Narcisa Arocha, and Wilfredo Bernaldes who are presently working as tenants of the respondent. That the three witnesses testified that they knew the complainant personally who has been working as overseer of the land because it was through him, the complainant, that they were allowed to work and/or occupy the land as tenants ever since up to the present. In fact, they further declared that they do not know personally the owner of the land and besides, they have not seen personally the said owner as their dealing were directly done thru the complainant. That they always received their share of the produce from the complainant for every two months up to 1981. xxx xxx xxx It is very clear in the evidence of record that complainant was an employee of the respondent. This fact is even admitted by the respondent in his answer by way of controverting the claim of the complainant. (pp. 44-45, Rollo.) On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of the respondent's plantation, was a regular employee whose services were necessary and desirable to the usual trade or business of his employer. The Labor Arbiter held that the dismissal of Zamoras was without just cause, hence, illegal. The private respondents were ordered to reinstate him to his former position as overseer of the plantation and to pay him backwages equivalent to P31,975.83 in the event that he opted not to be reinstated or that his reinstatement was not feasible. The private respondents appealed to the National Labor Relations Commission, alleging that the Labor Arbiter erred: 1. in disregarding respondents' evidence (a financial report showing the yearly copra sales from 1973 to 1977), proving that complainant's one-third share of the copra sales amounted to P5,985.16 only and not P6,300 per harvest; 2. in not holding that the complainant can no longer be reinstated for he is already dead; and 3. in not finding that no employer-employee relationship existed between the parties. On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that "the right to control test used in determining the existence of an employer-employee relationship is unavailing in the instant case and that what exists between the parties is a landlord-tenant relationship" (p. 32, Rollo), because such functions as introducing permanent improvements on the land, assigning portions to tenants, supervising the cleaning, planting, care and cultivation of the plants, and deciding where and to whom to sell the copra are attributes of a landlord-tenant relationship, hence, jurisdiction over the case rests with the Court of Agrarian Relations. Zamoras filed this petition, assailing the NLRC's decision.

There is merit in the petition. The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is not supported by the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of his coconut plantation. As overseer, Zamoras hired the tenants and assigned their respective portions which they cultivated under Zamoras' supervision. The tenants dealt directly with Zamoras and received their one-third share of the copra produce from him. The evidence also shows that Zamoras, aside from doing administrative work for Su, regularly managed the sale of copra processed by the tenants. There is no evidence that Zamoras cultivated any portion of Su's land personally or with the aid of his immediate farm household. In fact the respondents never raised the issue of tenancy in their answer. Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from within his immediate household, cultivates the land belonging to or possessed by another, with the latter's consent for purposes of production, sharing the produce with the landholder or for a price certain or ascertainable in produce or in money or both, under the leasehold tenancy system" (Matienzo vs. Servidad, 107 SCRA 276). Agricultural tenancy is defined as "the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm household in consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, whether in produce or in money, or both" (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56; Miguel Carag vs. CA, et al., 151 SCRA 44). The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant; (2) the subject is the agricultural holding; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of harvests between landlord and tenant (Antonio Castro vs. CA and De la Cruz, G.R. L34613, January 26, 1989; Tiongson vs. CA, 130 SCRA 482; Guerrero vs. CA, 142 SCRA 138). The element of personal cultivation of the land, or with the aid of his farm household, essential in establishing a landlord-tenant or a lessor-lessee relationship, is absent in the relationship between Su and Zamoras (Co vs. IAC, 162 SCRA 390; Graza vs. CA, 163 SCRA 39), for Zamoras did not cultivate any part of Su's plantation either by himself or with the help of his household. On the other hand, the following circumstances are indicative of an employer-employee relationship between them: 1. Zamoras was selected and hired by Su as overseer of the coconut plantation. 2. His duties were specified by Su. 3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras should sell the copra produced from the plantation. 4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two months as compensation for managing the plantation. Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian Relations, that has jurisdiction to try and decide Zamora's complaint for illegal dismissal (Art. 217,

Labor Code; Manila Mandarin Employees Union vs. NLRC, 154 SCRA 368; Jacqueline Industries Dunhill Bags Industries, et al. vs. NLRC, et al., 69 SCRA 242). WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to be an employee of respondent Roque Su, Jr. and that his dismissal was illegal and without lawful cause. He is entitled to reinstatement with backwages, but because he is dead and may no longer be reinstated, the private respondents are ordered to pay to his heirs the backwages due him, as well as his share of the copra sales from the plantation for a period of three (3) years from his illegal dismissal in September, 1981, plus separation pay in lieu of reinstatement. Costs against the private respondents. SO ORDERED. FORTUNE CEMENT CORPORATION vs. NLRC (First Division) and ANTONIO M. LAGDAMEO G.R. No. 79762 January 24, 1991 GRIO-AQUINO, J.:p This is a petition for certiorari with prayer to annul the resolution dated May 29, 1987 of respondent National Labor Relations Commission (NLRC) reversing the order dated December 3, 1985 of the Labor Arbiter which dismissed private respondent Antonio M. Lagdameo's (Lagdameo for brevity) complaint for Illegal Dismissal (NLRC NCR Case No. 1-228-85) against petitioner Fortune Cement Corporation (FCC for brevity) for lack of jurisdiction. Lagdameo is a registered stockholder of FCC. On October 14, 1975, at the FCC Board of Directors' regular monthly meeting, he was elected Executive Vice-President of FCC effective November 1, 1975 (p. 3, Rollo). Some eight (8) years later, or on February 10, 1983, during a regular meeting, the FCC Board resolved that all of its incumbent corporate officers, including Lagdameo, would be "deemed" retained in their respective positions without necessity of yearly reappointments, unless they resigned or were terminated by the Board (p. 4, Rollo). At subsequent regular meetings held on June 14 and 21, 1983, the FCC Board approved and adopted a resolution dismissing Lagdameo as Executive Vice-President of the company, effective immediately, for loss of trust and confidence (p. 4, Rollo). On June 21, 1983, Lagdameo filed with the National Labor Relations Commission (NLRC), National Capital Region, a complaint for illegal dismissal against FCC (NLRC-NCR Case No. 1-228-85) alleging that his dismissal was done without a formal hearing and investigation and, therefore, without due process (p. 63, Rollo). On August 5, 1985, FCC moved to dismiss Lagdameo's complaint on the ground that his dismiss as a corporate officer is a purely intra-corporate controversy over which the Securities and Exchange Commission (SEC) has original and exclusive jurisdiction. The Labor Arbiter granted the motion to dismiss (p. 22, Rollo). On appeal, however, the NLRC set aside the Labor Arbiter's order and remanded the case to the Arbitration Branch "for appropriate

proceedings" (NLRC Resolution dated April 30, 1987). The NLRC denied FCC's motion for reconsideration (p. 5, Rollo). Dissatisfied, FCC filed this petition for certiorari. We find merit in the petition. The sole issue to be resolved is whether or not the NLRC has jurisdiction over a complaint filed by a corporate executive vice-president for illegal dismissal, resulting from a board resolution dismissing him as such officer. Section 5 of Presidential Decree No. 902-A vests in the SEC original and exclusive jurisdiction over this controversy: Sec. 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: a) Devices and 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 stockholders, partners, members of associations or organization 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 appointments of directors, trustees, officers or managers of such corporations, partnership or associations." (Section 5, P.D. 902-A; Emphasis supplied.) In reversing the decision of Labor Arbiter Porfirio E. Villanueva, respondent NLRC held: . . . . It is not disputed that complainant Lagdameo was an employee of respondent Fortune Cement Corporation, being then the Executive Vice-President. For having been dismissed for alleged loss of trust and confidence, complainant questioned his dismissal on such ground and the manner in which he was dismissed, claiming that no investigation was conducted, hence, there was and is denial of due process. Predicated on the above facts, it is clear to Us that a labor dispute had arisen between the appellant and the respondent corporation, a dispute which falls within the original and exclusive jurisdiction of the NLRC. A labor dispute as defined in the Labor Code includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment regardless of whether or not the disputants stand in the proximate relations of employers and employees." (pp. 1617, Rollo). The Solicitor General, declining to defend public respondent in its pleading entitled "Manifestation in Lieu of Comment," aptly observed: The position of "Executive Vice-President," from which private respondent Lagdameo claims to have been illegally dismissed, is an elective corporate office. He himself

acquired that position through election by the corporation's Board of Directors, although he also lost the same as a consequence of the latter's resolution. Indeed the election, appointment and/or removal of an executive vice-president is a prerogative vested upon a corporate board. And it must be, not only because it is a practice observed in petitioner Fortune Cement Corporation, but more so, because of an express mandate of law. (p. 65, Rollo.) The Solicitor General pointed out 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." The dispute between petitioner and Lagdameo is of the class described in Section 5, par. (c) of Presidential Decree No. 902-A, hence, within the original and exclusive jurisdiction of the SEC. The Solicitor General recommended that the petition be granted and NLRC-NCR Case No. 1-228-85 be dismissed by respondent NLRC for lack of jurisdiction (p. 95, Rollo). In PSBA vs. Leao (127 SCRA 778), this Court, confronted with a similar controversy, ruled that the SEC, not the NLRC, has jurisdiction: This is not a case of dismissal. The situation is that of a corporate office having been declared vacant, and of Tan's not having been elected thereafter. The matter of whom to elect is a prerogative that belongs to the Board, and involves the exercise of deliberate choice and the faculty of discriminative selection. Generally speaking, the relationship of a person to a corporation, whether as officer or as agent or employee is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exist. Lagdameo claims that his dismissal was wrongful, illegal, and arbitrary, because the "irregularities" charged against him were not investigated (p. 85, Rollo); that the case of PSBA vs. Leao (supra) cited by the Labor Arbiter finds no application to his case because it is not a matter of corporate office having been declared vacant but one where a corporate officer was dismissed without legal and factual basis and without due process; that the power of dismissal should not be confused with the manner of exercising the same; that even a corporate officer enjoys security of tenure regardless of his rank (p. 97, Rollo); and that the SEC is without power to grant the reliefs prayed for in his complaint (p. 106, Rollo). The issue of the SEC's power or jurisdiction is decisive and renders unnecessary a consideration of the other questions raised by Lagdameo. Thus did this Court rule in the case of Dy vs. National Labor Relations Commission (145 SCRA 211) which involved a similar situation: It is of no moment that Vailoces, in his amended complaint, seeks other reliefs which would seemingly fall under the jurisdiction of the Labor Arbiter, because a closer look at these underpayment of salary and non-payment of living allowance shows that they are actually part of the perquisites of his elective position, hence, intimately linked with his relations with the corporation. The 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. (Emphasis ours.)
WHEREFORE, the questioned Resolution of the NLRC reversing the decision of the Labor Arbiter, having been rendered without jurisdiction, is hereby reversed and set aside. The decision of the

Labor Arbiter dated December 3, 1985 dismissing NLRC-NCR Case No. 1-228-85 is affirmed, without prejudice to private respondent Antonio M. Lagdameo's seeking recourse in the appropriate forum. No costs. SO ORDERED.

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDECAQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES (FINANCE OFFICER) vs. NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA G.R. No. 86773 NOCON, J.: This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits, and the resolution denying the petitioners' motion for reconsideration of said decision dated January 9, 1989. The antecedent facts of the case are as follows: SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the SEAFDEC). On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of Professional III and designated as Head of External Affairs Office with the same pay and benefits. On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to private respondent informing him that due to the financial constraints being experienced by the department, his services shall be terminated at the close of office hours on May February 14, 1992

15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153). Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari). Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as the SEAFDEC-AQD is an international organization and that private respondent must first secure clearances from the proper departments for property or money accountability before any claim for separation pay will be paid, and which clearances had not yet been obtained by the private respondent. A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by the petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private respondent has property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is not entitled to accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of the same during his employment with the SEAFDEC-AQD (Annex "D",Id.). On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered ordering respondents: 1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until full payment thereof is made, as separation pay and other post-employment benefits; 2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees. All other claims are hereby dismissed. SO ORDERED. (Rollo, p. 51, Annex "E") On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.) On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international character and the complaint is in effect a suit against the State which cannot be maintained without its consent. The petition is impressed with merit. Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an international agency beyond the jurisdiction of public respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam (Annex "H", Petition). The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968. Its purpose is as follows: The purpose of the Center is to contribute to the promotion of the fisheries development in Southeast Asia by mutual co-operation among the member governments of the Center, hereinafter called the "Members", and through collaboration with international organizations and governments external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H" Petition) (p.310,Rollo) SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates: 1. The Council shall be the supreme organ of the Center and all powers of the Center shall be vested in the Council. Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional independence and freedom from control of the state in whose territory its office is located. As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public International Law (p. 83, 1956 ed.): Permanent international commissions and administrative bodies have been created by the agreement of a considerable number of States for a variety of international purposes, economic or social and mainly non-political. Among the notable instances are the International Labor Organization, the International Institute of Agriculture, the International Danube Commission. In so far as they are autonomous and beyond the control of any one State, they have a distinct juridical personality independent of the municipal law of the State where they are situated. As such, according to one leading authority "they must be deemed to possess a species of international personality of their own." (Salonga and Yap, Public International Law, 83 [1956 ed.]) Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be represented by one Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H",ibid.) and that its national laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and immovable property and services necessary for the establishment and operation of the Center" are concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292). The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDECAQD in Opinion No. 139, Series of 1984

4. 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 there operations or even influence or control its policies and decisions of the organization; besides, such subjection to local jurisdiction would impair the capacity of such body to discharge its responsibilities impartially on behalf of its member-states. In the case at bar, for instance, the entertainment by the National Labor Relations Commission of Mr. Madamba's reinstatement cases would amount to interference by the Philippine Government in the management decisions of the SEARCA governing board; even worse, it could compromise the desired impartiality of the organization since it will have to suit its actuations to the requirements of Philippine law, which may not necessarily coincide with the interests of the other member-states. It is precisely to forestall these possibilities that in cases where the extent of the immunity is specified in the enabling instruments of international organizations, jurisdictional immunity from the host country is invariably among the first accorded. (See Jenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285). Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can provide one. Settled is the rule that the decision of a tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held: A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which it stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the timehonored principle that the issue of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982]) Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it took cognizance of the case. Said the Court: We would note, finally, that the present petition relates to a controversy between two claimants to the same position; this is not a controversy between the

SEAFDEC on the one hand, and an officer or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the other hand. There is before

us no question involving immunity from the jurisdiction of the Court, there being no plea for such immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied). WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without jurisdiction. No costs. SO ORDERED. INSULAR LIFE ASSURANCE CO., LTD., vs. NLRC and MELECIO BASIAO G.R. No. 84484 November 15, 1989 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. 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 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-Lagadan 10 ... 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). ... 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 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.

Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur.

ILAW AT BUKLOD NG MANGGAGAWA (IBM) vs. NLRC, LABOR ARBITER MANUEL P. ASUNCION, ABUNDIO IBASCO, ANTONIO MAGSIPOC, CARLOS VILLARANTE and BIENVENIDO RAMIREZ G.R. Nos. 81852-53 MELO, J.: Before us is a petition for certiorari seeking the annulment of the order dated February 4, 1987, of respondent Labor Arbiter, the decision dated May 29, 1987 rendered by said respondent, and the resolutions dated October 12, 1987, and January 11, 1988, of the respondent National Labor Relations Commission. The relevant facts as established by the record are as follows: Petitioner, a duly-registered labor union, is the sole and exclusive bargaining representative of all daily-paid workers of the Metro Manila plants of San Miguel Corporation, hereinafter referred to as SMC. On December 3, 1986, petitioner and SMB entered into a Memorandum of Agreement on Collective Bargaining Agreement (CBA). The National Council of petitioner called a general meeting on December 7, 1986 for the ratification of the CBA. On the morning of December 7, 1986, the National Council held a special meeting wherein the members present unanimously passed "Resolusyon Blg. 265, Serye 1986" (Annex G, Petition, p. 52, Rollo). It was agreed at said meeting to submit the resolution to the general membership for approval. Two thousand two hundred forty three (2,243) members attended the general meeting. Said Resolusyon Blg. 265 was submitted to the general assembly for approval. Two Thousand one hundred seven (2,107) members voted in favor and thirty six (36) voted against the resolution. In said general membership meeting the 1986 CBA was ratified by the members. Under said resolution, each member of the union was assessed P1,098.00 to be deducted from the lump sum of P10,980.00 which each employee was to receive under the CBA. Private respondents protested the deduction and refused to sign the authorization slip for the deduction. Petitioner passed March 5, 1993

a resolution on January 6, 1987, (Annex 9, Private Respondents' Comment, p. 169, Rollo) expelling private respondents from the union. SMB held in trust the amount of P1,098.00 pertaining to each private respondent. On January 8, 1987, private respondents Antonio Magsipoc and Abundio Ibasco filed a complaint (Annex I, Petition, p. 59, Rollo) docketed as NLRC-NCR Case No. 1-092-87, before the Arbitration Branch, National Capital Region, National Labor Relations Commission for illegal and exorbitant deduction and illegal expulsion from the union. In February, 1987, a similar complaint docketed as NLRC Case No. 00-02-00731-87 was filed by private respondents Carlos Villarante and Bienvenido Ramirez. On January 29, 1987, petitioner filed a motion to dismiss (Annex A, Petition, pp. 34-35, Rollo) Case No. 1-092-87 on the ground of lack of jurisdiction of NLRC. On February 4, 1987, respondent Labor Arbiter Manuel Asuncion issued an order (Annex B, Petition, pp. 36-37, Rollo) denying the motion to dismiss. It appears that the two cases were consolidated, and respondent Labor Arbiter proceeded to take cognizance of the cases and directed the parties to file their position papers. Only private respondents filed their position paper with petitioner continuing to refuse to submit to the jurisdiction of the Labor Arbiter. On May 29, 1987, respondent Labor Arbiter rendered a decision (Annex C, Petition, pp. 39-43, Rollo) finding the questioned assessment illegal and ordering petitioner and SMB to return the amount of P1,098.00 to each of private respondents; declaring the expulsion of private respondents from the union null and void; and ordering petitioner to desist from expelling the members who objected to the deduction of the questioned assessment from their CBA differentials. Petitioner seasonably filed a notice of appeal (Annex K, Petition, p. 61, Rollo) with respondent National Labor Relations Commission. On October 12, 1987, the NLRC issued a resolution (Annex D, Petition, pp. 44-46, Rollo) affirming the decision of respondent Labor Arbiter and dismissing the appeal. Petitioner filed a motion for reconsideration but the same was denied in a resolution dated January 11, 1988. (Annex E, Petition, p. 47,Rollo). Hence, the instant recourse under the following assigned errors: 1. The NLRC committed reversible error in assuming jurisdiction over the person of petitioner union; 2. The NLRC committed a reversible error in assuming jurisdiction over the nature of the action; 3. The NLRC committed reversible error in declaring the sum from which the special assessment is made, is a wage, that it is a deduction from a wage and that it is an attorney's fee. (pp. 12-13, Rollo) The second assigned error raising as it does the central issue of jurisdiction, attention must be focused on the same. It is fundamental that jurisdiction over the subject matter is conferred by law (Tijam vs. Sibonghanoy, 23 SCRA 29 [1968]) and is determined by the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein (Serrano vs. Muoz (Hi) Motors, Inc., 21 SCRA 1085 [1967]).

A perusal of the complaint (Annex I, Petition, p. 59, Rollo) clearly shows that the subject-matter concerns: (a) the assessment and deduction of 10% from private respondents' CBA differential pay which were denounced by private respondents as illegal and exorbitant and made against their will, and (b) private respondents' expulsion from the union. The assessment and deduction of 10% from each employee's differential pay were imposed by petitioner through Resolusyon Blg. 265 and the expulsion was adopted by petitioner through Resolusyon Blg. 15, dated January 6, 1987, both of which were denounced by private respondents as illegal and violative of their rights as union members. Clearly this is an intra-union dispute a dispute between a labor union and its members. "Internal Union Dispute" includes all disputes or grievances arising from any violation of or disagreement over any provision of the constitution and by-laws of a union, including any violation of the rights and conditions of union membership provided for in the Code (Book V, Rule I, Section l(a), Omnibus Rules Implementing The Labor Code). Article 226 of the Labor Code of the Philippines vests on the Bureau of Labor Relations and the Labor Relations Divisions jurisdiction to act on all inter-union or intra-union conflicts. Said Article thus provides: Art. 226. Bureau of Labor Relations The Bureau of Labor Relations and the Labor Relations Division in the regional offices of the Department of Labor shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all work places whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be subject of grievance procedure and/or voluntary arbitration. Unquestionably, therefore, NLRC Case No. 1-092-87 and Case No. 00-02-00731-87, the subject of which is an intra-union dispute, fall under the original and exclusive jurisdiction of the Bureau of Labor Relations, and respondent Labor Arbiter and NLRC have no jurisdiction over said cases. In view of the foregoing conclusion, there is no further need to discuss the other errors assigned by petitioner. WHEREFORE, the order dated February 4, 1987 issued by respondent Labor Arbiter, the decision rendered on May 29, 1987, by said respondent, the resolution dated October 12, 1987, of respondent NLRC affirming the decision of respondent Labor Arbiter and the resolution dated January 11, 1988, of respondent NLRC are hereby ANNULLED and SET ASIDE. Respondent Labor Arbiter is hereby ordered to dismiss NLRC Case No. 1-072-87 and NLRC Case No. 00-02-00731-87, without prejudice to private respondents' filing the same with the Bureau of Labor Relations. SO ORDERED. PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, vs. HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS & FULGENCIO LEGO G.R. No. 89621 September 24, 1991

CRUZ, J.:p 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. 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: 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. Pao, 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 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. case we here decide.

So it must be in the

WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against the petitioner. SO ORDERED.

Narvasa (Chairman), Grio-Aquino and Medialdea, JJ., concur.

EVELYN TOLOSA vs. NLRC, QWANA KAIUN (through its resident-agent, FUMIO NAKAGAWA), ASIA BULK TRANSPORT PHILS. INC., PEDRO GARATE and MARIO ASIS G.R. No. 149578 April 10, 2003 PANGANIBAN, J.: As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to grant reliefs from claims that do not arise from employer-employee relations. They have no jurisdiction over torts that have no reasonable causal connection to any of the claims provided for in the Labor Code, other labor statutes, or collective bargaining agreements.

The Case
The Petition for Review before us assails the April 18, 2001 Decision1 of the Court of Appeals (CA) in CA-GR SP No. 57660, as well as the April 17, 2001 CA Resolution 2 denying petitioner's Motion for Reconsideration. The dispositive portion of the challenged Decision reads as follows: "WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED and accordingly DISMISSED, without prejudice to the right of herein petitioner to file a suit before the proper court, if she so desires. No pronouncement as to costs."3

The Facts
The appellate court narrated the facts of the case in this manner: "Evelyn Tolosa (hereafter EVELYN), was the widow of Captain Virgilio Tolosa (hereafter CAPT. TOLOSA) who was hired by Qwana-Kaiun, through its manning agent, Asia Bulk Transport Phils. Inc., (ASIA BULK for brevity), to be the master of the Vessel named M/V Lady Dona. CAPT. TOLOSA had a monthly compensation of US$1700, plus US$400.00 monthly overtime allowance. His contract officially began on November 1, 1992, as supported by his contract of employment when he assumed command of the vessel in Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in the middle of the voyage. At the time of embarkation, CAPT. TOLOSA was allegedly shown to be in good health. "During 'channeling activities' upon the vessel's departure from Yokohama sometime on November 6, 1992, CAPT. TOLOSA was drenched with rainwater. The following day, November 7, 1992, he had a slight fever and in the succeeding twelve (12) days, his health rapidly deteriorated resulting in his death on November 18, 1992.

"According to Pedro Garate, Chief Mate of the Vessel, in his statement submitted to the U.S. Coast Guard on November 23, 1992 upon arrival in Long Beach, California CAPT. TOLOSA experienced high fever between November 11-15, 1992 and suffered from loose bowel movement (LBM) beginning November 9, 1992. By November 11, 1992, his temperature was 39.5 although his LBM had 'slightly' stopped. The next day, his temperature rose to 39.8 and had lost his appetite. In the evening of that day, November 13, 1992, he slipped in the toilet and suffered scratches at the back of his waist. First aid was applied and CAPT. TOLOSA was henceforth confined to his quarters with an able seaman to watch him 24 hours a day until November 15, 1992, when his conditioned worsened. "On the same day, November 15, 1992, the Chief Engineer initiated the move and contacted ASIA BULK which left CAPT. TOLOSA's fate in the hands of Pedro Garate and Mario Asis, Second Mate of the same vessel who was in-charge of the primary medical care of its officers and crew. Contact with the U.S. Coast Guard in Honolulu, Hawaii (USCGHH) was likewise initiated to seek medical advice. "On November 17, 1992, CAPT. TOLOSA was 'losing resistance' and his 'condition was getting serious.' At 2215 GMT, a telex was sent to ASIA BULK requesting for the immediate evacuation of CAPT. TOLOSA and thereafter an airlift was set on November 19, 1992. However, on November 18, 1992, at 0753 GMT, CAPT. TOLOSA was officially recorded as having breathed his last. "Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a Complaint/Position Paper before the POEA (POEA Case No. 93-06-1080) against Qwana-Kaiun, thru its resident-agent, Mr. Fumio Nakagawa, ASIA BULK, Pedro Garate and Mario Asis, as respondents. "After initial hearings and submissions of pleadings, the case was however transferred to the Department of Labor and Employment, National Labor Relations Commission (NLRC), when the amendatory legislation expanding its jurisdiction, and removing overseas employment related claims from the ambit of POEA jurisdiction. The case was then raffled to Labor Arbiter, Vladimir Sampang. xxx xxx xxx "After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter Vladimir P. L. Sampang, in conformity with petitioner's plea to hold respondents solidarily liable, granted all the damages, (plus legal interest), as prayed for by the petitioner. The dispositive portion of his Decision reads: 'WHEREFORE, premises considered, the respondents are hereby ordered to jointly and solidarily pay complainants the following: 1. US$176,400.00 (US$2,100.00 x 12 months x 7 years) or P4,586,400.00 (at P26.00 per US$1.00) by way of lost income; 2. interest at the legal rate of six percent (6%) per annum or P1,238,328.00 (from November 1992 to May 1997 or 4 years); 3. moral damages of P200,000.00; 4. exemplary damages of P100,000.00; and 5. 10% of the total award, or P612,472.80, as attorney's fees.' xxx xxx xxx

"On appeal, private respondents raised before the National Labor Relations Commission (NLRC) the following grounds: (a) the action before the Arbiter, as he himself concedes, is a complaint based on torts due to negligence. It is the regular courts of law which have jurisdiction over the action; (b) Labor Arbiters have jurisdiction over claims for damages arising from employeremployee relationship (Art. 217, Section (a) (3)); (c) In this case, gross negligence is imputed to respondents Garate and Asis, who have no employer-employee relationship with the late Capt. Virgilio Tolosa; (d) The labor arbiter has no jurisdiction over the controversy; xxx xxx xxx "Despite other peripheral issues raised by the parties in their respective pleadings, the NLRC on September 10, 1998, vacated the appealed decision dated July 8, 1997 of the Labor Arbiter and dismissed petitioner's case for lack of jurisdiction over the subject matter of the action pursuant to the provisions of the Labor Code, as amended."4 (Citations omitted)

Ruling of the Court of Appeals

Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the subject matter of the action filed by petitioner. Her cause did not arise from an employer-employee relation, but from a quasi delict or tort. Further, there is no reasonable causal connection between her suit for damages and her claim under Article 217 (a)(4) of the Labor Code, which allows an award of damages incident to an employer-employee relation. Hence, this Petition.5

Issues
Petitioner raises the following issues for our consideration: "I "Whether or not the NLRC has jurisdiction over the case. "II "Whether or not Evelyn is entitled to the monetary awards granted by the labor arbiter."6 After reviewing petitioner's Memorandum, we find that we are specifically being asked to determine 1) whether the labor arbiter and the NLRC had jurisdiction over petitioner's action, and 2) whether the monetary award granted by the labor arbiter has already reached finality.

The Court's Ruling

The Petition has no merit.

First Jurisdiction over the Action

Issue:

Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of private respondents -- as employers of her husband (Captain Tolosa) -- to provide him with timely, adequate and competent medical services under Article 161 of the Labor Code: "ART 161. Assistance of employer. -- It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency." Likewise, she contends that Article 217 (a) (4)7 of the Labor Code vests labor arbiters and the NLRC with jurisdiction to award all kinds of damages in cases arising from employer-employee relations. Petitioner also alleges that the "reasonable causal connection" rule should be applied in her favor. Citing San Miguel Corporation v. Etcuban,8 she insists that a reasonable causal connection between the claim asserted and the employer-employee relation confers jurisdiction upon labor tribunals. She adds that she has satisfied the required conditions: 1) the dispute arose from an employer-employee relation, considering that the claim was for damages based on the failure of private respondents to comply with their obligation under Article 161 of the Labor Code; and 2) the dispute can be resolved by reference to the Labor Code, because the material issue is whether private respondents complied with their legal obligation to provide timely, adequate and competent medical services to guarantee Captain Tolosa's occupational safety.9 We disagree. We affirm the CA's ruling that the NLRC and the labor arbiter had no jurisdiction over petitioner's claim for damages, because that ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.10 Time and time again, we have held that the allegations in the complaint determine the nature of the action and, consequently, the jurisdiction of the courts.11 After carefully examining the complaint/position paper of petitioner, we are convinced that the allegations therein are in the nature of an action based on a quasi delict or tort. It is evident that she sued Pedro Garate and Mario Asis for gross negligence. Petitioner's complaint/position paper refers to and extensively discusses the negligent acts of shipmates Garate and Asis, who had no employer-employee relation with Captain Tolosa. Specifically, the paper alleges the following tortious acts: "x x x [R]espondent Asis was the medical officer of the Vessel, who failed to regularly monitor Capt. Tolosa's condition, and who needed the USCG to prod him to take the latter's vital signs. In fact, he failed to keep a medical record, like a patient's card or folder, of Capt. Tolosa's illness."12 "Respondents, however, failed Capt. Tolosa because Garate never initiated actions to save him. x x x In fact, Garate rarely checked personally on Capt. Tolosa's condition, to wit:"13 "x x x Noticeably, the History (Annex "D") fails to mention any instance when Garate consulted the other officers, much less Capt. Tolosa, regarding the possibility of deviation. To save Capt. Tolosa's life was surely a just cause for the change in course, which the other officers would have concurred in had they been consulted by respondent Garate which he grossly neglected to do. "Garate's poor judgement, since he was the officer effectively in command of the vessel, prevented him from undertaking these emergency measures, the neglect of which resulted in Capt. Tolosa's untimely demise."14

The labor arbiter himself classified petitioner's case as "a complaint for damages, blacklisting and watchlisting (pending inquiry) for gross negligence resulting in the death of complainant's husband, Capt. Virgilio Tolosa."15 We stress that the case does not involve the adjudication of a labor dispute, but the recovery of damages based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from employer-employee relations, as we ruled in Georg Grotjahn GMBH & Co. v. Isnani:16 "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."17 The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner. From her paper, it is evident that the primary reliefs she seeks are as follows: (a) loss of earning capacity denominated therein as "actual damages" or "lost income" and (b) blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his earning capacity based on a life expectancy of 65 years. This amount is recoverable if the action is based on a quasi delict as provided for in Article 2206 of the Civil Code,18 but not in the Labor Code. While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by labor laws, but also damages governed by the Civil Code,19 these reliefs must still he based on an action that has a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining agreements.20 The central issue is determined essentially from the relief sought in the complaint. In San Miguel Corporation v. NLRC,21 this Court held: "It is the character of the principal relief sought that appears essential in this connection. Where suchprincipal 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."22 The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa, who died at age 58, could expect to live up to 65 years and to have an earning capacity of US$176,400. It must be noted that a worker's loss of earning capacity and blacklisting are not to be equated with wages, overtime compensation or separation pay, and other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi delict or a similar cause within the realm of civil law. "Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with any of the claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is such a connection with the other claims can the claim for damages be considered as arising from employer-employee relations."23 In the present case, petitioner's claim for damages is not related to any other claim under Article 217, other labor statutes, or collective bargaining agreements.

Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief. This provision is only a safety and health standard under Book IV of the same Code. The enforcement of this labor standard rests with the labor secretary.24 Thus, claims for an employer's violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor standard provided for in Article 161 by suing for damages before the labor arbiter. It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the employer-employee relation is merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort.25 Since petitioner's claim for damages is predicated on a quasi delict or tort that has no reasonable causal connection with any of the claims provided for in Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts26 -- not with the NLRC or the labor arbiters.

Second Issue: Finality of the Monetary Award

Petitioner contends that the labor arbiter's monetary award has already reached finality, since private respondents were not able to file a timely appeal before the NLRC. This argument cannot be passed upon in this appeal, because it was not raised in the tribunals a quo. Well-settled is the rule that issues not raised below cannot be raised for the first time on appeal. Thus, points of law, theories, and arguments not brought to the attention of the Court of Appeals need not -- and ordinarily will not -- be considered by this Court.27 Petitioner's allegation cannot be accepted by this Court on its face; to do so would be tantamount to a denial of respondents' right to due process.28 Furthermore, whether respondents were able to appeal on time is a question of fact that cannot be entertained in a petition for review under Rule 45 of the Rules of Court. In general, the jurisdiction of this Court in cases brought before it from the Court of Appeals is limited to a review of errors of law allegedly committed by the court a quo.29 WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. SO ORDERED.

Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

PASTOR DIONISIO V. AUSTRIA vs. HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR,

WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA G.R. No. 124382 KAPUNAN, J.: Subject of 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 vs. 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.1wphi1.nt 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 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 latter's motor vehicle which he failed to pay to Diamada.5 Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the latter harbored August 16, 1999

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 (Pador you are talking tough)."6 Irked by such remark, petitioner returned to the office of Pastor Buhat, and tried to overturn the latter's table, though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attach 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 dismissal 10 citing 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 employer's 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 P 21,060.00 B. Allowance P 4,770.83 C. Service Incentive Leave Pay P 3,461.85 D. Moral Damages P 50,000.00

E. Exemplary Damages P 25,000.00 F. Attorney's Fee P 22,012.27 SO ORDERED.12 The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor 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: 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 an 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 from 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 Labor Arbiter and the NLRC have no jurisdiction to the matter at bar allegedly involves the discipline purely ecclesiastical affair to which the State has no doctrine of separation of church and state, the entertain the complaint filed by petitioner. Since of a religious minister, it is to be considered a 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 Ceasar's and unto God the things that are God's."19 While the state is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters.20 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 of 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.21 Based on this definition, an ecclesiastical affair involves the 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 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 ex-communicated 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 petitioner's 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 employer's duly authorized 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 petitioner's 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 petitioner's letter of termination. As aptly stated by the OSG, this again is an eloquent admission by private respondents that NLRC has 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 worker's 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: Sec. 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 war 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 body's 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. 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 comfortable to the evidentiary facts. 27 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 petitioner's evidence but must stand on the merits of their own defense.

The issue being the legality of petitioner's 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 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 employer's 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 Noncompliance therewith is fatal because these requirements are conditions sine quanon before dismissal may be validly effected.35 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 petitioner's impending termination was 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 employer's 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 employer's 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 employer's 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.42 Though private respondents were able to establish that petitioner collected and received tithes and donations several times, they were notable 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 employer's duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioner's 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 attach 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 employer's representatives was never really established or proven by private respondents. Hence, there is no basis for the allegation that petitioner's act constituted serious misconduct or that the same was an offense against the person of the employer's duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While the Constitution does condone wrongdoing by the employee, it nevertheless 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 require 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. Petitioner's rise from the ranks disclose that he was actually a hard-worker. Private respondents' evidence,47 which consisted of petitioner's Worker's 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.46 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.1wphi1.nt SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.

TERESITA MONTOYA vs. TERESITA ESCAYO, JOY ESCAYO, AIDA GANANCIAL, MARY ANN CAPE, CECILIA CORREJADO, ERLINDA PAYPON and ROSALIE VERDE, AND NATIONAL LABOR RELATIONS COMMISSION

G.R. No. 82211-12 March 21, 1989 SARMIENTO, J.: This petition for certiorari seeks the annullment and setting aside of the resolution 1 9dated August 20, 1987 of the National Labor Relations Commission (NLRC), Third Division, which reversed and set aside the order dated September 27, 1985 of Labor Arbiter Ethelwoldo R. Ovejera of the NLRC's Regional Arbitration Branch No. VI, Bacolod City, dismissing the complaint filed by the private respondents against the petitioner. This petition raises a singular issue, i.e., the applicability of Presidential Decree (P.D.) No. 1508, more commonly known as the Katarungang Pambarangay Law, to labor disputes. The chronology of events leading to the present controversy is as follows: The private respondents were all formerly employed as salesgirls in the petitioner's store, the "Terry's Dry Goods Store," in Bacolod City. On different dates, they separately filed complaints for the collection of sums of money against the petitioner for alleged unpaid overtime pay, holiday pay, 13th month pay, ECOLA, and service leave pay: for violation of the minimum wage law, illegal dismissal, and attorney's fees. The complaints, which were originally treated as separate cases, were subsequently consolidated on account of the similarity in their nature. On August 1, 1984, the petitioner-employer moved (Annex "C" of Petition) for the dismissal of the complaints, claiming that among others, the private respondents failed to refer the dispute to the Lupong Tagapayapa for possible settlement and to secure the certification required from the Lupon Chairman prior to the filing of the cases with the Labor Arbiter. These actions were allegedly violative of the provisions of P.D. No. 1508, which apply to the parties who are all residents of Bacolod City. Acting favorably on the petitioner's motion, Labor Arbiter Ethelwoldo R. Ovejera, on September 27, 1985, ordered the dismissal of the complaints. The private respondents sought the reversal of the Labor Arbiter's order before the respondent NLRC. On August 20, 1987, the public respondent rendered the assailed resolution reversing the order of Ovejera, and remanded the case to the Labor Arbiter for further proceedings. A motion for reconsideration was filed by the petitioner but this was denied for lack of merit on October 28, 1987. Hence, this petition. It is the petitioner's contention that the provisions of the Katarungang Pambarangay Law (P.D. No. 1508) relative to the prior amicable settlement proceedings before the Lupong Tagapayapa as a jurisdictional requirement at the trial level apply to labor cases. More particularly, the petitioner insists that the failure of the private respondents to first submit their complaints for possible conciliation and amicable settlement in the proper barangay court in Bacolod City and to secure a certification from the Lupon Chairman prior to their filing with the Labor Arbiter, divests the Labor Arbiter, as well as the respondent Commission itself, of jurisdiction over these labor controversies and renders their judgments thereon null and void. On the other hand, the Solicitor General, as counsel for the public respondent NLRC, in his comment, strongly argues and convincingly against the applicability of P.D. No. 1508 to labor cases. We dismiss the petition for lack of merit, there being no satisfactory showing of any grave abuse of discretion committed by the public respondent.

The provisions of P.D. No. 1508 requiring the submission of disputes before the barangay Lupong Tagapayapa prior to their filing with the court or other government offices are not applicable to labor cases. For a better understanding of the issue in this case, the provisions of P.D. No. 1508 invoked by the petitioner are quoted: SEC. 6. Conciliation pre-condition to filing of complaint. No complaint, petition, action or proceeding involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or instituted in court or any other government office for adjudication unless there has been a confrontation of the parties before the Lupon Chairman or the Pangkat and no conciliation or settlement has been reached as certified by the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or unless the settlement has been repudiated. However, the parties may go directly to court in the following cases: (1) Where the accused is under detention; (2) Where a person has otherwise been deprived of per sonal liberty calling for habeas corpus proceedings; (3) Actions coupled with provisional remedies such as preliminary injunction, attachment, delivery of personal property and support pendente lite; and (4) Where the action may otherwise be barred by the Statute of Limitations. As correctly pointed out by the Solicitor General in his comment to the petition, even from the three "WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the decree's intended applicability only to courts of justice, and not to labor relations commissions or labor arbitrators' offices. The express reference to "judicial resources", to "courts of justice", "court dockets", or simply to "courts" are significant. On the other band, there is no mention at all of labor relations or controversies and labor arbiters or commissions in the clauses involved. These "WHEREAS" clauses state: WHEREAS, the perpetuation and official recognition of the time-honored tradition of amicably settling disputes among family and barangay members at the barangay level without judicial resourceswould promote the speedy administration of justice and implement the constitutional mandate to preserve and develop Filipino culture and to strengthen the family as a basic social institution; WHEREAS, the indiscriminate filing of cases in the courts of justice contributes heavily and unjustifiably to the congestion of court dockets, thus causing a deterioration in the quality of justice; WHEREAS, in order to help relieve the courts of such docket congestion and thereby enhance the quality of Justice dispensed by the courts, it is deemed desirable to formally organize and institutionalize a system of amicably settling disputes at the barangay level; (Emphasis supplied.) In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105, both issued on November 12, 1979 by the former President in connection with the implementation of the Katarungang Pambarangay Law, affirm this conclusion. These Letters were addressed only to the following officials: all judges of the Courts of first Instance, Circuit Criminal Courts, Juvenile and

Domestic Relations Courts, Courts of Agrarian Relations, City Courts and Municipal Courts, and all

Fiscals and other Prosecuting Officers. These presidential issuances make clear that the only official

directed to oversee the implementation of the provisions of the Katarungang Pambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then Minister of Local Governments and Community Development, and the Chief Justice of the Supreme Court. If the contention of the petitioner were correct, the then Minister (now Secretary) of Labor and Employment would have been included in the list, and the two presidential issuances also would have been addressed to the labor relations officers, labor arbiters, and the members of the National Labor Relations Commission. Expressio

unius est exclusio alterius.

Nor can we accept the petitioner's contention that the "other government office" referred to in Section 6 of P.D. No. 1508 includes the Office of the Labor Arbiter and the Med-Arbiter. The declared concern of the Katarungan Pambarangay Law is "to help relieve the courts of such docket congestion and thereby enhance the quality of justice dispensed by the courts." Thus, the" other government office" mentioned in Section 6 of P.D. No. 1508 refers only to such offices as the Fiscal's Office or, in localities where there is no fiscal, the Municipal Trial Courts, where complaints for crimes (such as those punishable by imprisonment of not more than 30 days or a, fine of not more than P 200.00) falling under the jurisdiction of the barangay court but which are not amicably settled, are subsequently filed for proper disposition. But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the contrary notwithstanding, all doubts on this score are dispelled by The Labor Code Of The Philippines (Presidential Decree No. 442, as amended) itself. Article 226 thereof grants original and exclusive jurisdiction over the conciliation and mediation of disputes, grievances, or problems in the regional offices of the Department of Labor and Employ- ment. It is the said Bureau and its divisions, and not the barangay Lupong Tagapayapa, which are vested by law with originaland exclusive authority to conduct conciliation and mediation proceedings on labor controversies before their endorsement to the appropriate Labor Arbiter for adjudication. Article 226, previously adverted to is clear on this regard. It provides: ART. 226. Bureau of Labor Relations.- The Bureau of Labor Relations and the Labor relations divisions in the regional officer of the Department of Labor shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all workplaces whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary arbitration. The Bureau shall have fifteen (15) working days to act on all labor cases, subject to extension by agreement of the parties, after which the Bureau shall certify the cases to the appropriate Labor Arbiters. The 15-working day deadline, however, shall not apply to cases involving deadlocks in collective bargaining which the Bureau shall certify to the appropriate Labor Arbiters only after all possibilities of voluntary settlement shall have been tried. Requiring conciliation of labor disputes before the barangay courts would defeat the very salutary purposes of the law. Instead of simplifying labor proceedings designed at expeditious settlement or referral to the proper court or office to decide it finally, the position taken by the petitioner would only duplicate the conciliation proceedings and unduly delay the disposition of the labor case. The fallacy of the petitioner's submission can readily be seen by following it to its logical conclusion. For then, if the procedure suggested is complied with, the private respondent would have to lodge first

their complaint with the barangay court, and then if not settled there, they would have to go to the labor relations division at the Regional Office of Region VI of the Department of Labor and Employment, in Bacolod City, for another round of conciliation proceedings. Failing there, their long travail would continue to the Office of the Labor Arbiter, then to the NLRC, and finally to us. This suggested procedure would destroy the salutary purposes of P.D. 1508 and of The Labor Code Of The Philippines. And labor would then be given another unnecessary obstacle to hurdle. We reject the petitioner's submission. It does violence to the constitutionally mandated policy of the State to afford full protection to labor. 2 Finally, it is already well-settled that the ordinary rules on procedure are merely suppletory in character vis-a-vis labor disputes which are primarily governed by labor laws. 3 And "(A)ll doubts in the implementation and interpretation of this Code (Labor), including its implementing rules and regulations, shall be resolved in favor of labor. 4 WHEREFORE, the petition is DISMISSED. Costs against the petitioner. SO ORDERED.

JUANITO A. GARCIA and ALBERTO J. DUMAGO vs. PHILIPPINE AIRLINES, INC G.R. No. 164856 January 20, 2009

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004 Resolution of the Court of Appeals1 in CA-G.R. SP No. 69540 which granted the petition for certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners Motion for Reconsideration, respectively. The dispositive portion of the assailed Decision reads: WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE. SO ORDERED.2 The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners3 after they were allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL Technical Centers Toolroom Section on July 24, 1995. After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of Discipline,4prompting them to file a complaint for illegal dismissal and damages which was, by Decision of January 11, 1999,5 resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the decision. Prior to the promulgation of the Labor Arbiters decision, the Securities and Exchange Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial

losses, under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999. From the Labor Arbiters decision, respondent appealed to the NLRC which, by Resolution of January 31, 2000, reversed said decision and dismissed petitioners complaint for lack of merit.6 Petitioners Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of Judgment was issued on July 13, 2000.7 Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting the reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners moved to release the garnished amount. In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action. Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiters decision (the first ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides a reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second ground). By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively reinstated the NLRC Resolutions insofar as it suspended the proceedings, viz: Since petitioners claim against PAL is a money claim for their wages during the pendency of PALs appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners case for illegal dismissal and should instead have directed them to lodge their claim before PALs receiver. However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar circumstances of the case that their dismissal was eventually held valid with only the matter of reinstatement pending appeal being the issue this Court deems it legally expedient to suspend the proceedings in this case. WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs. SO ORDERED.8 (Italics in the original; underscoring supplied) By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by Order of September 28, 2007, granted its request to exit from rehabilitation proceedings.9

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining issue for consideration, which is whether petitioners may collect their wages during the period between the Labor Arbiters order of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiters decision. On this score, the Courts attention is drawn to seemingly divergent decisions concerning reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora,10 while on the other is the recent case of Genuino v. National Labor Relations Commission.11 At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which reads: 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, 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. (Emphasis and underscoring supplied) The view as maintained in a number of cases is that: x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period.12 (Emphasis in the original; italics and underscoring supplied) In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply therewith.13 The opposite view is articulated in Genuino which states: If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision.14 (Emphasis, italics and underscoring supplied) It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to be valid, and to do so would constitute unjust enrichment. Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases,15 the Court did not order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of the reinstatement order. The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale of reinstatement pending appeal. x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man. xxxx These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability. xxxx x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal. xxxx x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family.16 The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory precepts portray the otherwise "unjust" situation as a condition affording full protection to labor. Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon. Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiters decision ordering reinstatement, the employe r gets back the same amount without having to spend ordinarily for bond premiums. This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not stay the execution for reinstatement."17 In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis--vis the effect of a reversal on appeal. Respondent insists that with the reversal of the Labor Arbiters Decision, there is no more basis to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the present case, the writ of execution therein was secured prior to the reversal of the Labor Arbiters decision. The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there without considering the cause of the delay. Second, it requires the issuance of a writ of execution despite the immediately executory nature of the reinstatement aspect of the decision. In Pioneer Texturing Corp. v. NLRC,18which was cited in Panuncillo v. CAP Philippines, Inc.,19 the Court observed: x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under

Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic exercise. x x x20 (Italics in the original; emphasis and underscoring supplied) The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. 21 It settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employees salaries.22

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by the appellate court in the assailed issuances. The Court sustains the appellate courts finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for respondent to exercise its option under the circumstances. The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution needs no further elaboration. Reinstatement pending appeal necessitates its immediate execution during the pendency of the appeal, if the law is to serve its noble purpose. At the same time, any attempt on the part of the employer to evade or delay its execution, as observed in Panuncillo and as what actually transpired in Kimberly,23 Composite,24 Air Philippines,25 and Roquero,26 should not be countenanced. After the labor arbiters decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer. The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employers unjustified act or omission. If the delay is due to the employers unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiters decision. In Genuino, there was no showing that the employer refused to reinstate the employee, who was the Treasury Sales Division Head, during the short span of four months or from the promulgation on May 2, 1994 of the Labor Arbiters Decision up to the promulgation on September 3, 1994 of the NLRC Decision. Notably, the former NLRC Rules of Procedure did not lay down a mechanism to promptly effectuate the self-executory order of reinstatement, making it difficult to establish that the employer actually refused to comply. In a situation like that in International Container Terminal Services, Inc. v. NLRC27 where it was alleged that the employer was willing to comply with the order and that the employee opted not to pursue the execution of the order, the Court upheld the self-executory nature of the reinstatement order and ruled that the salary automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later discovered that the employee indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that

scenario where the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed to act upon the employees motion for the issuance of a writ of execution may no longer adversely affect the cause of the dismissed employee in view of the self-executory nature of the order of reinstatement.28 The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to submit a report of compliance within 10 calendar days from receipt of the Labor Arbiters decision,29 disobedience to which clearly denotes a refusal to reinstate. The employee need not file a motion for the issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is hardly any difficulty in determining the employers intransigence in immediately complying with the order. In the case at bar, petitioners exerted efforts30 to execute the Labor Arbiters order of reinstatement until they were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the NLRC of the Labor Arbiters decision. Technically, there was still actual delay which brings to the question of whether the delay was due to respondents unjustified act or omission. It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was justified depends on the onset of the exigency of corporate rehabilitation. It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended.31 As stated early on, during the pendency of petitioners complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver. Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is ministerial and mandatory.32 This injunction or suspension of claims by legislative fiat33 partakes of the nature of a restraining order that constitutes a legal justification for respondents non-compliance with the reinstatement order. Respondents failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondents obligation to pay the salaries pending appeal, as the normal effect of the non exercise of the options, did not attach. While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to survive. The parallelism between a judicial order of corporation rehabilitation as a justification for the nonexercise of its options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was judicially predetermined by a competent court and not formulated for the first time in this case by respondent. More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation. Respondent was, during the period material to the case, effectively deprived of the

alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to optimize the utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver may decide otherwise, not to mention the subsistence of the injunction on claims. In sum, the obligation to pay the employees salaries upon the employers failure to exercise the alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of corporate rehabilitation. WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and the Notice of Garnishment are concerned, the Court finds no reversible error. SO ORDERED. PIONEER TEXTURIZING CORP. and/or JULIANO LIM vs. NLRC, PIONEER TEXTURIZING WORKERS UNION and LOURDES A. DE JESUS G.R. No. 118651 October 16, 1997 FRANCISCO, J.: The facts are as follows: Private respondent Lourdes A. de Jesus is petitioners' reviser/trimmer since 1980. As reviser/trimmer, de Jesus based her assigned work on a paper note posted by petitioners. The posted paper which contains the corresponding price for the work to be accomplished by a worker is identified by its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853 by trimming the cloths' ribs. She thereafter submitted tickets corresponding to the work done to her supervisor. Three days later, de Jesus received from petitioners' personnel manager a memorandum requiring her to explain why no disciplinary action should be taken against her for dishonesty and tampering of official records and documents with the intention of cheating as P.O. No. 3853 allegedly required no trimming. The memorandum also placed her under preventive suspension for thirty days starting from August 19, 1992. In her handwritten explanation, de Jesus maintained that she merely committed a mistake in trimming P.O. No. 3853 as it has the same style and design as P.O. No. 3824 which has an attached price list for trimming the ribs and admitted that she may have been negligent in presuming that the same work was to be done with P.O. No. 3853, but not for dishonesty or tampering. Petitioners' personnel department, nonetheless, terminated her from employment and sent her a notice of termination dated September 18, 1992. On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The Labor Arbiter who heard the case noted that de Jesus was amply accorded procedural due process in her termination from service. Nevertheless, after observing that de Jesus made some further trimming on P.O. No. 3853 and that her dismissal was not justified, the Labor Arbiter held petitioners guilty of illegal dismissal. Petitioners were accordingly ordered to reinstate de Jesus to her previous position without loss of seniority rights and with full backwages from the time of her suspension on August 19, 1992. Dissatisfied with the Labor Arbiter's decision, petitioners appealed to public respondent National Labor Relations Commission (NLRC). In its July 21, 1994 decision, the NLRC 1 ruled that de

Jesus was negligent in presuming that the ribs of P.O. No. 3853 should likewise be trimmed for having the same style and design as P.O. No. 3824, thus petitioners cannot be entirely faulted for dismissing de Jesus. The NLRC declared that the status quo between them should be maintained and affirmed the Labor Arbiter's order of reinstatement, but without backwages. The NLRC further "directed petitioner to pay de Jesus her back salaries from the date she filed her motion for execution on September 21, 1993 up to the date of the promulgation of [the] decision." 2 Petitioners filed their partial motion for reconsideration which the NLRC denied, hence this petition anchored substantially on the alleged NLRC's error in holding that de Jesus is entitled to reinstatement and back salaries. On March 6, 1996, petitioners filed its supplement to the petition amplifying further their arguments. In a resolution dated February 20, 1995, the Court required respondents to comment thereon. Private respondent de Jesus and the Office of the Solicitor General, in behalf of public respondent NLRC, subsequently filed their comments. Thereafter, petitioners filed two rejoinders [should be replies] to respondents' respective comments. Respondents in due time filed their rejoinders. There are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegally dismissed, and (2) whether or not an order for reinstatement needs a writ of execution. Petitioners insist that the NLRC gravely abused its discretion in holding that de Jesus is entitled to reinstatement to her previous position for she was not illegally dismissed in the first place. In support thereof, petitioners quote portions of the NLRC decision which stated that "respondents [petitioners herein] cannot be entirely faulted for dismissing the complainant" 3 and that there was "no illegal dismissal to speak of in the case at bar". 4 Petitioners further add that de Jesus breached the trust reposed in her, hence her dismissal from service is proper on the basis of loss of confidence, citing as authority the cases of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola Bottlers Phil., Inc. v. NLRC, 172 SCRA 751, and Piedad v. Lanao del Norte Electric Cooperative, 5 154 SCRA 500. The arguments lack merit. The entire paragraph which comprises the gist of the NLRC's decision from where petitioners derived and isolated the aforequoted portions of the NLRC's observation reads in full as follows: We cannot fully subscribe to the complainant's claim that she trimmed the ribs of PO3853 in the light of the sworn statement of her supervisor Rebecca Madarcos (Rollo, p. 64) that no trimming was necessary because the ribs were already of the proper length. The complainant herself admitted in her sinumpaang salaysay (Rollo, p. 45) that "Aking napansin na hindi pantay-pantay ang lapad ng mga ribs PO3853 mas maigsi ang nagupit ko sa mga ribs ng PO3853 kaysa sa mga ribs ng mga nakaraang PO's. The complainant being an experienced reviser/trimmer for almost twelve (12) years should have called the attention of her supervisor regarding her observation of PO3853. It should be noted that complainant was trying to claim as production output 447 pieces of trimmed ribs of PO3853 which respondents insists that complainant did not do any. She was therefore negligent in presuming that the ribs of PO3853 should likewise be trimmed for having the same style and design as PO3824. Complainant cannot pass on the blame to her supervisor whom she claimed checked the said tickets prior to the submission to the Accounting Department. As explained by respondent, what the supervisor does is merely not the submission of tickets and do some checking before forwarding the same to the Accounting Department. It was never disputed that it is the Accounting Department who does the detailed checking and computation of the tickets as has been the company policy and practice. Based on the foregoing and considering that respondent cannot be entirely faulted for dismissing complainant as the complainant herself

was also negligent in the performance of her job, We hereby rule that status quo between them should be maintained as a matter of course. We thus affirm the decision of Labor Arbiter reinstating the complainant but without backwages. The award of backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. (Indophil Acrylic Mfg. Corporation vs. NLRC, G.R. No. 96488 September 27, 1993) There being no illegal dismissal to speak in the case at bar, the award for backwages should necessarily be deleted. 6 We note that the NLRC's decision is quite categorical in finding that de Jesus was merely negligent in the performance of her duty. Such negligence, the Labor Arbiter delineated, was brought about by the petitioners' plain improvidence. Thus: After careful assessment of the allegations and documents available on record, we are convinced that the penalty of dismissal was not justified. At the outset, it is remarkable that respondents did not deny nor dispute that P.O. 3853 has the same style and design as P.O. 3824; that P.O. 3824 was made as guide for the work done on P.O. 3853; and, most importantly, that the notation correction on P.O. 3824 was made only after the error was discovered by respondents' Accounting Department. Be that as it may, the factual issue in this case is whether or not complainant trimmed the ribs of P.O. 3853? Respondents maintained that she did not because the record in Accounting Department allegedly indicates that no trimming is to be done on P.O. 3853. Basically, this allegation is unsubstantiated. It must be emphasized that in termination cases the burden of proof rests upon the employer. In the instant case, respondents' mere allegation that P.O. 3853 need not be trimmed does not satisfy the proof required to warrant complainant's dismissal. Now, granting that the Accounting record is correct, we still believe that complainant did some further trimming on P.O. 3853 based on the following grounds: Firstly, Supervisor Rebecca Madarcos who ought to know the work to be performed because she was in-charged of assigning jobs, reported no anomally when the tickets were submitted to her. Incidentally, supervisor Madarcos testimony is suspect because if she could recall what she ordered the complainant to do seven (7) months ago (to revise the collars and plackets of shirts) there was no reason for her not to detect the alleged tampering at the time complainant submitted her tickets, after all, that was part of her job, if not her main job. Secondly, she did not exceed her quota, otherwise she could have simply asked for more. That her output was remarkably big granting it is true, is well explained in that the parts she had trimmed were lesser compared to those which she had cut before. In this connection, respondents misinterpreted the handwritten explanation of the complainant dated 20 August 1992, because the letter never admits that she never trimmed P.O. 3853, on the contrary the following sentence, Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis na pala ang presyo ng Sec. 9 P.O. 3853 na ito. is crystal clear that she did trim the ribs on P.O. 3853. 7

Gleaned either from the Labor Arbiter's observations or from the NLRC's assessment, it distinctly appears that petitioners' accusation of dishonesty and tampering of official records and documents with intention of cheating against de Jesus was not substantiated by clear and convincing evidence. Petitioners simply failed, both before the Labor Arbiter and the NLRC, to discharge the burden of proof and to validly justify de Jesus' dismissal from service. The law, in this light, directs the employers, such as herein petitioners, not to terminate the services of an employee except for a just or authorized cause under the Labor Code. 8 Lack of a just cause in the dismissal from service of an employee, as in this case, renders the dismissal illegal, despite the employer's observance of procedural due process. 9 And while the NLRC stated that "there was no illegal dismissal to speak of in the case at bar" and that petitioners cannot be entirely faulted therefor, said statements are inordinate pronouncements which did not remove the assailed dismissal from the realm of illegality. Neither can these pronouncements preclude us from holding otherwise. We also find the imposition of the extreme penalty of dismissal against de Jesus as certainly harsh and grossly disproportionate to the negligence committed, especially where said employee holds a faithful and an untarnished twelve-year service record. While an employer has the inherent right to discipline its employees, we have always held that this right must always be exercised humanely, and the penalty it must impose should be commensurate to the offense involved and to the degree of its infraction. 10 The employer should bear in mind that, in the exercise of such right, what is at stake is not only the employee's position but her livelihood as well. Equally unmeritorious is petitioners' assertion that the dismissal is justified on the basis of loss of confidence. While loss of confidence, as correctly argued by petitioners, is one of the valid grounds for termination of employment, the same, however, cannot be used as a pretext to vindicate each and every instance of unwarranted dismissal. To be a valid ground, it must be shown that the employee concerned is responsible for the misconduct or infraction and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position. 11 In this case, petitioners were unsuccessful in establishing their accusations of dishonesty and tampering of records with intention of cheating. Indeed, even if petitioners' allegations against de Jesus were true, they just the same failed to prove that her position needs the continued and unceasing trust of her employers. The breach of trust must be related to the performance of the employee's functions. 12 Surely, de Jesus who occupies the position of a reviser/trimmer does not require the petitioners' perpetual and full confidence. In this regard, petitioners' reliance on the cases of Ocean Terminal Services, Inc. v. NLRC; Coca-Cola Bottlers Phil.,Inc. v. NLRC; and Piedad v. Lanao del Norte Electric Cooperative, which when perused involve positions that require the employers' full trust and confidence, is wholly misplaced. In Ocean Terminal Services, for instance, the dismissed employee was designated as expediter and canvasser whose responsibility is mainly to make emergency procurements of tools and equipments and was entrusted with the necessary cash for buying them. The case of Coca-Cola Bottlers, on the other hand, involves a sales agent whose job exposes him to the everyday financial transactions involving the employer's goods and funds, while that of Piedad concerns a bill collector who essentially handles the employer's cash collections. Undoubtedly, the position of a reviser/trimmer could not be equated with that of a canvasser, sales agent, or a bill collector. Besides, the involved employees in the three aforementioned cases were clearly proven guilty of infractions unlike private respondent in the case at bar. Thus, petitioners dependence on these cited cases is inaccurate, to say the least. More, whether or not de Jesus meets the day's quota of work she, just the same, is paid the daily minimum wage. 13

Corollary to our determination that de Jesus was illegally dismissed is her imperative entitlement to reinstatement and backwages as mandated by 14 law. Whence, we move to the second issue, i.e., whether or not an order for reinstatement needs a writ of execution. Petitioners' theory is that an order for reinstatement is not self-executory. They stress that there must be a writ of execution which may be issued by the NLRC or by the Labor Arbiter motu proprio or on motion of an interested party. They further maintain that even if a writ of execution was issued, a timely appeal coupled by the posting of appropriate supersedeas bond, which they did in this case, effectively forestalled and stayed execution of the reinstatement order of the Labor Arbiter. As supporting authority, petitioners emphatically cite and bank on the case of Maranaw Hotel Resort Corporation (Century Park Sheraton Manila) v. NLRC, 238 SCRA 190. Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her immediately after the decision of the Labor Arbiter ordering her reinstatement was promulgated since the law mandates that an order for reinstatement is immediately executory. An appeal, she says, could not stay the execution of a reinstatement order for she could either be admitted back to work or merely reinstated in the payroll without need of a writ of execution. De Jesus argues that a writ of execution is necessary only for the enforcement of decisions, orders, or awards which have acquired finality. In effect, de Jesus is urging the Court to re-examine the ruling laid down in Maranaw. Article 223 of the Labor Code, as amended by R.A. No. 6715 which took effect on March 21, 1989, pertinently provides: Art. 223. Appeal. Decision, 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: xxx xxx xxx 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. xxx xxx xxx We initially interpreted the aforequoted provision in Inciong v. NLRC. 15 The Court 16 made this brief comment: The decision of the Labor Arbiter in this case was rendered on December 18, 1988, or three (3) months before Article 223 of the Labor Code was amended by Republic Act 6715 (which became law on March 21, 1989), providing that a decision of the Labor Arbiter ordering the reinstatement of a dismissed or separated employee shall be immediately executory insofar as the reinstatement aspect is concerned, and the posting of an appeal bond by the employer shall not stay such execution. Since this new law contains no provision giving it retroactive effect (Art. 4, Civil Code), the amendment may not be applied to this case. which the Court adopted and applied in Callanta v. NLRC. 17 In Zamboanga City Water District v. Buat, 18 the Court construed Article 223 to mean exactly what it says. We said:

Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or separated employee insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The employer shall reinstate the employee concerned either by: (a) actually admitting him back to work under the same terms and conditions prevailing prior to his dismissal or separation; or (b) at the option of the employer, merely reinstating him in the payroll. Immediate reinstatement is mandated and is not stayed by the fact that the employer has appealed, or has posted a cash or surety bond pending appeal. 19 We expressed a similar view a year earlier in Medina v. Consolidated Broadcasting System (CBS) DZWX 20and laid down the rule that an employer who fails to comply with an order of reinstatement makes him liable for the employee's salaries. Thus: Petitioners construe the above paragraph to mean that the refusal of the employer to reinstate an employee as directed in an executory order of reinstatement would make it liable to pay the latter's salaries. This interpretation is correct. Under Article 223 of the Labor Code, as amended, an employer has two options in order for him to comply with an order of reinstatement, which is immediately executory, even pending appeal. Firstly, he can admit the dismissed employee back to work under the same terms and conditions prevailing prior to his dismissal or separation or to a substantially equivalent position if the former position is already filled up as we have ruled in Union of Supervisors (RB) NATU vs. Sec. of Labor, 128 SCRA 442 [1984]; and Pedroso vs. Castro, 141 SCRA 252 [1986]. Secondly, he can reinstate the employee merely in the payroll. Failing to exercise any of the above options, the employer can be compelled under pain of contempt, to pay instead the salary of the employee. This interpretation is more in consonance with the constitutional protection to labor (Section 3, Art. XIII, 1987 Constitution). The right of a person to his labor is deemed to be property within the meaning of the constitutional guaranty that no one shall be deprived of life, liberty, and property without due process of law. Therefore, he should be protected against any arbitrary and unjust deprivation of his job (Bondoc vs. People's Bank and Trust Co., Inc., 103 SCRA 599 [1981]). The employee should not be left without any remedy in case the employer unreasonably delays reinstatement. Therefore, we hold that the unjustified refusal of the employer to reinstate an illegally dismissed employee entitles the employee to payment of his salaries . . . . 21 The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting the import of Article 223 in Maranaw, the Court 22 declared that the reinstatement aspect of the Labor Arbiter's decision needs a writ of execution as it is not self-executory, a declaration the Court recently reiterated and adopted in Archilles Manufacturing Corp. v. NLRC. 23 We note that prior to the enactment of R.A. No. 6715, Article 223 24 of the Labor Code contains no provision dealing with the reinstatement of an illegally dismissed employee. The amendment introduced by R.A. No. 6715 is an innovation and a far departure from the old law indicating thereby the legislature's unequivocal intent to insert a new rule that will govern the reinstatement aspect of a decision or resolution in any given labor dispute. In fact, the law as now worded employs the phrase "shall immediately be executory" without qualification emphasizing the need for prompt compliance. As a rule, "shall" in a statute commonly denotes an imperative obligation and is inconsistent with the idea of discretion 25 and that the presumption is that the word "shall", when used in a statute, is mandatory. 26 An appeal or posting of bond, by plain mandate of the law, could not even forestall nor stay the executory nature of an order of reinstatement. The law, moreover, is unambiguous and clear. Thus, it must be applied according to its plain and obvious meaning, according to its express terms. In Globe-Mackay Cable and Radio Corporation v. NLRC, 27 we held that:

Under the principles of statutory construction, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain-meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by the use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure. 28 And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3) of the New Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the employer to immediately reinstate the dismissed employee. Thus: In case the decision includes an order of reinstatement, the Labor Arbiter shall direct the employer to immediately reinstate the dismissed or separated employee even pending appeal. The order of reinstatement shall indicate that 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. In declaring that reinstatement order is not self-executory and needs a writ of execution, the Court, in Maranaw, adverted to the rule provided under Article 224. We said: It must be stressed, however, that although the reinstatement aspect of the 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. Article 224 of the Labor Code provides: Art. 224. Execution of decision, orders or awards. (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory . . . (emphasis supplied) The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC also provides: The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of origin shall, motu proprio or on motion of any interested party, issue a writ of execution on a judgment only within five (5) years from the date it becomes final and executory . . . . No motion for execution shall be entertained nor a writ he issued unless the Labor Arbiter is in possession of the records of the case which shall include an entry of judgment. (emphasis supplied) xxx xxx xxx In the absence then of an order for the issuance of a writ of execution on the reinstatement aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to admit back to work the private respondent under the terms and conditions prevailing prior to her dismissal or, at the petitioner's option, to merely reinstate her in the payroll. An option is a right of election to exercise a privilege, and the option in Article 223 of the Labor Code is exclusively granted to the employer. The event that gives rise for its exercise is not the reinstatement decree of a Labor Arbiter, but the writ for its execution commanding the employer to reinstate the employee, while the final act which compels the employer to

exercise the option is the service upon it of the writ of execution when, instead of admitting the employee back to his work, the employer chooses to reinstate the employee in the payroll only. If the employer does not exercise this option, it must forthwith admit the employee back to work, otherwise it may be punished for contempt. 29 A closer examination, however, shows that the necessity for a writ of execution under Article 224 applies only to final and executory decisions which are not within the coverage of Article 223. For comparison, we quote the material portions of the subject articles: Art. 223. Appeal. . . . 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. xxx xxx xxx Art. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu propio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards of the Secretary of Labor and Employment or regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish immediately the counsels of record and the parties with copies of said decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible officer to appropriate administrative sanctions. Article 224 states that the need for a writ of execution applies only within five (5) years from the date a decision, an order or award becomes final and executory. It can not relate to an award or order of reinstatement still to be appealed or pending appeal which Article 223 contemplates. The provision of Article 223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. 30 And where the statute is fairly susceptible of two or more constructions, that construction should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted, and a construction

should be rejected which would tend to render abortive other provisions of the statute and to defeat the object which the legislator sought to attain by its enactment. 31 In introducing a new rule on the reinstatement aspect of a labor decision under R.A. No. 6715, Congress should not be considered to be indulging in mere semantic exercise. On appeal, however, the appellate tribunal concerned may enjoin or suspend the reinstatement order in the exercise of its sound discretion. Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws should be resolved in favor of labor. 32 In ruling that an order or award for reinstatement does not require a writ of execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rule that an award or order for reinstatement is self-executory. 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. In either instance, the employer has to inform the employee of his choice. The notification is based on practical considerations for without notice, the employee has no way of knowing if he has to report for work or not. WHEREFORE, the petition is DENIED and the decision of the Labor Arbiter is hereby REINSTATED. Costs against petitioner. SO ORDERED.

ST. MARTIN FUNERAL HOME vs NLRC and BIENVENIDO ARICAYOS G.R. No. 130866 September 16, 1998 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" 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 employeremployee 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; 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: (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. This, then, brings us to a somewhat perplexing impass, 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 which we reproduce the following excerpts:
19

from

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 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. 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, discussed.

22

inclusive of the dubious formulation on appeals to the Supreme Court earlier

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. 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.

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., ET AL., vs .COURT OF APPEALS, HON. ANGEL V. COLET, MANILA PILOTS ASSOCIATION, ET AL., FRANCISCO, J.: G.R. No. 116910 October 18, 1995

Material hereto are the antecedents mostly taken from the decision of the respondent Court of Appeals in CA-G.R. No. SP 33177, (International Container Terminal Services, Inc., et. al. v. Hon. Angel V. Colet, et. al.), 1subject of the present petition for review, viz: On February 3, 1988, the Philippine Ports Authority issued Administrative Order No. 02-88 (A.O. No. 02-88) entitled "Implementing Guidelines on Open Pilotage Service". A.O. No. 02-88 opened pilotage services in the Philippines to all licensed and accredited harbor pilots regardless of their nonmembership in existing harbor pilots association. 2 The United Harbor Pilots Association of the Philippines, Inc. (hereinafter referred to as "United Harbor" for brevity) and private respondent Manila Pilots Association (hereinafter referred to as "Manila Pilots") 3 made representations with then Acting Secretary of Transportation and Communications, Hon. Rainerio O. Reyes and the Chairman of the Philippine Ports Authority to set aside the implementation of A.O. No. 02-88 claiming that it violated their exclusive right to provide pilotage services in the Philippines. Failing in their efforts to obtain a reconsideration of the said administrative order, "United Harbor" and private respondent "Manila Pilots" sought to invalidate A.O. No. 02-88 by filing with the Regional Trial Court of Manila, a petition for certiorari and prohibition with prayer for a temporary restraining

order against Secretary Reyes, the Philippine Ports Authority, its General Manager, Maximo S. Dumlao, Jr. and certain "John Does" (Civil Case No. 88-44726). On October 26, 1989, the Regional Trial Court rendered its decision in Civil Case No. 88-44726 in favor of "United Harbor" and private respondent "Manila Pilots", the dispositive portion of which reads: WHEREFORE, for all of the foregoing, the petition is hereby granted: 1. Respondents are hereby declared to have acted in excess of jurisdiction and with grave abuse of discretion amounting to lack of jurisdiction in approving Resolution No. 869 and in enacting Administrative Order No. 02-88, the subject of which is "Implementing Guidelines or (sic) Open Pilotage Service; 2. Philippine Ports Authority Administrative Order No. 02-88 is declared null and void; 3. The preliminary injunction issued on September 8, 1989 is made permanent; and 4. Without costs. SO ORDERED.
4

The above decision was appealed to the Court of Appeals via a petition for certiorari and prohibition which was dismissed for lack of jurisdiction, as it raised a purely legal question. 5 The dismissal was appealed to this court by way of a petition for review on certiorari which was denied with finality on June 8, 1992. 6 Notwithstanding the finality of the decision recognizing the exclusive right to pilotage of "United Harbor" and private respondent "Manila Pilots", petitioner "International Container" took over the pilotage services at the Manila International Port area 7 on October 28, 1992 by virtue of a contract it entered into with the Philippine Ports Authority. As a consequence, "United Harbor" and private respondent "Manila Pilots" filed a series of petitions in Civil Case No. 88-44726 to hold then Philippine Ports Authority General Manager Rogelio A. Dayan and "International Container" officials and other persons in contempt of court. The contempt petitions, however, have not been resolved because the Office of the Solicitor General elevated to the Supreme Court (docketed as G.R. 107720) the question of whether or not the lower court still had jurisdiction to take cognizance of the petitions for contempt in view of the finality of the decision in Civil Case No. 88-44726. Pending resolution of the contempt petitions, private respondent "Manila Pilots" filed another case against petitioner "International Container" before Branch 32 of the Regional Trial Court of Manila docketed as Civil Case No. 93-66024 for damages suffered by private respondent "Manila Pilots" between April 19, 1993 and April 29, 1993 as a result of petitioner's usurpation of its sole and exclusive exercise of harbor pilotage in the South and North Harbors of Manila and Limay, Bataan, except the Manila International Port area. 8 Similarly, aggrieved by the unjust actuations of petitioner "International Container", and its continuing refusal to relinquish pilotage services in the Manila International Port area, private respondent "Manila Pilots" instituted a petition for mandamus, prohibition with preliminary mandatory injunction and damages against petitioner "International Container" before Branch 47 of the Regional Trial Court of Manila docketed as Civil Case No. 66143. In an Order dated January 20, 1994, the Regional Trial Court in Civil Case No. 93-66143 issued the writ prayed for, thereby "restoring and reinstating private respondent "Manila Pilots" to the exclusive

exercise of harbor pilotage in the Manila International Port (MIP) area and commanding petitioner "International Container" to cease and desist from usurping or exercising the right to compulsory pilotage in the said Manila International Port (MIP) area." 9 Petitioner "International Container" assailed this order of the lower court by filing a petition for certiorari with respondent court contending, among others, that the filing of Civil Case No. 93-66143, pending:

Contempt petitions incidents of Civil Case No. 88-44726 The contempt petitions filed by "United Harbor" and private respondent
1.) "Manila Pilots" against petitioner "International Container" and Philippine Ports Authority for defying the final judgment in Civil Case No. 88-44726;

2.) G.R. No. 107720 The case filed by the Office of the Solicitor General with the Supreme Court raising the question of jurisdiction of the lower court to take cognizance of the contempt petitions in view of the finality of the decision in Civil Case No. 8844726; and 3.) Civil Case No. 93-66024 The action for damages filed by private respondent "Manila Pilots" against "International Container" to recover unearned income from the exercise of harbor pilotage in ports other than the Manila International Port (MIP) area from April 19, 1993 to April 29, 1993 was violative of the prohibition against forum shopping. 10 Respondent court found no merit in this contention, and affirmed the decision of the lower court. Hence, the main inquiry posed before us: On the basis of the foregoing, is there forum shopping? Petitioner "International Container" contends that there is forum shopping because "[t]he issue on (sic) the contempt petition before Judge Flojo 11 and before this Court and (sic) in G.R. No. 107720 is the very same issue involved in the case for mandamus and prohibition (Civil Case No. 9366143)". 12 It further contends that private respondent "Manila Pilots" is guilty of forum shopping because "[a]t the time the contempt petitions were pending . . . and while these petitions were being challenged . . . (G.R. No. 107720), another case . . . was pending before RTC Manila, docketed as Civil Case No. 13 93-66024 . . ." We are not persuaded. The assailed decision is in accordance with the established rule that for forum shopping to exist, both actions must involve the same transactions, same essential facts and circumstances. 14 Furthermore, the actions must also raise identical causes of action, subject matter, and issues. 15 We find no such similarity in the actions involved. Thus, as correctly observed by the respondent court: The facts which gave rise to the contempt petition is directed against what was perceived to be violative of the permanent injunction issued by Judge Flojo not to implement the open pilotage policy as provided for under PPA Administrative Order No. 02-88, . . . . Upon the other hand the complaint in Civil Case No. 93-68143 (sic) is anchored on the alleged usurpation of the right of respondents on (sic) the sole and exclusive exercise of Harbor Pilotageonly in the MIP area, from October 29, 1992 up to the present and the corresponding claim for damages. 16 (Emphasis provided)

Furthermore, G.R. No. 107720 was filed with the Supreme Court solely to question the jurisdiction of the lower court to take cognizance of the contempt petitions filed in Civil Case No. 88-44726, and the issue raised therein has no bearing on that raised in Civil Case No. 93-66143. On the other hand, Civil Case No. 93-66024 sought the recovery of damages in the form of unearned income as a result of petitioner's usurpation of the right to pilotage of private respondent "Manila Pilots" in the South and North Harbors of Manila and Limay, Bataan except Manila International Port area from April 19, 1993 to April 29, 1993 while Civil Case No. 93-66143 was brought to enjoin petitioner from further usurping the same right of private respondent "Manila Pilots" in the Manila International Port area only from October 28, 1992 up to the present. Clearly, these two cases do not have the same facts nor do they raise identical causes of action. Moreover, "[t]here is forum shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another". 17 Therefore, a party to a case resorts to forum shopping because "[b]y filing another petition involving the same essential facts and circumstances, . . ., respondents approached two different fora in order to increase their chances of obtaining a favorable decision or action". 18 It cannot be said that private respondent "Manila Pilots" sought to increase its chances of obtaining a favorable decision or action as a result of an adverse opinion in one forum, inasmuch as no unfavorable decision had ever been rendered against private respondent "Manila Pilots" in any of the cases brought before the courts below. On the contrary, private respondent "Manila Pilots" was one of the prevailing parties in Civil Case No. 8844726 which established with finality its exclusive right together with "United Harbor" to provide pilotage services in the Philippines even prior to the institution of the other actions (G.R.107720, Civil Case No. 93-66024 and Civil Case No. 93-66143.) ACCORDINGLY, finding no reversible errors, the decision appealed from is hereby AFFIRMED and this petition is DENIED.

Narvasa, C.J., Regalado, Puno and Mendoza, JJ., concur.

EMCO PLYWOOD CORPORATION and JIMMY LIM vs. PERFERIO ABELGAS et al. G.R. No. 148532 April 14, 2004 PANGANIBAN, J.: Not every loss incurred or expected to be incurred by employers can justify retrenchment. They must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert those losses. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the December 21, 2000 Decision2 and the June 20, 2001 Resolution3 of the Court of Appeals4 (CA) in CA-GR SP No. 51967. The assailed Decision disposed as follows:

"WHEREFORE, the petition for certiorari is GRANTED and the challenged Orders of the National Labor Relations Commission are hereby declared NULL and VOID. "Considering that, as borne out of the records, EMCOs attempted retrenchment of the [respondents] was legally ineffective, EMCO is ordered to REINSTATE [respondents] with full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time their compensation was withheld from them up to the time of their actual reinstatement. Where reinstatement is no longer possible because the position they had previously filled are no longer in existence, EMCO shall pay backwages, inclusive of allowances and other benefits, computed from the time their employment was terminated up to the time the decision herein becomes final, and, in lieu of reinstatement, separation pay equivalent to one-months pay for every year of service including the putative period for which backwages are payable. In all these cases, the payments received by [respondents] and for which they executed quitclaims shall be deducted from the backwages and separation pay due to them. Costs against the [petitioners]."5 The assailed Resolution denied petitioners Motion for Partial Reconsideration. The Facts The factual antecedents of the case are summarized by the CA as follows: "[Respondents], the retrenched employees of [petitioner] seek the review and reversal of the resolutions of the National Labor Relations Commission (NLRC), dated February 11, 1997 and March 25, 1997, respectively. "The first resolution dismissed [respondents] appeal for lack of merit and affirmed the decision of the Labor Arbiter, dated July 24, 1996, which, in turn, dismissed [respondents] complaint against EMCO and the latters general manager, [petitioner] Jimmy N. Lim (Lim), for illegal dismissal, damages and attorneys fees. The second resolution assailed by the [respondents] consists of the NLRCs denial of their motion for reconsideration of the earlier mentioned February 11, 1997 resolution. "EMCO is a domestic corporation engaged in the business of wood processing, operating through its sawmill and plymill sections where [respondents] used to be assigned as regular workers. "On January 20, 1993 and of March 2, 1993, EMCO, represented by Lim, informed the Department of Labor and Employment (DOLE) of its intention to retrench some of its workers. The intended retrenchment was grounded on purported financial difficulties occasioned by alleged lack of raw materials, frequent machinery breakdown, low market demand and expiration of permit to operate its sawmill department. A memorandum was thereafter issued by EMCO, addressed to all its foremen, section heads, supervisors and department heads, with the following instructions: 1) Retrench some of your workers based on the following guidelines: a) Old Age (58 years and above except positions that are really skilled); b) Performance (Attitude, Attendance, Quality/ Quantity of Work[)];

2) Schedule the unspent VL/SL of your men without necessary replacements. x x x "Per EMCOs notice to the DOLE, one hundred four (104) workers were proposed for inclusion in its retrenchment program. As it turned out, though, EMCO terminated two hundred fifty (250) workers. Among them were herein [respondents]. "[Respondents] received their separation pay in the amount of four thousand eight hundred fifteen pesos (P4,815.00) each. Deductions were, nevertheless, made by EMCO purportedly for the attorneys fees payable to [respondents] lawyer, for the latters effort in purportedly renegotiating, sometime in 1993, the three peso (P3.00) increase in the wages of [respondents], as now contained in the Collective Bargaining Agreement. "Upon receipt of their separation pay, [respondents] were made to sign quitclaims, which read: TO WHOM IT MAY CONCERN: I, ________________of legal age and a resident of _______________________, for and in consideration of the amount of (P___________), the receipt of which, in full, is hereby acknowledged, forever discharge and release x x x EMCO PLYWOOD CORPORATION and all its officers men agents and corporate assigns from any and all forms of actions/suits, debts, sums of money, unpaid wages, overtime pay allowances, overtime pay or an other liability of any nature by reason of my employment which has ceased by this date. Done this _________________, at Magallanes, Agusan del Norte. "About two (2) years later, [respondents], through their labor union, lodged a compliant against EMCO for illegal dismissal, damages and attorneys fees. "In the main, [respondents] questioned the validity of their retrenchment and the sufficiency of the separation pay received by them. "EMCO countered by interposing the defense of lack of cause of action, contending that [respondents], by signing the quitclaims in favor of EMCO, had, in fact, waived whatever claims they may have against the latter. "Finding for EMCO, the Labor Arbiter dismissed [respondents] complaint. "[Respondents] subsequent appeal to the NLRC was dismissed for lack of merit and the decision of the Labor Arbiter was affirmed. Notably, the NLRC glossed over the issue of whether [respondents] were validly retrenched, and anchored its dismissal of the appeal on the effect of [respondents] waivers or quitclaims, to quote: The pivotal issue brought to fore is whether or not the qui tclaims/waivers executed by [respondents] are valid and binding. The other issues raised by [respondents] are either related to mere technicality, or are merely ancillary or dependent on the main issue. x x x xxx xxx

There is no doubt that the [respondents] voluntarily executed their quitclaims/waivers as manifested by the fact that they did not promptly question their validity within a reasonable time. It took them two (2) years to challenge and dispute the validity of the waivers by claiming belatedly that they were either forced or misled into signing the same. Clearly, this case was instituted by [respondents] to unduly exact more payment of separation benefits from [petitioner] at the expense of fairness and justice. "In passing, the NLRC likewise affirmed EMCOs deductions of attorneys fees from the separation pay received by the [respondents]. "A motion for reconsideration of the afore-quoted resolution was filed by [respondents] on March 10, 1997, but was denied by the NLRC, purportedly, for lack of merit and for having been filed out of time."6(Citations omitted) Ruling of the Court of Appeals The CA held that the evidence was insufficient to justify a ruling in favor of EMCO, which had not complied with the one-month prior notice requirement under the Labor Code. The appellate court added that the corporation had not served on the employees the required notice of termination. It opined that the Memorandum, having merely provided the guidelines on the conduct of the intended lay-off, did not constitute such notice. Furthermore, the Memorandum was not addressed to the workers, but to the foremen, the department supervisors and the section heads. Moreover, there was no proper notice to DOLE. The corporation terminated the services of 250 employees but included only 104 of them in the list it filed with DOLE. EMCOs argument that the 146 unlisted employees had voluntarily resigned was brushed aside by the appellate court. The CA also held that before EMCO resorted to retrenchment, the latter had failed to adduce evidence of its losses and to prove that it had undertaken measures to prevent the occurrence of its alleged actual or impending losses. Moreover, the CA ruled that the corporation had not paid the legally prescribed separation pay, which was equal to one-month pay or at least one-half month pay for every year of service, whichever was higher. Deducting attorneys fees from the supposed separation pay of the employees was held to be in clear violation of the law. Such fees should have been charged against the funds of their union. The appellate court further held that the cause of action of the employees had not yet prescribed when the case was filed, because an action for illegal dismissal constituted an injury to their rights. The CA added that the provision applicable to the case was Article 1146 of the New Civil Code, according to which the prescriptive period for such causes of action was four (4) years. The Complaint, having been filed by the employees only two years after their dismissal, had not prescribed. All in all, the appellate court concluded that the retrenchment was illegal, because of EMCOs failure to comply with the legal requirements. Hence, this Petition.7 The Issues In their Memorandum, petitioners raise these issues for our consideration:

"I. Whether or not respondent Court of Appeals seriously erred in reversing the factual findings of both the Labor Arbiter and the NLRC that petitioners had substantially complied with the requisites for a valid retrenchment? "II. Whether or not respondent Court manifestly erred in reversing the factual findings of both the Labor Arbiter and the NLRC that private respondents had voluntarily executed their respective Quitclaims? "III. Whether or not respondent Court may, in a petition for certiorari under Rule 65 of the Rules of Court, correct the evaluation of evidence made by both the Labor Arbiter and the NLRC, and thereafter substitute its own findings for those of the Labor Arbiter and the NLRC?"8 Simply put, petitioners are insisting on the validity of the retrenchment and the enforceability of the Quitclaims. They are also questioning whether or not the appellate court may disturb the findings of the labor arbiter and the NLRC. This Courts Ruling The Petition has no merit. Main Issues:

Retrenchment
Retrenchment is one of the authorized causes for the dismissal of employees. Resorted to by employers to avoid or minimize business losses,9 it is recognized under Article 283 of the Labor Code.10 The "loss" referred to in this provision cannot be of just any kind or amount; otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees. The Court has laid down the following standards that a company must meet to justify retrenchment and to guard against abuse: "x x x Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs other than labor costs. An employer who, for instance, lays off

substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called golden parachutes, can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing full protection to labor, the employers prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. have been tried and found wanting. "Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees. x x x."11 Retrenchment is only "a measure of last resort when other less drastic means have been tried and found to be inadequate."12 To prove that the retrenchment was necessary to prevent substantial losses, petitioners present their audited financial statements for the years 1991 and 1992.13 These statements show that EMCOs net income ofP1,052,817.00 for 1991 decreased to P880,407.85 in 1992. They allege that this decrease was due to low market demand, lack of raw materials, frequent breakdown of old equipment and high cost of operations. The financial statements also demonstrate that EMCOs liability then increased from P106,507,214.14 toP123,901,838.30. Petitioners cite several cases in which this Court has held that audited financial statements constitute the normal method of proof of the profit-andloss performance of a company. These statements allegedly partake the nature of public documents, because they have been audited and duly filed with the Bureau of Internal Revenue. As such, they enjoy the presumption of regularity and validity. Petitioners further argue that EMCO undertook preventive measures to prevent the occurrence of imminent losses.14 To accommodate and save all its employees, it allegedly implemented a scheme in which they would work on a rotation basis -- on at least a three-day-work per employee per week schedule.15 This arrangement was, however, short-lived to prevent a strike that the union and its members then threatened to stage.16 Petitioners also contend that the 146 employees not included in the list submitted to DOLE voluntarily resigned, not solely on the ground that the companys permit to operate its sawmill department had expired, but also because of a period of uncertainty brought about by the aforementioned factors that allegedly justified the retrenchment program.17 The Court is not persuaded. "Not every loss incurred or expected to be incurred by a company will justify retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary to avert such losses."18 The employer bears the burden of proving the existence or the imminence of substantial losses with clear and satisfactory evidence that there are legitimate business reasons justifying a retrenchment.19 Should the employer fail to do so, the dismissal shall be deemed unjustified.20 In the present case, petitioners have presented only EMCOs audited financial statements for the years 1991 and 1992. As already stated, these show that their net income of P1,052,817.00 for 1991

decreased to P880,407.85 in 1992. Somerville Stainless Steel Corporation v. NLRC21 held that the presentation of the companys financial statements for a particular year was inadequate to overcome the stringent requirement of the law. According to the Court, "[t]he failure of petitioner to show its income or loss for the immediately preceding years or to prove that it expected no abatement of such losses in the coming years bespeaks the weakness of its cause. The financial statement for 1992, by itself, x x x does not show whether its losses increased or decreased. Although [the employer] posted a loss for 1992, it is also possible that such loss was considerably less than those previously incurred, thereby indicating the companys improving condition."22 The Court further held therein that "[i]n the analysis of financial statements, (o)ne particular percentage of relationship may not be too significant in itself ; that is, it may not suffice to point out those unfavorable characteristics of the company that would require immediate or even drastic action."23 Petitioners have failed to prove that their alleged losses were substantial, continuing and without any immediate prospect of abating; hence, the nature of the retrenchment is seriously disputable. Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and the procedural requirements laid down by law and jurisprudence.24 It must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting. The only less drastic measure that EMCO undertook was the rotation work scheme: the three-daywork per employee per week schedule. It did not try other measures, such as cost reduction, lesser investment on raw materials, adjustment of the work routine to avoid the scheduled power failure, reduction of the bonuses and salaries of both management and rank-and-file, improvement of manufacturing efficiency, trimming of marketing and advertising costs, and so on. The fact that petitioners did not resort to other such measures seriously belies their claim that retrenchment was done in good faith to avoid losses.

Defective Notice
For a valid termination due to retrenchment, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the Department of Labor and Employment at least one (1) month before the actual date of the retrenchment.25 The purpose of this requirement is to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.26 There is no showing that such notice was served on the employees in the present case. Petitioners argue that on January 20, 1993, Petitioner Jimmy Lim gave the DOLE a formal notice of the intended retrenchment and furnished the EMCO Labor Association and its general membership copies of the notice by posting it on the bulletin boards of their respective departments. On March 2, 1993, EMCO sent DOLE another written notice. The next day, Lim sent a Memorandum to the foremen, the section heads, the supervisors and the department heads instructing them to retrench some of the workers based on certain guidelines. Petitioners aver that the Memorandum also served as a written notice to all the employees concerned. Clearly, it is not the notice contemplated by law. The written notice should have been served on the employees themselves, not on their supervisors. The Notice sent to DOLE was defective, because it stated that EMCO would terminate the services of 104 of its workers. The corporation, however, actually dismissed 250. Petitioners aver that the 146

employees not listed in the Notice sent to DOLE voluntarily resigned; hence, the latter were not retrenched. This assertion does not deserve any consideration. Petitioners reiterate that those workers voluntarily resigned because of the atmosphere of uncertainty, which occurred after the Sawmill Department had been temporarily shut off in February 1993. The renewal of the permit on March 31, 1993, however, removed the alleged shroud of uncertainty. Moreover, resignation is the voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment. It must be done with the intention of relinquishing an office, accompanied by the act of abandonment.27 Therefore, it would have been illogical for respondents to resign and then file a Complaint for illegal dismissal. Resignation is inconsistent with the filing of the Complaint.28

Propriety of Separation Benefits

Article 283 of the Labor Code provides for the proper separation benefits in this wise: "Article 283. x x x In case of retrenchment to prevent losses x x x, the separation pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year." The appellate court aptly ruled that petitioners had not complied with this statutory requirement. They deducted the amount of attorneys fees that had allegedly accrued as a result of the renegotiations for a new collective bargaining agreement.29 Without denying that they deducted those fees, petitioners argue that the deduction was made with the prior approval of respondents.30 This contention is untenable. The Labor Code prohibits such arrangement in this wise: "Article 222. APPEARANCES AND FEES. x x x xxx xxx xxx

(b) No attorneys fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or conclusion of the collective bargaining agreement shall be imposed on any individual member of the contracting union: Provided, however, That attorneys fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void." The obligation to pay attorneys fees belongs to the union and cannot be shunted to the individual workers as their direct responsibility. The law has made clear that any agreement to the contrary shall be null and void ab initio.31 Thus, petitioners deduction of attorneys fees from respondents separation pay has no basis in law. Second Issue:

Validity of the Quitclaims

Petitioners argue that the Quitclaims signed by respondents enjoy the presumption of regularity, and that the latter had the burden of proving that their consent had been vitiated.32 They further

maintain that aside from Eddie de la Cruz, the other respondents did not submit their respective supporting affidavits detailing how their individual consents had been obtained. Allegedly, such documents do not constitute the clear and convincing evidence required under the law to overturn the validity of quitclaims.33 We hold that the labor arbiter and the NLRC erred in concluding that respondents had voluntarily signed the Waivers and Quitclaim Deeds. Contrary to this assumption, the mere fact that respondents were not physically coerced or intimidated does not necessarily imply that they freely or voluntarily consented to the terms thereof.34Moreover, petitioners, not respondents, have the burden of proving that the Quitclaims were voluntarily entered into.35 Furthermore, in Trendline Employees Association-Southern Philippines Federation of Labor (TEASPFL) v. NLRC36 and Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation,37similar retrenchments were found to be illegal, as the employers had failed to prove that they were actually suffering from poor financial conditions. In these cases, the Quitclaims were deemed illegal, as the employees consents had been vitiated by mistake or fraud. These rulings are applicable to the case at bar. Because the retrenchment was illegal and of no effect, the Quitclaims were therefore not voluntarily entered into by respondents. Their consent was similarly vitiated by mistake or fraud. The law looks with disfavor upon quitclaims and releases by employees pressured into signing by unscrupulous employers minded to evade legal responsibilities.38 As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel.39 The amounts already received by the present respondents as consideration for signing the Quitclaims should, however, be deducted from their respective monetary awards. Third Issue:

The Office of Certiorari

Petitioners aver that in a special civil action for certiorari, the appellate court is limited to reviewing only questions related to jurisdiction or grave abuse of discretion. As in the present case, however, the lower tribunals factual findings will not be upheld where there is a showing that such findings were totally devoid of support, or that the judgment was based on a misapprehension of facts.40 WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED. WYETH-SUACO LABORATORIES, INC., AYERST LABORATORIES (PHILS.), INC. and THOMAS LEBER, vs. NLRC, LABOR ARBITER DAISY G. BARCELONA and ROLANDO SANTOS G.R. No. 100658. March 2, 1993. 1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; QUITCLAIM; FROWNED UPON AS CONTRARY TO PUBLIC POLICY; REASON THEREFORE; WHEN VALID; WHEN PROPERLY SET ASIDE. A quitclaim executed in favor of a company by an employee amounts to a

valid and binding compromise agreement between them (Samaniego v. NLRC, 198 SCRA 111 [1991]). Article 227 of the Labor Code provides that any compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties and the NLRC or any court "shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or it there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion." While Santos was not an ordinary employee and, therefore, the assistance of any DOLE official was not entirely necessary when he executed the release and quitclaim affidavit, the circumstances of this case call for a holding that he should still be given the difference between what he had received and that which he would have received through the retrenchment package, a privilege granted and extended to all employees of ALPI. Quitclaims are commonly frowned upon as contrary to public policy and they are ineffective to bar claims for the full measure of the workers' legal rights (Lopez Sugar Corporation v. FFW, 189 SCRA 179 [1990]). The reason for this is because the employer and the employee do not stand on the same footing, such that quitclaims usually take the form of contracts of adherence, not of choice (Cario v. ACCFA, 18 SCRA 183 [1966]). . . . Indeed, Santos resigned because of the uncertainty as to the future of ALPI. Like the other employees, he was made to believe that the deal between the two companies was merely a merger but it really was a projected buy-out. While "dire necessity" as a reason for signing a quitclaim is not acceptable reason to set aside the quitclaim in the absence of a showing that the employee had been forced to execute it, such reason gains importance if the consideration for the quitclaim is unconscionably low and the employee has been tricked into accepting it (Veloso v. DOLE, 200 SCRA 201 [1991]). 2. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF NLRC GENERALLY BINDING ON SUPREME COURT; EXCEPTION. In the case at bar, both the labor arbiter and the NLRC found for private respondent primarily because of the fact that petitioners were guilty of misrepresentation by their failure to disclose to the ALPI employees the real nature of the negotiations and transaction between Wyeth and ALPI. The Court is bound by this finding of fact there being no showing that neither the arbiter nor the NLRC gravely abused their discretion or otherwise acted without jurisdiction or in excess of the same (Ilas v. NLRC, 193 SCRA 682 [1991]). DECISION MELO, J p: Sought to be annulled and set aside by petitioners are: (a) the June 29, 1989 Decision of Labor Arbiter Daisy G. Cauton-Barcelona ordering Thomas Leber, Vice-President/General Manager of Wyeth-Suaco and Ayerst Laboratories (Phils.), Inc. and the said company to pay Rolando V. Santos separation pay equivalent to three (3) months' salary for every year of service subject to the deduction of whatever amounts he had received in the form of financial assistance; (b) the February 27, 1991 Resolution of the National Labor Relations Commission (NLRC) affirming said decision; and (c) the Resolution of March 26, 1991 of the NLRC denying the motion for reconsideration of its earlier resolution. Rolando V. Santos was hired by Ayerst Laboratories (Phils.), Inc. (ALPI for brevity) in April 1974 as a medical representative. He rose gradually from the ranks until in 1983 when he became a product manager with a monthly salary of P9,850.00 (p. 12, Rollo). On June 5, 1987, the management committee of ALPI announced to the company employees the contents of a telex it had received on June 3, 1987 from Area Director Richard Sperber regarding the

decision "to merge the international divisions of Wyeth and Ayerst into a single operating unit" and the new group would be called Wyeth-Ayerst International. The telex was followed by a phone call on June 4 from Sperber assuring "everybody that the merger (details of which will still take many months to complete) is a very positive move of ALPI and its employees in that it will be part of a much bigger company with room for everybody." (p. 80, Rollo). The assurance notwithstanding, during the negotiations for the supposed merger, the employees were advised to keep their options open and to look for other jobs. Faced with this uncertainty, Santos, a family man, started looking for vacancies in other companies. Having found one in Berlimed Corporation, on August 4, 1987, Santos tendered his resignation from ALPI to take effect on August 31, 1987 (p. 27, Rollo). Thereafter, he executed an affidavit of release and quitclaim dated October 19, 1987 discharging the company and its representatives "from any action, claim for sum of money, or other obligations arising from all incidents of my employment"; acknowledging receipt of "all amounts that are now or in the future may be due me from the Company"; and warranting that he would not institute any action against the same company (p. 43, Rollo). The company, in turn, gave him financial assistance amounting to P65,400.50 which is the equivalent of two and one-half (2-1/2) months' pay for every year of his 14-year service with the company or roughly one (1) month pay for every five (5) years of service (pp. 19-20, Rollo). In the meantime, the labor union in ALPI became restless as no word had come from the company regarding the details of the merger. Thus, the union president sent three letters to the management committee but they did not merit a reply. Later, however, the employees each received termination letters which prompted the union to file a notice of strike. Consequently, the management agreed to negotiate with the union. It was during these negotiations that the management revealed that the deal between ALPI and Wyeth-Suaco was a buy-out of the former's assets by the latter and not a merger of the two companies as earlier announced. The union also learned that only a few of ALPI's line production people would be retained by the buying company. However, the union's effort to get the best bargain for its members resulted in the retrenchment package consisting of three (3) months' pay for every year of service (p. 22, Rollo). On November 29, 1987, Santos filed a complaint against Leber, Wyeth-Suaco, and ALPI before the NLRC for unfair labor practice, underpayment, separation pay and/or retirement/resignation benefits and illegal constructive dismissal (NLRC-NCR Case No. 00-11-04068-87; p. 27, Rollo). In due course, Labor Arbiter Daisy G. Cauton-Barcelona rendered a decision in favor of Santos. She found that the respondents' non-disclosure of the true facts of the transaction between the two companies was a "material misrepresentation", which, had it not been timely discovered, would have resulted in the "serious economic dislocation" of many of ALPI's employees (p. 24, Rollo). She added: "Moreover, even the mere impending merger with no definite security as to the status of one's employment will certainly cause anxiety and worry especially during these times where the rate of unemployment is soaring and the means of survival is becoming extremely difficult everyday. Under the obtaining situation we find it hard to construe that the complainant's resignation was indeed voluntary considering that at that time, he was already receiving a relatively much higher pay. His resourcefulness and foresight, given such an uncertain predicament should not be taken as a negative factor to deny him the separation benefits afforded to those similarly situated. Otherwise, this would be rendering naught the objectives of social justice as guaranteed by the Constitution." (p. 8, Decision; p. 25, Rollo.)

Hence, the Arbiter ordered herein petitioners to pay Santos "separation pay in the amount equivalent to three (3) months' salary for every year of service subject to the deduction of whatever amounts already received by him in the form of financial assistance." She also ordered petitioners' to pay attorney's fees and the costs of suit (p. 26, Rollo). Wyeth-Suaco and Leber appealed (p. 100, Rollo), but in the Resolution of February 27, 1991, the NLRC, per Commissioner Domingo H. Zapanta and with the concurrence of Commissioners Edna Bonto-Perez and Rustico L. Diokno, affirmed the decision of Labor Arbiter Barcelona. The affirmance was based on the NLRC's findings that Santos is similarly situated as his co-employees in the managerial level who must have received much more than the rank and file employees who had been given three months' salary for every year of service and that, therefore, the refusal of the company to pay him even three months' salary for every year of service is discriminatory (p. 16, Rollo). Wyeth-Suaco and ALPI as well as Leber filed a motion for the reconsideration of said Resolution but the NLRC denied it on March 26, 1991 (p. 10, Rollo). Hence, the petition. Acting on the petition, on July 24, 1991, the First Division of this Court required respondents to file their comment. In the same Resolution, the Court issued a temporary restraining order enjoining the NLRC from enforcing the questioned decision and resolutions effective upon approval by the Court of a bond in the amount of P350,000.00 to be posted by petitioners within forty-eight (48) hours from notice (pp. 142 and 146, Rollo). Counsel for petitioners received a copy of the Resolution of July 24, 1991 on July 25, 1991. On July 27, 1991, petitioners mailed a manifestation and motion stating that they had earlier filed a bond with the NLRC through Prudential Guarantee and Assurance, Inc. in the amount of P340,328.45 and, therefore, posting of the P350,000.00 bond "may cause unnecessary hardship" upon them. They prayed that they be allowed "to avail themselves of the supersedeas bond posted before the NLRC and to post additional bond only in the amount of P9,671.55 as their compliance with the directive of this Court (pp. 175-176, Rollo). The Court granted the prayer in the Resolution of September 2, 1991 (p. 193-a, Rollo). Petitioners, however, failed to post the additional bond of P9,671.55 within the period which expired on December 3, 1992. The Court thus required petitioners' counsel to show cause why they should not "be disciplinarily dealt with or held in contempt for such failure and to comply with the directive .. to post additional bond." (p. 237, Rollo). Petitioners finally complied with the directive and posted the increased bond of P350,000.00 to cover the two-year period between July 14, 1990 and July 14, 1992 (pp. 239 and 241, Rollo). Thereafter, petitioners explained that the delay in posting the additional bond was due to their "difficulty in making arrangements for the form which the bond is to take" (pp. 262-263, Rollo). The Court is faced herein with the issue of whether or not an employee who had resigned three months prior to the purchase of his employer's assets by another company may still be entitled to the separation pay subsequently awarded to the other employees of the same company who had not resigned even if at the time of such award he had been employed and lucratively compensated by a third company. A touchstone to the resolution of this issue is the effect of the release and quitclaim affidavit he had executed after resigning from ALPI.

A quitclaim executed in favor of a company by an employee amounts to a valid and binding compromise agreement between them (Samaniego v. NLRC, 198 SCRA 111 [1991]). Article 227 of the Labor Code provides that any compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties and the NLRC or any court "shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion." While Santos was not an ordinary employee and, therefore, the assistance of any DOLE official was not entirely necessary when he executed the release and quitclaim affidavit, the circumstances of this case call for a holding that he should still be given the difference between what he had received and that which he would have received through the retrenchment package, a privilege granted and extended to all employees of ALPI. Quitclaims are commonly frowned upon as contrary to public policy and they are ineffective to bar claims for the full measure of the workers' legal rights (Lopez Sugar Corporation v. FFW, 189 SCRA 179 [1990]). The reason for this is because the employer and the employee do not stand on the same footing, such that quitclaims usually take the form of contracts of adherence, not of choice (Cario v. ACCFA, 18 SCRA 183 [1966]). In the case at bar, both the labor arbiter and the NLRC found for private respondent primarily because of the fact that petitioners were guilty of misrepresentation by their failure to disclose to the ALPI employees the real nature of the negotiations and transaction between Wyeth and ALPI. The Court is bound by this finding of fact there being no showing that neither the arbiter nor the NLRC gravely abused their discretion or otherwise acted without jurisdiction or in excess of the same (Ilas v. NLRC, 193 SCRA 682 [1991]). Indeed, Santos resigned because of the uncertainty as to the future of ALPI. Like the other employees, he was made to believe that the deal between the two companies was merely a merger but it really was a projected buy-out. While "dire necessity" as a reason for signing a quitclaim is not acceptable reason to set aside the quitclaim in the absence of a showing that the employee had been forced to execute it, such reason gains importance if the consideration for the quitclaim is unconscionably low and the employee has been tricked into accepting it (Veloso v. DOLE, 200 SCRA 201 [1991]). The consideration of compassionate justice cited by the labor arbiter in her decision which petitioners belittle as lacking in statutory basis (Petition, p. 5), in fact finds meaning in this case. Santos was no ordinary employee. He was the recipient of (a) the UTAK Award given by the Drug Association of the Philippines for two consecutive years (1986 and 1987); (b) two plagues for best art work; and (c) the Honorable Mention Award at the 1985 UTAK Awards. He was the Salesman of the Year in 1979-1980 and the second placer for the same award in 1976-1977. These awards were capped in April 1987 by the UTAK Grand Award (Rollo, p. 30). Although these awards were bestowed upon him as an individual, they also indirectly gave recognition to ALPI as an employer. That Santos resigned when he felt that the company he had worked for was floundering as it was in a way seeking a crutch for its survival should not be taken against him. Indeed, the employees of ALPI were advised by management to keep their options open and to begin to scout for other employment. Given such circumstances, Santos cannot be blamed for grabbing the first acceptable offer in another company. Equity and justice, therefore, demand that

Santos' untainted record of service to ALPI for fourteen years should be justly compensated by giving him at least the same retrenchment package as that given to the other employees. PREMISES CONSIDERED, the petition is hereby DISMISSED and the questioned Decision of the Labor Arbiter and the Resolutions of the NLRC AFFIRMED. The temporary restraining order issued on July 24, 1991 is lifted. SO ORDERED.

PHILIPS INDUSTRIAL DEVELOPMENT, INC., vs. NLRC & PHILIPS EMPLOYEES ORGANIZATION FFW G.R. No. 88957 June 25, 1992 DAVIDE, JR., J.: In this petition for certiorari and prohibition under Rule 65 of the Rules of Court with a prayer for a temporary restraining order and/or a writ of preliminary injunction, petitioner Philips Industrial Development, Inc. (PIDI) seeks to set aside the Decision and Resolution, dated 16 January 1989 and 17 March 1989, respectively, of the National Labor Relations Commission (NLRC) in Case No. NLRCNCR-00-11-03936-87 on the ground that it committed grave abuse of discretion amounting to lack of jurisdiction in holding that service engineers, sales representatives and confidential employees of PIDI are qualified to be included in the existing bargaining unit. PIDI is a domestic corporation engaged in the manufacturing and marketing of electronic products Since 1971, it had a total of six (6) collective bargaining agreements (CBAs) with private respondent Philips Employees Organization-FFW (PEO-FFW), a registered labor union and the certified bargaining agent of all the rank and file employees of PIDI. In the first CBA (1971-1974), the supervisors referred to in R.A. No. 875, confidential employees, security guards, temporary employees and sales representatives were excluded from the bargaining unit. In the second to the fifth CBAs (1975-1977; 1978-1980; 1981-1983; and 1984-1986), the sales force, confidential employees and heads of small units, together with the managerial employees, temporary employees and security personnel, were specifically excluded from the bargaining unit. 1 The confidential employees are the division secretaries of light/telecom/data and consumer electronics, marketing managers, secretaries of the corporate planning and business manager, fiscal and financial system manager and audit and EDP manager, and the staff of both the General Management and the Personnel Department. 2 In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among others, that the subject of inclusion or exclusion of service engineers, sales personnel and confidential employees in the coverage of the bargaining unit would be submitted for arbitration. Pursuant thereto, on June 1987, PEO-FFW filed a petition before the Bureau of Labor Relations (BLR) praying for an order "directing the parties to select a voluntary arbitrator in accordance with its rules and regulations." As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the Executive Labor Arbiter of the National Capital Region for compulsory arbitration pursuant to Article 228 of the Labor Code. Docketed as Case No. NLRC-NCR-00-11-03936-87, the case was assigned to Executive Labor Arbiter Arthur Amansec.

On 17 March 1988, Labor Arbiter Amansec rendered a decision, the dispositive portion of which states: In view of the foregoing, a decision is hereby rendered, ordering the respondent to conduct a referendum to determine the will of the service engineers, sales representatives as to their inclusion or exclusion in the bargaining unit. It is hereby declared that the Division Secretaries and all Staff of general management, personnel and industrial relations department, secretaries of audit, EDP, financial system are confidential employees and as such are hereby deemed excluded in the bargaining unit. SO ORDERED. PEO-FFW appealed from the decision to the NLRC. On 16 January 1989, the NLRC rendered the questioned decision, the dispositive portion of which reads: WHEREFORE, the foregoing premises considered, the appealed decision of the Executive Labor Arbiter is hereby SET ASIDE and a new one entered declaring respondent company's Service Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file bargaining unit. SO ORDERED. The reversal is anchored on the respondent NLRC's conclusion that based on Section 1, 3 Rule II, Book V of the Omnibus Rules Implementing the Labor Code, as amended by Section 3, Implementing Rules of E.O. No. 111; paragraph (c) Section 2, Rule V of the same Code, as amended by Section 6 4 of the Implementing Rules of E.O. No. 111; and Article 245 5 of the Labor Code, as amended: . . . all workers, except managerial employees and security personnel, are qualified to join or be a part of the bargaining unit. . . . It further ruled that: The Executive Labor Arbiters directive that the service engineers and sales representatives to (sic) conduct a referendum among themselves is erroneous inasmuch as it arrogates unto said employees the right to define what the law means. It would not be amiss to state at this point that there would be no one more interested in excluding the subject employees from the bargaining unit than management and that it would not be improbable for the latter to lobby and/or exert pressure on the employees concerned, thus agitating unrest among the rank-and-file. Likewise, the Executive Labor Arbiter's declaration that the Division Secretaries and all Staff of general management, personnel and industrial relations department, secretaries of audit, EDP and financial system "are confidential employees and as such are hereby deemed excluded in (sic) the bargaining unit" is contrary to law for the simple reason that the law, as earlier quoted, does not mention them as among those to be excluded from the bargaining unit only (sic) managerial employees and security guards. As a matter of fact, supervisory unions have already been dissolved and their members who do not fall within the definition of managerial employees have become eligible to join or assist the rank-and-file organization. 6

Its motion for the reconsideration of this decision having been denied by the NLRC in its Resolution of 16 March 1989, a copy of which it received on 8 June 1989, petitioner PIDI filed the instant petition on 20 July 1989, alleging that: I THE NLRC COMMITTED ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN HOLDING THAT SERVICE ENGINEERS, SALES REPRESENTATIVES AND CONFIDENTIAL EMPLOYEES OF PETITIONER ARE QUALIFIED TO BE PART OF THE EXISTING BARGAINING UNIT. II THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN NOT APPLYING THE TIME HONORED "GLOBE DOCTRINE." 7 On 31 July 1989, this Court; required the respondents to comment on the petition, which PEO-FFW complied with on 28 August 1989. Public respondent NLRC, thru its counsel, the Solicitor General, moved for, and was granted a 30-day extension to file its Comment. On 18 September 1989, this Court required the parties to show cause why the petition should not be dismissed in view of the finality of the NLRC decision as provided for by the penultimate sentence of Article 223 of the Labor Code, as amended by R.A. No. 6715 R..A. No. 6715, which amended Article 223 of the Labor Code, was enacted on 2 March 1989 and took effect on 21 March 1989. The parties subsequently complied with the Resolution. On 16 May 1990, this Court required the parties to submit Memoranda explaining the effect in this case of Article 223 of the Labor Code, as amended by Section 12 of R.A. No-6715 with respect to the finality of decisions of the NLRC. The parties complied separately with the same. On 10 September 1990, this Court gave due course to the petition and required the parties to submit their respective Memoranda. The petitioner and the Office of the Solicitor General filed their separate Memoranda. On the other hand, PEO-FFW moved that its Motion and manifestation dated 23 August 1989 be considered as its Memorandum; this Court granted the same. As stated earlier, the principal issue in this case is whether the NLRC committed grave abuse of discretion in holding that service engineers, sales representatives and confidential employees (division secretaries, staff of general management, personnel and industrial relations department, secretaries of audit, EDP and financial system) are qualified to be included in the existing bargaining unit. Petitioner maintains that it did, and in support of its stand that said employees should not be absorbed by the existing bargaining unit, it urges this Court to consider these points: 1) The inclusion of the group in the existing bargaining unit would run counter to the history of this parties CBA. The parties' five (5) previous CBAs consistently excluded this group of employees from the scope of the bargaining unit. The rationale for such exclusion is that these employees hold positions which are highly sensitive, confidential and of a highly fiduciary nature; to include them in the bargaining unit may subject the company to breaches in security and the possible revelation of highly sensitive and confidential matters. It would cripple the company's bargaining position and would give undue advantage to the union.

2) The absence of mutuality of interests between this group of employees and the regular rank and file militates against such inclusion. A table prepared by the petitioner shows the disparity of interests between the said groups: SERVICE ENGINEERS SALES REPRESENTATIVES TECHNICIANS (Non-Bargaining AREAS OF INTEREST Unit Employees) Unit Employees) SERVICE (Bargaining

Qualifications Professional Employees High School/ Vocational Grads. Work Schedule With Night Shift None Schedule Night Shift 10% of Basic Rate None Differential Pay Stand-By Call & On Stand-By Call with: None Allowance First Line:15% of basic rate Second Line: 10% of basic rate Uniforms None 2 sets of polo & pants every 6 months Retirement Benefits 15 yrs. ser.70% 15 yrs. serv. 50% 16 75% 16 85% 17 80% 17 90% 18 85% 18 100% 19 90% 19 115% 20 100% 20 135% Year End Performance Merit Increase system None Evaluation Sales Commission Yes None Car Loan Yes None Precalculated Yes None Kilometer allowance

The Office of the Solicitor General supports the decision of the Executive Labor Arbiter and refuses to uphold the position of the NLRC. It holds the view that the division Secretaries; the staff members of General Management, Personnel and the Industrial Relations Department; and the secretaries of Audit, EDP and Financial Systems, are disqualified from joining the PEO-FFW as they are confidential employees. They cannot even form a union of their own for, as held in Golden Farms, Inc. vs. FerrerCalleja, 8 the rationale for the disqualification of managerial employees from joining unions holds true also for confidential employees. As regards the sales representatives and service engineers, however, there is no doubt that they are entitled to join or form a union, as they are not disqualified by law from doing so. Considering that they have interests dissimilar to those of the rank and file employees comprising the existing bargaining unit, and following the Globe Doctrine enunciated in In Re: Globe Machine and Stamping Company 9 to the effect that in determining the proper bargaining unit the express will or desire of the employees shall be considered, they should be allowed to determine for

themselves what union to join or form. The best way to determine their preference is through a referendum. As shown by the records, such a. referendum was decreed by the Executive Labor Arbiter. The petition is impressed with merit. At the outset, We express Our agreement with the petitioner's view that respondent NLRC did not quite accurately comprehend the issue raised before it. Indeed, the issue is not whether the subject employees may join or form a union, but rather, whether or not they may be part of the existing bargaining unit for the rank and file employees of PIDI. Even if the issue was, indeed, as perceived by the NLRC, still, a palpable error was committed by it in ruling that under the law, all workers, except managerial employees and security personnel, are qualified to join a union, or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-1103936-87 was filed in 1987, security personnel were no longer disqualified from joining or forming a union. Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the original provisions of Article 245 of the Labor Code, reading as follows: Art. 245. Ineligibility of security personnel to join any labor organization. Security guards and other personnel employed for the protection and security of the person, properties and premises of the employer shall not be eligible for membership, in any labor organization. and substituted it with the following provision: Art. 245. Right of employees in the public service. xxx xxx xxx By virtue of such repeal and substitution, security guards became eligible for membership in any labor organization. 11 On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDI's "Service Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file bargaining unit." In the first place, all these employees, with the exception of the service engineers and the sales force personnel, are confidential employees. Their classification as such is not seriously disputed by PEOFFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential employees. By the very nature of their functions, they assist and act in a confidential capacity to, or have access to confidential matters of, persons who exercise managerial functions in the field of labor relations. 12 As such, the rationale behind the ineligibility of managerial employees to form, assist or join a labor union equally applies to them. In Bulletin Publishing Co., Inc. vs. Hon Augusto Sanchez, thus:
13 10

this Court elaborated on this rationale,

. . . 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. In Golden Farms, Inc. vs. Ferrer-Calleja, confidential employees:
14

this Court explicitly made this rationale applicable to

This rationale holds true also for confidential employees such as accounting personnel, radio and telegraph operators, who having access to confidential information, may become the source of undue advantage. Said employee(s) may act as a spy or, spies of either party to a collective bargaining agreement. This is specially true in the present case where the petitioning Union is already the bargaining agent of the rank-and-file employees in the establishment. To allow the confidential employees to join the existing Union of the rank-and-file would be in violation of the terms of the Collective Bargaining Agreement wherein this kind of employees by the nature of their functions/ positions are expressly excluded. As regards the service engineers and the sales representatives, two (2) points which respondent NLRC likewise arbitrarily and erroneously ruled upon agreed to be discussed. Firstly, in holding that they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC practically forced them to become members of PEO-FFW or to be subject to its sphere of influence, it being the certified bargaining agent for the subject bargaining unit. This violates, obstructs, impairs and impedes the service engineers' and the sales representatives' constitutional right to form unions or associations 15 and to self-organization. 16 In Victoriano vs. Elizalde Rope Workers Union, 17 this Court already ruled: . . . Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by law; and second, power, whereby an employee may, as he pleases, join or refrain from joining an association. It is, therefore, the employee who should decide for himself whether he should join or not an association; and should he choose to join, he himself makes up his mind as to which association he would join; and even after he has joined, he still retains the liberty and the power to leave and cancel his membership with said organization at any time. 18 It is clear, therefore, that the right to join a union includes the right to abstain from joining any 19 union. Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any association. The decision then of the Executive Labor Arbiter in merely directing the holding of a referendum "to determine the will of the service engineers, sales representatives as to their inclusion or exclusion in (sic) the bargaining unit" is the most appropriate procedure that conforms with their right to form, assist or join in labor union or organization. However, since this decision was rendered before the effectivity of R.A. No. 6715, it must now be stressed that its future application to the private parties in this case should, insofar as service engineers and sales representatives holding supervisory

positions or functions are concerned, take into account the present Article 245 which, as amended by R.A. No. 6715, now reads:

20

of the Labor Code

ARTICLE 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees. Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible for

membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own. (emphasis supplied)

The foregoing disquisitions render unnecessary a discussion on the second ground on the alleged grave abuse of discretion on the part of the NLRC in not applying the "Globe Doctrine". Suffice it to state here that since the only issue is the subject employees' inclusion in or exclusion from the bargaining unit in question, and PIDI never questioned the decision of the Executive Labor Arbiter, the Globe Doctrine finds no application. Besides, this doctrine applies only in instances of evenly balanced claims by competitive groups for the right to be established as the bargaining unit, 21 which do not obtain in this case. WHEREFORE, the petition is hereby GRANTED. The Decision of public respondent National Labor Relations Commission in Case No. NLRC-NCR-00-11-03936-87, promulgated on 16 January 1989, is hereby SET ASIDE while the Decision of the Executive Labor Arbiter in said case dated 17 March 1988 is hereby REINSTATED, subject to the modifications above indicated. Costs against private respondent. NATIONAL ASSOCIATION OF FREE TRADE UNIONS (NAFTU), Petitioner, vs .MAINIT LUMBER DEVELOPMENT COMPANY WORKERS UNION-UNITED LUMBER AND GENERAL WORKERS OF THE PHILIPPINES. (MALDECOWU-ULGWP), Respondents. [G.R. No. 79526 : December 21, 1990.] DECISION PARAS, J.: This is a petition for Certiorari to annul and set aside the resolution ** of the public respondent Bureau of Labor Relation dated January 29,1987 in BLR Case No. A-5-99-85 entitled: IN RE: Petition for Direct Certification or Certification Election, Mainit Lumber Development Company Workers UnionUnited Lumber and General Workers of the Philippines (MALDECOWU-ULGWP), petitioner-appellee vs. Mainit Lumber and Development Company, Inc. (MALDECO), respondent; National Association of Free Trade Unions (NAFTU), compulsory intervenor-appellant, affirming the Order of the Med-Arbiter date September 24, 1986 and denying petitioner's motion for reconsideration. The facts are as follows: On January 28, 1985, private respondent Mainit Lumber Development Company Workers UnionUnited Lumber and General Workers of the Philippines, MALDECOWU-ULGWP (ULGWP, for short), a legitimate labor organization duly registered with the Ministry of Labor and Employment under Registry No. 2944-IP, filed with Regional Office No. 10, Ministry of Labor and Employment at Cagayan de Oro City, a petition for certification election to determine the sole and exclusive collective bargaining representative among the rank and file workers/employees of Mainit Lumber Development Company Inc. (MALDECO), a duly organized, registered and existing corporation engaged in the business of logging and saw-mill operations employing approximately 136 rank and file employees/workers (Rollo, p. 11; Petition; Annex "A"). The case was scheduled for hearing two (2) times. During the first scheduled hearing on February 20, 1985, the counsel for compulsory intervenor (now petitioner), National Association of Free Trade Union (NAFTU) requested for

postponement on the ground that he was leaving for abroad. During the scheduled hearing of March 13, 1985, they, however, agreed to submit simultaneously their respective position papers within twenty (20) days (Rollo, p. 17; Petition; Annex "D"). Petitioner ULGWP, private respondent herein, in its petition and position paper alleged, among others: (1) that there was no certification election conducted within 12 months prior to the filing of the petition; (2) that the petition was filed within the 60 day freedom period, i.e. CBA expired on February 28, 1985; (3) that the petition is supported by the signatures of 101 rank and file employees out of a total of 201 employees of the employer or more than thirty percent (30%) than that required by law (Rollo, p. 13; Petition; Annex "B").:-cralaw On April 11, 1985, the Med-Arbiter granted the petition for certification election. On April 26, 1985, NAFTU appealed the decision of the Med-Arbiter on the ground that MALDECO was composed of two (2) bargaining units, the Sawmill Division and the Logging Division, but both the petition and decision treated these separate and distinct units only as one (Rollo, p. 20; Petition; Annex "E"). On April 28, 1986, the Bureau of Labor Relations affirmed the decision (Rollo, p. 26; Petition; Annex "J"). Thus, a certification election was held on separate dates at the employer's sawmill division and logging area respectively. In said election MALDECOWU-ULGWP garnered a total vote of 146 while NAFTU garnered a total of 2 votes (Rollo, p. 42; Petition; Annex "O"). On July 26, 1986, NAFTU filed an election protest alleging massive vote buying accompanied with grave and serious threat force and intimidation on the lives of 25 applicants as stated in a Joint Affidavit attached thereto (Rollo, p. 28; Petition; Annexes "K", "K-3"). MALDECO filed its Manifestation on August 3, 1986, which corroborated petitioner's stand. Attached to the said Manifestation was a joint affidavit executed by thirty five (35) of its employees/workers (Rollo, p. 33; Petition; Annexes "L", "L-1"). On September 3, 1986, private respondent filed its position paper (Rollo, p. 36; Petition; Annex "I"). On September 8, 1986 petitioner filed its opposition to private respondent's position paper (Rollo, p. 39; Petition; Annex "N"). On September 24, 1986, the Med-Arbiter dismissed the election protest (Rollo, p. 42; Petition; Annex "O"). On October 10, 1986, petitioner NAFTU appealed the order of the Med-Arbiter to the Bureau of Labor Relations in Manila (Rollo, p. 46) which denied the appeal (Rollo, p. 48) and the two motions for reconsideration (Rollo, pp. 51, 55). Hence, this petition. The issues raised in this petition are: I WHETHER OR NOT IT WAS RIGHT FOR THE MED-ARBITER TO CHANGE THE EMPLOYER FROM TWO SEPARATE BARGAINING UNITS TO ONLY ONE. II WHETHER OR NOT THERE WAS MASSIVE VOTE BUYING AND SERIOUS THREAT TO LIFE TO JUSTIFY INVALIDATING THE RESULT OF THE ELECTION. III WHETHER OR NOT AN ELECTION PROTEST IN A CERTIFICATION ELECTION CAN BE GIVEN DUE COURSE EVEN IF NOT ENTERED IN THE MINUTES OF THE ELECTION. In the case at bar, petitioner alleges that the employer MALDECO was composed of two bargaining units, the Sawmill Division in Butuan City and the Logging Division, in Zapanta Valley, Kitcharao,

Agusan Norte, about 80 kilometers distant from each other and in fact, had then two separate CBA's, one for the Sawmill Division and another for the Logging Division, both the petition and decision referred only to one bargaining unit; that from 1979 to 1985, the Ministry of Labor and Employment recognized the existence of two (2) separate bargaining units at MALDECO, one for its Logging Division and another for its Sawmill Division. Significantly, out of two hundred and one (201) employees of MALDECO, one hundred seventy five (175) consented and supported the petition for certification election, thereby confirming their desire for one bargaining representative (Rollo, p. 104).:- nad Moreover, while the existence of a bargaining history is a factor that may be reckoned with in determining the appropriate bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The test of grouping is community or mutuality of interests. This is so because "the basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights." (Democratic Labor Association v. Cebu Stevedoring Company, Inc., et al., 103 Phil. 1103 [1958]). Certainly, there is a mutuality of interest among the employees of the Sawmill Division and the Logging Division. Their functions mesh with one another. One group needs the other in the same way that the company needs them both. There may be difference as to the nature of their individual assignments but the distinctions are not enough to warrant the formation of a separate bargaining unit. Secondly, the issue had been raised earlier by petitioner. The respondent Bureau of Labor Relations had already ruled on the same in its decision dated April 28, 1986 affirming the Med-Arbiter's Order dated April 11, 1985 which granted the petition for Certification Election. NAFTU did not elevate the April 28, 1986 decision to this Court. On the contrary, it participated in the questioned election and later it did not raise the issue in its election protest (Rollo, p. 210). Hence, the principle of res judicata applies. It was settled as early as 1956 that "the rule which forbids the reopening of a matter once judicially determined by competent authority applies as well to the judicial and quasijudicial acts of public, executive or administrative officers and boards acting within their jurisdiction as to the judgments of courts having general judicial powers . . ." (B.F. Goodrich Philippines, Inc. v. Workmen's Compensation Commission and Leandro M. Castro, 159 SCRA 355 [1988]). With regard to the second and third issues raised by petitioner, the public respondent Bureau of Labor Relations in its order dated September 24, 1986 found the following, to wit: "After a careful perusal of the records of this case and after considering, adducing and weighing all the pleadings, arguments, etc. and the circumstances attendant to the instant case, this Office is of the opinion that the grounds relied upon by the protestant NAFTU in its protest are bereft of any merit, hence, this Office finds no cogent reason to order the invalidation or annulment of the certification election under protest or the holding of a run-off election thereat between no union and the protestee, MALDECOWU-ULGWP. Indeed, the minutes of said certification elections conducted both at the sawmill and logging departments on August 15 and 21, 1986 respectively, of the respondent/employer showed that there was no protest on massive vote buying accompanied with grave and serious threats, force and intimidation raised by any of the parties who were ably represented in said elections. Paragraph 2, Section 9, Rule 6 of the Rules and Regulations implementing the Labor Code of the Philippines (now Section 3, Rule VI, Book 5 of the Omnibus Rules Implementing the Labor Code) provides that protests not so raised and contained in the minutes of the proceedings are deemed waived. Allegations of vote buying, grave and serious threats, force and intimidation are questions of fact which should be contained in the minutes of said proceedings. There is no clear and convincing proof presented by the protestant in support of its contention, hence, we have no other alternative than to uphold the election results."

In the case of Philippine Airlines Employees' Association (PALEA) v. Hon. Pura Ferrer-Calleja, et al., 162 SCRA 425 [1988]), this Court held that factual findings of the Bureau of Labor Relations which are supported by substantial evidence are binding on this Court and must be respected.: nad PREMISES CONSIDERED, the resolution of public respondent Bureau of Labor Relations dated January 29, 1987 is hereby AFFIRMED. SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

** Penned by Pura Ferrer-Calleja.

MANILA ELECTRIC COMPANY vs. THE HON. SECRETARY OF LABOR AND EMPLOYMENT, STAFF AND TECHNICAL EMPLOYEES ASSOCIATION OF MERALCO, and FIRST LINE ASSOCIATION OF MERALCO SUPERVISORY EMPLOYEES G.R. No. 91902 May 20, 1991 MEDIALDEA, J.:p This petition seeks to review the Resolution of respondent Secretary of Labor and Employment Franklin M. Drilon dated November 3, 1989 which affirmed an Order of Med-Arbiter Renato P. Parungo (Case No. NCR-O-D-M-1-70), directing the holding of a certification election among certain employees of petitioner Manila Electric Company (hereafter "MERALCO") as well as the Order dated January 16, 1990 which denied the Motion for Reconsideration of MERALCO. The facts are as follows: On November 22, 1988, the Staff and Technical Employees Association of MERALCO (hereafter "STEAM-PCWF") a labor organization of staff and technical employees of MERALCO, filed a petition for certification election, seeking to represent regular employees of MERALCO who are: (a) nonmanagerial employees with Pay Grades VII and above; (b) non-managerial employees in the Patrol Division, Treasury Security Services Section, Secretaries who are automatically removed from the bargaining unit; and (c) employees within the rank and file unit who are automatically disqualified from becoming union members of any organization within the same bargaining unit. Among others, the petition alleged that "while there exists a duly-organized union for rank and file employees in Pay Grade I-VI, which is the MERALCO Employees and Worker's Association (MEWA) which holds a valid CBA for the rank and file employees, 1 there is no other labor organization except STEAM-PCWF claiming to represent the MERALCO employees. The petition was premised on the exclusion/disqualification of certain MERALCO employees pursuant to Art. I, Secs. 2 and 3 of the existing MEWA CBA as follows: ARTICLE I SCOPE xxx xxx xxx Sec. 2. Excluded from the appropriate bargaining unit and therefore outside the scope of this Agreement are:

(a) Employees in Patrol Division; (b) Employees in Treasury Security Services Section; (c) Managerial Employees; and (d) Secretaries. Any member of the Union who may now or hereafter be assigned or transferred to Patrol Division or Treasury Security Services Section, or becomes Managerial Employee or a Secretary, shall be considered automatically removed from the bargaining unit and excluded from the coverage of this agreement. He shall thereby likewise be deemed automatically to have ceased to be member of the union, and shall desist from further engaging in union activity of any kind. Sec. 3. Regular rank-and-file employees in the organization elements herein below listed shall be covered within the bargaining unit, but shall be automatically disqualified from becoming union members: 1. Office of the Corporate Secretary 2. Corporate Staff Services Department 3. Managerial Payroll Office 4. Legal Service Department 5. Labor Relations Division 6. Personnel Administration Division 7. Manpower Planning & Research Division 8. Computer Services Department 9. Financial Planning & Control Department 10. Treasury Department, except Cash Section 11. General Accounting Section xxx xxx xxx (p. 19, Rollo) MERALCO moved for the dismissal of the petition on the following grounds: I The employees sought to be represented by petitioner are either 1) managerial who are prohibited by law from forming or joining supervisory union; 2) security services personnel who are prohibited from joining or assisting the rank-and-file union; 3) secretaries who do not consent to the petitioner's representation and whom petitioner can not represent; and 4) rank-and-file employees represented by the certified or duly recognized bargaining representative of the only rank-and-file bargaining unit in the company, the Meralco Employees Workers Association (MEWA), in accordance with the existing Collective Bargaining Agreement with the latter. II The petition for certification election will disturb the administration of the existing Collective Bargaining Agreement in violation of Art. 232 of the Labor Code. III

The petition itself shows that it is not supported by the written consent of at least twenty percent (20%) of the alleged 2,500 employees sought to be represented. (Resolution, Sec. of Labor, pp. 223-224, Rollo) Before Med-Arbiter R. Parungo, MERALCO contended that employees from Pay Grades VII and above are classified as managerial employees who, under the law, are prohibited from forming, joining or assisting a labor organization of the rank and file. As regards those in the Patrol Division and Treasury Security Service Section, MERALCO maintains that since these employees are tasked with providing security to the company, they are not eligible to join the rank and file bargaining unit, pursuant to Sec. 2(c), Rule V, Book V of the then Implementing Rules and Regulations of the Labor Code (1988) which reads as follows: Sec. 2. Who may file petition. The employer or any legitimate labor organization may file the petition. The petition, when filed by a legitimate labor organization, shall contain, among others: xxx xxx xxx (c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require, and provided, further: that the appropriate bargaining unit of the rank and file employees shall not include security guards (As amended by Sec. 6, Implementing Rules of EO 111) xxx xxx xxx (p. 111, Labor Code, 1988 Ed.) As regards those rank and file employees enumerated in Sec. 3, Art. I, MERALCO contends that since they are already beneficiaries of the MEWA-CBA, they may not be treated as a separate and distinct appropriate bargaining unit. MERALCO raised the same argument with respect to employees sought to be represented by STEAMPCWF, claiming that these were already covered by the MEWA-CBA. On March 15, 1989, the Med-Arbiter ruled that having been excluded from the existing Collective Bargaining Agreement for rank and file employees, these employees have the right to form a union of their own, except those employees performing managerial functions. With respect to those employees who had resented their alleged involuntary membership in the existing CBA, the MedArbiter stated that the holding of a certification election would allow them to fully translate their sentiment on the matter, and thus directed the holding of a certification election. The dispositive portion of the Resolution provides as follows: WHEREFORE, premises considered, a certification election is hereby ordered conducted among the regular rank-and-file employees of MERALCO to wit: 1. Non-managerial employees with Pay Grades VII and above; 2. Non-managerial employees of Patrol Division, Treasury Security Services Section and Secretaries; and 3. Employees prohibited from actively participating as members of the union. within 20 days from receipt hereof, subject to the usual pre-election conference with the following choices: 1. Staff and Technical, Employees Association of MERALCO (STEAM-PCWF);

2. No Union. SO ORDERED. (p. 222, Rollo) On April 4, 1989, MERALCO appealed, contending that "until such time that a judicial finding is made to the effect that they are not managerial employee, STEAM-PCWF cannot represent employees from Pay Grades VII and above, additionally reiterating the same reasons they had advanced for disqualifying respondent STEAM-PCWF. On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as follows: A. The Order of the Med-Arbiter is null and void for being in violation of Article 245 of the Labor Code; B. The Order of the Med-Arbiter violates Article 232 of the Labor Code; and C. The Order is invalid because the bargaining unit it delineated is not an appropriated (sic) bargaining unit. On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention. With the enactment of RA 6715 and the rules and regulations implementing the same, STEAM-PCWF renounced its representation of the employees in Patrol Division, Treasury Security Services Section and rank-and-file employees in Pay Grades I-VI. On September 13, 1989, the First Line Association of Meralco Supervisory Employees. (hereafter FLAMES) filed a similar petition (NCR-OD-M-9-731-89) seeking to represent those employees with Pay Grades VII to XIV, since "there is no other supervisory union at MERALCO." (p. 266,Rollo). The petition was consolidated with that of STEAM-PCWF. On November 3, 1989, the Secretary of Labor affirmed with modification, the assailed order of the Med-Arbiter, disposing as follows: WHEREFORE, premises considered, the Order appealed from is hereby affirmed but modified as far as the employees covered by Section 3, Article I of the exist CBA in the Company are concerned. Said employees shall remain in the unit of the rank-and-file already existing and may exercise their right to self organization as above enunciated. Further, the First Line Association of Meralco Supervisory Employees (FLAMES) is included as among the choices in the certification election. Let, therefore, the pertinent records of the case be immediately forwarded to the Office of origin for the conduct of the certification election. SO ORDERED. (p. 7, Rollo) MERALCO's motion for reconsideration was denied on January 16, 1990. On February 9, 1990, MERALCO filed this petition, premised on the following ground: RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF DISCRETION AND/OR IN EXCESS OF JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT: I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE ESTABLISHED INDEPENDENT, DISTINCT AND SEPARATE FROM THE EXISTING RANK-AND-FILE BARGAINING UNIT.

II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE RANK-AND-FILE EMPLOYEES. III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED TOGETHER WITH THE RANK-AND-FILE UNION AND/OR THE SUPERVISORY UNION. (p. 8, Rollo) On February 26, 1990, We issued a temporary restraining order (TRO) against the implementation of the disputed resolution. In its petition, MERALCO has relented and recognized respondents STEAM-PCWF and FLAMES' desired representation of supervisory employees from Grades VII up. However, it believes that all that the Secretary of Labor has to do is to establish a demarcation line between supervisory and managerial rank, and not to classify outright the group of employees represented by STEAM-PCWF and FLAMES as rank and file employees. In questioning the Secretary of Labor's directive allowing security guards (Treasury/Patrol Services Section) to be represented by respondents, MERALCO contends that this contravenes the provisions of the recently passed RA 6715 and its implementing rules (specifically par. 2, Sec. 1, Rule II, Book V) which disqualifies supervisory employees and security guards from membership in a labor organization of the rank and file (p. 11, Rollo). The Secretary of Labor's Resolution was obviously premised on the provisions of Art. 212, then par. (k), of the 1988 Labor Code defining "managerial" and "rank and file" employees, the law then in force when the complaint was filed. At the time, only two groups of employees were recognized, the managerial and rank and file. This explains the absence of evidence on job descriptions on who would be classified managerial employees. It is perhaps also for this reason why the Secretary of Labor limited his classification of the Meralco employees belonging to Pay Grades VII and up, to only two groups, the managerial and rank and file. However, pursuant to the Department of Labor's goal of strenghthening the constitutional right of workers to self-organization, RA 6715 was subsequently passed which reorganized the employeeranks by including a third group, or the supervisory employees, and laying down the distinction between supervisory employees and those of managerial ranks in Art. 212, renumbered par. [m], depending on whether the employee concerned has the power to lay down and execute management policies, in the case of managerial employees, or merely to recommend them, in case of supervisory employees. In this petition, MERALCO has admitted that the employees belonging to Pay Grades VII and up are supervisory (p. 10, Rollo). The records also show that STEAM-PCWF had "renounced its representation of the employees in Patrol Division, Treasury Security Service Section and rank and file employees in Pay Grades I-VI" (p. 6, Rollo); while FLAMES, on the other hand, had limited its representation to employees belonging to Pay Grades VII-XIV,generally accepted as supervisory employees, as follows: It must be emphasized that private respondent First Line Association of Meralco Supervisory Employees seeks to represent only the Supervisory Employees with Pay Grades VII to XIV. Supervisory Employees with Pay Grades VII to XIV are not managerial employees. In fact the petition itself of petitioner Manila Electric Company on page 9, paragraph 3 of the petition stated as follows, to wit:

There was no need for petitioner to prove that these employees are not rank-and-file. As adverted to above, the private respondents admit that these are not the rank-and-file but the supervisory employees, whom they seek to represent. What needs to be established is the rank where supervisory ends and managerial begins. and First Line Association of Meralco Supervisory Employees herein states that Pay Grades VII to XIV are not managerial employees. In fact, although employees with Pay Grade XV carry the Rank of Department Managers, these employees only enjoys (sic) the Rank Manager but their recommendatory powers are subject to evaluation, review and final action by the department heads and other higher executives of the company. (FLAMES' Memorandum, p. 305, Rollo) Based on the foregoing, it is clear that the employees from Pay Grades VII and up have been recognized and accepted as supervisory. On the other hand, those employees who have been automatically disqualified have been directed by the Secretary of Labor to remain in the existing labor organization for the rank and file, (the condition in the CBA deemed as not having been written into the contract, as unduly restrictive of an employee's exercise of the right to self-organization). We shall discuss the rights of the excluded employees (or those covered by Sec. 2, Art. I, MEWA-CBA later. Anent the instant petition therefore, STEAM-PCWF, and FLAMES would therefore represent supervisory employees only. In this regard, the authority given by the Secretary of Labor for the establishment of two labor organizations for the rank and file will have to be disregarded since We hereby uphold certification elections only for supervisory employees from Pay Grade VII and up, with STEAM-PCWF and FLAMES as choices. As to the alleged failure of the Secretary of Labor to establish a demarcation line for purposes of segregating the supervisory from the managerial employees, the required parameter is really not necessary since the law itself, Art. 212-m, (as amended by Sec. 4 of RA 6715) has already laid down the corresponding guidelines: Art. 212. Definitions. . . . (m) "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. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of to Book. In his resolution, the Secretary of Labor further elaborated: . . . Thus, the determinative factor in classifying an employee as managerial, supervisory or rank-and-file is the nature of the work of the employee concerned. In National Waterworks and Sewerage Authority vs. National Waterworks and Sewerage Authority Consolidated Unions (11 SCRA 766) the Supreme Court had the occasion to come out with an enlightening dissertation of the nature of the work of a managerial employees as follows:

. . . that the employee's primary duty consists of the management of the establishment or of a customarily recognized department or subdivision thereof, that he customarily and regularly directs the work of other employees therein, that he has the authority to hire or discharge other employees or that his suggestions and recommendations as to the hiring and discharging and or to the advancement and promotion or any other change of status of other employees are given particular weight, that he customarily and regularly exercises discretionary powers . . . (56 CJS, pp. 666-668. (p. 226, Rollo) We shall now discuss the rights of the security guards to self-organize. MERALCO has questioned the legality of allowing them to join either the rank and file or the supervisory union, claiming that this is a violation of par. 2, Sec. 1, Rule II, Book V of the Implementing Rules of RA 6715, which states as follows: Sec 1. Who may join unions. . . . xxx xxx xxx Supervisory employees and security guards shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own; . . . xxx xxx xxx (emphasis ours) Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c), Rule V, also of Book V of the implementing rules of RA 6715: Rule REPRESENTATION INTERNAL-UNION CONFLICTS Sec. 1. . . . Sec. 2. Who may file.Any legitimate labor organization or the employer, when requested to bargain collectively, may file the petition. The petition, when filed by a legitimate labor-organization shall contain, among others: (a) . . . (b) . . . (c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise require; and provided further, that the appropriate bargaining unit of the rank-and-file employees shall not include supervisory employees and/or security guards; xxx xxx xxx (emphasis ours) Both rules, barring security guards from joining a rank and file organization, appear to have been carried over from the old rules which implemented then Art. 245 of the Labor Code, and which provided thus: CASES V. AND

Art. 245. Ineligibility of security personnel to join any labor organization.Security guards and other personnel employed for the protection and security of the person, properties and premises of the employer shall not be eligible for membership in any labor organization. On December 24, 1986, Pres. Corazon C. Aquino issued E.O. No. 111 which eliminated the abovecited provision on the disqualification of security guards. What was retained was the disqualification of managerial employees, renumbered as Art. 245 (previously Art. 246), as follows: Art. 245. Ineligibility of managerial employees to joint any labor organization. Managerial employees are not eligible to join, assist or form any labor organization. With the elimination, security guards were thus free to join a rank and file organization. On March 2, 1989, the present Congress passed RA 6715. read as follows:
2

Section 18 thereof amended Art. 245, to

Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees.Managerial employees are not eligible to join, assist or form any labor organization.Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist, or form separate labor organizations of their own. (emphasis ours) As will be noted, the second sentence of Art. 245 embodies an amendment disqualifying supervisory employeesfrom membership in a labor organization of the rank-and-file employees. It does not include security guards in the disqualification. The implementing rules of RA 6715, therefore, insofar as they disqualify security guards from joining a rank and file organization are null and void, for being not germane to the object and purposes of EO 111 and RA 6715 upon which such rules purportedly derive statutory moorings. In Shell Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA 628, We stated: The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. (citing University of Sto. Tomas vs. Board of Tax Appeals, 93 Phil. 376). While therefore under the old rules, security guards were barred from joining a labor organization of the rank and file, under RA 6715, they may now freely join a labor organization of the rank and file or that of the supervisory union, depending on their rank. By accommodating supervisory employees, the Secretary of Labor must likewise apply the provisions of RA 6715 to security guards by favorably allowing them free access to a labor organization, whether rank and file or supervisory, in recognition of their constitutional right to self-organization. We are aware however of possible consequences in the implementation of the law in allowing security personnel to join labor unions within the company they serve. The law is apt to produce divided loyalties in the faithful performance of their duties. Economic reasons would present the employees concerned with the temptation to subordinate their duties to the allegiance they owe the union of which they are members, aware as they are that it is usually union action that obtains for them increased pecuniary benefits.

Thus, in the event of a strike declared by their union, security personnel may neglect or outrightly abandon their duties, such as protection of property of their employer and the persons of its officials and employees, the control of access to the employer's premises, and the maintenance of order in the event of emergencies and untoward incidents. It is hoped that the corresponding amendatory and/or suppletory laws be passed by Congress to avoid possible conflict of interest in security personnel. ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with modification the Resolution of the Secretary of Labor dated November 3, 1989 upholding an employee's right to self-organization. A certification election is hereby ordered conducted among supervisory employees of MERALCO, belonging to Pay Grades VII and above, using as guideliness an employee's power to either recommend or execute management policies, pursuant to Art. 212 (m), of the Labor Code, as amended by Sec. 4 of RA 6715, with respondents STEAM-PCWF and FLAMES as choices. Employees of the Patrol Division, Treasury Security Services Section and Secretaries may freely join either the labor organization of the rank and file or that of the supervisory union depending on their employee rank. Disqualified employees covered by Sec. 3, Art. I of the MEWA-CBA, shall remain with the existing labor organization of the rank and file, pursuant to the Secretary of Labor's directive: By the parties' own agreement, they find the bargaining unit, which includes the positions enumerated in Section 3, Article I of their CBA, appropriate for purposes of collective bargaining. The composition of the bargaining unit should be left to the agreement of the parties, and unless there are legal infirmities in such agreement, this Office will not substitute its judgment for that of the parties. Consistent with the story of collective bargaining in the company, the membership of said group of employees in the existing rank-and-file unit should continue, for it will enhance stability in that unit already well establish. However, we cannot approve of the condition set in Section 3, Article I of the CBA that the employees covered are automatically disqualified from becoming union members. The condition unduly restricts the exercise of the right to self organization by the employees in question. It is contrary to law and public policy and, therefore, should be considered to have not been written into the contract. Accordingly, the option to join or not to join the union should be left entirely to the employees themselves. (p. 229, Rollo) The Temporary Restraining Order (TRO) issued on February 26, 1990 is hereby LIFTED. Costs against petitioner. SO ORDERED.

COOPERATIVE RURAL BANK OF DAVAO CITY, INC., vs. PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF LABOR RELATIONS, MOLE, MANILA; FELIZARDO T. SERAPIO, MED-ARBITER DESIGNATE, REGIONAL OFFICE NO. XI, MOLE, DAVAO CITY; and FEDERATION OF FREE WORKERS G.R. No. 77951 GANCAYCO, J.: September 26, 1988

This is a Petition for certiorari under Rule 65 of the Rules of Court where the issue is whether or not the employees of a cooperative can organize themselves for purposes of collective bargaining. The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao City, Inc. is a cooperative banking corporation operating in Davao City. It is owned in part by the Government and its employees are members and co-owners of the same. The petitioner has around 16 rank-andfile employees. As of August, 1986, there was no existing collective bargaining agreement between the said employees and the establishment. On the other hand, the herein private respondent Federation of Free Workers is a labor organization registered with the Department of Labor and Employment. It is interested in representing the said employees for purposes of collective bargaining. On August 27, 1986, the private respondent filed with the Davao City Regional Office of the then Ministry of Labor and Employment a verified Petition for certification election among the rank-and-file employees of the petitioner. 1 The same was docketed as Case No. R-325 ROXI MED-UR-73-86. On September 18, 1986, the herein public respondent issued an Order granting the Petition for certification election. On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the Order of the Med-Arbiter. 2 The petitioner argues therein that, among others, a cooperative is not covered by the Rules governing certification elections inasmuch as it is not an institution operating for profit. The petitioner also adds that two of the alleged rank-and-file employees seeking the certification election are managerial employees disqualified from joining concerted labor activities. In sum, the petitioner insists that its employees are disqualified from forming labor organizations for purposes of collective bargaining. On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October 15, 1986, the petitioner filed its opposition to the said Motion. On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura FerrerCalleja issued a Resolution affirming the Order of the Med-Arbiter and dismissing the Appeal. 3 The pertinent portions of the said Resolution are as follows It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao City falls within the purview of Article 212, paragraph C of the Labor Code, acting as such in the interest of an employer. To argue otherwise would amount to closing one's eyes to the realities of today's cooperative banking institutions. .... Moreover, basic is the right of every worker in any establishment whether operated for profit or not to organize and engage in concerted activity, mutually beneficial to their interest. Such right is sacredly enshrined and protected in our fundamental law, granting every worker the right to organize into a collective group and engage in concerted activities for purposes of promoting their well being, subject only to such limitations as may be provided for by law. xxx xxx xxx As this Office has consistently ruled and applied in various cases, being a member of a cooperative organization does not preclude one from forming or joining a labor union provided that such person or persons are not among those disqualified by law. Nowhere in the records can we find any piece of evidence showing that the signatories in the petition are among those disqualified to form or join a union.

Finally, we cannot give credence to (the) employer's allegation that two of the signatories thereof, are managerial employees, since no evidence showing such fact can be found from the records. xxx xxx xxx In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said Resolution. 4 The petitioner reiterated therein its view that its employees are disqualified from forming the labor organization so contemplated. The petitioner also called attention to an Opinion rendered by then Solicitor General and Minister of Justice Estelito P. Mendoza dated August 14, 1981. 5 The Opinion states that employees of an electric cooperative who are themselves members/co-owners of the same cannot form or join labor organizations for purposes of collective bargaining. The Opinion also states that the duty to bargain exists only between an employer and his/its employees, and that an employer has no duty to bargain with his co-owners of a corporation who are also its employees. The petitioner submits that the said Opinion calls for application in the present controversy. On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by the petitioner. 6Thus, the certification election was scheduled in the morning of April 23, 1987. Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly to this Court on April 9, 1987 by way of the instant Petition for certiorari. The petitioner maintains that the public respondents both acted without jurisdiction or in excess thereof, or with grave abuse of discretion amounting to lack of jurisdiction, in allowing the certification election sought by the private respondent despite the arguments of the petitioner in opposition thereto. The petitioner reiterates its argument that employees of cooperatives who are members and co-owners of the same cannot form and join labor organizations for purposes of collective bargaining. On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor Relations from proceeding with the certification election scheduled on April 23, 1987. 7 The certification election nonetheless pushed through as scheduled for the alleged reason that the temporary restraining order was not seasonably transmitted to Davao City. 8 This court also required the respondents to file their Comment on the Petition. The respondents complied as instructed. The Office of the Solicitor General represented the public respondents. The Solicitor General intimated to this Court that the instant Petition has been rendered moot and academic inasmuch as the certification election sought to be enjoined had already been conducted. The Solicitor General added that the public respondents did not commit any jurisdictional error. 10 In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed submitted for decision. After a careful examination of the entire record of the case, We find the instant Petition meritorious. Contrary to the view espoused by the Solicitor General, this case cannot be considered moot and academic simply because the certification election sought to be enjoined went on as scheduled. The instant Petition is one for certiorari as a special civil action. Errors of jurisdiction on the part of the public respondents are alleged in the Petition itself. If the public respondents had indeed committed jurisdictional errors, the action taken by both the Med-Arbiter and the Bureau Director will be deemed

null and void ab initio. 11 And if this were so, the certification election would, necessarily, have no legal justification. The arguments raised in the instant Petition strike at the very heart of the validity of the certification election itself. We come now to the main aspect of the case. Article 243 of the Labor Code 12 enumerates who are eligible to form, join, or assist labor organizations for purposes of collective bargaining, to wit ART. 243. Coverage and employees' right to self-organization. All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining. .... The recognized exception to this enumeration is found in Article 245 of the same code, which provides for the ineligibility of managerial employees to join any labor reorganization, vizART. 245. Ineligibility of managerial employees to join any labor organization. Managerial employees are not eligible to join, assist or form any labor organization. From the foregoing provisions of law it would appear at first blush that all the rank and file employees of a cooperative who are not managerial employees are eligible to form, join or assist any labor organization of their own choosing for the purpose of collective bargaining. However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations composed primarily of small producers and of consumers who voluntarily join together to form business enterprises which they themselves own, control, and patronize." Its creation and growth were declared as a policy of the State as a means of increasing the income and purchasing power of the low-income sector of the population in order to attain a more equitable distribution of income and wealth . 13 The principles governing it are: a) Open membership"Should be voluntary and available without artificial restriction, or any social, political, racial or religious discrimination, to all persons who can make use of its services and are willing to accept responsibilities of membership;" b) Democratic control."Irrespective of the number of shares owned, each member can only cast one vote in deciding upon the affairs of the cooperative;" c) Limited interests to capital. "Share capital shall earn only limited interest, the maximum rate of interest to be established by the Department of Local Government and Community Development from time to time;" and d) Patronage refund "Net income after the interest on capital has been paid shall be redistributed among the members in proposition to their patronage." 14 While cooperatives may exercise the same rights and privileges given to persons, partnership and corporations provided under existing laws, operate business enterprises of all kinds, establish rural banks, enjoy all the privileges and incentives granted by the NACIDA Act and other government agencies to business organizations under existing laws, to expropriate idle urban or rural lands for its purposes, to own and dispose of properties, enter into contracts, to sue and be sued and perform other acts necessary to pursue its objectives, 15 such cooperatives enjoy such privileges as:

a) Exemption from income tax and sales taxes; b) Preferential right to supply rice, corn and other grains, and other commodities produced by them to State agencies administering price stabilization program; and c) In appropriate cases, exemption from application of minimum wage law upon recommendation of the Bureau of Cooperative Development subject to the approval of the Secretary of Labor. 16 A cooperative development loan fund has been created for the development of the cooperative movement. 17 It may be, further stated that the Department of Local Govemment and Community Development through the Bureau of Cooperative Development is vested with full authority to promulgate rules and regulations to cover the promotion, organization, registration, regulation and supervision of all types of cooperatives. 18 Electric cooperatives, however, are under the regulation and supervision of the National Electrification Ad. Administration, 19 while it is the Monetary Board of the Central Bank that has exclusive responsibility and authority over the banking functions and operations of cooperative banks . 20 A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others are its employees. As above stated, irrespective of the number of shares owned by each member they are entitled to cast one vote each in deciding upon the affairs of the cooperative. Their share capital earn limited interests. They enjoy special privileges as exemption from income tax and sales taxes, preferential right to supply their products to State agencies and even exemption from the minimum wages laws. An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the cooperative. 21 However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country. 22 The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld insofar as it refers to the employees of petitioner who are not members or co-owners of petitioner. It cannot extend to the other employees who are at the same time its members or co-owners. The Court upholds the findings of said public respondent that no persuasive evidence has been presented to show that two of the signatories in the petition for certification election are managerial employees who under the law are disqualified from pursuing union activities. WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent Pura Ferrer-Calleja, Director, Bureau of Labor Relations, of February 11, 1987 is hereby MODIFIED to the effect that only the rank and file employees of petitioner who are not its members or co-owners are

entitled to self-organization, collective bargaining, and negotiations, while the other employees who are members or co-owners thereof can not enjoy such right. CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY, JOSE HICETA, REGINA ILON, GILDERBRANDO GISON, EPIFANIO MUYCO, EMILIANO OQUINA, ET AL., respondents. G.R. No. 106246 September 1, 1994 PUNO, J.: Private respondents are employees of petitioner, an electric cooperative company. They have worked for petitioner from a high of four and one half (4 1/2) years to a low of ten (10) months. Their work forms an integral part of the business of petitioner. Despite the length of their service, they were extended permanent appointments only on July 13, 1988, retroactive to June 16, 1988. Petitioner has a collective bargaining agreement with its employees' union for a duration of three (3) years from April 1, 1987 up to March 31, 1990. Article VII of the agreement provides for the following wage increase: Sec. 1. The Electric Cooperative hereby agrees to grant all employees covered by this agreement across the board increase on the basic monthly salary of P350.00 for the first year, effective April 1, 1987, in the following manner: 1. Partial payment of P200.00 monthly to start July 1, 1987 to March 31, 1988. 2. Differentials of : a. P350.00, for the period covering April 1, 1987 to June 30, 1987 plus and/or the additional of b. P150.00 for the period covering July 1, 1987 to March 31, 1988 shall be paid in three successive monthly installments starting April 1988. The collective bargaining agreement covers the following employees: ARTICLE I COVERAGE All the permanent employees and workers of the Central Negros Electric Cooperative, Inc. (CENECO), hereinafter referred to as the Electric Cooperative, as covered, except the following: 1. Those performing managerial functions, confidential employees regardless of status and those whom the Electric

Cooperative and the Union may individually agree upon to be excluded. 2. Temporary and probationary employees or those whose period of employment is fixed and/or who are employed on a trial basis for a definite period; and those who are under special contract. Though they were made permanent in 1988, private respondents demanded payment of the three hundred fifty pesos (P350.00) wage increase for the year 1987 as provided by the above collective bargaining agreement. Petitioner denied their demand. As called for by the parties' collective bargaining agreement, the demand was treated as a grievance. The grievance remained unsettled until their collective bargaining agreement expired on April 1, 1990. Private respondents then filed their complaint with the Labor Arbiter on May 18, 1990. Labor Arbiter Cesar D. Sideno of the Regional Arbitration Branch No. VI, Bacolod City dismissed the complaint for lack of merit on March 12, 1991. His Decision was, however, reversed by the NLRC, 4th Division, Cebu City, on September 18, 1991. 1 It held that: (1) private respondents became regular employees six (6) months after hiring, and hence, entitled to the across-the-board wage increase for the first year of the collective bargaining agreement starting from April 1, 1987 to March 1988; and (2) private respondents' complaint has not prescribed. In this petition for certiorari, petitioner raises the following issues: 1. WHETHER OR NOT THE PRIVATE RESPONDENTS WERE COVERED BY THE WAGE INCREASES OF P350.00 A MONTH DURING THE FIRST YEAR OF THE COLLECTIVE BARGAINING AGREEMENT; 2. WHETHER OR NOT ARTICLES 280 AND 281 OF THE LABOR CODE WILL APPLY; 3. WHETHER OR NOT THE CAUSE OF ACTION OF THE PRIVATE RESPONDENTS HAS ALREADY PRESCRIBED; 4. WHETHER OR NOT THE PRIVATE RESPONDENTS FAILED TO EXHAUST THE REQUIRED REMEDIES AVAILABLE TO THEM PURSUANT TO THE GRIEVANCE PROCEDURE AS STIPULATED IN THE COLLECTIVE BARGAINING AGREEMENT. Petitioner contends that its collective bargaining agreement clearly excludes "temporary or probationary employees . . ." It stresses that private respondents were extended appointments as permanent workers only on July 13, 1988 retroactive to June 16, 1988. The contention overlooks Articles 280 and 281 of the Labor Code,viz.: Art. 280. Regular and Casual Employment The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or

trade of the employer, except where the 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 services to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) Art. 281. Probationary employment Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. It cannot be denied that private respondents attained the status of regular employees even before 1988. Firstly, they perform activities which are necessary or desirable in the usual business of the petitioner as an electric cooperative. They are meter inspectors, PABX operators, utility men, disconnectors, linemen, messengers, secretaries, clerks, typists, plumbers, mechanics, draftsmen, HRD personnel, collectors and electricians. Indeed, their appointments would not have been regularized if their jobs were not indispensable in the daily operation of the petitioner's business. Secondly, they had worked for petitioner for more than six (6) months before they were given regular appointments. They had been hired on various dates starting from 1984. Petitioner's insistence that private respondents became regular employees only when they were extended appointments on July 13, 1988 is deplorable. Articles 280 and 281 of our Labor Code, supra, put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum. Thus, Article 281, supra, placed a ceiling on probationary employment, i.e., not to exceed six (6) months from the date the employee started working. On the other hand, Article 280, supra, defined when an employment shall be regular notwithstanding any written agreement to the contrary. In other words, the graduation of an employee from casual or probationary to regular does not depend on the arbitrary will of his employer. Rightly so, for if there is any group of employees that needs robust protection from the exploitation of employers, it is the casuals and probationaries. Usually the lowliest of the lowly, they are most vulnerable to abuses of management for they would rather suffer in silence than risk losing their jobs. The Labor Code has come to their succor by stopping schemes to eternalize their temporary status. Petitioner's too niggard a regard to the rights of its employees becomes more evident with its contention that even if private respondents were to be considered regular employees under Article 280 of the Labor Code, still, they can only claim security of tenure but not the benefits of the said collective bargaining agreement. Petitioner's contention does not convince for it will result in an anomalous situation where we have to categorize regular employees into two (2) kinds one entitled to security of tenure plus the benefits of the parties' collective bargaining agreement, and the

other, entitled to security of tenure alone. Such a classification finds no sanction under the Labor Code for it distinguishes where there is no difference. Not even the collective bargaining agreement of the parties justifies the submission. For reasonably read and interpreted, the parties collective bargaining agreement excludes only three classes, viz.: 1. Those performing managerial functions, confidential employees regardless of status and those whom the ELECTRIC COOPERATIVE and the UNION may individually agree upon to be excluded. 2. Temporary or probationary employees or those whose period of employment is fixed and/or who are employed on a trial basis for a definite period; and those who are under special contract. 3. Casuals and Extra Laborers. Private respondents do not belong to the excluded categories. Their employments had been regularized. There is no reason to deny them the benefits granted by their collective bargaining agreement when they contributed to the profits of management through their labors. Petitioner also clings to the contention that the claim of private respondents has already prescribed. It is alleged that the cause of action of private respondents accrued on April 1, 1987, the date of the effectivity of the collective bargaining agreement while their complaint was filed only on May 18, 1990. Our attention is called to Article 291 of the Labor Code which provides that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued. We hold that the claim has not prescribed. Within the three-year prescriptive period, private respondents submitted their claim to the grievance committee as provided for in their collective bargaining agreement and as called for by our laws. Thus Articles 260 and 261 of the Labor Code provide, to wit: Art. 260. Grievance Machinery and Voluntary Arbitration. The parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and resolution of grievances arising from the interpretation or implementation of their Collective Bargaining Agreement and those arising from the interpretation or enforcement of company personnel policies. All grievances submitted to the grievance machinery which are not settled within seven (7) calendar days from the date of its submission shall automatically be referred to voluntary arbitration prescribed in the Collective Bargaining Agreement. xxx xxx xxx Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. 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 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 Voluntary Arbitration provided in the Collective Bargaining Agreement. Likewise, Rule XI, Omnibus Rules Implementing the Labor Code, provides: Sec. 1. Jurisdiction of voluntary arbitrator or panel of voluntary arbitrators. The voluntary arbitrator or panel of voluntary arbitrators named in the collective bargaining agreement shall have exclusive and original jurisdiction to hear and decide all grievances arising from the implementation or interpretation of the collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies which remain unresolved after exhaustion of the grievance procedure. The voluntary arbitrator or panel of voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practice and bargaining deadlocks. Sec. 2. Referral of cases to voluntary arbitration. All grievances unsettled or unresolved within seven (7) calendar days from the date of its submission for resolution to the last step of the grievance machinery shall automatically be referred to voluntary arbitration prescribed in the collective bargaining agreement. The Commission, its regional branches 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 appropriate grievance machinery or voluntary arbitration provided in the collective bargaining agreement. In case issues arising from the interpretation or implementing of the collective bargaining agreement or those arising from the interpretation or enforcement of company personnel policies are raised in notices of strikes or lockouts or requests for preventive mediation, the regional branch of the Board shall advise the parties to submit the issue/s to voluntary arbitration. As noted by public respondent, the grievance of private respondents remained unsettled until the parties' collective bargaining agreement expired on April 1, 1990. With the expiration of their collective bargaining agreement, its provision requiring the parties to resort to voluntary arbitration ceased to have any effect at all. Consequently, private respondents lost no time in

filing their complaint with the labor arbiter on May 18, 1990. It is obvious that private respondents did not sleep on their right for more than three years as alleged by the petitioner and, hence, prescription will not lie against them. IN VIEW WHEREOF, the petition is dismissed there being no grave abuse of discretion on the part of public respondent in its Decision of September 18, 1991. Costs against petitioner. SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Mendoza, JJ., concur.