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[G.R. No. 179652. March 6, 2012.]


PEOPLE'S BROADCASTING
PHILS., INC.), petitioner, vs.
DEPARTMENT OF LABOR
REGIONAL DIRECTOR, DOLE
JUEZAN, respondents.

SERVICE (BOMBO RADYO


THE SECRETARY OF THE
AND EMPLOYMENT, THE
REGION VII, and JANDELEON

RESOLUTION

VELASCO, JR., J :
p

In a Petition for Certiorari under Rule 65, petitioner People's Broadcasting Service, Inc.
(Bombo Radyo Phils., Inc.) questioned the Decision and Resolution of the Court of
Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in C.A. G.R.
CEB-SP No. 00855.
cSaCDT

Private respondent Jandeleon Juezan filed a complaint against petitioner with the
Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City, for
illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay
for holiday and rest day and illegal diminution of benefits, delayed payment of wages and
noncoverage of SSS, PAG-IBIG and Philhealth. 1 After the conduct of summary
investigations, and after the parties submitted their position papers, the DOLE Regional
Director found that private respondent was an employee of petitioner, and was entitled to
his money claims. 2 Petitioner sought reconsideration of the Director's Order, but failed.
The Acting DOLE Secretary dismissed petitioner's appeal on the ground that petitioner
submitted a Deed of Assignment of Bank Deposit instead of posting a cash or surety
bond. When the matter was brought before the CA, where petitioner claimed that it had
been denied due process, it was held that petitioner was accorded due process as it had
been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction
over the matter, as the jurisdictional limitation imposed by Article 129 of the Labor Code
on the power of the DOLE Secretary under Art. 128 (b) of the Code had been repealed by
Republic Act No. (RA) 7730. 3
In the Decision of this Court, the CA Decision was reversed and set aside, and the
complaint against petitioner was dismissed. The dispositive portion of the Decision reads
as follows:

WHEREFORE, the petition is GRANTED. The Decision dated 26 October


2006 and the Resolution dated 26 June 2007 of the Court of Appeals in C.A.
G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the
then Acting Secretary of the Department of Labor and Employment dated 27
January 2005 denying petitioner's appeal, and the Orders of the Director, DOLE
Regional Office No. VII, dated 24 May 2004 and 27 February 2004,
respectively, are ANNULLED. The complaint against petitioner is
DISMISSED. 4

The Court found that there was no employer-employee relationship between petitioner
and private respondent. It was held that while the DOLE may make a determination of
the existence of an employer-employee relationship, this function could not be coextensive with the visitorial and enforcement power provided in Art. 128 (b) of the Labor
Code,as amended by RA 7730. The National Labor Relations Commission (NLRC) was
held to be the primary agency in determining the existence of an employer-employee
relationship. This was the interpretation of the Court of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b). 5
From this Decision, the Public Attorney's Office (PAO) filed a Motion for Clarification
of Decision (with Leave of Court). The PAO sought to clarify as to when the visitorial
and enforcement power of the DOLE be not considered as co-extensive with the power to
determine the existence of an employer-employee relationship. 6 In its Comment, 7 the
DOLE sought clarification as well, as to the extent of its visitorial and enforcement
power under the Labor Code, as amended.
SIDTCa

The Court treated the Motion for Clarification as a second motion for reconsideration,
granting said motion and reinstating the petition. 8 It is apparent that there is a need to
delineate the jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code,the power of the DOLE and its duly authorized hearing
officers to hear and decide any matter involving the recovery of wages and other
monetary claims and benefits was qualified by the proviso that the complaint not include
a claim for reinstatement, or that the aggregate money claims not exceed PhP5,000. RA
7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the
Secretary of Labor, did away with the PhP5,000 limitation, allowing the DOLE Secretary
to exercise its visitorial and enforcement power for claims beyond PhP5,000. The only
qualification to this expanded power of the DOLE was only that there still be an existing
employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been
terminated or it has not existed from the start, the DOLE has no jurisdiction. Under Art.
128 (b) of the Labor Code,as amended by RA 7730, the first sentence reads,
"Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee still exists, the Secretary of Labor

and Employment or his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions of this Code and other
labor legislation based on the findings of labor employment and enforcement officers or
industrial safety engineers made in the course of inspection." It is clear and beyond
debate that an employer-employee relationship must exist for the exercise of the visitorial
and enforcement power of the DOLE. The question now arises, may the DOLE make a
determination of whether or not an employer-employee relationship exists, and if so, to
what extent?
The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places a
limitation upon the power of the DOLE, that is, the determination of the existence of an
employer-employee relationship cannot be co-extensive with the visitorial and
enforcement power of the DOLE. But even in conceding the power of the DOLE to
determine the existence of an employer-employee relationship, the Court held that the
determination of the existence of an employer-employee relationship is still primarily
within the power of the NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the
existence of an employer-employee relationship. No procedure was laid down where the
DOLE would only make a preliminary finding, that the power was primarily held by the
NLRC. The law did not say that the DOLE would first seek the NLRC's determination of
the existence of an employer-employee relationship, or that should the existence of the
employer-employee relationship be disputed, the DOLE would refer the matter to the
NLRC. The DOLE must have the power to determine whether or not an employeremployee relationship exists, and from there to decide whether or not to issue compliance
orders in accordance with Art. 128 (b) of the Labor Code,as amended by RA 7730.
aCASEH

The DOLE, in determining the existence of an employer-employee relationship, has a


ready set of guidelines to follow, the same guide the courts themselves use. The elements
to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; (4)
the employer's power to control the employee's conduct. 9 The use of this test is not
solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can
utilize the same test, even in the course of inspection, making use of the same evidence
that would have been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE
must be respected. The expanded visitorial and enforcement power of the DOLE granted
by RA 7730 would be rendered nugatory if the alleged employer could, by the simple

expedient of disputing the employer-employee relationship, force the referral of the


matter to the NLRC. The Court issued the declaration that at least a prima facie showing
of the absence of an employer-employee relationship be made to oust the DOLE of
jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is
the DOLE that will weigh it, to see if the same does successfully refute the existence of
an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it
takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or it
appears, upon review, that no employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation
would eliminate the prospect of competing conclusions between the DOLE and the
NLRC. The prospect of competing conclusions could just as well have been eliminated
by according respect to the DOLE findings, to the exclusion of the NLRC, and this We
believe is the more prudent course of action to take.
This is not to say that the determination by the DOLE is beyond question or review.
Suffice it to say, there are judicial remedies such as a petition for certiorari under Rule
65 that may be availed of, should a party wish to dispute the findings of the DOLE.
It must also be remembered that the power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily result in an affirmative finding. The
DOLE may well make the determination that no employer-employee relationship exists,
thus divesting itself of jurisdiction over the case. It must not be precluded from being able
to reach its own conclusions, not by the parties, and certainly not by this Court.
Under Art. 128 (b) of the Labor Code,as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC.
There is a view that despite Art. 128 (b) of the Labor Code,as amended by RA 7730,
there is still a threshold amount set by Arts. 129 and 217 of the Labor Code when money
claims are involved, i.e., that if it is for PhP5,000 and below, the jurisdiction is with the
regional director of the DOLE, under Art. 129, and if the amount involved exceeds
PhP5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that
despite the wording of Art. 128 (b), this would only apply in the course of regular
inspections undertaken by the DOLE, as differentiated from cases under Arts. 129 and
217, which originate from complaints. There are several cases, however, where the Court
has ruled that Art. 128 (b) has been amended to expand the powers of the DOLE
Secretary and his duly authorized representatives by RA 7730. In these cases, the Court

resolved that the DOLE had the jurisdiction, despite the amount of the money claims
involved. Furthermore, in these cases, the inspection held by the DOLE regional director
was prompted specifically by a complaint. Therefore, the initiation of a case through a
complaint does not divest the DOLE Secretary or his duly authorized representative of
jurisdiction under Art. 128 (b).
CAcEaS

To recapitulate, if a complaint is brought before the DOLE to give effect to the labor
standards provisions of the Labor Code or other labor legislation, and there is a finding
by the DOLE that there is an existing employer-employee relationship, the DOLE
exercises jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no
employer-employee relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under Art. 217 (3) of the Labor
Code,which provides that the Labor Arbiter has original and exclusive jurisdiction over
those cases involving wages, rates of pay, hours of work, and other terms and conditions
of employment, if accompanied by a claim for reinstatement. If a complaint is filed with
the NLRC, and there is still an existing employer-employee relationship, the jurisdiction
is properly with the DOLE. The findings of the DOLE, however, may still be questioned
through a petition for certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an
employer-employee relationship has been subjected to review by this Court, with the
finding being that there was no employer-employee relationship between petitioner and
private respondent, based on the evidence presented. Private respondent presented selfserving allegations as well as self-defeating evidence. 10 The findings of the Regional
Director were not based on substantial evidence, and private respondent failed to prove
the existence of an employer-employee relationship. The DOLE had no jurisdiction over
the case, as there was no employer-employee relationship present. Thus, the dismissal of
the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED,
with the MODIFICATION that in the exercise of the DOLE's visitorial and enforcement
power, the Labor Secretary or the latter's authorized representative shall have the power
to determine the existence of an employer-employee relationship, to the exclusion of the
NLRC.
SO ORDERED.
Corona, C.J., Carpio, Leonardo-de Castro, Peralta, Bersamin, Abad, Villarama, Jr.,
Perez, Mendoza, Sereno, Reyes and Perlas-Bernabe, JJ., concur.
Brion, J., see Concurring Opinion (In the Result).

Del Castillo, J., is on official leave.

Separate Opinions
BRION, J., concurring:
I concur in the result in affirming with modification the Court's Decision of May 8,
2009. This Decision originally dismissed respondent Jandeleon Juezan's money claims
against the petitioner People's Broadcasting Service (Bombo Radyo Phils., Inc.). The
present Resolution still affirms the ruling in favor of the petitioner, but more importantly
to me, it recognizes the validity of the Department of Labor and Employment's (DOLE's)
plenary power under Article 128 (b) of the Labor Code,as amended by Republic Act No.
7730, including its power to determine the existence of employer-employee relationship
in the exercise of its Article 128 (b) powers.
ACDIcS

Background
The case arose when the DOLE Regional Office No. VII conducted an inspection of
Bombo Radyo's premises in response to Juezan's money claims against the broadcasting
company, resulting in an order for Bombo Radyo to rectify/restitute the labor standards
violations discovered during the inspection. Bombo Radyo failed to make any
rectification or restitution, prompting the DOLE to conduct a summary investigation.
Bombo Radyo reiterated its position, made during the inspection, that Juezan was not its
employee. Both parties submitted evidence to support their respective positions.
DOLE Director Rodolfo M. Sabulao found Juezan to be an employee of Bombo Radyo.
Consequently, Director Sabulao ordered Bombo Radyo to pay Juezan P203,726.30
representing his demanded money claims. Bombo Radyo moved for reconsideration and
submitted additional evidence, but Director Sabulao denied the motion. Bombo Radyo
then appealed to the DOLE Secretary, insisting that Juezan was not its employee as he
was a drama talent hired on a per drama basis. The Acting DOLE Secretary dismissed the
appeal for non-perfection due to Bombo Radyo's failure to put a cash or surety bond, as
required by Article 128 (b) of the Labor Code.
Bombo Radyo went to the Court of Appeals (CA) through a petition for certiorari under
Rule 65 of the Rules of Court. The CA dismissed the petition for lack of merit. Bombo
Radyo then sought relief from this Court, likewise through a Rule 65 petition, contending
that the CA committed grave abuse of discretion in dismissing the petition. It justified its
recourse to a petition for certiorari instead of a Rule 45 appeal by claiming that there was
no appeal or any plain and adequate remedy available to it in the ordinary course of law.

On May 8, 2009, the Court's Second Division rendered a Decision reversing the CA
rulings and dismissing Juezan's complaint. It reviewed the evidence and found that there
was no employer-employee relationship between Juezan and Bombo Radyo. The Court
overruled the CA's recognition of the DOLE's power to determine the existence of
employer-employee relationship in a labor standards case under Article 128 (b) of
the Labor Code. It stressed that the power to determine the existence of employeremployee relationship is primarily lodged with the National Labor Relations Commission
(NLRC) based on the clause "in cases where the relationship of employer-employee still
exists" in Article 128 (b).
cSCADE

The Dissent
The May 8, 2009 Court Decision was not unanimous. I wrote a Dissent and was joined by
Justice Conchita Carpio Morales. I took strong exception to the Court's Decision for:
1. taking cognizance of Bombo Radyo's Rule 65 petition for certiorari despite the fact
that a Rule 45 appeal (petition for review on certiorari) was available to the company and
would have been the proper recourse since errors of law against the CA were raised;
2. allowing a Deed of Assignment of Bank Deposits as a substitute for a cash or surety
bond in perfecting an appeal to the Labor Secretary, in violation of Article 128 (b) of the
Labor Code which requires only a cash or surety bond;
3. re-examining the evidence and finding that there was no employer-employee
relationship between Juezan and Bombo Radyo, thereby reversing the DOLE Regional
Director's findings which had already lapsed into finality in view of the non-perfection of
the appeal;
4. holding that while the Regional Director and the DOLE Secretary may preliminarily
determine the existence of an employer-employee relationship in a labor standards case,
they can be divested of jurisdiction over the issue by a mere prima facie showing of an
absence of an employer-employee relationship.
The Public Attorney's Office (PAO) moved, with leave of court, to clarify the Decision
on the question of when the visitorial and enforcement power of the DOLE can be
considered co-extensive or not co-extensive with the power to determine the existence of
an employer-employee relationship. The DOLE, in its Comment, also sought to clarify
the extent of its visitorial and enforcement power under the Labor Code.
The Court, treating the Motion for Clarification as a Second Motion for Reconsideration,
granted the motion and reinstated the petition. 1
The Court's Ruling

In a reversal of position, the present Resolution now recognizes that the


determination of the existence of an employer-employee relationship by the DOLE,
in the exercise of its visitorial and enforcement power under Article 128 (b) of the
Labor Code,is entitled to full respect and must be fully supported. It categorically
states:
ICDSca

No limitation in the law was placed upon the power of the DOLE to determine
the existence of an employer-employee relationship. No procedure was laid
down where the DOLE would only make a preliminary finding, that the power
was primarily held by the NLRC. The law did not say that the DOLE would
first seek the NLRC's determination of the existence of an employer-employee
relationship, or that should the existence of the employer-employee relationship
be disputed, the DOLE would refer the matter to the NLRC. The DOLE must
have the power to determine whether or not an employer-employee relationship
exists, and from there to decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code,as amended by RA 7730. 2
The determination of the existence of an employer-employee relationship by the
DOLE must be respected. The expanded visitorial and enforcement power of
the DOLE granted by RA 7730 would be rendered nugatory if the alleged
employer could, by the simple expedient of disputing the employer-employee
relationship, force the referral of the matter to the NLRC. The Court issued the
declaration that at least a prima facie showing of the absence of an employeremployee relationship be made to oust the DOLE of jurisdiction. But it is
precisely the DOLE that will be faced with that evidence, and it is the DOLE
that will weigh it, to see if the same does successfully refute the existence of an
employer-employee relationship. 3
This is not to say that the determination by the DOLE is beyond question or
review. Suffice it to say, there are judicial remedies such as a petition for
certiorari under Rule 65 that may be availed of, should a party wish to dispute
the findings of the DOLE. 4 (underscoring ours)

In short, the Court now recognizes that the DOLE has the full power to determine
the existence of an employer-employee relationship in cases brought to it under
Article 128 (b) of the Labor Code.This power is parallel and not subordinate to that
of the NLRC.
Our present ruling on the authority of the DOLE with respect to Article 128 (b) of the
Labor Code is, to my mind, a very positive development that cannot but benefit our
working masses, the vast majority of whom "are not organized and, therefore, outside the
protective mantle of collective bargaining." 5
It should be welcome to the DOLE, too, as it will greatly boost its visitorial and
enforcement power, and serve as an invaluable tool in its quest to ensure that workers

enjoy minimum terms and conditions of employment. The DOLE's labor inspection
program can now proceed without being sidetracked by unscrupulous employers who
could, as the Resolution acknowledges, render nugatory the "expanded visitorial and
enforcement power of the DOLE granted by RA 7730 . . . by the simple expedient of
disputing the employer-employee relationship [and] force the referral of the matter to the
NLRC." 6
But our Resolution does not fully go the DOLE's way. The Court, at the same time,
confirms its previous finding that no employer-employee relationship exists between
Juezan and Bombo Radyo based on the evidence presented, 7 and that a Deed of
Assignment of Bank Deposits can be a substitute for a cash or surety bond in perfecting
an appeal to the Labor Secretary.
I continue to entertain strong reservations against the validity of these rulings,
particularly the ruling on the Court's acceptance of a Deed of Assignment of Bank
Deposits to perfect an appeal to the Labor Secretary; this mode directly contravenes the
express terms of Article 128 (b) of the Labor Code which requires only a cash or surety
bond. I do hope that the Court will consider this ruling an isolated one applicable
only to the strict facts obtaining in the present case as this is a step backward in the
DOLE's bid for an orderly and efficient delivery of labor justice.
cHCaIE

In light of these reservations, I cannot fully concur with the present Resolution and must
only "concur in the result."
(People's Broadcasting Service v. Secretary of the Department of Labor and
Employment, G.R. No. 179652 (Resolution), [March 6, 2012], 683 PHIL 509-526)
|||

SECOND DIVISION
[G.R. No. 152396. November 20, 2007.]
EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner,
vs. THE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA,
REGIONAL DIRECTOR BRENDA A. VILLAFUERTE,
ALEXANDER POCDING, FIDEL BALANGAY, BUAGEN CLYDE,
DENNIS EPI, DAVID MENDOZA, JR., GABRIEL TAMULONG,
ANTON PEDRO, FRANCISCO PINEDA, GASTON DUYAO,
HULLARUB, NOLI DIONEDA, ATONG CENON, JR., TOMMY
BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY
MINO, ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES,
R. D. ALEJO, and P. C. DINTAN, respondents.

DECISION

CARPIO, J :
p

The Case
This is a petition for review 1 with prayer for the issuance of a temporary restraining
order or writ of preliminary injunction of the 29 May 2001 Decision 2 and the 26
February 2002 Resolution 3 of the Court of Appeals in CA-G.R. SP No. 57653. The 29
May 2001 Decision of the Court of Appeals affirmed the 4 October 1999 Order of the
Secretary of Labor in OS-LS-04-4-097-280. The 26 February 2002 Resolution denied the
motion for reconsideration.
The Facts
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing
security services while private respondents are EBVSAI's employees assigned to the
National Power Corporation at Ambuklao Hydro Electric Plant, Bokod, Benguet
(Ambuklao Plant).
On 20 February 1996, private respondents led by Alexander Pocding (Pocding) instituted
a complaint 4 for underpayment of wages against EBVSAI before the Regional Office of
the Department of Labor and Employment (DOLE).
On 7 March 1996, the Regional Office conducted a complaint inspection at the
Ambuklao Plant where the following violations were noted: (1) non-presentation of

records; (2) non-payment of holiday pay; (3) non-payment of rest day premium; (4)
underpayment of night shift differential pay; (5) non-payment of service incentive leave;
(6) underpayment of 13th month pay; (7) no registration; (8) no annual medical report;
(9) no annual work accidental report; (10) no safety committee; and (11) no trained first
aider. 5 On the same date, the Regional Office issued a notice of hearing 6 requiring
EBVSAI and private respondents to attend the hearing on 22 March 1996. Other hearings
were set for 8 May 1996, 27 May 1996 and 10 June 1996.
On 19 August 1996, the Director of the Regional Office (Regional Director) issued an
Order, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent EX-BATAAN VETERANS
SECURITY AGENCY is hereby ORDERED to pay the computed
deficiencies owing to the affected employees in the total amount of SEVEN
HUNDRED SIXTY THREE THOUSAND NINE HUNDRED NINETY
SEVEN PESOS and 85/PESOS within ten (10) calendar days upon receipt
hereof. Otherwise, a Writ of Execution shall be issued to enforce compliance of
this Order.
SEACTH

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.

NAME
ALEXANDER POCDING
FIDEL BALANGAY
BUAGEN CLYDE
DENNIS EPI
DAVID MENDOZA, JR.
GABRIEL TAMULONG
ANTON PEDRO
FRANCISCO PINEDA
GASTON DUYAO
HULLARUB
NOLI D[EO]NIDA
ATONG CENON, JR.
TOMMY BAUCAS
WILIAM PAPSONGAY
RICKY DORIA
GEOFREY MINO
ORLANDO R[IL]LASE
SIMPLICO TELLO
NOCES, M.G.
ALEJO, R.D.
D[I]NTAN, P.C.
TOTAL

xxx xxx xxx

DEFICIENCY
P36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85
36,380.85

P763,997.85
=========

SO ORDERED. 7

EBVSAI filed a motion for reconsideration 8 and alleged that the Regional Director does
not have jurisdiction over the subject matter of the case because the money claim of each
private respondent exceeded P5,000. EBVSAI pointed out that the Regional Director
should have endorsed the case to the Labor Arbiter.
In a supplemental motion for reconsideration, 9 EBVSAI questioned the Regional Director's
basis for the computation of the deficiencies due to each private respondent.

In an Order 10 dated 16 January 1997, the Regional Director denied EBVSAI's motion
for reconsideration and supplemental motion for reconsideration. The Regional Director
stated that, pursuant to Republic Act No. 7730 (RA 7730), 11 the limitations under
Articles 129 12 and 217 (6) 13 of the Labor Code no longer apply to the Secretary of
Labor's visitorial and enforcement powers under Article 128 (b). 14 The Secretary of
Labor or his duly authorized representatives are now empowered to hear and decide, in a
summary proceeding, any matter involving the recovery of any amount of wages and
other monetary claims arising out of employer-employee relations at the time of the
inspection.
EBVSAI appealed to the Secretary of Labor.
The Ruling of the Secretary of Labor
In an Order 15 dated 4 October 1999, the Secretary of Labor affirmed with modification
the Regional Director's 19 August 1996 Order. The Secretary of Labor ordered that the
P1,000 received by private respondents Romeo Alejo, Atong Cenon, Jr., Geofrey Mino,
Dennis Epi, and Ricky Doria be deducted from their respective claims. The Secretary of
Labor ruled that, pursuant to RA 7730, the Court's decision in the Servando 16 case is no
longer controlling insofar as the restrictive effect of Article 129 on the visitorial and
enforcement power of the Secretary of Labor is concerned.
The Secretary of Labor also stated that there was no denial of due process because
EBVSAI was accorded several opportunities to present its side but EBVSAI failed to
present any evidence to controvert the findings of the Regional Director. Moreover, the
Secretary of Labor doubted the veracity and authenticity of EBVSAI's documentary
evidence. The Secretary of Labor noted that these documents were not presented at the
initial stage of the hearing and that the payroll documents did not indicate the periods
covered by EBVSAI's alleged payments.
THCSAE

EVBSAI filed a motion for reconsideration which was denied by the Secretary of Labor
in his 3 January 2000 Order. 17
EBVSAI filed a petition for certiorari before the Court of Appeals.

The Ruling of the Court of Appeals


In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and affirmed
the Secretary of Labor's decision. The Court of Appeals adopted the Secretary of Labor's
ruling that RA 7730 repealed the jurisdictional limitation imposed by Article 129 on
Article 128 of the Labor Code.The Court of Appeals also agreed with the Secretary of
Labor's finding that EBVSAI was accorded due process.
The Court of Appeals also denied EBVSAI's motion for reconsideration in its 26
February 2002 Resolution.
Hence, this petition.
The Issues
This case raises the following issues:
1.Whether the Secretary of Labor or his duly authorized representatives
acquired jurisdiction over EBVSAI; and
2.Whether the Secretary of Labor or his duly authorized representatives have
jurisdiction over the money claims of private respondents which exceed
P5,000.
TSAHIa

The Ruling of the Court


The petition has no merit.
On the Regional Director's Jurisdiction over EBVSAI
EBVSAI claims that the Regional Director did not acquire jurisdiction over EBVSAI
because he failed to comply with Section 11, Rule 14 of the 1997 Rules of Civil
Procedure. 18 EBVSAI points out that the notice of hearing was served at the Ambuklao
Plant, not at EBVSAI's main office in Makati, and that it was addressed to Leonardo
Castro, Jr., EBVSAI's Vice-President.
The Rules on the Disposition of Labor Standards Cases in the Regional Offices 19 (rules)
specifically state that notices and copies of orders shall be served on the parties or their
duly authorized representatives at their last known address or, if they are represented by
counsel, through the latter. 20 The rules shall be liberally construed 21 and only in the
absence of any applicable provision will the Rules of Court apply in a suppletory
character. 22

In this case, EBVSAI does not deny having received the notices of hearing. In fact, on 29
March and 13 June 1996, Danilo Burgos and Edwina Manao, detachment commander
and bookkeeper of EBVSAI, respectively, appeared before the Regional Director. They
claimed that the 22 March 1996 notice of hearing was received late and manifested that
the notices should be sent to the Manila office. Thereafter, the notices of hearing were
sent to the Manila office. They were also informed of EBVSAI's violations and were
asked to present the employment records of the private respondents for verification. They
were, moreover, asked to submit, within 10 days, proof of compliance or their position
paper. The Regional Director validly acquired jurisdiction over EBVSAI. EBVSAI can
no longer question the jurisdiction of the Regional Director after receiving the notices of
hearing and after appearing before the Regional Director.
On the Regional Director's Jurisdiction over the Money Claims
EBVSAI maintains that under Articles 129 and 217 (6) of the Labor Code,the Labor
Arbiter, not the Regional Director, has exclusive and original jurisdiction over the case
because the individual monetary claim of private respondents exceeds P5,000. EBVSAI
also argues that the case falls under the exception clause in Article 128 (b) of the Labor
Code.EBVSAI asserts that the Regional Director should have certified the case to the
Arbitration Branch of the National Labor Relations Commission (NLRC) for a full-blown
hearing on the merits.
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:
While it is true that under Articles 129 and 217 of the Labor Code,the Labor
Arbiter has jurisdiction to hear and decide cases where the aggregate money
claims of each employee exceeds P5,000.00, said provisions of law do not
contemplate nor cover the visitorial and enforcement powers of the Secretary of
Labor or his duly authorized representatives.
Rather, said powers are defined and set forth in Article 128 of the Labor Code
(as amended by R.A. No. 7730) thus:
Art. 128 Visitorial and enforcement power. . . .

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


to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance
orders to give effect to [the labor standards provisions of this Code and
other] labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall

issue writs of execution to the appropriate authority for the enforcement


of their orders, except in cases where the employer contests the findings
of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the
course of inspection.
caHIAS

xxx xxx xxx


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

This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v. Sensing, 24
where we sustained the jurisdiction of the DOLE Regional Director and held that "the
visitorial and enforcement powers of the DOLE Regional Director to order and
enforce compliance with labor standard laws can be exercised even where the
individual claim exceeds P5,000."
However, if the labor standards case is covered by the exception clause in Article 128 (b)
of the Labor Code,then the Regional Director will have to endorse the case to the
appropriate Arbitration Branch of the NLRC. In order to divest the Regional Director or
his representatives of jurisdiction, the following elements must be present: (a) that the
employer contests the findings of the labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of inspection. 25 The
rules also provide that the employer shall raise such objections during the hearing of the
case or at any time after receipt of the notice of inspection results. 26
In this case, the Regional Director validly assumed jurisdiction over the money claims of
private respondents even if the claims exceeded P5,000 because such jurisdiction was
exercised in accordance with Article 128 (b) of the Labor Code and the case does not fall
under the exception clause.
The Court notes that EBVSAI did not contest the findings of the labor regulations officer
during the hearing or after receipt of the notice of inspection results. It was only in its
supplemental motion for reconsideration before the Regional Director that EBVSAI
questioned the findings of the labor regulations officer and presented documentary
evidence to controvert the claims of private respondents. But even if this was the case,
the Regional Director and the Secretary of Labor still looked into and considered

EBVSAI's documentary evidence and found that such did not warrant the reversal of the
Regional Director's order. The Secretary of Labor also doubted the veracity and
authenticity of EBVSAI's documentary evidence. Moreover, the pieces of evidence
presented by EBVSAI were verifiable in the normal course of inspection because all
employment records of the employees should be kept and maintained in or about the
premises of the workplace, which in this case is in Ambuklao Plant, the establishment
where private respondents were regularly assigned. 27
WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001 Decision and the
26 February 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 57653.
SO ORDERED.
Quisumbing, Carpio-Morales, Tinga and Velasco Jr., JJ., concur.
(Ex-Bataan Veterans Security Agency, Inc. v. Laguesma, G.R. No. 152396, [November
20, 2007], 563 PHIL 228-239)
|||

THIRD DIVISION
[G.R. No. 185567. October 20, 2010.]
ARSENIO Z. LOCSIN, petitioner, vs. NISSAN LEASE PHILS. INC.
and LUIS BANSON, respondents.

DECISION

BRION, *** J :
p

Through a petition for review on certiorari, 1 petitioner Arsenio Z. Locsin


(Locsin) seeks the reversal of the Decision 2 of the Court of Appeals (CA) dated
August 28, 2008, 3 in "Arsenio Z. Locsin v. Nissan Car Lease Phils., Inc. and Luis
Banson," docketed as CA-G.R. SP No. 103720 and the Resolution dated December 9,
2008, 4 denying Locsin's Motion for Reconsideration. The assailed ruling of the CA
reversed and set aside the Decision 5 of the Hon. Labor Arbiter Thelma Concepcion
(Labor Arbiter Concepcion) which denied Nissan Lease Phils. Inc.'s (NCLPI) and
Luis T. Banson's (Banson) Motion to Dismiss.
THE FACTUAL ANTECEDENTS
On January 1, 1992, Locsin was elected Executive Vice President and
Treasurer (EVP/Treasurer) of NCLPI. As EVP/Treasurer, his duties and
responsibilities included: (1) the management of the finances of the company; (2)
carrying out the directions of the President and/or the Board of Directors regarding
financial management; and (3) the preparation of financial reports to advise the
officers and directors of the financial condition of NCLPI. 6 Locsin held this position
for 13 years, having been re-elected every year since 1992, until January 21, 2005,
when he was nominated and elected Chairman of NCLPI's Board of Directors. 7
On August 5, 2005, a little over seven (7) months after his election as
Chairman of the Board, the NCLPI Board held a special meeting at the Manila Polo
Club. One of the items of the agenda was the election of a new set of officers.
Unfortunately, Locsin was neither re-elected Chairman nor reinstated to his previous
position as EVP/Treasurer. 8
Aggrieved, on June 19, 2007, Locsin filed a complaint for illegal dismissal
with prayer for reinstatement, payment of backwages, damages and attorney's fees
before the Labor Arbiter against NCLPI and Banson, who was then President of
NCLPI. 9
SACEca

The Compulsory Arbitration Proceedings before the Labor Arbiter.

On July 11, 2007, instead of filing their position paper, NCLPI and Banson
filed a Motion to Dismiss, 10 on the ground that the Labor Arbiter did not have
jurisdiction over the case since the issue of Locsin's removal as EVP/Treasurer
involves an intra-corporate dispute.
On August 16, 2007, Locsin submitted his opposition to the motion to dismiss,
maintaining his position that he is an employee of NCLPI.
On March 10, 2008, Labor Arbiter Concepcion issued an Order denying the
Motion to Dismiss, holding that her office acquired "jurisdiction to arbitrate and/or
decide the instant complaint finding extant in the case an employer-employee
relationship." 11
NCLPI, on June 3, 2008, elevated the case to the CA through a Petition for
Certiorari under Rule 65 of the Rules of Court. 12 NCLPI raised the issue on whether
the Labor Arbiter committed grave abuse of discretion by denying the Motion to
Dismiss and holding that her office had jurisdiction over the dispute.
The CA Decision - Locsin was a corporate officer; the issue of his removal as
EVP/Treasurer is an intra-corporate dispute under the RTC's jurisdiction.
On August 28, 2008, 13 the CA reversed and set aside the Labor Arbiter's
Order denying the Motion to Dismiss and ruled that Locsin was a corporate officer.
Citing PD 902-A, the CA defined "corporate officers as those officers of a
corporation who are given that character either by the Corporation Code or by the
corporations' by-laws." In this regard, the CA held:
Scrutinizing the records, We hold that petitioners successfully discharged their
onus of establishing that private respondent was a corporate officer who held
the position of Executive Vice-President/Treasurer as provided in the by-laws of
petitioner corporation and that he held such position by virtue of election by the
Board of Directors.
That private respondent is a corporate officer cannot be disputed. The position
of Executive Vice-President/Treasurer is specifically included in the roster of
officers provided for by the (Amended) By-Laws of petitioner corporation, his
duties and responsibilities, as well as compensation as such officer are likewise
set forth therein. 14

Article 280 of the Labor Code, the receipt of salaries by Locsin, SSS
deductions on that salary, and the element of control in the performance of work
duties indicia used by the Labor Arbiter to conclude that Locsin was a regular
employee were held inapplicable by the CA. 15 The CA noted the Labor Arbiter's
failure to address the fact that the position of EVP/Treasurer is specifically
enumerated as an "office" in the corporation's by-laws. 16
SAHEIc

Further, the CA pointed out Locsin's failure to "state any circumstance by


which NCLPI engaged his services as a corporate officer that would make him an
employee." The CA found, in this regard, that Locsin's assumption and retention as
EVP/Treasurer was based on his election and subsequent re-elections from 1992 until
2005. Further, he performed only those functions that were "specifically set forth in
the By-Laws or required of him by the Board of Directors." 17
With respect to the suit Locsin filed with the Labor Arbiter, the CA held that:
Private respondent, in belatedly filing this suit before the Labor Arbiter,
questioned the legality of his "dismissal" but in essence, he raises the issue of
whether or not the Board of Directors had the authority to remove him
from the corporate office to which he was elected pursuant to the By-Laws
of the petitioner corporation. Indeed, had private respondent been an ordinary
employee, an election conducted by the Board of Directors would not have been
necessary to remove him as Executive Vice-President/Treasurer. However, in an
obvious attempt to preclude the application of settled jurisprudence that
corporate officers whose position is provided in the by-laws, their election,
removal or dismissal is subject to Section 5 of P.D. No. 902-A (now R.A. No.
8799), private respondent would even claim in his Position Paper, that since his
responsibilities were akin to that of the company's Executive VicePresident/Treasurer, he was "hired under the pretext that he was being 'elected'
into said post. 18 [Emphasis supplied.]

As a consequence, the CA concluded that Locsin does not have any recourse
with the Labor Arbiter or the NLRC since the removal of a corporate officer, whether
elected or appointed, is an intra-corporate controversy over which the NLRC has no
jurisdiction. 19 Instead, according to the CA, Locsin's complaint for "illegal
dismissal" should have been filed in the Regional Trial Court (RTC), pursuant to Rule
6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies. 20
Finally, the CA addressed Locsin's invocation of Article 4 of the Labor
Code.Dismissing the application of the provision, the CA cited Dean Cesar
Villanueva of the Ateneo School of Law, as follows:
. . . the non-coverage of corporate officers from the security of tenure clause
under the Constitution is now well-established principle by numerous
decisions upholding such doctrine under the aegis of the 1987 Constitution in
the face of contemporary decisions of the same Supreme Court likewise
confirming that security of tenure covers all employees or workers including
managerial employees. 21

THE PETITIONER'S ARGUMENTS

Failing to obtain a reconsideration of the CA's decision, Locsin filed the


present petition on January 28, 2009, raising the following procedural and substantive
issues:
IATSHE

(1) Whether the CA has original jurisdiction to review decision of the Labor
Arbiter under Rule 65?
(2) Whether he is a regular employee of NCLPI under the definition of Article
280 of the Labor Code? and
(3) Whether Locsin's position as Executive Vice-President/Treasurer makes
him a corporate officer thereby excluding him from the coverage of the Labor Code?
Procedurally, Locsin essentially submits that NCLPI wrongfully filed a
petition for certiorari before the CA, as the latter's remedy is to proceed with the
arbitration, and to appeal to the NLRC after the Labor Arbiter shall have ruled on the
merits of the case. Locsin cites, in this regard, Rule V, Section 6 of the Revised Rules
of the National Labor Relations Commission (NLRC Rules), which provides that a
denial of a motion to dismiss by the Labor Arbiter is not subject to an appeal. Locsin
also argues that even if the Labor Arbiter committed grave abuse of discretion in
denying the NCLPI motion, a special civil action for certiorari, filed with the CA was
not the appropriate remedy, since this was a breach of the doctrine of exhaustion of
administrative remedies.
Substantively, Locsin submits that he is a regular employee of NCLPI since as he argued before the Labor Arbiter and the CA - his relationship with the company
meets the "four-fold test."
First, Locsin contends that NCLPI had the power to engage his services as
EVP/Treasurer. Second, he received regular wages from NCLPI, from which his SSS
and Philhealth contributions, as well as his withholding taxes were deducted. Third,
NCLPI had the power to terminate his employment. 22 Lastly, Nissan had control
over the manner of the performance of his functions as EVP/Treasurer, as shown by
the 13 years of faithful execution of his job, which he carried out in accordance with
the standards and expectations set by NCLPI. 23 Further, Locsin maintains that even
after his election as Chairman, he essentially performed the functions of
EVP/Treasurer handling the financial and administrative operations of the
Corporation thus making him a regular employee. 24
Under these claimed facts, Locsin concludes that the Labor Arbiter and the
NLRC not the RTC (as NCLPI posits) has jurisdiction to decide the
controversy. Parenthetically, Locsin clarifies that he does not dispute the validity of
his election as Chairman of the Board on January 1, 2005. Instead, he theorizes that he
never lost his position as EVP/Treasurer having continuously performed the functions
appurtenant thereto. 25 Thus, he questions his "unceremonious removal" as
EVP/Treasurer during the August 5, 2005 special Board meeting.
EDcICT

THE RESPONDENT'S ARGUMENTS

It its April 17, 2009 Comment, 26 Nissan prays for the denial of the petition
for lack of merit. Nissan submits that the CA correctly ruled that the Labor Arbiter
does not have jurisdiction over Locsin's complaint for illegal dismissal. In support,
Nissan maintains that Locsin is a corporate officer and not an employee. In addressing
the procedural defect Locsin raised, Nissan brushes the issue aside, stating that (1)
this issue was belatedly raised in the Motion for Reconsideration, and that (2) in any
case, Rule VI, Section 2 (1) of the NLRC does not apply since only appealable
decisions, resolutions and orders are covered under the rule.
THE COURT'S RULING
We resolve to deny the petition for lack of merit.
At the outset, we stress that there are two (2) important considerations in the
final determination of this case. On the one hand, Locsin raises a procedural issue
that, if proven correct, will require the Court to dismiss the instant petition for using
an improper remedy. On the other hand, there is the substantive issue that will be
disregarded if a strict implementation of the rules of procedure is upheld.
Prefatorily, we agree with Locsin's submission that the NCLPI incorrectly
elevated the Labor Arbiter's denial of the Motion to Dismiss to the CA. Locsin is
correct in positing that the denial of a motion to dismiss is unappealable. As a general
rule, an aggrieved party's proper recourse to the denial is to file his position paper,
interpose the grounds relied upon in the motion to dismiss before the labor arbiter,
and actively participate in the proceedings. Thereafter, the labor arbiter's decision can
be appealed to the NLRC, not to the CA.
As a rule, we strictly adhere to the rules of procedure and do everything we
can, to the point of penalizing violators, to encourage respect for these rules. We take
exception to this general rule, however, when a strict implementation of these rules
would cause substantial injustice to the parties.
We see it appropriate to apply the exception to this case for the reasons
discussed below; hence, we are compelled to go beyond procedure and rule on the
merits of the case. In the context of this case, we see sufficient justification to rule on
the employer-employee relationship issue raised by NCLPI, even though the Labor
Arbiter's interlocutory order was incorrectly brought to the CA under Rule 65.
cCEAHT

The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss
is not appealable because the denial is merely an interlocutory order.
In Metro Drug v. Metro Drug Employees, 27 we definitively stated that the
denial of a motion to dismiss by a labor arbiter is not immediately appealable. 28
We similarly ruled in Texon Manufacturing v. Millena, 29 in Sime Darby
Employees Association v. National Labor Relations Commission 30 and in Westmont
Pharmaceuticals v. Samaniego. 31 In Texon, we specifically said:

The Order of the Labor Arbiter denying petitioners' motion to dismiss is


interlocutory. It is well-settled that a denial of a motion to dismiss a complaint
is an interlocutory order and hence, cannot be appealed, until a final
judgment on the merits of the case is rendered. [Emphasis supplied.] 32

and indicated the appropriate recourse in Metro Drug, as follows: 33


. . . The NLRC rule proscribing appeal from a denial of a motion to dismiss is
similar to the general rule observed in civil procedure that an order denying a
motion to dismiss is interlocutory and, hence, not appealable until final
judgment or order is rendered [1 Feria and Noche, Civil Procedure Annotated
453 (2001 ed.)]. The remedy of the aggrieved party in case of denial of the
motion to dismiss is to file an answer and interpose, as a defense or defenses,
the ground or grounds relied upon in the motion to dismiss, proceed to trial
and, in case of adverse judgment, to elevate the entire case by appeal in due
course [Mendoza v. Court of Appeals, G.R. No. 81909, September 5, 1991, 201
SCRA 343]. In order to avail of the extraordinary writ of certiorari, it is
incumbent upon petitioner to establish that the denial of the motion to dismiss
was tainted with grave abuse of discretion. [Macawiwili Gold Mining and
Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998,
297 SCRA 602]

In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of
the Rules of Court, which specifically enumerates interlocutory orders as one of the
court actions that cannot be appealed. In the same rule, as amended by A.M. No. 077-12-SC, the aggrieved party is allowed to file an appropriate special civil action
under Rule 65. The latter rule, however, also contains limitations for its application,
clearly outlined in its Section 1 which provides:
Section 1. Petition for certiorari.
When any tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary course
of law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and
granting such incidental reliefs as law and justice may require.

In the labor law setting, a plain, speedy and adequate remedy is still open to the
aggrieved party when a labor arbiter denies a motion to dismiss. This is Article 223 of
Presidential Decree No. 442, as amended (Labor Code), 34 which states:
cSICHD

ART. 223. APPEAL

Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar
days from receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the
Labor Arbiter; . . . [Emphasis supplied.]

Pursuant to this Article, we held in Metro Drug (citing Air Services


Cooperative, et al. v. Court of Appeals) 35 that the NLRC is clothed with sufficient
authority to correct any claimed "erroneous assumption of jurisdiction" by labor
arbiters:
In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where
the jurisdiction of the labor arbiter was put in issue and was assailed through a
petition for certiorari, prohibition and annulment of judgment before a regional
trial court, this Court had the opportunity to expound on the nature of appeal as
embodied in Article 223 of the Labor Code,thus:
. . . Also, while the title of the Article 223 seems to provide only for the
remedy of appeal as that term is understood in procedural law and as
distinguished from the office of certiorari, nonetheless, a closer reading
thereof reveals that it is not as limited as understood by the petitioners . .
..
Abuse of discretion is admittedly within the ambit of certiorari and
its grant of review thereof to the NLRC indicates the lawmakers'
intention to broaden the meaning of appeal as that term is used in the
Code. For this reason, petitioners cannot argue now that the NLRC is
devoid of any corrective power to rectify a supposed erroneous
assumption of jurisdiction by the Labor Arbiter . . . . [Air Services
Cooperative, et al. v. The Court of Appeals, et al. G.R. No. 118693, 23
July 1998, 293 SCRA 101]
Since the legislature had clothed the NLRC with the appellate authority to
correct a claimed "erroneous assumption of jurisdiction" on the part of the labor
arbiter a case of grave abuse of discretion - the remedy availed of by
petitioner in this case is patently erroneous as recourse in this case is
lodged, under the law, with the NLRC.
DSacAE

In Metro Drug, as in the present case, the defect imputed through the NLCPI
Motion to Dismiss is the labor arbiter's lack of jurisdiction since Locsin is alleged to
be a corporate officer, not an employee. Parallelisms between the two cases is
undeniable, as they are similar on the following points: (1) in Metro Drug, as in this
case, the Labor Arbiter issued an Order denying the Motion to Dismiss by one of the
parties; (2) the basis of the Motion to Dismiss is also the alleged lack of jurisdiction

by the Labor Arbiter to settle the dispute; and (3) dissatisfied with the Order of the
Labor Arbiter, the aggrieved party likewise elevated the case to the CA via Rule 65.
The similarities end there, however. Unlike in the present case, the CA denied
the petition forcertiorari and the subsequent Motion for Reconsideration in Metro
Drug; the CA correctly found that the proper appellate mechanism was an appeal to
the NLRC and not a petition for certiorari under Rule 65. In the present case, the CA
took a different position despite our clear ruling in Metro Drug, and allowed, not only
the use of Rule 65, but also ruled on the merits.
From this perspective, the CA clearly erred in the application of the procedural
rules by disregarding the relevant provisions of the NLRC Rules, as well as the
requirements for a petition for certiorari under the Rules of Court. To reiterate, the
proper action of an aggrieved party faced with the labor arbiter's denial of his motion
to dismiss is to submit his position paper and raise therein the supposed lack of
jurisdiction. The aggrieved party cannot immediately appeal the denial since it is an
interlocutory order; the appropriate remedial recourse is the procedure outlined in
Article 223 of the Labor Code,not a petition for certiorari under Rule 65.
A strict implementation of the NLRC Rules and the Rules of Court would cause
injustice to the parties because the Labor Arbiter clearly has no jurisdiction over
the present intra-corporate dispute.
Our ruling in Mejillano v. Lucillo 36 stands for the proposition that we should
strictly apply the rules of procedure. We said:
Time and again, we have ruled that procedural rules do not exist for the
convenience of the litigants. Rules of Procedure exist for a purpose, and to
disregard such rules in the guise of liberal construction would be to defeat such
purpose. Procedural rules were established primarily to provide order to
and enhance the efficiency of our judicial system. [Emphasis supplied.]

An exception to this rule is our ruling in Lazaro v. Court of Appeals 37 where


we held that the strict enforcement of the rules of procedure may be relaxed in
exceptionally meritorious cases:
. . . Procedural rules are not to be belittled or dismissed simply because
their non-observance may have resulted in prejudice to a party's
substantive rights. Like all rules, they are required to be followed except
only for the most persuasive of reasons when they may be relaxed to relieve a
litigant of an injustice not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed. The Court
reiterates that rules of procedure, especially those prescribing the time within
which certain acts must be done, "have oft been held as absolutely indispensable
to the prevention of needless delays and to the orderly and speedy discharge of
business. . . . The reason for rules of this nature is because the dispatch of
business by courts would be impossible, and intolerable delays would result,

without rules governing practice . . . . Such rules are a necessary incident to the
proper, efficient and orderly discharge of judicial functions." Indeed, in no
uncertain terms, the Court held that the said rules may be relaxed only in
exceptionally meritorious cases. [Emphasis supplied.]
ESTDIA

Whether a case involves an exceptionally meritorious circumstance can be


tested under the guidelines we established in Sanchez v. Court of Appeals, 38 as
follows:
Aside from matters of life, liberty, honor or property which would warrant
the suspension of the Rules of the most mandatory character and an examination
and review by the appellate court of the lower court's findings of fact, the other
elements that should be considered are the following: (a) the existence of
special or compelling circumstances, (b) the merits of the case, (c) a cause
not entirely attributable to the fault or negligence of the party favored by
the suspension of the rules, (d) a lack of any showing that the review sought
is merely frivolous and dilatory, and (e) the other party will not be unjustly
prejudiced thereby. [Emphasis supplied.]

Under these standards, we hold that exceptional circumstances exist in the


present case to merit the relaxation of the applicable rules of procedure.
Due to existing exceptional circumstances, the ruling on the merits that Locsin is
an officer and not an employee of Nissan must take precedence over procedural
considerations.
We arrived at the conclusion that we should go beyond the procedural rules
and immediately take a look at the intrinsic merits of the case based on several
considerations.
First, the parties have sufficiently ventilated their positions on the disputed
employer-employee relationship and have, in fact, submitted the matter for the CA's
consideration.
Second, the CA correctly ruled that no employer-employee relationship exists
between Locsin and Nissan.
Locsin was undeniably Chairman and President, and was elected to these
positions by the Nissan board pursuant to its By-laws. 39 As such, he was a corporate
officer, not an employee. The CA reached this conclusion by relying on the submitted
facts and on Presidential Decree 902-A, which defines corporate officers as "those
officers of a corporation who are given that character either by the Corporation Code
or by the corporation's by-laws." Likewise, Section 25 of Batas Pambansa Blg. 69, or
the Corporation Code of the Philippines (Corporation Code) provides that corporate
officers are the president, secretary, treasurer and such other officers as may be
provided for in the by-laws.
THEDCA

Third. Even as Executive Vice-President/Treasurer, Locsin already acted as a


corporate officer because the position of Executive Vice-President/Treasurer is
provided for in Nissan's By-Laws. Article IV, Section 4 of these By-Laws specifically
provides for this position, as follows:
ARTICLE IV
Officers
Section 1. Election and Appointment. The Board of Directors at their first
meeting, annually thereafter, shall elect as officers of the Corporation a
Chairman of the Board, a President, an Executive Vice-President/Treasurer, a
Vice-President/General Manager and a Corporate Secretary. The other Senior
Operating Officers of the Corporation shall be appointed by the Board upon the
recommendation of the President.
xxx xxx xxx
Section 4. Executive Vice-President/Treasurer. The Executive VicePresident/Treasurer shall have such powers and perform such duties as are
prescribed by these By-Laws, and as may be required of him by the Board of
Directors. As the concurrent Treasurer of the Corporation, he shall have the
charge of the funds, securities, receipts, and disbursements of the Corporation.
He shall deposit, or cause to be deposited, the credit of the Corporation in such
banks or trust companies, or with such banks of other depositories, as the Board
of Directors may from time to time designate. He shall tender to the President or
to the Board of Directors whenever required an account of the financial
condition of the corporation and of all his transactions as Treasurer. As soon as
practicable after the close of each fiscal year, he shall make and submit to the
Board of Directors a like report of such fiscal year. He shall keep correct books
of account of all the business and transactions of the Corporation.

In Okol v. Slimmers World International, 40 citing Tabang v. National Labor


Relations Commission, 41 we held that
x x x an "office" is created by the charter of the corporation and the officer
is elected by the directors or stockholders. On the other hand, an "employee"
usually occupies no office and generally is employed not by action of the
directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee. [Emphasis
supplied.]

In this case, Locsin was elected by the NCLPI Board, in accordance with the
Amended By-Laws of the corporation. The following factual determination by the
CA is elucidating:

More important, private respondent failed to state any such "circumstance" by


which the petitioner corporation "engaged his services" as corporate officer that
would make him an employee. In the first place, the Vice-President/Treasurer
was elected on an annual basis as provided in the By-Laws, and no duties and
responsibilities were stated by private respondent which he discharged while
occupying said position other than those specifically set forth in the By-Laws or
required of him by the Board of Directors. The unrebutted fact remains that
private respondent held the position of Executive Vice-President/Treasurer of
petitioner corporation, a position provided for in the latter's by-laws, by virtue
of election by the Board of Directors, and has functioned as such Executive
Vice-President/Treasurer pursuant to the provisions of the said By-Laws.
Private respondent knew very well that he was simply not re-elected to the said
position during the August 5, 2005 board meeting, but he had objected to the
election of a new set of officers held at the time upon the advice of his lawyer
that he cannot be "terminated" or replaced as Executive VicePresident/Treasurer as he had attained tenurial security. 42
ACTESI

We fully agree with this factual determination which we find to be sufficiently


supported by evidence. We likewise rule, based on law and established jurisprudence,
that Locsin, at the time of his severance from NCLPI, was the latter's corporate
officer.
a. The Question of Jurisdiction
Given Locsin's status as a corporate officer, the RTC, not the Labor Arbiter or
the NLRC, has jurisdiction to hear the legality of the termination of his relationship
with Nissan. As we also held in Okol, a corporate officer's dismissal from service is
an intra-corporate dispute:
In a number of cases [Estrada v. National Labor Relations Commission, G.R.
No. 106722, 4 October 1996, 262 SCRA 709; Lozon v. National Labor
Relations Commission, 310 Phil. 1 (1995); Espino v. National Labor Relations
Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National
Labor Relations Commission, G.R. No. 79762, 24 January 1991, 193 SCRA
258], we have held that a corporate officer's dismissal is always a corporate
act, or an intra-corporate controversy which arises between a stockholder and
a corporation. 43 [Emphasis supplied.]

so that the RTC should exercise jurisdiction based on the following legal reasoning:
Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902A) provided that intra-corporate disputes fall within the jurisdiction of the
Securities and Exchange Commission (SEC):
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:
xxx xxx xxx
c) Controversies in the election or appointments of directors, trustees,
officers or managers of such corporations, partnerships or associations.
Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8
August 2000, transferred to regional trial courts the SEC's jurisdiction over all
cases listed in Section 5 of PD 902-A:
SCaEcD

5.2. The Commission's jurisdiction over all cases enumerated under


Section 5 of Presidential Decree No. 902-A is hereby transferred to the
Courts of general jurisdiction or the appropriate Regional Trial Court.
[Emphasis supplied.]

b. Precedence of Substantive Merits;


Primacy of Element of Jurisdiction
Based on the above jurisdictional considerations, we would be forced to
remand the case to the Labor Arbiter for further proceedings if we were to dismiss the
petition outright due to the wrongful use of Rule 65. 44 We cannot close our eyes,
however, to the factual and legal reality, established by evidence already on record,
that Locsin is a corporate officer whose termination of relationship is outside a labor
arbiter's jurisdiction to rule upon.
Under these circumstances, we have to give precedence to the merits of the
case, and primacy to the element of jurisdiction. Jurisdiction is the power to hear
and rule on a case and is the threshold element that must exist before any quasijudicial officer can act. In the context of the present case, the Labor Arbiter does
not have jurisdiction over the termination dispute Locsin brought, and should
not be allowed to continue to act on the case after the absence of jurisdiction has
become obvious, based on the records and the law. In more practical terms, a
contrary ruling will only cause substantial delay and inconvenience as well as
unnecessary expenses, to the point of injustice, to the parties. This conclusion, of
course, does not go into the merits of termination of relationship and is without
prejudice to the filing of an intra-corporate dispute on this point before the appropriate
RTC.
WHEREFORE, we DISMISS the petitioner's petition for review on
certiorari, and AFFIRM the Decision of the Court of Appeals, in CA-G.R. SP No.
103720, promulgated on August 28, 2008, as well as its Resolution of December 9,
2008, which reversed and set aside the March 10, 2008 Order of Labor Arbiter
Concepcion in NLRC NCR Case No. 00-06-06165-07. This Decision is without

prejudice to petitioner Locsin's available recourse for relief through the appropriate
remedy in the proper forum.
No pronouncement as to costs.
SO ORDERED.
Carpio, * Nachura, ** Mendoza **** and Sereno, JJ., concur.
(Locsin v. Nissan Lease Phils., Inc., G.R. No. 185567, [October 20, 2010], 648 PHIL
596-616)
|||

SECOND DIVISION
[G.R. No. 165744. August 11, 2008.]
OSCAR C. REYES, petitioner, vs. HON. REGIONAL TRIAL
COURT OF MAKATI, Branch 142, ZENITH INSURANCE
CORPORATION, and RODRIGO C. REYES, respondents.

DECISION

BRION, J :
p

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set
aside the Decision of the Court of Appeals (CA) 1 promulgated on May 26, 2004 in CAG.R. SP No. 74970. The CA Decision affirmed the Order of the Regional Trial Court
(RTC), Branch 142, Makati City dated November 29, 2002 2 in Civil Case No. 00-1553
(entitled "Accounting of All Corporate Funds and Assets, and Damages") which denied
petitioner Oscar C. Reyes' (Oscar) Motion to Declare Complaint as Nuisance or
Harassment Suit.
ATcaEH

BACKGROUND FACTS
Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are two of the four children of
the spouses Pedro and Anastacia Reyes. Pedro, Anastacia, Oscar, and Rodrigo each
owned shares of stock of Zenith Insurance Corporation (Zenith), a domestic corporation
established by their family. Pedro died in 1964, while Anastacia died in 1993. Although
Pedro's estate was judicially partitioned among his heirs sometime in the 1970s, no
similar settlement and partition appear to have been made with Anastacia's estate, which
included her shareholdings in Zenith. As of June 30, 1990, Anastacia owned 136,598
shares of Zenith; Oscar and Rodrigo owned 8,715,637 and 4,250 shares, respectively. 3
On May 9, 2000, Zenith and Rodrigo filed a complaint 4 with the Securities and
Exchange Commission (SEC) against Oscar, docketed as SEC Case No. 05-00-6615. The
complaint stated that it is "a derivative suit initiated and filed by the complainant Rodrigo
C. Reyes to obtain an accounting of the funds and assets of ZENITH INSURANCE
CORPORATION which are now or formerly in the control, custody, and/or possession of
respondent [herein petitioner Oscar] and to determine the shares of stock of deceased
spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently appropriated
[by Oscar] for himself [and] which were not collated and taken into account in the
partition, distribution, and/or settlement of the estate of the deceased spouses, for which

he should be ordered to account for all the income from the time he took these shares of
stock, and should now deliver to his brothers and sisters their just and respective shares."
5 [Emphasis supplied.]
In his Answer with Counterclaim, 6 Oscar denied the charge that he illegally acquired the
shares of Anastacia Reyes. He asserted, as a defense, that he purchased the subject shares
with his own funds from the unissued stocks of Zenith, and that the suit is not a bona fide
derivative suit because the requisites therefor have not been complied with. He thus
questioned the SEC's jurisdiction to entertain the complaint because it pertains to the
settlement of the estate of Anastacia Reyes.
When Republic Act (R.A.) No. 8799 7 took effect, the SEC's exclusive and original
jurisdiction over cases enumerated in Section 5 of Presidential Decree (P.D.) No. 902-A
was transferred to the RTC designated as a special commercial court. 8 The records of
Rodrigo's SEC case were thus turned over to the RTC, Branch 142, Makati, and docketed
as Civil Case No. 00-1553.
On October 22, 2002, Oscar filed a Motion to Declare Complaint as Nuisance or
Harassment Suit. 9 He claimed that the complaint is a mere nuisance or harassment suit
and should, according to the Interim Rules of Procedure for Intra-Corporate
Controversies, be dismissed; and that it is not a bona fide derivative suit as it partakes of
the nature of a petition for the settlement of estate of the deceased Anastacia that is
outside the jurisdiction of a special commercial court. The RTC, in its Order dated
November 29, 2002 (RTC Order), denied the motion in part and declared:
cHDaEI

A close reading of the Complaint disclosed the presence of two (2) causes of
action, namely: a) a derivative suit for accounting of the funds and assets of the
corporation which are in the control, custody, and/or possession of the
respondent [herein petitioner Oscar] with prayer to appoint a management
committee; and b) an action for determination of the shares of stock of deceased
spouses Pedro and Anastacia Reyes allegedly taken by respondent, its
accounting and the corresponding delivery of these shares to the parties'
brothers and sisters. The latter is not a derivative suit and should properly be
threshed out in a petition for settlement of estate.
Accordingly, the motion is denied. However, only the derivative suit consisting
of the first cause of action will be taken cognizance of by this Court. 10

Oscar thereupon went to the CA on a petition for certiorari, prohibition, and mandamus
11 and prayed that the RTC Order be annulled and set aside and that the trial court be
prohibited from continuing with the proceedings. The appellate court affirmed the RTC
Order and denied the petition in its Decision dated May 26, 2004. It likewise denied
Oscar's motion for reconsideration in a Resolution dated October 21, 2004.

Petitioner now comes before us on appeal through a petition for review on certiorari
under Rule 45 of the Rules of Court.
ASSIGNMENT OF ERRORS
Petitioner Oscar presents the following points as conclusions the CA should have made:
1. that the complaint is a mere nuisance or harassment suit that should be
dismissed under the Interim Rules of Procedure of Intra-Corporate
Controversies; and
2. that the complaint is not a bona fide derivative suit but is in fact in the
nature of a petition for settlement of estate; hence, it is outside the
jurisdiction of the RTC acting as a special commercial court.
Accordingly, he prays for the setting aside and annulment of the CA decision and
resolution, and the dismissal of Rodrigo's complaint before the RTC.
SECAHa

THE COURT'S RULING


We find the petition meritorious.
The core question for our determination is whether the trial court, sitting as a special
commercial court, has jurisdiction over the subject matter of Rodrigo's complaint. To
resolve it, we rely on the judicial principle that "jurisdiction over the subject matter of a
case is conferred by law and is determined by the allegations of the complaint,
irrespective of whether the plaintiff is entitled to all or some of the claims asserted
therein." 12
JURISDICTION OF SPECIAL COMMERCIAL COURTS
P.D. No. 902-A enumerates the cases over which the SEC (now the RTC acting as a
special commercial court) exercises exclusive jurisdiction:
SEC. 5. In addition to the regulatory and adjudicative functions of the Securities
and Exchange Commission over corporations, partnership, 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 or schemes employed by or any acts of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or
organizations registered with the Commission.

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


between and among stockholders, members, or associates; between any
or all of them and the corporation, partnership or association of which
they are stockholders, members, or associates, respectively; and between
such corporation, partnership or association and the State insofar as it
concerns their individual franchise or right to exist as such entity; and
c) Controversies in the election or appointment of directors, trustees,
officers, or managers of such corporations, partnerships, or associations.

The allegations set forth in Rodrigo's complaint principally invoke Section 5, paragraphs
(a) and (b) above as basis for the exercise of the RTC's special court jurisdiction. Our
focus in examining the allegations of the complaint shall therefore be on these two
provisions.
CaATDE

Fraudulent Devices and Schemes


The rule is that a complaint must contain a plain, concise, and direct statement of the
ultimate facts constituting the plaintiff's cause of action and must specify the relief
sought. 13 Section 5, Rule 8 of the Revised Rules of Court provides that in all averments
of fraud or mistake, the circumstances constituting fraud or mistake must be stated
with particularity. 14 These rules find specific application to Section 5 (a) of P.D. No.
902-A which speaks of corporate devices or schemes that amount to fraud or
misrepresentation detrimental to the public and/or to the stockholders.
In an attempt to hold Oscar responsible for corporate fraud, Rodrigo alleged in the
complaint the following:
3. This is a complaint . . . to determine the shares of stock of the deceased
spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently
appropriated for himself [herein petitioner Oscar] which were not collated
and taken into account in the partition, distribution, and/or settlement of the
estate of the deceased Spouses Pedro and Anastacia Reyes, for which he should
be ordered to account for all the income from the time he took these shares of
stock, and should now deliver to his brothers and sisters their just and respective
shares with the corresponding equivalent amount of P7,099,934.82 plus interest
thereon from 1978 representing his obligations to the Associated Citizens' Bank
that was paid for his account by his late mother, Anastacia C. Reyes. This
amount was not collated or taken into account in the partition or distribution of
the estate of their late mother, Anastacia C. Reyes.
3.1. Respondent Oscar C. Reyes, through other schemes of fraud including
misrepresentation, unilaterally, and for his own benefit, capriciously
transferred and took possession and control of the management of Zenith

Insurance Corporation which is considered as a family corporation, and other


properties and businesses belonging to Spouses Pedro and Anastacia Reyes.
TDcEaH

xxx xxx xxx


4.1. During the increase of capitalization of Zenith Insurance Corporation,
sometime in 1968, the property covered by TCT No. 225324 was illegally and
fraudulently used by respondent as a collateral.
xxx xxx xxx
5. The complainant Rodrigo C. Reyes discovered that by some manipulative
scheme, the shareholdings of their deceased mother, Doa Anastacia C.
Reyes, shares of stocks and [sic] valued in the corporate books at
P7,699,934.28, more or less, excluding interest and/or dividends, had been
transferred solely in the name of respondent. By such fraudulent
manipulations and misrepresentation, the shareholdings of said respondent
Oscar C. Reyes abruptly increased to P8,715,637.00 [sic] and becomes [sic] the
majority stockholder of Zenith Insurance Corporation, which portion of said
shares must be distributed equally amongst the brothers and sisters of the
respondent Oscar C. Reyes including the complainant herein.
xxx xxx xxx
9.1 The shareholdings of deceased Spouses Pedro Reyes and Anastacia C.
Reyes valued at P7,099,934.28 were illegally and fraudulently transferred
solely to the respondent's [herein petitioner Oscar] name and installed
himself as a majority stockholder of Zenith Insurance Corporation [and]
thereby deprived his brothers and sisters of their respective equal shares thereof
including complainant hereto.
xxx xxx xxx
10.1 By refusal of the respondent to account of his [sic] shareholdings in the
company, he illegally and fraudulently transferred solely in his name
wherein [sic] the shares of stock of the deceased Anastacia C. Reyes [which]
must be properly collated and/or distributed equally amongst the children,
including the complainant Rodrigo C. Reyes herein, to their damage and
prejudice.
xxx xxx xxx
11.1 By continuous refusal of the respondent to account of his [sic]
shareholding with Zenith Insurance Corporation[,] particularly the number of
shares of stocks illegally and fraudulently transferred to him from their deceased

parents Sps. Pedro and Anastacia Reyes[,] which are all subject for collation
and/or partition in equal shares among their children. [Emphasis supplied.]
HTcDEa

Allegations of deceit, machination, false pretenses, misrepresentation, and threats are


largely conclusions of law that, without supporting statements of the facts to which the
allegations of fraud refer, do not sufficiently state an effective cause of action. 15 The
late Justice Jose Feria, a noted authority in Remedial Law, declared that fraud and
mistake are required to be averred with particularity in order to enable the opposing party
to controvert the particular facts allegedly constituting such fraud or mistake. 16
Tested against these standards, we find that the charges of fraud against Oscar were not
properly supported by the required factual allegations. While the complaint contained
allegations of fraud purportedly committed by him, these allegations are not particular
enough to bring the controversy within the special commercial court's jurisdiction; they
are not statements of ultimate facts, but are mere conclusions of law: how and why the
alleged appropriation of shares can be characterized as "illegal and fraudulent" were not
explained nor elaborated on.
Not every allegation of fraud done in a corporate setting or perpetrated by corporate
officers will bring the case within the special commercial court's jurisdiction. To fall
within this jurisdiction, there must be sufficient nexus showing that the corporation's
nature, structure, or powers were used to facilitate the fraudulent device or scheme.
Contrary to this concept, the complaint presented a reverse situation. No corporate power
or office was alleged to have facilitated the transfer of the shares; rather, Oscar, as an
individual and without reference to his corporate personality, was alleged to have
transferred the shares of Anastacia to his name, allowing him to become the majority and
controlling stockholder of Zenith, and eventually, the corporation's President. This is the
essence of the complaint read as a whole and is particularly demonstrated under the
following allegations:
5. The complainant Rodrigo C. Reyes discovered that by some manipulative
scheme, the shareholdings of their deceased mother, Doa Anastacia C. Reyes,
shares of stocks and [sic] valued in the corporate books at P7,699,934.28, more
or less, excluding interest and/or dividends, had been transferred solely in the
name of respondent. By such fraudulent manipulations and
misrepresentation, the shareholdings of said respondent Oscar C. Reyes
abruptly increased to P8,715,637.00 [sic] and becomes [sic] the majority
stockholder of Zenith Insurance Corporation, which portion of said shares
must be distributed equally amongst the brothers and sisters of the respondent
Oscar C. Reyes including the complainant herein.
CHDAEc

xxx xxx xxx

9.1 The shareholdings of deceased Spouses Pedro Reyes and Anastacia C.


Reyes valued at P7,099,934.28 were illegally and fraudulently transferred
solely to the respondent's [herein petitioner Oscar] name and installed
himself as a majority stockholder of Zenith Insurance Corporation [and]
thereby deprived his brothers and sisters of their respective equal shares thereof
including complainant hereto. [Emphasis supplied.]

In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute
a ground for dismissal since such defect can be cured by a bill of particulars. In cases
governed by the Interim Rules of Procedure on Intra-Corporate Controversies, however, a
bill of particulars is a prohibited pleading. 17 It is essential, therefore, for the complaint
to show on its face what are claimed to be the fraudulent corporate acts if the complainant
wishes to invoke the court's special commercial jurisdiction.
We note that twice in the course of this case, Rodrigo had been given the opportunity to
study the propriety of amending or withdrawing the complaint, but he consistently
refused. The court's function in resolving issues of jurisdiction is limited to the review of
the allegations of the complaint and, on the basis of these allegations, to the
determination of whether they are of such nature and subject that they fall within the
terms of the law defining the court's jurisdiction. Regretfully, we cannot read into the
complaint any specifically alleged corporate fraud that will call for the exercise of the
court's special commercial jurisdiction. Thus, we cannot affirm the RTC's assumption of
jurisdiction over Rodrigo's complaint on the basis of Section 5 (a) of P.D. No. 902-A. 18
Intra-Corporate Controversy
A review of relevant jurisprudence shows a development in the Court's approach in
classifying what constitutes an intra-corporate controversy. Initially, the main
consideration in determining whether a dispute constitutes an intra-corporate controversy
was limited to a consideration of the intra-corporate relationship existing between or
among the parties. 19 The types of relationships embraced under Section 5 (b), as
declared in the case of Union Glass & Container Corp. v. SEC, 20 were as follows:
SAEHaC

a) between the corporation, partnership, or association and the public;


b) between the corporation, partnership, or association and its stockholders,
partners, members, or officers;
c) between the corporation, partnership, or association and the State as far as its
franchise, permit or license to operate is concerned; and
d) among the stockholders, partners, or associates themselves. [Emphasis
supplied.]

The existence of any of the above intra-corporate relations was sufficient to confer
jurisdiction to the SEC, regardless of the subject matter of the dispute. This came to be
known as the relationship test.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc.,
21 the Court introduced the nature of the controversy test. We declared in this case that
it is not the mere existence of an intra-corporate relationship that gives rise to an intracorporate controversy; to rely on the relationship test alone will divest the regular courts
of their jurisdiction for the sole reason that the dispute involves a corporation, its
directors, officers, or stockholders. We saw that there is no legal sense in disregarding or
minimizing the value of the nature of the transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intracorporate. 22 The controversy must not only be rooted in the existence of an intracorporate relationship, but must as well pertain to the enforcement of the parties'
correlative rights and obligations under the Corporation Code and the internal and intracorporate regulatory rules of the corporation. If the relationship and its incidents are
merely incidental to the controversy or if there will still be conflict even if the
relationship does not exist, then no intra-corporate controversy exists.
HICSaD

The Court then combined the two tests and declared that jurisdiction should be
determined by considering not only the status or relationship of the parties, but also the
nature of the question under controversy. 23 This two-tier test was adopted in the recent
case of Speed Distribution, Inc. v. Court of Appeals: 24
To determine whether a case involves an intra-corporate controversy, and is to
be heard and decided by the branches of the RTC specifically designated by the
Court to try and decide such cases, two elements must concur: (a) the status or
relationship of the parties; and (2) the nature of the question that is the subject
of their controversy.

The first element requires that the controversy must arise out of intra-corporate
or partnership relations between any or all of the parties and the corporation,
partnership, or association of which they are 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 franchises. The second element
requires that the dispute among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the controversy involves matters
that are purely civil in character, necessarily, the case does not involve an intracorporate controversy.
HEDaTA

Given these standards, we now tackle the question posed for our determination under the
specific circumstances of this case:
Application of the Relationship Test
Is there an intra-corporate relationship between the parties that would characterize the
case as an intra-corporate dispute?
We point out at the outset that while Rodrigo holds shares of stock in Zenith, he holds
them in two capacities: in his own right with respect to the 4,250 shares registered in his
name, and as one of the heirs of Anastacia Reyes with respect to the 136,598 shares
registered in her name. What is material in resolving the issues of this case under the
allegations of the complaint is Rodrigo's interest as an heir since the subject matter of the
present controversy centers on the shares of stocks belonging to Anastacia, not on
Rodrigo's personally-owned shares nor on his personality as shareholder owning these
shares. In this light, all reference to shares of stocks in this case shall pertain to the
shareholdings of the deceased Anastacia and the parties' interest therein as her heirs.
Article 777 of the Civil Code declares that the successional rights are transmitted from
the moment of death of the decedent. Accordingly, upon Anastacia's death, her children
acquired legal title to her estate (which title includes her shareholdings in Zenith), and
they are, prior to the estate's partition, deemed co-owners thereof. 25 This status as coowners, however, does not immediately and necessarily make them stockholders of the
corporation. Unless and until there is compliance with Section 63 of the Corporation
Code on the manner of transferring shares, the heirs do not become registered
stockholders of the corporation. Section 63 provides:
Section 63. Certificate of stock and transfer of shares. The capital stock of
stock corporations shall be divided into shares for which certificates signed by
the president or vice-president, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation shall be issued in
accordance with the by-laws. Shares of stock so issued are personal property
and may be transferred by delivery of the certificate or certificates indorsed by
the owner or his attorney-in-fact or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the parties,
until the transfer is recorded in the books of the corporation so as to show
the names of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates, and the number of shares
transferred. [Emphasis supplied.]
ASCTac

No shares of stock against which the corporation holds any unpaid claim shall
be transferable in the books of the corporation.

Simply stated, the transfer of title by means of succession, though effective and valid
between the parties involved (i.e., between the decedent's estate and her heirs), does not
bind the corporation and third parties. The transfer must be registered in the books of the
corporation to make the transferee-heir a stockholder entitled to recognition as such both
by the corporation and by third parties. 26
We note, in relation with the above statement, that in Abejo v. Dela Cruz 27 and TCL
Sales Corporation v. Court of Appeals 28 we did not require the registration of the
transfer before considering the transferee a stockholder of the corporation (in effect
upholding the existence of an intra-corporate relation between the parties and bringing
the case within the jurisdiction of the SEC as an intra-corporate controversy). A marked
difference, however, exists between these cases and the present one.
In Abejo and TCL Sales, the transferees held definite and uncontested titles to a
specific number of shares of the corporation; after the transferee had established prima
facie ownership over the shares of stocks in question, registration became a mere
formality in confirming their status as stockholders. In the present case, each of
Anastacia's heirs holds only an undivided interest in the shares. This interest, at this point,
is still inchoate and subject to the outcome of a settlement proceeding; the right of the
heirs to specific, distributive shares of inheritance will not be determined until all the
debts of the estate of the decedent are paid. In short, the heirs are only entitled to what
remains after payment of the decedent's debts; 29 whether there will be residue remains
to be seen. Justice Jurado aptly puts it as follows:
No succession shall be declared unless and until a liquidation of the assets and
debts left by the decedent shall have been made and all his creditors are fully
paid. Until a final liquidation is made and all the debts are paid, the right of the
heirs to inherit remains inchoate. This is so because under our rules of
procedure, liquidation is necessary in order to determine whether or not the
decedent has left any liquid assets which may be transmitted to his heirs.
30 [Emphasis supplied.]

Rodrigo must, therefore, hurdle two obstacles before he can be considered a stockholder
of Zenith with respect to the shareholdings originally belonging to Anastacia. First, he
must prove that there are shareholdings that will be left to him and his co-heirs, and this
can be determined only in a settlement of the decedent's estate. No such proceeding has
been commenced to date. Second, he must register the transfer of the shares allotted to
him to make it binding against the corporation. He cannot demand that this be done
unless and until he has established his specific allotment (and prima facie ownership) of
the shares. Without the settlement of Anastacia's estate, there can be no definite partition
and distribution of the estate to the heirs. Without the partition and distribution, there can
be no registration of the transfer. And without the registration, we cannot consider the
transferee-heir a stockholder who may invoke the existence of an intra-corporate

relationship as premise for an intra-corporate controversy within the jurisdiction of a


special commercial court.
In sum, we find that insofar as the subject shares of stock (i.e., Anastacia's shares) are
concerned Rodrigo cannot be considered a stockholder of Zenith. Consequently, we
cannot declare that an intra-corporate relationship exists that would serve as basis to
bring this case within the special commercial court's jurisdiction under Section 5 (b) of
P.D. 902-A, as amended. Rodrigo's complaint, therefore, fails the relationship test.
aESTAI

Application of the Nature of Controversy Test


The body rather than the title of the complaint determines the nature of an action. 31 Our
examination of the complaint yields the conclusion that, more than anything else, the
complaint is about the protection and enforcement of successional rights. The controversy
it presents is purely civil rather than corporate, although it is denominated as a "complaint
for accounting of all corporate funds and assets".
Contrary to the findings of both the trial and appellate courts, we read only one cause of
action alleged in the complaint. The "derivative suit for accounting of the funds and
assets of the corporation which are in the control, custody, and/or possession of the
respondent [herein petitioner Oscar]" does not constitute a separate cause of action but is,
as correctly claimed by Oscar, only an incident to the "action for determination of the
shares of stock of deceased spouses Pedro and Anastacia Reyes allegedly taken by
respondent, its accounting and the corresponding delivery of these shares to the parties'
brothers and sisters". There can be no mistake of the relationship between the
"accounting" mentioned in the complaint and the objective of partition and distribution
when Rodrigo claimed in paragraph 10.1 of the complaint that:
DTcASE

10.1 By refusal of the respondent to account of [sic] his shareholdings in the


company, he illegally and fraudulently transferred solely in his name wherein
[sic] the shares of stock of the deceased Anastacia C. Reyes [which] must be
properly collated and/or distributed equally amongst the children including the
complainant Rodrigo C. Reyes herein to their damage and prejudice.

We particularly note that the complaint contained no sufficient allegation that justified
the need for an accounting other than to determine the extent of Anastacia's
shareholdings for purposes of distribution.
Another significant indicator that points us to the real nature of the complaint are
Rodrigo's repeated claims of illegal and fraudulent transfers of Anastacia's shares by
Oscar to the prejudice of the other heirs of the decedent; he cited these allegedly
fraudulent acts as basis for his demand for the collation and distribution of Anastacia's
shares to the heirs. These claims tell us unequivocally that the present controversy arose
from the parties' relationship as heirs of Anastacia and not as shareholders of Zenith.

Rodrigo, in filing the complaint, is enforcing his rights as a co-heir and not as a
stockholder of Zenith. The injury he seeks to remedy is one suffered by an heir (for the
impairment of his successional rights) and not by the corporation nor by Rodrigo as a
shareholder on record.

More than the matters of injury and redress, what Rodrigo clearly aims to accomplish
through his allegations of illegal acquisition by Oscar is the distribution of Anastacia's
shareholdings without a prior settlement of her estate an objective that, by law and
established jurisprudence, cannot be done. The RTC of Makati, acting as a special
commercial court, has no jurisdiction to settle, partition, and distribute the estate of a
deceased. A relevant provision Section 2 of Rule 90 of the Revised Rules of Court
that contemplates properties of the decedent held by one of the heirs declares:
Questions as to advancement made or alleged to have been made by the
deceased to any heir may be heard and determined by the court having
jurisdiction of the estate proceedings; and the final order of the court thereon
shall be binding on the person raising the questions and on the heir. [Emphasis
supplied.]

Worth noting are this Court's statements in the case of Natcher v. Court of Appeals:
32
Matters which involve settlement and distribution of the estate of the
decedent fall within the exclusive province of the probate court in the
exercise of its limited jurisdiction.
CaSHAc

xxx xxx xxx


It is clear that trial courts trying an ordinary action cannot resolve to
perform acts pertaining to a special proceeding because it is subject to
specific prescribed rules. [Emphasis supplied.]

That an accounting of the funds and assets of Zenith to determine the extent and value of
Anastacia's shareholdings will be undertaken by a probate court and not by a special
commercial court is completely consistent with the probate court's limited jurisdiction. It
has the power to enforce an accounting as a necessary means to its authority to determine
the properties included in the inventory of the estate to be administered, divided up, and
distributed. Beyond this, the determination of title or ownership over the subject shares
(whether belonging to Anastacia or Oscar) may be conclusively settled by the probate
court as a question of collation or advancement. We had occasion to recognize the court's
authority to act on questions of title or ownership in a collation or advancement situation
in Coca v. Pangilinan 33 where we ruled:

It should be clarified that whether a particular matter should be resolved by the


Court of First Instance in the exercise of its general jurisdiction or of its limited
probate jurisdiction is in reality not a jurisdictional question. In essence, it is a
procedural question involving a mode of practice "which may be waived".
As a general rule, the question as to title to property should not be passed upon
in the testate or intestate proceeding. That question should be ventilated in a
separate action. That general rule has qualifications or exceptions justified by
expediency and convenience.
Thus, the probate court may provisionally pass upon in an intestate or testate
proceeding the question of inclusion in, or exclusion from, the inventory of a
piece of property without prejudice to its final determination in a separate
action.
Although generally, a probate court may not decide a question of title or
ownership, yet if the interested parties are all heirs, or the question is one of
collation or advancement, or the parties consent to the assumption of
jurisdiction by the probate court and the rights of third parties are not impaired,
the probate court is competent to decide the question of ownership.
[Citations omitted. Emphasis supplied.]
AEIcSa

In sum, we hold that the nature of the present controversy is not one which may be
classified as an intra-corporate dispute and is beyond the jurisdiction of the special
commercial court to resolve. In short, Rodrigo's complaint also fails the nature of the
controversy test.
DERIVATIVE SUIT
Rodrigo's bare claim that the complaint is a derivative suit will not suffice to confer
jurisdiction on the RTC (as a special commercial court) if he cannot comply with the
requisites for the existence of a derivative suit. These requisites are:
a. the party bringing suit should be a shareholder during the time of the act or
transaction complained of, the number of shares not being material;
b. the party has tried to exhaust intra-corporate remedies, i.e., has made a
demand on the board of directors for the appropriate relief, but the latter
has failed or refused to heed his plea; and
c. the cause of action actually devolves on the corporation; the wrongdoing or
harm having been or being caused to the corporation and not to the
particular stockholder bringing the suit. 34

Based on these standards, we hold that the allegations of the present complaint do not
amount to a derivative suit.
First, as already discussed above, Rodrigo is not a shareholder with respect to the
shareholdings originally belonging to Anastacia; he only stands as a transferee-heir
whose rights to the share are inchoate and unrecorded. With respect to his own
individually-held shareholdings, Rodrigo has not alleged any individual cause or basis as
a shareholder on record to proceed against Oscar.
Second, in order that a stockholder may show a right to sue on behalf of the corporation,
he must allege with some particularity in his complaint that he has exhausted his
remedies within the corporation by making a sufficient demand upon the directors or
other officers for appropriate relief with the expressed intent to sue if relief is denied. 35
Paragraph 8 of the complaint hardly satisfies this requirement since what the rule
contemplates is the exhaustion of remedies within the corporate setting:
AaCTID

8. As members of the same family, complainant Rodrigo C. Reyes has resorted


[to] and exhausted all legal means of resolving the dispute with the end view of
amicably settling the case, but the dispute between them ensued.

Lastly, we find no injury, actual or threatened, alleged to have been done to the
corporation due to Oscar's acts. If indeed he illegally and fraudulently transferred
Anastacia's shares in his own name, then the damage is not to the corporation but to his
co-heirs; the wrongful transfer did not affect the capital stock or the assets of Zenith. As
already mentioned, neither has Rodrigo alleged any particular cause or wrongdoing
against the corporation that he can champion in his capacity as a shareholder on record.
36
In summary, whether as an individual or as a derivative suit, the RTC sitting as special
commercial court has no jurisdiction to hear Rodrigo's complaint since what is
involved is the determination and distribution of successional rights to the shareholdings
of Anastacia Reyes. Rodrigo's proper remedy, under the circumstances, is to institute a
special proceeding for the settlement of the estate of the deceased Anastacia Reyes, a
move that is not foreclosed by the dismissal of his present complaint.
WHEREFORE, we hereby GRANT the petition and REVERSE the decision of the Court
of Appeals dated May 26, 2004 in CA-G.R. SP No. 74970. The complaint before the
Regional Trial Court, Branch 142, Makati, docketed as Civil Case No. 00-1553, is
ordered DISMISSED for lack of jurisdiction.
SO ORDERED.
Quisumbing, Corona, * Carpio-Morales and Velasco, Jr., JJ., concur.

(Reyes v. Regional Trial Court of Makati, Branch 142, G.R. No. 165744, [August 11,
2008], 583 PHIL 591-617)
|||

SECOND DIVISION
[G.R. No. 160146. December 11, 2009.]
LESLIE
OKOL,
petitioner,
vs.
SLIMMERS
WORLD
INTERNATIONAL, BEHAVIOR MODIFICATIONS, INC., and
RONALD JOSEPH MOY, respondents.

DECISION

CARPIO, J :
p

The Case
Before the Court is a petition for review on certiorari 1 assailing the Decision
2 dated 18 October 2002 and Resolution dated 22 September 2003 of the Court of
Appeals in CA-G.R. SP No. 69893, which set aside the Resolutions dated 29 May
2001 and 21 December 2001 of the National Labor Relations Commission (NLRC).
The Facts
Respondent Slimmers World International operating under the name Behavior
Modifications, Inc. (Slimmers World) employed petitioner Leslie Okol (Okol) as a
management trainee on 15 June 1992. She rose up the ranks to become Head Office
Manager and then Director and Vice President from 1996 until her dismissal on 22
September 1999.
On 28 July 1999, prior to Okol's dismissal, Slimmers World preventively
suspended Okol. The suspension arose from the seizure by the Bureau of Customs of
seven Precor elliptical machines and seven Precor treadmills belonging to or
consigned to Slimmers World. The shipment of the equipment was placed under the
names of Okol and two customs brokers for a value less than US$500. For being
undervalued, the equipment were seized.
On 2 September 1999, Okol received a memorandum that her suspension had
been extended from 2 September until 1 October 1999 pending the outcome of the
investigation on the Precor equipment importation.
On 17 September 1999, Okol received another memorandum from Slimmers
World requiring her to explain why no disciplinary action should be taken against her
in connection with the equipment seized by the Bureau of Customs.
On 19 September 1999, Okol filed her written explanation. However,
Slimmers World found Okol's explanation to be unsatisfactory. Through a letter dated

22 September 1999 signed by its president Ronald Joseph Moy (Moy), Slimmers
World terminated Okol's employment.
DECSIT

Okol filed a complaint 3 with the Arbitration branch of the NLRC against
Slimmers World, Behavior Modifications, Inc. and Moy (collectively called
respondents) for illegal suspension, illegal dismissal, unpaid commissions, damages
and attorney's fees, with prayer for reinstatement and payment of backwages.
On 22 February 2000, respondents filed a Motion to Dismiss 4 the case with a
reservation of their right to file a Position Paper at the proper time. Respondents
asserted that the NLRC had no jurisdiction over the subject matter of the complaint.
In an Order, 5 dated 20 March 2000, the labor arbiter granted the motion to
dismiss. The labor arbiter ruled that Okol was the vice-president of Slimmers World
at the time of her dismissal. Since it involved a corporate officer, the dispute was an
intra-corporate controversy falling outside the jurisdiction of the Arbitration branch.
Okol filed an appeal with the NLRC. In a Resolution 6 dated 29 May 2001, the
NLRC reversed and set aside the labor arbiter's order. The dispositive portion of the
resolution states:
WHEREFORE, the Order appealed from is SET ASIDE and REVERSED. A
new one is hereby ENTERED ordering respondent Behavior Modification,
Inc./Slimmers World International to reinstate complainant Leslie F. Okol to her
former position with full back wages which to date stood in the amount of
P10,000,000.00 computed from July 28, 1999 to November 28, 2000 until fully
reinstated; and the further sum of P1,250,000.00 as indemnity pay plus
attorney's fee equivalent to ten (10%) of the total monetary award. However,
should reinstatement be not feasible separation pay equivalent to one month pay
per year of service is awarded, a fraction of at least six months considered one
whole year.
All other claims are dismissed for lack of factual or legal basis.
SO ORDERED. 7

Respondents filed a Motion for Reconsideration with the NLRC. Respondents


contended that the relief prayed for was confined only to the question of jurisdiction.
However, the NLRC not only decided the case on the merits but did so in the absence
of position papers from both parties. In a Resolution 8 dated 21 December 2001, the
NLRC denied the motion for lack of merit.
Respondents then filed an appeal with the Court of Appeals, docketed as CAG.R. SP No. 69893.
The Ruling of the Court of Appeals

In a Decision 9 dated 18 October 2002, the appellate court set aside the
NLRC's Resolution dated 29 May 2001 and affirmed the labor arbiter's Order dated
20 March 2000. The Court of Appeals ruled that the case, being an intra-corporate
dispute, falls within the jurisdiction of the regular courts pursuant to Republic Act No.
8799. 10 The appellate court added that the NLRC had acted without jurisdiction in
giving due course to the complaint and deprived respondents of their right to due
process in deciding the case on the merits.
Okol filed a Motion for Reconsideration which was denied in a Resolution 11
dated 22 September 2003.
STECAc

Hence, the instant petition.


The Issue
The issue is whether or not the NLRC has jurisdiction over the illegal dismissal
case filed by petitioner.
The Court's Ruling
The petition lacks merit.
Petitioner insists that the Court of Appeals erred in ruling that she was a
corporate officer and that the case is an intra-corporate dispute falling within the
jurisdiction of the regular courts. Petitioner asserts that even as vice-president, the
work that she performed conforms to that of an employee rather than a corporate
officer. Mere title or designation in a corporation will not, by itself, determine the
existence of an employer-employee relationship. It is the "four-fold" test, namely (1)
the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the
power to control, which must be applied.
Petitioner enumerated the instances that she was under the power and control of Moy,
Slimmers World's president: (1) petitioner received salary evidenced by pay slips, (2)
Moy deducted Medicare and SSS benefits from petitioner's salary, and (3) petitioner
was dismissed from employment not through a board resolution but by virtue of a
letter from Moy. Thus, having shown that an employer-employee relationship exists,
the jurisdiction to hear and decide the case is vested with the labor arbiter and the
NLRC.
Respondents, on the other hand, maintain that petitioner was a corporate officer at the
time of her dismissal from Slimmers World as supported by the General Information
Sheet and Director's Affidavit attesting that petitioner was an officer. Also, the factors
cited by petitioner that she was a mere employee do not prove that she was not an
officer of Slimmers World. Even the alleged absence of any resolution of the Board of
Directors approving petitioner's termination does not constitute proof that petitioner
was not an officer. Respondents assert that petitioner was not only an officer but also
a stockholder and director; which facts provide further basis that petitioner's
separation from Slimmers World does not come under the NLRC's jurisdiction.

The issue revolves mainly on whether petitioner was an employee or a


corporate officer of Slimmers World. Section 25 of the Corporation Code enumerates
corporate officers as the president, secretary, treasurer and such other officers as may
be provided for in the by-laws. In Tabang v. NLRC, 12 we held that an "office" is
created by the charter of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation to be paid
to such employee.
In the present case, the respondents, in their motion to dismiss filed before the labor
arbiter, questioned the jurisdiction of the NLRC in taking cognizance of petitioner's
complaint. In the motion, respondents attached the General Information Sheet 13
(GIS) dated 14 April 1998, Minutes 14 of the meeting of the Board of Directors dated
14 April 1997 and Secretary's Certificate, 15 and the Amended By-Laws 16 dated 1
August 1994 of Slimmers World as submitted to the SEC to show that petitioner was
a corporate officer whose rights do not fall within the NLRC's jurisdiction. The GIS
and minutes of the meeting of the board of directors indicated that petitioner was a
member of the board of directors, holding one subscribed share of the capital stock,
and an elected corporate officer.
cDCIHT

The relevant portions of the Amended By-Laws of Slimmers World which


enumerate the power of the board of directors as well as the officers of the
corporation state:
Article II
The Board of Directors
1. Qualifications and Election The general management of the corporation
shall be vested in a board of five directors who shall be stockholders and who
shall be elected annually by the stockholders and who shall serve until the
election and qualification of their successors.
xxx xxx xxx
Article III
Officers
xxx xxx xxx
4. Vice-President Like the Chairman of the Board and the President, the
Vice-President shall be elected by the Board of Directors from [its] own
members.

The Vice-President shall be vested with all the powers and authority and is
required to perform all the duties of the President during the absence of the
latter for any cause.
The Vice-President will perform such duties as the Board of Directors may
impose upon him from time to time.
xxx xxx xxx

Clearly, from the documents submitted by respondents, petitioner was a


director and officer of Slimmers World. The charges of illegal suspension, illegal
dismissal, unpaid commissions, reinstatement and back wages imputed by petitioner
against respondents fall squarely within the ambit of intra-corporate disputes. In a
number of cases, 17 we have held that a corporate officer's dismissal is always a
corporate act, or an intra-corporate controversy which arises between a stockholder
and a corporation. The question of remuneration involving a stockholder and officer,
not a mere employee, is not a simple labor problem but a matter that comes within the
area of corporate affairs and management and is a corporate controversy in
contemplation of the Corporation Code. 18
Prior to its amendment, Section 5 (c) of Presidential Decree No. 902-A 19 (PD 902A) provided that intra-corporate disputes fall within the jurisdiction of the Securities
and Exchange Commission (SEC):
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:
DCSETa

xxx xxx xxx


c) Controversies in the election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or associations.

Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August
2000, transferred to regional trial courts the SEC's jurisdiction over all cases listed in
Section 5 of PD 902-A:
5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court.
xxx xxx xxx

It is a settled rule that jurisdiction over the subject matter is conferred by law.
20 The determination of the rights of a director and corporate officer dismissed from
his employment as well as the corresponding liability of a corporation, if any, is an
intra-corporate dispute subject to the jurisdiction of the regular courts. Thus, the
appellate court correctly ruled that it is not the NLRC but the regular courts which
have jurisdiction over the present case.
WHEREFORE, we DENY the petition. We AFFIRM the 18 October 2002
Decision and 22 September 2003 Resolution of the Court of Appeals in CA-G.R. SP
No. 69893. This Decision is without prejudice to petitioner Leslie Okol's taking
recourse to and seeking relief through the appropriate remedy in the proper forum.
SO ORDERED.
Carpio Morales, * Leonardo-de Castro, ** Del Castillo and Abad, JJ., concur.
(Okol v. Slimmers World International, G.R. No. 160146, [December 11, 2009], 623
PHIL 13-22)
|||

THIRD DIVISION
[G.R. No. 164888. December 6, 2006.]
RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD
STORAGE AND DEVELOPMENT CORPORATION, CITIZENS
DEVELOPMENT INCORPORATED, CARIDAD B. GARCIA,
SANDRA G. ESCAT, LORNA GARCIA, and OLGA G. ESCAT,
petitioners, vs. ANNALISA CORTES, respondent.

DECISION

CARPIO MORALES, J :
p

In 1987, Virgilio Garcia, "founder" of petitioner corporations (the corporations), hired the
then still single Annalisa Cortes (respondent) as clerk of the Rural Bank of Coron
(Manila Office).
After Virgilio died, his son Victor took over the management of the corporations.
Anita Cortes (Anita), the wife of Victor Garcia, was also involved in the management of
the corporations. Respondent later married Anita's brother Eduardo Cortes.
Anita soon assumed the position of Vice President of petitioner Citizens Development
Incorporated (CDI) and practically controlled the financial operations of almost all of the
other corporations in the course of which she allowed some of her relatives and in-laws,
including respondent, to hold several key sensitive positions thereat.
Respondent later became the Financial Assistant, Personnel Officer and Corporate
Secretary of The Rural Bank of Coron, Personnel Officer of CDI, and also Personnel
Officer and Disbursing Officer of The Empire Cold Storage Development Corporation
(ECSDC). She simultaneously received salaries from these corporations.
On examination of the financial books of the corporations by petitioner Sandra Garcia
Escat, a daughter of Virgilio Garcia who was previously residing in Spain, she found out
that respondent was involved in several anomalies, 1 drawing petitioners to terminate
respondent's services on November 23, 1998 in petitioner corporations. 2
By letter of November 25, 1998 3 addressed to individual petitioners Caridad B. Garcia
(widow of Virgilio Garcia), Sandra G. Escat, and Olga G. Escat (another daughter of
Virgilio Garcia), respondent's counsel conveyed respondent's willingness to abide by the

decision to terminate her but reminded them that she was entitled to separation pay
equivalent to 11 months salary as well as to the other benefits provided by law in her
favor.
EcHIAC

Respondent's counsel thus demanded the payment of respondent's unpaid salary for the
months of October and November 1998, separation pay equivalent to 12 months salary, 4
13th month pay and other benefits.
As the demand remained unheeded, respondent filed a complaint 5 for illegal dismissal
and non-payment of salaries and other benefits, docketed as NLRC-NCR Case No. 0005-05738-99.
Petitioners moved for the dismissal of the complaint on the ground of lack of jurisdiction,
contending that the case was an intra-corporate controversy involving the removal of a
corporate officer, respondent being the Corporate Secretary of the Rural Bank of Coron,
Inc., hence, cognizable by the Securities and Exchange Commission (SEC) pursuant to
Section 5 of PD 902-A. 6
In resolving the issue of jurisdiction, the Labor Arbiter noted as follows:
It is to be noted that complainant, aside from her being Corporate Secretary of
Rural Bank of Coron, complainant was likewise appointed as Financial
Assistant & Personnel Officer of all respondents herein, whose services
w[ere] terminated on 23 November 1998, hence, the instant complaint.
Verily, a Financial Assistant & Personnel Officer is not a Corporate Officer
of the [petitioners'] corporation, thus, pursuant to Article 217 of the Labor
Code, as amended, the instant case falls within the ambit of original and
exclusive jurisdiction of this Office. 7 (Emphasis and underscoring supplied).

Eventually, the Labor Arbiter found for respondent, computing the monetary award due
her as follows:
Backwages P658,000.00
13th Month Pay for 1998, 1999 & 2000 63,000.00
P721,000.00
Separation Pay 315,000.00
Unpaid Salary 25,900.00
Attorney's fees 106,190.00
P1,168,090.00

Thus, the Labor Arbiter, by Decision of July 18, 2001, disposed:

WHEREFORE, in view of all the foregoing, respondents are hereby ordered to


jointly and severally pay complainant the total amount of ONE MILLION ONE
HUNDRED SIXTY-EIGHT THOUSAND NINETY (P1,168,090.00) PESOS as
discussed above. 8

On August 13, 2001, the tenth or last day of the period of appeal, 9 petitioners filed a
Notice of Appeal and Motion for Reduction of Bond 10 to which they attached a
Memorandum on Appeal. 11 In their Motion for Reduction of Bond, petitioners alleged
that the corporations were under financial distress and the Rural Bank of Coron was
under receivership. They thus prayed that the amount of bond be substantially reduced,
preferably to one half thereof or even lower. 12
By Resolution of October 16, 2001 13 , the National Labor Relations Commission
(NLRC), while noting that petitioners timely filed the appeal, held that the same was not
accompanied by an appeal bond, a mandatory requirement under Article 223 14 of the
Labor Code and Section 6, Rule VI of the NLRC New Rules of Procedure. It also noted
that the Motion for Reduction of Bond was "premised on self-serving allegations." It
accordingly dismissed the appeal.
Petitioners' Motion for Reconsideration 15 was denied by the NLRC by November 26,
2001 Resolution, 16 hence, they filed a Petition for Certiorari 17 before the Court of
Appeals.
aSIATD

By Decision dated May 26, 2004 18 , the appellate court dismissed the petition for lack of
merit. Petitioners' motion for reconsideration was also denied by Resolution of August
13, 2004. 19
Hence, this petition, 20 petitioners faulting the appellate court for:
I
. . . FAIL[URE] TO RULE THAT THE NLRC'S RULE OF PROCEDURE
WHICH PROVIDES FOR THE POSTING OF A BOND AS A CONDITION
PRECEDENT FOR PERFECTING AN APPEAL AS A CONDITION
PRECEDENT FOR PERFECTING AN APPEAL IS CONTRARY TO LAW
AND ESTABLISHED JURISPRUDENCE.
II
. . . DISMISS[ING] PETITIONERS['] PETITION FOR [CERTIORARI]
BASED ON TECHNICALITY AND FAIL[URE] TO DECIDE THE SAME
BASED ON ITS MERIT.
III

. . . DISMISSING PETITIONERS' PETITION FOR CERTIORARI FROM


THE DECISION OF THE NLRC FOR NON-PERFECTION THEREOF.
IV
. . . DISMISSING PETITIONERS' PETITION FOR [CERTIORARI] FROM
THE DECISION OF THE NLRC WITHOUT RESOLVING THE CASE
BASED ON ITS MERITS.
V
. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL PETITIONERS ARE
NOT SOLIDARY LIABLE TO PAY THE RESPONDENT FOR HER
MONETARY CLAIM IN VIEW OF THE ABSENCE OF ANY EVIDENCE
SHOWING THAT THEY WERE MOTIVATED BY ILL-WILL OR MALICE
IN SEVERING HER EMPLOYMENT.
VI
. . . FAIL[URE] TO RESOLVE THE ISSUE OF JURISDICTION. 21

While, indeed, respondent was the Corporate Secretary of the Rural Bank of Coron, she
was also its Financial Assistant and the Personnel Officer of the two other petitioner
corporations. 22
Mainland Construction Co., Inc. v. Movilla 23 instructs that a corporation can engage its
corporate officers to perform services under a circumstance which would make them
employees. 24
The Labor Arbiter has thus jurisdiction over respondent's complaint.
On the first three assigned errors which bear on whether petitioners' appeal before the
NLRC was perfected:
As before the Court of Appeals, petitioners cite Cosico, Jr. v. NLRC 25 and Taberrah v.
NLRC 26 in support of their contention that their appeal before the NLRC was perfected.
As correctly ruled by the Court of Appeals, however, the cited cases are not in point.
. . . The appellant in Taberrah filed a motion to fix appeal bond instead of
posting an appeal bond; and the Supreme Court relaxed the requirement
considering that the labor arbiter's decision did not contain a computation of the
monetary award. In Cosico, the appeal bond posted was of insufficient amount
but the Supreme Court ruled that provisions of the Labor Code on requiring a
bond on appeal involving monetary awards must be given liberal interpretation
in line with the desired objective of resolving controversies on their merits.

Herein, no appeal bond, whether sufficient or not, was ever filed by the
petitioners. 27 (Italics in the original; emphasis and underscoring supplied)
CEHcSI

Petitioners additionally cite Star Angel Handicraft v. NLRC 28 to support their position
that there is a distinction between the filing of an appeal within the reglementary period
and its perfection. In the parallel case of Computer Innovations Center v. National Labor
Relations Commission, 29 this Court hesitated to reiterate the doctrine in Star Angel in
this wise:
Petitioners invoke the aforementioned holding in Star Angel that there is a
distinction between the filing of an appeal within the reglementary period and
its perfection, and that the appeal may be perfected after the said reglementary
period. Indeed, Star Angel held that the filing of a motion for reduction of
appeal bond necessarily stays the reglementary period for appeal. However, in
this case, the motion for reduction of appeal bond, which was incorporated in
the appeal memorandum, was filed only on the tenth or final day of the
reglementary period. Under such circumstance, the motion for reduction of
appeal bond can no longer be deemed to have stayed the appeal, and the
petitioner faces the risk, as had happened in this case, of summary
dismissal of the appeal for non-perfection.
Moreover, the reference in Star Angel to the distinction between the period to
file the appeal and to perfect the appeal has been pointedly made only once by
this Court in Gensoli v. NLRC thus, it has not acquired the sheen of venerability
reserved for repeatedly-cited cases. The distinction, if any, is not particularly
evident or material in the Labor Code; hence, the reluctance of the Court to
adopt such doctrine. Moreover, the present provision in the NLRC Rules of
Procedure, that "the filing of a motion to reduce bond shall not stop the running
of the period to perfect appeal" flatly contradicts the notion expressed in Star
Angel that there is a distinction between the filing an appeal and perfecting
an appeal.

Ultimately, the disposition of Star Angel was premised on the ruling that a
motion for reduction of the appeal bond necessarily stays the period for
perfecting the appeal, and that the employer cannot be expected to perfect the
appeal by posting the proper bond until such time the said motion for reduction
is resolved. The unduly stretched-out distinction between the period to file
an appeal and to perfect an appeal was not material to the resolution of
Star Angel, and this could be properly considered as obiter dictum. 30
(Italics in the original; emphasis and underscoring supplied)

The appellate court did not thus err in dismissing the petition before it. And contrary to
petitioners' assertion, the appellate court dismissed its petition not "on a mere
technicality." For the non-posting of an appeal bond within the reglementary period

divests the NLRC of its jurisdiction to entertain the appeal. Thus, in the same case of
Computer Innovations Center, this Court held:
Petitioners also characterize the appeal bond requirement as a technical rule,
and that the dismissal of an appeal on purely technical grounds is frowned upon.
However, Article 223, which prescribes the appeal bond requirement, is a
rule of jurisdiction and not of procedure. There is a little leeway for
condoning a liberal interpretation thereof, and certainly none premised on the
ground that its requirements are mere technicalities. It must be emphasized that
there is no inherent right to an appeal in a labor case, as it arises solely from
grant of statute, namely the Labor Code.
IDTSEH

We have indeed held that the requirement for posting the surety bond is not
merely procedural but jurisdictional and cannot be trifled with. Noncompliance with such legal requirements is fatal and has the effect of rendering
the judgment final and executory. The petitioners cannot be allowed to seek
refuge in a liberal application of rules for their act of negligence. 31 (Emphasis
and underscoring supplied)

It bears emphasis that all that is required to perfect the appeal is the posting of a bond to
ensure that the award is eventually paid should the appeal be dismissed. Petitioners
should thus have posted a bond, even if it were only partial, but they did not. No
relaxation of the Rule may thus be considered. 32
In the case at bar, petitioner did not post a full or partial appeal bond within
the prescribed period, thus, no appeal was perfected from the decision of the
Labor Arbiter. For this reason, the decision sought to be appealed to the NLRC
had become final and executory and therefore immutable. Clearly then, the
NLRC has no authority to entertain the appeal, much less to reverse the decision
of the Labor Arbiter. Any amendment or alteration made which substantially
affects the final and executory judgment is null and void for lack of jurisdiction,
including the entire proceeding held for that purpose. 33 (Emphasis and

underscoring supplied)
As the decision of the Labor Arbiter had become final and executory, a discussion of the
fourth and fifth assigned errors is no longer necessary.
WHEREFORE, the petition is DENIED.
SO ORDERED.
Quisumbing, Carpio, Tinga and Velasco, Jr., JJ., concur.
(Rural Bank of Coron (Palawan), Inc. v. Cortes, G.R. No. 164888, [December 6, 2006],
539 PHIL 498-509)
|||

THIRD DIVISION
[G.R. No. 172013. October 2, 2009.]
PATRICIA HALAGUEA, MA. ANGELITA L. PULIDO, MA.
TERESITA P. SANTIAGO, MARIANNE V. KATINDIG,
BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARY
CHRISTINE A. VILLARETE, CYNTHIA A. STEHMEIER, ROSE
ANNA G. VICTA, NOEMI R. CRESENCIO, and other flight
attendants of PHILIPPINE AIRLINES, petitioners, vs. PHILIPPINE
AIRLINES INCORPORATED, respondent.

DECISION

PERALTA, J. :
p

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision 1 and the Resolution 2 of the Court of
Appeals (CA) in CA-G.R. SP. No. 86813.
Petitioners were employed as female flight attendants of respondent Philippine Airlines
(PAL) on different dates prior to November 22, 1996. They are members of the Flight
Attendants and Stewards Association of the Philippines (FASAP), a labor organization
certified as the sole and exclusive certified as the sole and exclusive bargaining
representative of the flight attendants, flight stewards and pursers of respondent.
On July 11, 2001, respondent and FASAP entered into a Collective Bargaining
Agreement 3 incorporating the terms and conditions of their agreement for the years 2000
to 2005, hereinafter referred to as PAL-FASAP CBA.
Section 144, Part A of the PAL-FASAP CBA, provides that:
A.For the Cabin Attendants hired before 22 November 1996:
xxx xxx xxx
3.Compulsory Retirement
Subject to the grooming standards provisions of this Agreement, compulsory
retirement shall be fifty-five (55) for females and sixty (60) for males. . . . .
cDHAaT

In a letter dated July 22, 2003, 4 petitioners and several female cabin crews manifested
that the aforementioned CBA provision on compulsory retirement is discriminatory, and
demanded for an equal treatment with their male counterparts. This demand was
reiterated in a letter 5 by petitioners' counsel addressed to respondent demanding the
removal of gender discrimination provisions in the coming re-negotiations of the PALFASAP CBA.
On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005
CBA proposals 6 and manifested their willingness to commence the collective bargaining
negotiations between the management and the association, at the soonest possible time.
On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with
Prayer for the Issuance of Temporary Restraining Order and Writ of Preliminary
Injunction 7 with the Regional Trial Court (RTC) of Makati City, Branch 147, docketed
as Civil Case No. 04-886, against respondent for the invalidity of Section 144, Part A of
the PAL-FASAP CBA. The RTC set a hearing on petitioners' application for a TRO and,
thereafter, required the parties to submit their respective memoranda.
On August 9, 2004, the RTC issued an Order 8 upholding its jurisdiction over the present
case. The RTC reasoned that:
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA
which is allegedly discriminatory as it discriminates against female flight
attendants, in violation of the Constitution, the Labor Code, and the CEDAW.
The allegations in the Petition do not make out a labor dispute arising from
employer-employee relationship as none is shown to exist. This case is not
directed specifically against respondent arising from any act of the latter, nor
does it involve a claim against the respondent. Rather, this case seeks a
declaration of the nullity of the questioned provision of the CBA, which is
within the Court's competence, with the allegations in the Petition constituting
the bases for such relief sought.

The RTC issued a TRO on August 10, 2004, 9 enjoining the respondent for implementing
Section 144, Part A of the PAL-FASAP CBA.
The respondent filed an omnibus motion 10 seeking reconsideration of the order
overruling its objection to the jurisdiction of the RTC the lifting of the TRO. It further
prayed that the (1) petitioners' application for the issuance of a writ of preliminary
injunction be denied; and (2) the petition be dismissed or the proceedings in this case be
suspended.
On September 27, 2004, the RTC issued an Order 11 directing the issuance of a writ of
preliminary injunction enjoining the respondent or any of its agents and representatives

from further implementing Sec. 144, Part A of the PAL-FASAP CBA pending the
resolution of the case.
HSDCTA

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition
with Prayer for a Temporary Restraining Order and Writ of Preliminary Injunction 12
with the Court of Appeals (CA) praying that the order of the RTC, which denied its
objection to its jurisdiction, be annuled and set aside for having been issued without
and/or with grave abuse of discretion amounting to lack of jurisdiction.
The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition,
and ruled that:
WHEREFORE, the respondent court is by us declared to have NO
JURISDICTION OVER THE CASE BELOW and, consequently, all the
proceedings, orders and processes it has so far issued therein are ANNULED
and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No.
04-886.
SO ORDERED.

Petitioner filed a motion for reconsideration, 13 which was denied by the CA in its
Resolution dated March 7, 2006.
Hence, the instant petition assigning the following error:
THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT
MATTER IS A LABOR DISPUTE OR GRIEVANCE IS CONTRARY TO
LAW AND JURISPRUDENCE.

The main issue in this case is whether the RTC has jurisdiction over the petitioners'
action challenging the legality or constitutionality of the provisions on the compulsory
retirement age contained in the CBA between respondent PAL and FASAP.
Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of
the litigation is incapable of pecuniary estimation and in all cases not within the exclusive
jurisdiction of any court, tribunal, person or body exercising judicial or quasi-judicial
functions. The RTC has the power to adjudicate all controversies except those expressly
witheld * from the plenary powers of the court. Accordingly, it has the power to decide
issues of constitutionality or legality of the provisions of Section 144, Part A of the PALFASAP CBA. As the issue involved is constitutional in character, the labor arbiter or the
National Labor Relations Commission (NLRC) has no jurisdiction over the case and,
thus, the petitioners pray that judgment be rendered on the merits declaring Section 144,
Part A of the PAL-FASAP CBA null and void.

Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the
present case, as the controversy partakes of a labor dispute. The dispute concerns the
terms and conditions of petitioners' employment in PAL, specifically their retirement age.
The RTC has no jurisdiction over the subject matter of petitioners' petition for declaratory
relief because the Voluntary Arbitrator or panel of Voluntary Arbitrators have original
and exclusive jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the CBA. Regular courts have no power to set and fix
the terms and conditions of employment. Finally, respondent alleged that petitioners'
prayer before this Court to resolve their petition for declaratory relief on the merits is
procedurally improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the material allegations of the
complaint and the character of the relief prayed for irrespective of whether plaintiff is
entitled to such relief. 14
In the case at bar, the allegations in the petition for declaratory relief plainly show that
petitioners' cause of action is the annulment of Section 144, Part A of the PAL-FASAP
CBA. The pertinent portion of the petition recites:
CAUSE OF ACTION
24.Petitioners have the constitutional right to fundamental equality with men
under Section 14, Article II, 1987 of the Constitution and, within the specific
context of this case, with the male cabin attendants of Philippine Airlines.
26.Petitioners have the statutory right to equal work and employment
opportunities with men under Article 3, Presidential Decree No. 442, The Labor
Code and, within the specific context of this case, with the male cabin
attendants of Philippine Airlines.
27.It is unlawful, even criminal, for an employer to discriminate against women
employees with respect to terms and conditions of employment solely on
account of their sex under Article 135 of the Labor Code as amended by
Republic Act No. 6725 or the Act Strengthening Prohibition on Discrimination
Against Women.
EScAID

28.This discrimination against Petitioners is likewise against the Convention on


the Elimination of All Forms of Discrimination Against Women (hereafter,
"CEDAW"), a multilateral convention that the Philippines ratified in 1981. The
Government and its agents, including our courts, not only must condemn all
forms of discrimination against women, but must also implement measures
towards its elimination.

29.This case is a matter of public interest not only because of Philippine


Airlines' violation of the Constitution and existing laws, but also because it
highlights the fact that twenty-three years after the Philippine Senate ratified the
CEDAW, discrimination against women continues.
31.Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory
retirement from service is invidiously discriminatory against and manifestly
prejudicial to Petitioners because, they are compelled to retire at a lower age
(fifty-five (55) relative to their male counterparts (sixty (60)).
33.There is no reasonable, much less lawful, basis for Philippine Airlines to
distinguish, differentiate or classify cabin attendants on the basis of sex and
thereby arbitrarily set a lower compulsory retirement age of 55 for Petitioners
for the sole reason that they are women.

37.For being patently unconstitutional and unlawful, Section 114, Part A of the
PAL-FASAP 2000-2005 CBA must be declared invalid and stricken down to
the extent that it discriminates against petitioner.
38.Accordingly, consistent with the constitutional and statutory guarantee of
equality between men and women, Petitioners should be adjudged and declared
entitled, like their male counterparts, to work until they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the Honorable Court:
c.after trial on the merits:
(I)declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID,
NULL and VOID to the extent that it discriminates against Petitioners; . . . .

From the petitioners' allegations and relief prayed for in its petition, it is clear that the
issue raised is whether Section 144, Part A of the PAL-FASAP CBA is unlawful and
unconstitutional. Here, the petitioners' primary relief in Civil Case No. 04-886 is the
annulment of Section 144, Part A of the PAL-FASAP CBA, which allegedly
discriminates against them for being female flight attendants. The subject of litigation is
incapable of pecuniary estimation, exclusively cognizable by the RTC, pursuant to
Section 19 (1) of Batas Pambansa Blg. 129, as amended. 15 Being an ordinary civil
action, the same is beyond the jurisdiction of labor tribunals.
TIEHDC

The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires
the application of the Constitution, labor statutes, law on contracts and the Convention on

the Elimination of All Forms of Discrimination Against Women, 16 and the power to
apply and interpret the constitution and CEDAW is within the jurisdiction of trial courts,
a court of general jurisdiction. In Georg Grotjahn GMBH & Co. v. Isnani, 17 this Court
held that not every dispute between an employer and employee involves matters that only
labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasijudicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the
Labor Code is limited to disputes arising from an employer-employee relationship which
can only be resolved by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement.
Not every controversy or money claim by an employee against the employer or viceversa is within the exclusive jurisdiction of the labor arbiter. Actions between employees
and employer where the employer-employee relationship is merely incidental and the
cause of action precedes from a different source of obligation is within the exclusive
jurisdiction of the regular court. 18 Here, the employer-employee relationship between
the parties is merely incidental and the cause of action ultimately arose from different
sources of obligation, i.e., the Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved not by reference to the Labor
Code or other labor relations statute or a collective bargaining agreement but by the
general civil law, the jurisdiction over the dispute belongs to the regular courts of justice
and not to the labor arbiter and the NLRC. In such situations, resolution of the dispute
requires expertise, not in labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the application of the general civil law.
Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed
to labor arbiters and the NLRC and the rationale for granting jurisdiction over such
claims to these agencies disappears. 19
If We divest the regular courts of jurisdiction over the case, then which tribunal or forum
shall determine the constitutionality or legality of the assailed CBA provision?
This Court holds that the grievance machinery and voluntary arbitrators do not have the
power to determine and settle the issues at hand. They have no jurisdiction and
competence to decide constitutional issues relative to the questioned compulsory
retirement age. Their exercise of jurisdiction is futile, as it is like vesting power to
someone who cannot wield it.
In Gonzales v. Climax Mining Ltd., 20 this Court affirmed the jurisdiction of courts over
questions on constitutionality of contracts, as the same involves the exercise of judicial
power. The Court said:
Whether the case involves void or voidable contracts is still a judicial question.
It may, in some instances, involve questions of fact especially with regard to the

determination of the circumstances of the execution of the contracts. But the


resolution of the validity or voidness of the contracts remains a legal or judicial
question as it requires the exercise of judicial function. It requires the
ascertainment of what laws are applicable to the dispute, the interpretation and
application of those laws, and the rendering of a judgment based thereon.
Clearly, the dispute is not a mining conflict. It is essentially judicial. The
complaint was not merely for the determination of rights under the mining
contracts since the very validity of those contracts is put in issue.
DTIaCS

In Saura v. Saura, Jr., 21 this Court emphasized the primacy of the regular court's
judicial power enshrined in the Constitution that is true that the trend is towards vesting
administrative bodies like the SEC with the power to adjudicate matters coming under
their particular specialization, to insure a more knowledgeable solution of the problems
submitted to them. This would also relieve the regular courts of a substantial number of
cases that would otherwise swell their already clogged dockets. But as expedient as this
policy may be, it should not deprive the courts of justice of their power to decide
ordinary cases in accordance with the general laws that do not require any particular
expertise or training to interpret and apply. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render the
judiciary virtually impotent in the discharge of the duties assigned to it by the
Constitution.
To be sure, in Rivera v. Espiritu, 22 after Philippine Airlines (PAL) and PAL Employees
Association (PALEA) entered into an agreement, which includes the provision to suspend
the PAL-PALEA CBA for 10 years, several employees questioned its validity via a
petition for certiorari directly to the Supreme Court. They said that the suspension was
unconstitutional and contrary to public policy. Petitioners submit that the suspension was
inordinately long, way beyond the maximum statutory life of 5 years for a CBA provided
for in Article 253-A of the Labor Code.By agreeing to a 10-year suspension, PALEA, in
effect, abdicated the workers' constitutional right to bargain for another CBA at the
mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to
petitioners a plain, speedy, and adequate remedy in the ordinary course of law. The Court
said that while the petition was denominated as one for certiorari and prohibition, its
object was actually the nullification of the PAL-PALEA agreement. As such, petitioners'
proper remedy is an ordinary civil action for annulment of contract, an action which
properly falls under the jurisdiction of the regional trial courts.
The change in the terms and conditions of employment, should Section 144 of the CBA
be held invalid, is but a necessary and unavoidable consequence of the principal relief
sought, i.e., nullification of the alleged discriminatory provision in the CBA. Thus, it
does not necessarily follow that a resolution of controversy that would bring about a
change in the terms and conditions of employment is a labor dispute, cognizable by labor

tribunals. It is unfair to preclude petitioners from invoking the trial court's jurisdiction
merely because it may eventually result into a change of the terms and conditions of
employment. Along that line, the trial court is not asked to set and fix the terms and
conditions of employment, but is called upon to determine whether CBA is consistent
with the laws.
Although the CBA provides for a procedure for the adjustment of grievances, such
referral to the grievance machinery and thereafter to voluntary arbitration would be
inappropriate to the petitioners, because the union and the management have
unanimously agreed to the terms of the CBA and their interest is unified.
HaIATC

In Pantranco North Express, Inc., v. NLRC, 23 this Court held that:


. . . Hence, only disputes involving the union and the company shall be referred
to the grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to
an agreement regarding the dismissal of private respondents. No grievance
between them exists which could be brought to a grievance machinery. The
problem or dispute in the present case is between the union and the company on
the one hand and some union and non-union members who were dismissed, on
the other hand. The dispute has to be settled before an impartial body. The
grievance machinery with members designated by the union and the company
cannot be expected to be impartial against the dismissed employees. Due
process demands that the dismissed workers' grievances be ventilated before an
impartial body. . . . .
Applying the same rationale to the case at bar, it cannot be said that the
"dispute" is between the union and petitioner company because both have
previously agreed upon the provision on "compulsory retirement" as embodied
in the CBA. Also, it was only private respondent on his own who questioned the
compulsory retirement. . . . .

In the same vein, the dispute in the case at bar is not between FASAP and respondent
PAL, who have both previously agreed upon the provision on the compulsory retirement
of female flight attendants as embodied in the CBA. The dispute is between respondent
PAL and several female flight attendants who questioned the provision on compulsory
retirement of female flight attendants. Thus, applying the principle in the aforementioned
case cited, referral to the grievance machinery and voluntary arbitration would not serve
the interest of the petitioners.

Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator
under the CBA would be futile because respondent already implemented Section 114,

Part A of PAL-FASAP CBA when several of its female flight attendants reached the
compulsory retirement age of 55.
Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its
association's bargaining proposal for the remaining period of 2004-2005 of the PALFASAP CBA, which includes the renegotiation of the subject Section 144. However,
FASAP's attempt to change the questioned provision was shallow and superficial, to say
the least, because it exerted no further efforts to pursue its proposal. When petitioners in
their individual capacities questioned the legality of the compulsory retirement in the
CBA before the trial court, there was no showing that FASAP, as their representative,
endeavored to adjust, settle or negotiate with PAL for the removal of the difference in
compulsory age retirement between its female and male flight attendants, particularly
those employed before November 22, 1996. Without FASAP's active participation on
behalf of its female flight attendants, the utilization of the grievance machinery or
voluntary arbitration would be pointless.
The trial court in this case is not asked to interpret Section 144, Part A of the PALFASAP CBA. Interpretation, as defined in Black's Law Dictionary, is the art of or
process of discovering and ascertaining the meaning of a statute, will, contract, or other
written document. 24 The provision regarding the compulsory retirement of flight
attendants is not ambiguous and does not require interpretation. Neither is there any
question regarding the implementation of the subject CBA provision, because the manner
of implementing the same is clear in itself. The only controversy lies in its intrinsic
validity.
AaDSTH

Although it is a rule that a contract freely entered between the parties should be
respected, since a contract is the law between the parties, said rule is not absolute.
In Pakistan International Airlines Corporation v. Ople, 25 this Court held that:
The principle of party autonomy in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil Code is that the contracting
parties may establish such stipulations as they may deem convenient, "provided
they are not contrary to law, morals, good customs, public order or public
policy". Thus, counter-balancing the principle of autonomy of contracting
parties is the equally general rule that provisions of applicable law, especially
provisions relating to matters affected with public policy, are deemed written
into the contract. Put a little differently, the governing principle is that parties
may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the impact of labor
laws and regulations by simply contracting with each other.

Moreover, the relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. . . . 26
The supremacy of the law over contracts is explained by the fact that labor contracts are
not ordinary contracts; these are imbued with public interest and therefore are subject to
the police power of the state. 27 It should not be taken to mean that retirement provisions
agreed upon in the CBA are absolutely beyond the ambit of judicial review and
nullification. A CBA, as a labor contract, is not merely contractual in nature but
impressed with public interest. If the retirement provisions in the CBA run contrary to
law, public morals, or public policy, such provisions may very well be voided. 28
Finally, the issue in the petition for certiorari brought before the CA by the respondent
was the alleged exercise of grave abuse of discretion of the RTC in taking cognizance of
the case for declaratory relief. When the CA annuled and set aside the RTC's order,
petitioners sought relief before this Court through the instant petition for review under
Rule 45. A perusal of the petition before Us, petitioners pray for the declaration of the
alleged discriminatory provision in the CBA against its female flight attendants.
This Court is not persuaded. The rule is settled that pure questions of fact may not be the
proper subject of an appeal by certiorari under Rule 45 of the Revised Rules of Court.
This mode of appeal is generally limited only to questions of law which must be
distinctly set forth in the petition. The Supreme Court is not a trier of facts. 29
The question as to whether said Section 114, Part A of the PAL-FASAP CBA is
discriminatory or not is a question of fact. This would require the presentation and
reception of evidence by the parties in order for the trial court to ascertain the facts of the
case and whether said provision violates the Constitution, statutes and treaties. A fullblown trial is necessary, which jurisdiction to hear the same is properly lodged with the
the * RTC. Therefore, a remand of this case to the RTC for the proper determination of
the merits of the petition for declaratory relief is just and proper.
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of
the Court of Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CAG.R. SP. No. 86813 are REVERSED and SET ASIDE. The Regional Trial Court of
Makati City, Branch 147 is DIRECTED to continue the proceedings in Civil Case No.
04-886 with deliberate dispatch.
DCScaT

SO ORDERED.
Ynares-Santiago, Chico-Nazario, Velasco, Jr. and Nachura, JJ., concur.
(Halaguea v. Philippine Airlines, Inc., G.R. No. 172013, [October 2, 2009], 617 PHIL
502-521)
|||

SECOND DIVISION
[G.R. No. 162419. July 10, 2007.]
PAUL V. SANTIAGO, petitioner, vs. CF SHARP CREW
MANAGEMENT, INC., respondent.

DECISION

TINGA, J :
p

At the heart of this case involving a contract between a seafarer, on one hand, and the
manning agent and the foreign principal, on the other, is this erstwhile unsettled legal
quandary: whether the seafarer, who was prevented from leaving the port of Manila and
refused deployment without valid reason but whose POEA-approved employment
contract provides that the employer-employee relationship shall commence only upon the
seafarer's actual departure from the port in the point of hire, is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the
Decision and Resolution of the Court of Appeals dated 16 October 2003 and 19 February
2004, respectively, in CA-G.R. SP No. 68404. 1
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent)
for about five (5) years. 2 On 3 February 1998, petitioner signed a new contract of
employment with respondent, with the duration of nine (9) months. He was assured of a
monthly salary of US$515.00, overtime pay and other benefits. The following day or on 4
February 1998, the contract was approved by the Philippine Overseas Employment
Administration (POEA). Petitioner was to be deployed on board the "MSV Seaspread"
which was scheduled to leave the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondent's
Vice President, sent a facsimile message to the captain of "MSV Seaspread," which
reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking
me not to send her husband to MSV Seaspread anymore. Other callers who did
not reveal their identity gave me some feedbacks that Paul Santiago this time if
allowed to depart will jump ship in Canada like his brother Christopher
Santiago, O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last
December, 1997.
CScTED

We do not want this to happen again and have the vessel penalized like the C.S.
Nexus in Japan.
Forewarned is forearmed like his brother when his brother when he was
applying he behaved like a Saint but in his heart he was a serpent. If you agree
with me then we will send his replacement.
Kindly advise. 3

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


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

On 9 February 1998, petitioner was thus told that he would not be leaving for Canada
anymore, but he was reassured that he might be considered for deployment at some future
date.
Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against
respondent and its foreign principal, Cable and Wireless (Marine) Ltd. 5 The case was
raffled to Labor Arbiter Teresita Castillon-Lora, who ruled that the employment contract
remained valid but had not commenced since petitioner was not deployed. According to
her, respondent violated the rules and regulations governing overseas employment when
it did not deploy petitioner, causing petitioner to suffer actual damages representing lost
salary income for nine (9) months and fixed overtime fee, all amounting to US$7,209.00.
The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29
January 1999 reads:
WHEREFORE, premises considered, respondent is hereby Ordered to pay
complainant actual damages in the amount of US$7,209.00 plus 10% attorney's
fees, payable in Philippine peso at the rate of exchange prevailing at the time of
payment.
TacSAE

All the other claims are hereby DISMISSED for lack of merit.
SO ORDERED. 6

On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that
there is no employer-employee relationship between petitioner and respondent because
under the Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean Going Vessels (POEA Standard Contract), the employment
contract shall commence upon actual departure of the seafarer from the airport or seaport
at the point of hire and with a POEA-approved contract. In the absence of an employeremployee relationship between the parties, the claims for illegal dismissal, actual

damages, and attorney's fees should be dismissed. 7 On the other hand, the NLRC found
respondent's decision not to deploy petitioner to be a valid exercise of its management
prerogative. 8 The NLRC disposed of the appeal in this wise:
WHEREFORE, in the light of the foregoing, the assailed Decision dated
January 29, 1999 is hereby AFFIRMED in so far as other claims are concerned
and with MODIFICATION by VACATING the award of actual damages and
attorney's fees as well as excluding Pacifico Fernandez as party respondent.
SO ORDERED. 9

Petitioner moved for the reconsideration of the NLRC's Decision but his motion was
denied for lack of merit. 10 He elevated the case to the Court of Appeals through a
petition for certiorari.
In its Decision 11 dated 16 October 2003, the Court of Appeals noted that there is an
ambiguity in the NLRC's Decision when it affirmed with modification the labor arbiter's
Decision, because by the very modification introduced by the Commission (vacating the
award of actual damages and attorney's fees), there is nothing more left in the labor
arbiter's Decision to affirm. 12
According to the appellate court, petitioner is not entitled to actual damages because
damages are not recoverable by a worker who was not deployed by his agency within the
period prescribed in the POEA Rules. 13 It agreed with the NLRC's finding that
petitioner's non-deployment was a valid exercise of respondent's management
prerogative. 14 It added that since petitioner had not departed from the Port of Manila, no
employer-employee relationship between the parties arose and any claim for damages
against the so-called employer could have no leg to stand on. 15
HaECDI

Petitioner's subsequent motion for reconsideration was denied on 19 February 2004. 16


The present petition is anchored on two grounds, to wit:
A. The Honorable Court of Appeals committed a serious error of law when it
ignored [S]ection 10 of Republic Act [R.A.] No. 8042 otherwise known as the
Migrant Worker's Act of 1995 as well as Section 29 of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board OceanGoing Vessels (which is deemed incorporated under the petitioner's POEA
approved Employment Contract) that the claims or disputes of the Overseas
Filipino Worker by virtue of a contract fall within the jurisdiction of the Labor
Arbiter of the NLRC.
B. The Honorable Court of Appeals committed a serious error when it
disregarded the required quantum of proof in labor cases, which is substantial
evidence, thus a total departure from established jurisprudence on the matter. 17

Petitioner maintains that respondent violated the Migrant Workers Act and the POEA
Rules when it failed to deploy him within thirty (30) calendar days without a valid
reason. In doing so, it had unilaterally and arbitrarily prevented the consummation of the
POEA-approved contract. Since it prevented his deployment without valid basis, said
deployment being a condition to the consummation of the POEA contract, the contract is
deemed consummated, and therefore he should be awarded actual damages, consisting of
the stipulated salary and fixed overtime pay. 18 Petitioner adds that since the contract is
deemed consummated, he should be considered an employee for all intents and purposes,
and thus the labor arbiter and/or the NLRC has jurisdiction to take cognizance of his
claims. 19
Petitioner additionally claims that he should be considered a regular employee, having
worked for five (5) years on board the same vessel owned by the same principal and
manned by the same local agent. He argues that respondent's act of not deploying him
was a scheme designed to prevent him from attaining the status of a regular employee. 20
Petitioner submits that respondent had no valid and sufficient cause to abandon the
employment contract, as it merely relied upon alleged phone calls from his wife and other
unnamed callers in arriving at the conclusion that he would jump ship like his brother. He
points out that his wife had executed an affidavit 21 strongly denying having called
respondent, and that the other alleged callers did not even disclose their identities to
respondent. 22 Thus, it was error for the Court of Appeals to adopt the unfounded
conclusion of the NLRC, as the same was not based on substantial evidence. 23
aHATDI

On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award
petitioner's monetary claims. His employment with respondent did not commence
because his deployment was withheld for a valid reason. Consequently, the labor arbiter
and/or the NLRC cannot entertain adjudication of petitioner's case much less award
damages to him. The controversy involves a breach of contractual obligations and as such
is cognizable by civil courts. 24 On another matter, respondent claims that the second
issue posed by petitioner involves a recalibration of facts which is outside the jurisdiction
of this Court. 25
There is some merit in the petition.
There is no question that the parties entered into an employment contract on 3 February
1998, whereby petitioner was contracted by respondent to render services on board
"MSV Seaspread" for the consideration of US$515.00 per month for nine (9) months,
plus overtime pay. However, respondent failed to deploy petitioner from the port of
Manila to Canada. Considering that petitioner was not able to depart from the airport or
seaport in the point of hire, the employment contract did not commence, and no
employer-employee relationship was created between the parties. 26

However, a distinction must be made between the perfection of the employment contract
and the commencement of the employer-employee relationship. The perfection of the
contract, which in this case coincided with the date of execution thereof, occurred when
petitioner and respondent agreed on the object and the cause, as well as the rest of the
terms and conditions therein. The commencement of the employer-employee
relationship, as earlier discussed, would have taken place had petitioner been actually
deployed from the point of hire. Thus, even before the start of any employer-employee
relationship, contemporaneous with the perfection of the employment contract was the
birth of certain rights and obligations, the breach of which may give rise to a cause of
action against the erring party. Thus, if the reverse had happened, that is the seafarer
failed or refused to be deployed as agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither
the manning agent nor the employer can simply prevent a seafarer from being deployed
without a valid reason.
Respondent's act of preventing petitioner from departing the port of Manila and boarding
"MSV Seaspread" constitutes a breach of contract, giving rise to petitioner's cause of
action. Respondent unilaterally and unreasonably reneged on its obligation to deploy
petitioner and must therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals' conclusion that damages are not recoverable
by a worker who was not deployed by his agency. The fact that the POEA Rules 27 are
silent as to the payment of damages to the affected seafarer does not mean that the
seafarer is precluded from claiming the same. The sanctions provided for nondeployment do not end with the suspension or cancellation of license or fine and the
return of all documents at no cost to the worker. They do not forfend a seafarer from
instituting an action for damages against the employer or agency which has failed to
deploy him.
HaIESC

The POEA Rules only provide sanctions which the POEA can impose on erring agencies.
It does not provide for damages and money claims recoverable by aggrieved employees
because it is not the POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and
respondent, the Court rules that the NLRC has jurisdiction over petitioner's complaint.
The jurisdiction of labor arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or

contract involving Filipino workers for overseas deployment including


claims for actual, moral, exemplary and other forms of damages. . . .
[Emphasis supplied]

Since the present petition involves the employment contract entered into by petitioner for
overseas employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has duly proved. Respondent is thus
liable to pay petitioner actual damages in the form of the loss of nine (9) months' worth of
salary as provided in the contract. He is not, however, entitled to overtime pay. While the
contract indicated a fixed overtime pay, it is not a guarantee that he would receive said
amount regardless of whether or not he rendered overtime work. Even though petitioner
was "prevented without valid reason from rendering regular much less overtime service,"
28 the fact remains that there is no certainty that petitioner will perform overtime work
had he been allowed to board the vessel. The amount of US$286.00 stipulated in the
contract will be paid only if and when the employee rendered overtime work. This has
been the tenor of our rulings in the case of Stolt-Nielsen Marine Services (Phils.), Inc. v.
National Labor Relations Commission 29 where we discussed the matter in this light:
AaCTcI

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

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

However, moral damages cannot be awarded in this case. While respondent's failure to
deploy petitioner seems baseless and unreasonable, we cannot qualify such action as
being tainted with bad faith, or done deliberately to defeat petitioner's rights, as to justify
the award of moral damages. At most, respondent was being overzealous in protecting its
interest when it became too hasty in making its conclusion that petitioner will jump ship
like his brother.
We likewise do not see respondent's failure to deploy petitioner as an act designed to
prevent the latter from attaining the status of a regular employee. Even if petitioner was
able to depart the port of Manila, he still cannot be considered a regular employee,
regardless of his previous contracts of employment with respondent. In Millares v.
National Labor Relations Commission, 33 the Court ruled that seafarers are considered
contractual employees and cannot be considered as regular employees under the Labor
Code. Their employment is governed by the contracts they sign every time they are
rehired and their employment is terminated when the contract expires. The exigencies of
their work necessitates that they be employed on a contractual basis. 34
CDTHSI

WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003


and the Resolution dated 19 February 2004 of the Court of Appeals are REVERSED and
SET ASIDE. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated 29 January
1999 is REINSTATED with the MODIFICATION that respondent CF Sharp Crew
Management, Inc. is ordered to pay actual or compensatory damages in the amount of
US$4,635.00 representing salary for nine (9) months as stated in the contract, and
attorney's fees at the reasonable rate of 10% of the recoverable amount.
SO ORDERED.
Carpio, Carpio-Morales and Velasco, Jr., JJ., concur.
Quisumbing, J., is on official leave.
(Santiago v. CF Sharp Crew Management, Inc., G.R. No. 162419, [July 10, 2007], 554
PHIL 63-77)
|||

SECOND DIVISION
[G.R. No. 142244. November 18, 2002.]
ATLAS FARMS, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, JAIME O. DELA PEA and
MARCIAL I. ABION, respondents.
Eufemio Law Offices for petitioner.
Joshua P. Lapuz for private respondents.
SYNOPSIS
Private respondent Jaime O. dela Pea was employed as a veterinary aide by petitioner
Atlas Farms, Inc., in December 1975. On March 3, 1993, Pea was allegedly caught
urinating and defecating on company premises not intended for the purpose. The farm
manager of petitioner issued a formal notice directing him to explain within 24 hours why
disciplinary action should not be taken against him for violating company rules and
regulations. Pea refused, however, to receive the formal notice. On March 20, 1993, a
notice of termination with payment of his monetary benefits was sent to him. He duly
acknowledged receipt of his separation pay of P13,918.67. Co-respondent Martial I.
Abion was a carpenter/mason and a maintenance man whose employment by petitioner
commenced on October 8, 1990. He allegedly caused the clogging of the fishpond
drainage resulting in damages worth several hundred thousand pesos when he improperly
disposed of the cut grass and other waste materials into the pond's drainage system.
Petitioner sent a written notice to Abion, requiring him to explain what happened,
otherwise, disciplinary action would be taken against him. He refused to receive the
notice and give an explanation. The company terminated his services on October 27,
1992. He acknowledged receipt of a written notice of dismissal, with his separation pay.
Thereafter, Pea and Abion filed separate complaints for illegal dismissal that were later
consolidated. Both claimed that their termination from the service was due to petitioner's
suspicion that they were the leaders in a plan to form a union to compete and replace the
existing management-dominated union. The labor arbiter dismissed their complaints on
the ground that the grievance machinery in the collective bargaining agreement (CBA)
had not yet been exhausted. Private respondents availed of the grievance process, but
later on refiled the case before the NLRC in Region IV. They alleged "lack of sympathy"
on petitioner's part to engage in conciliation proceedings. Their cases were consolidated
in the NLRC. At the initial mandatory conference, petitioner filed a motion to dismiss on
the ground of lack of jurisdiction, alleging private respondents themselves admitted that
they were members of the employees' union with which petitioner had an existing CBA.

According to petitioner, jurisdiction over the case belonged to the grievance machinery
and thereafter the voluntary arbitrator, as provided in the CBA. The labor arbiter
dismissed the complaint for lack of merit, finding that the case was one of illegal
dismissal and did not involve the interpretation or implementation of any CBA provision.
Private respondents appealed to the National Labor Relations Commission (NLRC),
which reversed the labor arbiter's decision. Dissatisfied with the NLRC ruling, petitioner
went to the Court of Appeals by way of a petition for certiorari under Rule 65, seeking
reinstatement of the labor arbiter's decision. The appellate court denied the petition and
affirmed the NLRC resolution. Hence, the present petition. The Supreme Court affirmed
the decision of the Court of Appeals. The Court pointed out that private respondents went
to the NLRC only after the labor arbiter dismissed their original complaint for illegal
dismissal. Given the circumstances, private respondents acted within their legal rights in
finding another avenue for the redress of their grievances. The Court also upheld the
NLRC in concluding that private respondents had already exhausted the remedies under
the grievance procedure and in ruling that it was petitioner who failed to show proof that
it took steps to convene the grievance machinery after the labor arbiter first dismissed the
complaint for illegal dismissal and directed the parties to avail of the grievance procedure
under Article VII of the existing CBA. Private respondents could not be faulted for
attempting to find an impartial forum, after petitioner failed to listen to them and after the
intercession of the labor arbiter proved futile. Petitioner also did not comply with the
requirements of a valid dismissal. Considering the illegality of the dismissal, the cases
were then effectively removed from the jurisdiction of the voluntary arbitrator, thus
placing them within the jurisdiction of the labor arbiter. The Court emphasized that where
the dispute is just in the interpretation, implementation or enforcement stage, it may be
referred to the grievance machinery set up in the CBA, or brought to voluntary
arbitration. But, where there was already actual termination, with alleged violation of the
employee's rights, it is already cognizable by the labor arbiter.
TcaAID

SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF AGENCIES
EXERCISING QUASI-JUDICIAL FUNCTIONS ARE ACCORDED NOT ONLY
RESPECT BUT EVEN FINALITY. The first issue primarily involves questions of
fact, which can serve as basis for the conclusion that private respondents were legally and
validly dismissed. The burden of proving that the dismissal of private respondents was
legal and valid falls upon petitioner. The NLRC found that petitioner failed to
substantiate its claim that both private respondents committed certain acts that violated
company rules and regulations, hence we find no factual basis to say that private
respondents' dismissal was in order. We see no compelling reason to deviate from the
NLRC ruling that their dismissal was illegal, absent a showing that it reached its
conclusion arbitrarily. Moreover, factual findings of agencies exercising quasi-judicial

functions are accorded not only respect but even finality, aside from the consideration
here that this Court is not a trier of facts.
2. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; GRIEVANCE
MACHINERY AND VOLUNTARY ARBITRATION; NON-EXHAUSTION
THEREOF JUSTIFIED IN CASE AT BAR; PETITIONER FAILED TO TAKE STEPS
TO CONVENE THE GRIEVANCE MACHINERY AFTER THE LABOR ARBITER
DISMISSED THE COMPLAINTS FOR ILLEGAL DISMISSAL AND DIRECTED
THE PARTIES TO AVAIL OF THE GRIEVANCE PROCEDURE UNDER ARTICLE
VII OF THEIR EXISTING COLLECTIVE BARGAINING AGREEMENT. Records
show, however, that private respondents sought without success to avail of the grievance
procedure in their CBA. On this point, petitioner maintains that by so doing, private
respondents recognized that their cases still fell under the grievance machinery.
According to petitioner, without having exhausted said machinery, the private
respondents filed their action before the NLRC, in a clear act of forum-shopping.
However, it is worth pointing out that private respondents went to the NLRC only after
the labor arbiter dismissed their original complaint for illegal dismissal. Under these
circumstances private respondents had to find another avenue for redress. We agree with
the NLRC that it was petitioner who failed to show proof that it took steps to convene the
grievance machinery after the labor arbiter first dismissed the complaints for illegal
dismissal and directed the parties to avail of the grievance procedure under Article VII of
the existing CBA. They could not now be faulted for attempting to find an impartial
forum, after petitioner failed to listen to them and after the intercession of the labor
arbiter proved futile. The NLRC had aptly concluded in part that private respondents had
already exhausted the remedies under the grievance procedure. It erred only in finding
that their cause of action was ripe for arbitration.
3. ID.; ID.; ID.; ARBITRATION WITHOUT THE UNION'S ACTIVE
PARTICIPATION ON BEHALF OF THE DISMISSED EMPLOYEES WOULD BE
POINTLESS, OR EVEN PREJUDICIAL TO THEIR CAUSE. One significant fact in
the present petition also needs stressing. Pursuant to Article 260 of the Labor Code, the
parties to a CBA shall name or designate their respective representatives to the grievance
machinery and if the grievance is unsettled in that level, it shall automatically be referred
to the voluntary arbitrators designated in advance by the parties to a CBA. Consequently
only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators. In these termination cases of private respondents, the
union had no participation, it having failed to object to the dismissal of the employees
concerned by the petitioner. It is obvious that arbitration without the union's active
participation on behalf of the dismissed employees would be pointless, or even
prejudicial to their cause.
4. ID.; TERMINATION OF EMPLOYMENT; REQUIREMENTS OF A VALID
DISMISSAL; NOT COMPLIED WITH IN CASE AT BAR. The NLRC found that

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

5. ID.; ID.; RIGHTS OF ILLEGALLY DISMISSED EMPLOYEES. We find that a


modification of the monetary awards is in order. As a consequence of their illegal
dismissal, private respondents are entitled to reinstatement to their former positions. But
since reinstatement is no longer feasible because petitioner had already closed its shop,
separation pay in lieu of reinstatement shall be awarded. A terminated employee's receipt
of his separation pay and other monetary benefits does not preclude reinstatement or full
benefits under the law, should reinstatement be no longer possible. As held in Cario vs.
ACCFA: Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get hold of the money. Because
out of job, he had to face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence, not of choice. One
thing sure, however, is that petitioners did not relent their claim. They pressed it. They
are deemed not to have waived their rights. Renuntiato non praesumitur. Conformably,
private respondents are entitled to separation pay equivalent to one month's salary for
every year of service, in lieu of reinstatement. As regards the award of damages, in order
not to further delay the disposition of this case, we find it necessary to expressly set forth
the extent of the backwages as awarded by the appellate court. Pursuant to R.A. 6715, as
amended, private respondents shall be entitled to full backwages computed from the time
of their illegal dismissal up to the date of promulgation of this decision without
qualification, considering that reinstatement is no longer practicable under the
circumstances.
CDAHIT

DECISION

QUISUMBING, J :
p

Petitioner seeks the reversal of the decision 1 dated January 10, 2000 of the Court of
Appeals in CA-G.R. SP No. 52780, dismissing its petition for certiorari against the
NLRC, as well as the resolution 2 dated February 24, 2000, denying its motion for
reconsideration.
The antecedent facts of the case, as found by the Court of Appeals, 3 are as follows:
Private respondent Jaime O. dela Pea was employed as a veterinary aide by petitioner in
December 1975. He was among several employees terminated in July 1989. On July 8,
1989, he was re-hired by petitioner and given the additional job of feedmill operator. He
was instructed to train selected workers to operate the feedmill.
On March 13, 1993, 4 Pea was allegedly caught urinating and defecating on company
premises not intended for the purpose. The farm manager of petitioner issued a formal
notice directing him to explain within 24 hours why disciplinary action should not be
taken against him for violating company rules and regulations. Pea refused, however, to
receive the formal notice. He never bothered to explain, either verbally or in writing,
according to petitioner. Thus, on March 20, 1993, a notice of termination with payment
of his monetary benefits was sent to him. He duly acknowledged receipt of his separation
pay of P13,918.67.
From the start of his employment on July 8, 1989, until his termination on March 20,
1993, Pea had worked for seven days a week, including holidays, without overtime,
holiday, rest day pay and service incentive leave. At the time of his dismissal from
employment, he was receiving P180 pesos daily wage, or an average monthly salary of
P5,402.
Co-respondent Marcial I. Abion 5 was a carpenter/mason and a maintenance man whose
employment by petitioner commenced on October 8, 1990. Allegedly, he caused the
clogging of the fishpond drainage resulting in damages worth several hundred thousand
pesos when he improperly disposed of the cut grass and other waste materials into the
pond's drainage system. Petitioner sent a written notice to Abion, requiring him to explain
what happened, otherwise, disciplinary action would be taken against him. He refused to
receive the notice and give an explanation, according to petitioner. Consequently, the
company terminated his services on October 27, 1992. He acknowledged receipt of a
written notice of dismissal, with his separation pay.
Like Pea, Abion worked seven days a week, including holidays, without holiday pay,
rest day pay, service incentive leave pay and night shift differential pay. When terminated
on October 27, 1992, Abion was receiving a monthly salary of P4,500.

Pea and Abion filed separate complaints for illegal dismissal that were later
consolidated. Both claimed that their termination from service was due to petitioner's
suspicion that they were the leaders in a plan to form a union to compete and replace the
existing management-dominated union.
On November 9, 1993, the labor arbiter dismissed their complaints on the ground that the
grievance machinery in the collective bargaining agreement (CBA) had not yet been
exhausted. Private respondents availed of the grievance process, but later on refiled the
case before the NLRC in Region IV. They alleged "lack of sympathy" on petitioner's part
to engage in conciliation proceedings.
Their cases were consolidated in the NLRC. At the initial mandatory conference,
petitioner filed a motion to dismiss, on the ground of lack of jurisdiction, alleging private
respondents themselves admitted that they were members of the employees' union with
which petitioner had an existing CBA. This being the case, according to petitioner,
jurisdiction over the case belonged to the grievance machinery and thereafter the
voluntary arbitrator, as provided in the CBA.
In a decision dated January 30, 1996, the labor arbiter dismissed the complaint for lack of
merit, finding that the case was one of illegal dismissal and did not involve the
interpretation or implementation of any CBA provision. He stated that Article 217 (c) of
the Labor Code 6 was inapplicable to the case. Further, the labor arbiter found that
although both complainants did not substantiate their claims of illegal dismissal, there
was proof that private respondents voluntarily accepted their separation pay and
petitioner's financial assistance.
Thus, private respondents brought the case to the NLRC, which reversed the labor
arbiter's decision. Dissatisfied with the NLRC ruling, petitioner went to the Court of
Appeals by way of a petition for review on certiorari under Rule 65, seeking
reinstatement of the labor arbiter's decision. The appellate court denied the petition and
affirmed the NLRC resolution with some modifications, thus:
WHEREFORE, the petition is DENIED. The resolution in NLRC CA No.
010520-96 is AFFIRMED with the following modifications:
1) The private respondents can not be reinstated, due to their acceptance of the
separation pay offered by the petitioner;
2) The private respondents are entitled to their full back wages; and,
3) The amount of the separation pay received by private respondents from
petitioner shall not be deducted from their full back wages.
Costs against petitioner.

SO ORDERED. 7

Petitioner forthwith filed its motion for reconsideration, which was denied in a resolution
dated February 24, 2000, which reads:
Acting on the Motion for Reconsideration filed by petitioner[s] which drew an
opposition from private respondents, the Court resolved to DENY the aforesaid
motion for reconsideration, as the issues raised therein have been passed upon
by the Court in its questioned decision and no substantial arguments were
presented to warrant its reversal, let alone modification.
SO ORDERED. 8

In this petition now before us, petitioner alleges that the appellate court erred in:
I. . . . DENYING THE PETITION FOR CERTIORARI AND IN EFFECT
AFFIRMING THE RULINGS OF THE PUBLIC RESPONDENT
NLRC THAT THE PRIVATE RESPONDENTS WERE ILLEGALLY
DISMISSED;
II. . . . RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED
TO SEPARATION PAY AND FULL BACKWAGES;
III. . . . RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT. 9

Petitioner contends that the dismissal of private respondents was for a just and valid
cause, pursuant to the provisions of the company's rules and regulations. It also alleges
lack of jurisdiction on the part of the labor arbiter, claiming that the cases should have
been resolved through the grievance machinery, and eventually referred to voluntary
arbitration, as prescribed in the CBA.
For their part, private respondents contend that they were illegally dismissed from
employment because management discovered that they intended to form another union,
and because they were vocal in asserting, their rights. In any case, according to private
respondents, the petition involves factual issues that cannot be properly raised in a
petition for review on certiorari under Rule 45 of the Revised Rules of Court. 10
In fine, there are three issues to be resolved: 1) whether private respondents were legally
and validly dismissed; 2) whether the labor arbiter and the NLRC had jurisdiction to
decide complaints for illegal dismissal; and 3) whether petitioner is liable for costs of the
suit.
The first issue primarily involves questions of fact, which can serve as basis for the
conclusion that private respondents were legally and validly dismissed. The burden of
proving that the dismissal of private respondents was legal and valid falls upon petitioner.

The NLRC found that petitioner failed to substantiate its claim that both private
respondents committed certain acts that violated company rules and regulations, 11 hence
we find no factual basis to say that private respondents' dismissal was in order. We see no
compelling reason to deviate from the NLRC ruling that their dismissal was illegal,
absent a showing that it reached its conclusion arbitrarily. 12 Moreover, factual findings
of agencies exercising quasi-judicial functions are accorded not only respect but even
finality, aside from the consideration here that this Court is not a trier of facts. 13

Anent the second issue, Article 217 of the Labor Code provides that labor arbiters have
original and exclusive jurisdiction over termination disputes. A possible exception is
provided in Article 261 of the Labor Code, which provides that
The Voluntary Arbitrator or panel of voluntary arbitrators shall have original
and exclusive jurisdiction to hear and decide all unresolved grievances arising
from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company
personnel policies referred to in the immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross
in character, shall no longer be treated as unfair labor practice and shall be
resolved as grievances under the Collective Bargaining Agreement. For
purposes of this article, gross violations of Collective Bargaining Agreement
shall mean flagrant and or malicious refusal to comply with the economic
provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes, grievances
or matters under the exclusive and original jurisdiction of the Voluntary
Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose and
refer the same to the grievance Machinery or Arbitration provided in the
Collective Bargaining Agreement.

But as held in Vivero vs. CA, 14 "petitioner cannot arrogate into the powers of Voluntary
Arbitrators the original and exclusive jurisdiction of Labor Arbiters over unfair labor
practices, termination disputes, and claims for damages, in the absence of an express
agreement between the parties in order for Article 262 of the Labor Code [Jurisdiction
over other labor disputes] to apply in the case at bar."
Moreover, per Justice Bellosillo:
It may be observed that under Policy Instruction No. 56 of the Secretary of
Labor, dated 6 April 1993, "Clarifying the Jurisdiction Between Voluntary
Arbitrators and Labor Arbiters Over Termination Cases and Providing
Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the

NCMB," termination cases arising in or resulting from the interpretation and


implementation of collective bargaining agreements and interpretation and
enforcement of company personnel policies which were initially processed at
the various steps of the plant-level Grievance Procedures under the parties'
collective bargaining agreements fall within the original and exclusive
jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and Art. 261 of
the Labor Code; and, if filed before the Labor Arbiter, these cases shall be
dismissed by the Labor Arbiter for lack of jurisdiction and referred to the
concerned NCMB Regional Branch for appropriate action towards an
expeditious selection by the parties of a Voluntary Arbitrator or Panel of
Arbitrators based on the procedures agreed upon in the CBA.
As earlier stated, the instant case is a termination dispute falling under the
original and exclusive jurisdiction of the Labor Arbiter, and does not
specifically involve the application, implementation or enforcement of company
personnel policies contemplated in Policy Instruction No. 56. Consequently,
Policy Instruction No. 56 does not apply in the case at bar. 15 . . .

Records show, however, that private respondents sought without success to avail of the
grievance procedure in their CBA. 16 On this point, petitioner maintains that by so doing,
private respondents recognized that their cases still fell under the grievance machinery.
According to petitioner, without having exhausted said machinery, the private
respondents filed their action before the NLRC, in a clear act of forum-shopping. 17
However, it is worth pointing out that private respondents went to the NLRC only after
the labor arbiter dismissed their original complaint for illegal dismissal. Under these
circumstances private respondents had to find another avenue for redress. We agree with
the NLRC that it was petitioner who failed to show proof that it took steps to convene the
grievance machinery after the labor arbiter first dismissed the complaints for illegal
dismissal and directed the parties to avail of the grievance procedure under Article VII of
the existing CBA. They could not now be faulted for attempting to find an impartial
forum, after petitioner failed to listen to them and after the intercession of the labor
arbiter proved futile. The NLRC had aptly concluded in part that private respondents had
already exhausted the remedies under the grievance procedure. 18 It erred only in finding
that their cause of action was ripe for arbitration.
In the case of Maneja vs. NLRC, 19 we held that the dismissal case does not fall within
the phrase "grievances arising from the interpretation or implementation of the collective
bargaining agreement and those arising from the interpretation or enforcement of
company personnel policies." In Maneja, the hotel employee was dismissed without
hearing. We ruled that her dismissal was unjustified, and her right to due process was
violated, absent the twin requirements of notice and hearing. We also held that the labor
arbiter had original and exclusive jurisdiction over the termination case, and that it was
error to give the voluntary arbitrator jurisdiction over the illegal dismissal case.

In Vivero vs. CA, 20 private respondents attempted to justify the jurisdiction of the
voluntary arbitrator over a termination dispute alleging that the issue involved the
interpretation and implementation of the grievance procedure in the CBA. There, we held
that since what was challenged was the legality of the employee's dismissal for lack of
cause and lack of due process, the case was primarily a termination dispute. The issue of
whether there was proper interpretation and implementation of the CBA provisions came
into play only because the grievance procedure in the CBA was not observed, after he
sought his union's assistance. Since the real issue then was whether there was a valid
termination, there was no reason to invoke the need to interpret nor question an
implementation of any CBA provision.
One significant fact in the present petition also needs stressing. Pursuant to Article 260
21 of the Labor Code, the parties to a CBA shall name or designate their respective
representatives to the grievance machinery and if the grievance is unsettled in that level,
it shall automatically be referred to the voluntary arbitrators designated in advance by the
parties to a CBA. Consequently only disputes involving the union and the company shall
be referred to the grievance machinery or voluntary arbitrators. In these termination cases
of private respondents, the union had no participation, it having failed to object to the
dismissal of the employees concerned by the petitioner. It is obvious that arbitration
without the union's active participation on behalf of the dismissed employees would be
pointless, or even prejudicial to their cause.
Coming to the merits of the petition, the NLRC found that petitioner did not comply with
the requirements of a valid dismissal. For a dismissal to be valid, the employer must
show that: (1) the employee was accorded due process, and (2) the dismissal must be for
any of the valid causes provided for by law. 22 No evidence was shown that private
respondents refused, as alleged, to receive the notices requiring them to show cause why
no disciplinary action should be taken against them. Without proof of notice, private
respondents who were subsequently dismissed without hearing were also deprived of a
chance to air their side at the level of the grievance machinery. Given the fact of
dismissal, it can be said that the cases were effectively removed from the jurisdiction of
the voluntary arbitrator, thus placing them within the jurisdiction of the labor arbiter.
Where the dispute is just in the interpretation, implementation or enforcement stage, it
may be referred to the grievance machinery set up in the CBA, or brought to voluntary
arbitration. But, where there was already actual termination, with alleged violation of the
employee's rights, it is already cognizable by the labor arbiter. 23
In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction over the
cases involving private respondents' dismissal, and no error was committed by the
appellate court in upholding their assumption of jurisdiction.
However, we find that a modification of the monetary awards is in order. As a
consequence of their illegal dismissal, private respondents are entitled to reinstatement to

their former positions. But since reinstatement is no longer feasible because petitioner
had already closed its shop, separation pay in lieu of reinstatement shall be awarded. 24 A
terminated employee's receipt of his separation pay and other monetary benefits does not
preclude reinstatement or full benefits under the law, should reinstatement be no longer
possible. 25 As held in Cario vs. ACCFA: 26
Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing. The
employer drove the employee to the wall. The latter must have to get hold of the
money. Because out of job, he had to face the harsh necessities of life. He thus
found himself in no position to resist money proffered. His, then, is a case of
adherence, not of choice. One thing sure, however, is that petitioners did not
relent their claim. They pressed it. They are deemed not to have waived their
rights. Renuntiato non praesumitur.

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

Having found private respondents' dismissal to be illegal, and the labor arbiter and the
NLRC duly vested with jurisdiction to hear and decide their cases, we agree with the
appellate court that petitioner should pay the costs of suit.
WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of
Appeals in CA-G.R. SP No. 52780 is AFFIRMED with the MODIFICATION that
petitioner is ordered to pay private respondents (a) separation pay, in lieu of their
reinstatement, equivalent to one month's salary for every year of service, (b) full
backwages from the date of their dismissal up to the date of the promulgation of this
decision, together with (c) the costs of suit.
SO ORDERED.
Bellosillo, Mendoza and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on leave.

(Atlas Farms, Inc. v. National Labor Relations Commission, G.R. No. 142244,
[November 18, 2002], 440 PHIL 620-636)
|||

THIRD DIVISION
[G.R. No. 121948. October 8, 2001.]
PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner, vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA
TAMAYO, HAROLD CATIPAY, and the NATIONAL LABOR
RELATIONS COMMISSION, Fourth Division, Cebu City,
respondents.
Sedillo Icao Hernando and Associates for petitioner.
The Solicitor General for public respondent.
Sonia B. Eleccion for private respondents.
SYNOPSIS
Private respondents filed a complaint against petitioner with the Arbitration
Branch, Department of Labor and Employment, Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days, separation pay, wage differential,
moral damages, and attorney's fees. Petitioner moved to dismiss the complaint on
ground of absence of employer-employee relationship between them and private
respondents. Petitioner contended that private respondents were mere volunteer
workers, not regular employees. Thus, they cannot sue them. Petitioner also
questioned the jurisdiction of the Labor Arbiter. The Labor Arbiter dismissed the
petitioner's motion to dismiss and subsequently ruled in favor of private respondents.
On appeal, the National Labor Relations Commission affirmed the findings of the
labor arbiter that private respondents were illegally dismissed and were entitled to
reinstatement and full backwages.
Hence, this petition.
In determining the existence of an employer-employee relationship, the
following elements are considered: (1) the selection and engagement of the worker or
the power to hire; (2) the power to dismiss; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with the latter assuming
primacy in the overall consideration. The Supreme Court found that the said elements
are present in this case. Petitioner hired private respondents to work for it. They work
regularly on regular working hours, were assigned specific duties, were paid regular
wages and made to accomplish daily time records. They worked under the supervision
of the cooperative manager. Moreover, private respondents were rendering services
necessary to the day-to-day operations of petitioner, which qualified them as regular

employees. Hence, as regular employees, private respondents are entitled to security


of tenure and can be terminated only for a valid cause, with observance of due
process. The Court, however, found that private respondents' dismissal was not for a
valid cause. They were dismissed because petitioner considered them to be mere
voluntary workers, being its members, and as such, work at its pleasure. Moreover,
the Court found that petitioner failed to comply with the twin requisites of a valid
notice.
With respect to the issue on jurisdiction, the Court held that disputes about
payment of wages, overtime pay, restday and termination of employment are within
the original and exclusive jurisdiction of the labor arbiter. Hence, the decision of the
NLRC was affirmed by the Court with modification as to the computation of back
wages.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; EMPLOYER-EMPLOYEE
RELATIONSHIP; ELEMENTS; PRESENT IN CASE AT BAR. In determining the
existence of an employer-employee relationship, the following elements are considered:
(1) the selection and engagement of the worker or the power to hire; (2) the power to
dismiss; (3) the payment of wages by whatever means; and (4) the power to control the
worker's conduct, with the latter assuming primacy in the overall consideration. No
particular form of proof is required to prove the existence of an employer-employee
relationship. Any competent and relevant evidence may show the relationship. The above
elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its
Manager, hired private respondents to work for it. They worked regularly on regular
working hours, were assigned specific duties, were paid regular wages and made to
accomplish daily time records just like any other regular employee. They worked under
the supervision of the cooperative manager. But unfortunately, they were dismissed.
2. ID.; ID.; EMPLOYEES; KINDS. Article 280 of the Labor Code provides for three
kinds of employees: (1) regular employees or those who have been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the
employer; (2) project employees or those whose employment has been fixed for a
specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or service
to be performed is seasonal in nature and the employment is for the duration of the
season; and (3) casual employees or those who are neither regular nor project employees.
The employees who are deemed regular are: (a) those who have been engaged to perform
activities which are usually necessary or desirable in the usual trade or business of the
employer; and (b) those casual employees who have rendered at least one (1) year of
service, whether such service is continuous or broken, with respect to the activity in
which they are employed.

3. ID.; ID.; ID.; REGULAR EMPLOYEES; REGULARITY OF EMPLOYMENT


DETERMINED BY THE NATURE AND BY THE LENGTH OF TIME AN
EMPLOYEE HAS BEEN IN A PARTICULAR JOB; CASE AT BAR. Undeniably,
private respondents were rendering services necessary to the day-to-day operations of
petitioner PHCCI. This fact alone qualified them as regular employees. All of them,
except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto
Faburada, for one and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C.
Tamayo, for two (2) years and two (2) months. That Benedicto Faburada worked only on
a part-time basis, does not mean that he is not a regular employee. One's regularity of
employment is not determined by the number of hours one works but by the nature and
by the length of time one has been in that particular job. Petitioner's contention that
private respondents are mere volunteer workers, not regular employees, must necessarily
fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of Labor and
Employment (173 SCRA 697, 703 [1989]) is misplaced. The issue in this case is whether
or not the employees-members of a cooperative can organize themselves for purposes of
collective bargaining, not whether or not the members can be employees. Petitioner
missed the point.
4. ID.; ID.; ID.; ID.; ENTITLED TO SECURITY OF TENURE AND CAN BE
TERMINATED ONLY FOR A VALID CAUSE. As regular employees or workers,
private respondents are entitled to security of tenure. Thus, their services may be
terminated only for a valid cause, with observance of due process.
5. ID.; LABOR RELATIONS; TERMINATION OF EMPLOYMENT; VALID
CAUSES; KINDS. The valid causes are categorized into two groups: the just causes
under Articles 282 of the Labor Code and the authorized causes under Articles 283 and
284 of the same Code. The just causes are: (1) serious misconduct or willful disobedience
of lawful orders in connection with the employee's work; (2) gross or habitual neglect of
duties; (3) fraud or willful breach of trust; (4) commission of a crime or an offense
against the person of the employer or his immediate family member or representative;
and, analogous cases. The authorized causes are: (1) the installation of labor-saving
devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation
of operations of the establishment or undertaking, unless the closing is for the purpose of
circumventing the provisions of law. Article 284 provides that an employer would be
authorized to terminate the services of an employee found to be suffering from any
disease if the employee's continued employment is prohibited by law or is prejudicial to
his health or to the health of his fellow employees.
6. ID.; ID.; ID.; PROCEDURAL DUE PROCESS; EMPLOYER MUST COMPLY
WITH THE TWIN REQUISITES OF A VALID NOTICE; CASE AT BAR.
Procedural due process requires that the employer serve the employees to be dismissed
two (2) written notices before the termination of their employment is effected: (a) the
first, to apprise them of the particular acts or omissions for which their dismissal is

sought and (b) the second, to inform them of the decision of the employer that they are
being dismissed. In this case, only one notice was served upon private respondents by
petitioner. It was in the form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their services effective December 29,
1989. Clearly, petitioner failed to comply with the twin requisites of a valid notice.
7. ID.; ID.; ID.; ILLEGALLY DISMISSED EMPLOYEES ARE ENTITLED TO
REINSTATEMENT AND FULL BACKWAGES. As illegally dismissed employees,
private respondents are therefore entitled to reinstatement without loss of seniority rights
and other privileges and to full backwages, inclusive of allowances, plus other benefits or
their monetary equivalent computed from the time their compensation was withheld from
them up to the time of their actual reinstatement. Since they were dismissed after March
21, 1989, the effectivity date of R.A. 6715 they are granted full backwages, meaning,
without deducting from their backwages the earnings derived by them elsewhere during
the period of their illegal dismissal. If reinstatement is no longer feasible, as when the
relationship between petitioner and private respondents has become strained, payment of
their separation pay in lieu of reinstatement is in order.
HSTaEC

8. ID.; LABOR ARBITER; HAS ORIGINAL AND EXCLUSIVE JURISDICTION


OVER DISPUTES ON PAYMENT OF WAGES, OVERTIME PAY, REST DAY AND
TERMINATION OF EMPLOYMENT. Article 121 of Republic Act No. 6938
(Cooperative Code of the Philippines) provides the procedure how cooperative disputes
are to be resolved, thus: . . . . Complementing this Article is Section 8 of R.A. No. 6939
(Cooperative Development Authority Law) which reads: . . . . The above provisions
apply to members, officers and directors of the cooperative involved in disputes within a
cooperative or between cooperatives. There is no evidence that private respondents are
members of petitioner PHCCI and even if they are, the dispute is about payment of
wages, overtime pay, rest day and termination of employment. Under Art. 217 of the
Labor Code,these disputes are within the original and exclusive jurisdiction of the Labor
Arbiter.

DECISION

SANDOVAL-GUTIERREZ, J :
p

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold
Catipay, private respondents, filed a complaint against the Perpetual Help Credit
Cooperative, Inc. (PHCCI), petitioner, with the Arbitration Branch, Department of Labor
and Employment (DOLE), Dumaguete City, for illegal dismissal, premium pay on

holidays and rest days, separation pay, wage differential, moral damages, and attorney's
fees.
Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that
there is no employer-employee relationship between them as private respondents are all
members and co-owners of the cooperative. Furthermore, private respondents have not
exhausted the remedies provided in the cooperative by-laws.
On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that
Article 121 of R.A. No. 6939, otherwise known as the Cooperative Development
Authority Law which took effect on March 26, 1990, requires conciliation or mediation
within the cooperative before a resort to judicial proceeding.
On the same date, the Labor Arbiter denied petitioner's motion to dismiss, holding that
the case is impressed with employer-employee relationship and that the law on
cooperatives is subservient to the Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring
complainants illegally dismissed, thus respondent is directed to pay
Complainants backwages computed from the time they were illegally dismissed
up to the actual reinstatement but subject to the three year backwages rule,
separation pay for one month for every year of service since reinstatement is
evidently not feasible anymore, to pay complainants 13th month pay, wage
differentials and Ten Percent (10%) attorney's fees from the aggregate monetary
award. However, complainant Benedicto Faburada shall only be awarded what
are due him in proportion to the nine and a half months that he had served the
respondent, he being a part-time employee.
All other claims are hereby dismissed for lack of merit.
The computation of the foregoing awards is hereto attached and forms an
integral part of this decision."

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


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

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

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


elements are considered: (1) the selection and engagement of the worker or the power to
hire; (2) the power to dismiss; (3) the payment of wages by whatever means; and (4) the
power to control the worker's conduct, with the latter assuming primacy in the overall
consideration. No particular form of proof is required to prove the existence of an
employer-employee relationship. Any competent and relevant evidence may show the
relationship. 2
The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca,
Jr., its Manager, hired private respondents to work for it. They worked regularly on
regular working hours, were assigned specific duties, were paid regular wages and made
to accomplish daily time records just like any other regular employee. They worked
under the supervision of the cooperative manager. But unfortunately, they were
dismissed.
That an employer-employee exists between the parties is shown by the averments of
private respondents in their respective affidavits, carefully considered by respondent
NLRC in affirming the Labor Arbiter's decision, thus:
Benedicto Faburada Regular part-time Computer programmer/operator.
Worked with the Cooperative since June 1, 1988 up to December 29, 1989.
Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to 5:30 p.m. and every
Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3)
hours during Sundays. Monthly salary: P1,000.00 from June to December
1988; P1,350.00 from January to June 1989; and P1,500.00 from July to
December 1989. Duties: Among others, Enter data into the computer;
compute interests on savings deposits, effect mortuary deductions and dividends
on fixed deposits; maintain the masterlist of the cooperative members; perform
various forms for mimeographing; and perform such other duties as may be
assigned from time to time.
Sisinita Vilar Clerk. Worked with the Cooperative since December 1, 1987
up to December 29, 1989. Work schedule: Regular working hours. Monthly
salary: P500.00 from December 1, 1987 to December 31, 1988; P1,000.00
from January 1, 1989 to June 30, 1989; and P1,150.00 from July 1, 1989
to December 31, 1989. Duties: Among others, Prepare summary of salary
advances, journal vouchers, daily summary of disbursements to respective
classifications; schedule loans; prepare checks and cash vouchers for regular
and emergency loans; reconcile bank statements to the daily summary of
disbursements; post the monthly balance of fixed and savings deposits in
preparation for the computation of interests, dividends, mortuary and patronage
funds; disburse checks during regular and emergency loans; and perform such

other bookkeeping and accounting duties as may be assigned to her from time to
time.
Imelda C. Tamayo Clerk. Worked with the Cooperative since October 19,
1987 up to December 29, 1989. Work schedule: Monday to Friday - 8:00 to
11:30 a.m and 2:00 to 5:30 p.m.; every Saturday 8:00 to 11:30 a.m and 1:00
to 4:00 p.m; and for one Sunday each month for at least three (3) hours.
Monthly salary: P60.00 from October to November 1987; P250.00 for
December 1987; P500.00 from January to December 1988; P950 from
January to June 1989; and P1,000.00 from July to December 1989. Duties:
Among others, pick up balances for the computation of interests on savings
deposit, mortuary, dividends and patronage funds; prepare cash vouchers; check
petty cash vouchers; take charge of the preparation of new passbooks and
ledgers for new applicants; fill up members logbook of regular depositors,
junior depositors and special accounts; take charge of loan releases every
Monday morning; assist in the posting and preparation of deposit slips; receive
deposits from members; and perform such other bookkeeping and accounting
duties as may be assigned her from time to time.
Harold D. Catipay Clerk. Worked with the Cooperative since March 3 to
December 29, 1989. Work schedule: Monday to Friday 8:00 to 11:30 a.m.
and 2:00 to 5:30 p.m.; Saturday 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m.; and
one Sunday each month for at least three (3) hours. Monthly salary: P900.00
from March to June 1989; P1,050.00 from July to December 1989.
Duties: Among others, Bookkeeping, accounting and collecting duties, such as,
post daily collections from the two (2) collectors in the market; reconcile
passbooks and ledgers of members in the market; and assist the other clerks in
their duties.
All of them were given a memorandum of termination on January 2, 1990,
effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and respondent
NLRC, the same being supported by substantial evidence, that quantum of evidence
required in quasi-judicial proceedings, like this one.
Necessarily, this leads us to the issue of whether or not private respondents are regular
employees. Article 280 of the Labor Code provides for three kinds of employees: (1)
regular employees or those who have been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; (2) project
employees or those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be performed is seasonal
in nature and the employment is for the duration of the season; and (3) casual employees
or those who are neither regular nor project employees. 3 The employees who are

deemed regular are: (a) those who have been engaged to perform activities which are
usually necessary or desirable in the usual trade or business of the employer; and (b)
those casual employees who have rendered at least one (1) year of service, whether such
service is continuous or broken, with respect to the activity in which they are employed. 4
Undeniably, private respondents were rendering services necessary to the day-to-day
operations of petitioner PHCCI. This fact alone qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year:
Benedicto Faburada, for one and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and
Imelda C. Tamayo, for two (2) years and two (2) months. That Benedicto Faburada
worked only on a part-time basis, does not mean that he is not a regular employee. One's
regularity of employment is not determined by the number of hours one works but by the
nature and by the length of time one has been in that particular job. 5 Petitioner's
contention that private respondents are mere volunteer workers, not regular employees,
must necessarily fail. Its invocation of San Jose City Electric Cooperative vs. Ministry of
Labor and Employment (173 SCRA 697, 703 (1989) is misplaced. The issue in this case
is whether or not the employees-members of a cooperative can organize themselves for
purposes of collective bargaining, not whether or not the members can be employees.
Petitioner missed the point
As regular employees or workers, private respondents are entitled to security of tenure.
Thus, their services may be terminated only for a valid cause, with observance of due
process.

The valid causes are categorized into two groups: the just causes under Articles 282 of
the Labor Code and the authorized causes under Articles 283 and 284 of the same Code.
The just causes are: (1) serious misconduct or willful disobedience of lawful orders in
connection with the employee's work; (2) gross or habitual neglect of duties; (3) fraud or
willful breach of trust; (4) commission of a crime or an offense against the person of the
employer or his immediate family member or representative; and, analogous cases. The
authorized causes are: (1) the installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of operations of the
establishment or undertaking, unless the closing is for the purpose of circumventing the
provisions of law. Article 284 provides that an employer would be authorized to
terminate the services of an employee found to be suffering from any disease if the
employee's continued employment is prohibited by law or is prejudicial to his health or to
the health of his fellow employees. 6
Private respondents were dismissed not for any of the above causes. They were dismissed
because petitioner considered them to be mere voluntary workers, being its members, and

as such work at its pleasure. Petitioner thus vehemently insists that their dismissal is not
against the law.
Procedural due process requires that the employer serve the employees to be dismissed
two (2) written notices before the termination of their employment is effected: (a) the
first, to apprise them of the particular acts or omissions for which their dismissal is
sought and (b) the second, to inform them of the decision of the employer that they are
being dismissed. 7 In this case, only one notice was served upon private respondents by
petitioner. It was in the form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their services effective December 29,
1989. Clearly, petitioner failed to comply with the twin requisites of a valid notice.
We hold that private respondents have been illegally dismissed.
Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the
complaint of private respondents considering that they failed to submit their dispute to
the grievance machinery as required by P.D. 175 (strengthening the Cooperative
Movement) 8 and its implementing rules and regulations under LOI 23. Likewise, the
Cooperative Development Authority did not issue a Certificate of Non-Resolution
pursuant to Section 8 of R.A. 6939 or the Cooperative Development Authority Law.
As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a
grievance machinery where a dispute or claim may first be submitted. LOI 23 refers to
instructions to the Secretary of Public Works and Communications to implement
immediately the recommendation of the Postmaster General for the dismissal of some
employees of the Bureau of Post. Obviously, this LOI has no relevance to the instant
case.
Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the
procedure how cooperative disputes are to be resolved, thus:
"ART. 121. Settlement of Disputes. Disputes among members, officers,
directors, and committee members, and intra-cooperative disputes shall, as far
as practicable, be settled amicably in accordance with the conciliation or
mediation mechanisms embodied in the bylaws of the cooperative, and in
applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled
in a court of competent jurisdiction."

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


Authority Law) which reads:

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


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

The above provisions apply to members, officers and directors of the cooperative
involved in disputes within a cooperative or between cooperatives.
There is no evidence that private respondents are members of petitioner PHCCI and even
if they are, the dispute is about payment of wages, overtime pay, rest day and termination
of employment. Under Art. 217 of the Labor Code,these disputes are within the original
and exclusive jurisdiction of the Labor Arbiter.
As illegally dismissed employees, private respondents are therefore entitled to
reinstatement without loss of seniority rights and other privileges and to full backwages,
inclusive of allowances, plus other benefits or their monetary equivalent computed from
the time their compensation was withheld from them up to the time of their actual
reinstatement. 9 Since they were dismissed after March 21, 1989, the effectivity date of
R.A. 6715 10 they are granted full backwages, meaning, without deducting from their
backwages the earnings derived by them elsewhere during the period of their illegal
dismissal. 11 If reinstatement is no longer feasible, as when the relationship between
petitioner and private respondents has become strained, payment of their separation pay
in lieu of reinstatement is in order. 12
AIaSTE

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


AFFIRMED, with modification in the sense that the backwages due private respondents
shall be paid in full, computed from the time they were illegally dismissed up to the time
of the finality of this Decision. 13
SO ORDERED.
Melo, Vitug and Panganiban, JJ., concur.
(Perpetual Help Credit Cooperative, Inc. v. Faburada, G.R. No. 121948, [October 8,
2001], 419 PHIL 147-159)
|||

FIRST DIVISION
[G.R. No. 124382. August 16, 1999.]
PASTOR DIONISIO V. AUSTRIA, petitioner, 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, respondents.
Raul T. Montesino for petitioner.
The Solicitor General for public respondent.
Gemeno M. Ymballa for private respondents.
SYNOPSIS
Petitioner had worked with the private respondent Seventh Day Adventists (SDA) for 28
years before he was terminated. Prior to said termination, petitioner was asked to admit
accountability for the church offerings collected by his wife in the amount of P15,078.10.
Petitioner refused since it was private respondents Pastor Buhat and Eufronio Ibesate who
authorized his wife to collect. Thereafter petitioner requested Pastor Buhat to convene the
Executive Committee to settle the dispute between him and Pastor Rodrigo, but the latter
denied the same, and heated arguments between the two ensued until petitioner banged
the attach case of Pastor Buhat on the table, scattered the books and threw the phone.
Later, an Executive Committee meeting was held where the non-remittance of church
collections and the events that transpired were discussed. Subsequently, petitioner
received a letter of dismissal citing therein grounds for the termination of his services.
Petitioner then filed a complaint for illegal dismissal and a decision was rendered in his
favor. The SDA appealed the same to the NLRC and after much ado, the case was
dismissed for lack of jurisdiction on the ground that the case involved an ecclessiastical
affair to which the State cannot interfere.

The case at bar did not concern a purely religious affair as to bar the State from taking
cognizance thereof. What is involved here is the relationship of the church as an
employer and the minister as an employee. There was no compliance of the requirement
that there should be a written notice specifying the grounds for termination and giving the
employee reasonable opportunity to explain his side. Here, petitioner was not given
enough opportunity to properly prepare for his defense. At any rate, the validity of the
dismissal cannot be sustained. There was no basis for the loss of confidence and breach
of trust as it was petitioner's wife who collected the money and failed to remit the same.
On the ground of serious misconduct and commission of an offense against the person of
the employer's duly authorized representative, the same was unmeritorious as petitioner's
actuations cannot be considered grave enough to be considered as serious misconduct to
merit the ultimate penalty of dismissal. Then also, there was no proof that petitioner
committed gross and habitual neglect of duties. Hence, since petitioner was illegally
dismissed, he is entitled to reinstatement with full backwages.
DCcSHE

SYLLABUS
1. POLITICAL LAW; SEPARATION OF CHURCH AND STATE; ELUCIDATED.
The rationale of principle of separation of church and state is summed up in the familiar
saying, "Strong fences make good neighbors." 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. 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." While
the State is prohibited from interfering in purely ecclesiastical affairs, the Church is
likewise barred from meddling in purely secular matters.
2. ID.; ID.; ECCLESIASTICAL AFFAIR; ELUCIDATED. 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." 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.
3. ID.; ID.; ID.; NOT APPRECIATED AS CASE AT BAR CONCERNS
EMPLOYMENT PROBLEM. The case at bar does not concern an ecclesiastical or
purely religious affair as to bar the State from taking cognizance of the same. While the
matter at hand relates to the church and its religious minister it does not ipso facto give

the case a religious significance. Simply stated, what is involved here is the relationship
of the church as an employer and the minister as an employee. It is purely secular and has
no relation whatsoever with the practice of faith, worship or doctrines of the church. In
this case, petitioner was not excommunicated or expelled from the membership of the
SDA but was terminated from employment. Indeed, the matter of terminating an
employee, which is purely secular in nature, is different from the ecclesiastical act of
expelling a member from the religious congregation.
4. LABOR AND SOCIAL LEGISLATION; EMPLOYMENT; DISMISSAL OF
EMPLOYEES; PROVISIONS THEREOF APPLICABLE TO RELIGIOUS
CORPORATIONS. 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. Hence, 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.
5. REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; ESTOPPEL; RAISING
THE ISSUE OF LACK OF JURISDICTION FOR THE FIRST TIME ON APPEAL
AFTER ACTIVE PARTICIPATION IN TRIAL BELOW. Private respondents are
estopped from raising the issue of lack of jurisdiction for the first time on appeal. It is
already too late in the day for private respondents to question the jurisdiction of the
NLRC and the Labor Arbiter since the SDA had fully participated in the trials and
hearings of the case from start to finish. The Court has already ruled that the active
participation of a party against whom the action was brought, coupled with his failure to
object to the jurisdiction of the court or quasi-judicial body where the action is pending,
is tantamount to an invocation of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from later on impugning the court or body's
jurisdiction. Thus, the active participation of private respondents in the proceedings
before the Labor Arbiter and the NLRC mooted the question on jurisdiction.
6. ID.; EVIDENCE; FACTUAL FINDINGS OF NATIONAL LABOR RELATIONS
COMMISSION, RESPECTED; EXCEPTIONS; WHEN IT DIFFERS FROM THE
FINDINGS OF THE LABOR ARBITER. 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. 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 conformable to the evidentiary facts.
7. LABOR AND SOCIAL LEGISLATION; EMPLOYMENT; DISMISSAL BY
EMPLOYER; VALIDITY; REQUISITES. 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. 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. Without the concurrence of
this twin requirements, the termination would, in the eyes of the law, be illegal.
8. ID.; ID.; ID.; ID.; ID.; NOTICE OF TERMINATION; DISCUSSED. 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.
The second notice on the other hand seeks to inform the employee of the employer's
decision to dismiss him. 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. This is in consonance with the express provision of law
on the protection of labor and the broader dictates of procedural due process. Noncompliance therewith is fatal because these requirements are conditions sine qua non
before dismissal may be validly effected.

9. ID.; ID.; ID.; GROUNDS; BREACH OF TRUST; NOT APPRECIATED. 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. 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. It should be genuine and not simulated. 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. The
stenographic notes on the witnesses' testimony show that Pastor Austria was able to remit
all his collections to the treasurer of the Negros Mission. Then, 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.
10. ID.; ID.; ID.; ID.; SERIOUS MISCONDUCT AND COMMISSION OF AN
OFFENSE AGAINST THE PERSON OF THE EMPLOYER'S DULY AUTHORIZED
REPRESENTATIVE; NOT APPRECIATED. 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. For misconduct to be considered serious it must be of such
grave and aggravated character and not merely trivial or unimportant. 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, though petitioner committed damage to property, records show that he did not
physically assault Pastor Buhat or any other pastor present during the incident. 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 not 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. 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. For the foregoing reasons, we believe that the
minor infraction committed by petitioner does not merit the ultimate penalty of dismissal.
SIDTCa

11. ID.; ID.; ID.; ID.; GROSS AND HABITUAL NEGLECT OF DUTIES; NOT
APPRECIATED. 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,
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 dismissal from the service for a non-existent
cause.
12. ID.; ID.; ILLEGAL DISMISSAL; REINSTATEMENT AND BACKWAGES,
PROPER. 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 rights and the payment of full backwages without any deduction corresponding
to the period from his illegal dismissal up to actual reinstatement.

DECISION

KAPUNAN, J :
p

Subject to the instant petition for certiorari under Rule 65 of the Rules of Court is the
Resolution 1 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.
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
communications 3 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 David 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 (Pastor
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 letter 8 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 amd
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 complaint 11 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 qualifications.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A. 13th month pay P21,060.00
B. Allowance P4,770.83
C. Service Incentive Leave Pay P3,461.85
D. Moral Damages P50,000.00
E. Exemplary Damages P25,000.00
F. Attorney's Fee P22,012.27

SO ORDERED. 12

The SDA, through its officers, appealed the decision of the Labor Arbiter to the National
Labor Relations Commission, Fourth Division, Cebu City. In a decision, dated 26 August
1994, the NLRC vacated the findings of the Labor Arbiter. The decretal portion of the
NLRC decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and a new
one ENTERED dismissing this case for want of merit.
SO ORDERED. 13

Petitioner filed a motion for reconsideration of the above-named decision. On 18 July


1995, the NLRC issued a Resolution reversing its original decision. The dispositive
portion of the resolution reads:
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 comment 16 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 doctrine of separation of church and
state, the Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint
filed by petitioner. Since the matter at bar allegedly involves the discipline of a religious
minister, it is to be considered a purely ecclesiastical affair to which the State has no right
to interfere.
The contention of private respondents deserves scant consideration. The principle of
separation of church and state finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the
familiar saying, "Strong fences make good neighbors." 17 The idea advocated by this
principle is to delineate the boundaries between the two institutions and thus avoid
encroachments by one against the other because of a misunderstanding of the limits of
their respective exclusive jurisdictions. 18 The demarcation line calls on the entities to
"render therefore unto Ceasar the things that are 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 or worship of the church, or the adoption and enforcement within
a religious association of needful laws and regulations for the government of the
membership, and the power of excluding from such associations those deemed unworthy
of membership. 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 which attached religious significance. The case at bar does not even
remotely concern any of the abovecited examples. While the matter at hand relates to the
church and its religious minister it does not ipso facto give the case a religious
significance. Simply stated, what is involved here is the relationship of the church as an
employer and the minister as an employee. It is purely secular and has no relation
whatsoever with the practice of faith, worship or doctrines of the church. In this case,
petitioner was not excommunicated or expelled from the membership of the SDA but was
terminated from employment. Indeed, the matter of terminating an employee, which is
purely secular in nature, is different from the ecclesiastical act of expelling a member
from the religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for 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 authorize representative, are all based on Article
282 of the Labor Code which enumerates the just causes for termination of employment.
22 By this alone, it is palpable that the reason for 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 certification 23 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:

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


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

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

Finally, as correctly pointed out by petitioner, private respondents are estopped from
raising the issue of lack of jurisdiction for the first time on appeal. It is already too late in
the day for private respondents to question the jurisdiction of the NLRC and the Labor
Arbiter since the SDA had fully participated in the trials and hearings of the case from
start to finish. The Court has already ruled that the active participation of a party against
whom the action was brought, coupled with his failure to object to the jurisdiction of the
court or quasi-judicial body where the action is pending, is tantamount to an invocation
of that jurisdiction and a willingness to abide by the resolution of the case and will bar
said party from later on impugning the court or body's jurisdiction. 25 Thus, the active
participation of private respondents in the proceedings before the Labor Arbiter and the
NLRC mooted the question of 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 conformable 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 Non-compliance
therewith is fatal because these requirements are conditions sine qua non 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 not able to establish that petitioner failed to
remit the same to the Negros Mission, and that he pocketed the amount and used it for his
personal purpose. In fact, as admitted by their own witness, Naomi Geniebla, petitioner
remitted the amounts which he collected to the Negros Mission for which corresponding
receipts were issued to him. Thus, the allegations of private respondents that petitioner
breached their trust have no leg to stand on.
cdasia

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 Mrs. 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 not 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 right
48 and the payment of full backwages without any deduction corresponding to the period
from his illegal dismissal up to the actual reinstatement. 49
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of
public respondent National Labor Relations Commission, rendered on 23 January 1996,
is NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15 February
1993, is REINSTATED and hereby AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.
(Austria v. National Labor Relations Commission, G.R. No. 124382, [August 16, 1999],
371 PHIL 340-362)
|||

FIRST DIVISION
[G.R. No. 113191. September 18, 1996.]
DEPARTMENT OF FOREIGN AFFAIRS, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR
ARBITER NIEVES V. DE CASTRO and JOSE C. MAGNAYI,
respondents.
DFA Office of Legal Affairs for petitioner.
The Solicitor General for public respondent.
Ronald E. Javier for private respondent.
SYLLABUS
1. POLITICAL LAW; PUBLIC INTERNATIONAL LAW; SOVEREIGN IMMUNITY;
EXTENDED TO ASIAN DEVELOPMENT BANK AS WELL AS TO ITS OFFICERS
WITH RESPECT TO ALL ACTS PERFORMED BY THEM IN THEIR OFFICIAL
CAPACITY; EXCEPTIONS. The above stipulations of both the Charter and
Headquarters Agreement should be able, nay well enough, to establish that, except in the
specified cases of borrowing and guarantee operations, as well as the purchase, sale and
underwriting of securities, the ADB enjoys immunity from legal process of every form.
The Bank's officers, on their part, enjoy immunity in respect of all acts performed by
them in their official capacity. The Charter and the Headquarters Agreement granting
these immunities and privileges are treaty covenants and commitments voluntarily
assumed by the Philippine government which must be respected.
2. ID.; ID.; ID.; THE COURTS ARE DUTY BOUND TO ACCEPT PLEA OF
DIPLOMATIC IMMUNITY BY AN INTERNATIONAL ORGANIZATION;
RECOGNIZED AND AFFIRMED BY THE EXECUTIVE BRANCH OF THE
GOVERNMENT. In World Health Organization vs. Aquino, we have declared: "It is a
recognized principle of international law and under our system of separation of powers
that diplomatic immunity is essentially a political question and courts should refuse to
look beyond a determination by the executive branch of the government, and where the
plea of diplomatic immunity is recognized and affirmed by the executive branch of the
government . . . it is then the duty of the courts to accept the claim of immunity upon
appropriate suggestion by the principal law officer of the government, . . . or other officer
acting under his direction. Hence, in adherence to the settled principle that courts may not
so exercise their jurisdiction . . . as to embarrass the executive arm of the government in

conducting foreign relations, it is accepted doctrine that 'in such cases the judicial
department of government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic jurisdiction."' To the same effect is the
decision in International Catholic Migration Commission vs. Calleja, which has similarly
deemed the Memoranda of the Legal Adviser of the Department of Foreign Affairs to be
"a categorical recognition by the Executive Branch of Government that ICMC . . .
enjoy(s) immunities accorded to international organizations" and which determination
must be held "conclusive upon the Courts in order not to embarrass a political department
of Government." In the instant case, the filing of the petition by the DFA, in behalf of
ADB, is itself an affirmance of the government's own recognition of ADB's immunity.
3. ID.; ID.; ID.; REASON FOR GRANTING THEREOF TO INTERNATIONAL
ORGANIZATIONS. Being an international organization that has been extended a
diplomatic status, the ADB is independent of the municipal law. In Southeast Asian
Fisheries Development Center vs. Acosta, the Court has cited with approval the opinion
of the then Minister of Justice; thus "One of the basic immunities of an international
organization is immunity from local jurisdiction, i.e., that it is immune from the legal
writs and processes issued by the tribunals of the country where it is found. The obvious
reason for this is that the subjection of such an organization to the authority of the local
courts would afford a convenient medium thru which the host government may interfere
in their operations or even influence or control its policies and decisions of the
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.
4. ID.; ID.; ID.; ACTS JURE IMPERII AND JURE GESTIONIS, DISTINGUISHED.
"There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the Courts of another sovereign. According to the
newer or restrictive theory, the immunity of the sovereign is recognized only with regard
to public acts or acts jure imperii of a state, but not with regard to private act or acts jure
gestionis. . . . Certainly, the mere entering into a contract by a foreign state with a private
party cannot be the ultimate test. Such an act can only be the start of the inquiry. The
logical question is whether the foreign state is engaged in the activity in the regular
course of business. If the foreign state is not engaged regularly in a business or trade, the
particular act or transaction must then be tested by its nature. If the act is in pursuit of a
sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it
is not undertaken for gain or profit." The service contracts referred to by private
respondent have not been intended by the ADB for profit or gain but are official acts over
which a waiver of immunity would not attach.
5. ID.; ID.; ID.; THE DEPARTMENT OF FOREIGN AFFAIRS IS IN CHARGE WITH
THE DETERMINATION OF PERSONS AND INSTITUTIONS COVERED BY
DIPLOMATIC IMMUNITIES. The DFA's function includes, among its other

mandates the determination of persons and institutions covered by diplomatic


immunities, a determination which, when challenged, entitles it to seek relief from the
court so as not to seriously impair the conduct of the country's foreign relations. The
DFA must be allowed to plead its case whenever necessary or advisable to enable it to
help keep the credibility of the Philippine government before the international
community. When international agreements are concluded, the parties thereto are deemed
to have likewise accepted the responsibility of seeing to it that their agreements are duly
regarded. In our country, this task falls principally on the DFA as being the highest
executive department with the competence and authority to so act in this aspect of the
international arena.
6. ID.; ID.; ID.; PROCEDURE IN INVOLVING IT. In Holy See vs. Hon. Rosario,
Jr., this Court has explained the matter in good detail; viz: "In Public International Law,
when a state or international agency wishes to plead sovereign or diplomatic immunity in
a foreign court, it requests the Foreign Office of the state where it is sued to convey to the
court that said defendant is entitled to immunity. "In the United States, the procedure
followed is the process of 'suggestion,' where the foreign state or the international
organization sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the Secretary of State finds that
the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the
court a 'suggestion' that the defendant is entitled to immunity. In England, a similar
procedure is followed, only the Foreign Office issues a certification to that effect instead
of submitting a 'suggestion' (O'Connell, I International Law 130 [1965]; Note: Immunity
from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal
1088 [1941]). In the Philippines, the practice is for the foreign government or the
international organization to first secure an executive endorsement of its claim of
sovereign or diplomatic immunity. But how the Philippine Foreign Office conveys its
endorsement to the courts varies. In International Catholic Migration Commission vs.
Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly
to the Secretary of Labor and Employment, informing the latter that the respondentemployer could not be sued because it enjoyed diplomatic immunity. In World Health
Organization vs. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the U. S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make,
in behalf of the Commander of the United States Naval Base at Olongapo City,
Zambales, a 'suggestion' to respondent Judge. The Solicitor General embodied the
'suggestion' in a manifestation and memorandum as amicus curiae. In the case at bench,
the Department of Foreign Affairs, through the Office of Legal Affairs moved with this
Court to be allowed to intervene on the side of petitioner. The Court allowed the said
Department to file its memorandum in support of petitioner's claim of sovereign
immunity. In some cases, the defense of sovereign immunity was submitted directly to
the local courts by the respondents through their private counsels (Raquiza vs. Bradford,
75 Phil. 50 [1945]; Miquiabas vs. Philippine-Ryukyus Command, 80 Phil. 262 [1948];

United States of America vs. Guinto, 182 SCRA 644 [1990] and companion cases). In
cases where the foreign states bypass the Foreign Office, the courts can inquire into the
facts and make their own determination as to the nature of the acts and transactions
involved.
7. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; CAN BE
AVAILED OF ONLY WHEN THERE IS NO APPEAL NOR PLAIN, SPEEDY AND
ADEQUATE REMEDY IN ORDINARY COURSE OF LAW. Relative to the
propriety of the extraordinary remedy of certiorari, the Court has, under special
circumstances, so allowed and entertained such a petition when (a) the questioned order
or decision is issued in excess of or without jurisdiction, or (b) where the order or
decision is a patent nullity, which, verily, are the circumstances that can be said to obtain
in the present case. When an adjudicator is devoid of jurisdiction on a matter before him,
his action that assumes otherwise would be a clear nullity.

DECISION

VITUG, J :
p

The questions raised in the petition for certiorari are a few coincidental matters relative
to the diplomatic immunity extended to the Asian Development Bank ("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-0690-93
for his alleged illegal dismissal by ADB and the latter's violation of the "labor-only"
contracting law. Two summonses were served, one sent directly to the ADB and the other
through the Department of Foreign Affairs ("DFA"), both with a copy of the
complainant. Forthwith, the ADB and the DFA notified respondent Labor Arbiter that the
ADB, as well as its President and Officers, were covered by an immunity from legal
process except for borrowings, guaranties or the sale of securities pursuant to Article
50(1) and Article 55 of the Agreement Establishing the Asian Development Bank (the
"Charter") in relation to Section 5 and Section 44 of the Agreement Between The Bank
And The Government Of The Philippines Regarding The Bank's Headquarters (the
"Headquarters Agreement").
The Labor Arbiter took cognizance of the complaint on the impression that the ADB had
waived its diplomatic immunity from suit. In time, the Labor Arbiter rendered his
decision, dated 31 August 1993, that concluded:

"WHEREFORE, above premises considered, judgment is hereby rendered


declaring the complainant as a regular employee of respondent ADB, and the
termination of his services as illegal. Accordingly, respondent Bank is hereby
ordered:
"1. To immediately reinstate the complainant to his former position effective
September 16, 1993;
"2. To pay complainant full backwages from December 1, 1992 to September
15, 1993 in the amount of P42,750.00 (P4,500.00 x 9 months);
"3. And to pay complainants other benefits and without loss of seniority rights
and other privileges and benefits due a regular employee of Asian Development
Bank from the time he was terminated on December 31, 1992;
"4. To pay 10% attorney's fees of the total entitlements." 1

The ADB did not appeal the decision. Instead, on 03 November 1993, the DFA referred
the matter to the National Labor Relations Commission ("NLRC"); in its referral, the
DFA sought a "formal vacation of the void judgment." Replying to the letter, the NLRC
Chairman, wrote:
"The undersigned submits that the request for the 'investigation' of Labor
Arbiter Nieves de Castro, by the National Labor Relations Commission, has
been erroneously premised on Art. 218(c) of the Labor Code, as cited in the
letter of Secretary Padilla, considering that the provision deals with 'a question,
matter or controversy within its (the Commission) jurisdiction' obviously
referring to a labor dispute within the ambit of Art. 217 (on jurisdiction of
Labor Arbiters and the Commission over labor cases).
"The procedure, in the adjudication of labor cases, including raising of defenses,
is prescribed by law. The defense of immunity could have been raised before
the Labor Arbiter by a special appearance which, naturally, may not be
considered as a waiver of the very defense being raised. Any decision thereafter
is subject to legal remedies, including appeals to the appropriate division of the
Commission and/or a petition for certiorari with the Supreme Court, under Rule
65 of the Rules of Court. Except where an appeal is seasonably and properly
made, neither the Commission nor the undersigned may review, or even
question, the propriety of any decision by a Labor Arbiter. Incidentally, the
Commission sits en banc (all fifteen Commissioners) only to promulgate rules
of procedure or to formulate policies (Art. 213, Labor Code).
"On the other hand, while the undersigned exercises 'administrative supervision
over the Commission and its regional branches and all its personnel, including
the Executive Labor Arbiters and Labor Arbiters' (penultimate paragraph, Art.
213, Labor Code), he does not have the competence to investigate or review any

decision of a Labor Arbiter. However, on the purely administrative aspect of the


decision-making process, he may cause that an investigation be made of any
misconduct, malfeasance or misfeasance, upon complaint properly made.
"If the Department of Foreign Affairs feels that the action of Labor Arbiter
Nieves de Castro constitutes misconduct, malfeasance or misfeasance, it is
suggested that an appropriate complaint be lodged with the Office of the
Ombudsman.
"Thank you for your kind attention." 2

Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's resolution
of 31 January 1994, respondents were required to comment. Petitioner was later
constrained to make an application for a restraining order and/or writ of preliminary
injunction following the issuance, on 16 March 1994, by the Labor Arbiter of a writ of
execution. In a resolution, dated 07 April 1994, the Court issued the temporary
restraining order prayed for.
The Office of the Solicitor General ("OSG"), in its comment of 26 May 1994, initially
assailed the claim of immunity by the ADB. Subsequently, however, it submitted a
Manifestation (dated 20 June 1994) stating, among other things, that "after a thorough
review of the case and the records," it became convinced that ADB, indeed, was correct
in invoking its immunity from suit under the Charter and the Headquarters Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
"The Bank shall enjoy immunity from every form of legal process, except in
cases arising out of or in connection with the exercise of its powers to borrow
money, to guarantee obligations, or to buy and sell or underwrite the sale of
securities." 3

Under Article 55 thereof


"All Governors, Directors, alternates, officers and employees of the Bank,
including experts performing missions for the Bank:
"(1) shall be immune from legal process with respect of acts performed by them
in their official capacity, except when the Bank waives the immunity." 4

Like provisions are found in the Headquarters Agreement. Thus, its Section 5 reads:
"The Bank shall enjoy immunity from every form of legal process, except in
cases arising out of, or in connection with, the exercise of its powers to borrow

money, to guarantee obligations, or to buy and sell or underwrite the sale of


securities." 5

And, with respect to certain officials of the bank, Section 44 of the agreement states:
"Governors, other representatives of Members, Directors, the President, VicePresident and executive officers as may be agreed upon between the
Government and the Bank shall enjoy, during their stay in the Republic of the
Philippines in connection with their official duties with the Bank:
"xxx xxx xxx
"(b) Immunity from legal process of every kind in respect of words spoken or
written and all acts done by them in their official capacity." 6

The above stipulations of both the Charter and Headquarters Agreement should be
able, nay well enough, to establish that, except in the specified cases of borrowing and
guarantee operations, as well as the purchase, sale and underwriting of securities, the
ADB enjoys immunity from legal process of every form. The Bank's officers, on their
part, enjoy immunity in respect of all acts performed by them in their official
capacity. The Charter and the Headquarters Agreement granting these immunities and
privileges are treaty covenants and commitments voluntarily assumed by the
Philippine government which must be respected.
In World Health Organization vs. Aquino, 7 we have declared:
"It is a recognized principle of international law and under our system of
separation of powers that diplomatic immunity is essentially a political question
and courts should refuse to look beyond a determination by the executive
branch of the government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the government. . . it is then
the duty of the courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government, . . . or other officer
acting under his direction. Hence, in adherence to the settled principle that
courts may not so exercise their jurisdiction . . . as to embarrass the executive
arm of the government in conducting foreign relations, it is accepted doctrine
that 'in such cases the judicial department of government follows the action of
the political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction." 8

To the same effect is the decision in International Catholic Migration Commission vs.
Calleja, 9 which has similarly deemed the Memoranda of the Legal Adviser of the
Department of Foreign Affairs to be "a categorical recognition by the Executive Branch
of Government that ICMC . . . enjoy(s) immunities accorded to international
organizations" and which determination must be held "conclusive upon the Courts in

order not to embarrass a political department of Government." In the instant case, the
filing of the petition by the DFA, in behalf of ADB, is itself an affirmance of the
government's own recognition of ADB's immunity.
Being an international organization that has been extended a diplomatic status, the ADB
is independent of the municipal law. 10 In Southeast Asian Fisheries Development
Center vs. Acosta, 11 the Court has cited with approval the opinion 12 of the then
Minister of Justice; thus
"One of the basic immunities of an international organization is immunity from
local jurisdiction, i.e., that it is immune from the legal writs and processes
issued by the tribunals of the country where it is found. (See Jenks, Id., pp. 37
44). The obvious reason for this is that the subjection of such an organization to
the authority of the local courts would afford a convenient medium thru which
the host government may interfere in their operations or even influence or
control its policies and decisions of the 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." 13

Contrary to private respondent's assertion, the claim of immunity is not here being raised
for the first time; it has been invoked before the forum of origin through communications
sent by petitioner and the ADB to the Labor Arbiter, as well as before the NLRC
following the rendition of the questioned judgment by the Labor Arbiter, but evidently to
no avail.
In its communication of 27 May 1993, the DFA, through the Office of Legal Affairs, has
advised the NLRC:
"Respectfully returned to the Honorable Domingo B. Mabazza, Labor
Arbitration Associate, National Labor Relations Commission, National Capital
Judicial Region, Arbitration Branch, Associated bank Bldg., T.M. Kalaw St.,
Ermita, Manila, the attached Notice of Hearing addressed to the Asian
Development Bank, in connection with the aforestated case, for the reason
stated in the Department's 1st Indorsement dated 23 March 1993, copy attached,
which is self-explanatory.
"In view of the fact that the Asian Development Bank (ADB) invokes its
immunity which is sustained by the Department of Foreign Affairs, a
continuous hearing of this case erodes the credibility of the Philippine
government before the international community, let alone the negative
implication of such a suit on the official relationship of the Philippine
government with the ADB.

"For the Secretary of Foreign Affairs.


(Sgd.)
"SIME D. HIDALGO
Assistant Secretary" 14

The Office of the President, likewise, has issued on 18 May 1993 a letter to the
Secretary of Labor, viz:
"Dear Secretary Confesor,
"I am writing to draw your attention to a case filed by a certain Jose C. Magnayi
against the Asian Development Bank and its President, Kimimasa Tarumizu,
before the National Labor Relations Commission, National Capital Region
Arbitration Board (NLRC NCR Case No. 00-01690-93).
"Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de
Castro, addressed a Notice of Resolution/Order to the Bank which brought it to
the attention of the Department of Foreign Affairs on the ground that the service
of such notice was in violation of the RP-ADB Headquarters Agreement which
provided, inter-alia, for the immunity of the Bank, its President and officers
from every form of legal process, except only, in cases of borrowings,
guarantees or the sale of securities.
"The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V.
de Castro of this fact by letter dated March 22, copied to you.
"Despite this, the labor arbiter in question persisted to send summons, the latest
dated May 4, herewith attached, regarding the Magnayi case.
"The Supreme Court has long settled the matter of diplomatic immunities. In
WHO vs. Aquino, SCRA 48, it ruled that courts should respect diplomatic
immunities of foreign officials recognized by the Philippine government. Such
decision by the Supreme Court forms part of the law of the land.
"Perhaps you should point out to Labor Arbiter Nieves V. de Castro that
ignorance of the law is a ground for dismissal.
"Very truly yours,
(Sgd.)
JOSE B. ALEJANDRINO

Chairman, PCC-ADB" 15

Private respondent argues that, by entering into service contracts with different private
companies, ADB has descended to the level of an ordinary party to a commercial
transaction giving rise to a waiver of its immunity from suit. In the case of Holy See vs.
Hon. Rosario, Jr., 16 the Court has held:
"There are two conflicting concepts of sovereign immunity, each widely held
and firmly established. According to the classical or absolute theory, a
sovereign cannot, without its consent, be made a respondent in the Courts of
another sovereign. According to the newer or restrictive theory, the immunity of
the sovereign is recognized only with regard to public acts or acts jure imperii
of a state, but not with regard to private act or acts jure gestionis.
"xxx xxx xxx
"Certainly, the mere entering into a contract by a foreign state with a private
party cannot be the ultimate test. Such an act can only be the start of the inquiry.
The logical question is whether the foreign state is engaged in the activity in the
regular course of business. If the foreign state is not engaged regularly in a
business or trade, the particular act or transaction must then be tested by its
nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then
it is an act jure imperii, especially when it is not undertaken for gain or profit."

17
The service contracts referred to by private respondent have not been intended by the
ADB for profit or gain but are official acts over which a waiver of immunity would not
attach.
With regard to the issue of whether or not the DFA has the legal standing to
file the present petition, and whether or not petitioner has regarded the basic rule that
certiorari can be availed of only when there is no appeal nor plain, speedy and
adequate remedy in the ordinary course of law, we hold both in the affirmative.
The DFA's function includes, among its other mandates, the determination of persons and
institutions covered by diplomatic immunities, a determination which, when challenged,
entitles it to seek relief from the court so as not to seriously impair the conduct of the
country's foreign relations. The DFA must be allowed to plead its case whenever
necessary or advisable to enable it to help keep the credibility of the Philippine
government before the international community. When international agreements are
concluded, the parties thereto are deemed to have likewise accepted the responsibility of
seeing to it that their agreements are duly regarded. In our country, this task falls
principally on the DFA as being the highest executive department with the competence

and authority to so act in this aspect of the international arena. 18 In Holy See vs. Hon.
Rosario, Jr., 19 this Court has explained the matter in good detail; viz:
"In Public International Law, when a state or international agency wishes to
plead sovereign or diplomatic immunity in a foreign court, it requests the
Foreign Office of the state where it is sued to convey to the court that said
defendant is entitled to immunity.
"In the United States, the procedure followed is the process of 'suggestion,'
where the foreign state or the international organization sued in an American
court requests the Secretary of State to make a determination as to whether it is
entitled to immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to submit to the court a
'suggestion' that the defendant is entitled to immunity. In England, a similar
procedure is followed, only the Foreign Office issues a certification to that
effect instead of submitting a 'suggestion' (O'Connell, I International Law 130
[1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and
Obligations, 50 Yale Law Journal 1088 [1941]).
"In the Philippines, the practice is for the foreign government or the
international organization to first secure an executive endorsement of its claim
of sovereign or diplomatic immunity. But how the Philippine Foreign Office
conveys its endorsement to the courts varies. In International Catholic
Migration Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary of
Foreign Affairs just sent a letter directly to the Secretary of Labor and
Employment, informing the latter that the respondent-employer could not be
sued because it enjoyed diplomatic immunity. In World Health Organization vs.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial
court a telegram to that effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General
to make, in behalf of the Commander of the United States Naval Base at
Olongapo City, Zambales, a 'suggestion' to respondent Judge. The Solicitor
General embodied the 'suggestion' in a manifestation and memorandum as
amicus curiae.
"In the case at bench, the Department of Foreign Affairs, through the Office of
Legal Affairs moved with this Court to be allowed to intervene on the side of
petitioner. The Court allowed the said Department to file its memorandum in
support of petitioner's claim of sovereign immunity.
"In some cases, the defense of sovereign immunity was submitted directly to the
local courts by the respondents through their private counsels (Raquiza vs.
Bradford, 75 Phil. 50 [1945]; Miquiabas vs. Philippine-Ryukyus Command, 80
Phil. 262 [1948]; United States of America vs. Guinto, 182 SCRA 644 [1990]
and companion cases). In cases where the foreign states bypass the Foreign

Office, the courts can inquire into the facts and make their own determination as
to the nature of the acts and transactions involved." 20

Relative to the propriety of the extraordinary remedy of certiorari, the Court has, under
special circumstances, so allowed and entertained such a petition when (a) the questioned
order or decision is issued in excess of or without jurisdiction, 21 or (b) where the order
or decision is a patent nullity, 22 which, verily, are the circumstances that can be said to
obtain in the present case. When an adjudicator is devoid of jurisdiction on a matter
before him, his action that assumes otherwise would be a clear nullity.
WHEREFORE, the petition for certiorari is GRANTED, and the decision of the Labor
Arbiter, dated 31 August 1993 is VACATED for being NULL AND VOID. The
temporary restraining order issued by this Court on 07 April 1994 is hereby made
permanent. No costs.
SO ORDERED.
Bellosillo, Kapunan and Hermosisima Jr., JJ., concur.
Padilla, J., took no part.
(Department of Foreign Affairs v. National Labor Relations Commission, G.R. No.
113191, [September 18, 1996], 330 PHIL 573-590)
|||

THIRD DIVISION
[G.R. No. 157010. June 21, 2005.]
PHILIPPINE NATIONAL BANK, petitioner, vs. FLORENCE O.
CABANSAG, respondent.

DECISION

PANGANIBAN, J :
p

The Court reiterates the basic policy that all Filipino workers, whether employed locally
or overseas, enjoy the protective mantle of Philippine labor and social legislations. Our
labor statutes may not be rendered ineffective by laws or judgments promulgated, or
stipulations agreed upon, in a foreign country.
The Case
Before us is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court,
seeking to reverse and set aside the July 16, 2002 Decision 2 and the January 29, 2003
Resolution 3 of the Court of Appeals (CA) in CA-GR SP No. 68403. The assailed
Decision dismissed the CA Petition (filed by herein petitioner), which had sought to
reverse the National Labor Relations Commission (NLRC)'s June 29, 2001 Resolution, 4
affirming Labor Arbiter Joel S. Lustria's January 18, 2000 Decision. 5
The assailed CA Resolution denied herein petitioner's Motion for Reconsideration.
The Facts
The facts are narrated by the Court of Appeals as follows:
"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a
tourist. She applied for employment, with the Singapore Branch of the
Philippine National Bank, a private banking corporation organized and existing
under the laws of the Philippines, with principal offices at the PNB Financial
Center, Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was
under the helm of Ruben C. Tobias, a lawyer, as General Manager, with the
rank of Vice-President of the Bank. At the time, too, the Branch Office had two
(2) types of employees: (a) expatriates or the regular employees, hired in Manila
and assigned abroad including Singapore, and (b) locally (direct) hired. She
applied for employment as Branch Credit Officer, at a total monthly package of

$SG4,500.00, effective upon assumption of duties after approval. Ruben C.


Tobias found her eminently qualified and wrote on October 26, 1998, a letter to
the President of the Bank in Manila, recommending the appointment of
Florence O. Cabansag, for the position.
xxx xxx xxx
"The President of the Bank was impressed with the credentials of Florence O.
Cabansag that he approved the recommendation of Ruben C. Tobias. She then
filed an 'Application,' with the Ministry of Manpower of the Government of
Singapore, for the issuance of an 'Employment Pass' as an employee of the
Singapore PNB Branch. Her application was approved for a period of two (2)
years.
"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag
offering her a temporary appointment, as Credit Officer, at a basic salary of
Singapore Dollars 4,500.00, a month and, upon her successful completion of her
probation to be determined solely, by the Bank, she may be extended at the
discretion of the Bank, a permanent appointment and that her temporary
appointment was subject to the following terms and conditions:
'1. You will be on probation for a period of three (3) consecutive months
from the date of your assumption of duty.
'2. You will observe the Bank's rules and regulations and those that may
be adopted from time to time.
'3. You will keep in strictest confidence all matters related to
transactions between the Bank and its clients.
'4. You will devote your full time during business hours in promoting
the business and interest of the Bank.
HICSTa

'5. You will not, without prior written consent of the Bank, be employed
in anyway for any purpose whatsoever outside business hours by any
person, firm or company.
'6. Termination of your employment with the Bank may be made by
either party after notice of one (1) day in writing during probation, one
month notice upon confirmation or the equivalent of one (1) day's or
month's salary in lieu of notice.'
"Florence O. Cabansag accepted the position and assumed office. In the
meantime, the Philippine Embassy in Singapore processed the employment
contract of Florence O. Cabansag and, on March 8, 1999, she was issued by the

Philippine Overseas Employment Administration, an 'Overseas Employment


Certificate,' certifying that she was a bona fide contract worker for Singapore.
xxx xxx xxx
"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C.
Tobias, on March 9, 1999, her initial 'Performance Report.' Ruben C. Tobias
was so impressed with the 'Report' that he made a notation and, on said 'Report':
'GOOD WORK.' However, in the evening of April 14, 1999, while Florence O.
Cabansag was in the flat, which she and Cecilia Aquino, the Assistant VicePresident and Deputy General Manager of the Branch and Rosanna Sarmiento,
the Chief Dealer of the said Branch, rented, she was told by the two (2) that
Ruben C. Tobias has asked them to tell Florence O. Cabansag to resign from her
job. Florence O. Cabansag was perplexed at the sudden turn of events and the
runabout way Ruben C. Tobias procured her resignation from the Bank. The
next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what
Cecilia Aquino and Rosanna Sarmiento had told her was true. Ruben C. Tobias
confirmed the veracity of the information, with the explanation that her
resignation was imperative as a 'cost-cutting measure' of the Bank. Ruben C.
Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch
will be sold or transformed into a remittance office and that, in either way,
Florence O. Cabansag had to resign from her employment. The more Florence
O. Cabansag was perplexed. She then asked Ruben C. Tobias that she be
furnished with a 'Formal Advice' from the PNB Head Office in Manila.
However, Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit
any letter of resignation.
"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to
his office and demanded that she submit her letter of resignation, with the
pretext that he needed a Chinese-speaking Credit Officer to penetrate the local
market, with the information that a Chinese-speaking Credit Officer had already
been hired and will be reporting for work soon. She was warned that, unless she
submitted her letter of resignation, her employment record will be blemished
with the notation 'DISMISSED' spread thereon. Without giving any definitive
answer, Florence O. Cabansag asked Ruben C. Tobias that she be given
sufficient time to look for another job. Ruben C. Tobias told her that she should
be 'out' of her employment by May 15, 1999.
"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O.
Cabansag and adamantly ordered her to submit her letter of resignation. She
refused. On April 20, 1999, she received a letter from Ruben C. Tobias
terminating her employment with the Bank.
xxx xxx xxx

"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the
Complainant and against the Respondents, the decretal portion of which reads
as follows:
'WHEREFORE, considering the foregoing premises, judgment is hereby
rendered finding respondents guilty of Illegal dismissal and devoid of
due process, and are hereby ordered:
1. To reinstate complainant to her former or substantially
equivalent position without loss of seniority rights,
benefits and privileges;
2. Solidarily liable to pay complainant as follows:
a) To pay complainant her backwages from 16 April 1999
up to her actual reinstatement. Her backwages as
of the date of the promulgation of this decision
amounted to SGD 40,500.00 or its equivalent in
Philippine Currency at the time of payment;
b) Mid-year bonus in the amount of SGD 2,250.00 or its
equivalent in Philippine Currency at the time of
payment;
c) Allowance for Sunday banking in the amount of SGD
120.00 or its equivalent in Philippine Currency at
the time of payment;
d) Monetary equivalent of leave credits earned on Sunday
banking in the amount of SGD 1,557.67 or its
equivalent in Philippine Currency at the time of
payment;
e.) Monetary equivalent of unused sick leave benefits in
the amount of SGD 1,150.60 or its equivalent in
Philippine Currency at the time of payment.
f.) Monetary equivalent of unused vacation leave benefits
in the amount of SGD 319.85 or its equivalent in
Philippine Currency at the time of payment.
g.) 13th month pay in the amount of SGD 4,500.00 or its
equivalent in Philippine Currency at the time of
payment;

3. Solidarily to pay complainant actual damages in the amount of


SGD 1,978.00 or its equivalent in Philippine Currency at
the time of payment, and moral damages in the amount of
PhP 200,000.00, exemplary damages in the amount of
PhP 100,000.00;
4. To pay complainant the amount of SGD 5,039.81 or its
equivalent in Philippine Currency at the time of payment,
representing attorney's fees.
TAIDHa

SO ORDERED." 6 [Emphasis in the original.]

PNB appealed the labor arbiter's Decision to the NLRC. In a Resolution dated June 29,
2001, the Commission affirmed that Decision, but reduced the moral damages to
P100,000 and the exemplary damages to P50,000. In a subsequent Resolution, the NLRC
denied PNB's Motion for Reconsideration.
Ruling of the Court of Appeals
In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to
adduce in evidence the Singaporean law supposedly governing the latter's employment
Contract with respondent. The appellate court found that the Contract had actually been
processed by the Philippine Embassy in Singapore and approved by the Philippine
Overseas Employment Administration (POEA), which then used that Contract as a basis
for issuing an Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an employment pass from the
Singapore Ministry of Employment, she did not thereby waive Philippine labor laws, or
the jurisdiction of the labor arbiter or the NLRC over her Complaint for illegal dismissal.
In so doing, neither did she submit herself solely to the Ministry of Manpower of
Singapore's jurisdiction over disputes arising from her employment. The appellate court
further noted that a cursory reading of the Ministry's letter will readily show that no such
waiver or submission is stated or implied.

Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of
respondent. The bank had also failed to give her sufficient notice and an opportunity to be
heard and to defend herself. The CA ruled that she was consequently entitled to
reinstatement and back wages, computed from the time of her dismissal up to the time of
her reinstatement.
Hence, this Petition. 7

Issues
Petitioner submits the following issues for our consideration:
"1. Whether or not the arbitration branch of the NLRC in the National Capital
Region has jurisdiction over the instant controversy;
"2. Whether or not the arbitration of the NLRC in the National Capital Region is
the most convenient venue or forum to hear and decide the instant
controversy; and
"3. Whether or not the respondent was illegally dismissed, and therefore,
entitled to recover moral and exemplary damages and attorney's fees." 8

In addition, respondent assails, in her Comment, 9 the propriety of Rule 45 as the


procedural mode for seeking a review of the CA Decision affirming the NLRC
Resolution. Such issue deserves scant consideration. Respondent miscomprehends the
Court's discourse in St. Martin Funeral Home v. NLRC, 10 which has indeed affirmed that
the proper mode of review of NLRC decisions, resolutions or orders is by a special civil
action for certiorari under Rule 65 of the Rules of Court. The Supreme Court and the
Court of Appeals have concurrent original jurisdiction over such petitions for certiorari.
Thus, in observance of the doctrine on the hierarchy of courts, these petitions should be
initially filed with the CA. 11
Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for
Certiorari. In seeking a review by this Court of the CA Decision on questions of
jurisdiction, venue and validity of employment termination petitioner is likewise
correct in invoking Rule 45. 12
It is true, however, that in a petition for review on certiorari, the scope of the Supreme
Court's judicial review of decisions of the Court of Appeals is generally confined only to
errors of law. It does not extend to questions of fact. This doctrine applies with greater
force in labor cases. Factual questions are for the labor tribunals to resolve. 13 In the
present case, the labor arbiter and the NLRC have already determined the factual issues.
Their findings, which are supported by substantial evidence, were affirmed by the CA.
Thus, they are entitled to great respect and are rendered conclusive upon this Court,
absent a clear showing of palpable error or arbitrary disregard of evidence. 14
The Court's Ruling
The Petition has no merit.
First Issue:
Jurisdiction

The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor
Code as follows:
"ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except
as otherwise provided under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work and
other terms and conditions of employment
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount of
exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
SaCIAE

(b) The commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
xxx xxx xxx."

More specifically, Section 10 of RA 8042 reads in part:


"SECTION 10. Money Claims. Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.

xxx xxx xxx"

Based on the foregoing provisions, labor arbiters clearly have original and exclusive
jurisdiction over claims arising from employer-employee relations, including termination
disputes involving all workers, among whom are overseas Filipino workers (OFW). 15
We are not unmindful of the fact that respondent was directly hired, while on a tourist
status in Singapore, by the PNB branch in that city state. Prior to employing respondent,
petitioner had to obtain an employment pass for her from the Singapore Ministry of
Manpower. Securing the pass was a regulatory requirement pursuant to the immigration
regulations of that country. 16
Similarly, the Philippine government requires non-Filipinos working in the country to
first obtain a local work permit in order to be legally employed here. That permit,
however, does not automatically mean that the non-citizen is thereby bound by local laws
only, as averred by petitioner. It does not at all imply a waiver of one's national laws on
labor. Absent any clear and convincing evidence to the contrary, such permit simply
means that its holder has a legal status as a worker in the issuing country.
Noteworthy is the fact that respondent likewise applied for and secured an Overseas
Employment Certificate from the POEA through the Philippine Embassy in Singapore.
The Certificate, issued on March 8, 1999, declared her a bona fide contract worker for
Singapore. Under Philippine law, this document authorized her working status in a
foreign country and entitled her to all benefits and processes under our statutes. Thus,
even assuming arguendo that she was considered at the start of her employment as a
"direct hire" governed by and subject to the laws, common practices and customs
prevailing in Singapore 17 she subsequently became a contract worker or an OFW who
was covered by Philippine labor laws and policies upon certification by the POEA. At the
time her employment was illegally terminated, she already possessed the POEA
employment Certificate.
Moreover, petitioner admits that it is a Philippine corporation doing business through a
branch office in Singapore. 18 Significantly, respondent's employment by the Singapore
branch office had to be approved by Benjamin P. Palma Gil, 19 the president of the bank
whose principal offices were in Manila. This circumstance militates against petitioner's
contention that respondent was "locally hired"; and totally "governed by and subject to
the laws, common practices and customs" of Singapore, not of the Philippines. Instead,
with more reason does this fact reinforce the presumption that respondent falls under the
legal definition of migrant worker, in this case one deployed in Singapore. Hence,
petitioner cannot escape the application of Philippine laws or the jurisdiction of the
NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown
Internationale v. NLRC: 20
". . . Whether employed locally or overseas, all Filipino workers enjoy the
protective mantle of Philippine labor and social legislation, contract stipulations
to the contrary notwithstanding. This pronouncement is in keeping with the
basic public policy of the State to afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed,
and regulate the relations between workers and employers. For the State assures
the basic rights of all workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work [Article 3 of the
Labor Code of the Philippines; See also Section 18, Article II and Section 3,
Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by
Article 17 of the Civil Code which states that laws 'which have for their object
public order, public policy and good customs shall not be rendered ineffective
by laws or judgments promulgated, or by determination or conventions agreed
upon in a foreign country."

Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
"Section 1. Venue. (a) All cases which Labor Arbiters have authority to hear
and decide may be filed in the Regional Arbitration Branch having jurisdiction
over the workplace of the complainant/petitioner; Provided, however that cases
of Overseas Filipino Worker (OFW) shall be filed before the Regional
Arbitration Branch where the complainant resides or where the principal office
of the respondent/employer is situated, at the option of the complainant.
"For purposes of venue, workplace shall be understood as the place or locality
where the employee is regularly assigned when the cause of action arose. It
shall include the place where the employee is supposed to report back after a
temporary detail, assignment or travel. In the case of field employees, as well as
ambulant or itinerant workers, their workplace is where they are regularly
assigned, or where they are supposed to regularly receive their salaries/wages or
work instructions from, and report the results of their assignment to their
employers."

Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant
worker "refers to a person who is to be engaged, is engaged or has been engaged in a
remunerated activity in a state of which he or she is not a legal resident; to be used
interchangeably with overseas Filipino worker." 21 Undeniably, respondent was
employed by petitioner in its branch office in Singapore. Admittedly, she is a Filipino and

not a legal resident of that state. She thus falls within the category of "migrant worker" or
"overseas Filipino worker."
As such, it is her option to choose the venue of her Complaint against petitioner for
illegal dismissal. The law gives her two choices: (1) at the Regional Arbitration Branch
(RAB) where she resides or (2) at the RAB where the principal office of her employer is
situated. Since her dismissal by petitioner, respondent has returned to the Philippines
specifically to her residence at Filinvest II, Quezon City. Thus, in filing her Complaint
before the RAB office in Quezon City, she has made a valid choice of proper venue.
cCSDTI

Third Issue:
Illegal Dismissal
The appellate court was correct in holding that respondent was already a regular
employee at the time of her dismissal, because her three-month probationary period of
employment had already ended. This ruling is in accordance with Article 281 of the
Labor Code: "An employee who is allowed to work after a probationary period shall be
considered a regular employee." Indeed, petitioner recognized respondent as such at the
time it dismissed her, by giving her one month's salary in lieu of a one-month notice,
consistent with provision No. 6 of her employment Contract.
Notice
Not Complied With

and

Hearing

As a regular employee, respondent was entitled to all rights, benefits and privileges
provided under our labor laws. One of her fundamental rights is that she may not be
dismissed without due process of law. The twin requirements of notice and hearing
constitute the essential elements of procedural due process, and neither of these elements
can be eliminated without running afoul of the constitutional guarantee. 22
In dismissing employees, the employer must furnish them two written notices: 1) one to
apprise them of the particular acts or omissions for which their dismissal is sought; and 2)
the other to inform them of the decision to dismiss them. As to the requirement of a
hearing, its essence lies simply in the opportunity to be heard. 23
The evidence in this case is crystal-clear. Respondent was not notified of the specific act
or omission for which her dismissal was being sought. Neither was she given any chance
to be heard, as required by law. At any rate, even if she were given the opportunity to be
heard, she could not have defended herself effectively, for she knew no cause to answer
to.
All that petitioner tendered to respondent was a notice of her employment termination
effective the very same day, together with the equivalent of a one-month pay. This Court

has already held that nothing in the law gives an employer the option to substitute the
required prior notice and opportunity to be heard with the mere payment of 30 days'
salary. 24
Well-settled is the rule that the employer shall be sanctioned for noncompliance with the
requirements of, or for failure to observe, due process that must be observed in
dismissing an employee. 25
No
for Dismissal

Valid

Cause

Moreover, Articles 282, 26 283 27 and 284 28 of the Labor Code provide the valid
grounds or causes for an employee's dismissal. The employer has the burden of proving
that it was done for any of those just or authorized causes. The failure to discharge this
burden means that the dismissal was not justified, and that the employee is entitled to
reinstatement and back wages. 29
Notably, petitioner has not asserted any of the grounds provided by law as a valid reason
for terminating the employment of respondent. It merely insists that her dismissal was
validly effected pursuant to the provisions of her employment Contract, which she had
voluntarily agreed to be bound to.
cDIHES

Truly, the contracting parties may establish such stipulations, clauses, terms and
conditions as they want, and their agreement would have the force of law between them.
However, petitioner overlooks the qualification that those terms and conditions agreed
upon must not be contrary to law, morals, customs, public policy or public order. 30 As
explained earlier, the employment Contract between petitioner and respondent is
governed by Philippine labor laws. Hence, the stipulations, clauses, and terms and
conditions of the Contract must not contravene our labor law provisions.
Moreover, a contract of employment is imbued with public interest. The Court has time
and time again reminded parties that they "are not at liberty to insulate themselves and
their relationships from the impact of labor laws and regulations by simply contracting
with each other." 31 Also, while a contract is the law between the parties, the provisions
of positive law that regulate such contracts are deemed included and shall limit and
govern the relations between the parties. 32
Basic in our jurisprudence is the principle that when there is no showing of any clear,
valid, and legal cause for the termination of employment, the law considers the matter a
case of illegal dismissal. 33
Awards
Justified

for

Damages

Finally, moral damages are recoverable when the dismissal of an employee is attended by
bad faith or constitutes an act oppressive to labor or is done in a manner contrary to
morals, good customs or public policy. 34 Awards for moral and exemplary damages
would be proper if the employee was harassed and arbitrarily dismissed by the employer.
35

In affirming the awards of moral and exemplary damages, we quote with approval the
following ratiocination of the labor arbiter:
"The records also show that [respondent's] dismissal was effected by
[petitioners'] capricious and high-handed manner, anti-social and oppressive,
fraudulent and in bad faith, and contrary to morals, good customs and public
policy. Bad faith and fraud are shown in the acts committed by [petitioners]
before, during and after [respondent's] dismissal in addition to the manner by
which she was dismissed. First, [respondent] was pressured to resign for two
different and contradictory reasons, namely, cost-cutting and the need for a
Chinese[-]speaking credit officer, for which no written advice was given despite
complainant's request. Such wavering stance or vacillating position indicates
bad faith and a dishonest purpose. Second, she was employed on account of her
qualifications, experience and readiness for the position of credit officer and
pressured to resign a month after she was commended for her good work. Third,
the demand for [respondent's] instant resignation on 19 April 1999 to give way
to her replacement who was allegedly reporting soonest, is whimsical,
fraudulent and in bad faith, because on 16 April 1999 she was given a period of
[sic] until 15 May 1999 within which to leave. Fourth, the pressures made on
her to resign were highly oppressive, anti-social and caused her absolute torture,
as [petitioners] disregarded her situation as an overseas worker away from home
and family, with no prospect for another job. She was not even provided with a
return trip fare. Fifth, the notice of termination is an utter manifestation of bad
faith and whim as it totally disregards [respondent's] right to security of tenure
and due process. Such notice together with the demands for [respondent's]
resignation contravenes the fundamental guarantee and public policy of the
Philippine government on security of tenure.
"[Respondent] likewise established that as a proximate result of her dismissal
and prior demands for resignation, she suffered and continues to suffer mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock and social humiliation. Her standing in the social and business
community as well as prospects for employment with other entities have been
adversely affected by her dismissal. [Petitioners] are thus liable for moral
damages under Article 2217 of the Civil Code.
xxx xxx xxx
"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in
terminating [respondent's] employment and are therefore liable for exemplary

damages. This should served [sic] as protection to other employees of


[petitioner] company, and by way of example or correction for the public good
so that persons similarly minded as [petitioners] would be deterred from
committing the same acts." 36

The Court also affirms the award of attorney's fees. It is settled that when an action is
instituted for the recovery of wages, or when employees are forced to litigate and
consequently incur expenses to protect their rights and interests, the grant of attorney's
fees is legally justifiable. 37
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio Morales and Garcia, JJ., concur.
(Philippine National Bank v. Cabansag, G.R. No. 157010, [June 21, 2005], 499 PHIL
512-536)
|||

FIRST DIVISION
[G.R. No. 120077. October 13, 2000.]
THE MANILA HOTEL CORP. and MANILA HOTEL INTL. LTD.,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
ARBITER CEFERINA J. DIOSANA and MARCELO G. SANTOS,
respondents.
Office of the Government Corporate Counsel for petitioner.
The Solicitor General for respondent.
Genie Castillo Quilas for private respondent.
SYNOPSIS
Private respondent Marcelo Santos was an overseas worker employed as printer at the
Mazoon Printing Press, Sultanate of Oman. While in Oman, on May 2, 1998, he received
a letter from Mr. Gerald R. Shmidt, General Manager of Palace Hotel, Beijing, China,
offering him the same position as printer with a higher monthly salary and increased
benefits as he was recommended by his friend Nestor Buenio. Palace Hotel is a member
of the Manila Hotel Group. Santos signified his acceptance. Subsequently, an
employment contract for a period of two years beginning September 1, 1998 was
perfected. However, since it was only on November 5, 1988 that Santos left for Beijing,
China, the employment contract was amended. The amended employment contract was
signed by Mr. Shmidt as the representative of Palace Hotel, and was noted by the Vice
President for Operations and Development of MHICL, Miguel O. Cergueda. On August
10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt
that his employment at the Palace Hotel print shop will be terminated due to business
reverses brought about by the political upheaval in China. On February 20, 1990,
respondent Santos filed a complaint for illegal dismissal against MHC, MHICL, the
Palace Hotel and Mr. Shmidt before the Arbitration Branch, National Capital Region,
National Labor Relations Commission. The Palace Hotel and Mr. Shmidt were not served
with summons and neither participated in the proceedings before the Labor Arbiter.
Subsequently, the Labor Arbiter decided against MHC and MHICL. MHC and MHICL
appealed to the NLRC which decided in favor of Santos. Hence, this appeal.
The main aspects of the case transpired in two foreign jurisdictions, and the case involves
purely foreign elements. The only link that the Philippines has with the case is that
respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign

corporations. Not all cases involving Filipino citizens can be tried here. This is not to say
that Philippine courts and agencies have no power to solve controversies involving
foreign employers. If Santos were an "overseas contract worker," a Philippine forum,
specifically the POEA, not the NLRC, would protect him. However, he is not an
"overseas contract worker," a fact which he admits with conviction. He was hired directly
by the Palace Hotel, a foreign employer, through correspondence sent to the Sultanate of
Oman where he was then employed. He was hired without the intervention of the POEA
or any authorized recruitment agency of the government.
Further, it is basic that a corporation has a personality separate and distinct from those
composing it as well as from that of any other legal entity to which it may be related.
Clear and convincing evidence is needed to pierce the veil of corporate fiction. The Court
found no evidence to show that MHICL and MHC are one and the same entity.
Moreover, when one "notes" a contract, one is not expressing his agreement or approval,
as a party would. In Sichangco v. Board of Commissioners of Immigration, the Court
recognized that the term "noted" means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter. Considering that no employeremployee relationship existed between MHICL, MHC and respondent Santos, the Labor
Arbiter had no jurisdiction over respondent's claim.
The Court ANNULLED the orders and resolutions of the National Labor Relations
Commission.
SYLLABUS
1. REMEDIAL LAW; COURTS; JURISDICTION; NOT ALL CASES INVOLVING
FILIPINO CITIZENS CAN BE TRIED IN THE PHILIPPINES. We note that the
main aspects of the case transpired in two foreign jurisdictions and the case involves
purely foreign elements. The only link that the Philippines has with the case is that
respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign
corporations. Not all cases involving our citizens can be tried here.
2. ID.; ID.; ID.; RULE OF FORUM NON CONVENIENS; REQUISITES. Under the
rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over
the case if it chooses to do so provided: (1) that the Philippine court is one to which the
parties may conveniently resort to; (2) that the Philippine court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the Philippine court has or is
likely to have power to enforce its decision.
3. ID.; ID.; ID.; ID.; NOT APPLICABLE IN CASE AT BAR. Respondent Santos was
hired directly by the Palace Hotel, a foreign employer, through correspondence sent to

the Sultanate of Oman, where respondent Santos was then employed. He was hired
without the intervention of the POEA or any authorized recruitment agency of the
government. . . . We fail to see how the NLRC is a convenient forum given that all the
incidents of the case from the time of recruitment, to employment to dismissal
occurred outside the Philippines. The inconvenience is compounded by the fact that the
proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines.
Neither are they "doing business in the Philippines." Likewise, the main witnesses, Mr.
Shmidt and Mr. Henk are non-residents of the Philippines.
4. ID.; ID.; ID.; PRINCIPLE OF LEX LOCI CONTRACTUS; NOT APPLICABLE IN
CASE AT BAR. Neither can an intelligent decision be made as to the law governing
the employment contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place where the contract
was made). The employment contract was not perfected in the Philippines. Respondent
Santos signified his acceptance by writing a letter while he was in the Republic of Oman.
This letter was sent to the Palace Hotel in the People's Republic of China.
5. ID.; ID.; ID.; PHILIPPINE COURT COULD NOT EXECUTE A DECISION SINCE
JURISDICTION OVER THE PERSON OF THE DEFENDANT WAS NOT
ACQUIRED. Even assuming that a proper decision could be reached by the NLRC,
such would not have any binding effect against the employer, the Palace Hotel. The
Palace Hotel is a corporation incorporated under the laws of China and was not even
served with summons. Jurisdiction over its person was not acquired.
6. LABOR AND SOCIAL LEGISLATIONS; LABOR CODE; NATIONAL LABOR
RELATIONS COMMISSION; NO POWER TO DETERMINE THE FACTS SINCE
THE ALLEGED ILLEGAL DISMISSAL TOOK PLACE IN OTHER COUNTRY.
Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all
acts complained of took place in Beijing, People's Republic of China. The NLRC was not
in a position to determine whether the Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to justify respondent Santos' retrenchment.
7. ID.; ID.; POEA, NOT NLRC, HAS JURISDICTION OVER OVERSEAS
CONTRACT WORKER. This is not to say that Philippine courts and agencies have
no power to solve controversies involving foreign employers. Neither are we saying that
we do not have power over an employment contract executed in a foreign country. If
Santos were an "overseas contract worker," a Philippine forum, specifically the POEA,
not the NLRC, would protect him. He is not an "overseas contract worker" a fact which he
admits with conviction.
8. MERCANTILE LAW; CORPORATION CODE; PIERCING THE VEIL OF
CORPORATE ENTITY; ELUCIDATED. Piercing the veil of corporate entity is an
equitable remedy. It is resorted to when the corporate fiction is used to defeat public

convenience, justify wrong, protect fraud or defend a crime. It is done only when a
corporation is a mere alter ego or business conduit of a person or another corporation.
9. ID.; ID.; ID.; NOT APPLICABLE IN CASE AT BAR. True, MHC is an
incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this
is not enough to pierce the veil of corporate fiction between MHICL and MHC. . . . In
Traders Royal Bank v. Court of Appeals, we held that "the mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding the fiction of separate
corporate personalities." . . . Likewise, there is no evidence to show that the Palace Hotel
and MHICL are one and the same entity. The fact that the Palace Hotel is a member of
the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and
the Palace Hotel.
10. ID.; ID.; ID.; TESTS TO DETERMINE WHETHER THE CORPORATE VEIL
MAY BE PIERCED. The tests in determining whether the corporate veil may be
pierced are: First, the defendant must have control or complete domination of the other
corporation's finances, policy and business practices with regard to the transaction
attacked. There must be proof that the other corporation had no separate mind, will or
existence with respect the act complained of. Second, control must be used by the
defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must
be the proximate cause of the injury or loss complained of. The absence of any of the
elements prevents the piercing of the corporate veil.
11. ID.; ID.; CORPORATION HAS PERSONALITY SEPARATE AND DISTINCT
FROM THOSE COMPOSING IT. It is basic that a corporation has a personality
separate and distinct from those composing it as well as from that of any other legal
entity to which it may be related. Clear and convincing evidence is needed to pierce the
veil of corporate fiction. In this case, we find no evidence to show that MHICL and MHC
are one and the same entity.

12. CIVIL LAW; OBLIGATIONS AND CONTRACTS; "NOTED"; CONSTRUED.


[W]e note that the Vice President (Operations and Development) of MHICL, Miguel D.
Cergueda signed the employment contract as a mere witness. He merely signed under the
word "noted". When one "notes" a contract, one is not expressing his agreement or
approval, as a party would. In Sichangco v. Board of Commissioners of Immigration, the
Court recognized that the term "noted" means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter. Mr. Cergueda merely signed the
"witnessing part" of the document. The "witnessing part" of the document is that which,
"in a deed or other formal instrument is that part which comes after the recitals, or where

there are no recitals, after the parties." As opposed to a party to a contract, a witness is
simply one who, "being present, personally sees or perceives a thing; a beholder, a
spectator, or eyewitness." One who "notes" something just makes a "brief written
statement" a memorandum or observation.
13. LABOR AND SOCIAL LEGISLATIONS; LABOR CODE; EMPLOYEREMPLOYEE RELATIONSHIP; ELEMENTS. In determining the existence of an
employer-employee relationship, the following elements are considered: "(1) the
selection and engagement of the employee; "(2) the payment of wages; "(3) the power to
dismiss; and "(4) the power to control employee's conduct."
14. ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. [MHICL] did not select
respondent Santos as an employee for the Palace Hotel. He was referred to the Palace
Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to work.
The terms of employment were negotiated and finalized through correspondence between
respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of
the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that
MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through
Mr. Schmidt and not MHICL that terminated respondent Santos' services.
15. ID.; ID.; ID.; "LABOR-ONLY CONTRACTOR"; NO ESTABLISHED IN CASE AT
BAR. Neither is there evidence to suggest that MHICL was a "labor-only contractor."
There is no proof that MHICL "supplied" respondent Santos or even referred him for
employment to the Palace Hotel.
16. ID.; ID.; NATIONAL LABOR RELATIONS COMMISSION; LABOR ARBITERS;
EXCLUSIVE AND ORIGINAL JURISDICTION. Labor Arbiters have exclusive and
original jurisdiction only over the following: "1. Unfair labor practice cases; "2.
Termination disputes; "3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wages, rates of pay, hours of work and other terms and
conditions of employment; "4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations; "5. Cases arising from any violation
of Article 264 of this Code, including questions involving legality of strikes and lockouts;
and "6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations, including
those of persons in domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement."
17. ID.; ID.; ID.; ID.; ID.; EMPLOYER-EMPLOYEE RELATIONSHIP IS AN
INDISPENSABLE JURISDICTIONAL REQUIREMENT. In all these cases, an
employer-employee relationship is an indispensable jurisdictional requirement. The
jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is

limited to disputes arising from an employer-employee relationship which can be


resolved by reference to the Labor Code, or other labor statutes, or their collective
bargaining agreements.
18. REMEDIAL LAW; COURTS; JURISDICTION OVER THE SUBJECT MATTER;
DETERMINED BY THE ALLEGATIONS OF COMPLAINT. "To determine which
body has jurisdiction over the present controversy, we rely on the sound judicial principle
that jurisdiction over the subject matter is conferred by law and is determined by the
allegations of the complaint irrespective of whether the plaintiff is entitled to all or some
of the claims asserted therein."
cSHATC

19. ID.; ID.; ID.; LACK OF JURISDICTION AMOUNTS TO GRAVE ABUSE OF


DISCRETION. Considering that the NLRC was forum non-conveniens and
considering further that no employer-employee relationship existed between MHICL,
MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
jurisdiction over respondent's claim in NLRC NCR Case no. 00-02-01058-90. . . . The
lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the
complaint. His failure to dismiss the case amounts to grave abuse of discretion.

DECISION

PARDO, J :
p

The case before the Court is a petition for certiorari 1 to annul the following orders of the
National Labor Relations Commission (hereinafter referred to as "NLRC") for having
been issued without or with excess jurisdiction and with grave abuse of discretion: 2
(1) Order of May 31, 1993. 3 Reversing and setting aside its earlier resolution of August
28, 1992. 4 The questioned order declared that the NLRC, not the Philippine Overseas
Employment Administration (hereinafter referred to as "POEA"), had jurisdiction over
private respondent's complaint;
(2) Decision of December 15, 1994. 5 Directing petitioners to jointly and severally pay
private respondent twelve thousand and six hundred dollars (US$12,600.00) representing
salaries for the unexpired portion of his contract; three thousand six hundred dollars
(US$3,600.00) as extra four months salary for the two (2) year period of his contract,
three thousand six hundred dollars (US$3,600.00) as "14th month pay" or a total of
nineteen thousand and eight hundred dollars (US$19,800.00) or its peso equivalent and
attorney's fees amounting to ten percent (10%) of the total award; and
(3) Order of March 30, 1995. 6 Denying the motion for reconsideration of the petitioners.
EHSITc

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos")


was an overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of
Oman. Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing,
People's Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the
Manila Hotel International Company, Limited (hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a government-owned and controlled
corporation duly organized and existing under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong Kong. 7
MHC is an "incorporator" of MHICL, owning 50% of its capital stock. 8
By virtue of a "management agreement" 9 with the Palace Hotel (Wang Fu Company
Limited), MHICL 10 trained the personnel and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of Oman,
respondent Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt,
General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos
that he was recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher
monthly salary and increased benefits. The position was slated to open on October 1,
1988. 11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of
the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign
employment contract to respondent Santos. Mr. Henk advised respondent Santos that if
the contract was acceptable, to return the same to Mr. Henk in Manila, together with his
passport and two additional pictures for his visa to China.
TAIEcS

On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective
June 30, 1988, under the pretext that he was needed at home to help with the family's
piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr.
Henk's letter. Respondent Santos enclosed four (4) signed copies of the employment
contract (dated June 4, 1988) and notified them that he was going to arrive in Manila
during the first week of July 1988.

The employment contract of June 4, 1988 stated that his employment would commence
September 1, 1988 for a period of two years. 12 It provided for a monthly salary of nine
hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a year. 13
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing
Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work at
the Palace Hotel. 14
Subsequently, respondent Santos signed an amended "employment agreement" with the
Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the
Palace Hotel. The Vice President (Operations and Development) of petitioner MHICL
Miguel D. Cergueda signed the employment agreement under the word "noted."
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He
returned to China and reassumed his post on July 17, 1989.
AaEcDS

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a
handwritten note that respondent Santos be given one (1) month notice of his release
from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by
Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated due
to business reverses brought about by the political upheaval in China. 15 We quote the
letter: 16

"After the unfortunate happenings in China and especially Beijing (referring to


Tiannamen Square incidents), our business has been severely affected. To
reduce expenses, we will not open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest assured
this does in no way reflect your past performance which we found up to our
expectations."
"Should a turnaround in the business happen, we will contact you directly and
give you priority on future assignment."

On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos
and paid all benefits due him, including his plane fare back to the Philippines.

On October 3, 1989, respondent Santos was repatriated to the Philippines.


On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr.
Shmidt, demanding full compensation pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
"His service with the Palace Hotel, Beijing was not abruptly terminated but we
followed the one-month notice clause and Mr. Santos received all benefits due
him.
"For your information the Print Shop at the Palace Hotel is still not operational
and with a low business outlook, retrenchment in various departments of the
hotel is going on which is a normal management practice to control costs.
"When going through the latest performance ratings, please also be advised that
his performance was below average and a Chinese National who is doing his job
now shows a better approach.
"In closing, when Mr. Santos received the letter of notice, he hardly showed up
for work but still enjoyed free accommodation/laundry/meals up to the day of
his departure."

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the
Arbitration Branch, National Capital Region, National Labor Relations Commission
(NLRC). He prayed for an award of nineteen thousand nine hundred and twenty-three
dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as
exemplary damages and attorney's fees equivalent to 20% of the damages prayed for. The
complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.
DCSETa

The Palace Hotel and Mr. Shmidt were not served with summons and neither participated
in the proceedings before the Labor Arbiter. 18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against
petitioners, thus: 19
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly and severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as unearned
salaries;
"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and


"d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the
NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating: 20
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and
void for want of jurisdiction. Complainant is hereby enjoined to file his
complaint with the POEA.
"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the aforequoted resolution. He argued that the case was not cognizable by the POEA as he was not
an "overseas contract worker." 21
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed
Labor Arbiter Emerson Tumanon to hear the case on the question of whether private
respondent was retrenched or dismissed. 22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the
testimonial and documentary evidence presented to and heard by him. 23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National
Capital Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G.
de Vera. 24
On November 25, 1994, Labor Arbiter de Vera submitted his report. 25 He found that
respondent Santos was illegally dismissed from employment and recommended that he
be paid actual damages equivalent to his salaries for the unexpired portion of his contract.
26

On December 15, 1994, the NLRC ruled in favor of private respondent, to wit: 27
"WHEREFORE, finding that the report and recommendations of Arbiter de
Vera are supported by substantial evidence, judgment is hereby rendered,
directing the respondents to jointly and severally pay complainant the following
computed contractual benefits: (1) US$12,600.00 as salaries for the unexpired
portion of the parties' contract; (2) US$3,600.00 as extra four (4) months salary
for the two (2) years period (sic) of the parties' contract; (3) US$3,600.00 as

"14th month pay" for the aforesaid two (2) years contract stipulated by the
parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorney's fees
of 10% of complainant's total award.
"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor
Arbiter de Vera's recommendation had no basis in law and in fact. 28
On March 30, 1995, the NLRC denied the motion for reconsideration. 29
Hence, this petition. 30
On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of
a temporary restraining order and/or writ of preliminary injunction and a motion for the
annulment of the entry of judgment of the NLRC dated July 31, 1995. 31
On November 20, 1995, the Court denied petitioner's urgent motion. The Court required
respondents to file their respective comments, without giving due course to the petition.
32

On March 8, 1996, the Solicitor General filed a manifestation stating that after going over
the petition and its annexes, they can not defend and sustain the position taken by the
NLRC in its assailed decision and orders. The Solicitor General prayed that he be
excused from filing a comment on behalf of the NLRC. 33
On April 30,1996, private respondent Santos filed his comment. 34
On June 26, 1996, the Court granted the manifestation of the Solicitor General and
required the NLRC to file its own comment to the petition. 35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and the
case involves purely foreign elements. The only link that the Philippines has with the
case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are
foreign corporations. Not all cases involving our citizens can be tried here.
ICTaEH

The employment contract. Respondent Santos was hired directly by the Palace Hotel,
a foreign employer, through correspondence sent to the Sultanate of Oman, where
respondent Santos was then employed. He was hired without the intervention of the
POEA or any authorized recruitment agency of the government. 36
Under the rule of forum non conveniens, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is
one to which the parties may conveniently resort to; (2) that the Philippine court is in a
position to make an intelligent decision as to the law and the facts; and (3) that the
Philippine court has or is likely to have power to enforce its decision. 37 The conditions
are unavailing in the case at bar.
Not Convenient. We fail to see how the NLRC is a convenient forum given that all the
incidents of the case from the time of recruitment, to employment to dismissal
occurred outside the Philippines. The inconvenience is compounded by the fact that the
proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines.
Neither are they "doing business in the Philippines." Likewise, the main witnesses, Mr.
Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law. Neither can an intelligent decision be made as
to the law governing the employment contract as such was perfected in foreign soil. This
calls to fore the application of the principle of lex loci contractus (the law of the place
where the contract was made). 38
The employment contract was not perfected in the Philippines. Respondent Santos
signified his acceptance by writing a letter while he was in the Republic of Oman. This
letter was sent to the Palace Hotel in the People's Republic of China.
No power to determine the facts. Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all acts complained of took place in Beijing,
People's Republic of China. The NLRC was not in a position to determine whether the
Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to
justify respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision. Even assuming that a proper
decision could be reached by the NLRC, such would not have any binding effect against
the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated under the
laws of China and was not even served with summons. Jurisdiction over its person was
not acquired.
This is not to say that Philippine courts and agencies have no power to solve
controversies involving foreign employers. Neither are we saying that we do not have
power over an employment contract executed in a foreign country. If Santos were an

"overseas contract worker," a Philippine forum, specifically the POEA, not the NLRC,
would protect him. 39 He is not an "overseas contract worker" a fact which he admits
with conviction. 40
Even assuming that the NLRC was the proper forum, even on the merits, the
NLRC's decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2)
that MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct
juridical entity cannot be held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital
stock. However, this is not enough to pierce the veil of corporate fiction between MHICL
and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud or
defend a crime. 41 It is done only when a corporation is a mere alter ego or business
conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals, 42 we held that "the mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding the fiction of separate
corporate personalities."
The tests in determining whether the corporate veil may be pierced are: First, the
defendant must have control or complete domination of the other corporation's finances,
policy and business practices with regard to the transaction attacked. There must be proof
that the other corporation had no separate mind, will or existence with respect the act
complained of. Second, control must be used by the defendant to commit fraud or wrong.
Third, the aforesaid control or breach of duty must be the proximate cause of the injury or
loss complained of. The absence of any of the elements prevents the piercing of the
corporate veil. 43
It is basic that a corporation has a personality separate and distinct from those composing
it as well as from that of any other legal entity to which it may be related. 44 Clear and
convincing evidence is needed to pierce the veil of corporate fiction. 45 In this case, we
find no evidence to show that MHICL and MHC are one and the same entity.
DSHTaC

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his
employment contract with the Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Miguel
D. Cergueda signed the employment contract as a mere witness. He merely signed under
the word "noted."
When one "notes" a contract, one is not expressing his agreement or approval, as a party
would. 46 In Sichangco v. Board of Commissioners of Immigration, 47 the Court
recognized that the term "noted" means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing
part" of the document is that which, "in a deed or other formal instrument is that part
which comes after the recitals, or where there are no recitals, after the parties (italics
ours)." 48 As opposed to a party to a contract, a witness is simply one who, "being
present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness." 49
One who "notes" something just makes a "brief written statement" 50 a memorandum or
observation.
Second, and more importantly, there was no existing employer-employee relationship
between Santos and MHICL. In determining the existence of an employer-employee
relationship, the following elements are considered: 51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."

MHICL did not have and did not exercise any of the aforementioned powers. It did not
select respondent Santos as an employee for the Palace Hotel. He was referred to the
Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to
work. The terms of employment were negotiated and finalized through correspondence
between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and
representatives of the Palace Hotel and not MHICL. Neither did respondent Santos
adduce any proof that MHICL had the power to control his conduct. Finally, it was the
Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos'
services.

Neither is there evidence to suggest that MHICL was a "labor-only contractor." 52 There
is no proof that MHICL "supplied" respondent Santos or even referred him for
employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the
same entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is
not enough to pierce the corporate veil between MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering further that no
employer-employee relationship existed between MHICL, MHC and respondent Santos,
Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondent's claim in
NLRC NCR Case No. 00-02-01058-90.
AaCcST

Labor Arbiters have exclusive and original jurisdiction only over the following: 53
"1. Unfair labor practice cases;
"2. Termination disputes;
"3. If accompanied with a claim for reinstatement, those cases that workers may
file involving wages, rates of pay, hours of work and other terms and conditions
of employment;
"4. Claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
"5. Cases arising from any violation of Article 264 of this Code, including
questions involving legality of strikes and lockouts; and
"6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement."

In all these cases, an employer-employee relationship is an indispensable jurisdictional


requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is
limited to disputes arising from an employer-employee relationship which can be
resolved by reference to the Labor Code, or other labor statutes, or their collective
bargaining agreements. 54

"To determine which body has jurisdiction over the present controversy, we rely on the
sound judicial principle that jurisdiction over the subject matter is conferred by law and is
determined by the allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein." 55
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the
complaint. His failure to dismiss the case amounts to grave abuse of discretion. 56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the
orders and resolutions of the National Labor Relations Commission dated May 31, 1993,
December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR
Case No. 00-02-01058-90).
No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concur.
(Manila Hotel Corp. v. National Labor Relations Commission, G.R. No. 120077,
[October 13, 2000], 397 PHIL 1-23)
|||

THIRD DIVISION
[G.R. No. 128024. May 9, 2000.]
BEBIANO M. BAEZ, petitioner, vs. HON. DOWNEY C.
VALDEVILLA and ORO MARKETING, INC., respondents.
Gregorio A. Pizarro for petitioner.
The Solicitor General for public respondent.
Recto P. Achas for private respondent.
SYNOPSIS
After the NLRC ruling that petitioner was illegally dismissed by his employer, Oro
Marketing, Inc. became final, Oro Marketing, Inc. filed a complaint for damages against
petitioner in the RTC. Petitioner moved for the dismissal of the same alleging that the
action was within the jurisdiction of the NLRC, having arisen from an employeremployee relationship. The RTC, however, declared that it has jurisdiction over the
subject matter of the instant controversy. Hence, this petition.
Art. 217(a) of the Labor Code bestows upon the Labor Arbiter original and exclusive
jurisdiction over ALL claims for damages arising from employer-employee relations.
This means the Labor Arbiter has jurisdiction to award not only the reliefs provided by
labor laws, but also damages governed by the Civil Code. This includes the claim of an
employer for actual damages against its dismissed employee, where the basis for the
claim is necessarily connected with the fact of termination. Hence, the claim should have
been entered as a counterclaim in the illegal dismissal case and not subject of a separate
action for damages. Appeal from the Labor Arbiter's decision should have been the
proper remedy, but the same is no longer available with the finality of the decision of the
NLRC. The petition was granted, and the complaint before the trial court against
petitioner was dismissed.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; JURISDICTION OF LABOR ARBITERS
AND NLRC; CLAIMS FOR ALL DAMAGES ARISING FROM EMPLOYEREMPLOYEE RELATIONS, DISCUSSED. Article 217(a), paragraph 4 of the Labor
Code, which provides for the jurisdiction of Labor Arbiters and the Commission, states:
Claims for actual, moral, exemplary and other forms of damages arising from the

employer-employee relations. . . ." This jurisdiction of Labor Arbiters and the NLRC in
Article 217 is comprehensive enough to include claims for all forms of damages "arising
from the employer-employee relations." The Labor Arbiter has jurisdiction to award not
only the reliefs provided by labor laws, but also damages governed by the Civil Code.
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, we hold that by the designating
clause "arising from the employer-employee relations" Article 217 should apply with
equal force to the claim of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is necessarily connected with the
fact of termination, and should be entered as a counterclaim in the illegal dismissal case.
Even under Republic Act No. 875 (the "Industrial Peace Act," now completely
superseded by the Labor Code), jurisprudence was settled that where the plaintiff's cause
of action for damages arose out of, or was necessarily intertwined with, an alleged unfair
labor practice committed by the union, the jurisdiction is exclusively with the (now
defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular
courts over the same is a nullity. To allow otherwise would be "to sanction split
jurisdiction, which is prejudicial to the orderly administration of justice." Thus, even after
the enactment of the Labor Code, where the damages separately claimed by the employer
were allegedly incurred as a consequence of strike or picketing of the union, such
complaint for damages is deeply rooted from the labor dispute between the parties, and
should be dismissed by ordinary courts for lack of jurisdiction.
2. REMEDIAL LAW; REGULAR COURTS; JURISDICTION; DAMAGES WHERE
EMPLOYER-EMPLOYEE RELATIONSHIP IS MERELY INCIDENTAL AND
PROCEEDS FROM A DIFFERENT CAUSE OF ACTION. The provision in Art.
217(a) should be distinguished from cases of actions for damages where the employeremployee relationship is merely incidental and the cause of action proceeds from a
different source of obligation. Thus, the jurisdiction of regular courts was upheld where
the damages claimed for were based on tort, malicious prosecution, or breach of contract,
as when the claimant seeks to recover a debt from a former employee or seeks liquidated
damages in enforcement of a prior employment contract.

DECISION

GONZAGA-REYES, J :
p

The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking
jurisdiction over an action for damages filed by an employer against its dismissed
employee, are assailed in this petition for certiorari under Rule 65 of the Rules of Court
for having been issued in grave abuse of discretion.

Petitioner was the sales operations manager of private respondent in its branch in Iligan
City. In 1993, private respondent "indefinitely suspended" petitioner and the latter filed a
complaint for illegal dismissal with the National Labor Relations Commission ("NLRC")
in Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan
found petitioner to have been illegally dismissed and ordered the payment of separation
pay in lieu of reinstatement, and of backwages and attorney's fees. The decision was
appealed to the NLRC, which dismissed the same for having been filed out of time. 2
Elevated by petition for certiorari before this Court, the case was dismissed on technical
grounds; 3 however, the Court also pointed out that even if all the procedural
requirements for the filing of the petition were met, it would still be dismissed for failure
to show grave abuse of discretion on the part of the NLRC.
Cdpr

On November 13, 1995, private respondent filed a complaint for damages before the
Regional Trial Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554,
which prayed for the payment of the following:
a. P709,217.97 plus 12% interest as loss of profit and/or unearned income of
three years;
b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities,
properties, space, etc. for three years;
c. P5,000.00 as initial expenses of litigation; and
d. P25,000.00 as attorney's fees. 4

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He
interposed in the court below that the action for damages, having arisen from an
employer-employee relationship, was squarely under the exclusive original jurisdiction of
the NLRC under Article 217(a), paragraph 4 of the Labor Code and is barred by reason of
the final judgment in the labor case. He accused private respondent of splitting causes of
action, stating that the latter could very well have included the instant claim for damages
in its counterclaim before the Labor Arbiter. He also pointed out that the civil action of
private respondent is an act of forum-shopping and was merely resorted to after a failure
to obtain a favorable decision with the NLRC.
Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order,
which summarized the basis for private respondent's action for damages in this manner:
Paragraph 5 of the complaint alleged that the defendant violated the plaintiffs
policy re: His business in his branch at Iligan City wherein defendant was the
Sales Operations Manager, and paragraph 7 of the same complaint briefly
narrated the modus operandi of defendant, quoted herein: Defendant canvassed
customers personally or through salesmen of plaintiff which were hired or

recruited by him. If said customer decided to buy items from plaintiff on


installment basis, defendant, without the knowledge of said customer and
plaintiff, would buy the items on cash basis at ex-factory price, a privilege not
given to customers, and thereafter required the customer to sign promissory
notes and other documents using the name and property of plaintiff, purporting
that said customer purchased the items from plaintiff on installment basis.
Thereafter, defendant collected the installment payments either personally or
through Venus Lozano, a Group Sales Manager of plaintiff but also utilized by
him as secretary in his own business for collecting and receiving of installments,
purportedly for the plaintiff but in reality on his own account or business. The
collection and receipt of payments were made inside the Iligan City branch
using plaintiffs facilities, property and manpower. That accordingly plaintiffs
sales decreased and reduced to a considerable extent the profits which it would
have earned. 5

In declaring itself as having jurisdiction over the subject matter of the instant controversy,
respondent court stated:
A perusal of the complaint which is for damages does not ask for any relief
under the Labor Code of the Philippines. It seeks to recover damages as redress
for defendant's breach of his contractual obligation to plaintiff who was
damaged and prejudiced. The Court believes such cause of action is within the
realm of civil law, and jurisdiction over the controversy belongs to the regular
courts.
While seemingly the cause of action arose from employer-employee relations,
the employer's claim for damages is grounded on the nefarious activities of
defendant causing damage and prejudice to plaintiff as alleged in paragraph 7 of
the complaint. The Court believes that there was a breach of a contractual
obligation, which is intrinsically a civil dispute. The averments in the complaint
removed the controversy from the coverage of the Labor Code of the
Philippines and brought it within the purview of civil law. (Singapore Airlines,
Ltd. Vs. Pao, 122 SCRA 671.) . . . 6

Petitioner's motion for reconsideration of the above Order was denied for lack of merit on
October 16, 1996. Hence, this petition.
Acting on petitioner's prayer, the Second Division of this Court issued a Temporary
Restraining Order ("TRO") on March 5, 1997, enjoining respondents from further
proceeding with Civil Case No. 95-554 until further orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in the Motion to
Dismiss dated January 30, 1996, namely, lack of jurisdiction over the subject matter of

the action, res judicata, splitting of causes of action, and forum-shopping. The
determining issue, however, is the issue of jurisdiction.
Article 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of
the filing of this case, reads:
cda

ARTICLE 217. Jurisdiction of Labor Arbiters and the Commission. (a)


Except as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
xxx xxx xxx
4. Claims for actual, moral, exemplary and other forms of damages arising from
the employer-employee relations;
xxx xxx xxx

The above provisions are a result of the amendment by Section 9 of Republic Act
("R.A.") No. 6715, which took effect on March 21, 1989, and which put to rest the earlier
confusion as to who between Labor Arbiters and regular courts had jurisdiction over
claims for damages as between employers and employees.
It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of
workers, including claims for damages, was originally lodged with the Labor Arbiters
and the NLRC by Article 217 of the Labor Code. 7 On May 1, 1979, however,
Presidential Decree ("P.D.") No. 1367 amended said Article 217 to the effect that
"Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for
moral or other forms of damages." 8 This limitation in jurisdiction, however, lasted only
briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored Article
217 of the Labor Code almost to its original form. Presently, and as amended by R.A.
6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is comprehensive
enough to include claims for all forms of damages "arising from the employer-employee
relations".
Whereas this Court in a number of occasions had applied the jurisdictional provisions of
Article 217 to claims for damages filed by employees, 9 we hold that by the designating
clause "arising from the employer-employee relations" Article 217 should apply with
equal force to the claim of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is necessarily connected with the
fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely
superseded by the Labor Code), jurisprudence was settled that where the plaintiff's cause
of action for damages arose out of, or was necessarily intertwined with, an alleged unfair
labor practice committed by the union, the jurisdiction is exclusively with the (now
defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular
courts over the same is a nullity. 10 To allow otherwise would be "to sanction split
jurisdiction, which is prejudicial to the orderly administration of justice." 11 Thus, even
after the enactment of the Labor Code, where the damages separately claimed by the
employer were allegedly incurred as a consequence of strike or picketing of the union,
such complaint for damages is deeply rooted from the labor dispute between the parties,
and should be dismissed by ordinary courts for lack of jurisdiction. As held by this Court
in National Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on
policy grounds, and equally so in the interest of greater promptness in the
disposition of labor matters, a court is spared the often onerous task of
determining what essentially is a factual matter, namely, the damages that may
be incurred by either labor or management as a result of disputes or
controversies arising from employer-employee relations.

There is no mistaking the fact that in the case before us, private respondent's claim
against petitioner for actual damages arose from a prior employer-employee relationship.
In the first place, private respondent would not have taken issue with petitioner's "doing
business of his own" had the latter not been concurrently its employee. Thus, the
damages alleged in the complaint below are: first, those amounting to lost profits and
earnings due to petitioner's abandonment or neglect of his duties as sales manager, having
been otherwise preoccupied by his unauthorized installment sale scheme; and second,
those equivalent to the value of private respondent's property and supplies which
petitioner used in conducting his "business".
Second, and more importantly, to allow respondent court to proceed with the instant
action for damages would be to open anew the factual issue of whether petitioner's
installment sale scheme resulted in business losses and the dissipation of private
respondent's property. This issue has been duly raised and ruled upon in the illegal
dismissal case, where private respondent brought up as a defense the same allegations
now embodied in his complaint, and presented evidence in support thereof. The Labor
Arbiter, however, found to the contrary that no business losses may be attributed to
petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the
Iligan branch of private respondent (where petitioner was employed) reached its highest
record level to the extent that petitioner was awarded the 1989 Field Sales Achievement
Award in recognition of his exceptional sales performance, and that the installment
scheme was in fact with the knowledge of the management of the Iligan branch of private
respondent. 12 In other words, the issue of actual damages has been settled in the labor
case, which is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor court, it
may help to refer to that period from 1979 to 1980 when jurisdiction over employmentpredicated actions for damages vacillated from labor tribunals to regular courts, and back
to labor tribunals. In Ebon vs. de Guzman, 113 SCRA 52, 13 this Court discussed:
The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to
award moral and other forms of damages in labor cases could have assumed that
the Labor Arbiters' position-paper procedure of ascertaining the facts in dispute
might not be an adequate tool for arriving at a just and accurate assessment of
damages, as distinguished from backwages and separation pay, and that the trial
procedure in the Court of First Instance would be a more effective means of
determining such damages. . .
Evidently, the lawmaking authority had second thoughts about depriving the
Labor Arbiters and the NLRC of the jurisdiction to award damages in labor
cases because that setup would mean duplicity of suits, splitting the cause of
action and possible conflicting findings and conclusions by two tribunals on one
and the same claim.
LexLib

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially


reenacted Article 217 in its original form) nullified Presidential Decree No.
1367 and restored to the Labor Arbiter and the NLRC their jurisdiction to award
all kinds of damages in cases arising from employer-employee relations. . . .
(Italics supplied)

Clearly, respondent court's taking jurisdiction over the instant case would bring about
precisely the harm that the lawmakers sought to avoid in amending the Labor Code to
restore jurisdiction over claims for damages of this nature to the NLRC.
This is, of course, to distinguish from cases of actions for damages where the employeremployee relationship is merely incidental and the cause of action proceeds from a
different source of obligation. Thus, the jurisdiction of regular courts was upheld where
the damages, claimed for were based on tort, 14 malicious prosecution, 15 or breach of
contract, as when the claimant seeks to recover a debt from a former employee 16 or
seeks liquidated damages in enforcement of a prior employment contract. 17
Neither can we uphold the reasoning of respondent court that because the resolution of
the issues presented by the complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as
amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over
claims for damages arising from employer-employee relations in other words, the
Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but
also damages governed by the Civil Code. 18

Thus, it is obvious that private respondent's remedy is not in the filing of this separate
action for damages, but in properly perfecting an appeal from the Labor Arbiter's
decision. Having lost the right to appeal on grounds of untimeliness, the decision in the
labor case stands as a final judgment on the merits, and the instant action for damages
cannot take the place of such lost appeal.
Respondent court clearly having no jurisdiction over private respondent's complaint for
damages, we will no longer pass upon petitioner's other assignments of error.
WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554
before Branch 39 of the Regional Trial Court of Misamis Oriental is hereby
DISMISSED. No pronouncement as to costs.
cdphil

SO ORDERED.
Melo, Vitug and Panganiban, JJ., concur.
Purisima, J., is abroad took no part.

|||

(Baez v. Valdevilla, G.R. No. 128024, [May 9, 2000], 387 PHIL 601-612)

THIRD DIVISION
[G.R. No. 166377. November 28, 2008.]
MA. ISABEL T. SANTOS, represented by ANTONIO P. SANTOS,
petitioner, vs. SERVIER PHILIPPINES, INC. and NATIONAL
LABOR RELATIONS COMMISSION, respondents.

DECISION

NACHURA, J :
p

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking to set aside the Court of Appeals (CA) Decision, 1 dated August 12, 2004
and its Resolution 2 dated December 17, 2004, in CA-G.R. SP No. 75706.
IHSTDE

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


Petitioner Ma. Isabel T. Santos was the Human Resource Manager of respondent Servier
Philippines, Inc. since 1991 until her termination from service in 1999. On March 26 and
27, 1998, petitioner attended a meeting 3 of all human resource managers of respondent,
held in Paris, France. Since the last day of the meeting coincided with the graduation of
petitioner's only child, she arranged for a European vacation with her family right after
the meeting. She, thus, filed a vacation leave effective March 30, 1998. 4
On March 29, 1998, petitioner, together with her husband Antonio P. Santos, her son, and
some friends, had dinner at Leon des Bruxelles, a Paris restaurant known for mussels 5 as
their specialty. While having dinner, petitioner complained of stomach pain, then
vomited. Eventually, she was brought to the hospital known as Centre Chirurgical de
L'Quest where she fell into coma for 21 days; and later stayed at the Intensive Care Unit
(ICU) for 52 days. The hospital found that the probable cause of her sudden attack was
"alimentary allergy", as she had recently ingested a meal of mussels which resulted in a
concomitant uticarial eruption. 6
During the time that petitioner was confined at the hospital, her husband and son stayed
with her in Paris. Petitioner's hospitalization expenses, as well as those of her husband
and son, were paid by respondent. 7
In June 1998, petitioner's attending physicians gave a prognosis of the former's condition;
and, with the consent of her family, allowed her to go back to the Philippines for the

continuation of her medical treatment. She was then confined at the St. Luke's Medical
Center for rehabilitation. 8 During the period of petitioner's rehabilitation, respondent
continued to pay the former's salaries; and to assist her in paying her hospital bills.
In a letter dated May 14, 1999, respondent informed the petitioner that the former had
requested the latter's physician to conduct a thorough physical and psychological
evaluation of her condition, to determine her fitness to resume her work at the company.
Petitioner's physician concluded that the former had not fully recovered mentally and
physically. Hence, respondent was constrained to terminate petitioner's services effective
August 31, 1999. 9
As a consequence of petitioner's termination from employment, respondent offered a
retirement package which consists of:
TEHIaD

Retirement Plan Benefits: P1,063,841.76


Insurance Pension at P20,000.00/month
for 60 months from company-sponsored
group life policy: P1,200,000.00
Educational assistance: P465,000.00
Medical and Health Care: P200,000.00 10

Of the promised retirement benefits amounting to P1,063,841.76, only P701,454.89 was


released to petitioner's husband, the balance 11 thereof was withheld allegedly for
taxation purposes. Respondent also failed to give the other benefits listed above. 12
Petitioner, represented by her husband, instituted the instant case for unpaid salaries;
unpaid separation pay; unpaid balance of retirement package plus interest; insurance
pension for permanent disability; educational assistance for her son; medical assistance;
reimbursement of medical and rehabilitation expenses; moral, exemplary, and actual
damages, plus attorney's fees. The case was docketed as NLRC-NCR (SOUTH) Case No.
30-06-02520-01.
On September 28, 2001, Labor Arbiter Aliman D. Mangandog rendered a Decision 13
dismissing petitioner's complaint. The Labor Arbiter stressed that respondent had been
generous in giving financial assistance to the petitioner. 14 He likewise noted that there
was a retirement plan for the benefit of the employees. In denying petitioner's claim for
separation pay, the Labor Arbiter ratiocinated that the same had already been integrated
in the retirement plan established by respondent. Thus, petitioner could no longer collect
separation pay over and above her retirement benefits. 15 The arbiter refused to rule on

the legality of the deductions made by respondent from petitioner's total retirement
benefits for taxation purposes, as the issue was beyond the jurisdiction of the NLRC. 16
On the matter of educational assistance, the Labor Arbiter found that the same may be
granted only upon the submission of a certificate of enrollment. 17 Lastly, as to
petitioner's claim for damages and attorney's fees, the Labor Arbiter denied the same as
the former's dismissal was not tainted with bad faith. 18
On appeal to the National Labor Relations Commission (NLRC), the tribunal set aside
the Labor Arbiter's decision, ruling that:
WHEREFORE, premises considered, Complainant's appeal is partly
GRANTED. The Labor Arbiter's decision in the above-entitled case is hereby
SET ASIDE. Respondent is ordered to pay Complainant's portion of her
separation pay covering the following: 1) P200,000.00 for medical and health
care from September 1999 to April 2001; and 2) P35,000.00 per year for her
son's high school (second year to fourth year) education and P45,000.00 per
semester for the latter's four-year college education, upon presentation of any
applicable certificate of enrollment.
SO ORDERED. 19

The NLRC emphasized that petitioner was not retired from the service pursuant to
law, collective bargaining agreement (CBA) or other employment contract; rather, she
was dismissed from employment due to a disease/disability under Article 284 20 of
the Labor Code. 21 In view of her non-entitlement to retirement benefits, the amounts
received by petitioner should then be treated as her separation pay. 22 Though not
legally obliged to give the other benefits, i.e., educational assistance, respondent
volunteered to grant them, for humanitarian consideration. The NLRC therefore
ordered the payment of the other benefits promised by the respondent. 23 Lastly, it
sustained the denial of petitioner's claim for damages for the latter's failure to
substantiate the same. 24
SaIACT

Unsatisfied, petitioner elevated the matter to the Court of Appeals which affirmed the
NLRC decision. 25
Hence, the instant petition.
At the outset, the Court notes that initially, petitioner raised the issue of whether she was
entitled to separation pay, retirement benefits, and damages. In support of her claim for
separation pay, she cited Article 284 of the Labor Code, as amended. However, in
coming to this Court via a petition for review on certiorari, she abandoned her original
position and alleged that she was, in fact, not dismissed from employment based on the
above provision. She argued that her situation could not be characterized as a disease;
rather, she became disabled. In short, in her petition before us, she now changes her

theory by saying that she is not entitled to separation pay but to retirement pay pursuant
to Section 4, 26 Article V of the Retirement Plan, on disability retirement. She, thus,
prayed for the full payment of her retirement benefits by giving back to her the amount
deducted for taxation purposes.
In our Resolution 27 dated November 23, 2005 requiring the parties to submit their
respective memoranda, we specifically stated:
No new issues may be raised by a party in the Memorandum and the issues
raised in the pleadings but not included in the Memorandum shall be deemed
waived or abandoned.
Being summations of the parties' previous pleadings, the Court may consider the
Memoranda alone in deciding or resolving this petition.

Pursuant to the above resolution, any argument raised in her petition, but not raised in her
Memorandum, 28 is deemed abandoned. 29 Hence, the only issue proper for
determination is the propriety of deducting P362,386.87 from her total benefits, for
taxation purposes. Nevertheless, in order to resolve the legality of the deduction, it is
imperative that we settle, once and for all, the ground relied upon by respondent in
terminating the services of the petitioner, as well as the nature of the benefits given to her
after such termination. Only then can we decide whether the amount deducted by the
respondent should be paid to the petitioner.
Respondent dismissed the petitioner from her employment based on Article 284 of the
Labor Code, as amended, which reads:
Art. 284. Disease as Ground for Termination.
An employer may terminate the services of an employee who has been found to
be suffering from any disease and whose continued employment is prohibited
by law or is prejudicial to his health as well as to the health of his coemployees: Provided, That he is paid separation pay equivalent to at least one
(1) month salary or to one-half (1/2) month salary for every year of service,
whichever is greater, a fraction of at least six (6) months being considered as
one (1) whole year.

As she was dismissed on the abovementioned ground, the law gives the petitioner the
right to demand separation pay. However, respondent established a retirement plan in
favor of all its employees which specifically provides for "disability retirement", to
wit:
Sec. 4. Disability Retirement.

In the event that a Member is retired by the Company due to permanent total
incapacity or disability, as determined by a competent physician appointed by
the Company, his disability retirement benefit shall be the Full Member's
Account Balance determined as of the last valuation date. . . . . 30
cSATEH

On the basis of the above-mentioned retirement plan, respondent offered the petitioner a
retirement package which consists of retirement plan benefits, insurance pension, and
educational assistance. 31 The amount of P1,063,841.76 represented the disability
retirement benefit provided for in the plan; while the insurance pension was to be paid by
their insurer; and the educational assistance was voluntarily undertaken by the respondent
as a gesture of compassion to the petitioner. 32
We have declared in Aquino v. National Labor Relations Commission 33 that the receipt
of retirement benefits does not bar the retiree from receiving separation pay. Separation
pay is a statutory right designed to provide the employee with the wherewithal during the
period that he/she is looking for another employment. On the other hand, retirement
benefits are intended to help the employee enjoy the remaining years of his life, lessening
the burden of worrying about his financial support, and are a form of reward for his
loyalty and service to the employer. 34 Hence, they are not mutually exclusive. However,
this is only true if there is no specific prohibition against the payment of both benefits in
the retirement plan and/or in the Collective Bargaining Agreement (CBA). 35
In the instant case, the Retirement Plan bars the petitioner from claiming additional
benefits on top of that provided for in the Plan. Section 2, Article XII of the Retirement
Plan provides:
Section 2. No Duplication of Benefits.
No other benefits other than those provided under this Plan shall be payable
from the Fund. Further, in the event the Member receives benefits under the
Plan, he shall be precluded from receiving any other benefits under the Labor
Code or under any present or future legislation under any other contract or
Collective Bargaining Agreement with the Company. 36

There being such a provision, as held in Cruz v. Philippine Global Communications,


Inc., 37 petitioner is entitled only to either the separation pay under the law or
retirement benefits under the Plan, and not both.
Clearly, the benefits received by petitioner from the respondent represent her retirement
benefits under the Plan. The question that now confronts us is whether these benefits are
taxable. If so, respondent correctly made the deduction for tax purposes. Otherwise, the
deduction was illegal and respondent is still liable for the completion of petitioner's
retirement benefits.
ASHICc

Respondent argues that the legality of the deduction from petitioner's total benefits
cannot be taken cognizance of by this Court since the issue was not raised during the
early stage of the proceedings. 38
We do not agree.
Records reveal that as early as in petitioner's position paper filed with the Labor Arbiter,
she already raised the legality of said deduction, albeit designated as "unpaid balance of
the retirement package". Petitioner specifically averred that P362,386.87 was not given to
her by respondent as it was allegedly a part of the former's taxable income. 39 This is
likewise evident in the Labor Arbiter and the NLRC's decisions although they ruled that
the issue was beyond the tribunal's jurisdiction. They even suggested that petitioner's
claim for illegal deduction could be addressed by filing a tax refund with the Bureau of
Internal Revenue. 40
Contrary to the Labor Arbiter and NLRC's conclusions, petitioner's claim for illegal
deduction falls within the tribunal's jurisdiction. It is noteworthy that petitioner demanded
the completion of her retirement benefits, including the amount withheld by respondent
for taxation purposes. The issue of deduction for tax purposes is intertwined with the
main issue of whether or not petitioner's benefits have been fully given her. It is,
therefore, a money claim arising from the employer-employee relationship, which clearly
falls within the jurisdiction 41 of the Labor Arbiter and the NLRC.
This is not the first time that the labor tribunal is faced with the issue of illegal deduction.
In Intercontinental Broadcasting Corporation (IBC) v. Amarilla, 42 IBC withheld the
salary differentials due its retired employees to offset the tax due on their retirement
benefits. The retirees thus lodged a complaint with the NLRC questioning said
withholding. They averred that their retirement benefits were exempt from income tax;
and IBC had no authority to withhold their salary differentials. The Labor Arbiter took
cognizance of the case, and this Court made a definitive ruling that retirement benefits
are exempt from income tax, provided that certain requirements are met.
ScCEIA

Nothing, therefore, prevents us from deciding this main issue of whether the retirement
benefits are taxable.
We answer in the affirmative.
Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides for
the exclusion of retirement benefits from gross income, thus:
(6) Retirement Benefits, Pensions, Gratuities, etc.
a) Retirement benefits received under Republic Act 7641 and those received by
officials and employees of private firms, whether individual or corporate, in

accordance with a reasonable private benefit plan maintained by the employer:


Provided, That the retiring official or employee has been in the service of the
same employer for at least ten (10) years and is not less than fifty (50) years of
age at the time of his retirement: Provided further, That the benefits granted
under this subparagraph shall be availed of by an official or employee only
once. . . . .

Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is
burdened to prove the concurrence of the following elements: (1) a reasonable private
benefit plan is maintained by the employer; (2) the retiring official or employee has been
in the service of the same employer for at least ten (10) years; (3) the retiring official or
employee is not less than fifty (50) years of age at the time of his retirement; and (4) the
benefit had been availed of only once. 43
As discussed above, petitioner was qualified for disability retirement. At the time of such
retirement, petitioner was only 41 years of age; and had been in the service for more or
less eight (8) years. As such, the above provision is not applicable for failure to comply
with the age and length of service requirements. Therefore, respondent cannot be faulted
for deducting from petitioner's total retirement benefits the amount of P362,386.87, for
taxation purposes.
WHEREFORE, the petition is DENIED for lack of merit. The Court of Appeals Decision
dated August 12, 2004 and its Resolution dated December 17, 2004, in CA-G.R. SP No.
75706 are AFFIRMED.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Chico-Nazario and Reyes, JJ., concur.
(Santos v. Servier Philippines, Inc., G.R. No. 166377, [November 28, 2008], 593 PHIL
133-145)
|||

FIRST DIVISION
[G.R. No. 89621. September 24, 1991.]
PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC.,
represented by its Plant General Manager ANTHONY B. SIAN,
ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA,
petitioners, vs. HON. LOLITA O. GAL-LANG, SALVADOR
NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAAS &
FULGENCIO LEGO, respondents.
Aurelio D. Menzon for petitioners.
Mario P. Nicolasora co-counsel for petitioners.
Papiano L. Santo for private respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR ARBITER; SCOPE OF POWER;
RULE. 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.
2. REMEDIAL LAW; CIVIL PROCEDURE; COMPLAINT FOR DAMAGE FOR
MALICIOUS PROSECUTION FILED BY EMPLOYEES AGAINST EMPLOYERS;
COGNIZABLE BY REGULAR COURTS OF JUSTICE; CASE AT BAR. 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 employee" 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.

DECISION

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.
prLL

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 demanded reinstatement with damages. In
addition, they instituted in the Regional Trial Court of Leyte, on April 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 employeeemployer 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 nonagricultural:
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 tortuous 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.
prLL

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 no jurisdiction 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.
llcd

"Talents differ, all is well and wisely put," so observed the philosopher-poet. 8
So it must be in the case we here decide.

WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED,
with costs against the petitioner.
SO ORDERED.
Narvasa, Grio-Aquino and Medialdea, JJ., concur.
(Pepsi Cola Distributors of the Philippines, Inc. v. Gal-lang, G.R. No. 89621,
[September 24, 1991], 278 PHIL 708-715)
|||

FIRST DIVISION
[G.R. No. 182295. June 26, 2013.]
7K CORPORATION, petitioner, vs. EDDIE ALBARICO, respondent.

DECISION

SERENO, C.J :
p

This is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of
Court, asking the Court to determine whether a voluntary arbitrator in a labor dispute
exceeded his jurisdiction in deciding issues not specified in the submission agreement of
the parties. It assails the Decision 1 dated 18 September 2007 and the Resolution 2 dated
17 March 2008 of the Court of Appeals (CA). 3
FACTS
When he was dismissed on 5 April 1993, respondent Eddie Albarico (Albarico) was a
regular employee of petitioner 7K Corporation, a company selling water purifiers. He
started working for the company in 1990 as a salesman. 4 Because of his good
performance, his employment was regularized. He was also promoted several times: from
salesman, he was promoted to senior sales representative and then to acting team field
supervisor. In 1992, he was awarded the President's Trophy for being one of the
company's top water purifier specialist distributors.
In April of 1993, the chief operating officer of petitioner 7K Corporation terminated
Albarico's employment allegedly for his poor sales performance. 5 Respondent had to
stop reporting for work, and he subsequently submitted his money claims against
petitioner for arbitration before the National Conciliation and Mediation Board (NCMB).
The issue for voluntary arbitration before the NCMB, according to the parties'
Submission Agreement dated 19 April 1993, was whether respondent Albarico was
entitled to the payment of separation pay and the sales commission reserved for him by
the corporation. 6
While the NCMB arbitration case was pending, respondent Albarico filed a Complaint
against petitioner corporation with the Arbitration Branch of the National Labor
Relations Commission (NLRC) for illegal dismissal with money claims for overtime pay,
holiday compensation, commission, and food and travelling allowances. 7 The Complaint

was decided by the labor arbiter in favor of respondent Albarico, who was awarded
separation pay in lieu of reinstatement, backwages and attorney's fees. 8
On appeal by petitioner, the labor arbiter's Decision was vacated by the NLRC for forum
shopping on the part of respondent Albarico, because the NCMB arbitration case was still
pending. 9 The NLRC Decision, which explicitly stated that the dismissal was without
prejudice to the pending NCMB arbitration case, 10 became final after no appeal was
taken.
HSTCcD

On 17 September 1997, petitioner corporation filed its Position Paper in the NCMB
arbitration case. 11 It denied that respondent was terminated from work, much less
illegally dismissed. The corporation claimed that he had voluntarily stopped reporting for
work after receiving a verbal reprimand for his sales performance; hence, it was he who
was guilty of abandonment of employment. Respondent made an oral manifestation that
he was adopting the position paper he submitted to the labor arbiter, a position paper in
which the former claimed that he had been illegally dismissed. 12
On 12 January 2005, almost 12 years after the filing of the NCMB case, both parties
appeared in a hearing before the NCMB. 13 Respondent manifested that he was willing
to settle the case amicably with petitioner based on the decision of the labor arbiter
ordering the payment of separation pay in lieu of reinstatement, backwages and attorney's
fees. On its part, petitioner made a counter-manifestation that it was likewise amenable to
settling the dispute. However, it was willing to pay only the separation pay and the sales
commission according to the Submission Agreement dated 19 April 1993. 14
The factual findings of the voluntary arbitrator, as well as of the CA, are not clear on
what happened afterwards. Even the records are bereft of sufficient information.
On 18 November 2005, the NCMB voluntary arbitrator rendered a Decision finding
petitioner corporation liable for illegal dismissal. 15 The termination of respondent
Albarico, by reason of alleged poor performance, was found invalid. 16 The arbitrator
explained that the promotions, increases in salary, and awards received by respondent
belied the claim that the latter was performing poorly. 17 It was also found that Albarico
could not have abandoned his job, as the abandonment should have been clearly shown.
Mere absence was not sufficient, according to the arbitrator, but must have been
accompanied by overt acts pointing to the fact that the employee did not want to work
anymore. It was noted that, in the present case, the immediate filing of a complaint for
illegal dismissal against the employer, with a prayer for reinstatement, showed that the
employee was not abandoning his work. The voluntary arbitrator also found that Albarico
was dismissed from his work without due process.
However, it was found that reinstatement was no longer possible because of the strained
relationship of the parties. 18 Thus, in lieu of reinstatement, the voluntary arbitrator

ordered the corporation to pay separation pay for two years at P4,456 for each year, or a
total amount of P8,912.
Additionally, in view of the finding that Albarico had been illegally dismissed, the
voluntary arbitrator also ruled that the former was entitled to backwages in the amount of
P90,804. 19 Finally, the arbitrator awarded attorney's fees in respondent's favor, because
he had been compelled to file an action for illegal dismissal. 20
Petitioner corporation subsequently appealed to the CA, imputing to the voluntary
arbitrator grave abuse of discretion amounting to lack or excess of jurisdiction for
awarding backwages and attorney's fees to respondent Albarico based on the former's
finding of illegal dismissal. 21 The arbitrator contended that the issue of the legality of
dismissal was not explicitly included in the Submission Agreement dated 19 April 1993
filed for voluntary arbitration and resolution. It prayed that the said awards be set aside,
and that only separation pay of P8,912.00 and sales commission of P4,787.60 be
awarded.
The CA affirmed the Decision of the voluntary arbitrator, but eliminated the award of
attorney's fees for having been made without factual, legal or equitable justification. 22
Petitioner's Motion for Partial Reconsideration was denied as well. 23
Hence, this Petition.
ISSUE
The issue before the Court is whether the CA committed reversible error in finding that
the voluntary arbitrator properly assumed jurisdiction to decide the issue of the legality of
the dismissal of respondent as well as the latter's entitlement to backwages, even if
neither the legality nor the entitlement was expressedly claimed in the Submission
Agreement of the parties.
The Petition is denied for being devoid of merit.
DISCUSSION
Preliminarily, we address petitioner's claim that under Article 217 of the Labor
Code,original and exclusive jurisdiction over termination disputes, such as the present
case, is lodged only with the labor arbiter of the NLRC. 24
Petitioner overlooks the proviso in the said article, thus:
Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

a. Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
xxx xxx xxx
2. Termination disputes;
xxx xxx xxx
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement. (Emphases supplied)

Thus, although the general rule under the Labor Code gives the labor arbiter exclusive
and original jurisdiction over termination disputes, it also recognizes exceptions. One of
the exceptions is provided in Article 262 of the Labor Code.In San Jose v. NLRC, 25 we
said:
The phrase "Except as otherwise provided under this Code" refers to the
following exceptions:
A. Art. 217. Jurisdiction of Labor Arbiters. . . .
xxx xxx xxx
(c) Cases arising from the interpretation or implementation of collective
bargaining agreement and those arising from the interpretation or enforcement
of company procedure/policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitrator as may
be provided in said agreement.
B. Art. 262. Jurisdiction over other labor disputes. 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 practices and bargaining deadlocks. (Emphasis supplied)

We also said in the same case that "[t]he labor disputes referred to in the same Article
262 [of the Labor Code] can include all those disputes mentioned in Article 217 over
which the Labor Arbiter has original and exclusive jurisdiction." 26

From the above discussion, it is clear that voluntary arbitrators may, by agreement of the
parties, assume jurisdiction over a termination dispute such as the present case, contrary
to the assertion of petitioner that they may not.
We now resolve the main issue. Petitioner argues that, assuming that the voluntary
arbitrator has jurisdiction over the present termination dispute, the latter should have
limited his decision to the issue contained in the Submission Agreement of the parties
the issue of whether respondent Albarico was entitled to separation pay and to the sales
commission the latter earned before being terminated. 27 Petitioner asserts that under
Article 262 of the Labor Code,the jurisdiction of a voluntary arbitrator is strictly limited
to the issues that the parties agree to submit. Thus, it contends that the voluntary
arbitrator exceeded his jurisdiction when he resolved the issues of the legality of the
dismissal of respondent and the latter's entitlement to backwages on the basis of a finding
of illegal dismissal.
According to petitioner, the CA wrongly concluded that the issue of respondent's
entitlement to separation pay was necessarily based on his allegation of illegal dismissal,
thereby making the issue of the legality of his dismissal implicitly submitted to the
voluntary arbitrator for resolution. 28 Petitioner argues that this was an erroneous
conclusion, because separation pay may in fact be awarded even in circumstances in
which there is no illegal dismissal.
We rule that although petitioner correctly contends that separation pay may in fact be
awarded for reasons other than illegal dismissal, the circumstances of the instant case
lead to no other conclusion than that the claim of respondent Albarico for separation pay
was premised on his allegation of illegal dismissal. Thus, the voluntary arbitrator
properly assumed jurisdiction over the issue of the legality of his dismissal.
True, under the Labor Code, separation pay may be given not only when there is illegal
dismissal. In fact, it is also given to employees who are terminated for authorized causes,
such as redundancy, retrenchment or installation of labor-saving devices under Article
283 29 of the Labor Code.Additionally, jurisprudence holds that separation pay may also
be awarded for considerations of social justice, even if an employee has been terminated
for a just cause other than serious misconduct or an act reflecting on moral character. 30
The Court has also ruled that separation pay may be awarded if it has become an
established practice of the company to pay the said benefit to voluntarily resigning
employees 31 or to those validly dismissed for non-membership in a union as required in
a closed-shop agreement. 32
The above circumstances, however, do not obtain in the present case. There is no claim
that the issue of entitlement to separation pay is being resolved in the context of any
authorized cause of termination undertaken by petitioner corporation. Neither is there any
allegation that a consideration of social justice is being resolved here. In fact, even in

instances in which separation pay is awarded in consideration of social justice, the issue
of the validity of the dismissal still needs to be resolved first. Only when there is already
a finding of a valid dismissal for a just cause does the court then award separation pay for
reason of social justice. The other circumstances when separation pay may be awarded
are not present in this case.
The foregoing findings indisputably prove that the issue of separation pay emanates
solely from respondent's allegation of illegal dismissal. In fact, petitioner itself
acknowledged the issue of illegal dismissal in its position paper submitted to the NCMB.
Moreover, we note that even the NLRC was of the understanding that the NCMB
arbitration case sought to resolve the issue of the legality of the dismissal of the
respondent. In fact, the identity of the issue of the legality of his dismissal, which was
previously submitted to the NCMB, and later submitted to the NLRC, was the basis of
the latter's finding of forum shopping and the consequent dismissal of the case before it.
In fact, petitioner also implicitly acknowledged this when it filed before the NLRC its
Motion to Dismiss respondent's Complaint on the ground of forum shopping. Thus, it is
now estopped from claiming that the issue before the NCMB does not include the issue
of the legality of the dismissal of respondent. Besides, there has to be a reason for
deciding the issue of respondent's entitlement to separation pay. To think otherwise
would lead to absurdity, because the voluntary arbitrator would then be deciding that
issue in a vacuum. The arbitrator would have no basis whatsoever for saying that
Albarico was entitled to separation pay or not if the issue of the legality of respondent's
dismissal was not resolve first.
Hence, the voluntary arbitrator correctly assumed that the core issue behind the issue of
separation pay is the legality of the dismissal of respondent. Moreover, we have ruled in
Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin 33 that a voluntary
arbitrator has plenary jurisdiction and authority to interpret an agreement to arbitrate and
to determine the scope of his own authority when the said agreement is vague subject
only, in a proper case, to the certiorari jurisdiction of this Court.
Having established that the issue of the legality of dismissal of Albarico was in fact
necessarily albeit not explicitly included in the Submission Agreement signed by
the parties, this Court rules that the voluntary arbitrator rightly assumed jurisdiction to
decide the said issue.
Consequently, we also rule that the voluntary arbitrator may award backwages upon a
finding of illegal dismissal, even though the issue of entitlement thereto is not explicitly
claimed in the Submission Agreement. Backwages, in general, are awarded on the ground
of equity as a form of relief that restores the income lost by the terminated employee by
reason of his illegal dismissal. 34

In Sime Darby we ruled that although the specific issue presented by the parties to the
voluntary arbitrator was only "the issue of performance bonus," the latter had the
authority to determine not only the issue of whether or not a performance bonus was to be
granted, but also the related question of the amount of the bonus, were it to be granted.
We explained that there was no indication at all that the parties to the arbitration
agreement had regarded "the issue of performance bonus" as a two-tiered issue, of which
only one aspect was being submitted to arbitration. Thus, we held that the failure of the
parties to limit the issues specifically to that which was stated allowed the arbitrator to
assume jurisdiction over the related issue.
Similarly, in the present case, there is no indication that the issue of illegal dismissal
should be treated as a two-tiered issue whereupon entitlement to backwages must be
determined separately. Besides, "since arbitration is a final resort for the adjudication of
disputes," the voluntary arbitrator in the present case can assume that he has the
necessary power to make a final settlement. 35 Thus, we rule that the voluntary arbitrator
correctly assumed jurisdiction over the issue of entitlement of respondent Albarico to
backwages on the basis of the former's finding of illegal dismissal.
WHEREFORE, premises considered, the instant Petition is DENIED. The 18
September 2007 Decision and 17 March 2008 Resolution of the Court of Appeals in CAG.R. SP No. 92526, are hereby AFFIRMED.
SO ORDERED.
Leonardo-de Castro, Bersamin, Villarama, Jr. and Reyes, JJ., concur.

|||

(7K Corp. v. Albarico, G.R. No. 182295, [June 26, 2013])

SECOND DIVISION
[G.R. No. 163768. March 27, 2007.]
JULIUS KAWACHI and GAYLE KAWACHI, petitioners, vs.
DOMINIE DEL QUERO and HON. JUDGE MANUEL R. TARO,
Metropolitan Trial Court, Branch 43, Quezon City, respondents.

DECISION

TINGA, J :
p

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure,
assailing two resolutions of the Regional Trial Court (RTC), Branch 226, Quezon City
which affirmed the jurisdiction of the Metropolitan Trial Court (MeTC), Branch 42,
Quezon City over private respondent's action for damages against petitioner.
The following factual antecedents are matters of record.
In an Affidavit-Complaint dated 14 August 2002, private respondent Dominie Del Quero
charged A/J Raymundo Pawnshop, Inc., Virgilio Kawachi and petitioner Julius Kawachi
with illegal dismissal, non-execution of a contract of employment, violation of the
minimum wage law, and non-payment of overtime pay. The complaint was filed before
the National Labor Relations Commission (NLRC). 1
The complaint essentially alleged that Virgilio Kawachi hired private respondent as a
clerk of the pawnshop and that on certain occasions, she worked beyond the regular
working hours but was not paid the corresponding overtime pay.
The complaint also narrated an incident on 10 August 2002, wherein petitioner Julius
Kawachi scolded private respondent in front of many people about the way she treated
the customers of the pawnshop and afterwards terminated private respondent's
employment without affording her due process.
On 7 November 2002, private respondent Dominie Del Quero filed an action for damages
against petitioners Julius Kawachi and Gayle Kawachi before the MeTC of Quezon City.
2 The complaint, which was docketed as Civil Case No. 29522, alleged the following:
2. That the Plaintiff was employed as a clerk in the pawnshop business office of
the Defendants otherwise known as the A/J RAYMUNDO PAWNSHOP, INC.

located (sic) and with principal office address at Unit A Virka Bldg. Edsa
Corner Roosevelt[,] Quezon City, from May 27, 2002 to August 10, 2002;
3. That on August 10, 2002 at or about 11:30 AM, the Plaintiff was admonished
by the Defendants Julius Kawachi and Gayle Kawachi who are acting as
manager and assistant manager respectively of the pawnshop business and
alternately accused her of having committed an act which she had not done and
was scolded in a loud voice in front of many employees and customers in their
offices;
4. That further for no apparent reason the Plaintiff was ordered to get out and
leave the pawnshop office and was told to wait for her salary outside the office
when she tried to explain that she had no fault in the complaint of the customer,
(sic) [H]owever[,] her explanation fell on deaf ears;
5. That she was instantly dismissed from her job without due process;
6. That the incident happened in front of many people which caused the Plaintiff
to suffer serious embarrassment and shame so that she could not do anything but
cry because of the shameless way by which she was terminated from the
service; . . . 3

The complaint for damages specifically sought the recovery of moral damages,
exemplary damages and attorney's fees.
DSETcC

Petitioners moved for the dismissal of the complaint on the grounds of lack of jurisdiction
and forum-shopping or splitting causes of action. At first, the MeTC granted petitioners'
motion and ordered the dismissal of the complaint for lack of jurisdiction in an Order
dated 2 January 2003. 4 Upon private respondent's motion, the MeTC reconsidered and
set aside the order of dismissal in an Order dated 3 March 2003. 5 It ruled that no causal
connection appeared between private respondent's cause of action and the employeremployee relations between the parties. The MeTC also rejected petitioners' motion for
reconsideration in an Order dated 22 April 2003. 6
Thus, petitioners elevated the MeTC's aforesaid two orders to the RTC, Branch 226 of
Quezon City, via a Petition for Certiorari (With Prayer for Temporary Restraining Order
and/or Preliminary Injunction). After due hearing, the RTC declined petitioners' prayer
for a temporary restraining order. For her part, private respondent filed a Motion to
Dismiss Petition.
On 20 October 2003, the RTC issued the assailed Resolution, upholding the jurisdiction
of the MeTC over private respondent's complaint for damages. 7
The RTC held that private respondent's action for damages was based on the alleged
tortious acts committed by her employers and did not seek any relief under the Labor

Code. The RTC cited the pronouncement in Medina, et al. v. Hon. Castro-Bartolome,
etc., et al. 8 where the Court held that the employee's action for damages based on the
slanderous remarks uttered by the employer was within the regular courts' jurisdiction
since the complaint did not allege any unfair labor practice on the part of the employer.
On 29 March 2004, the RTC denied petitioners' motion for reconsideration. 9 Hence, the
instant petition for review on certiorari, raising the sole issue of jurisdiction over private
respondent's complaint for damages.
aHcDEC

Petitioners argue that the NLRC has jurisdiction over the action for damages because the
alleged injury is work-related. They also contend that private respondent should not be
allowed to split her causes of action by filing the action for damages separately from the
labor case.
Private respondent maintains that there is no causal connection between her cause of
action and the employer-employee relations of the parties.
The petition is meritorious.
The jurisdictional controversy of the sort presented in this case has long been settled by
this Court.
Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter
original and exclusive jurisdiction over claims for damages arising from employeremployee relations in other words, the Labor Arbiter has jurisdiction to award not
only the reliefs provided by labor laws, but also damages governed by the Civil Code. 10
In the 1999 case of San Miguel Corporation v. Etcuban, 11 the Court noted what was then
the current trend, and still is, to refer worker-employer controversies to labor courts,
unless unmistakably provided by the law to be otherwise. Because of the trend, the Court
noted further, jurisprudence has developed the "reasonable causal connection rule."
Under this rule, if there is a reasonable causal connection between the claim asserted and
the employer-employee relations, then the case is within the jurisdiction of our labor
courts. In the absence of such nexus, it is the regular courts that have jurisdiction. 12
In San Miguel Corporation, 13 the Court upheld the labor arbiter's jurisdiction over the
employees' separate action for damages, which also sought the nullification of the socalled "contract of termination" and noted that the allegations in the complaint were so
carefully formulated as to avoid a semblance of employer-employee relations.
ECaSIT

In said case, the employees of San Miguel Corporation (SMC) availed of the
"Retrenchment to Prevent Loss Program." After their inclusion in the retrenchment
program, the employees were given their termination letters and separation pay. In return,

the employees executed "receipt and release" documents in favor of the company.
Subsequently, the employees learned that the company was never in financial distress and
was engaged in hiring new employees. Thus, they filed a complaint before the NLRC for
the declaration of nullity of the retrenchment program and prayed for reinstatement,
backwages and damages. After the labor arbiter dismissed the complaint, the employees
filed an action for damages before the RTC, alleging the deception employed upon them
by SMC which led to their separation from the company. They sought the declaration of
nullity of their so-called collective "contract of termination" and the recovery of actual
and compensatory damages, moral damages, exemplary damages, and attorney's fees.
The Court held that the employees' claim for damages was intertwined with their having
been separated from their employment without just cause and, consequently, had a
reasonable causal connection with their employer-employee relations with petitioner. The
Court explained in this manner:
. . . First, their claim for damages is grounded on their having been deceived
into serving their employment due to SMC's concocted financial distress and
fraudulent retrenchment program a clear case of illegal dismissal. Second, a
comparison of respondents' complaint for the declaration of nullity of the
retrenchment program before the labor arbiter and the complaint for the
declaration of nullity of their "contract of termination" before the RTC reveals
that the allegations and prayer of the former are almost identical with those of
the latter except that the prayer for reinstatement was no longer included and the
claim for backwages and other benefits was replaced with a claim for actual
damages. These are telltale signs that respondents' claim for damages is
intertwined with their having been separated from their employment without
just cause and, consequently, has a reasonable causal connection with their
employer-employee relations with SMC. Accordingly, it cannot be denied that
respondents' claim falls under the jurisdiction of the labor arbiter as provided in
paragraph 4 of Article 217. 14

The "reasonable causal connection rule" emerged in the 1987 case of Primero v.
Intermediate Appellate Court, 15 where the Court recognized the jurisdiction of the labor
arbiters over claims for damages in connection with termination of employment, thus:
It is clear that the question of the legality of the act of dismissal is intimately
related to the issue of the legality of the manner by which that act of dismissal
was performed. But while the Labor Code treats of the nature of, and the
remedy available as regards the first the employee's separation from
employment it does not at all deal with the second the manner of that
separation which is governed exclusively by the Civil Code. In addressing
the first issue, the Labor Arbiter applies the Labor Code; in addressing the
second, the Civil Code. And this appears to be the plain and patent intendment
of the law. For apart from the reliefs expressly set out in the Labor Code
flowing from illegal dismissal from employment, no other damages may be

awarded to an illegally dismissed employee other than those specified by the


Civil Code. Hence, the fact that the issue of whether or not moral or other
damages were suffered by an employee and in the affirmative, the amount that
should properly be awarded to him in the circumstances is determined under
the provisions of the Civil Code and not the Labor Code, obviously was not
meant to create a cause of action independent of that for illegal dismissal and
thus place the matter beyond the Labor Arbiter's jurisdiction. 16

In the instant case, the allegations in private respondent's complaint for damages show
that her injury was the offshoot of petitioners' immediate harsh reaction as her
administrative superiors to the supposedly sloppy manner by which she had discharged
her duties. Petitioners' reaction culminated in private respondent's dismissal from work in
the very same incident. The incident on 10 August 2002 alleged in the complaint for
damages was similarly narrated in private respondent's Affidavit-Complaint supporting
her action for illegal dismissal before the NLRC. Clearly, the alleged injury is directly
related to the employer-employee relations of the parties.
Where the employer-employee relationship is merely incidental and the cause of action
proceeds from a different source of obligation, the Court has not hesitated to uphold the
jurisdiction of the regular courts. Where the damages claimed for were based on tort,
malicious prosecution, or breach of contract, as when the claimant seeks to recover a debt
from a former employee or seeks liquidated damages in the enforcement of a prior
employment contract, 17 the jurisdiction of regular courts was upheld. The scenario that
obtains in this case is obviously different. The allegations in private respondent's
complaint unmistakably relate to the manner of her alleged illegal dismissal.
For a single cause of action, the dismissed employee cannot be allowed to sue in two
forums: one, before the labor arbiter for reinstatement and recovery of back wages or for
separation pay, upon the theory that the dismissal was illegal; and two, before a court of
justice for recovery of moral and other damages, upon the theory that the manner of
dismissal was unduly injurious or tortious. Suing in the manner described is known as
"splitting a cause of action," a practice engendering multiplicity of actions. It is
considered procedurally unsound and obnoxious to the orderly administration of justice.
18
In the instant case, the NLRC has jurisdiction over private respondent's complaint for
illegal dismissal and damages arising therefrom. She cannot be allowed to file a separate
or independent civil action for damages where the alleged injury has a reasonable
connection to her termination from employment. Consequently, the action for damages
filed before the MeTC must be dismissed.

WHEREFORE, the petition for review on certiorari is GRANTED. The two Resolutions
dated 20 October 2003 and 29 March 2004 of the Regional Trial Court, Branch 226,
Quezon City are REVERSED and SET ASIDE. Costs against private respondent.
SO ORDERED.
Quisumbing, Carpio, Carpio-Morales and Velasco, Jr., JJ., concur.
|||

(Kawachi v. del Quero, G.R. No. 163768, [March 27, 2007], 548 PHIL 42-51)

THIRD DIVISION
[G.R. No. 200476 : April 18, 2012]
GILDA G. LUNZAGA v. ALBAR SHIPPING AND TRADING CORP. AND/OR AKIRA
KATO, AND DARWIN, VENUS, ROMEO ULYSSES, MARIKIT ODESSA, ALL
SURNAMED LUNZAGA
Sirs/Mesdames:
Please take notice that the Court, Third Division, issued a Resolution dated 18 April 2012, which
reads as follows:cralaw
G.R. No. 200476 (Gilda G. Lunzaga v. Albar Shipping and Trading Corp. and/or Akira Kato,
and Darwin, Venus, Romeo Ulysses, Marikit Odessa, all surnamed Lunzaga)
RESOLUTION
Before the Court is a Petition for Review on Certiorari under Rule 45, assailing the July 21, 2011
Decision[1] and February 2, 2012 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP
No. 116476. The CA Decision upheld the Decision dated April 30, 2010[3] of the National
Labor Relations Commission (NLRC), which dismissed the appeal of petitioner for having been
filed out of time. The CA Decision, in effect, affirmed the Order dated August 28, 2009[4] of
the Labor Arbiter, which ruled that jurisdiction over the instant controversy is with the regular
courts and not with the NLRC, the dispositive portion of which reads:
WHEREFORE PREMISES CONSIDERED the parties are directed to ventilate their conflict
before the regular court to determine who the rightful heirs to receive the disability benefits.
For the meantime instant case is temporarily dismissed.
SO ORDERED.
The facts of the case are as follows:
Romeo Lunzaga (Romeo) was a seaman working for respondent Albar Shipping and Trading
Corp. (Albar). On June 11, 2008, Romeo was assigned as Chief Engineer on board Albar's
Philippine vessel MV Lake Aru by virtue of a Philippine Overseas Employment Administrationapproved employment contract. One month later, Romeo suffered a heart attack and was
repatriated to the Philippines only to die on September 5, 2008.
Sometime in early 2009, Gilda G. Lunzaga (Gilda), claiming to be the surviving spouse of
Romeo, filed with the NLRC a complaint against Albar for payment of death benefits, damages
and attorney's fees. It should be noted that Gilda was the designated heir in Romeo's Overseas
Filipino Worker Verification Sheet and PhilHealth Information Sheet. Darwin Lunzaga, Venus
Lunzaga, Romeo Ulysses Lunzaga, and Marikit Odessa Lunzaga (Lunzaga siblings), the children

of Romeo from his first marriage that was judicially declared null and void, opposed the
complaint through a complaint-in-intervention. The Lunzaga siblings claimed that Gilda is not
entitled to the death benefits of Romeo, as she had a subsisting marriage when she married him.
They claim that her marriage with Romeo was, therefore, bigamous. During the mandatory
conferences of the parties before the Labor Arbiter, Albar signified its willingness to pay
Romeo's death benefits in the amount of USD 55,547.44. However, Gilda and the Lunzaga
siblings could not agree as to the sharing of the benefits.
Thus, on August 28, 2009, the Labor Arbiter issued an Order temporarily dismissing the
complaint and directing the parties to file their case with the regular courts. Gilda received a
copy of the August 28, 2009 Order of the Labor Arbiter on September 28, 2009. Gilda's appeal
to the NLRC was, however, filed only on October 9, 2009, one day past the 10-day period for
filing an appeal from the decision of the Labor Arbiter. Thus, the NLRC rendered a Decision
dated April 30, 2010, dismissing the appeal for having been filed beyond the reglementary
period.
On appeal, the CA rendered the July 21, 2011 Decision, ruling that the petition is devoid of
merit. The CA ruled that despite the fact that the appeal to the NLRC was filed only one day
beyond the reglementary period, Gilda failed to present any reason for the liberal application of
the rule on filing of appeals. The CA wrote, "Indeed, the matter of the parties' entitlement is
inherently intertwined with their status as legal heirs of Romeo Lunzaga. Clearly, this is a matter
not within the competence of the Labor Arbiter to decide."[5]
Gilda's motion for reconsideration of the Decision of the CA was denied in its February 2, 2012
Resolution. Hence, We have this petition.
We agree with the pronouncement of the Labor Arbiter and the CA that the issue of who is the
proper beneficiary of Romeo is properly within the jurisdiction of the regular courts. However,
this is not the only issue in the instant petition.
A review of the records of the case reveals that the main issue in the complaint before the Labor
Arbiter was whether the heirs of Romeo are entitled to receive his death benefits from Albar.
Clearly, the Labor Arbiter has jurisdiction over this issue and the case itself, involving as it does
a claim arising from an employer-employee relationship. And while the Labor Arbiter has no
jurisdiction to determine who among the alleged heirs is entitled to receive Romeo's death
benefits, it should have made a ruling holding Albar liable for the claim.
In this light, substantial justice and fair play dictate that the Court reconsider the August 28, 2009
Order of the Labor Arbiter, the April 30, 2010 Decision of the NLRC, and the July 21, 2011
Decision and February 2, 2012 Resolution of the CA.
With regard to the dismissal of the appeal by the NLRC on the ground that it was filed one (1)
day past the reglementary period, We rule that the ends of justice would be best served with the
admission of the appeal for the complete ventilation of the issues in the case. Considering that
Albar admitted its liability to the heirs of Romeo for his death benefits, the NLRC should have

given due course to the meritorious appeal. Thus, this Court ruled in Chronicle Securities
Corporation v. National Labor Relations Commission:[6]
In not a few instances, we relaxed the rigid application of the rules of procedure to afford the
parties the opportunity to fully ventilate their cases on the merits. This is in line with the time
honored principle that cases should be decided only after giving all parties the chance to argue
their causes and defenses. Technicality and procedural imperfections should thus not serve as
bases of decisions. In that way, the ends of justice would be better served. For indeed, the
general objective of procedure is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedure is not to hinder but to promote the
administration of justice.
In Philippine National Bank, et al. v. Court of Appeals, we allowed, in the higher interest of
justice, an appeal filed three days late.
In Republic v. Court of Appeals, we ordered the Court of Appeals to entertain an appeal filed six
days after the expiration of the [reglementary] period; while in Siguenza v. Court of Appeals, we
accepted an appeal filed thirteen days late. Likewise, in Olacao v. NLRC, we affirmed the
respondent Commission's order giving due course to a tardy appeal "to forestall the grant of
separation pay twice" since the issue of separation pay had been judicially settled with finality in
another case. All of the aforequoted rulings were reiterated in our 2001 decision in the case of
Equitable PCI Bank v. Ku.
Notably, in Philippine National Bank v. Court of Appeals,[7] the Court cited the following cases,
applicable to the instant controversy:
It has been said this time and again that the perfection of an appeal within the period fixed by the
rules is mandatory and jurisdictional. But, it is always in the power of this Court to suspend its
own rules, or to except a particular case from its operation, whenever the purposes of justice
require it. Strong compelling reasons such as serving the ends of justice and preventing a grave
miscarriage thereof warrant the suspension of the rules.
xxxx
In Siguenza vs. Court of Appeals, the appeal which was perfected thirteen days late was
permitted, "since on its face the appeal appeared to be impressed with merit." x x x
xxxx
In Cortes vs. Court of Appeals, the counsel of record of a party failed to withdraw his appearance
as such when he was appointed as Judge of the RTC of Dumaguete City. Thus, the copy of the
adverse decision was still served at his address of record in Cebu City on 28 February 1983. He
was at the time in Dumaguete City and learned of the decision only on 8 March 1983 when he
came home to Cebu City. He right away informed his client through a telegram, which reached
the latter's office in Zamboanga City at a time when he was out on official business and which
came to his knowledge only a few days later. It was only on 22 March 1983 that a notice of

appeal was filed by his new lawyer. This Court held that the seven-day delay is excusable, and
that the appeal, being ostensibly meritorious, deserves to be given due course. (Emphasis
supplied.)
Evidently, the NLRC and the CA erred in not giving due course to the appeal due to a one (l)-day
delay of its filing, considering the apparent merit of the appeal as shown by the admission of
Albar.
Verily, Albar is liable to the heirs of Romeo for the amount of USD 55,547.44. Albar hereby is
ordered to deposit this amount in an escrow account under the control of the NLRC in order to
protect the interests of Romeo's heirs. The parties claiming to be the beneficiaries of Romeo are
directed to file the appropriate action with a trial court to determine the true and legal heirs of
Romeo entitled to receive the disability benefits. The amount in the escrow account will only be
released to the legal heirs per the decision of a trial court.cralaw
WHEREFORE, the instant petition is GRANTED. The July 21, 2011 Decision and February 2,
2012 Resolution of the CA in CA-G.R. SP No. 116476, the Decision dated April 30, 2010 of the
NLRC, and the Order dated August 28, 2009 of the Labor Arbiter dismissing the complaint of
petitioner Gilda G. Lunzaga are hereby REVERSED and SET ASIDE.
Further, respondent Albar Shipping and Trading Corp. is hereby ORDERED to pay the heirs of
Romeo Lunzaga the amount of USD 55,547.44 and to deposit in escrow the said amount with the
NLRC in a bank account in trust for the heirs of Romeo Lunzaga. The said amount shall only be
released to the legal beneficiaries of Romeo adjudged as such by a trial court in the appropriate
action to determine his legal heirs.
SO ORDERED.

THIRD DIVISION
[G.R. Nos. 178382-83. September 23, 2015.]
CONTINENTAL MICRONESIA, INC., petitioner, vs. JOSEPH
BASSO, respondent.

DECISION

JARDELEZA, J :
p

This is a Petition for Review on Certiorari 1 under Rule 45 of the Revised


Rules of Court assailing the Decision 2 dated May 23, 2006 and Resolution 3 dated
June 19, 2007 of the Court of Appeals in the consolidated cases CA-G.R. SP No.
83938 and CA-G.R. SP No. 84281. These assailed Decision and Resolution set aside
the Decision 4 dated November 28, 2003 of the National Labor Relations Commission
(NLRC) declaring Joseph Basso's (Basso) dismissal illegal, and ordering the payment
of separation pay as alternative to reinstatement and full backwages until the date of
the Decision.
HTcADC

The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation
organized and existing under the laws of and domiciled in the United States of
America (US). It is licensed to do business in the Philippines. 5 Basso, a US citizen,
resided in the Philippines prior to his death. 6
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden),
Managing Director-Asia of Continental Airlines, Inc. (Continental), offered Basso the
position of General Manager of the Philippine Branch of Continental. Basso accepted
the offer. 7
It was not until much later that Mr. Braden, who had since returned to the US,
sent Basso the employment contract 8 dated February 1, 1991, which Mr. Braden had
already signed. Basso then signed the employment contract and returned it to Mr.
Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of
Continental, with Basso retaining his position as General Manager. 9
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr.
Schulz), who was then CMI's Vice President of Marketing and Sales, informing Basso
that he has agreed to work in CMI as a consultant on an "as needed basis" effective
February 1, 1996 to July 31, 1996. The letter also informed Basso that: (1) he will not

receive any monetary compensation but will continue being covered by the insurance
provided by CMI; (2) he will enjoy travel privileges; and (3) CMI will advance
Php1,140,000.00 for the payment of housing lease for 12 months. 10
On January 11, 1996, Basso wrote a counter-proposal 11 to Mr. Schulz
regarding his employment status in CMI. On March 14, 1996, Basso wrote another
letter addressed to Ms. Marty Woodward (Ms. Woodward) of CMI's Human
Resources Department inquiring about the status of his employment. 12 On the same
day, Ms. Woodward responded that pursuant to the employment contract dated
February 1, 1991, Basso could be terminated at will upon a thirty-day notice. This
notice was allegedly the letter Basso received from Mr. Schulz on December 20,
1995. Ms. Woodward also reminded Basso of the telephone conversation between
him, Mr. Schulz and Ms. Woodward on December 19, 1995, where they informed
him of the company's decision to relieve him as General Manager. Basso, instead, was
offered the position of consultant to CMI. Ms. Woodward also informed Basso that
CMI rejected his counter-proposal and, thus, terminated his employment effective
January 31, 1996. CMI offered Basso a severance pay, in consideration of the
Php1,140,000.00 housing advance that CMI promised him. 13
Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary
Damages against CMI on December 19, 1996. 14 Alleging the presence of foreign
elements, CMI filed a Motion to Dismiss 15 dated February 10, 1997 on the ground of
lack of jurisdiction over the person of CMI and the subject matter of the controversy.
In an Order 16 dated August 27, 1997, the Labor Arbiter granted the Motion to
Dismiss. Applying the doctrine of lex loci contractus, the Labor Arbiter held that the
terms and provisions of the employment contract show that the parties did not intend
to apply our Labor Code (Presidential Decree No. 442). The Labor Arbiter also held
that no employer-employee relationship existed between Basso and the branch office
of CMI in the Philippines, but between Basso and the foreign corporation itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the
determination of certain facts to settle the issue on jurisdiction. NLRC ruled that the
issue on whether the principle of lex loci contractus or lex loci celebrationis should
apply has to be further threshed out. 17
Labor Arbiter's Ruling
Labor Arbiter Madjayran H. Ajan in his Decision
dismissed the case for lack of merit and jurisdiction.

18

dated September 24, 1999

The Labor Arbiter agreed with CMI that the employment contract was
executed in the US "since the letter-offer was under the Texas letterhead and the
acceptance of Complainant was returned there." 19 Thus, applying the doctrine of lex
loci celebrationis, US laws apply. Also, applying lex loci contractus, the Labor
Arbiter ruled that the parties did not intend to apply Philippine laws, thus:

Although the contract does not state what law shall apply, it is obvious
that Philippine laws were not written into it. More specifically, the Philippine
law on taxes and the Labor Code were not intended by the parties to apply,
otherwise Par. 7 on the payment by Complainant U.S. Federal and Home State
income taxes, and Pars. 22/23 on termination by 30-day prior notice, will not
be there. The contract was prepared in contemplation of Texas or U.S. laws
where Par. 7 is required and Pars. 22/23 is allowed. 20

The Labor Arbiter also ruled that Basso was terminated for a valid cause based
on the allegations of CMI that Basso committed a series of acts that constitute breach
of trust and loss of confidence. 21
The Labor Arbiter, however, found CMI to have voluntarily submitted to his
office's jurisdiction. CMI participated in the proceedings, submitted evidence on the
merits of the case, and sought affirmative relief through a motion to dismiss. 22
NLRC's Ruling
On appeal, the NLRC Third Division promulgated its Decision
November 28, 2003, the decretal portion of which reads:

23

dated

WHEREFORE, the decision dated 24 September 1999 is VACATED


and SET ASIDE. Respondent CMI is ordered to pay complainant the amount
of US$5,416.00 for failure to comply with the due notice requirement. The
other claims are dismissed.
SO ORDERED. 24

The NLRC did not agree with the pronouncement of the Labor Arbiter that his
office has no jurisdiction over the controversy. It ruled that the Labor Arbiter acquired
jurisdiction over the case when CMI voluntarily submitted to his office's jurisdiction
by presenting evidence, advancing arguments in support of the legality of its acts, and
praying for reliefs on the merits of the case. 25
On the merits, the NLRC agreed with the Labor Arbiter that Basso was
dismissed for just and valid causes on the ground of breach of trust and loss of
confidence. The NLRC ruled that under the applicable rules on loss of trust and
confidence of a managerial employee, such as Basso, mere existence of a basis for
believing that such employee has breached the trust of his employer suffices.
However, the NLRC found that CMI denied Basso the required due process notice in
his dismissal. 26
Both CMI and Basso filed their respective Motions for Reconsideration dated
January 15, 2004 27 and January 8, 2004. 28 Both motions were dismissed in separate
Resolutions dated March 15, 2004 29 and February 27, 2004, 30 respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of
Appeals docketed as CA-G.R. SP No. 83938. 31 Basso imputed grave abuse of
discretion on the part of the NLRC in ruling that he was validly dismissed. CMI filed
its own Petition for Certiorari dated May 13, 2004 docketed as CA-G.R. SP No.

84281, 32 alleging that the NLRC gravely abused its discretion when it assumed
jurisdiction over the person of CMI and the subject matter of the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the
two cases 33 and ordered the parties to file their respective Memoranda.
The Court of Appeal's Decision
The Court of Appeals promulgated the now assailed Decision 34 dated May 23,
2006, the relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP
No. 84281 is DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No.
83938 is GIVEN DUE COURSE and GRANTED, and accordingly, the
assailed Decision dated November 28, 2003 and Resolution dated February
27, 2004 of the NLRC are SET ASIDE and VACATED. Instead judgment is
rendered hereby declaring the dismissal of Basso illegal and ordering
Continental to pay him separation pay equivalent to one (1) month pay for
every year of service as an alternative to reinstatement. Further, ordering
Continental to pay Basso his full backwages from the date of his said illegal
dismissal until date of this decision. The claim for moral and exemplary
damages as well as attorney's fees are dismissed. 35

The Court of Appeals ruled that the Labor Arbiter and the NLRC had
jurisdiction over the subject matter of the case and over the parties. The Court of
Appeals explained that jurisdiction over the subject matter of the action is determined
by the allegations of the complaint and the law. Since the case filed by Basso is a
termination dispute that is "undoubtedly cognizable by the labor tribunals", the Labor
Arbiter and the NLRC had jurisdiction to rule on the merits of the case. On the issue
of jurisdiction over the person of the parties, who are foreigners, the Court of Appeals
ruled that jurisdiction over the person of Basso was acquired when he filed the
complaint for illegal dismissal, while jurisdiction over the person of CMI was
acquired through coercive process of service of summons to its agent in the
Philippines. The Court of Appeals also agreed that the active participation of CMI in
the case rendered moot the issue on jurisdiction.
aScITE

On the merits of the case, the Court of Appeals declared that CMI illegally
dismissed Basso. The Court of Appeals found that CMI's allegations of loss of trust
and confidence were not established. CMI "failed to prove its claim of the incidents
which were its alleged bases for loss of trust or confidence." 36 While managerial
employees can be dismissed for loss of trust and confidence, there must be a basis for
such loss, beyond mere whim or caprice.
After the parties filed their Motions for Reconsideration, 37 the Court of
Appeals promulgated Resolution 38 dated June 19, 2007 denying CMI's motion, while
partially granting Basso's as to the computation of backwages.

Hence, this petition, which raises the following issues:


I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REVIEWING THE FACTUAL FINDINGS OF THE NLRC INSTEAD OF
LIMITING ITS INQUIRY INTO WHETHER OR NOT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING
THAT THE LABOR ARBITER AND THE NLRC HAD JURISDICTION
TO HEAR AND TRY THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING
THAT BASSO WAS NOT VALIDLY DISMISSED ON THE GROUND OF
LOSS OF TRUST OR CONFIDENCE.

We begin with the second issue on the jurisdiction of the Labor Arbiter and the
NLRC in the illegal dismissal case. The first and third issues will be discussed jointly.
The labor tribunals had jurisdiction
over the parties and the subject
matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to
determine proper jurisdiction over the parties and the subject matter of the case. It
also alleges that the existence of foreign elements calls for the application of US laws
and the doctrines of lex loci celebrationis (the law of the place of the ceremony), lex
loci contractus (law of the place where a contract is executed), and lex loci intentionis
(the intention of the parties as to the law that should govern their agreement). CMI
also invokes the application of the rule of forum non conveniens to determine the
propriety of the assumption of jurisdiction by the labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be
resolved first. Where the facts establish the existence of foreign elements, the case
presents a conflict-of-laws issue. 39 The foreign element in a case may appear in
different forms, such as in this case, where one of the parties is an alien and the other
is domiciled in another state.
In Hasegawa v. Kitamura, 40 we stated that in the judicial resolution of
conflict-of-laws problems, three consecutive phases are involved: jurisdiction, choice
of law, and recognition and enforcement of judgments. In resolving the conflicts
problem, courts should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the
parties to this case?

2. "If the answer is yes, is this a convenient forum to the parties, in light of the
facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly
pleaded and proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one
of the basic exceptions to the application of foreign law? In short, is there any
strong policy or vital interest of the forum that is at stake in this case and
which should preclude the application of foreign law? 41

Jurisdiction is defined as the power and authority of the courts to hear, try and
decide cases. Jurisdiction over the subject matter is conferred by the Constitution or
by law and by the material allegations in the complaint, regardless of whether or not
the plaintiff is entitled to recover all or some of the claims or reliefs sought therein. 42
It cannot be acquired through a waiver or enlarged by the omission of the parties or
conferred by the acquiescence of the court. 43 That the employment contract of Basso
was replete with references to US laws, and that it originated from and was returned
to the US, do not automatically preclude our labor tribunals from exercising
jurisdiction to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code, under
Article 217, clearly vests original and exclusive jurisdiction to hear and decide cases
involving termination disputes to the Labor Arbiter. Hence, the Labor Arbiter and the
NLRC have jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals
that the Labor Arbiter acquired jurisdiction over the person of Basso, notwithstanding
his citizenship, when he filed his complaint against CMI. On the other hand,
jurisdiction over the person of CMI was acquired through the coercive process of
service of summons. We note that CMI never denied that it was served with
summons. CMI has, in fact, voluntarily appeared and participated in the proceedings
before the courts. Though a foreign corporation, CMI is licensed to do business in the
Philippines and has a local business address here. The purpose of the law in requiring
that foreign corporations doing business in the country be licensed to do so, is to
subject the foreign corporations to the jurisdiction of our courts. 44
Considering that the Labor Arbiter and the NLRC have jurisdiction over the
parties and the subject matter of this case, these tribunals may proceed to try the case
even if the rules of conflict-of-laws or the convenience of the parties point to a foreign
forum, this being an exercise of sovereign prerogative of the country where the case is
filed. 45
The next question is whether the local forum is the convenient forum in light of
the facts of the case. CMI contends that a Philippine court is an inconvenient forum.
We disagree.

Under the doctrine of forum non conveniens, a Philippine court in a conflict-oflaws case may assume jurisdiction if it chooses to do so, provided, that the following
requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the Philippine Court has or
is likely to have power to enforce its decision. 46 All these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI had
physical presence in the Philippines during the duration of the trial. CMI has a
Philippine branch, while Basso, before his death, was residing here. Thus, it could be
reasonably expected that no extraordinary measures were needed for the parties to
make arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts.
The incident subject of this case (i.e., dismissal of Basso) happened in the Philippines,
the surrounding circumstances of which can be ascertained without having to leave
the Philippines. The acts that allegedly led to loss of trust and confidence and Basso's
eventual dismissal were committed in the Philippines. As to the law, we hold that
Philippine law is the proper law of the forum, as we shall discuss shortly. Also, the
labor tribunals have the power to enforce their judgments because they acquired
jurisdiction over the persons of both parties.
HEITAD

Our labor tribunals being the convenient fora, the next question is what law
should apply in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the
following important questions: (1) What legal system should control a given situation
where some of the significant facts occurred in two or more states; and (2) to what
extent should the chosen legal system regulate the situation. 47 These questions are
entirely different from the question of jurisdiction that only seeks to answer whether
the courts of a state where the case is initiated have jurisdiction to enter a judgment. 48
As such, the power to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law. 49
CMI insists that US law is the applicable choice-of-law under the principles of
lex loci celebrationis and lex loci contractus. It argues that the contract of
employment originated from and was returned to the US after Basso signed it, and
hence, was perfected there. CMI further claims that the references to US law in the
employment contract show the parties' intention to apply US law and not ours. These
references are:
a. Foreign station allowance of forty percent (40%) using the "U.S. State
Department Index, the base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any home
state income taxes."

c. Hardship allowance of fifteen percent (15%) of base pay based upon the
"U.S. Department of State Indexes of living costs abroad."
d. The employment arrangement is "one at will, terminable by either party
without any further liability on thirty days prior written notice." 50
CMI asserts that the US law on labor relations particularly, the US Railway
Labor Act sanctions termination-at-will provisions in an employment contract. Thus,
CMI concludes that if such laws were applied, there would have been no illegal
dismissal to speak of because the termination-at-will provision in Basso's employment
contract would have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals, 51 we emphasized that an
essential element of conflict rules is the indication of a "test" or "connecting factor" or
"point of contact". Choice-of-law rules invariably consist of a factual relationship
(such as property right, contract claim) and a connecting fact or point of contact, such
as the situs of the res, the place of celebration, the place of performance, or the place
of wrongdoing. Pursuant to Saudi Arabian Airlines, we hold that the "test factors,"
"points of contact" or "connecting factors" in this case are the following:
(1) The nationality, domicile or residence of Basso;
(2) The seat of CMI;
(3) The place where the employment contract has been made, the locus actus;
(4) The place where the act is intended to come into effect, e.g., the place of
performance of contractual duties;
(5) The intention of the contracting parties as to the law that should govern
their agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or
done. 52
Applying the foregoing in this case, we conclude that Philippine law is the
applicable law. Basso, though a US citizen, was a resident here from the time he was
hired by CMI until his death during the pendency of the case. CMI, while a foreign
corporation, has a license to do business in the Philippines and maintains a branch
here, where Basso was hired to work. The contract of employment was negotiated in
the Philippines. A purely consensual contract, it was also perfected in the Philippines
when Basso accepted the terms and conditions of his employment as offered by CMI.
The place of performance relative to Basso's contractual duties was in the Philippines.
The alleged prohibited acts of Basso that warranted his dismissal were committed in
the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the
problem. Thus, we hold that CMI and Basso intended Philippine law to govern,

notwithstanding some references made to US laws and the fact that this intention was
not expressly stated in the contract. We explained in Philippine Export and Foreign
Loan Guarantee Corporation v. V. P. Eusebio Construction, Inc. 53 that the law
selected may be implied from such factors as substantial connection with the
transaction, or the nationality or domicile of the parties. 54 We cautioned, however,
that while Philippine courts would do well to adopt the first and most basic rule in
most legal systems, namely, to allow the parties to select the law applicable to their
contract, the selection is subject to the limitation that it is not against the law, morals,
or public policy of the forum. 55
Similarly, in Bank of America, NT & SA v. American Realty Corporation, 56 we
ruled that a foreign law, judgment or contract contrary to a sound and established
public policy of the forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application
would work undeniable injustice to the citizens or residents of the forum. To
give justice is the most important function of law; hence, a law, or judgment
or contract that is obviously unjust negates the fundamental principles of
Conflict of Laws. 57

Termination-at-will is anathema to the public policies on labor protection


espoused by our laws and Constitution, which dictates that no worker shall be
dismissed except for just and authorized causes provided by law and after due process
having been complied with. 58 Hence, the US Railway Labor Act, which sanctions
termination-at-will, should not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As
any other fact, it must be alleged and proved. 59 If the foreign law is not properly
pleaded or proved, the presumption of identity or similarity of the foreign law to our
own laws, otherwise known as processual presumption, applies. Here, US law may
have been properly pleaded but it was not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third
issues.
The Court of Appeals may review the
factual findings of the NLRC in a
Rule 65 petition.
CMI submits that the Court of Appeals overstepped the boundaries of the
limited scope of its certiorari jurisdiction when instead of ruling on the existence of
grave abuse of discretion, it proceeded to pass upon the legality and propriety of
Basso's dismissal. Moreover, CMI asserts that it was error on the part of the Court of
Appeals to re-evaluate the evidence and circumstances surrounding the dismissal of
Basso.
We disagree.

The power of the Court of Appeals to review NLRC decisions via a Petition for
Certiorari under Rule 65 of the Revised Rules of Court was settled in our decision in
St. Martin Funeral Home v. NLRC. 60 The general rule is that certiorari does not lie to
review errors of judgment of the trial court, as well as that of a quasi-judicial tribunal.
In certiorari proceedings, judicial review does not go as far as to examine and assess
the evidence of the parties and to weigh their probative value. 61 However, this rule
admits of exceptions. In Globe Telecom, Inc. v. Florendo-Flores, 62 we stated:
In the review of an NLRC decision through a special civil action for
certiorari, resolution is confined only to issues of jurisdiction and grave abuse
of discretion on the part of the labor tribunal. Hence, the Court refrains from
reviewing factual assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC. Occasionally, however, the Court is
constrained to delve into factual matters where, as in the instant case, the
findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may
look into the records of the case and re-examine the questioned findings. As a
corollary, this Court is clothed with ample authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their
consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of
Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the ruling of
the NLRC. 63 (Citations omitted.)

Thus, the Court of Appeals may grant the petition when the factual findings
complained of are not supported by the evidence on record; when it is necessary to
prevent a substantial wrong or to do substantial justice; when the findings of the
NLRC contradict those of the Labor Arbiter; and when necessary to arrive at a just
decision of the case. 64 To make these findings, the Court of Appeals necessarily has
to look at the evidence and make its own factual determination. 65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find
that the Court of Appeals correctly exercised its power to review the evidence and the
records of the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI. Managerial
employees enjoy security of tenure and the right of the management to dismiss must
be balanced against the managerial employee's right to security of tenure, which is not
one of the guaranties he gives up. 66
In Apo Cement Corporation v. Baptisma, 67 we ruled that for an employer to
validly dismiss an employee on the ground of loss of trust and confidence under
Article 282 (c) of the Labor Code, the employer must observe the following

guidelines: 1) loss of confidence should not be simulated; 2) it should not be used as


subterfuge for causes which are improper, illegal or unjustified; 3) it may not be
arbitrarily asserted in the face of overwhelming evidence to the contrary; and 4) it
must be genuine, not a mere afterthought to justify earlier action taken in bad faith.
More importantly, it must be based on a willful breach of trust and founded on clearly
established facts.
We agree with the Court of Appeals that the dismissal of Basso was not
founded on clearly established facts and evidence sufficient to warrant dismissal from
employment. While proof beyond reasonable doubt is not required to establish loss of
trust and confidence, substantial evidence is required and on the employer rests the
burden to establish it. 68 There must be some basis for the loss of trust, or that the
employer has reasonable ground to believe that the employee is responsible for
misconduct, which renders him unworthy of the trust and confidence demanded by his
position. 69
CMI alleges that Basso committed the following:
(1) Basso delegated too much responsibility to the General Sales Agent and
relied heavily on its judgments. 70
(2) Basso excessively issued promotional tickets to his friends who had no
direct business with CMI. 71
(3) The advertising agency that CMI contracted had to deal directly with Guam
because Basso was hardly available. 72 Mr. Schulz discovered that
Basso exceeded the advertising budget by $76,000.00 in 1994 and by
$20,000.00 in 1995. 73
(4) Basso spent more time and attention to his personal businesses and was
reputed to own nightclubs in the Philippines. 74
(5) Basso used free tickets and advertising money to promote his personal
business, 75 such as a brochure that jointly advertised one of Basso's
nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI
merely submitted affidavits of its officers, without any other corroborating evidence.
Basso, on the other hand, had adequately explained his side. On the advertising
agency and budget issues raised by CMI, he explained that these were blatant lies as
the advertising needs of CMI were centralized in its Guam office and the Philippine
office was not authorized to deal with CMI's advertising agency, except on minor
issues. 76 Basso further stated that under CMI's existing policy, ninety percent (90%)
of the advertising decisions were delegated to the advertising firm of McCannEricsson in Japan and only ten percent (10%) were left to the Philippine office. 77
Basso also denied the allegations of owning nightclubs and promoting his personal
businesses and explained that it was illegal for foreigners in the Philippines to engage
in retail trade in the first place.
TIADCc

Apart from these accusations, CMI likewise presented the findings of the audit
team headed by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and
1996, personal passes for Continental and other airline employees were noted (sic) to
be issued for which no service charge was collected." 78 The audit cited the trip pass
log of a total of 10 months. The trip log does not show, however, that Basso caused all
the ticket issuances. More, half of the trips in the log occurred from March to July of
1996, 79 a period beyond the tenure of Basso. Basso was terminated effectively on
January 31, 1996 as indicated in the letter of Ms. Woodward. 80
CMI also accused Basso of making "questionable overseas phone calls".
Basso, however, adequately explained in his Reply 81 that the phone calls to Italy and
Portland, USA were made for the purpose of looking for a technical maintenance
personnel with US Federal Aviation Authority qualifications, which CMI needed at
that time. The calls to the US were also made in connection with his functions as
General Manager, such as inquiries on his tax returns filed in Nevada. Basso also
explained that the phone lines 82 were open direct lines that all personnel were free to
use to make direct long distance calls. 83
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to
cover the transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the
previous General Manager, to him. CMI claimed that "nowhere in the said contract
was it likewise indicated that the Manila Polo Club share was part of the
compensation package given by CMI to Basso." 84 CMI's claims are not credible.
Basso explained that the Manila Polo Club share was offered to him as a bonus to
entice him to leave his then employer, United Airlines. A letter from Mr. Paul J.
Casey, former president of Continental, supports Basso. 85 In the letter, Mr. Casey
explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental
Airlines, he was given the Manila Polo Club share and authorized to have the
share re-issued in his name. In addition to giving Mr. Basso the Manila Polo
Club share, Continental agreed to pay the dues for a period of three years and
this was embodied in his contract with Continental. This was all done with my
knowledge and approval. 86

Clause 14 of the employment contract also states:


Club Memberships: The Company will locally pay annual dues for
membership in a club in Manila that your immediate supervisor and I agree is
of at least that value to Continental through you in your role as our General
Manager for the Philippines. 87

Taken together, the above pieces of evidence suggest that the Manila Polo
Club share was part of Basso's compensation package and thus he validly used
company funds to pay for the transfer fees. If doubts exist between the evidence
presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter. 88

Finally, CMI violated procedural due process in terminating Basso. In King of


Kings Transport, Inc. v. Mamac 89 we detailed the procedural due process steps in
termination of employment:
To clarify, the following should be considered in terminating the services of
employees:
(1) The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them, and a
directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that management must accord
to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt
of the notice to give the employees an opportunity to study the accusation
against them, consult a union official or lawyer, gather data and evidence, and
decide on the defenses they will raise against the complaint. Moreover, in
order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which
among the grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and
conduct a hearing or conference wherein the employees will be given the
opportunity to: (1) explain and clarify their defenses to the charge against
them; (2) present evidence in support of their defenses; and (3) rebut the
evidence presented against them by the management. During the hearing or
conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice.
Moreover, this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the
employers shall serve the employees a written notice of termination
indicating that: (1) all circumstances involving the charge against the
employees have been considered; and (2) grounds have been established to
justify the severance of their employment. (Emphasis in original.)

Here, Mr. Schulz's and Ms. Woodward's letters dated December 19, 1995 and
March 14, 1996, respectively, are not one of the valid twin notices. Neither identified
the alleged acts that CMI now claims as bases for Basso's termination. Ms.
Woodward's letter even stressed that the original plan was to remove Basso as
General Manager but with an offer to make him consultant. It was inconsistent of
CMI to declare Basso as unworthy of its trust and confidence and, in the same breath,
offer him the position of consultant. As the Court of Appeals pointed out:
AIDSTE

But mark well that Basso was clearly notified that the sole ground for
his dismissal was the exercise of the termination at will clause in the
employment contract. The alleged loss of trust and confidence claimed by
Continental appears to be a mere afterthought belatedly trotted out to save the
day. 90

Basso is entitled to separation pay and full backwages.


Under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and
other privileges, and to his full backwages, inclusive of allowances and to his other
benefits or their monetary equivalent computed from the time his compensation was
withheld up to the time of actual reinstatement.
Where reinstatement is no longer viable as an option, separation pay equivalent
to one (1) month salary for every year of service should be awarded as an alternative.
The payment of separation pay is in addition to payment of backwages. 91 In the case
of Basso, reinstatement is no longer possible since he has already passed away. Thus,
Basso's separation pay with full backwages shall be paid to his heirs.
As to the computation of backwages, we agree with CMI that Basso was
entitled to backwages only up to the time he reached 65 years old, the compulsory
retirement age under the law. 92 This is our consistent ruling. 93 When Basso was
illegally dismissed on January 31, 1996, he was already 58 years old. 94 He turned 65
years old on October 2, 2002. Since backwages are granted on grounds of equity for
earnings lost by an employee due to his illegal dismissal, 95 Basso was entitled to
backwages only for the period he could have worked had he not been illegally
dismissed, i.e., from January 31, 1996 to October 2, 2002.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated May 23, 2006 and Resolution dated June 19, 2007 in the consolidated cases
CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281 are AFFIRMED, with
MODIFICATION as to the award of backwages. Petitioner Continental Micronesia,
Inc. is hereby ordered to pay Respondent Joseph Basso's heirs: 1) separation pay
equivalent to one (1) month pay for every year of service, and 2) full backwages from
January 31, 1996, the date of his illegal dismissal, to October 2, 2002, the date of his
compulsory retirement age.
SO ORDERED.
Velasco, Jr., Peralta, Villarama, Jr. and Perez, * JJ., concur.
|||

(Continental Micronesia, Inc. v. Basso, G.R. Nos. 178382-83, [September 23, 2015])

FIRST DIVISION
[G.R. No. 211588. September 9, 2015.]
WORLD'S BEST GAS, INC., petitioner, vs. HENRY VITAL, joined
by his wife FLOSERFINA VITAL, respondents.

DECISION

PERLAS-BERNABE, J :
p

Before the Court is a petition for review on certiorari 1 filed by petitioner


World's Best Gas, Inc. (WBGI) assailing the Decision 2 dated September 30, 2013 and
the Resolution 3 dated March 4, 2014 of the Court of Appeals (CA) in CA-G.R. SP
No. 123497, which affirmed the Decision 4 dated December 12, 2011 of the Regional
Trial Court of Bataan, Branch 2 (RTC) in Civil Case No. 8694 finding WBGI liable to
respondent Henry Vital (Vital) for his unpaid salaries and separation pay.
The Facts
Vital was one of the incorporators of WBGI, holding P500,000.00 worth of
shares of stocks therein. 5 As a separate business venture, Vital and his wife,
respondent Floserfina Vital (respondents), sourced Liquefied Petroleum Gas (LPG)
from WBGI and distributed the same through ERJ Enterprises owned by them. 6 As of
respondents' last statement of account, their outstanding balance with WBGI for
unpaid LPG amounted to P923,843.59. 7
On January 6, 1999, Vital was appointed as Internal Auditor and Personnel
Manager by WBGI's President/CEO and continued to serve as such until his
mandatory retirement on September 25, 2003. 8 Upon his retirement, WBGI's Board
of Directors computed Vital's retirement benefits at P82,500.00 by multiplying his
P15,000.00 monthly pay by 5.5 years, which was the number of years he served as
Internal Auditor and Personnel Manager. WBGI also agreed to acquire Vital's
P500,000.00 shares of stocks at par value. 9
After offsetting the P500,000.00 due from WBGI's acquisition of his shares of
stocks against ERJ Enterprises' P923,843.59 outstanding balance to WBGI, Vital
claimed that the unpaid salaries and separation pay due him amounted to
P845,000.00 and P250,000.00, respectively, leaving a net amount of P671,156.41
payable to him. WBGI rejected Vital's claim and contended that after offsetting, Vital
actually owed it P369,156.19. 10
On January 4, 2006, Vital filed a complaint before the National Labor
Relations Commission (NLRC) Regional Arbitration Branch III (RAB), docketed

as NLRC Case No. RAB-III-01-9671-06, for non-payment of separation and


retirement benefits, underpayment of salaries/wages and 13th month pay, illegal
reduction of salary and benefits, and damages. 11
For its part, WBGI averred that the Labor Arbiter (LA) had no jurisdiction over
the complaint because Vital is not an employee, but a mere incorporator and
stockholder of WBGI, hence, no employer-employee relationship exists between
them. 12
AIDSTE

The LA Ruling
In a Decision 13 dated May 3, 2006, the LA found that the issues between Vital
and WBGI are intra-corporate in nature as they arose between the relations of a
stockholder and the corporation, and not from an employee and employer
relationship. 14 Thus, the LA dismissed the case for lack of jurisdiction, 15 prompting
Vital to file his complaint 16 for payment of unpaid salaries, separation and retirement
benefits, and damages on July 19, 2007 before the RTC, docketed as Civil Case No.
8694. 17
The RTC Ruling
In a Decision 18 dated December 12, 2011, the RTC, acting as a special
commercial court, oppositely found that Vital was an employee of WBGI and thereby,
upheld his claim of P845,000.00 and P250,000.00 in unpaid salaries and separation
pay. However, the RTC offset these amounts, including the P500,000.00 due from
WBGI's acquisition of Vital's shares of stocks, against the P923,843.59 payable to
WBGI from ERJ Enterprises, thus, awarding Vital the net amount of P671,156.41,
with legal interest from date of demand until full payment, P50,000.00 as attorney's
fees and costs of suit plus litigation expenses. 19
The RTC ratiocinated that since the positions of Internal Auditor and Personnel
Manager were not provided for in WBGI's By-Laws, Vital was not a corporate officer
but an employee entitled to employment benefits. It also maintained that it had
jurisdiction to rule on the main intra-corporate controversy, together with the question
of damages and employment benefits. 20
Aggrieved, WBGI elevated the case to the CA on appeal. 21
The CA Ruling
In a Decision 22 dated September 30, 2013, the CA dismissed the appeal,
agreeing with the RTC's finding that Vital was an employee of WGBI. While the CA
observed that the RTC's award of employment benefits to Vital was improper, as the
same was under the exclusive jurisdiction of the labor arbiters, it still ruled on said
claim, reasoning that it has the eventual authority to review the labor courts' decision
on the matter. 23
WBGI filed a motion for reconsideration 24 which was, however, denied in a
Resolution 25 dated March 4, 2014; hence, the present petition.

The Issue before the Court


The main issue to be resolved is whether or not the CA erred in ruling upon
Vital's claim of P845,000.00 and P250,000.00 in unpaid salaries and separation pay.
The Court's Ruling
The petition is partly meritorious.
At the outset, it should be pointed out that the instant case actually involves
three (3) distinct causes of action, namely, (1) Vital's claim for P845,000.00 and
P250,000.00 in unpaid salaries and separation pay; (2) the P923,843.59 in arrearages
payable to WBGI from ERJ Enterprises, which was admitted by Vital but not claimed
by WBGI; and (3) Vital's claim of P500,000.00 due from WBGI's acquisition of
Vital's shares of stocks. All of the foregoing were threshed out by the RTC in its
December 12, 2011 Decision, and effectively upheld by the CA on appeal.
AaCTcI

However, the RTC's adjudication of the first cause of action was improper
since the same is one which arose from Vital and WBGI's employer-employee
relations, involving an amount exceeding P5,000.00, hence, belonging to the
jurisdiction of the labor arbiters pursuant to Article 217 of the Labor Code:
Art. 217. Jurisdiction of the Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and
acEHCD

6. Except claims for Employees' Compensation, Social


Security, Medicare and maternity benefits, all other claims
arising from employer-employee relations, including those
of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement.

xxx xxx xxx

Having no subject matter jurisdiction to resolve claims arising from employeremployee relations, the RTC's ruling on Vital's claim of P845,000.00 and
P250,000.00 in unpaid salaries and separation pay is, thus, null and void, and
therefore, cannot perpetuate even if affirmed on appeal, 26 rendering the CA's
ratiocination that it "has the eventual authority to review the labor courts' decision on
the matter" 27 direly infirm. As a result, WBGI's petition is meritorious on this score.
However, since the dismissal is grounded on lack of jurisdiction, then the same should
be considered as a dismissal without prejudice. 28 As such, Vital may re-file 29 the
same claim, including those related thereto (e.g., moral and exemplary damages,
and, attorney's fees) before the proper labor tribunal.
Contrary to its lack of jurisdiction over claims arising from employeremployee relations, the RTC has: (a) general jurisdiction to adjudicate on the
P923,843.59 in arrearages payable to WBGI from ERJ Enterprises, which was
admitted by Vital but not claimed by WBGI; 30 and (b) special jurisdiction, as a
special commercial court, to adjudicate on Vital's claim of P500,000.00 from
WBGI's acquisition of his shares of stocks. 31 Indeed, even acting as a special
commercial court, the RTC's general jurisdiction to adjudicate on the first-mentioned
claim is retained.
With the RTC's jurisdiction established over the above-mentioned causes of
action, Vital's claim of P500,000.00 due from WBGI's acquisition of his shares of
stocks should therefore be offset against the P923,843.59 in arrearages payable to
WBGI by ERJ Enterprises owned by respondents, as prayed for by him. Hence, no
amount can be adjudicated in Vital's favor, since it is the respondents who, after due
computation, would be left liable to WBGI in the net amount of P423,843.59. This
notwithstanding, WBGI cannot recover this latter amount in this case since it never
interposed a permissive counterclaim therefor in its answer. 32 It is well-settled that
courts cannot grant a relief not prayed for in the pleadings or in excess of what is
being sought by the party. 33 WBGI may, however, opt to file a separate collection
suit, including those related thereto (e.g., moral and exemplary damages, and
attorney's fees), to recover such sum.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated
September 30, 2013 and the Resolution dated March 4, 2014 of the Court of Appeals
in CA-G.R. SP No. 123497 are hereby SET ASIDE. A new one is entered:
(a) DISMISSING respondent Henry Vital's (Vital) labor claims of
P845,000.00 and P250,000.00 in unpaid salaries and separation pay against petitioner
World's Best Gas, Inc.'s (WBGI), WITHOUT PREJUDICE as stated in this
Decision; and
HSAcaE

(b) RECOGNIZING WBGI's liability to Vital in the amount of P500,000.00


due from the acquisition of his shares of stocks. This amount is, however, OFFSET
against the P923,843.59 in arrearages payable to WBGI by ERJ Enterprises owned by

Vital and his wife, respondent Floserfina Vital, leaving a net amount of P423,843.59,
which WBGI may claim in a separate case as stated in this Decision.
SO ORDERED.
Sereno, C.J., Leonardo-de Castro, Bersamin and Perez, JJ., concur.
|||

(World's Best Gas, Inc. v. Vital, G.R. No. 211588, [September 9, 2015])

SECOND DIVISION
[G.R. No. 201595. January 25, 2016.]
ALLAN M. MENDOZA, petitioner, vs. OFFICERS OF MANILA
WATER EMPLOYEES UNION (MWEU), namely, EDUARDO B.
BORELA, BUENAVENTURA QUEBRAL, ELIZABETH COMETA,
ALEJANDRO TORRES, AMORSOLO TIERRA, SOLEDAD
YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA
BOLO, ROGELIO BARBERO, JOSE CASAAS, ALFREDO
MAGA, EMILIO FERNANDEZ, ROSITA BUENAVENTURA,
ALMENIO CANCINO, ADELA IMANA, MARIO MANCENIDO,
WILFREDO MANDILAG, ROLANDO MANLAPAZ, EFREN
MONTEMAYOR, NELSON PAGULAYAN, CARLOS VILLA, RIC
BRIONES, and CHITO BERNARDO, respondents.

DECISION

DEL CASTILLO, J :
p

This Petition for Review on Certiorari 1 assails the April 24, 2012 Decision 2
of the Court of Appeals (CA) which dismissed the Petition for Certiorari 3 in CAG.R. SP No. 115639.
Factual Antecedents
Petitioner was a member of the Manila Water Employees Union (MWEU), a
Department of Labor and Employment (DOLE)-registered labor organization
consisting of rank-and-file employees within Manila Water Company (MWC). The
respondents herein named Eduardo B. Borela (Borela), Buenaventura Quebral
(Quebral), Elizabeth Cometa (Cometa), Alejandro Torres (Torres), Amorsolo Tierra
(Tierra), Soledad Yeban (Yeban), Luis Rendon (Rendon), Virginia Apilado (Apilado),
Teresita Bolo (Bolo), Rogelio Barbero (Barbero), Jose Casaas (Casaas), Alfredo
Maga (Maga), Emilio Fernandez (Fernandez), Rosita Buenaventura (Buenaventura),
Almenio Cancino (Cancino), Adela Imana, Mario Mancenido (Mancenido), Wilfredo
Mandilag (Mandilag), Rolando Manlapaz (Manlapaz), Efren Montemayor
(Montemayor), Nelson Pagulayan, Carlos Villa, Ric Briones, and Chito Bernardo
were MWEU officers during the period material to this Petition, with Borela as
President and Chairman of the MWEU Executive Board, Quebral as First VicePresident and Treasurer, and Cometa as Secretary. 4

In an April 11, 2007 letter, 5 MWEU through Cometa informed petitioner that
the union was unable to fully deduct the increased P200.00 union dues from his salary
due to lack of the required December 2006 check-off authorization from him.
Petitioner was warned that his failure to pay the union dues would result in sanctions
upon him. Quebral informed Borela, through a May 2, 2007 letter, 6 that for such
failure to pay the union dues, petitioner and several others violated Section 1 (g),
Article IX of the MWEU's Constitution and By-Laws. 7 In turn, Borela referred the
charge to the MWEU grievance committee for investigation.
HESIcT

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the
scheduled hearing. On June 6, 2007, the MWEU grievance committee recommended
that petitioner be suspended for 30 days.
In a June 20, 2007 letter, 8 Borela informed petitioner and his co-respondents
of the MWEU Executive Board's "unanimous approval" 9 of the grievance
committee's recommendation and imposition upon them of a penalty of 30 days
suspension, effective June 25, 2007.
In a June 26, 2007 letter 10 to Borela, petitioner and his co-respondents took
exception to the imposition and indicated their intention to appeal the same to the
General Membership Assembly in accordance with Section 2 (g), Article V of the
union's Constitution and By-Laws, 11 which grants them the right to appeal any
arbitrary resolution, policy and rule promulgated by the Executive Board to the
General Membership Assembly. In a June 28, 2007 reply, 12 Borela denied petitioner's
appeal, stating that the prescribed period for appeal had expired.
Petitioner and his co-respondents sent another letter 13 on July 4, 2007,
reiterating their arguments and demanding that the General Membership Assembly be
convened in order that their appeal could be taken up. The letter was not acted upon.
Petitioner was once more charged with non-payment of union dues, and was
required to attend an August 3, 2007 hearing. 14 Thereafter, petitioner was again
penalized with a 30-day suspension through an August 21, 2007 letter 15 by Borela
informing petitioner of the Executive Board's "unanimous approval" 16 of the
grievance committee recommendation to suspend him effective August 24, 2007, to
which he submitted a written reply, 17 invoking his right to appeal through the
convening of the General Membership Assembly. However, the respondents did not
act on petitioner's plea.
Meanwhile, MWEU scheduled an election of officers on September 14, 2007.
Petitioner filed his certificate of candidacy for Vice-President, but he was disqualified
for not being a member in good standing on account of his suspension.
On October 2, 2007, petitioner was charged with non-payment of union dues
for the third time. He did not attend the scheduled hearing. This time, he was meted
the penalty of expulsion from the union, per "unanimous approval" 18 of the members

of the Executive Board. His pleas for an appeal to the General Membership Assembly
were once more unheeded. 19
In 2008, during the freedom period and negotiations for a new collective
bargaining agreement (CBA) with MWC, petitioner joined another union, the
Workers Association for Transparency, Empowerment and Reform, All-Filipino
Workers Confederation (WATER-AFWC). He was elected union President. Other
MWEU members were inclined to join WATER-AFWC, but MWEU director Torres
threatened that they would not get benefits from the new CBA. 20
The MWEU leadership submitted a proposed CBA which contained provisions
to the effect that in the event of retrenchment, non-MWEU members shall be removed
first, and that upon the signing of the CBA, only MWEU members shall receive a
signing bonus. 21
Ruling of the Labor Arbiter
On October 13, 2008, petitioner filed a Complaint 22 against respondents for
unfair labor practices, damages, and attorney's fees before the National Labor
Relations Commission (NLRC), Quezon City, docketed as NLRC Case No. NCR-1014255-08. In his Position Paper and other written submissions, 23 petitioner accused
the respondents of illegal termination from MWEU in connection with the events
relative to his non-payment of union dues; unlawful interference, coercion, and
violation of the rights of MWC employees to self-organization in connection with
the proposed CBA submitted by MWEU leadership, which petitioner claims
contained provisions that discriminated against non-MWEU members. Petitioner
prayed in his Supplemental Position Paper that respondents be held guilty of unfair
labor practices and ordered to indemnify him moral damages in the amount of
P100,000.00, exemplary damages amounting to P50,000.00, and 10% attorney's fees.
In their joint Position Paper and other pleadings, 24 respondents claimed that
the Labor Arbiter had no jurisdiction over the dispute, which is intra-union in nature;
that the Bureau of Labor Relations (BLR) was the proper venue, in accordance with
Article 226 of the Labor Code 25 and Section 1, Rule XI of Department Order 40-03,
series of 2003, of the DOLE; 26 and that they were not guilty of unfair labor practices,
discrimination, coercion or restraint.
On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her
Decision 27 which decreed as follows:
Indeed the filing of the instant case is still premature. Section 5,
Article X-Investigation Procedures and Appeal Process of the Union
Constitution and By-Laws provides that:
Section 5. Any dismissed and/or expelled member shall
have the rights to appeal to the Executive Board within seven
(7) days from the date of notice of the said dismissal and/or
expulsion, which in [turn] shall be referred to the General

Membership Assembly. In case of an appeal, a simple majority


of the decision of the Executive Board is imperative. The same
shall be approved/disapproved by a majority vote of the
general membership assembly in a meeting duly called for the
purpose.
caITAC

On the basis of the foregoing, the parties shall exhaust first all the
administrative remedies before resorting to compulsory arbitration. Thus,
instant case is referred back to the Union for the General Assembly to act or
deliberate complainant's appeal on the decision of the Executive Board.
WHEREFORE PREMISES CONSIDERED, instant case is referred
back to the Union level for the General Assembly to act on complainant's
appeal.
SO ORDERED. 28

Ruling of the National Labor Relations Commission


Petitioner appealed before the NLRC, where the case was docketed as NLRC
LAC No. 07-001913-09. On March 15, 2010, the NLRC issued its Decision, 29
declaring as follows:
Complainant
decided as follows:

30

imputes serious error to the Labor Arbiter when she

a. Referring back the subject case to the Union level for the General
Assembly to act on his appeal.
b. Not ruling that respondents are guilty of ULP as charged.
c. Not granting to complainant moral and exemplary damages and
attorney's fees.
Complainant, in support of his charges, claims that respondents
restrained or coerced him in the exercise of his right as a union member in
violation of paragraph "a", Article 249 of the Labor Code,31 particularly, in
denying him the explanation as to whether there was observance of the proper
procedure in the increase of the membership dues from P100.00 to P200.00
per month. Further, complainant avers that he was denied the right to appeal
his suspension and expulsion in accordance with the provisions of the Union's
Constitution and By-Laws. In addition, complainant claims that respondents
attempted to cause the management to discriminate against the members of
WATER-AFWC thru the proposed CBA.
Pertinent to the issue then on hand, the Labor Arbiter ordered that the
case be referred back to the Union level for the General Assembly to act on
complainant's appeal. Hence, these appeals.
After a careful look at all the documents submitted and a meticulous
review of the facts, We find that this Commission lacks the jurisdictional
competence to act on this case.

Article 217 of the Labor Code,32 as amended, specifically enumerates


the cases over which the Labor Arbiters and the Commission have original
and exclusive jurisdiction. A perusal of the record reveals that the causes of
action invoked by complainant do not fall under any of the enumerations
therein. Clearly, We have no jurisdiction over the same.
Moreover, pursuant to Section 1, Rule XI, as amended, DOLE
Department Order No. 40-03 in particular, Item A, paragraphs (h) and (j) and
Item B, paragraph (a)(3), respectively, provide:
"A. Inter-Intra-Union disputes shall include:
"(h) violation of or disagreements over any provision of the
Constitution and By-Laws of a Union or workers' association.
"(j) violation of the rights and conditions of membership in a
Union or workers' association.
"B. Other Labor Relations disputes, not otherwise covered by
Article 217 of the Labor Code,shall include
"3. a labor union and an individual who is not a member of
said union."
Clearly, the above-mentioned disputes and conflict fall under the
jurisdiction of the Bureau of Labor Relations, as these are inter/intra-union
disputes.
WHEREFORE, the decision of the Labor Arbiter a quo dated May 29,
2009 is hereby declared NULL and VOID for being rendered without
jurisdiction and the instant complaint is DISMISSED.
SO ORDERED. 33

Petitioner moved for reconsideration, 34 but in a June 16, 2010 Resolution,


the motion was denied and the NLRC sustained its Decision.

35

Ruling of the Court of Appeals


In a Petition for Certiorari 36 filed with the CA and docketed as CA-G.R. SP
No. 115639, petitioner sought to reverse the NLRC Decision and be awarded his
claim for damages and attorney's fees on account of respondents' unfair labor
practices, arguing among others that his charge of unfair labor practices is cognizable
by the Labor Arbiter; that the fact that the dispute is inter- or intra-union in nature
cannot erase the fact that respondents were guilty of unfair labor practices in
interfering and restraining him in the exercise of his right to self-organization as
member of both MWEU and WATER-AFWC, and in discriminating against him and
other members through the provisions of the proposed 2008 CBA which they drafted;
that his failure to pay the increased union dues was proper since the approval of said
increase was arrived at without observing the prescribed voting procedure laid down
in the Labor Code; that he is entitled to an award of damages and attorney's fees as a

result of respondents' illegal acts in discriminating against him; and that in ruling the
way it did, the NLRC committed grave abuse of discretion.
ICHDca

On April 24, 2012, the CA issued the assailed Decision containing the
following pronouncement:
The petition lacks merit.
Petitioner's causes of action against MWEU are inter/intra-union
disputes cognizable by the BLR whose functions and jurisdiction are largely
confined to union matters, collective bargaining registry, and labor education.
Section 1, Rule XI of Department Order (D.O.) No. 40-03, Series of 2003, of
the Department of Labor and Employment enumerates instances of inter/intraunion disputes, viz.:
Section 1. Coverage. Inter/intra-union disputes shall
include:
xxx xxx xxx
(b) conduct of election of union and workers'
association officers/nullification of election of union and
workers' association officers;
(c) audit/accounts examination of union or workers'
association funds;
xxx xxx xxx
(g) validity/invalidity of impeachment/expulsion of
union and workers' association officers and members;
xxx xxx xxx
(j) violations of or disagreements over any provision in
a union or workers' association constitution and by-laws;
xxx xxx xxx
(l) violations of the rights and conditions of union or
workers' association membership;
xxx xxx xxx
(n) such other disputes or conflicts involving the rights
to self-organization, union membership and collective
bargaining
(1) between and among legitimate labor organizations;
(2) between and among members of a union or workers'
association.
In brief, "Inter-Union Dispute" refers to any conflict between and
among legitimate labor unions involving representation questions for purposes
of collective bargaining or to any other conflict or dispute between legitimate

labor unions. "Intra-Union Dispute" refers to any conflict between and among
union members, including grievances arising from any violation of the rights
and conditions of membership, violation of or disagreement over any
provision of the union's constitution and by-laws, or disputes arising from
chartering or affiliation of union. On the other hand, the circumstances of
unfair labor practices (ULP) of a labor organization are stated in Article 249
of the Labor Code,to wit:
Article 249. Unfair labor practices of labor organizations. It
shall be unlawful for labor organization, its officers, agents, or
representatives to commit any of the following unfair labor
practices:
(a) To restrain or coerce employees in the exercise of their right to selforganization; Provided, That the labor organization shall have the
right to prescribe its own rules with respect to the acquisition or
retention of membership;
(b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with
respect to whom membership in such organization has been
denied or terminated on any ground other than the usual terms
and conditions under which membership or continuation of
membership is made available to other members;
xxx xxx xxx
Applying the aforementioned rules, We find that the issues arising
from petitioner's right to information on the increased membership dues, right
to appeal his suspension and expulsion according to CBL provisions, and right
to vote and be voted on are essentially intra-union disputes; these involve
violations of rights and conditions of union membership. But his claim that a
director of MWEU warned that non-MWEU members would not receive CBA
benefits is an inter-union dispute. It is more of an "interference" by a rival
union to ensure the loyalty of its members and to persuade non-members to
join their union. This is not an actionable wrong because interfering in the
exercise of the right to organize is itself a function of self-organizing. 37 As
long as it does not amount to restraint or coercion, a labor organization may
interfere in the employees' right to self-organization. 38 Consequently, a
determination of validity or illegality of the alleged acts necessarily touches
on union matters, not ULPs, and are outside the scope of the labor arbiter's
jurisdiction.
As regards petitioner's other accusations, i.e., discrimination in terms
of meting out the penalty of expulsion against him alone, and attempt to cause
the employer, MWC, to discriminate against non-MWEU members in terms
of retrenchment or reduction of personnel, and signing bonus, while We may
consider them as falling within the concept of ULP under Article 249(a) and
(b), still, petitioner's complaint cannot prosper for lack of substantial evidence.
Other than his bare allegation, petitioner offered no proof that MWEU did not

penalize some union members who failed to pay the increased dues. On the
proposed discriminatory CBA provisions, petitioner merely attached the pages
containing the questioned provisions without bothering to reveal the MWEU
representatives responsible for the said proposal. Article 249 mandates that ". .
. only the officers, members of the governing boards, representatives or agents
or members of labor associations or organizations who have actually
participated in, authorized or ratified unfair labor practices shall be held
criminally liable." Plain accusations against all MWEU officers, without
specifying their actual participation, do not suffice. Thus, the ULP charges
must necessarily fail.
TCAScE

In administrative and quasi-judicial proceedings, only substantial


evidence is necessary to establish the case for or against a party. Substantial
evidence is that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion. Petitioner failed to discharge the
burden of proving, by substantial evidence, the allegations of ULP in his
complaint. The NLRC, therefore, properly dismissed the case.
FOR THESE REASONS, the petition is DISMISSED.
SO ORDERED. 39

Thus, the instant Petition.


Issue
In an August 28, 2013 Resolution, 40 this Court resolved to give due course to
the Petition, which claims that the CA erred:
A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION
CONFLICTS NEGATES THE COMPLAINT FOR UNFAIR LABOR
PRACTICES AGAINST A LABOR ORGANIZATION AND ITS
OFFICERS, AND IN AFFIRMING THAT THE NLRC PROPERLY
DISMISSED THE CASE FOR ALLEGED LACK OF JURISDICTION.
B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR
LABOR PRACTICES UNDER ARTICLE 249(a) AND (b) OF THE
LABOR CODE.
C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER
AGAINST MEMBERS OF A RIVAL UNION IS (sic) MERELY AN
"INTERFERENCE" AND DO NOT AMOUNT TO "RESTRAINT" OR
"COERCION".
D. IN

DECLARING THAT PETITIONER FAILED TO PRESENT


SUBSTANTIAL EVIDENCE IN PROVING RESPONDENTS'
SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.

E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE


TO PETITIONER FOR MORAL AND EXEMPLARY DAMAGES,
AND ATTORNEY'S FEES. 41

Petitioner's Arguments

Praying that the assailed CA dispositions be set aside and that respondents be
declared guilty of unfair labor practices under Article 249 (a) and (b) and adjudged
liable for damages and attorney's fees as prayed for in his complaint, petitioner
maintains in his Petition and Reply 42 that respondents are guilty of unfair labor
practices which he clearly enumerated and laid out in his pleadings below; that these
unfair labor practices committed by respondents fall within the jurisdiction of the
Labor Arbiter; that the Labor Arbiter, the NLRC, and the CA failed to rule on his
accusation of unfair labor practices and simply dismissed his complaint on the ground
that his causes of action are intra- or inter-union in nature; that admittedly, some of
his causes of action involved intra- or inter-union disputes, but other acts of
respondents constitute unfair labor practices; that he presented substantial evidence to
prove that respondents are guilty of unfair labor practices by failing to observe the
proper procedure in the imposition of the increased monthly union dues, and in
unduly imposing the penalties of suspension and expulsion against him; that under the
union's constitution and by-laws, he is given the right to appeal his suspension and
expulsion to the general membership assembly; that in denying him his rights as a
union member and expelling him, respondents are guilty of malice and evident bad
faith; that respondents are equally guilty for violating and curtailing his rights to vote
and be voted to a position within the union, and for discriminating against nonMWEU members; and that the totality of respondents' conduct shows that they are
guilty of unfair labor practices.
Respondent's Arguments
In their joint Comment, 43 respondents maintain that petitioner raises issues of
fact which are beyond the purview of a petition for review on certiorari; that the
findings of fact of the CA are final and conclusive; that the Labor Arbiter, NLRC, and
CA are one in declaring that there is no unfair labor practices committed against
petitioner; that petitioner's other allegations fall within the jurisdiction of the BLR, as
they refer to intra- or inter-union disputes between the parties; that the issues arising
from petitioner's right to information on the increased dues, right to appeal his
suspension and expulsion, and right to vote and be voted upon are essentially intraunion in nature; that his allegations regarding supposed coercion and restraint relative
to benefits in the proposed CBA do not constitute an actionable wrong; that all of the
acts questioned by petitioner are covered by Section 1, Rule XI of Department Order
40-03, series of 2003 as intra-/inter-union disputes which do not fall within the
jurisdiction of the Labor Arbiter; that in not paying his union dues, petitioner is guilty
of insubordination and deserved the penalty of expulsion; that petitioner failed to
petition to convene the general assembly through the required signature of 30% of the
union membership in good standing pursuant to Article VI, Section 2 (a) of MWEU's
Constitution and By-Laws or by a petition of the majority of the general membership
in good standing under Article VI, Section 3; and that for his failure to resort to said
remedies, petitioner can no longer question his suspension or expulsion and avail of
his right to appeal.
cTDaEH

Our Ruling
The Court partly grants the Petition.
In labor cases, issues of fact are for the labor tribunals and the CA to resolve,
as this Court is not a trier of facts. However, when the conclusion arrived at by them
is erroneous in certain respects, and would result in injustice as to the parties, this
Court must intervene to correct the error. While the Labor Arbiter, NLRC, and CA are
one in their conclusion in this case, they erred in failing to resolve petitioner's charge
of unfair labor practices against respondents.
It is true that some of petitioner's causes of action constitute intra-union cases
cognizable by the BLR under Article 226 of the Labor Code.
An intra-union dispute refers to any conflict between and among union
members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision of
the union's constitution and by-laws, or disputes arising from chartering or
disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order No.
40-03, Series of 2003 of the DOLE enumerate the following circumstances as
inter/intra-union disputes . . . . 44

However, petitioner's charge of unfair labor practices falls within the original
and exclusive jurisdiction of the Labor Arbiters, pursuant to Article 217 of the Labor
Code.In addition, Article 247 of the same Code provides that "the civil aspects of all
cases involving unfair labor practices, which may include claims for actual, moral,
exemplary and other forms of damages, attorney's fees and other affirmative relief,
shall be under the jurisdiction of the Labor Arbiters."
Unfair labor practices may be committed both by the employer under Article
248 and by labor organizations under Article 249 of the Labor Code,45 which provides
as follows:
ART. 249. Unfair labor practices of labor organizations. It shall be
unfair labor practice for a labor organization, its officers, agents or
representatives:
(a) To restrain or coerce employees in the exercise of their right to
self-organization. However, a labor organization shall have the right to
prescribe its own rules with respect to the acquisition or retention of
membership;
(b) To cause or attempt to cause an employer to discriminate against
an employee, including discrimination against an employee with respect to
whom membership in such organization has been denied or to terminate an
employee on any ground other than the usual terms and conditions under
which membership or continuation of membership is made available to other
members;
(c) To violate the duty, or refuse to bargain collectively with the
employer, provided it is the representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree


to pay or deliver any money or other things of value, in the nature of an
exaction, for services which are not performed or not to be performed,
including the demand for fee for union negotiations;
(e) To ask for or accept negotiation or attorney's fees from employers
as part of the settlement of any issue in collective bargaining or any other
dispute; or
(f) To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the
officers, members of governing boards, representatives or agents or members
of labor associations or organizations who have actually participated in,
authorized or ratified unfair labor practices shall be held criminally liable. (As
amended by Batas Pambansa Bilang 130, August 21, 1981).

Petitioner contends that respondents committed acts constituting unfair labor


practices which charge was particularly laid out in his pleadings, but that the Labor
Arbiter, the NLRC, and the CA ignored it and simply dismissed his complaint on the
ground that his causes of action were intra- or inter-union in nature. Specifically,
petitioner claims that he was suspended and expelled from MWEU illegally as a result
of the denial of his right to appeal his case to the general membership assembly in
accordance with the union's constitution and by-laws. On the other hand, respondents
counter that such charge is intra-union in nature, and that petitioner lost his right to
appeal when he failed to petition to convene the general assembly through the
required signature of 30% of the union membership in good standing pursuant to
Article VI, Section 2 (a) of MWEU's Constitution and By-Laws or by a petition of the
majority of the general membership in good standing under Article VI, Section 3.
Under Article VI, Section 2 (a) of MWEU's Constitution and By-Laws, the
general membership assembly has the power to "review revise modify affirm or
repeal [sic] resolution and decision of the Executive Board and/or committees upon
petition of thirty percent (30%) of the Union in good standing," 46 and under Section 2
(d), to "revise, modify, affirm or reverse all expulsion cases." 47 Under Section 3 of
the same Article, "[t]he decision of the Executive Board may be appealed to the
General Membership which by a simple majority vote reverse the decision of said
body. If the general Assembly is not in session the decision of the Executive Board
may be reversed by a petition of the majority of the general membership in good
standing." 48 And, in Article X, Section 5, "[a]ny dismissed and/or expelled member
shall have the right to appeal to the Executive Board within seven days from notice of
said dismissal and/or expulsion which, in [turn] shall be referred to the General
membership assembly. In case of an appeal, a simple majority of the decision of the
Executive Board is imperative. The same shall be approved/disapproved by a majority
vote of the general membership assembly in a meeting duly called for the purpose." 49
cSaATC

In regard to suspension of a union member, MWEU's Constitution and ByLaws provides under Article X, Section 4 thereof that "[a]ny suspended member shall
have the right to appeal within three (3) working days from the date of notice of said
suspension. In case of an appeal a simple majority of vote of the Executive Board
shall be necessary to nullify the suspension."
Thus, when an MWEU member is suspended, he is given the right to appeal
such suspension within three working days from the date of notice of said suspension,
which appeal the MWEU Executive Board is obligated to act upon by a simple
majority vote. When the penalty imposed is expulsion, the expelled member is given
seven days from notice of said dismissal and/or expulsion to appeal to the Executive
Board, which is required to act by a simple majority vote of its members. The Board's
decision shall then be approved/disapproved by a majority vote of the general
membership assembly in a meeting duly called for the purpose.
The documentary evidence is clear that when petitioner received Borela's
August 21, 2007 letter informing him of the Executive Board's unanimous approval of
the grievance committee recommendation to suspend him for the second time
effective August 24, 2007, he immediately and timely filed a written appeal.
However, the Executive Board then consisting of respondents Borela, Tierra, Bolo,
Casaas, Fernandez, Rendon, Montemayor, Torres, Quebral, Pagulayan, Cancino,
Maga, Cometa, Mancenido, and two others who are not respondents herein did not
act thereon. Then again, when petitioner was charged for the third time and meted the
penalty of expulsion from MWEU by the unanimous vote of the Executive Board, his
timely appeal was again not acted upon by said board this time consisting of
respondents Borela, Quebral, Tierra, Imana, Rendon, Yeban, Cancino, Torres,
Montemayor, Mancenido, Mandilag, Fernandez, Buenaventura, Apilado, Maga,
Barbero, Cometa, Bolo, and Manlapaz.
Thus, contrary to respondents' argument that petitioner lost his right to appeal
when he failed to petition to convene the general assembly through the required
signature of 30% of the union membership in good standing pursuant to Article VI,
Section 2 (a) of MWEU's Constitution and By-Laws or by a petition of the majority of
the general membership in good standing under Article VI, Section 3, this Court finds
that petitioner was illegally suspended for the second time and thereafter unlawfully
expelled from MWEU due to respondents' failure to act on his written appeals. The
required petition to convene the general assembly through the required signature of
30% (under Article VI, Section 2 [a]) or majority (under Article VI, Section 3) of the
union membership does not apply in petitioner's case; the Executive Board must first
act on his two appeals before the matter could properly be referred to the general
membership. Because respondents did not act on his two appeals, petitioner was
unceremoniously suspended, disqualified and deprived of his right to run for the
position of MWEU Vice-President in the September 14, 2007 election of officers,
expelled from MWEU, and forced to join another union, WATER-AFWC. For these,
respondents are guilty of unfair labor practices under Article 249 (a) and (b) that is,

violation of petitioner's right to self-organization, unlawful discrimination, and illegal


termination of his union membership which case falls within the original and
exclusive jurisdiction of the Labor Arbiters, in accordance with Article 217 of the
Labor Code.
The primary concept of unfair labor practices is stated in Article 247 of the
Labor Code,which states:
Article 247. Concept of unfair labor practice and procedure for
prosecution thereof. Unfair labor practices violate the constitutional right
of workers and employees to self-organization, are inimical to the legitimate
interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom
and mutual respect, disrupt industrial peace and hinder the promotion of
healthy and stable labor-management relations.

"In essence, [unfair labor practice] relates to the commission of acts that
transgress the workers' right to organize." 50 "[A]ll the prohibited acts constituting
unfair labor practice in essence relate to the workers' right to self-organization." 51
"[T]he term unfair labor practice refers to that gamut of offenses defined in the Labor
Code which, at their core, violates the constitutional right of workers and employees
to self-organization." 52
Guaranteed to all employees or workers is the 'right to selforganization and to form, join, or assist labor organizations of their own
choosing for purposes of collective bargaining.' This is made plain by no less
than three provisions of the Labor Code of the Philippines. Article 243 of the
Code provides as follows:
ART. 243. Coverage and employees' right to selforganization. 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 selforganization and to form, join, or assist labor organizations of
their own choosing for purposes or collective bargaining.
Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers
may form labor organizations for their mutual aid and
protection.
cHDAIS

Article 248 (a) declares it to be an unfair labor practice for an


employer, among others, to 'interfere with, restrain or coerce employees in the
exercise of their right to self-organization.' Similarly, Article 249 (a) makes it
an unfair labor practice for a labor organization to 'restrain or coerce
employees in the exercise of their rights to self-organization . . .'
xxx xxx xxx

The right of self-organization includes the right to organize or affiliate


with a labor union or determine which of two or more unions in an
establishment to join, and to engage in concerted activities with co-workers
for purposes of collective bargaining through representatives of their own
choosing, or for their mutual aid and protection, i.e., the protection,
promotion, or enhancement of their rights and interests. 53

As members of the governing board of MWEU, respondents are presumed to


know, observe, and apply the union's constitution and by-laws. Thus, their repeated
violations thereof and their disregard of petitioner's rights as a union member their
inaction on his two appeals which resulted in his suspension, disqualification from
running as MWEU officer, and subsequent expulsion without being accorded the full
benefits of due process connote willfulness and bad faith, a gross disregard of his
rights thus causing untold suffering, oppression and, ultimately, ostracism from
MWEU. "Bad faith implies breach of faith and willful failure to respond to plain and
well understood obligation." 54 This warrants an award of moral damages in the
amount of P100,000.00. Moreover, the Civil Code provides:
Art. 32. Any public officer or employee, or any private individual,
who directly or indirectly obstructs, defeats, violates or in any manner
impedes or impairs any of the following rights and liberties of another person
shall be liable to the latter for damages:
xxx xxx xxx
(12) The right to become a member of associations or societies for
purposes not contrary to law;

In Vital-Gozon v. Court of Appeals, 55 this Court declared, as follows:


Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. They may be recovered if they are the
proximate result of the defendant's wrongful act or omission. The instances
when moral damages may be recovered are, inter alia, 'acts and actions
referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,'
which, in turn, are found in the Chapter on Human Relations of the
Preliminary Title of the Civil Code.. . .

Under the circumstances, an award of exemplary damages in the amount of


P50,000.00, as prayed for, is likewise proper. "Exemplary damages are designed to
permit the courts to mould behavior that has socially deleterious consequences, and
their imposition is required by public policy to suppress the wanton acts of the
offender." 56 This should prevent respondents from repeating their mistakes, which
proved costly for petitioner.
Under Article 2229 of the Civil Code,'[e]xemplary or corrective
damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages.' As this
court has stated in the past: 'Exemplary damages are designed by our civil law

to permit the courts to reshape behaviour that is socially deleterious in its


consequence by creating negative incentives or deterrents against such
behaviour.' 57

Finally, petitioner is also entitled to attorney's fees equivalent to 10 per cent


(10%) of the total award. The unjustified acts of respondents clearly compelled him to
institute an action primarily to vindicate his rights and protect his interest. Indeed,
when an employee is forced to litigate and incur expenses to protect his rights and
interest, he is entitled to an award of attorney's fees. 58
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April
24, 2012 Decision of the Court of Appeals in CA-G.R. SP No. 115639 is hereby
MODIFIED, in that all of the respondents except for Carlos Villa, Ric Briones,
and Chito Bernardo are declared guilty of unfair labor practices and ORDERED
TO INDEMNIFY petitioner Allan M. Mendoza the amounts of P100,000.00 as and
by way of moral damages, P50,000.00 as exemplary damages, and attorney's fees
equivalent to 10 per cent (10%) of the total award.
SO ORDERED.
Carpio, Brion, Mendoza and Leonen, JJ., concur.
(Mendoza v. Officers of Manila Water Employees Union, G.R. No. 201595, [January 25,
2016])
|||

SECOND DIVISION
[G.R. No. 208986. January 13, 2016.]
HIJO RESOURCES CORPORATION, petitioner, vs. EPIFANIO P.
MEJARES, REMEGIO C. BALURAN, JR., DANTE SAYCON, and
CECILIO CUCHARO, represented by NAMABDJERA-HRC,
respondents.

DECISION

CARPIO, J :
p

The Case
This petition for review 1 assails the 29 August 2012 Decision 2 and the 13
August 2013 Resolution 3 of the Court of Appeals in CA-G.R. SP No. 04058-MIN.
The Court of Appeals reversed and set aside the Resolutions dated 29 June 2009 and
16 December 2009 of the National Labor Relations Commission (NLRC) in NLRC
No. MIC-03-000229-08 (RAB XI-09-00774-2007), and remanded the case to the
Regional Arbitration Branch, Region XI, Davao City for further proceedings.
ISHCcT

The Facts
Respondents Epifanio P. Mejares, Remegio C. Baluran, Jr., Dante Saycon, and
Cecilio Cucharo (respondents) were among the complainants, represented by their
labor union named "Nagkahiusang Mamumuo ng Bit, Djevon, at Raquilla Farms sa
Hijo Resources Corporation" (NAMABDJERA-HRC), who filed with the NLRC an
illegal dismissal case against petitioner Hijo Resources Corporation (HRC).
Complainants (which include the respondents herein) alleged that petitioner
HRC, formerly known as Hijo Plantation Incorporated (HPI), is the owner of
agricultural lands in Madum, Tagum, Davao del Norte, which were planted primarily
with Cavendish bananas. In 2000, HPI was renamed as HRC. In December 2003,
HRC's application for the conversion of its agricultural lands into agri-industrial use
was approved. The machineries and equipment formerly used by HPI continued to be
utilized by HRC.
Complainants claimed that they were employed by HPI as farm workers in
HPI's plantations occupying various positions as area harvesters, packing house
workers, loaders, or labelers. In 2001, complainants were absorbed by HRC, but they
were working under the contractor-growers: Buenaventura Tano (Bit Farm); Djerame
Pausa (Djevon Farm); and Ramon Q. Laurente (Raquilla Farm). Complainants
asserted that these contractor-growers received compensation from HRC and were

under the control of HRC. They further alleged that the contractor-growers did not
have their own capitalization, farm machineries, and equipment.
On 1 July 2007, complainants formed their union NAMABDJERA-HRC,
which was later registered with the Department of Labor and Employment (DOLE).
On 24 August 2007, NAMABDJERA-HRC filed a petition for certification election
before the DOLE.
When HRC learned that complainants formed a union, the three contractorgrowers filed with the DOLE a notice of cessation of business operations. In
September 2007, complainants were terminated from their employment on the ground
of cessation of business operations by the contractor-growers of HRC. On 19
September 2007, complainants, represented by NAMABDJERA-HRC, filed a case for
unfair labor practices, illegal dismissal, and illegal deductions with prayer for moral
and exemplary damages and attorney's fees before the NLRC.
On 19 November 2007, DOLE Med-Arbiter Lito A. Jasa issued an Order, 4
dismissing NAMABDJERA-HRC's petition for certification election on the ground
that there was no employer-employee relationship between complainants (members of
NAMABDJERA-HRC) and HRC. Complainants did not appeal the Order of MedArbiter Jasa but pursued the illegal dismissal case they filed.
On 4 January 2008, HRC filed a motion to inhibit Labor Arbiter Maria
Christina S. Sagmit and moved to dismiss the complaint for illegal dismissal. The
motion to dismiss was anchored on the following arguments: (1) Lack of jurisdiction
under the principle of res judicata; and (2) The Order of the Med-Arbiter finding that
complainants were not employees of HRC, which complainants did not appeal, had
become final and executory.
The Labor Arbiter's Ruling
On 5 February 2008, Labor Arbiter Sagmit denied the motion to inhibit. Labor
Arbiter Sagmit likewise denied the motion to dismiss in an Order dated 12 February
2008. Labor Arbiter Sagmit held that res judicata does not apply. Citing the cases of
Manila Golf & Country Club, Inc. v. IAC 5 and Sandoval Shipyards, Inc. v. Pepito, 6
the Labor Arbiter ruled that the decision of the Med-Arbiter in a certification election
case, by the nature of that proceedings, does not foreclose further dispute between the
parties as to the existence or non-existence of employer-employee relationship
between them. Thus, the finding of Med-Arbiter Jasa that no employment relationship
exists between HRC and complainants does not bar the Labor Arbiter from making
his own independent finding on the same issue. The non-litigious nature of the
proceedings before the Med-Arbiter does not prevent the Labor Arbiter from hearing
and deciding the case. Thus, Labor Arbiter Sagmit denied the motion to dismiss and
ordered the parties to file their position papers.

HRC filed with the NLRC a petition for certiorari with a prayer for temporary
restraining order, seeking to nullify the 5 February 2008 and 12 February 2008 Orders
of Labor Arbiter Sagmit.
The Ruling of the NLRC
The NLRC granted the petition, holding that Labor Arbiter Sagmit gravely
abused her discretion in denying HRC's motion to dismiss. The NLRC held that the
Med-Arbiter Order dated 19 November 2007 dismissing the certification election case
on the ground of lack of employer-employee relationship between HRC and
complainants (members of NAMABDJERA-HRC) constitutes res judicata under the
concept of conclusiveness of judgment, and thus, warrants the dismissal of the case.
The NLRC ruled that the Med-Arbiter exercises quasi-judicial power and the MedArbiter's decisions and orders have, upon their finality, the force and effect of a final
judgment within the purview of the doctrine of res judicata.
On the issue of inhibition, the NLRC found it moot and academic in view of
Labor Arbiter Sagmit's voluntary inhibition from the case as per Order dated 11
March 2009.
The Ruling of the Court of Appeals
The Court of Appeals found the ruling in the Sandoval case more applicable in
this case. The Court of Appeals noted that the Sandoval case, which also involved a
petition for certification election and an illegal dismissal case filed by the union
members against the alleged employer, is on all fours with this case. The issue in
Sandoval on the effect of the Med-Arbiter's findings as to the existence of employeremployee relationship is the very same issue raised in this case. On the other hand, the
case of Chris Garments Corp. v. Hon. Sto. Tomas 7 cited by the NLRC, which
involved three petitions for certification election filed by the same union, is of a
different factual milieu.
The Court of Appeals held that the certification proceedings before the MedArbiter are non-adversarial and merely investigative. On the other hand, under Article
217 of the Labor Code, the Labor Arbiter has original and exclusive jurisdiction over
illegal dismissal cases. Although the proceedings before the Labor Arbiter are also
described as non-litigious, the Court of Appeals noted that the Labor Arbiter is given
wide latitude in ascertaining the existence of employment relationship. Thus, unlike
the Med-Arbiter, the Labor Arbiter may conduct clarificatory hearings and even avail
of ocular inspection to ascertain facts speedily.
Hence, the Court of Appeals concluded that the decision in a certification
election case does not foreclose further dispute as to the existence or non-existence of
an employer-employee relationship between HRC and the complainants.
On 29 August 2012, the Court of Appeals promulgated its Decision, the
dispositive portion of which reads:

WHEREFORE, the petition is hereby GRANTED and the assailed


Resolutions dated June 29, 2009 and December 16, 2009 of the National
Labor Relations Commission are hereby REVERSED AND SET ASIDE. Let
NLRC CASE No. RAB-XI-09-00774-0707 be remanded to the Regional
Arbitration Branch, Region XI, Davao City for further proceedings.
SO ORDERED. 8

The Issue
Whether the Court of Appeals erred in setting aside the NLRC ruling and
remanding the case to the Labor Arbiter for further proceedings.
The Ruling of the Court
We find the petition without merit.
There is no question that the Med-Arbiter has the authority to determine the
existence of an employer-employee relationship between the parties in a petition for
certification election. As held in M.Y. San Biscuits, Inc. v. Acting Sec. Laguesma: 9
Under Article 226 of the Labor Code, as amended, the Bureau of
Labor Relations (BLR), of which the med-arbiter is an officer, has the
following jurisdiction
"ART. 226. Bureau of Labor Relations. The Bureau
of Labor Relations and the Labor Relations Division[s] 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 intraunion 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 labor cases before it, subject to extension by agreement of
the parties." (Italics supplied)
From the foregoing, the BLR has the original and exclusive
jurisdiction to inter alia, decide all disputes, grievances or problems arising
from or affecting labor-management relations in all workplaces whether
agricultural or non-agricultural. Necessarily, in the exercise of this jurisdiction
over labor-management relations, the med-arbiter has the authority, original
and exclusive, to determine the existence of an employer-employee
relationship between the parties.
Apropos to the present case, once there is a determination as to the
existence of such a relationship, the med-arbiter can then decide the
certification election case. As the authority to determine the employer-

employee relationship is necessary and indispensable in the exercise of


jurisdiction by the med-arbiter, his finding thereon may only be reviewed and
reversed by the Secretary of Labor who exercises appellate jurisdiction under
Article 259 of the Labor Code, as amended, which provides
"ART. 259. Appeal from certification election orders.
Any party to an election may appeal the order or results of
the election as determined by the Med-Arbiter directly to the
Secretary of Labor and Employment on the ground that the
rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the
election have been violated. Such appeal shall be decided
within fifteen (15) calendar days." 10

In this case, the Med-Arbiter issued an Order dated 19 November 2007,


dismissing the certification election case because of lack of employer-employee
relationship between HRC and the members of the respondent union. The order
dismissing the petition was issued after the members of the respondent union were
terminated from their employment in September 2007, which led to the filing of the
illegal dismissal case before the NLRC on 19 September 2007. Considering their
termination from work, it would have been futile for the members of the respondent
union to appeal the Med-Arbiter's order in the certification election case to the DOLE
Secretary. Instead, they pursued the illegal dismissal case filed before the NLRC.
The Court is tasked to resolve the issue of whether the Labor Arbiter, in the
illegal dismissal case, is bound by the ruling of the Med-Arbiter regarding the
existence or non-existence of employer-employee relationship between the parties in
the certification election case.
CAacTH

The Court rules in the negative. As found by the Court of Appeals, the facts in
this case are very similar to those in the Sandoval case, which also involved the issue
of whether the ruling in a certification election case on the existence or non-existence
of an employer-employee relationship operates as res judicata in the illegal dismissal
case filed before the NLRC. In Sandoval, the DOLE Undersecretary reversed the
finding of the Med-Arbiter in a certification election case and ruled that there was no
employer-employee relationship between the members of the petitioner union and
Sandoval Shipyards, Inc. (SSI), since the former were employees of the
subcontractors. Subsequently, several illegal dismissal cases were filed by some
members of the petitioner union against SSI. Both the Labor Arbiter and the NLRC
ruled that there was no employer-employee relationship between the parties, citing the
resolution of the DOLE Undersecretary in the certification election case. The Court of
Appeals reversed the NLRC ruling and held that the members of the petitioner union
were employees of SSI. On appeal, this Court affirmed the appellate court's decision
and ruled that the Labor Arbiter and the NLRC erred in relying on the pronouncement
of the DOLE Undersecretary that there was no employer-employee relationship
between the parties. The Court cited the ruling in the Manila Golf 11 case that the

decision in a certification election case, by the very nature of that proceeding, does
not foreclose all further dispute between the parties as to the existence or nonexistence of an employer-employee relationship between them.
This case is different from the Chris Garments case cited by the NLRC where
the Court held that the matter of employer-employee relationship has been resolved
with finality by the DOLE Secretary, whose factual findings were not appealed by the
losing party. As mentioned earlier, the Med-Arbiter's order in this case dismissing
the petition for certification, election on the basis of non-existence of employeremployee relationship was issued after the members of the respondent union
were dismissed from their employment. The purpose of a petition for certification
election is to determine which organization will represent the employees in their
collective bargaining with the employer. 12 The respondent union, without its
member-employees, was thus stripped of its personality to challenge the MedArbiter's decision in the certification election case. Thus, the members of the
respondent union were left with no option but to pursue their illegal dismissal
case filed before the Labor Arbiter. To dismiss the illegal dismissal case filed
before the Labor Arbiter on the basis of the pronouncement of the Med-Arbiter in the
certification election case that there was no employer-employee relationship between
the parties, which the respondent union could not even appeal to the DOLE Secretary
because of the dismissal of its members, would be tantamount to denying due process
to the complainants in the illegal dismissal case. This, we cannot allow.
WHEREFORE, we DENY the petition. We AFFIRM the 29 August 2012
Decision and the 13 August 2013 Resolution of the Court of Appeals in CA-G.R. SP
No. 04058-MIN.
SO ORDERED.
|||

(Hijo Resources Corp. v. Mejares, G.R. No. 208986, [January 13, 2016])

SECOND DIVISION
[G.R. No. 202961. February 4, 2015.]
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER,
RONALDO
DAVID,
BONIFACIO
MATUNDAN,
NORA
MENDOZA, et al., petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, SOLID MILLS, INC., and/or PHILIP ANG,
respondents.

DECISION

LEONEN, J :
p

An employer is allowed to withhold terminal pay and benefits pending the employee's
return of its properties.
Petitioners are respondent Solid Mills, Inc.'s (Solid Mills) employees. 1 They are
represented by the National Federation of Labor Unions (NAFLU), their collective
bargaining agent. 2
As Solid Mills' employees, petitioners and their families were allowed to occupy SMI
Village, a property owned by Solid Mills. 3 According to Solid Mills, this was "[o]ut of
liberality and for the convenience of its employees . . . [and] on the condition that the
employees . . . would vacate the premises anytime the Company deems fit." 4
In September 2003, petitioners were informed that effective October 10, 2003, Solid
Mills would cease its operations due to serious business losses. 5 NAFLU recognized
Solid Mills' closure due to serious business losses in the memorandum of agreement
dated September 1, 2003. 6 The memorandum of agreement provided for Solid Mills'
grant of separation pay less accountabilities, accrued sick leave benefits, vacation leave
benefits, and 13th month pay to the employees. 7 Pertinent portions of the agreement
provide:
WHEREAS, the COMPANY has incurred substantial financial losses and is
currently experiencing further severe financial losses;
WHEREAS, in view of such irreversible financial losses, the COMPANY will
cease its operations on October 10, 2003;

WHEREAS, all employees of the COMPANY on account of irreversible


financial losses, will be dismissed from employment effective October 10,
2003;
In view thereof, the parties agree as follows:
1. That UNION acknowledges that the COMPANY is experiencing
severe financial losses and as a consequence of which,
management is constrained to cease the company's operations.
2. The UNION acknowledges that under Article 283 of the Labor
Code,separation pay is granted to employees who are dismissed
due to closures or cessation of operations NOT DUE to serious
business losses.
3. The UNION acknowledges that in view of the serious business losses
the Company has been experiencing as seen in their audited
financial statements, employees ARE NOT granted separation
benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity
agrees to grant financial assistance less accountabilities to
members of the Union based on length of service to be computed
as follows: (Italics in this paragraph supplied)
Number of days 12.625 for every year of service
5. In view of the above, the members of the UNION will receive such
financial assistance on an equal monthly installments basis based
on the following schedule:
First Check due on January 5, 2004 and every 5th of the month
thereafter until December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union
members are entitled to, specifically those arising from sick and
vacation leave benefits and 13th month pay, less accountabilities
based on the following schedule:
One Time Cash Payment to be distributed anywhere from. . . .
xxx xxx xxx
8. The foregoing agreement is entered into with full knowledge by the
parties of their rights under the law and they hereby bind
themselves not to conduct any concerted action of whatsoever

kind, otherwise the grant of financial assistance as discussed


above will be withheld. 8 (Emphasis in the original)
DacASC

Solid Mills filed its Department of Labor and Employment termination report on
September 2, 2003. 9
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate
SMI Village. 10
Petitioners were no longer allowed to report for work by October 10, 2003. 11 They were
required to sign a memorandum of agreement with release and quitclaim before their
vacation and sick leave benefits, 13th month pay, and separation pay would be released.
12 Employees who signed the memorandum of agreement were considered to have
agreed to vacate SMI Village, and to the demolition of the constructed houses inside as
condition for the release of their termination benefits and separation pay. 13 Petitioners
refused to sign the documents and demanded to be paid their benefits and separation pay.
14

Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of
separation pay, accrued sick and vacation leaves, and 13th month pay. 15 They argued
that their accrued benefits and separation pay should not be withheld because their
payment is based on company policy and practice. 16 Moreover, the 13th month pay is
based on law, specifically, Presidential Decree No. 851. 17 Their possession of Solid
Mills property is not an accountability that is subject to clearance procedures. 18 They
had already turned over to Solid Mills their uniforms and equipment when Solid Mills
ceased operations. 19
On the other hand, Solid Mills argued that petitioners' complaint was premature because
they had not vacated its property. 20
The Labor Arbiter ruled in favor of petitioners. 21 According to the Labor Arbiter, Solid
Mills illegally withheld petitioners' benefits and separation pay. 22 Petitioners' right to
the payment of their benefits and separation pay was vested by law and contract. 23 The
memorandum of agreement dated September 1, 2003 stated no condition to the effect that
petitioners must vacate Solid Mills' property before their benefits could be given to them.
24 Petitioners' possession should not be construed as petitioners' "accountabilities" that
must be cleared first before the release of benefits. 25 Their possession "is not by virtue
of any employer-employee relationship." 26 It is a civil issue, which is outside the
jurisdiction of the Labor Arbiter. 27
The dispositive portion of the Labor Arbiter's decision reads:

WHEREFORE, premises considered, judgment is entered ORDERING


respondents SOLID MILLS, INC. and/or PHILIP ANG (President), in solido
to pay the remaining 21 complainants:
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY,
ALFREDO
JAVIER,
RONALDO
DAVID,
BONIFACIO
MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS
ALAS, RENATO ESTOLANO, REX S. DIMAFELIX, MAURA
MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA, ROBERTO
IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA
MAHILOM, MARILOU LINGA, RENATO LINGA their separation
pay of 12.625 days' pay per year of service, pro-rated 13th month pay
for 2003 and accrued vacation and sick leaves, plus 12% interest p.a.
from date of filing of the lead case/judicial demand on 12/08/03 until
actual payment and/or finality;
2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS,
as she already received on 12/19/03 her accrued 13th month pay for
2003, accrued VL/SL total amount of P15,435.16, likewise, complainant
Jerry L. Sesma as he already received his accrued 13th month pay for
2003, SL/VL in the total amount of P10,974.97, shall be paid only their
separation pay of 12.625 days' pay per year of service but also with 12%
interest p.a. from date of filing of the lead case/judicial demand on
12/08/03 until actual payment and/or finality, which computation as of
date, amount to as shown in the attached computation sheet.
3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez,
Ronaldo Vergara, Ronnie Vergara, Antonio R. Dulo, Sr., Bryan D.
Durano, Silverio P. Durano, Sr., Elizabeth Duarte and Purificacion
Malabanan are DISMISSED WITH PREJUDICE due to amicable
settlement, whereas, that of [RONIE ARANAS], [EMILITO
NAVARRO], [NONILON PASCO], [GENOVEVA PASCO],
[OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE,
for lack of interest and/or failure to prosecute.
The Computation and Examination unit is directed to cause the
computation of the award in Pars. 2 and 3 above. 28 (Emphasis in the
original)

Solid Mills appealed to the National Labor Relations Commission. 29 It prayed for,
among others, the dismissal of the complaints against it and the reversal of the Labor
Arbiter's decision. 30
The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter's
dispositive portion, but reversed paragraphs 1 and 2. Thus:

WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated


10/17/05 is AFFIRMED in so far as par. 3 thereof is concerned but modified in
that paragraphs 1 and 2 thereof are REVERSED and SET ASIDE. Accordingly,
the following complainants, namely: Emir Milan, Ramon Masangkay, Alfredo
Javier, Ronaldo David, Bonifacio Matundan, Nora Mendoza, Myrna Igcas, Raul
De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan, Jessica
Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L.
Sesma's monetary claims in the form of separation pay, accrued 13th month pay
for 2003, accrued vacation and sick leave pays are held in abeyance pending
compliance of their accountabilities to respondent company by turning over the
subject lots they respectively occupy at SMI Village Sucat Muntinlupa City,
Metro Manila to herein respondent company. 31
CAacTH

The National Labor Relations Commission noted that complainants Marilou Linga,
Renato Linga, Ismael Mata, and Carlito Damian were already paid their respective
separation pays and benefits. 32 Meanwhile, Teodora Mahilom already retired long
before Solid Mills' closure. 33 She was already given her retirement benefits. 34
The National Labor Relations Commission ruled that because of petitioners' failure to
vacate Solid Mills' property, Solid Mills was justified in withholding their benefits and
separation pay. 35 Solid Mills granted the petitioners the privilege to occupy its property
on account of petitioners' employment. 36 It had the prerogative to terminate such
privilege. 37 The termination of Solid Mills and petitioners' employer-employee
relationship made it incumbent upon petitioners to turn over the property to Solid Mills.
38

Petitioners filed a motion for partial reconsideration on October 18, 2010, 39 but this was
denied in the November 30, 2010 resolution. 40
Petitioners, thus, filed a petition for certiorari 41 before the Court of Appeals to assail the
National Labor Relations Commission decision of August 31, 2010 and resolution of
November 30, 2010. 42
On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners'
petition, 43 thus:
WHEREFORE, the petition is hereby ordered DISMISSED. 44

The Court of Appeals ruled that Solid Mills' act of allowing its employees to make
temporary dwellings in its property was a liberality on its part. It may be revoked any
time at its discretion. 45 As a consequence of Solid Mills' closure and the resulting
termination of petitioners, the employer-employee relationship between them ceased to
exist. There was no more reason for them to stay in Solid Mills' property. 46 Moreover,
the memorandum of agreement between Solid Mills and the union representing

petitioners provided that Solid Mills' payment of employees' benefits should be "less
accountabilities." 47
On petitioners' claim that there was no evidence that Teodora Mahilom already received
her retirement pay, the Court of Appeals ruled that her complaint filed before the Labor
Arbiter did not include a claim for retirement pay. The issue was also raised for the first
time on appeal, which is not allowed. 48 In any case, she already retired before Solid
Mills ceased its operations. 49
The Court of Appeals agreed with the National Labor Relations Commission's deletion of
interest since it found that Solid Mills' act of withholding payment of benefits and
separation pay was proper. Petitioners' terminal benefits and pay were withheld because
of petitioners' failure to vacate Solid Mills' property. 50
Finally, the Court of Appeals noted that Carlito Damian already received his separation
pay and benefits. 51 Hence, he should no longer be awarded these claims. 52
In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners'
motion for reconsideration. 53
Petitioners raise in this petition the following errors:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT PAYMENT
OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE HELD IN
ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES
TO RESPONDENT SOLID MILLS BY TURNING OVER THE SUBJECT
LOTS THEY RESPECTIVELY OCCUPY AT SMI VILLAGE, SUCAT,
MUNTINLUPA CITY.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE RULING
OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM
IMPOSED BY THE HONORABLE LABOR ARBITER HERNANDEZ ON
THE AMOUNT DUE FROM THE DATE OF FILING OF THE LEAD
CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL ACTUAL
PAYMENT AND/OR FINALITY.
III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS


COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE RULING
OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM FOR
PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY
EVIDENCE THAT SHE RECEIVED THE SAME.
IV
WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO
HIS MONETARY BENEFITS FROM RESPONDENT SOLID MILLS. 54

Petitioners argue that respondent Solid Mills and NAFLU's memorandum of agreement
has no provision stating that benefits shall be paid only upon return of the possession of
respondent Solid Mills' property. 55 It only provides that the benefits shall be "less
accountabilities," which should not be interpreted to include such possession. 56 The fact
that majority of NAFLU's members were not occupants of respondent Solid Mills'
property is evidence that possession of the property was not contemplated in the
agreement. 57 "Accountabilities" should be interpreted to refer only to accountabilities
that were incurred by petitioners while they were performing their duties as employees at
the worksite. 58 Moreover, applicable laws, company practice, or policies do not provide
that 13th month pay, and sick and vacation leave pay benefits, may be withheld pending
satisfaction of liabilities by the employee. 59
Petitioners also point out that the National Labor Relations Commission and the Court of
Appeals have no jurisdiction to declare that petitioners' act of withholding possession of
respondent Solid Mills' property is illegal. 60 The regular courts have jurisdiction over
this issue. 61 It is independent from the issue of payment of petitioners' monetary
benefits. 62
For these reasons, and because, according to petitioners, the amount of monetary award is
no longer in question, petitioners are entitled to 12% interest per annum. 63
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their
claims. They insist that Teodora Mahilom did not receive her retirement benefits and that
Carlito Damian did not receive his separation benefits. 64
Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners'
failure to turn over respondent Solid Mills' property "constituted an unsatisfied
accountability" for which reason "petitioners' benefits could rightfully be withheld." 65
The term "accountability" should be given its natural and ordinary meaning. 66 Thus, it
should be interpreted as "a state of being liable or responsible," or "obligation." 67
Petitioners' differentiation between accountabilities incurred while performing jobs at the
worksite and accountabilities incurred outside the worksite is baseless because the
agreement with NAFLU merely stated "accountabilities," without qualification. 68
DHIETc

On the removal of the award of 12% interest per annum, respondents argue that such
removal was proper since respondent Solid Mills was justified in withholding the
monetary claims. 69
Respondents argue that Teodora Mahilom had no more cause of action for retirement
benefits claim. 70 She had already retired more than a decade before Solid Mills' closure.
She also already received her retirement benefits in 1991. 71 Teodora Mahilom's claim
was also not included in the complaint filed before the Labor Arbiter. It was improper to
raise this claim for the first time on appeal. In any case, Teodora Mahilom's claim was
asserted long after the three-year prescriptive period provided in Article 291 of the Labor
Code. 72
Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed
to receive monetary benefits again, which he, admittedly, already received from Solid
Mills. 73
I
The National Labor Relations
Commission may preliminarily
determine issues related to rights
arising from an employer-employee
relationship
The National Labor Relations Commission has jurisdiction to determine, preliminarily,
the parties' rights over a property, when it is necessary to determine an issue related to
rights or claims arising from an employer-employee relationship.
Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the
National Labor Relations Commission, in its appellate jurisdiction, may determine issues
involving claims arising from employer-employee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION.
(1) Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide within thirty (30)
calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;

CaATDE

3. If accompanied with a claim for reinstatement, those cases that


workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00), regardless of whether
accompanied with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters. (Emphasis supplied)

Petitioners' claim that they have the right to the immediate release of their benefits as
employees separated from respondent Solid Mills is a question arising from the
employer-employee relationship between the parties.
Claims arising from an employer-employee relationship are not limited to claims by an
employee. Employers may also have claims against the employee, which arise from the
same relationship.
In Baez v. Valdevilla, 74 this court ruled that Article 217 of the Labor Code also applies
to employers' claim for damages, which arises from or is connected with the labor issue.
Thus:
Whereas this Court in a number of occasions had applied the jurisdictional
provisions of Article 217 to claims for damages filed by employees, we hold
that by the designating clause "arising from the employer-employee relations"
Article 217 should apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the claim arises
from or is necessarily connected with the fact of termination, and should be
entered as a counterclaim in the illegal dismissal case. 75

Baez was cited inDomondon v. National Labor Relations Commission. 76 One of the
issues in Domondon is whether the Labor Arbiter has jurisdiction to decide an issue on
the transfer of ownership of a vehicle assigned to the employee. It was argued that only
regular courts have jurisdiction to decide the issue. 77

This court ruled that since the transfer of ownership of the vehicle to the employee was
connected to his separation from the employer and arose from the employer-employee
relationship of the parties, the employer's claim fell within the Labor Arbiter's
jurisdiction. 78
As a general rule, therefore, a claim only needs to be sufficiently connected to the labor
issue raised and must arise from an employer-employee relationship for the labor
tribunals to have jurisdiction.
In this case, respondent Solid Mills claims that its properties are in petitioners' possession
by virtue of their status as its employees. Respondent Solid Mills allowed petitioners to
use its property as an act of liberality. Put in other words, it would not have allowed
petitioners to use its property had they not been its employees. The return of its properties
in petitioners' possession by virtue of their status as employees is an issue that must be
resolved to determine whether benefits can be released immediately. The issue raised by
the employer is, therefore, connected to petitioners' claim for benefits and is sufficiently
intertwined with the parties' employer-employee relationship. Thus, it is properly within
the labor tribunals' jurisdiction.
II
Institution of clearance procedures
has legal bases
Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. Clearance procedures are
instituted to ensure that the properties, real or personal, belonging to the employer but are
in the possession of the separated employee, are returned to the employer before the
employee's departure.
As a general rule, employers are prohibited from withholding wages from employees.
The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited. It shall be
unlawful for any person, directly or indirectly, to withhold any amount from the
wages of a worker or induce him to give up any part of his wages by force,
stealth, intimidation, threat or by any other means whatsoever without the
worker's consent.

The Labor Code also prohibits the elimination or diminution of benefits. Thus:
Art. 100. Prohibition against elimination or diminution of benefits.
Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.

However, our law supports the employers' institution of clearance procedures before the
release of wages. As an exception to the general rule that wages may not be withheld and
benefits may not be diminished, the Labor Code provides:
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of
any person, shall make any deduction from the wages of his employees, except:
1. In cases where the worker is insured with his consent by the employer, and
the deduction is to recompense the employer for the amount paid by him as
premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to checkoff has been recognized by the employer or authorized in writing by the
individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor and Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not be
made by the employer.

"Debt" in this case refers to any obligation due from the employee to the employer. It
includes any accountability that the employee may have to the employer. There is no
reason to limit its scope to uniforms and equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union representing
petitioners, agreed that the release of petitioners' benefits shall be "less accountabilities."
"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning
of the term "accountability" does not limit the definition of accountability to those
incurred in the worksite. As long as the debt or obligation was incurred by virtue of the
employer-employee relationship, generally, it shall be included in the employee's
accountabilities that are subject to clearance procedures.
AHDcCT

It may be true that not all employees enjoyed the privilege of staying in respondent Solid
Mills' property. However, this alone does not imply that this privilege when enjoyed was
not a result of the employer-employee relationship. Those who did avail of the privilege
were employees of respondent Solid Mills. Petitioners' possession should, therefore, be
included in the term "accountability."

Accountabilities of employees are personal. They need not be uniform among all
employees in order to be included in accountabilities incurred by virtue of an employeremployee relationship.
Petitioners do not categorically deny respondent Solid Mills' ownership of the property,
and they do not claim superior right to it. What can be gathered from the findings of the
Labor Arbiter, National Labor Relations Commission, and the Court of Appeals is that
respondent Solid Mills allowed the use of its property for the benefit of petitioners as its
employees. Petitioners were merely allowed to possess and use it out of respondent Solid
Mills' liberality. The employer may, therefore, demand the property at will. 79
The return of the property's possession became an obligation or liability on the part of the
employees when the employer-employee relationship ceased. Thus, respondent Solid
Mills has the right to withhold petitioners' wages and benefits because of this existing
debt or liability. In Solas v. Power and Telephone Supply Phils., Inc., et al., this court
recognized this right of the employer when it ruled that the employee in that case was not
constructively dismissed. 80 Thus:
There was valid reason for respondents' withholding of petitioner's salary for the
month of February 2000. Petitioner does not deny that he is indebted to his
employer in the amount of around P95,000.00. Respondents explained that
petitioner's salary for the period of February 1-15, 2000 was applied as partial
payment for his debt and for withholding taxes on his income; while for the
period of February 15-28, 2000, petitioner was already on absence without
leave, hence, was not entitled to any pay. 81

The law does not sanction a situation where employees who do not even assert any claim
over the employer's property are allowed to take all the benefits out of their employment
while they simultaneously withhold possession of their employer's property for no
rightful reason.
Withholding of payment by the employer does not mean that the employer may renege on
its obligation to pay employees their wages, termination payments, and due benefits. The
employees' benefits are also not being reduced. It is only subjected to the condition that
the employees return properties properly belonging to the employer. This is only
consistent with the equitable principle that "no one shall be unjustly enriched or benefited
at the expense of another." 82
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld
separation benefits. These benefits were properly withheld by respondent Solid Mills
because of their refusal to return its property.
III

Mahilom and Damian are not


entitled to the benefits claimed
Teodora Mahilom is not entitled to separation benefits.
Both the National Labor Relations Commission and the Court of Appeals found that
Teodora Mahilom already retired long before respondent Solid Mills' closure. They found
that she already received her retirement benefits. We have no reason to disturb this
finding. This court is not a trier of facts. Findings of the National Labor Relations
Commission, especially when affirmed by the Court of Appeals, are binding upon this
court. 83
Moreover, Teodora Mahilom's claim for retirement benefits was not included in her
complaint filed before the Labor Arbiter. Hence, it may not be raised in the appeal.
Similarly, the National Labor Relations Commission and the Court of Appeals found that
Carlito Damian already received his terminal benefits. Hence, he may no longer claim
terminal benefits.
The fact that respondent Solid Mills has not yet demolished Carlito Damian's house in
SMI Village is not evidence that he did not receive his benefits. Both the National Labor
Relations Commission and the Court of Appeals found that he executed an affidavit
stating that he already received the benefits.
Absent any showing that the National Labor Relations Commission and the Court of
Appeals misconstrued these facts, we will not reverse these findings.
Our laws provide for a clear preference for labor. This is in recognition of the
asymmetrical power of those with capital when they are left to negotiate with their
workers without the standards and protection of law. In cases such as these, the collective
bargaining unit of workers are able to get more benefits and in exchange, the owners are
able to continue with the program of cutting their losses or wind down their operations
due to serious business losses. The company in this case did all that was required by law.
CSIcTa

The preferential treatment given by our law to labor, however, is not a license for abuse.
84 It is not a signal to commit acts of unfairness that will unreasonably infringe on the
property rights of the company. Both labor and employer have social utility, and the law
is not so biased that it does not find a middle ground to give each their due.
Clearly, in this case, it is for the workers to return their housing in exchange for the
release of their benefits. This is what they agreed upon. It is what is fair in the premises.

WHEREFORE, the petition is DENIED. The Court of Appeals' decision is


AFFIRMED.
Carpio, Velasco, Jr., * Del Castillo and Mendoza, JJ., concur.
|||

(Milan v. National Labor Relations Commission, G.R. No. 202961, [February 4, 2015])

SECOND DIVISION
[G.R. No. 198587. January 14, 2015.]
SAUDI ARABIAN AIRLINES (SAUDIA) and BRENDA J. BETIA,
petitioners, vs. MA. JOPETTE M. REBESENCIO, MONTASSAH B.
SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL and LORAINE
S. SCHNEIDER-CRUZ, respondents.

DECISION

LEONEN, J :
p

All Filipinos are entitled to the protection of the rights guaranteed in the
Constitution.
This is a Petition for Review on Certiorari with application for the issuance of
a temporary restraining order and/or writ of preliminary injunction under Rule 45 of
the 1997 Rules of Civil Procedure praying that judgment be rendered reversing and
setting aside the June 16, 2011 Decision 1 and September 13, 2011 Resolution 2 of the
Court of Appeals in CA-G.R. SP. No. 113006.
Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established
and existing under the laws of Jeddah, Kingdom of Saudi Arabia. It has a Philippine
office located at 4/F, Metro House Building, Sen. Gil J. Puyat Avenue, Makati City. 3
In its Petition filed with this court, Saudia identified itself as follows:
1. Petitioner SAUDIA is a foreign corporation established and existing
under the Royal Decree No. M/24 of 18.07.1385H (10.02.1962G) in Jeddah,
Kingdom of Saudi Arabia ("KSA"). Its Philippine Office is located at 4/F
Metro House Building, Sen. Gil J. Puyat Avenue, Makati City (Philippine
Office). It may be served with orders of this Honorable Court through
undersigned counsel at 4th and 6th Floors, Citibank Center Bldg., 8741 Paseo
de Roxas, Makati City. 4 (Emphasis supplied)

Respondents (complainants before the Labor Arbiter) were recruited and hired
by Saudia as Temporary Flight Attendants with the accreditation and approval of the
Philippine Overseas Employment Administration. 5 After undergoing seminars
required by the Philippine Overseas Employment Administration for deployment
overseas, as well as training modules offered by Saudia (e.g., initial flight
attendant/training course and transition training), and after working as Temporary
Flight Attendants, respondents became Permanent Flight Attendants. They then
entered into Cabin Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma.
Jopette) on May 16, 1990; 6 Montassah B. Sacar-Adiong (Montassah) and Rouen

Ruth A. Cristobal (Rouen Ruth) on May 22, 1993;


(Loraine) on August 27, 1995. 8

and Loraine Schneider-Cruz

Respondents continued their employment with Saudia until they were


separated from service on various dates in 2006. 9
Respondents contended that the termination of their employment was illegal.
They alleged that the termination was made solely because they were pregnant. 10
As respondents alleged, they had informed Saudia of their respective
pregnancies and had gone through the necessary procedures to process their maternity
leaves. Initially, Saudia had given its approval but later on informed respondents that
its management in Jeddah, Saudi Arabia had disapproved their maternity leaves. In
addition, it required respondents to file their resignation letters. 11
Respondents were told that if they did not resign, Saudia would terminate them
all the same. The threat of termination entailed the loss of benefits, such as separation
pay and ticket discount entitlements. 12
DHITCc

Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's
Base Manager, Abdulmalik Saddik (Abdulmalik). 13 Montassah was informed
personally by Abdulmalik and a certain Faisal Hussein on October 20, 2006 after
being required to report to the office one (1) month into her maternity leave. 14 Rouen
Ruth was also personally informed by Abdulmalik on October 17, 2006 after being
required to report to the office by her Group Supervisor. 15 Loraine received a call on
October 12, 2006 from her Group Supervisor, Dakila Salvador. 16
Saudia anchored its disapproval of respondents' maternity leaves and demand
for their resignation on its "Unified Employment Contract for Female Cabin
Attendants" (Unified Contract). 17 Under the Unified Contract, the employment of a
Flight Attendant who becomes pregnant is rendered void. It provides:
(H) Due to the essential nature of the Air Hostess functions to be physically fit
on board to provide various services required in normal or emergency
cases on both domestic/international flights beside her role in
maintaining continuous safety and security of passengers, and since she
will not be able to maintain the required medical fitness while at work in
case of pregnancy, accordingly, if the Air Hostess becomes pregnant at
any time during the term of this contract, this shall render her
employment contract as void and she will be terminated due to lack of
medical fitness. 18 (Emphasis supplied)

In their Comment on the present Petition, 19 respondents emphasized that the


Unified Contract took effect on September 23, 2006 (the first day of Ramadan), 20
well after they had filed and had their maternity leaves approved. Ma. Jopette filed her
maternity leave application on September 5, 2006. 21 Montassah filed her maternity
leave application on August 29, 2006, and its approval was already indicated in
Saudia's computer system by August 30, 2006. 22 Rouen Ruth filed her maternity

leave application on September 13, 2006,


application on August 22, 2006. 24

23

and Loraine filed her maternity leave

Rather than comply and tender resignation letters, respondents filed separate
appeal letters that were all rejected. 25
Despite these initial rejections, respondents each received calls on the morning
of November 6, 2006 from Saudia's office secretary informing them that their
maternity leaves had been approved. Saudia, however, was quick to renege on its
approval. On the evening of November 6, 2006, respondents again received calls
informing them that it had received notification from Jeddah, Saudi Arabia that their
maternity leaves had been disapproved. 26
Faced with the dilemma of resigning or totally losing their benefits,
respondents executed handwritten resignation letters. In Montassah's and Rouen
Ruth's cases, their resignations were executed on Saudia's blank letterheads that
Saudia had provided. These letterheads already had the word "RESIGNATION" typed
on the subject portions of their headings when these were handed to respondents. 27
On November 8, 2007, respondents filed a Complaint against Saudia and its
officers for illegal dismissal and for underpayment of salary, overtime pay, premium
pay for holiday, rest day, premium, service incentive leave pay, 13th month pay,
separation pay, night shift differentials, medical expense reimbursements, retirement
benefits, illegal deduction, lay-over expense and allowances, moral and exemplary
damages, and attorney's fees. 28 The case was initially assigned to Labor Arbiter
Hermino V. Suelo and docketed as NLRC NCR Case No. 00-11-12342-07.
Saudia assailed the jurisdiction of the Labor Arbiter. 29 It claimed that all the
determining points of contact referred to foreign law and insisted that the Complaint
ought to be dismissed on the ground of forum non conveniens. 30 It added that
respondents had no cause of action as they resigned voluntarily. 31
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco
rendered the Decision 32 dismissing respondents' Complaint. The dispositive portion
of this Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
DISMISSING the instant complaint for lack of jurisdiction/merit. 33

On respondents' appeal, the National Labor Relations Commission's Sixth


Division reversed the ruling of Executive Labor Arbiter Jambaro-Franco. It explained
that "[c]onsidering that complainants-appellants are OFWs, the Labor Arbiters and the
NLRC has [sic] jurisdiction to hear and decide their complaint for illegal
termination." 34 On the matter of forum non conveniens, it noted that there were no
special circumstances that warranted its abstention from exercising jurisdiction. 35 On
the issue of whether respondents were validly dismissed, it held that there was nothing
on record to support Saudia's claim that respondents resigned voluntarily.
cEaSHC

The dispositive portion of the November 19, 2009 National Labor Relations
Commission Decision 36 reads:
WHEREFORE, premises considered, judgment is hereby rendered
finding the appeal impressed with merit. The respondents-appellees are hereby
directed to pay complainants-appellants the aggregate amount of
SR614,001.24 corresponding to their backwages and separation pay plus ten
(10%) percent thereof as attorney's fees. The decision of the Labor Arbiter
dated December 12, 2008 is hereby VACATED and SET ASIDE. Attached is
the computation prepared by this Commission and made an integral part of
this Decision. 37

In the Resolution dated February 11, 2010, 38 the National Labor Relations
Commission denied petitioners' Motion for Reconsideration.
In the June 16, 2011 Decision, 39 the Court of Appeals denied petitioners' Rule
65 Petition and modified the Decision of the National Labor Relations Commission
with respect to the award of separation pay and backwages.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the instant petition is hereby DENIED. The Decision
dated November 19, 2009 issued by public respondent, Sixth Division of the
National Labor Relations Commission National Capital Region is
MODIFIED only insofar as the computation of the award of separation pay
and backwages. For greater clarity, petitioners are ordered to pay private
respondents separation pay which shall be computed from private respondents'
first day of employment up to the finality of this decision, at the rate of one
month per year of service and backwages which shall be computed from the
date the private respondents were illegally terminated until finality of this
decision. Consequently, the ten percent (10%) attorney's fees shall be based
on the total amount of the award. The assailed Decision is affirmed in all other
respects.
The labor arbiter is hereby DIRECTED to make a recomputation
based on the foregoing. 40

In the Resolution dated September 13, 2011,


petitioners' Motion for Reconsideration.

41

the Court of Appeals denied

Hence, this Appeal was filed.


The issues for resolution are the following:
First, whether the Labor Arbiter and the National Labor Relations Commission
may exercise jurisdiction over Saudi Arabian Airlines and apply Philippine law in
adjudicating the present dispute;
Second, whether respondents voluntarily resigned or were illegally terminated;
and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi
Arabian Airlines.
I
Summons were validly served on Saudia and jurisdiction over it validly
acquired.
There is no doubt that the pleadings and summons were served on Saudia
through its counsel. 42 Saudia, however, claims that the Labor Arbiter and the
National Labor Relations Commission had no jurisdiction over it because summons
were never served on it but on "Saudia Manila." 43 Referring to itself as "Saudia
Jeddah," it claims that "Saudia Jeddah" and not "Saudia Manila" was the employer of
respondents because:
First, "Saudia Manila" was never a party to the Cabin Attendant contracts
entered into by respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for respondents'
salaries and benefits; and
Lastly, it was with "Saudia Jeddah" that respondents filed their resignations. 44
CTIEac

Saudia posits that respondents' Complaint was brought against the wrong party
because "Saudia Manila," upon which summons was served, was never the employer
of respondents. 45
Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other
than its bare allegation, there is no basis for concluding that "Saudia Jeddah" is
distinct from "Saudia Manila."
What is clear is Saudia's statement in its own Petition that what it has is a
"Philippine Office . . . located at 4/F Metro House Building, Sen. Gil J. Puyat Avenue,
Makati City." 46 Even in the position paper that Saudia submitted to the Labor Arbiter,
47 what Saudia now refers to as "Saudia Jeddah" was then only referred to as "Saudia
Head Office at Jeddah, KSA," 48 while what Saudia now refers to as "Saudia Manila"
was then only referred to as "Saudia's office in Manila." 49
By its own admission, Saudia, while a foreign corporation, has a Philippine
office.
Section 3 (d) of Republic Act No. 7042, otherwise known as the Foreign
Investments Act of 1991, provides the following:
The phrase "doing business" shall include . . . opening offices, whether
called "liaison" offices or branches; . . . and any other act or acts that imply
a continuity of commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of commercial

gain or of the purpose and object of the business organization. (Emphasis


supplied)

A plain application of Section 3 (d) of the Foreign Investments Act leads to no


other conclusion than that Saudia is a foreign corporation doing business in the
Philippines. As such, Saudia may be sued in the Philippines and is subject to the
jurisdiction of Philippine tribunals.
Moreover, since there is no real distinction between "Saudia Jeddah" and
"Saudia Manila" the latter being nothing more than Saudia's local office service
of summons to Saudia's office in Manila sufficed to vest jurisdiction over Saudia's
person in Philippine tribunals.
II
Saudia asserts that Philippine courts and/or tribunals are not in a position to
make an intelligent decision as to the law and the facts. This is because respondents'
Cabin Attendant contracts require the application of the laws of Saudi Arabia, rather
than those of the Philippines. 50 It claims that the difficulty of ascertaining foreign law
calls into operation the principle of forum non conveniens, thereby rendering improper
the exercise of jurisdiction by Philippine tribunals. 51
A choice of law governing the validity of contracts or the interpretation of its
provisions does not necessarily imply forum non conveniens. Choice of law and forum
non conveniens are entirely different matters.
Choice of law provisions are an offshoot of the fundamental principle of
autonomy of contracts. Article 1306 of the Civil Code firmly ensconces this:
Article 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy.

In contrast, forum non conveniens is a device akin to the rule against forum
shopping. It is designed to frustrate illicit means for securing advantages and vexing
litigants that would otherwise be possible if the venue of litigation (or dispute
resolution) were left entirely to the whim of either party.
Contractual choice of law provisions factor into transnational litigation and
dispute resolution in one of or in a combination of four ways: (1) procedures for
settling disputes, e.g., arbitration; (2) forum, i.e., venue; (3) governing law; and (4)
basis for interpretation. Forum non conveniens relates to, but is not subsumed by, the
second of these.
SaCIDT

Likewise, contractual choice of law is not determinative of jurisdiction.


Stipulating on the laws of a given jurisdiction as the governing law of a contract does
not preclude the exercise of jurisdiction by tribunals elsewhere. The reverse is equally
true: The assumption of jurisdiction by tribunals does not ipso facto mean that it

cannot apply and rule on the basis of the parties' stipulation. In Hasegawa v.
Kitamura: 52
Analytically, jurisdiction and choice of law are two distinct concepts.
Jurisdiction considers whether it is fair to cause a defendant to travel to this
state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both
parties. The power to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law. While jurisdiction and the choice
of the lex fori will often coincide, the "minimum contacts" for one do not
always provide the necessary "significant contacts" for the other. The question
of whether the law of a state can be applied to a transaction is different from
the question of whether the courts of that state have jurisdiction to enter a
judgment. 53

As various dealings, commercial or otherwise, are facilitated by the


progressive ease of communication and travel, persons from various jurisdictions find
themselves transacting with each other. Contracts involving foreign elements are,
however, nothing new. Conflict of laws situations precipitated by disputes and
litigation anchored on these contracts are not totally novel.
Transnational transactions entail differing laws on the requirements for the
validity of the formalities and substantive provisions of contracts and their
interpretation. These transactions inevitably lend themselves to the possibility of
various fora for litigation and dispute resolution. As observed by an eminent expert on
transnational law:
The more jurisdictions having an interest in, or merely even a point of contact
with, a transaction or relationship, the greater the number of potential fora for
the resolution of disputes arising out of or related to that transaction or
relationship. In a world of increased mobility, where business and personal
transactions transcend national boundaries, the jurisdiction of a number of
different fora may easily be invoked in a single or a set of related disputes. 54

Philippine law is definite as to what governs the formal or extrinsic validity of


contracts. The first paragraph of Article 17 of the Civil Code provides that "[t]he
forms and solemnities of contracts . . . shall be governed by the laws of the country in
which they are executed" 55 (i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling conflict of laws
situations on matters pertaining to substantive content of contracts. It has been noted
that three (3) modes have emerged: (1) lex loci contractus or the law of the place of
the making; (2) lex loci solutionis or the law of the place of performance; and (3) lex
loci intentionis or the law intended by the parties. 56
Given Saudia's assertions, of particular relevance to resolving the present
dispute is lex loci intentionis.
cHECAS

An author observed that Spanish jurists and commentators "favor lex loci
intentionis." 57 These jurists and commentators proceed from the Civil Code of Spain,
which, like our Civil Code,is silent on what governs the intrinsic validity of contracts,
and the same civil law traditions from which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan
Guarantee v. V.P. Eusebio Construction, Inc., 58 manifested preference for
"allow[ing] the parties to select the law applicable to their contract":
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal systems, however, is
that the intrinsic validity of a contract must be governed by the lex contractus
or "proper law of the contract." This is the law voluntarily agreed upon by the
parties (the lex loci voluntatis) or the law intended by them either expressly or
implicitly (the lex loci intentionis). The law selected may be implied from
such factors as substantial connection with the transaction, or the nationality
or domicile of the parties. Philippine courts would do well to adopt the first
and most basic rule in most legal systems, namely, to allow the parties to
select the law applicable to their contract, subject to the limitation that it is
not against the law, morals, or public policy of the forum and that the chosen
law must bear a substantive relationship to the transaction. 59 (Emphasis in
the original)

Saudia asserts that stipulations set in the Cabin Attendant contracts require the
application of the laws of Saudi Arabia. It insists that the need to comply with these
stipulations calls into operation the doctrine of forum non conveniens and, in turn,
makes it necessary for Philippine tribunals to refrain from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational litigation in
any or a combination of four (4) ways. Moreover, forum non conveniens relates to one
of these: choosing between multiple possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora along with
the host of difficulties it poses is not unique to transnational litigation. It is a
difficulty that similarly arises in disputes well within the bounds of a singe
jurisdiction.
aTHCSE

When parallel litigation arises strictly within the context of a single


jurisdiction, such rules as those on forum shopping, litis pendentia, and res judicata
come into operation. Thus, in the Philippines, the 1997 Rules on Civil Procedure
provide for willful and deliberate forum shopping as a ground not only for summary
dismissal with prejudice but also for citing parties and counsels in direct contempt, as
well as for the imposition of administrative sanctions. 60 Likewise, the same rules
expressly provide that a party may seek the dismissal of a Complaint or another
pleading asserting a claim on the ground "[t]hat there is another action pending
between the same parties for the same cause," i.e., litis pendentia, or "[t]hat the cause
of action is barred by a prior judgment," 61 i.e., res judicata.

Forum non conveniens, like the rules of forum shopping, litis pendentia, and
res judicata, is a means of addressing the problem of parallel litigation. While the
rules of forum shopping, litis pendentia, and res judicata are designed to address the
problem of parallel litigation within a single jurisdiction, forum non conveniens is a
means devised to address parallel litigation arising in multiple jurisdictions.
Forum non conveniens literally translates to "the forum is inconvenient." 62 It
is a concept in private international law and was devised to combat the "less than
honorable" reasons and excuses that litigants use to secure procedural advantages,
annoy and harass defendants, avoid overcrowded dockets, and select a "friendlier"
venue. 63 Thus, the doctrine of forum non conveniens addresses the same rationale that
the rule against forum shopping does, albeit on a multijurisdictional scale.
Forum non conveniens, like res judicata, 64 is a concept originating in common
law. 65 However, unlike the rule on res judicata, as well as those on litis pendentia
and forum shopping, forum non conveniens finds no textual anchor, whether in statute
or in procedural rules, in our civil law system. Nevertheless, jurisprudence has applied
forum non conveniens as basis for a court to decline its exercise of jurisdiction. 66
Forum non conveniens is soundly applied not only to address parallel litigation
and undermine a litigant's capacity to vex and secure undue advantages by engaging
in forum shopping on an international scale. It is also grounded on principles of
comity and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in exercising
jurisdiction on account of forum non conveniens is a deferential gesture to the
tribunals of another sovereign. It is a measure that prevents the former's having to
interfere in affairs which are better and more competently addressed by the latter.
Further, forum non conveniens entails a recognition not only that tribunals elsewhere
are better suited to rule on and resolve a controversy, but also, that these tribunals are
better positioned to enforce judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation where a tribunal is
rendered incompetent in the face of the greater capability both analytical and
practical of a tribunal in another jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is as much a
matter of efficiency and economy as it is a matter of international courtesy. A court
would effectively be neutering itself if it insists on adjudicating a controversy when it
knows full well that it is in no position to enforce its judgment. Doing so is not only
an exercise in futility; it is an act of frivolity. It clogs the dockets of a tribunal and
leaves it to waste its efforts on affairs, which, given transnational exigencies, will be
reduced to mere academic, if not trivial, exercises.
Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts
of law cases, may refuse impositions on its jurisdiction where it is not the most
'convenient' or available forum and the parties are not precluded from seeking

remedies elsewhere." 67 In Puyat v. Zabarte, 68 this court recognized the following


situations as among those that may warrant a court's desistance from exercising
jurisdiction:
1) The belief that the matter can be better tried and decided elsewhere, either
because the main aspects of the case transpired in a foreign jurisdiction
or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known
as forum shopping[,] merely to secure procedural advantages or to
convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non-residents or aliens
when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right
sought to be maintained; and
5) The difficulty of ascertaining foreign law. 69

In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of


Appeals, 70 this court underscored that a Philippine court may properly assume
jurisdiction over a case if it chooses to do so to the extent: "(1) that the Philippine
Court is one to which the parties may conveniently resort to; (2) that the Philippine
Court is in a position to make an intelligent decision as to the law and the facts; and
(3) that the Philippine Court has or is likely to have power to enforce its decision." 71
The use of the word "may" (i.e., "may refuse impositions on its jurisdiction") 72
in the decisions shows that the matter of jurisdiction rests on the sound discretion of a
court. Neither the mere invocation of forum non conveniens nor the averment of
foreign elements operates to automatically divest a court of jurisdiction. Rather, a
court should renounce jurisdiction only "after 'vital facts are established, to determine
whether special circumstances' require the court's desistance." 73 As the propriety of
applying forum non conveniens is contingent on a factual determination, it is,
therefore, a matter of defense. 74
IDSEAH

The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure
is exclusive in its recital of the grounds for dismissal that are exempt from the
omnibus motion rule: (1) lack of jurisdiction over the subject matter; (2) litis
pendentia; (3) res judicata; and (4) prescription. Moreover, dismissal on account of
forum non conveniens is a fundamentally discretionary matter. It is, therefore, not a
matter for a defendant to foist upon the court at his or her own convenience; rather, it
must be pleaded at the earliest possible opportunity.
On the matter of pleading forum non conveniens, we state the rule, thus: Forum
non conveniens must not only be clearly pleaded as a ground for dismissal; it must be
pleaded as such at the earliest possible opportunity. Otherwise, it shall be deemed
waived.

This court notes that in Hasegawa, 76 this court stated that forum non
conveniens is not a ground for a motion to dismiss. The factual ambience of this case
however does not squarely raise the viability of this doctrine. Until the opportunity
comes to review the use of motions to dismiss for parallel litigation, Hasegawa
remains existing doctrine.
Consistent with forum non conveniens as fundamentally a factual matter, it is
imperative that it proceed from a factually established basis. It would be improper to
dismiss an action pursuant to forum non conveniens based merely on a perceived,
likely, or hypothetical multiplicity of fora. Thus, a defendant must also plead and
show that a prior suit has, in fact, been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by duplicitous
litigation, the embarrassment of intruding into the affairs of another sovereign, and the
squandering of judicial efforts in resolving a dispute already lodged and better
resolved elsewhere. As has been noted:
A case will not be stayed or dismissed on [forum] non conveniens
grounds unless the plaintiff is shown to have an available alternative forum
elsewhere. On this, the moving party bears the burden of proof.
A number of factors affect the assessment of an alternative forum's
adequacy. The statute of limitations abroad may have run, of the foreign court
may lack either subject matter or personal jurisdiction over the defendant. . . .
Occasionally, doubts will be raised as to the integrity or impartiality of the
foreign court (based, for example, on suspicions of corruption or bias in favor
of local nationals), as to the fairness of its judicial procedures, or as to is
operational efficiency (due, for example, to lack of resources, congestion and
delay, or interfering circumstances such as a civil unrest). In one noted case,
[it was found] that delays of 'up to a quarter of a century' rendered the foreign
forum. . . inadequate for these purposes. 77

We deem it more appropriate and in the greater interest of prudence that a


defendant not only allege supposed dangerous tendencies in litigating in this
jurisdiction; the defendant must also show that such danger is real and present in that
litigation or dispute resolution has commenced in another jurisdiction and that a
foreign tribunal has chosen to exercise jurisdiction.
III
Forum non conveniens finds no application and does not operate to divest
Philippine tribunals of jurisdiction and to require the application of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the stipulations
of the Cabin Attendant contracts that require the application of the laws of Saudi
Arabia.
Forum non conveniens relates to forum, not to the choice of governing law.
That forum non conveniens may ultimately result in the application of foreign law is

merely an incident of its application. In this strict sense, forum non conveniens is not
applicable. It is not the primarily pivotal consideration in this case.
In any case, even a further consideration of the applicability of forum non
conveniens on the incidental matter of the law governing respondents' relation with
Saudia leads to the conclusion that it is improper for Philippine tribunals to divest
themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a forum and
its incidents must grapple with two (2) considerations: first, the availability and
adequacy of recourse to a foreign tribunal; and second, the question of where, as
between the forum court and a foreign court, the balance of interests inhering in a
dispute weighs more heavily.
The first is a pragmatic matter. It relates to the viability of ceding jurisdiction
to a foreign tribunal and can be resolved by juxtaposing the competencies and
practical circumstances of the tribunals in alternative fora. Exigencies, like the statute
of limitations, capacity to enforce orders and judgments, access to records,
requirements for the acquisition of jurisdiction, and even questions relating to the
integrity of foreign courts, may render undesirable or even totally unfeasible recourse
to a foreign court. As mentioned, we consider it in the greater interest of prudence that
a defendant show, in pleading forum non conveniens, that litigation has commenced in
another jurisdiction and that a foreign tribunal has, in fact, chosen to exercise
jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of interests
inhering in a dispute: first, the vinculum which the parties and their relation have to a
given jurisdiction; and second, the public interest that must animate a tribunal, in its
capacity as an agent of the sovereign, in choosing to assume or decline jurisdiction.
The first is more concerned with the parties, their personal circumstances, and private
interests; the second concerns itself with the state and the greater social order.
AHCETa

In considering the vinculum, a court must look into the preponderance of


linkages which the parties and their transaction may have to either jurisdiction. In this
respect, factors, such as the parties' respective nationalities and places of negotiation,
execution, performance, engagement or deployment, come into play.
In considering public interest, a court proceeds with a consciousness that it is
an organ of the state. It must, thus, determine if the interests of the sovereign (which
acts through it) are outweighed by those of the alternative jurisdiction. In this respect,
the court delves into a consideration of public policy. Should it find that public
interest weighs more heavily in favor of its assumption of jurisdiction, it should
proceed in adjudicating the dispute, any doubt or contrary view arising from the
preponderance of linkages notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law


provisions. Where such provisions exist, Philippine tribunals, acting as the forum
court, generally defer to the parties' articulated choice.
This is consistent with the fundamental principle of autonomy of contracts.
Article 1306 of the Civil Code expressly provides that "[t]he contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem
convenient." 78 Nevertheless, while a Philippine tribunal (acting as the forum court) is
called upon to respect the parties' choice of governing law, such respect must not be
so permissive as to lose sight of considerations of law, morals, good customs, public
order, or public policy that underlie the contract central to the controversy.
Specifically with respect to public policy, in Pakistan International Airlines
Corporation v. Ople, 79 this court explained that:
cHaCAS

counter-balancing the principle of autonomy of contracting parties is the


equally general rule that provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written into the
contract. Put a little differently, the governing principle is that parties may not
contract away applicable provisions of law especially peremptory provisions
dealing with matters heavily impressed with public interest. 80 (Emphasis
supplied)

Article II, Section 14 of the 1987 Constitution provides that "[t]he State . . .
shall ensure the fundamental equality before the law of women and men." Contrasted
with Article II, Section 1 of the 1987 Constitution's statement that "[n]o person shall .
. . be denied the equal protection of the laws," Article II, Section 14 exhorts the State
to "ensure." This does not only mean that the Philippines shall not countenance nor
lend legal recognition and approbation to measures that discriminate on the basis of
one's being male or female. It imposes an obligation to actively engage in securing the
fundamental equality of men and women.
The Convention on the Elimination of all Forms of Discrimination against
Women (CEDAW), signed and ratified by the Philippines on July 15, 1980, and on
August 5, 1981, respectively, 81 is part of the law of the land. In view of the
widespread signing and ratification of, as well as adherence (in practice) to it by
states, it may even be said that many provisions of the CEDAW may have become
customary international law. The CEDAW gives effect to the Constitution's policy
statement in Article II, Section 14. Article I of the CEDAW defines "discrimination
against women" as:
any distinction, exclusion or restriction made on the basis of sex which has the
effect or purpose of impairing or nullifying the recognition, enjoyment or
exercise by women, irrespective of their marital status, on a basis of equality
of men and women, of human rights and fundamental freedoms in the
political, economic, social, cultural, civil or any other field. 82

The constitutional exhortation to ensure fundamental equality, as illumined by


its enabling law, the CEDAW, must inform and animate all the actions of all
personalities acting on behalf of the State. It is, therefore, the bounden duty of this
court, in rendering judgment on the disputes brought before it, to ensure that no
discrimination is heaped upon women on the mere basis of their being women. This is
a point so basic and central that all our discussions and pronouncements regardless
of whatever averments there may be of foreign law must proceed from this
premise.
So informed and animated, we emphasize the glaringly discriminatory nature
of Saudia's policy. As argued by respondents, Saudia's policy entails the termination
of employment of flight attendants who become pregnant. At the risk of stating the
obvious, pregnancy is an occurrence that pertains specifically to women. Saudia's
policy excludes from and restricts employment on the basis of no other consideration
but sex.
We do not lose sight of the reality that pregnancy does present physical
limitations that may render difficult the performance of functions associated with
being a flight attendant. Nevertheless, it would be the height of iniquity to view
pregnancy as a disability so permanent and immutable that it must entail the
termination of one's employment. It is clear to us that any individual, regardless of
gender, may be subject to exigencies that limit the performance of functions.
However, we fail to appreciate how pregnancy could be such an impairing occurrence
that it leaves no other recourse but the complete termination of the means through
which a woman earns a living.
Apart from the constitutional policy on the fundamental equality before the law
of men and women, it is settled that contracts relating to labor and employment are
impressed with public interest. Article 1700 of the Civil Code provides that "[t]he
relation between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good."
Consistent with this, this court's pronouncements in Pakistan International
Airlines Corporation 83 are clear and unmistakable:
DACcIH

Petitioner PIA cannot take refuge in paragraph 10 of its employment


agreement which specifies, firstly, the law of Pakistan as the applicable law of
the agreement and, secondly, lays the venue for settlement of any dispute
arising out of or in connection with the agreement "only [in] courts of
Karachi, Pakistan". The first clause of paragraph 10 cannot be invoked to
prevent the application of Philippine labor laws and regulations to the subject
matter of this case, i.e., the employer-employee relationship between
petitioner PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the otherwise
applicable Philippine laws and regulations cannot be rendered illusory by the
parties agreeing upon some other law to govern their relationship. . . . Under
these circumstances, paragraph 10 of the employment agreement cannot be

given effect so as to oust Philippine agencies and courts of the jurisdiction


vested upon them by Philippine law. 84 (Emphasis supplied)

As the present dispute relates to (what the respondents allege to be) the illegal
termination of respondents' employment, this case is immutably a matter of public
interest and public policy. Consistent with clear pronouncements in law and
jurisprudence, Philippine laws properly find application in and govern this case.
Moreover, as this premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals may properly
assume jurisdiction over the present controversy.
Philippine jurisprudence provides ample illustrations of when a court's
renunciation of jurisdiction on account of forum non conveniens is proper or
improper.
In Philsec Investment Corporation v. Court of Appeals, 85 this court noted that
the trial court failed to consider that one of the plaintiffs was a domestic corporation,
that one of the defendants was a Filipino, and that it was the extinguishment of the
latter's debt that was the object of the transaction subject of the litigation. Thus, this
court held, among others, that the trial court's refusal to assume jurisdiction was not
justified by forum non conveniens and remanded the case to the trial court.
In Raytheon International, Inc. v. Rouzie, Jr., 86 this court sustained the trial
court's assumption of jurisdiction considering that the trial court could properly
enforce judgment on the petitioner which was a foreign corporation licensed to do
business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr., 87 this court found no reason to
disturb the trial court's assumption of jurisdiction over a case in which, as noted by
the trial court, "it is more convenient to hear and decide the case in the Philippines
because Todaro [the plaintiff] resides in the Philippines and the contract allegedly
breached involve[d] employment in the Philippines." 88
In Pacific Consultants International Asia, Inc. v. Schonfeld, 89 this court held
that the fact that the complainant in an illegal dismissal case was a Canadian citizen
and a repatriate did not warrant the application of forum non conveniens considering
that: (1) the Labor Code does not include forum non conveniens as a ground for the
dismissal of a complaint for illegal dismissal; (2) the propriety of dismissing a case
based on forum non conveniens requires a factual determination; and (3) the requisites
for assumption of jurisdiction as laid out in Bank of America, NT&SA 90 were all
satisfied.
HSCATc

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor
Relations Commission 91 that the National Labor Relations Commission was a
seriously inconvenient forum. In that case, private respondent Marcelo G. Santos was
working in the Sultanate of Oman when he received a letter from Palace Hotel
recruiting him for employment in Beijing, China. Santos accepted the offer.

Subsequently, however, he was released from employment supposedly due to


business reverses arising from political upheavals in China (i.e., the Tiananmen
Square incidents of 1989). Santos later filed a Complaint for illegal dismissal
impleading Palace Hotel's General Manager, Mr. Gerhard Schmidt, the Manila Hotel
International Company Ltd. (which was responsible for training Palace Hotel's
personnel and staff), and the Manila Hotel Corporation (which owned 50% of Manila
Hotel International Company Ltd.'s capital stock).
In ruling against the National Labor Relations Commission's exercise of
jurisdiction, this court noted that the main aspects of the case transpired in two (2)
foreign jurisdictions, Oman and China, and that the case involved purely foreign
elements. Specifically, Santos was directly hired by a foreign employer through
correspondence sent to Oman. Also, the proper defendants were neither Philippine
nationals nor engaged in business in the Philippines, while the main witnesses were
not residents of the Philippines. Likewise, this court noted that the National Labor
Relations Commission was in no position to conduct the following: first, determine
the law governing the employment contract, as it was entered into in foreign soil;
second, determine the facts, as Santos' employment was terminated in Beijing; and
third, enforce its judgment, since Santos' employer, Palace Hotel, was incorporated
under the laws of China and was not even served with summons.
Contrary to Manila Hotel, the case now before us does not entail a
preponderance of linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not approximate the
circumstances enumerated in Puyat, 92 which this court recognized as possibly
justifying the desistance of Philippine tribunals from exercising jurisdiction.
First, there is no basis for concluding that the case can be more conveniently
tried elsewhere. As established earlier, Saudia is doing business in the Philippines.
For their part, all four (4) respondents are Filipino citizens maintaining residence in
the Philippines and, apart from their previous employment with Saudia, have no other
connection to the Kingdom of Saudi Arabia. It would even be to respondents'
inconvenience if this case were to be tried elsewhere.
Second, the records are bereft of any indication that respondents filed their
Complaint in an effort to engage in forum shopping or to vex and inconvenience
Saudia.
Third, there is no indication of "unwillingness to extend local judicial facilities
to non-residents or aliens." 93 That Saudia has managed to bring the present
controversy all the way to this court proves this.
Fourth, it cannot be said that the local judicial machinery is inadequate for
effectuating the right sought to be maintained. Summons was properly served on
Saudia and jurisdiction over its person was validly acquired.

Lastly, there is not even room for considering foreign law. Philippine law
properly governs the present dispute.
As the question of applicable law has been settled, the supposed difficulty of
ascertaining foreign law (which requires the application of forum non conveniens)
provides no insurmountable inconvenience or special circumstance that will justify
depriving Philippine tribunals of jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the laws of
Saudi Arabia which should apply, it does not follow that Philippine tribunals should
refrain from exercising jurisdiction. To recall our pronouncements in Puyat, 94 as well
as in Bank of America, NT&SA, 95 it is not so much the mere applicability of foreign
law which calls into operation forum non conveniens. Rather, what justifies a court's
desistance from exercising jurisdiction is "[t]he difficulty of ascertaining foreign law"
96 or the inability of a "Philippine Court . . . to make an intelligent decision as to the
law[.]" 97
IDTSEH

Consistent with lex loci intentionis, to the extent that it is proper and
practicable (i.e., "to make an intelligent decision"), 98 Philippine tribunals may apply
the foreign law selected by the parties. In fact, (albeit without meaning to make a
pronouncement on the accuracy and reliability of respondents' citation) in this case,
respondents themselves have made averments as to the laws of Saudi Arabia. In their
Comment, respondents write:
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is
illegal and unlawful to terminate the employment of any woman by virtue of
pregnancy. The law in Saudi Arabia is even more harsh and strict [sic] in that
no employer can terminate the employment of a female worker or give her a
warning of the same while on Maternity Leave, the specific provision of Saudi
Labor Laws on the matter is hereto quoted as follows:
"An employer may not terminate the employment of a
female worker or give her a warning of the same while on
maternity leave." (Article 155, Labor Law of the Kingdom of
Saudi Arabia, Royal Decree No. M/51.) 99

All told, the considerations for assumption of jurisdiction by Philippine


tribunals as outlined in Bank of America, NT&SA 100 have been satisfied. First, all the
parties are based in the Philippines and all the material incidents transpired in this
jurisdiction. Thus, the parties may conveniently seek relief from Philippine tribunals.
Second, Philippine tribunals are in a position to make an intelligent decision as to the
law and the facts. Third, Philippine tribunals are in a position to enforce their
decisions. There is no compelling basis for ceding jurisdiction to a foreign tribunal.
Quite the contrary, the immense public policy considerations attendant to this case
behoove Philippine tribunals to not shy away from their duty to rule on the case.
IV

Respondents were illegally terminated.


In Bilbao v. Saudi Arabian Airlines, 101 this court defined voluntary resignation
as "the voluntary act of an employee who is in a situation where one believes that
personal reasons cannot be sacrificed in favor of the exigency of the service, and one
has no other choice but to dissociate oneself from employment. It is a formal
pronouncement or relinquishment of an office, with the intention of relinquishing the
office accompanied by the act of relinquishment." 102 Thus, essential to the act of
resignation is voluntariness. It must be the result of an employee's exercise of his or
her own will.
In the same case of Bilbao, this court advanced a means for determining
whether an employee resigned voluntarily:
As the intent to relinquish must concur with the overt act of relinquishment,
the acts of the employee before and after the alleged resignation must be
considered in determining whether he or she, in fact, intended to sever his or
her employment. 103 (Emphasis supplied)

On the other hand, constructive dismissal has been defined as "cessation of


work because 'continued employment is rendered impossible, unreasonable or
unlikely, as an offer involving a demotion in rank or a diminution in pay' and other
benefits." 104
In Penaflor v. Outdoor Clothing Manufacturing Corporation, 105 constructive
dismissal has been described as tantamount to "involuntarily [sic] resignation due to
the harsh, hostile, and unfavorable conditions set by the employer." 106 In the same
case, it was noted that "[t]he gauge for constructive dismissal is whether a reasonable
person in the employee's position would feel compelled to give up his employment
under the prevailing circumstances." 107
Applying the cited standards on resignation and constructive dismissal, it is
clear that respondents were constructively dismissed. Hence, their termination was
illegal.
The termination of respondents' employment happened when they were
pregnant and expecting to incur costs on account of child delivery and infant rearing.
As noted by the Court of Appeals, pregnancy is a time when they need employment to
sustain their families. 108 Indeed, it goes against normal and reasonable human
behavior to abandon one's livelihood in a time of great financial need.
SICDAa

It is clear that respondents intended to remain employed with Saudia. All they
did was avail of their maternity leaves. Evidently, the very nature of a maternity leave
means that a pregnant employee will not report for work only temporarily and that she
will resume the performance of her duties as soon as the leave allowance expires.
It is also clear that respondents exerted all efforts to remain employed with
Saudia. Each of them repeatedly filed appeal letters (as much as five [5] letters in the
case of Rebesencio) 109 asking Saudia to reconsider the ultimatum that they resign or

be terminated along with the forfeiture of their benefits. Some of them even went to
Saudia's office to personally seek reconsideration. 110
Respondents also adduced a copy of the "Unified Employment Contract for
Female Cabin Attendants." 111 This contract deemed void the employment of a flight
attendant who becomes pregnant and threatened termination due to lack of medical
fitness. 112 The threat of termination (and the forfeiture of benefits that it entailed) is
enough to compel a reasonable person in respondents' position to give up his or her
employment.
Saudia draws attention to how respondents' resignation letters were supposedly
made in their own handwriting. This minutia fails to surmount all the other indications
negating any voluntariness on respondents' part. If at all, these same resignation letters
are proof of how any supposed resignation did not arise from respondents' own
initiative. As earlier pointed out, respondents' resignations were executed on Saudia's
blank letterheads that Saudia had provided. These letterheads already had the word
"RESIGNATION" typed on the subject portion of their respective headings when
these were handed to respondents. 113
"In termination cases, the burden of proving just or valid cause for dismissing
an employee rests on the employer." 114 In this case, Saudia makes much of how
respondents supposedly completed their exit interviews, executed quitclaims, received
their separation pay, and took more than a year to file their Complaint. 115 If at all,
however, these circumstances prove only the fact of their occurrence, nothing more.
The voluntariness of respondents' departure from Saudia is non sequitur.
Mere compliance with standard procedures or processes, such as the
completion of their exit interviews, neither negates compulsion nor indicates
voluntariness.
As with respondent's resignation letters, their exit interview forms even support
their claim of illegal dismissal and militates against Saudia's arguments. These exit
interview forms, as reproduced by Saudia in its own Petition, confirms the
unfavorable conditions as regards respondents' maternity leaves. Ma. Jopette's and
Loraine's exit interview forms are particularly telling:
a. From Ma. Jopette's exit interview form:
3. In what respects has the job met or failed to meet your expectations?
THE SUDDEN TWIST OF DECISION REGARDING THE
MATERNITY LEAVE. 116

b. From Loraine's exit interview form:


1. What are your main reasons for leaving Saudia? What company are
you joining?
xxx xxx xxx
Others

CHANGING POLICIES REGARDING MATERNITY


LEAVE (PREGNANCY). 117

As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v.


Paramio, 118 this court noted that "[i]f (a) there is clear proof that the waiver was
wangled from an unsuspecting or gullible person; or (b) the terms of the settlement
are unconscionable, and on their face invalid, such quitclaims must be struck down as
invalid or illegal." 119 Respondents executed their quitclaims after having been
unfairly given an ultimatum to resign or be terminated (and forfeit their benefits).
V
Having been illegally and unjustly dismissed, respondents are entitled to full
backwages and benefits from the time of their termination until the finality of this
Decision. They are likewise entitled to separation pay in the amount of one (1)
month's salary for every year of service until the finality of this Decision, with a
fraction of a year of at least six (6) months being counted as one (1) whole year.
DHIcET

Moreover, "[m]oral damages are awarded in termination cases where the


employee's dismissal was attended by bad faith, malice or fraud, or where it
constitutes an act oppressive to labor, or where it was done in a manner contrary to
morals, good customs or public policy." 120 In this case, Saudia terminated
respondents' employment in a manner that is patently discriminatory and running
afoul of the public interest that underlies employer-employee relationships. As such,
respondents are entitled to moral damages.
To provide an "example or correction for the public good" 121 as against such
discriminatory and callous schemes, respondents are likewise entitled to exemplary
damages.
In a long line of cases, this court awarded exemplary damages to illegally
dismissed employees whose "dismissal[s were] effected in a wanton, oppressive or
malevolent manner." 122 This court has awarded exemplary damages to employees
who were terminated on such frivolous, arbitrary, and unjust grounds as membership
in or involvement with labor unions, 123 injuries sustained in the course of
employment, 124 development of a medical condition due to the employer's own
violation of the employment contract, 125 and lodging of a Complaint against the
employer. 126 Exemplary damages were also awarded to employees who were deemed
illegally dismissed by an employer in an attempt to evade compliance with statutorily
established employee benefits. 127 Likewise, employees dismissed for supposedly just
causes, but in violation of due process requirements, were awarded exemplary
damages. 128
These examples pale in comparison to the present controversy. Stripped of all
unnecessary complexities, respondents were dismissed for no other reason than
simply that they were pregnant. This is as wanton, oppressive, and tainted with bad
faith as any reason for termination of employment can be. This is no ordinary case of

illegal dismissal. This is a case of manifest gender discrimination. It is an affront not


only to our statutes and policies on employees' security of tenure, but more so, to the
Constitution's dictum of fundamental equality between men and women. 129 The
award of exemplary damages is, therefore, warranted, not only to remind employers
of the need to adhere to the requirements of procedural and substantive due process in
termination of employment, but more importantly, to demonstrate that gender
discrimination should in no case be countenanced.
Having been compelled to litigate to seek reliefs for their illegal and unjust
dismissal, respondents are likewise entitled to attorney's fees in the amount of 10% of
the total monetary award. 130
VI
Petitioner Brenda J. Betia may not be held liable.
A corporation has a personality separate and distinct from those of the persons
composing it. Thus, as a rule, corporate directors and officers are not liable for the
illegal termination of a corporation's employees. It is only when they acted in bad
faith or with malice that they become solidarily liable with the corporation. 131
In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng
Ever Electrical, 132 this court clarified that "[b]ad faith does not connote bad judgment
or negligence; it imports a dishonest purpose or some moral obliquity and conscious
doing of wrong; it means breach of a known duty through some motive or interest or
ill will; it partakes of the nature of fraud." 133
Respondents have not produced proof to show that Brenda J. Betia acted in bad
faith or with malice as regards their termination. Thus, she may not be held solidarily
liable with Saudia.
WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J.
Betia is not solidarily liable with petitioner Saudi Arabian Airlines, and second, that
petitioner Saudi Arabian Airlines is liable for moral and exemplary damages. The
June 16, 2011 Decision and the September 13, 2011 Resolution of the Court of
Appeals in CA-G.R. SP. No. 113006 are hereby AFFIRMED in all other respects.
Accordingly, petitioner Saudi Arabian Airlines is ordered to pay respondents:
(1) Full backwages and all other benefits computed from the respective dates in
which each of the respondents were illegally terminated until the finality
of this Decision;
(2) Separation pay computed from the respective dates in which each of the
respondents commenced employment until the finality of this Decision
at the rate of one (1) month's salary for every year of service, with a
fraction of a year of at least six (6) months being counted as one (1)
whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;

(4) Exemplary damages in the amount of P200,000.00 per respondent; and


(5) Attorney's fees equivalent to 10% of the total award.
Interest of 6% per annum shall likewise be imposed on the total judgment
award from the finality of this Decision until full satisfaction thereof.
This case is REMANDED to the Labor Arbiter to make a detailed
computation of the amounts due to respondents which petitioner Saudi Arabian
Airlines should pay without delay.
SO ORDERED.
Carpio, Velasco, Jr., * Del Castillo and Mendoza, JJ., concur.
|||

(Saudi Arabian Airlines (Saudia) v. Rebesencio, G.R. No. 198587, [January 14, 2015])

SECOND DIVISION
[G.R. No. 178055. July 2, 2014.]
AMECOS INNOVATIONS, INC. and ANTONIO F. MATEO,
petitioners, vs. ELIZA R. LOPEZ, respondent.

DECISION

DEL CASTILLO, J :
p

Assailed in this Petition for Review on Certiorari 1 are the March 22, 2007 Resolution 2
of the Court of Appeals (CA) in CA-G.R. SP No. 96959 which affirmed the June 30,
2006 Decision 3 of the Regional Trial Court (RTC) of Caloocan City, Branch 121,
dismissing the Complaint 4 for lack of jurisdiction, and its May 23, 2007 Resolution 5
denying petitioners' Motion for Reconsideration. 6
Factual Antecedents
Petitioner Amecos Innovations, Inc. (Amecos) is a corporation duly incorporated under
Philippine laws engaged in the business of selling assorted products created by its
President and herein co-petitioner, Antonio F. Mateo (Mateo). On May 30, 2003, Amecos
received a Subpoena 7 from the Office of the City Prosecutor of Quezon City in
connection with a complaint filed by the Social Security System (SSS) for alleged
delinquency in the remittance of SSS contributions and penalty liabilities in violation of
Section 22 (a) and 22 (d) in relation to Section 28 (e) of the SSS law, as amended.
By way of explanation, Amecos attributed its failure to remit the SSS contributions to
herein respondent Eliza R. Lopez (respondent). Amecos claimed that it hired respondent
on January 15, 2001 as Marketing Assistant to promote its products; that upon hiring,
respondent refused to provide Amecos with her SSS Number and to be deducted her
contributions; that on the basis of the foregoing, Amecos no longer enrolled respondent
with the SSS and did not deduct her corresponding contributions up to the time of her
termination in February 2002.
Amecos eventually settled its obligations with the SSS; consequently, SSS filed a Motion
to Withdraw Complaint 8 which was approved by the Office of the City Prosecutor. 9
Thereafter, petitioners sent a demand letter 10 to respondent for P27,791.65 representing
her share in the SSS contributions and expenses for processing, but to no avail. Thus,

petitioners filed the instant Complaint for sum of money and damages against respondent
docketed as Civil Case No. 04-27802 and raffled to Branch 51 of the Metropolitan Trial
Court (MeTC) of Caloocan City. Petitioners claimed that because of respondent's
misrepresentation, they suffered actual damages in the amount of P27,791.65 allegedly
incurred by Amecos by way of settlement and payment of its obligations with the SSS.
11 Mateo also allegedly suffered extreme embarrassment and besmirched reputation as a
result of the filing of the complaint by the SSS. Hence they prayed for P50,000.00 as
moral damages, P50,000.00 as exemplary damages, P50,000.00 as attorney's fees, and
costs of the suit.
CIHTac

Respondent filed her Answer with Motion to Dismiss 12 claiming that she was formerly
an employee of Amecos until her illegal dismissal in February 2002; that Amecos
deliberately failed to deduct and remit her SSS contributions; and that petitioners filed the
instant Complaint in retaliation to her filing of an illegal dismissal case. Respondent also
averred that the regular courts do not have jurisdiction over the instant case as it arose out
of their employer-employee relationship.
The parties then submitted their respective Position Papers. 13
Ruling of the Metropolitan Trial Court
On March 24, 2006, the MeTC issued its Decision, 14 which decreed as follows:
All viewed from the foregoing, the court hereby dismisses the complaint for
lack of jurisdiction.
SO ORDERED. 15

Ruling of the Regional Trial Court


Petitioners appealed to the RTC. On June 30, 2006, the RTC rendered its Decision 16
disposing as follows:
WHEREFORE, premises considered, the instant appeal is accordingly
DISMISSED for lack of merit.
SO ORDERED. 17

The RTC affirmed the view taken by the MeTC that under Article 217 (a) (4) of the
Labor Code,18 claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relationship are under the jurisdiction of the Labor Arbiters or
the National Labor Relations Commission (NLRC); that since petitioners and respondent
were in an employer-employee relationship at the time, the matter of SSS contributions
was thus an integral part of that relationship; and as a result, petitioners' cause of action

for recovery of damages from respondent falls under the jurisdiction of the Labor
Arbiters, pursuant to Article 217 (a) (4) of the Labor Code.
Petitioners filed a Motion for Reconsideration 19 which the RTC denied. 20
Ruling of the Court of Appeals
Petitioners thus instituted a Petition for Review 21 with the CA claiming that the RTC
seriously erred in sustaining the dismissal of the Complaint by the MeTC on the ground
of lack of jurisdiction. On March 22, 2007, the CA rendered the assailed Resolution, viz.:
SCaITA

ACCORDINGLY, the petition for review is DENIED DUE COURSE and this
case is DISMISSED.
SO ORDERED. 22

Finding no error in the Decision of the RTC, the CA held that:


. . . The matter of whether the SSS employer's contributive shares required of
the petitioners to be paid due to the complaint of the respondent necessarily
flowed from the employer-employee relationship between the parties. As
such, the lower courts were correct in ruling that jurisdiction over the claim
pertained to the Labor Arbiter and the National Labor Relations Commission,
not to the regular courts, even if the claim was initiated by the employer
against the employee. 23

Petitioners moved to reconsider, but in the second assailed Resolution 24 dated May 23,
2007, the CA denied petitioners' Motion for Reconsideration. 25 Hence, the instant
Petition.
Issues
The issues raised in this Petition are:
WHETHER THE REGULAR CIVIL COURT AND NOT THE LABOR
ARBITER OR . . . THE NATIONAL LABOR RELATIONS COMMISSION
HAS JURISDICTION OVER CLAIM[S] FOR REIMBURSEMENT ARISING
FROM EMPLOYER-EMPLOYEE RELATIONS.
WHETHER THE REGULAR CIVIL COURT AND NOT THE LABOR
ARBITER OR . . . THE NATIONAL LABOR RELATIONS COMMISSION
HAS JURISDICTION OVER CLAIM[S] FOR DAMAGES FOR
MISREPRESENTATION ARISING FROM EMPLOYER-EMPLOYEE
RELATIONS. 26

Petitioners' Arguments
In praying that the assailed CA Resolutions be set aside, petitioners argue that their
Complaint is one for recovery of a sum of money and damages based on Articles 19, 27
22, 28 and 2154 29 of the Civil Code; that their cause of action is based on solutio indebiti
or unjust enrichment, which arose from respondent's misrepresentation that there was no
need to enroll her with the SSS as she was concurrently employed by another outfit,
Triple A Glass and Aluminum Company, and that she was self-employed as well. They
argue that the employer-employee relationship between Amecos and respondent is
merely incidental, and does not necessarily place their dispute within the exclusive
jurisdiction of the labor tribunals; the true source of respondent's obligation is derived
from Articles 19, 22, and 2154 of the Civil Code.They add that by reason of their
payment of respondent's counterpart or share in the SSS premiums even as it was not
their legal obligation to do so, respondent was unjustly enriched, for which reason she
must return what petitioners paid to the SSS.
IDSETA

Petitioners cite the pronouncements of the Court to the effect that where the employeremployee relationship is merely incidental and the cause of action proceeds from a
different source of obligation, such as tort, malicious prosecution or breach of contract,
the regular courts have jurisdiction; 30 that when the cause of action is based on Articles
19 and 21 of the Civil Code,the case is not cognizable by the labor tribunals; 31 that
money claims of workers which 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; 32 and that when a person unjustly retains a
benefit to the loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good conscience, a case of
solutio indebiti arises. 33
Respondent's Arguments
Respondent, on the other hand, maintains that jurisdiction over petitioners' case lies with
the Labor Arbiter, as their cause of action remains necessarily connected to and arose
from their employer-employee relationship. At any rate, respondent insists that
petitioners, as employers, have the legal duty to enroll her with the SSS as their employee
and to pay or remit the necessary contributions.
Our Ruling
The Court denies the Petition.
This Court holds that as between the parties, Article 217 (a) (4) of the Labor Code is
applicable. Said provision bestows upon the Labor Arbiter original and exclusive
jurisdiction over claims for damages arising from employer-employee relations. The

observation that the matter of SSS contributions necessarily flowed from the employeremployee relationship between the parties shared by the lower courts and the CA is
correct; thus, petitioners' claims should have been referred to the labor tribunals. In this
connection, it is noteworthy to state that "the Labor Arbiter has jurisdiction to award not
only the reliefs provided by labor laws, but also damages governed by the Civil Code."
34

At the same time, it cannot be assumed that since the dispute concerns the payment of
SSS premiums, petitioners' claim should be referred to the Social Security Commission
(SSC) pursuant to Republic Act No. 1161, as amended by Republic Act No. 8282. 35 As
far as SSS is concerned, there is no longer a dispute with respect to petitioners'
accountability to the System; petitioners already settled their pecuniary obligations to it.
Since there is no longer any dispute regarding coverage, benefits, contributions and
penalties to speak of, the SSC need not be unnecessarily dragged into the picture. 36
Besides, it cannot be made to act as a collecting agency for petitioners' claims against the
respondent; the Social Security Law should not be so interpreted, lest the SSC be
swamped with cases of this sort.
At any rate, it appears that petitioners do not have a cause of action against respondent.
The Complaint in Civil Case No. 04-27802 reads in part:
STATEMENT OF FACTS AND CAUSES OF ACTION
4. On or about 15 January 2001, [petitioners] hired [respondent] as a Marketing
Assistant to promote the products of [petitioners].
5. Immediately, [respondent] represented that she had other gainful work and
that she was also self-employed for which reason, she refused to divulge
her [SSS] Number and refused to be deducted her share in the [SSS]
contributions. In her bio-data submitted to [petitioners], she did not even
indicate her SSS [N]umber. . . . [These] representations were later found
out to be untrue and [respondent] knew that.
6. Misled by such misrepresentation, [petitioners'] employees no longer
deducted her corresponding SSS contributions up to the time of her
termination from employment on or about 18 February 2002.
7. On or about 30 May 2003, to the unpleasant surprise and consternation of
[petitioner] Mateo, he received a Subpoena . . . pursuant to a criminal
complaint against [petitioner] Dr. Antonio Mateo for alleged un-remitted
SSS Contributions including that corresponding to the [respondent].
Upon subsequent clarification with the Social Security System, only that
portion corresponding to the [respondent's] supposed unremitted
contribution remained as the demandable amount. The total amount
demanded was P18,149.95. . . .

8. On or about 24 July 2003, [petitioner] Mateo had to explain to the Social


Security System the circumstances as to why no contributions reflected
for [respondent]. . . .
9. On or about 31 July 2003, [petitioners] had to pay the Social Security System
the amount of P18,149.95 including the share which should have been
deducted from [respondent] in the amount of P12,291.62. . . .
10. With this development, some of [petitioners'] employees felt troubled and
started to doubt . . . whether or not their SSS contributions were being
remitted or paid by the [petitioners]. [Petitioner] Mateo had to explain to
them why there was an alleged deficiency in SSS contributions and had
to assure them that their contributions were properly remitted.
11. As a result of these events, [petitioner] Mateo, for days, felt deep worry and
fear leading to sleepless nights that the Social Security System might
prosecute him for a possible criminal offense.
12. [Petitioner] Mateo also felt extreme embarrassment and besmirched
reputation as he, being a recognized inventor, a dean of a reputable
university and a dedicated teacher, was made the butt of ridicule and
viewed as a shrewd businessman capitalizing on even the SSS
contributions of his employees. . . .
13. On or about 15 January 2004, in order to [recover] what is due [petitioners],
they sent a demand letter to [respondent] for her to pay the amount of
P27,791.65 as her share in the SSS contributions and other expenses for
processing. . . .
14. This demand, however, fell on deaf ears as [respondent] did not pay and has
not paid to date the amount of her share in the SSS contributions and
other amounts demanded.
15. For such malicious acts and the suffering befalling [petitioner] Mateo,
[respondent] is liable for moral damages in the amount of FIFTY
THOUSAND PESOS (P50,000.00).
16. For having made gross misrepresentation, she is liable for exemplary
damages in the amount of FIFTY THOUSAND PESOS (P50,000.00) to
serve as a warning for the public not to follow her evil example.
17. As [petitioners] were compelled to file the instant suit to protect and
vindicate [their] right and reputation, [respondent] should also be held
liable for attorney's fees in the amount of FIFTY THOUSAND PESOS
(P50,000.00) in addition to the costs of this suit.

PRAYER
[Petitioners] respectfully [pray] that a judgment, in [their] favor and against
[respondent], be rendered by this Honorable Court, ordering [respondent]:

ADEacC

1. To pay the amount due of TWENTY SEVEN THOUSAND SEVEN


HUNDRED NINETY ONE AND 65/100 (P27,791.65) representing her
share in the SSS contributions and processing costs, with interest, at
legal rate, from the time of the filing of this Complaint;
2. To pay FIFTY THOUSAND PESOS (P50,000.00) for moral damages;
3. To pay FIFTY THOUSAND PESOS (P50,000.00) for exemplary damages;
4. To pay FIFTY THOUSAND PESOS (P50,000.00) as attorney's fees;
5. To pay the costs of this suit.
[Petitioners] further [pray] for such other relief as are just and equitable under
the circumstances. 37

In fine, petitioners alleged that respondent misrepresented that she was simultaneously
employed by another company; consequently, they did not enroll her with the SSS or pay
her SSS contributions. Likewise, when petitioners eventually paid respondent's SSS
contributions as a result of the filing of a complaint by the SSS, respondent was unjustly
enriched because the amount was not deducted from her wages in Amecos.
The evidence, however, indicates that while respondent was employed, Amecos did not
remit premium contributions both employer and employees' shares to the SSS; the
SSS demand letter 38 sent to it covers non-payment of SSS premium contributions from
January 2001 up to April 2002, amounting to P85,687.84. 39 The Amecos payroll 40
covering the period from January 30 to November 29, 2001 likewise shows that no
deductions for SSS contributions were being made from respondent's salaries. This can
only mean that during the period, Amecos was not remitting SSS contributions
whether the employer or employees' shares pertaining to respondent. As such, during
her employment with Amecos, respondent was never covered under the System as SSS
did not know in the first instance that petitioners employed her, since the petitioners were
not remitting her contributions. Petitioners were forced to remit monthly SSS
contributions only when SSS filed I.S. No. 03-6068 with the Quezon City Prosecutor's
Office. By that time, however, respondent was no longer with Amecos, as her
employment was terminated sometime in mid-February of 2002.
Given the above facts, it is thus clear that petitioners have no cause of action against the
respondent in Civil Case No. 04-27802. Since Amecos did not remit respondent's full

SSS contributions, the latter was never covered by and protected under the System. If she
was never covered by the System, certainly there is no sense in making her answerable
for the required contributions during the period of her employment. And it follows as a
matter of consequence that claims for other damages founded on the foregoing nonexistent cause of action should likewise fail.
WHEREFORE, premises considered, the Petition is DENIED. The assailed March 22,
2007 and the May 23, 2007 Resolutions of the Court of Appeals in CA-G.R. SP No.
96959 are AFFIRMED.
SO ORDERED.
Carpio, Brion, Perez and Leonen, * JJ., concur.
|||

(Amecos Innovations, Inc. v. Lopez, G.R. No. 178055, [July 2, 2014])