G.R. No.

L-50459 August 25, 1989

LEONARDO D. SUARIO, petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS, Davao Branch or The Manager/Cashier and NATIONAL
LABOR RELATIONS COMMISSION, respondents.

Leonardo D. Suario for and in his own behalf.

Canete Tolentino, Buyo, Caballero and Fuentes for respondent BPI.

GUTIERREZ, JR., J.:

The petitioner, with himself as his own counsel, filed this petition for review of the decision of the
National Labor Relations Commission (NLRC) which denied his claim for damages arising from an
alleged illegal dismissal. In addition to the separation pay already awarded to him, the petitioner
asks for P9,995.00 actual damages, P300,000.00 moral damages, P200,000.00 exemplary
damages, and attorney's fees to be determined by the Court.

On August 4,1977, petitioner Leonardo D. Suario filed a complaint for separation pay, damages and
attorney's fees against the Bank of the Philippine Islands, Davao Branch/ or the Manager and
Assistant Manager/Cashier alleging:

xxx xxx xxx

2. That complainant has been a loyal employee of the respondent bank since March,
1969, first assigned as a saving clerk, then rose to become the head of the loan
section in 1976 with an official designation as Credit Investigator Appraiser-Credit
Analyst;

3. That during the time of the complainant's employment with the respondent bank,
he pursued his studies of law without criticism or adverse comments from the
respondent bank but instead praises were showered and incentives and
considerations were bestowed in view of the complainant's determination for
intellectual advancement;

4. That sometime in March, 1976, the complainant verbally requested the then Asst.
Vice-President and Branch Manager, Mr. Armando N. Guilatco, for a 6-month leave
of absence without pay purposely to take the 1976 pre-bar review in Manila and that
the said Mr. Guilatco informed the complainant that there would be no problem as
regards the requested leave of absence;

5. That sometime in May, 1976, the complainant received a verbal notice from the
new Branch Manager, Mr. Vicente Casino, that the respondent's Head Office
approved only a 30-day leave of absence without pay but that Mr. Guilatco, then
assigned in Head Office as Vice President, advised him (Casino) to inform the
complainant to just avail of the 30-day leave of absence first and then proceed to
Manila for the review since the request would be ultimately granted;
6. That complainant never suspected that his application would be disapproved,
much less any bad faith on the part of the respondent bank to discriminate union
member (sic), since it has been the policy of the respondent bank to grant request of
this nature as shown in the case of four (4) former employees who were all granted
leave of absence without pay. Copies of the affidavits of Judge Juan Montejo and
Atty. Bienvenido Banez and xerox copies of the payroll of Jose Ledesma and Antonio
Tan are hereto attached as ANNEXES 'A', 'B', 'C', and 'D' and made an integral part
hereof;

7. That on May 10, 1976, the complainant wrote a formal letter to the President of the
respondent bank, Mr. Alberto Villa Abrille, asking for a formal reconsideration and
caused the same to be received by Mr. Vicente Casino but the latter advised instead
the complainant to address to him (Casino) a letter of mild tenor since any
reconsideration should be coursed through the proper channel; and that Mr. Casino
advised the complainant to just file his 30-day leave of absence without pay as
approved and then proceed to Manila since the request would ultimately be granted.
A Xerox copy of the said letter is hereto attached as ANNEX 'E' to be made an
integral part hereof;

8. That acting on the said advice of Vicente Casino, the complainant, with utmost
good faith, wrote a letter addressed to Mr. Casino aid at the same time, filed a 30-
day leave of absence. Copies of the letter and Application for Leave of Absence are
hereto attached as ANNEXES 'F' and 'G' to be made an integral part hereof,

9. That on May 17, 1976, the complainant proceeded to Manila for the pre-bar review
and even went to the extent of going to the respondent's Head Office to seek an
audience with the Personnel Manager with an alternative of working with any of the
Metro Manila Branches of the respondent bank if and when the request would not be
granted and that the Personnel Manager promised to take up the matter with Mr.
Alberto Villa Abrille;

10. That during the first week of August, 1976, the complainant received a letter from
the Asst. Manager/Cashier, Mr. Douglas E. Aurelio, ordering the complainant to
report back for work since the complainant's request was allegedly disapproved and
that failure to report back for work would be a conclusive proof that the complainant
is no longer interested to continue working and therefore considered resigned. ...

11. That upon receipt of the letter, complainant's review was unduly interrupted since
sleepless nights were spent in order to arrive at the proper decision and that the
complainant has decided not to report back because of the considerable expenses
already incurred in Manila after he has been led to believe that the request would
ultimately be granted;

12. That during the last week of August, 1976, the complainant received another
letter from Douglas E. Aurelio, attaching a xerox copy of the application for a
Clearance to terminate on the ground of resignation/ or abandonment. ...

13. That the complainant failed to file his opposition since as above averred to, he
was already in Manila taking up the review and was then very busy since the bar
examination was only two months shy;
 14. That sometime during the first week of December, 1976, the complainant went to
the respondent bank but was verbally informed that he was already dismissed;

15. That on December 13, 1976, the complainant formally wrote a letter to the
respondent bank requesting for a written and formal advise as to his real status and
that on December 14, 1976, the respondent bank replied that the matter was still
referred to the Personnel Department at Head Office leading again the complainant
to believe that his case was not yet hopeless. ...

16. That on December 21, 1976, the complainant wrote another letter pressing for a
categorical answer and on December 23, 1976, the lawyers of the respondent bank
replied that as far as the bank is concerned the services of the complainant was
considered terminated effective July 19, 1976 contrary to the respondent bank's
manifestation that his case was still pending before the Personnel Department. ...

17. That the dismissal of the complainant was clearly illegal and without just cause,
being discriminatory in character he being an active union member and in fact the
Vice President of the ALU-BPI Chapter until his dismissal in view of the uneven
application of the respondent's policy; ... (Rollo, pp. 15-19)

The case was set for conciliation but since the parties could not agree on any settlement, the case
was certified to the Labor Arbiter. Thereafter, the Executive Labor Arbiter required the parties to
submit their position papers. Based on the position papers submitted, a decision was rendered on
December 7, 1977. The dispositive portion reads as follows:

WHEREFORE, premises considered, respondent is hereby ordered to pay

complainant's claim for separation pay in the amount of P11,813.36. His claim for
moral, actual, and exemplary damages and attorney's fees are hereby dismissed for
lack of merit. (Rollo, p. 46)

The decision of the Executive Labor Arbiter was affirmed on appeal to the National Labor Relations
Commission on October 9, 1978. A motion for reconsideration was likewise denied. Hence, this
petition.

The petitioner alleges that the public respondent committed the following:

THAT THE NATIONAL LABOR RELATIONS COMMISSION IN ITS DECISION

DATED OCTOBER 9, 1978 (ANNEX F OF THE PETITION) ERRED IN NOT
GRANTING THE CLAIM OF DAMAGES PRAYED FOR BY PETITIONER DESPITE
FINDINGS THAT THE DISMISSAL WAS CLEARLY ILLEGAL; and

II

THAT THE NATIONAL LABOR RELATIONS COMMISSION ERRED IN

DISMISSING PETITIONER'S MOTION FOR RECONSIDERATION BASED MAINLY
ON PD NOS. 1367 AND 1391 IN ITS DECISION DATED FEBRUARY 9, 1979.
(Rollo, p. 139).
The main issue in this case is whether or not the NLRC committed grave abuse of discretion in
denying the petitioner's claim for actual, moral and exemplary damages plus attorney's fees in
addition to his separation pay.

On the matter of NLRC jurisdiction over claims for damages, it clearly appears that the complaint
was filed on August 4, 1977 and decided by the Labor Arbiter on December 7, 1977; hence, the
applicable law is Article 217 of the Labor Code which took effect on October 1, 1974, and which
provides:

xxx xxx xxx

ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor
Arbiters shall have exclusive jurisdiction to hear and decide the following cases
involving all workers, whether agricultural or non-agricultural:

(1) Unfair labor practice cases;

(2) Unresolved issues in collective bargaining including those which involve wages,
hours of work, and other terms and conditions of employment duly indorsed by the
Bureau in accordance with the provisions of this Code;

(3) All money claims of workers involving non-payment or underpayment of wages,

overtime or premium compensation, maternity or service incentive leave, separation
pay and other money claims arising from employer-employee relation, except claims
for employee's compensation, social security and medicare benefits and as
otherwise provided in Article 128 of this Code;

(4) Cases involving household services; and

(5) All other cases arising from employer-employee relationship unless expressly
excluded by this Code.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided
by Labor Arbiters, compulsory arbitrators, and voluntary arbitrators in appropriate
casino provided in Article 263 of this Code. ...

The contention of private respondent that the NLRC is not clothed with authority to entertain claims
for moral and other forms of damages is based on PD 1367 which took effect on May 1, 1979 and
which amended Article 217 by specifically providing that "Regional Directors shall not indorse and
Labor Arbiters shall not entertain claims for moral or other forms of damages."

This limitation on jurisdiction did not last long. This Court in the case of Ebon v. De Guzman, (113
SCRA 52 [1982]) explained:

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 set up would mean duplicity of suits, splitting the cause of action and possible
conflicting findings and conclusions by two tribunals on one and the same claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted
Article 217 in its original form) nullified Presidential Decree No. 1367 and restored to
 the Labor Arbiters and the NLRC their jurisdiction to award all kinds of damages in
cases arising from employer-employee relations (Pepsi-Cola Bottling Company of the
Philippines v. Martinez, G.R. No. 58877).

It is now well settled that money claims of workers provided by law over which the labor arbiter has
original and exclusive jurisdiction are comprehensive enough to include claims for moral damages of
a dismissed employee against his employer. (Vargas v. Akai Phil. Inc., 156 SCRA 531 [1987]).

On the issue whether or not the petitioner is entitled to his claim for moral damages, we are
constrained to decide in the negative. The case of Primero v. Intermediate Appellate Court, (156
SCRA 435 [1987]) expounded on this matter, to wit:

xxx xxx xxx

The legislative intent appears clear to allow recovery in proceedings before Labor
Arbiters of moral and other forms of damages, in all cases or matters arising from
employer-employee relations. This would no doubt include, particularly, instances
where an employee has been unlawfully dismissed. In such a case the Labor Arbiter
has jurisdiction to award to the dismissed employee not only the reliefs specifically
provided by labor laws, but also moral and the forms of damages governed by the
Civil Code. Moral damages would be recoverable, for example, where the dismissal
of the employee was not only effected without authorized cause and/or due process
— for which relief is granted by the Labor Code — but was attended by bad faith or
fraud, or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy-for which the obtainable relief is determined by
'the Civil Code (not the Labor Code). Stated otherwise, if the evidence adduced by
lâwphî1.ñèt

the employee before the Labor Arbiter should establish that the employer did indeed
terminate the employee's services without just cause or without according him due
process, the Labor Arbiter's judgment shall be for the employer to reinstate the
employee and pay him his back wages, or exceptionally, for the employee simply to
receive separation pay. These are reliefs explicitly prescribed by the Labor Code. But
any award of moral damages by the Labor Arbiter obviously cannot be based on the
Labor Code but should be grounded on the Civil Code. Such an award cannot be
justified solely upon the premise (otherwise sufficient for redress under the Labor
Code) that the employer fired his employee without just cause or due
process. Additional facts must be pleaded and proven to warrant the grant of moral
damages under the Civil Code, these being, to repeat, that the act of dismissal was
attended by bad faith or fraud, or was oppressive to labor, or done in a manner
contrary to morals, good customs, or public policy; and, of course, that social
humiliation, wounded feelings, grave anxiety, etc., resulted therefrom. (pp. 443-444,
emphasis supplied)

The case of Primero v. IAC states the distinction between the two seemingly disparate causes of
action, to wit:

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 dismiss from employment, no other damages may be awarded to
an illegally dismiss 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. ... (P. 445)

In the case of Guita v. Court of Appeals (139 SCRA 576 [1985]), we stated that:

Moral damages may be awarded to compensate one for diverse injuries such as
mental anguish, besmirched reputation, wounded feelings and social humiliation. It is
however not enough that such injuries have arisen; it is essential that they have
sprung from a wrongful act or omission of the defendant which was the proximate
cause thereof.

Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant's wrongful act or omission.
(Civil Code, Article 2217).

In a long line of cases, we have consistently ruled that in the absence of a wrongful
act or omission or of fraud or bad faith, moral damages cannot be awarded. . . (R & B
Surety and Insurance Co., Inc. v. IAC, 129 SCRA 736, 743.) (p. 580)

We do not find any bad faith or fraud on the part of the bank officials who denied the petitioner's
request for a six months' leave of absence without pay. If the petitioner was made to believe that his
request would be granted, we can not fault the branch manager or his subsequent replacement for
giving their assurances. They were merely personal assurances which could be reconsidered on the
basis of later developments or upon consultation with higher authorities and which are not binding.
Certainly, the bank officials who gave their verbal assurances had only the petitioner's paramount
welfare in their minds. There is no evidence to show that they meant to deceive the petitioner. They
themselves thought that such a request would be granted. Unfortunately, company policy had to be
followed. The fact that the petitioner's request for six months' leave of absence was denied does not
ipso facto entitle him to damages.

As held in the case of Rubio v. Court of Appeals (141 SCRA 488 [1986]):

xxx xxx xxx

In a long line of cases, we have consistently ruled that in the absence of a wrongful
act or omission or of fraud or bad faith, moral damages cannot be awarded and that
the adverse result of an action does not per se make the action wrongful and subject
the actor to have payment of damages, for the law could not have meant to impose a
penalty on the right to litigate. ... (p. 516)

It is incumbent upon the petitioner to prove that there was malice or bad faith on the part of the
private respondents in terminating him On the contrary, the records of this petition show that the
private respondent acted in accordance with law before effecting the dismissal. The records also
show that there was a prior application with the Ministry of Labor to terminate the petitioner's
employment. A copy of said application was furnished to the petitioner. The petitioner, however, did
not oppose such application nor did he do anything to preserve his right.

More pertinent is the fact that the petitioner knew as early as May 6, 1976 that he was granted only a
one month study leave (rollo, p. 98). He may have asked for a reconsideration but notwithstanding
its denial, the petitioner proceeded with his review. Whether or not his request for six months' leave
without pay would be granted, the petitioner was set on continuing with his review.

Neither can we consider the private respondents' response to the petitioner's query regarding his
status as having given him false hopes. The referral to the personnel department was merely a part
of the formal procedure undertaken by the bank. Such referral does not show that the bank acted in
a wanton or willful manner.

In the light of the foregoing, we sustain the Labor Arbiter's finding that the petitioner's claim for
damages must be dismissed for lack of sufficient basis.

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

SO ORDERED.

Feliciano, Bidin and Cortes, JJ., concur.

Fernan, C.J., took no part.

G.R. No. 72644 December 14, 1987

ALFREDO F. PRIMERO, petitioner,

vs.
INTERMEDIATE APPELLATE COURT and DM TRANSIT, respondents.

NARVASA, J.:

The question on which the petitioner's success in the instant appeal depends, and to which he would
have us give an affirmative answer, is whether or not, having recovered separation pay by judgment
of the Labor Arbiter — which held that he had been fired by respondent DM Transit Corporation
without just cause — he may subsequently recover moral damages by action in a regular court,
upon the theory that the manner of his dismissal from employment was tortious and therefore his
cause of action was intrinsically civil in nature.

Petitioner Primero was discharged from his employment as bus driver of DM Transit Corporation
(hereafter, simply DM) in August, 1974 after having been employed therein for over 6 years. The
circumstances attendant upon that dismissal are recounted by the Court of Appeals 1 as follows:

Undisputably, since August 1, 1974, appellee's bus dispatcher did not assign any
bus to be driven by appellant Primero. No reason or cause was given by the
dispatcher to appellant for not assigning a bus to the latter for 23 days (pp. 6-14, 21-
22, tsn, May 15, 1979).
 Also, for 23 days, appellant was given a run-around from one management official to
another, pleading that he be allowed to work as his family was in dire need of money
and at the same time inquiring (why) he was not allowed to work or drive a bus of the
company. Poor appellant did not only get negative results but was given cold
treatment, oftentimes evaded and given confusing information, or ridiculed,
humiliated, or sometimes made to wait in the offices of some management personnel
of the appellee (pp. 2-29, tsn, May 15, 1979).

(The) General Manager and (the) Vice-President and Treasurer ... wilfully and
maliciously made said appellant ... seesaw or ... go back and forth between them for
not less than ten (10) times within a period of 23 days ... but (he) got negative results
from both corporate officials. Worse, on the 23rd day of his ordeal appellant was
suddenly told by General Manager Briones to seek employment with other bus
companies because he was already dismissed from his job with appellee (without
having been) told of the cause of his hasty and capricious dismissal ... (pp. 8, 11-13,
25, tsn, May 15, 1979).

Impelled to face the harsh necessities of life as a jobless person and worried by his
immediate need for money, appellant pleaded with Corporate President Demetrio
Munoz, Jr. for his reinstatement and also asked P300.00 as financial assistance, but
the latter told the former that he (Munoz, Jr.) will not give him even one centavo and
that should appellant sue him in court, then that will be the time President Munoz, Jr.
will pay him, if Munoz, Jr. loses the case x x (pp. 21-22, tsn, May 15, 1979).

Appellant also advised (the) President of the oppressive, anti-social and inhumane
acts of subordinate officers ... (but) Munoz, Jr. did nothing to resolve appellant's
predicament and ... just told the latter to go back ... to ... Briones, who insisted that
appellant seek employment with other bus firms in Metro Manila ... (but) admitted
that the appellant has not violated any company rule or regulation ... (pp. 23-26, tsn,
May 15, 1979).

... In pursuance (of) defendant's determination to oppress plaintiff and cause further
loss, irreparable injury, prejudice and damage, (D.M. Transit) in bad faith and with
malice persuaded other firms (California Transit, Pascual Lines, De Dios Transit,
Negrita Corporation, and MD Transit) not to employ (appellant) in any capacity after
he was already unjustly dismissed by said defendant ... (paragraph 8 of plaintiff's
complaint).

These companies with whom appellant applied for a job called up the D.M. Transit
Office (which) ... told them ... that they should not accept (appellant) because (he)
was dismissed from that Office.

Primero instituted proceedings against DM with the Labor Arbiters of the Department of Labor, for
illegal dismissal, and for recovery of back wages and reinstatement. It is not clear from the record
whether these proceedings consisted of one or two actions separately filed. What is certain is that he
withdrew his claims for back wages and reinstatement, "with the end in view of filing a damage suit"
"in a civil court which has exclusive jurisdiction over his complaint for damages on causes of action
founded on tortious acts, breach of employment contract ... and consequent effects (thereof ). 2

In any case, after due investigation, the Labor Arbiter rendered judgment dated January 24, 1977
ordering DM to pay complainant Primero P2,000.00 as separation pay in accordance with the
Termination Pay Law. 3 The judgment was affirmed by the National Labor Relations Commission and
later by the Secretary of Labor, the case having been concluded at this level on March 3, 1978. 4

Under the provisions of the Labor Code in force at that time, Labor Arbiters had jurisdiction inter
alia over —

1) claims involving non-payment or underpayment of wages, overtime compensation,

social security and medicare benefits, and

2) all other cases or matters arising from employer-employee relations, unless

otherwise expressly excluded. 5

And we have since held that under these "broad and comprehensive" terms of the law, Labor
Arbiters possessed original jurisdiction over claims for moral and other forms of damages in labor
disputes. 6

The jurisdiction of Labor Arbiters over such claims was however removed by PD 1367, effective May
1, 1978, which explicitly provided that "Regional Directors shall not indorse and Labor Arbiters shall
not entertain claims for moral or other forms of damages." 7

Some three months afterwards, Primero brought suit against DM in the Court of First Instance of
Rizal seeking recovery of damages caused not only by the breach of his employment contract, but
also by the oppressive and inhuman, and consequently tortious, acts of his employer and its officers
antecedent and subsequent to his dismissal from employment without just cause. 8

While this action was pending in the CFI, the law governing the Labor Arbiters' jurisdiction was once
again revised. The amending act was PD 1691, effective May 1, 1980. It eliminated the restrictive
clause placed by PD 1367, that Regional Directors shall not indorse and Labor Arbiters entertain
claims for moral or other forms of damages. And, as we have had occasion to declare in several
cases, it restored the principle that "exclusive and original jurisdiction for damages would once again
be vested in labor arbiters;" eliminated "the rather thorny question as to where in labor matters the
dividing line is to be drawn between the power lodged in an administrative body and a court;' " and,
"in the interest of greater promptness in the disposition of labor matters, ... spared (courts of) 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." 9 Parenthetically, there was still another amendment of the provision
in question which, however, has no application to the case at bar. The amendment was embodied in
B.P. Blg. 227, effective June 1, 1982. 10

On August 11, 1980 the Trial Court rendered judgment dismissing the complaint on the ground of
lack of jurisdiction, for the reason that at the time that the complaint was filed. on August 17, 1978,
the law — the Labor Code as amended by PD 1367, eff. May 1, 1978 — conferred exclusive,
original jurisdiction over claims for moral or other damages, not on ordinary courts, but on Labor
Arbiters.

This judgment was affirmed by the Intermediate Appellate Court, by Decision rendered on June 29,
1984. This is the judgment now subject of the present petition for review on certiorari. The decision
was reached by a vote of 3 to 2. The dissenters, placing reliance on certain of our pronouncements,
opined that Primero's causes of action were cognizable by the courts, that existence of employment
relations was not alone decisive of the issue of jurisdiction, and that such relations may indeed give
rise to "civil" as distinguished from purely labor disputes, as where an employer's right to dismiss his
employee is exercised tortiously, in a manner oppressive to labor, contrary to morals, good customs
or public policy. 11

Primero has appealed to us from this judgment of the IAC praying that we overturn the majority view
and sustain the dissent.

Going by the literal terms of the law, it would seem clear that at the time that Primero filed his
complaints for illegal dismissal and recovery of backwages, etc. with the Labor Arbiter, the latter
possessed original and exclusive jurisdiction also over claims for moral and other forms of damages;
this, in virtue of Article 265 12 of PD 442, otherwise known as the Labor Code, effective from May 1, 1974. In other words, in the
proceedings before the Labor Arbiter, Primero plainly had the right to plead and prosecute a claim not only for the reliefs specified by the
Labor Code itself for unlawful termination of employment, but also for moral or other damages under the Civil Code arising from or connected
with that termination of employment. And this was the state of the law when he moved for the dismissal of his claims before the Labor
Arbiter, for reinstatement and recovery of back wages, so that he might later file a damage suit "in a civil court which has exclusive
jurisdiction over his complaint ... founded on tortious acts, breach of employment contract ... and consequent effects (thereof)." 13

The legislative intent appears clear to allow recovery in proceedings before Labor Arbiters of moral
and other forms of damages, in all cases or matters arising from employer-employee relations. This
would no doubt include, particularly, instances where an employee has been unlawfully dismissed.
In such a case the Labor Arbiter has jurisdiction to award to the dismissed employee not only the
reliefs specifically provided by labor laws, but also moral and other forms of damages governed by
the Civil Code. Moral damages would be recoverable, for example, where the dismissal of the
employee was not only effected without authorized cause and/or due process for which relief is
granted by the Labor Code — but was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs or public policy 14 —
for which the obtainable relief is determined by the Civil Code 15 (not the Labor Code). Stated otherwise, if the evidence adduced by the
employee before the Labor Arbiter should establish that the employer did indeed terminate the employee's services without just cause or
without according him due process, the Labor Arbiter's judgment shall be for the employer to reinstate the employee and pay him his back
wages or, exceptionally, for the employee simply to receive separation pay. These are reliefs explicitly prescribed by the Labor Code. 16 But
any award of moral damages by the Labor Arbiter obviously cannot be based on the Labor Code but should be grounded on the Civil Code.
Such an award cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor Code) that the employer fired his
employee without just cause or due process. Additional facts must be pleaded and proven to warrant the grant of moral damages under the
Civil Code, these being, to repeat, that the act of dismissal was attended by bad faith or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy; and, of course, that social humiliation, wounded feelings, grave anxiety, etc.,
resulted therefrom. 17

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.

Thus, an employee who has been illegally dismissed (i.e., discharged without just cause or being
accorded due process), in such a manner as to cause him to suffer moral damages (as determined
by the Civil Code), has a cause of action for reinstatement and recovery of back wages and
damages. When he institutes proceedings before the Labor Arbiter, he should make a claim for all
said reliefs. He cannot, to be sure, be permitted to prosecute his claims piecemeal. He cannot
institute proceedings separately and contemporaneously in a court of justice upon the same cause
of action or a part thereof. He cannot and should not 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 his dismissal was illegal; and two, before a court of justice for recovery of moral and other
damages, upon the theory that the manner of his dismissal was unduly injurious, or tortious. This is
what in procedural law is known as splitting causes of action, engendering multiplicity of actions. It is
against such mischiefs that the Labor Code amendments just discussed are evidently directed, and
it is such duplicity which the Rules of Court regard as ground for abatement or dismissal of actions,
constituting either litis pendentia (auter action pendant) or res adjudicata, as the case may be. 18 But
this was precisely what Primero's counsel did. He split Primero's cause of action; and he made one of the split parts the subject of a cause of
action before a court of justice. Consequently, the judgment of the Labor Arbiter granting Primero separation pay operated as a bar to his
subsequent action for the recovery of damages before the Court of First Instance under the doctrine of res judicata, The rule is that the prior
"judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity. 19

We are not unmindful of our previous rulings on the matter cited in the dissent to the decision of the
Court of Appeals subject of the instant petition, 20 notably, Quisaba v. Sta Ines-Melale Veneer &
Plywood Inc., where a distinction was drawn between the right of the employer to dismiss an
employee, which was declared to be within the competence of labor agencies to pass upon, and the
"manner in which the right was exercised and the effects flowing therefrom," declared to be a matter
cognizable only by the regular courts because "intrinsically civil." 21 We opine that it is this very
distinction which the law has sought to eradicate as being so tenuous and so difficult to
observe, 22 and, of course, as herein pointed out, as giving rise to split jurisdiction, or to multiplicity of
actions, "a situation obnoxious to the orderly administration of justice. 23 Actually we merely reiterate
in this decision the doctrine already laid down in other cases (Garcia v. Martinez, 84 SCRA 577;
Ebon v. de Guzman, 13 SCRA 52; Bengzon v. Inciong, 91 SCRA 248; Pepsi-Cola Bottling Co. v.
Martinez, 112 SCRA 578; Aguda v. Vallejos, 113 SCRA 69; Getz v. C.A., 116 SCRA 86; Cardinal
Industries v. Vallejos, 114 SCRA 471; Sagmit v. Sibulo, 133 SCRA 359) to the effect that the grant of
jurisdiction to the Labor Arbiter by Article 217 of the Labor Code is sufficiently comprehensive to
include claims for moral and exemplary damages sought to be recovered from an employer by an
employee upon the theory of his illegal dismissal. Rulings to the contrary are deemed abandoned or
modified accordingly.

WHEREFORE, the petition is DISMISSED, without pronouncement as to costs.

Teehankee, C.J., Cruz, Paras, * and Gancayco, JJ., concur.

G.R. No. L-38088 August 30, 1974

JOVITO N. QUISABA, petitioner,

vs.
STA. INES-MELALE VENEER & PLYWOOD, INC., et al., respondents.

Pedro F. Alcantara Jr. for petitioner.

Armando Dominguez for respondents.

CASTRO, J.:p

In this special civil action for certiorari,1 the sole issue of law posed for resolution is whether a complaint for moral damages, exemplary
damages, termination pay and attorney's fees, arising from an employer's constructive dismissal of an employee, is exclusively cognizable by
the regular courts of justice or by the National Labor Relations Commission created by Presidential Decree No. 21, promulgated on October
14, 1972.2

On February 5, 1973 the petitioner Jovito N. Quisaba filed with the Court of First Instance of Davao a
complaint for moral damages, exemplary damages, termination pay and attorney's fees against the
Sta. Ines-Melale Veneer & Plywood, Inc. and its vice-president Robert Hyde. The complaint avers
that Quisaba, for eighteen years prior to his dismissal, was in the employ of the defendant
corporation; that on January 11, 1973 the respondent Robert Hyde instructed him to purchase logs
for the company's plant; that he refused on the ground that the work of purchasing logs is
inconsistent with his position as internal auditor; that on the following day Hyde informed him of his
temporary relief as internal auditor so that he could carry out immediately the instructions thus given,
and he was warned that his failure to comply would be considered a ground for his dismissal; that on
January 16, 1973 he responded with a plea for fairness and mercy as he would be without a job
during an economic crisis; that he was demoted from a position of dignity to a servile and menial job;
that the defendants did not reconsider their "clever and subterfugial dismissal" of him which for all
purposes constituted a "constructive discharge;" and that because of the said acts of the defendants,
he suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings, moral shock
and social humiliate on. The complaint does not pray for reinstatement or payment of backwages.

After the defendants filed their answer, they moved to dismiss the complaint on the ground of lack of
jurisdiction of the Davao Court of First Instance, asserting that the proper forum is the National Labor
Relations Commission established by Presidential Decree No. 21. Quisaba opposed the motion and
at the same time informed the court that in response to a "consults" presented by his counsel, the
NLRC's authorized representative in Davao City opined as follows:

In response to your query dated September 12, 1973, inquiring as to whether or not
the National Labor Relations Commission has jurisdiction over claims or suits for
damages, such as moral, exemplary and other related damages including attorney's
fees, arising out of employee-employer relationship, we regret to inform you that the
National Labor Relations Commission has no such power.

The Commission's disclaimer of jurisdiction notwithstanding, the court a quo, in an order of

September 18, 1973, granted the motion to dismiss on the ground that the complaint basically
involves an employee-employer relation.

Hence the present recourse.

The jurisdiction of the National Labor Relations Commission is defined by section 2 of Presidential
Decree No. 21 which reads:

SEC. 2. The Commission shall have original and exclusive jurisdiction over the
following.

(1) All matters involving employee employer relations including all disputes and
grievances which may otherwise lead to strikes and lockouts under Republic Act No.
875;

(2) All strikes overtaken by Proclamation No. 1081; and

(3) All pending cases in the Bureau of Labor Relations.

Although the acts complained of seemingly appear to constitute "matters involving employee-
employer relations" as Quisaba's dismissal was the severance of a pre-existing employee-employer
relation, his complaint is grounded not on his dismissal per se as in fact he does not ask for
reinstatement or backwages, but on the manner of his dismissal and the consequent effects of such
dismissal.

Civil law consists of that "mass of precepts that determine or regulate the relations ... that exist
between members of a society for the protection of private interests.3

The "right" of the respondents to dismiss Quisaba should not be confused with the manner in which
the right was exercised and the effects flowing therefrom. If the dismissal was done anti-socially or
oppressively, as the complaint alleges, then the respondents violated article 1701 of the Civil Code
which prohibits acts of oppression by either capital or labor against the other, and article 21, which
makes a person liable for damages if he wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy, the sanction for which, by way of moral damages,
is provided in article 2219, no. 10.4

Art. 2219. Moral damages may be recovered in the following and analogous cages:

xxx xxx xxx

(10) Acts and actions referred to in articles 21, ....

The case at bar is intrinsically concerned with a civil (not a labor) dispute;5 it has to
do with an alleged violation of Quisaba's rights as a member of society, and does not
involve an existing employee-employer relation within the meaning of section 2(1) of
Presidential Decree No. 21. The complaint is thus properly and exclusively
cognizable by the regular courts of justice, not by the National Labor Relations
Commission.

ACCORDINGLY, the order of September 18, 1973 is set aside, and this case is hereby ordered
remanded to the court a quo for further proceedings in accordance with law. Costs against the
private respondents.

Makalintal, C.J., Teehankee, Makasiar, Esguerra and Muñoz Palma, JJ., concur.

G.R. No. 128024 May 9, 2000

BEBIANO M. BAÑEZ, petitioner,

vs.
HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.

GONZAGA-REYES, J.:

The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking jurisdiction over
an action for damages filed by an employer against its dismissed employee, are assailed in this
petition for certiorari under Rule 65 of the Rules of Court for having been issued in grave abuse of
discretion.
Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In
1993, private respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal
dismissal with the National Labor Relations Commission ("NLRC") in Iligan City. In a decision dated
July 7, 1994, Labor Arbiter Nicodemus G. Palangan found petitioner to have been illegally dismissed
and ordered the payment of separation pay in lieu of reinstatement, and of backwages and
attorney's fees. The decision was appealed to the NLRC, which dismissed the same for having been
filed out of time. 2 Elevated by petition for certiorari before this Court, the case was dismissed on
technical grounds3 ; however, the Court also pointed out that even if all the procedural requirements
for the filing of the petition were met, it would still be dismissed for failure to show grave abuse of
discretion on the part of the NLRC.

On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial
Court ("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the
payment of the following:

a. P709,217.97 plus 12% interest as loss of profit and/or unearned

income of three years;

b. P119,700.00 plus 12% interest as estimated cost of supplies,

facilities, properties, space, etc. for three years;

c. P5,000.00 as initial expenses of litigation; and

d. P25,000.00 as attorney's fees. 4

On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He interposed in the
court below that the action for damages, having arisen from an employer-employee relationship, was
squarely under the exclusive original jurisdiction of the NLRC under Article 217(a), paragraph 4 of
the Labor Code and is barred by reason of the final judgment in the labor case. He accused private
respondent of splitting causes of action, stating that the latter could very well have included the
instant claim for damages in its counterclaim before the Labor Arbiter. He also pointed out that the
civil action of private respondent is an act of forum-shopping and was merely resorted to after a
failure to obtain a favorable decision with the NLRC.

Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which
summarized the basis for private respondent's action for damages in this manner:

Paragraph 5 of the complaint alleged that the defendant violated the plaintiff's policy
re: His business in his branch at Iligan City wherein defendant was the Sales
Operations Manager, and paragraph 7 of the same complaint briefly narrated
the modus operandi of defendant, quoted herein: Defendant canvassed customers
personally or through salesmen of plaintiff which were hired or recruited by him. If
said customer decided to buy items from plaintiff on installment basis, defendant,
without the knowledge of said customer and plaintiff, would buy the items on cash
basis at ex-factory price, a privilege not given to customers, and thereafter required
the customer to sign promissory notes and other documents using the name and
property of plaintiff, purporting that said customer purchased the items from plaintiff
on installment basis. Thereafter, defendant collected the installment payments either
personally or through Venus Lozano, a Group Sales Manager of plaintiff but also
utilized by him as secretary in his own business for collecting and receiving of
installments, purportedly for the plaintiff but in reality on his own account or business.
The collection and receipt of payments were made inside the Iligan City branch using
 plaintiff's facilities, property and manpower. That accordingly plaintiff's sales
decreased and reduced to a considerable extent the profits which it would have
earned. 5

In declaring itself as having jurisdiction over the subject matter of the instant controversy, respondent
court stated:

A perusal of the complaint which is for damages does not ask for any relief under the
Labor Code of the Philippines. It seeks to recover damages as redress for
defendant's breach of his contractual obligation to plaintiff who was damaged and
prejudiced. The Court believes such cause of action is within the realm of civil law,
and jurisdiction over the controversy belongs to the regular courts.

While seemingly the cause of action arose from employer-employee relations, the
employer's claim for damages is grounded on the nefarious activities of defendant
causing damage and prejudice to plaintiff as alleged in paragraph 7 of the complaint.
The Court believes that there was a breach of a contractual obligation, which is
intrinsically a civil dispute. The averments in the complaint removed the controversy
from the coverage of the Labor Code of the Philippines and brought it within the
purview of civil law. (Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) . . . 6

Petitioner's motion for reconsideration of the above Order was denied for lack of merit on October
16, 1996. Hence, this petition.

Acting on petitioner's prayer, the Second Division of this Court issued a Temporary Restraining
Order ("TRO") on March 5, 1997, enjoining respondents from further proceeding with Civil Case No.
95-554 until further orders from the Court.

By way of assignment of errors, the petition reiterates the grounds raised in the Motion to Dismiss
dated January 30, 1996, namely, lack of jurisdiction over the subject matter of the action, res
judicata, splitting of causes of action, and forum-shopping. The determining issue, however, is the
issue of jurisdiction.

Art. 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of this
case, reads:

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:

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 employment-predicated actions for
damages vacillated from labor tribunals to regular courts, and back to labor tribunals. In Ebon vs. de
Guzman, 113 SCRA 52, 1 this Court discussed:

The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award
moral and other forms of damages in labor cases could have assumed that the Labor
Arbiters' position-paper procedure of ascertaining the facts in dispute might not be an
adequate tool for arriving at a just and accurate assessment of damages, as
distinguished from backwages and separation pay, and that the trial procedure in the
Court of First Instance would be a more effective means of determining such
damages. . . .

Evidently, the lawmaking authority had second thoughts about depriving the Labor
Arbiters and the NLRC of the jurisdiction to award damages in labor cases because
that setup would mean duplicity of suits, splitting the cause of action and possible
conflicting findings and conclusions by two tribunals on one and the same claim.

So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted
Article 217 in its original form) nullified Presidential Decree No. 1367 and restored to
the Labor Arbiter and the NLRC their jurisdiction to award all kinds of damages in
cases arising from employer-employee relations. . . . (Emphasis supplied).

Clearly, respondent court's taking jurisdiction over the instant case would bring about precisely the
harm that the lawmakers sought to avoid in amending the Labor Code to restore jurisdiction over
claims for damages of this nature to the NLRC.

This is, of course, to distinguish from cases of actions for damages where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of
obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for were
based on tort 14 , malicious prosecution 15 , or breach of contract, as when the claimant seeks to
recover a debt from a former employee 16 or seeks liquidated damages in enforcement of a prior
employment contract. 17

Neither can we uphold the reasoning of respondent court that because the resolution of the issues
presented by the complaint does not entail application of the Labor Code or other labor laws, the
dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the
Labor Arbiter original and exclusive jurisdiction over claims for damages arising from employer-
employee relations — in other words, the Labor Arbiter has jurisdiction to award not only the reliefs
provided by labor laws, but also damages governed by the Civil Code. 18
Thus, it is obvious that private respondent's remedy is not in the filing of this separate action for
damages, but in properly perfecting an appeal from the Labor Arbiter's decision. Having lost the right
to appeal on grounds of untimeliness, the decision in the labor case stands as a final judgment on
the merits, and the instant action for damages cannot take the place of such lost appeal.

Respondent court clearly having no jurisdiction over private respondent's complaint for damages, we
will no longer pass upon petitioner's other assignments of error.

WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before Branch
39 of the Regional Trial Court of Misamis Oriental is hereby DISMISSED. No pronouncement as to
costs.

SO ORDERED.

Melo, Vitug and Panganiban, JJ., concur.

Purisima, J., abroad - no part.

G.R. No. 79907 March 16, 1989

SAMUEL CASAS LIM, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and VICTORIA R. CALSADO, respondents.

G.R. No. 79975. March 16, 1989

SWEET LINES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION; HON. NESTOR C. LIM (In his capacity as
Labor Arbiter of the Ministry of Labor and Employment and VICTORIA R.
CALSADO, respondents.

Puruganan, Chato, Chato & Tan Law Office for petitioner.

Leo C. Romero for petitioner Sweet Lines, Inc.

Andrea R. dela Cueva for Victoria R. Calsado.

CRUZ, J.:

These two cases have been consolidated because they relate to the same factual antecedents and
the same private respondent. The issues are:

1. In G.R. No. 79975, whether or not the private respondent was an employee of the
petitioner and, if so, had been illegally dismissed; and corollarily, whether or not the
NLRC had jurisdiction over their dispute.
 2. In G.R. No. 79907, whether or not the petitioner could be held solidarity liable with
Sweet Lines, Inc. to the private respondent.

The record shows that private respondent Victoria Calsado was hired by Sweet Lines, Inc. on March
5, 1981, as Senior Branch Officer of its International Accounts Department for a fixed salary and a
stipulated 5 % commission on sales production. On December 1, 1983, after tendering her
resignation to accept another offer of employment, she was persuaded to remain with an offer of her
promotion to Manager of the Department with corresponding increase in compensation, which she
accepted. She was also allowed to buy a second-hand Colt Lancer pursuant to a liberal car plan
under which one-half of the cost was to be paid by the company and the other half was to be
deducted from her salary. Relations began to sour later, however, when she repeatedly asked for
payment of her commissions, which had accumulated and were long overdue. She also complained
of the inordinate demands on her time even when she was sick and in the hospital. Finally, on July
16, 1985, she was served with a letter from Samuel Casas Lim, the other petitioner, informing her
that her "employment with Sweet Lines" would terminate on August 5, 1985. Efforts were also taken
by Sweet Lines to forcibly take the car from her, culminating in an action for replevin against her in
the regional trial court of Manila.

On August 14, 1985, Calsado filed a complaint against both petitioners for illegal dismissal, illegal
deduction, and unpaid wages and commissions plus moral and exemplary damages, among other
claims. 1 There followed an extended hearing where she testified on the details of her employment, emphasizing her unsatisfactory
treatment by the management of Sweet Lines and especially the termination of her services without the required notice and hearing and
without valid cause. She also presented four other witnesses to corroborate her charges.

The respondents' defenses were based mainly on the claim that Calsado was not an employee of
Sweet Lines but an independent contractor and that therefore their dispute with her came under the
jurisdiction of the civil courts and not of the Labor Arbiter. 2 On this matter the private respondent pointedly
comments:

At this point, private respondent would like to underscore the fact that while private
respondent in the proceedings before the Labor Arbiter presented five witnesses
including herself, all of whom were cross-examined by petitioners, and numerous
documents which were marked as Exhs. "A" to "GG-8d" and 858 receipts and bills,
all of which were duly identified and testified to by private respondent and her
witnesses and examined by petitioners, petitioner failed to present any single
evidence, testimonial or documentary, to controvert private respondent's evidence.
All that they presented were their unsubstantiated pleadings not one of which was
under oath, not even their position paper which, under the NLRC rules (Sec. 2, Rule
7, Revised Rules of the NLRC), have to be verified. 3

On December 29, 1986, decision was rendered against the two petitioners by the Labor Arbiter 4 who
held them liable in solidum to the complainant for the following amounts:

(a) Separation pay equivalent to one month pay for every year of service based on
her latest basic salary of P2,500.00 plus allowance of P500.00, or a total monthly pay
of P3,000.00;

(b) Backwages based on her last monthly pay rate of P3,000.00 to be computed from
the time of her dismissal to the actual payment of her separation pay;

(c) Proportionate 13th month pay for the year 1985;

(d) Sales commission in the sum of P432,656.68;

 (e) Moral damages of P100,000.00;

(f) Exemplary damages of P10,000.00; and

(g) Attorney's fees of P10,000.00 plus 25 % of the total monetary awards in favor of
the complainant.

The decision was appealed to the National Labor Relations Commission and affirmed in toto except
as to the attorney's fees, which were reduced to 10% of the total award. 5 Both Sweet Lines and Lim then came
to us in separate petitions to raise the above-stated issues. On October 14, 1987, we issued a temporary restraining order against the
enforcement of the decision of the public respondent dated September 11, 1987. 6 The petitions were consolidated on December 7, 1987,
and given due course on May 16, 1987, with the parties being required to submit their respective memoranda. On the first question, we hold
that the employee-employer relations between Calsado and Sweet Lines have been sufficiently established. The following documents
submitted by the former and not controverted by the latter should belie the claim that Calsado was only an independent contractor over
whom Sweet Lines had no control.

1. Certification issued by Sweet Lines, lnc. dated May 2l,1984, stating that private
respondent 'is employed with this company since March 5, 1982 up to the present,
presently designated as International Accounts Manager of the Sweet Lines, Inc.,
Manila Branch." (Exh. "W" )

2. Termination letter issued by Samuel Casas Lim to private respondent reading.

'Your employment with Sweet lines, Inc. will cease effective August 15, 1985. In
connection with the foregoing, you are entitled to (1) separation pay equivalent to
one half month of every year of service ... ; (2) The computed money value of unused
vacation leave ... ; (3) Thirteenth month pay ... ;" (Exh. "W")

3. Notice of private respondent's promotion effective December 1, 1982 from Senior

Branch Officer to Manager, International Accounts, with an increase in basic salary
from P1,250 to P2,500 a month; (Exh. "D")

4. Computation of her salary, allowance and 13th month pay differentials on account
of her promotion, prepared and approved by the proper officials of petitioner Sweet
Lines, Inc. whose signatures appear thereon; (Exh. "E")

5. Certification dated September 6, 19M issued by the petitioner company,

subscribed and sworn to before a notary public declaring that private respondent was
then an Account Executive of Sweet Lines, Inc.; (Exh. "E")

6. Certification, notarized on January 10, 1985, by Atty. Gregorio Francisco, counsel

for petitioner company, that private respondent "is a bona fide employee of Sweet
Lines, Inc. and presently holding the position of Manager, International Account.'
(Exh. "Y")

7. Approved application for sick leave of private respondent for 15 days from March
7, 1985 to April 3, 1985. (Exh. "I")

There is in the above exhibits a consistent and categorical recognition of Calsado as an employee of
petitioner Sweet Lines. Indeed, its notarized certification that Calsado was its bona fide employee is
irrefutable. The petitioner cannot now argue that the grant to her of the 13th month pay and even the
differential pay was a mere accomodation like the car plan (which, for that matter, is a benefit usually
extended only to employees). If it is true that Sweet Lines had no control over her and left her free to
determine her work schedule, there would have been no reason at all for its approval of her
application for sick leave from March 7, 1985 to April 3, 1985. The termination letter itself, which was
signed by the other petitioner as Vice President of Sweet Lines, said she was "entitled" to certain
payments as a result of the cessation of her "employment with Sweet Lines, Inc."

Sweet Lines has also failed to substantiate its allegation that Calsado was an independent
contractor, as it should have, with evidence showing inter alia that she had the financial resources
and other means or equipment to operate as such. One must prove what one alleges, but Sweet
Lines confined itself to mere denials.

At any rate, the determination of the existence of employee-employer relations is a factual finding
which this Court will not disturb or reverse in the absence of a showing of grave abuse of discretion.
We do not see such justification here. On the contrary, the ascertainment of the employment status
of the private respondent was made on the basis of the criteria consistently employed by the Court in
the determination of the employee- employer relationship. 7 We find from the record that all these test have been
satisfied.

Such relationship having been established, the third issue is automatically resolved and requires not
much elaboration. Suffice it only to stress that the damages claimed by private respondent as a
result of her illegal dismissal and the violation of the terms and conditions of her employment also
come within the jurisdiction of the Labor Arbiter as a contrary rule would result in the splitting of
actions and the consequent multiplication of suits. So we recently affirmed in Limquiaco v.
Ramolete 8 and more positively in National Union of Bank Employees v. Lazaro, 9 where we declared:

As we stated, the damages (allegedly) suffered by the petitioners only form part of
the civil component of the injury arising from the unfair labor practice. Under Article
247 of the Code, "the civil aspects of all cases involving unfair labor practices which
may include claims for damages and other affirmative relief, shall be under the
jurisdiction of the labor arbiters.

On the fourth issue, we agree with petitioner Lim that he cannot be held personally liable with Sweet
Lines for merely having signed the letter informing Calsado of her separation. There is no evidence
that he acted with malice or bad faith. The letter, in fact, informed her not only of her separation but
also of the benefits due her as a result of the termination of her services.

It is true that Lim has raised this matter rather tardily and also that he belongs to a closed
corporation controlled by the members of one family only. But these circumstances should not be
allowed to operate against him if he is to be accorded substantial justice in the resolution of the
private respondent's claim. As we said in Ortigas vs. Lufthansa German Airlines, 10 the Court is "clothed
with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that its consideration is necessary in
arriving at a just decision of the case." As for the second charge, the mere fact that Lim is part of the family corporation does not mean that
all its acts are imputable to him directly and personally. His acts were official acts, done in his capacity as Vice President of Sweet Lines and
on its behalf. There is no showing that he acted without or in excess of his authority or was motivated by personal ill-will toward Calsado. The
applicable decision is Sunio v. NLRC, 11 where it was held:

Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager
of petitioner corporation. There appears to be no evidence on record that he acted
maliciously or in bad faith in terminating the services of private respondents. His act,
therefore, was within the scope of his authority and was a corporate act.

It is basic that a corporation is invested by law with a personality separate and

distinct from those of the persons composing it as well as from that of any other
entity to which it may be related. 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 sufficient ground for disregarding the separate corporate personality. Petitioner
 Sunio, therefore, should not have been made personally answerable for the payment
of private respondents' back salaries.

The case of Ransom v. NLRC 12 is not in point because there the debtor corporation actually ceased operations after the
decision of the Court of Industrial Relations was promulgated against it, making it necessary to enforce it against its former president. Sweet
lines is still existing and able to satisfy the judgment in favor of the private respondent.

The Solicitor General, invoking equity rather than law, observes that making Lim solidarity liable with
Sweet Lines will ensure payment of Calsado's claim. But this precaution, even assuming it to be
valid, is really unnecessary. in fact, as a condition for the issuance of our temporary restraining order
of October 14, 1987, Sweet Lines posted as required a bond in the amount of P850,000.00, which
should cover the amounts awarded to the private respondent.13

We especially uphold the award of moral and exemplary damages in view of the acts of harassment
and bad faith testified to by the private respondent and not refuted by Sweet Lines. Her treatment
during her employment, the delays in the payment of her commissions, the pressures exerted upon
her even when she was sick in the hospital, the suggestion of one of the company officers that she
discuss her complaints with him alone in a private place, her arbitrary separation, the questionable
attempts to get the vehicle from her after her dismissal, among other aggravations, clearly
demonstrate the validity of the private respondent's complaints.

Finally, we hold that the contention of Sweet Lines that separation pay and back wages are
inconsistent with each other is not well-taken. Separation pay is granted where reinstatement is no
longer advisable because of strained relations between the employee and the employer. Back
wages represent compensation that should have been earned but were not collected because of the
unjust dismissal. The bases for computing the two are different, the first being usually the length of
the employee's service and the second the actual period when he was unlawfully prevented from
working.

We have ordered the payment of both in proper case 14 as otherwise the employee might be deprived of benefits justly
due him. Thus, if an employee who has worked only one year is sustained by the labor court after three years from his unjust dismissal,
granting him separation pay only would entitle him to only one month salary. There is no reason why he should not also be paid three years
back wages corresponding to the period when he could not return to his work or could not find employment elsewhere.

WHEREFORE, subject to the modification that the award of backwages shall be limited to only three
years, in accordance with existing policy, G.R. No. 79975 is DISMISSED, with costs against the
petitioner, G.R. No. 79907 is GRANTED and petitioner Samuel Casas Lim is hereby absolved of
liability in his personal capacity. The temporary restraining order dated October 14, 1987, is LIFTED.
It is so ordered.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of
poverty. Their earnings have built houses, provided health care, equipped schools and planted the
seeds of businesses. They have woven together the world by transmitting ideas and knowledge from
country to country. They have provided the dynamic human link between cultures, societies and
economies. Yet, only recently have we begun to understand not only how much international
migration impacts development, but how smart public policies can magnify this effect.

United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 20071

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section
10, Republic Act (R.A.) No. 8042,2 to wit:

Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)

does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but
exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal
dismissal to their lump-sum salary either for the unexpired portion of their employment contract "or
for three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner
claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of their
contract, deprives them of equal protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December
8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the
subject clause, entreating this Court to declare the subject clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract
of Employment with the following terms and conditions:

Duration of contract 12 months

Position Chief Officer

Basic monthly salary US$1,400.00

Hours of work 48.0 hours per week

Overtime US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon
the assurance and representation of respondents that he would be made Chief Officer by the end of
April 1998.6

Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner
refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8

Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March
19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and
seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23)
days.

Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive
dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down
as follows:

May US$ 413.90

27/31,
1998 (5
days)
incl.
Leave
pay
June 2,590.00
01/30,
1998
July 2,590.00
01/31,
1998
August 2,590.00
01/31,
1998
Sept. 2,590.00
01/30,
1998
Oct. 2,590.00
01/31,
1998
Nov. 2,590.00
01/30,
1998
Dec. 2,590.00
01/31,
1998
Jan. 2,590.00
01/31,
1999
Feb. 2,590.00
01/28,
1999
Mar. 1,640.00
1/19,
1999
(19
days)
incl.
leave
pay
--------------------------------------------------------------------------------
25,382.23
Amount
adjusted
to chief
mate's
salary
(March 1,060.5010
19/31,
1998 to
April
1/30,
1998) +
----------------------------------------------------------------------------------------------
TOTAL US$ 26,442.7311
CLAIM

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal
and awarding him monetary benefits, to wit:

WHEREFORE, premises considered, judgment is hereby rendered declaring that the

dismissal of the complainant (petitioner) by the respondents in the above-entitled case was
illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly and
severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS
(US $8,770.00), representing the complainant’s salary for three (3) months of the
unexpired portion of the aforesaid contract of employment. 1avvphi1

The respondents are likewise ordered to pay the complainant [petitioner], jointly and
severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the
complainant’s claim for a salary differential. In addition, the respondents are hereby ordered
to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate
prevailing at the time of payment, the complainant’s (petitioner's) claim for attorney’s fees
 equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee
under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for
lack of merit.

All other claims are hereby DISMISSED.

SO ORDERED.13 (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on

the salary period of three months only -- rather than the entire unexpired portion of nine
months and 23 days of petitioner's employment contract - applying the subject clause.
However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month."14

Respondents appealed15 to the National Labor Relations Commission (NLRC) to question

the finding of the LA that petitioner was illegally dismissed.

Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the
ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18

In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby
ordered to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate
of exchange at the time of payment the following:

1. Three (3) months salary

$1,400 x 3 US$4,200.00

2. Salary differential 45.00

US$4,245.00

3. 10% Attorney’s fees 424.50

TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.19

The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing
the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not
provide for the award of overtime pay, which should be proven to have been actually performed, and
for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality
of the subject clause.21 The NLRC denied the motion.22

Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against
the subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave
due course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the
petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the
applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25

His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this
Court on the following grounds:

The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker
back wages equal to the unexpired portion of his contract of employment instead of limiting it to
three (3) months

II

In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals
gravely erred in law when it failed to discharge its judicial duty to decide questions of substance not
theretofore determined by the Honorable Supreme Court, particularly, the constitutional issues
raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and
arbitrarily limits payment of the award for back wages of overseas workers to three (3) months.

III

Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the
Court of Appeals gravely erred in law in excluding from petitioner’s award the overtime pay and
vacation pay provided in his contract since under the contract they form part of his salary.28

On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and
sickly, and he intends to make use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to allow
partial execution of the undisputed monetary award and, at the same time, praying that the
constitutional question be resolved.30

Considering that the parties have filed their respective memoranda, the Court now takes up the full
merit of the petition mindful of the extreme importance of the constitutional question raised therein.

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not
disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all
three fora. What remains disputed is only the computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at
the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of
nine months and 23 days of his employment contract or a total of US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the
US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of
US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of US$2,590.00.31

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom
of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate
employment period and a fixed salary package.32 It also impinges on the equal protection clause, for
it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount
of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to
the same monetary award for local workers when their dismissal is declared illegal; that the
disparate treatment is not reasonable as there is no substantial distinction between the two
groups;33 and that it defeats Section 18,34 Article II of the Constitution which guarantees the
protection of the rights and welfare of all Filipino workers, whether deployed locally or overseas.35

Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with
existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are
conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected
OFWs.36

Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no
other purpose but to benefit local placement agencies. He marks the statement made by the Solicitor
General in his Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the
event that jurisdiction over the foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect
them and to promote their continued helpful contribution in deploying Filipino migrant workers,
liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis supplied)

Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause
sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off
than local employers because in cases involving the illegal dismissal of employees, foreign
employers are liable for salaries covering a maximum of only three months of the unexpired
employment contract while local employers are liable for the full lump-sum salaries of their
employees. As petitioner puts it:

In terms of practical application, the local employers are not limited to the amount of backwages they
have to give their employees they have illegally dismissed, following well-entrenched and
unequivocal jurisprudence on the matter. On the other hand, foreign employers will only be limited to
giving the illegally dismissed migrant workers the maximum of three (3) months unpaid salaries
notwithstanding the unexpired term of the contract that can be more than three (3) months.38

Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of
the salaries and other emoluments he is entitled to under his fixed-period employment contract.39
The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional issue should not
be entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at
the earliest opportunity, which was when he filed an appeal before the NLRC.40

The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its
provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042
having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms
of petitioner's employment, especially on the matter of money claims, as this was not stipulated upon
by the parties.42

Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their
employment, such that their rights to monetary benefits must necessarily be treated differently. The
OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local
workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers,
over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible
to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and
Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular employees.
Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable and valid basis for the
differentiated treatment under the subject clause of the money claims of OFWs who are illegally
dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II
of the Constitution.45

Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted
to mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant
workers whose welfare the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly deployed and are
employed under decent and humane conditions."46

The Court's Ruling

The Court sustains petitioner on the first and second issues.

When the Court is called upon to exercise its power of judicial review of the acts of its co-equals,
such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case
or controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the
constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that the
constitutional question is the very lis mota of the case,50 otherwise the Court will dismiss the case or
decide the same on some other ground.51

Without a doubt, there exists in this case an actual controversy directly involving petitioner who is
personally aggrieved that the labor tribunals and the CA computed his monetary award based on the
salary period of three months only as provided under the subject clause.

The constitutional challenge is also timely. It should be borne in mind that the requirement that a
constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the
pleadings before a competent court, such that, if the issue is not raised in the pleadings before that
competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be
considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause
was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari before the
CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA
which has the competence to resolve the constitutional issue. The NLRC is a labor tribunal that
merely performs a quasi-judicial function – its function in the present case is limited to determining
questions of fact to which the legislative policy of R.A. No. 8042 is to be applied and to resolving
such questions in accordance with the standards laid down by the law itself;55 thus, its foremost
function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its
provisions. The CA, on the other hand, is vested with the power of judicial review or the power to
declare unconstitutional a law or a provision thereof, such as the subject clause.56 Petitioner's
interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA was
therefore remiss in failing to take up the issue in its decision.

The third condition that the constitutional issue be critical to the resolution of the case likewise
obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired
portion of his 12-month employment contract, and not just for a period of three months, strikes at the
very core of the subject clause.

Thus, the stage is all set for the determination of the constitutionality of the subject clause.

Does the subject clause violate Section 10,

Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the
term of his employment and the fixed salary package he will receive57 is not tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation,58 and cannot affect acts or contracts already perfected;59 however, as to laws already in
existence, their provisions are read into contracts and deemed a part thereof.60 Thus, the non-
impairment clause under Section 10, Article II is limited in application to laws about to be enacted
that would in any way derogate from existing acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties thereto.

As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of
the employment contract between petitioner and respondents in 1998. Hence, it cannot be argued
that R.A. No. 8042, particularly the subject clause, impaired the employment contract of the parties.
Rather, when the parties executed their 1998 employment contract, they were deemed to have
incorporated into it all the provisions of R.A. No. 8042.

But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in
the exercise of the police power of the State to regulate a business, profession or calling, particularly
the recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the
dignity and well-being of OFWs wherever they may be employed.61 Police power legislations
adopted by the State to promote the health, morals, peace, education, good order, safety, and
general welfare of the people are generally applicable not only to future contracts but even to those
already in existence, for all private contracts must yield to the superior and legitimate measures
taken by the State to promote public welfare.62

Does the subject clause violate Section 1,

Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall any
person be denied the equal protection of the law.

Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without
distinction as to place of deployment, full protection of their rights and welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to
economic security and parity: all monetary benefits should be equally enjoyed by workers of similar
category, while all monetary obligations should be borne by them in equal degree; none should be
denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in
like circumstances.65

Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it
sees fit, a system of classification into its legislation; however, to be valid, the classification must
comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the
purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all
members of the class.66

There are three levels of scrutiny at which the Court reviews the constitutionality of a classification
embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification
needs only be shown to be rationally related to serving a legitimate state interest;67 b) the middle-tier
or intermediate scrutiny in which the government must show that the challenged classification serves
an important state interest and that the classification is at least substantially related to serving that
interest;68 and c) strict judicial scrutiny69 in which a legislative classification which impermissibly
interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a
suspect class71 is presumed unconstitutional, and the burden is upon the government to prove that
the classification is necessary to achieve a compelling state interest and that it is the least
restrictive means to protect such interest.72

Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based
on race74 or gender75 but not when the classification is drawn along income categories.76

It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of
the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the
rank-and-file employees of other GFIs had been exempted from the SSL by their respective
charters. Finding that the disputed provision contained a suspect classification based on salary
grade, the Court deliberately employed the standard of strict judicial scrutiny in its review of the
constitutionality of said provision. More significantly, it was in this case that the Court revealed the
broad outlines of its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid classification, and its policies should be
accorded recognition and respect by the courts of justice except when they run afoul of the
Constitution. The deference stops where the classification violates a fundamental right,
or prejudices persons accorded special protection by the Constitution. When these violations
arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and
require a stricter and more exacting adherence to constitutional limitations. Rational basis should not
suffice.

Admittedly, the view that prejudice to persons accorded special protection by the Constitution
requires a stricter judicial scrutiny finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per se controlling in this jurisdiction. At
best, they are persuasive and have been used to support many of our decisions. We should not
place undue and fawning reliance upon them and regard them as indispensable mental crutches
without which we cannot come to our own decisions through the employment of our own
endowments. We live in a different ambience and must decide our own problems in the light of our
own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with
our own concept of law and justice. Our laws must be construed in accordance with the intention of
our own lawmakers and such intent may be deduced from the language of each law and the context
of other local legislation related thereto. More importantly, they must be construed to serve our own
public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our
public interest is distinct and different from others.

xxxx

Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of
effective judicial intervention.

Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble
proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society.
The command to promote social justice in Article II, Section 10, in "all phases of national
development," further explicitated in Article XIII, are clear commands to the State to take affirmative
action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of
doctrinal support for a more vigorous state effort towards achieving a reasonable measure of
equality.

Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justification that those
with less privilege in life should have more in law. And the obligation to afford protection to labor is
incumbent not only on the legislative and executive branches but also on the judiciary to translate
this pledge into a living reality. Social justice calls for the humanization of laws and the equalization
of social and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated.

xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative
power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion
would be given deferential treatment.

But if the challenge to the statute is premised on the denial of a fundamental right, or the
perpetuation of prejudice against persons favored by the Constitution with special
protection, judicial scrutiny ought to be more strict. A weak and watered down view would call
for the abdication of this Court’s solemn duty to strike down any law repugnant to the Constitution
and the rights it enshrines. This is true whether the actor committing the unconstitutional act is a
private person or the government itself or one of its instrumentalities. Oppressive acts will be struck
down regardless of the character or nature of the actor.

xxxx

In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-
employee status. It is akin to a distinction based on economic class and status, with the higher
grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP now
receive higher compensation packages that are competitive with the industry, while the poorer, low-
salaried employees are limited to the rates prescribed by the SSL. The implications are quite
disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while
employees higher in rank - possessing higher and better education and opportunities for career
advancement - are given higher compensation packages to entice them to stay. Considering that
majority, if not all, the rank-and-file employees consist of people whose status and rank in life are
less and limited, especially in terms of job marketability, it is they - and not the officers - who have
the real economic and financial need for the adjustment . This is in accord with the policy of the
Constitution "to free the people from poverty, provide adequate social services, extend to them a
decent standard of living, and improve the quality of life for all." Any act of Congress that runs
counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present
case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent against,
and an invidious impact on, OFWs at two levels:

First, OFWs with employment contracts of less than one year vis-à-vis OFWs with
employment contracts of one year or more;

Second, among OFWs with employment contracts of more than one year; and

Third, OFWs vis-à-vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis-à-vis OFWs with employment
contracts of one year or more

As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid down the following rules on the application
of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an
illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months’ salary for every year of the unexpired
term, whichever is less, comes into play only when the employment contract concerned has a
term of at least one (1) year or more. This is evident from the words "for every year of the
unexpired term" which follows the words "salaries x x x for three months." To follow
petitioners’ thinking that private respondent is entitled to three (3) months salary only simply because
it is the lesser amount is to completely disregard and overlook some words used in the statute while
giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or word thereof be given effect since the
law-making body is presumed to know the meaning of the words employed in the statue and to have
used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but
was awarded his salaries for the remaining 8 months and 6 days of his contract.

Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on
Section 10(5). One was Asian Center for Career and Employment System and Services v. National
Labor Relations Commission (Second Division, October 1998),81 which involved an OFW who was
awarded a two-year employment contract, but was dismissed after working for one year and two
months. The LA declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary
covering eight months, the unexpired portion of his contract. On appeal, the Court reduced the
award to SR3,600.00 equivalent to his three months’ salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just,
valid or authorized cause is entitled to his salary for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private respondent’s employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3)
months or a total of SR3,600.82

Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third
Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was
originally granted a 12-month contract, which was deemed renewed for another 12 months. After
serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and
the Court awarded her salaries for the entire unexpired portion of four and one-half months of her
contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:

Case Title Contract Period of Unexpired Period Applied in

Period Service Period the Computation
of the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping 9 months 8 months 4 months 4 months

v. Reynaldo
Chua 85
 Centennial 9 months 4 months 5 months 5 months
Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87
Univan v. CA 88 12 months 3 months 9 months 3 months
Oriental v. 12 months more than 2 10 months 3 months
CA 89 months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days
JSS v.Ferrer92 12 months 16 days 11 months and 3 months
24 days
Pentagon v. 12 months 9 months and 2 months and 23 2 months and 23
Adelantar93 7 days days days
Phil. Employ v. 12 months 10 months 2 months Unexpired portion
Paramio, et
al.94
Flourish 2 years 26 days 23 months and 4 6 months or 3
Maritime v. days months for each
Almanzor 95 year of contract
Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3
Manpower v. months and and 28 days months for each
Villanos 96 28 days year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The
first category includes OFWs with fixed-period employment contracts of less than one year; in case
of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract.
The second category consists of OFWs with fixed-period employment contracts of one year or more;
in case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the
unexpired portion of their contracts.

The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent
OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the
remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for
about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the
unexpired portion of their contracts. Even the OFWs involved in Talidano and Univan who
had worked for a longer period of 3 months out of their 12-month contracts before being illegally
dismissed were awarded their salaries for only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an
employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical
OFW-B with an employment contract of 15 months with the same monthly salary rate of
US$1,000.00. Both commenced work on the same day and under the same employer, and were
illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to
US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B
will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion
of his contract, instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as
the US$3,000.00 is the lesser amount.

The disparity becomes more aggravating when the Court takes into account jurisprudence
that, prior to the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no
matter how long the period of their employment contracts, were entitled to their salaries for the entire
unexpired portions of their contracts. The matrix below speaks for itself:

Case Title Contract Period of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98
Phil. Integrated 2 years 7 days 23 months 23 months and 23
v. NLRC99 and 23 days days

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. 2 years 2 months 22 months 22 months
NLRC101
EDI v. NLRC, 2 years 5 months 19 months 19 months
et al.102

Barros v. 12 months 4 months 8 months 8 months

NLRC, et al.103

Philippine 12 months 6 months 5 months and 5 months and 18 days

Transmarine v. and 22 days 18 days
Carilla104

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired
portions thereof, were treated alike in terms of the computation of their monetary benefits in case of
illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries
multiplied by the entire unexpired portion of their employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation
of the money claims of illegally dismissed OFWs based on their employment periods, in the
process singling out one category whose contracts have an unexpired portion of one year or more
and subjecting them to the peculiar disadvantage of having their monetary awards limited to their
salaries for 3 months or for the unexpired portion thereof, whichever is less, but all the while sparing
the other category from such prejudice, simply because the latter's unexpired contracts fall short of
one year.

Among OFWs With Employment Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause, the Court now has
misgivings on the accuracy of the Marsaman interpretation.

The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its
ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that
"every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term
must be at least one year, for if it were any shorter, there would be no occasion for such unexpired
term to be measured by every year; and second, the original term must be more than one year, for
otherwise, whatever would be the unexpired term thereof will not reach even a year. Consequently,
the more decisive factor in the determination of when the subject clause "for three (3) months
for every year of the unexpired term, whichever is less" shall apply is not the length of the original
contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period
-- the subject clause applies in cases when the unexpired portion of the contract period is at least
one year, which arithmetically requires that the original contract period be more than one year.

Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with less than one
year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof,
while those who are illegally dismissed with one year or more remaining in their contracts shall be
covered by the subject clause, and their monetary benefits limited to their salaries for three months
only.

To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court
assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of
US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th
month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the
subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be
entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the
contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-
month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the
subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be
entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month
unexpired portion.

OFWs vis-à-vis Local Workers

With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary
awards of illegally dismissed OFWs was in place. This uniform system was applicable even to local
workers with fixed-term employment.107

The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of
Commerce (1888),108 to wit:

Article 299. If the contracts between the merchants and their shop clerks and employees should
have been made of a fixed period, none of the contracting parties, without the consent of the other,
may withdraw from the fulfillment of said contract until the termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the
exception of the provisions contained in the following articles.
In Reyes v. The Compañia Maritima,109 the Court applied the foregoing provision to determine the
liability of a shipping company for the illegal discharge of its managers prior to the expiration of their
fixed-term employment. The Court therein held the shipping company liable for the salaries of its
managers for the remainder of their fixed-term employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of
Commerce which provides:

Article 605. If the contracts of the captain and members of the crew with the agent should be for a
definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for
reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage
caused to the vessel or to its cargo by malice or manifest or proven negligence.

Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in

which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.

While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce
was replaced by Art. 1586 of the Civil Code of 1889, to wit:

Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a
certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a
conjunctive "and" so as to apply the provision to local workers who are employed for a time certain
although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v.
Hotel de France Company.113 And in both Lemoine and Palomar, the Court adopted the general
principle that in actions for wrongful discharge founded on Article 1586, local workers are entitled to
recover damages to the extent of the amount stipulated to be paid to them by the terms of their
contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay114 held:

The doctrine is well-established in American jurisprudence, and nothing has been brought to our
attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully
discharged it is his duty to seek other employment of the same kind in the same community, for the
purpose of reducing the damages resulting from such wrongful discharge. However, while this is the
general rule, the burden of showing that he failed to make an effort to secure other employment of a
like nature, and that other employment of a like nature was obtainable, is upon the defendant. When
an employee is wrongfully discharged under a contract of employment his prima facie damage is the
amount which he would be entitled to had he continued in such employment until the termination of
the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School
District No. 2, 98 Mich., 43.)115 (Emphasis supplied)

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment:
Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3
(Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil
Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies
available to a fixed-term worker who is illegally discharged. However, it is noted that in Mackay
Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of
damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving
the illegal discharge of a local worker whose fixed-period employment contract was entered into in
1952, when the new Civil Code was already in effect.118

More significantly, the same principles were applied to cases involving overseas Filipino workers
whose fixed-term employment contracts were illegally terminated, such as in First Asian Trans &
Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally discharged. In Teknika Skills
and Trade Services, Inc. v. National Labor Relations Commission,120 an OFW who was illegally
dismissed prior to the expiration of her fixed-period employment contract as a baby sitter, was
awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the
same ruling in Anderson v. National Labor Relations Commission,121 which involved a foreman hired
in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine
months on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired
portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a
Filipino working as a security officer in 1989 in Angola was awarded his salaries for the remaining
period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co.,
Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was illegally cut
short in the second month was declared entitled to his salaries for the remaining 10 months of his
contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were
illegally discharged were treated alike in terms of the computation of their money claims: they were
uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with the
enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed
OFWs with an unexpired portion of one year or more in their employment contract have since been
differently treated in that their money claims are subject to a 3-month cap, whereas no such
limitation is imposed on local workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more
in their contracts, but none on the claims of other OFWs or local workers with fixed-term
employment. The subject clause singles out one classification of OFWs and burdens it with a
peculiar disadvantage.

There being a suspect classification involving a vulnerable sector protected by the Constitution, the
Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a
compelling state interest through the least restrictive means.

What constitutes compelling state interest is measured by the scale of rights and powers arrayed in
the Constitution and calibrated by history.124 It is akin to the paramount interest of the state125 for
which some individual liberties must give way, such as the public interest in safeguarding health or
maintaining medical standards,126 or in maintaining access to information on matters of public
concern.127

In the present case, the Court dug deep into the records but found no compelling state interest that
the subject clause may possibly serve.

The OSG defends the subject clause as a police power measure "designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino
seafarers have better chance of getting hired by foreign employers." The limitation also protects the
interest of local placement agencies, which otherwise may be made to shoulder millions of pesos in
"termination pay."128
The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the
event that jurisdiction over the foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect
them and to promote their continued helpful contribution in deploying Filipino migrant workers,
liability for money are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose welfare the government seeks
to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)

However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception
of the state interest sought to be served by the subject clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in
sponsorship of House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech
makes no reference to the underlying reason for the adoption of the subject clause. That is only
natural for none of the 29 provisions in HB 14314 resembles the subject clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:

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 the complaint, the claim arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas employment including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal and the recruitment/placement agency or any and all claims under this
Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of

damages under this Section shall not be less than fifty percent (50%) of such money
claims: Provided, That any installment payments, if applicable, to satisfy any such compromise or
voluntary settlement shall not be more than two (2) months. Any compromise/voluntary agreement in
violation of this paragraph shall be null and void.

Non-compliance with the mandatory period for resolutions of cases provided under this Section shall
subject the responsible officials to any or all of the following penalties:

(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;

(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability
which any such official may have incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money
claims.

A rule on the computation of money claims containing the subject clause was inserted and
eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the
rationale of the subject clause in the transcripts of the "Bicameral Conference Committee
(Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate
Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible state interest, let
alone a compelling one, that is sought to be protected or advanced by the adoption of the subject
clause.

In fine, the Government has failed to discharge its burden of proving the existence of a compelling
state interest that would justify the perpetuation of the discrimination against OFWs under the
subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the
employment of OFWs by mitigating the solidary liability of placement agencies, such callous and
cavalier rationale will have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes the same burden on another
sector, especially when the favored sector is composed of private businesses such as placement
agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the
Constitution commands. The idea that private business interest can be elevated to the level of a
compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement
agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be
employed to achieve that purpose without infringing on the constitutional rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based
Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring
foreign employers who default on their contractual obligations to migrant workers and/or their
Philippine agents. These disciplinary measures range from temporary disqualification to preventive
suspension. The POEA Rules and Regulations Governing the Recruitment and Employment of
Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring
foreign employers.

Resort to these administrative measures is undoubtedly the less restrictive means of aiding local
placement agencies in enforcing the solidary liability of their foreign principals.

Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right
of petitioner and other OFWs to equal protection. 1avvphi1

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3,131 Article XIII of the Constitution.

While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some
which this Court has declared not judicially enforceable, Article XIII being one,133 particularly
Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as
self-executing in the sense that these are automatically acknowledged and observed without need
for any enabling legislation. However, to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein, and the realization of ideals therein
expressed, would be impractical, if not unrealistic. The espousal of such view presents the
dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest
interpretation possible suggests a blanket shield in favor of labor against any form of removal
regardless of circumstance. This interpretation implies an unimpeachable right to continued
employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure
the protection and promotion, not only the rights of the labor sector, but of the employers' as well.
Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own
conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to
serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the
provisions on social justice require legislative enactments for their enforceability.135 (Emphasis
added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for
the violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk
opening the floodgates of litigation to every worker or union over every conceivable violation of so
broad a concept as social justice for labor.

It must be stressed that Section 3, Article XIII does not directly bestow on the working class any
actual enforceable right, but merely clothes it with the status of a sector for whom the Constitution
urges protection through executive or legislative action and judicial recognition. Its utility is best
limited to being an impetus not just for the executive and legislative departments, but for the judiciary
as well, to protect the welfare of the working class. And it was in fact consistent with that
constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice
Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on
the perpetuation of prejudice against persons favored by the Constitution with special protection --
such as the working class or a section thereof -- the Court may recognize the existence of a suspect
classification and subject the same to strict judicial scrutiny.

The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central
Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause.
Article XIII, by itself, without the application of the equal protection clause, has no life or force of its
own as elucidated in Agabon.

Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's
right to substantive due process, for it deprives him of property, consisting of monetary benefits,
without any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the
entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better
chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there is
nothing in the text of the law or the records of the deliberations leading to its enactment or the
pleadings of respondent that would indicate that there is an existing governmental purpose for the
subject clause, or even just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for that
precise reason that the clause violates not just petitioner's right to equal protection, but also her right
to substantive due process under Section 1,137 Article III of the Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired
period of nine months and 23 days of his employment contract, pursuant to law and jurisprudence
prior to the enactment of R.A. No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary basis in the
computation of his monetary award, because these are fixed benefits that have been stipulated into
his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like
petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract
of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and
other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the
regular eight hours, and holiday pay is compensation for any work "performed" on designated rest
days and holidays.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and
holiday pay in the computation of petitioner's monetary award, unless there is evidence that he
performed work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela
Cruz,138

However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in
Cagampan v. National Labor Relations Commission, to wit:

The rendition of overtime work and the submission of sufficient proof that said 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.

In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.

WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every
year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No.
8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005
Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his
salaries for the entire unexpired portion of his employment contract consisting of nine months and 23
days computed at the rate of US$1,400.00 per month.

No costs.

SO ORDERED.

G.R. No. 170139 August 5, 2014

SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,

vs.
JOY C. CABILES, Respondent.

DECISION

LEONEN, J.:

This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts
and the law, to approximate justice for her.

We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals’
decision2 dated June 27, 2005. This decision partially affirmed the National Labor
RelationsCommission’s resolution dated March 31, 2004,3 declaring respondent’s dismissal illegal,
directing petitioner to pay respondent’s three-month salary equivalent to New Taiwan Dollar (NT$)
46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from respondent, and pay her
NT$300.00 attorney’s fees.4

Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement

agency.5 Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for
a quality control job in Taiwan.6

Joy’s application was accepted.7 Joy was later asked to sign a oneyear employment contract for a
monthly salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a
placement fee of ₱70,000.00 when she signed the employment contract.9

Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that
in her employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was
asked to work as a cutter.12

Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang from
Wacoal informedJoy, without prior notice, that she was terminated and that "she should immediately
report to their office to get her salary and passport."13 She was asked to "prepare for immediate
repatriation."14

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15 According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.16

On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as
well as moral and exemplary damages.19 She identified Wacoal as Sameer Overseas Placement
Agency’s foreign principal.20

Sameer Overseas Placement Agency alleged that respondent's termination was due to her
inefficiency, negligence in her duties, and her "failure to comply with the work requirements [of] her
foreign [employer]."21 The agency also claimed that it did not ask for a placement fee of
₱70,000.00.22 As evidence, it showedOfficial Receipt No. 14860 dated June 10, 1997, bearing the
amount of ₱20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had already
been transferred to the Pacific Manpower & Management Services, Inc. (Pacific) as of August 6,
1997.24 Thus, petitioner asserts that it was already substituted by Pacific Manpower.25

Pacific Manpower moved for the dismissal of petitioner’s claims against it.26 It alleged that there was
no employer-employee relationship between them.27 Therefore, the claims against it were outside the
jurisdiction of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first
be presented so that the employer’s contractual obligations might be identified.29 It further denied that
it assumed liability for petitioner’s illegal acts.30

On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint.31 Acting Executive Labor Arbiter
Pedro C.Ramos ruled that her complaint was based on mereallegations.32 The Labor Arbiter found
that there was no excess payment of placement fees, based on the official receipt presented by
petitioner.33 The Labor Arbiter found unnecessary a discussion on petitioner’s transfer of obligations
to Pacific34 and considered the matter immaterial in view of the dismissal of respondent’s complaint.35

Joy appealed36 to the National Labor Relations Commission.

In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy
was illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal
was based on a just or valid cause belongs to the employer.39 It found that Sameer Overseas
Placement Agency failed to prove that there were just causes for termination.40 There was no
sufficient proofto show that respondent was inefficient in her work and that she failed to comply with
company requirements.41 Furthermore, procedural dueprocess was not observed in terminating
respondent.42

The National Labor Relations Commission did not rule on the issue of reimbursement of placement
fees for lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to
Pacific.44 It did not acquire jurisdiction over that issue because Sameer Overseas Placement Agency
failed to appeal the Labor Arbiter’s decision not to rule on the matter.45

The National Labor Relations Commission awarded respondent only three (3) months worth of
salaryin the amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and
attorney’s fees of NT$300.46

The Commission denied the agency’s motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.

Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for
certiorari with the Court of Appeals assailing the National Labor Relations Commission’s resolutions
dated March 31, 2004 and July 2, 2004.

The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with
respect to the finding of illegal dismissal, Joy’s entitlement to the equivalent of three months worth of
salary, reimbursement of withheld repatriation expense, and attorney’s fees.51 The Court of Appeals
remanded the case to the National Labor Relations Commission to address the validity of petitioner's
allegations against Pacific.52 The Court of Appeals held, thus: Although the public respondent found
the dismissal of the complainant-respondent illegal, we should point out that the NLRC merely
awarded her three (3) months backwages or the amount of NT$46,080.00, which was based upon
its finding that she was dismissed without due process, a finding that we uphold, given petitioner’s
lack of worthwhile discussion upon the same in the proceedings below or before us. Likewise we
sustain NLRC’s finding in regard to the reimbursement of her fare, which is squarely based on the
law; as well as the award of attorney’s fees.

But we do find it necessary to remand the instant case to the public respondent for further
proceedings, for the purpose of addressing the validity or propriety of petitioner’s third-party
complaint against the transferee agent or the Pacific Manpower & Management Services, Inc. and
Lea G. Manabat. We should emphasize that as far as the decision of the NLRC on the claims of Joy
Cabiles, is concerned, the same is hereby affirmed with finality, and we hold petitioner liable thereon,
but without prejudice to further hearings on its third party complaint against Pacific for
reimbursement.

WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in
accordance with the foregoing discussion, but subject to the caveat embodied inthe last sentence.
No costs.

SO ORDERED.53

Dissatisfied, Sameer Overseas Placement Agency filed this petition.54

We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the
National Labor Relations Commission finding respondent illegally dismissed and awarding her three
months’ worth of salary, the reimbursement of the cost ofher repatriation, and attorney’s fees despite
the alleged existence of just causes of termination.

Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal
that respondent was inefficient in her work.55

Therefore, it claims that respondent’s dismissal was valid.56

Petitioner also reiterates that since Wacoal’s accreditation was validly transferred to Pacific at the
time respondent filed her complaint, it should be Pacific that should now assume responsibility for
Wacoal’s contractual obligations to the workers originally recruited by petitioner.57

Sameer Overseas Placement Agency’spetition is without merit. We find for respondent.

Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy’s
dismissal. The employer, Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose productivity and quality standards at work.58 They
may also impose reasonable rules to ensure that the employees comply with these
standards.59 Failure to comply may be a just cause for their dismissal.60 Certainly, employers cannot
be compelled to retain the services of anemployee who is guilty of acts that are inimical to the
interest of the employer.61 While the law acknowledges the plight and vulnerability of workers, it does
not "authorize the oppression or self-destruction of the employer."62 Management prerogative is
recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is "tempered with the employee’s right to
security of tenure."63 Workers are entitled to substantive and procedural due process before
termination. They may not be removed from employment without a validor just cause as determined
by law and without going through the proper procedure.

Security of tenure for labor is guaranteed by our Constitution.64

Employees are not stripped of their security of tenure when they move to work in a different
jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle of lex loci
contractus.Thus, in Triple Eight Integrated Services, Inc. v. NLRC,65 this court noted:

Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since
Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country.
Apparently, petitioner hopes tomake it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of employees due to illness.

Again, petitioner’s argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. There is no question that the contract of employment in this case was
perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations,
and other laws affecting labor apply in this case.Furthermore, settled is the rule that the courts of the
forum will not enforce any foreign claim obnoxious to the forum’s public policy. Herein the
Philippines, employment agreements are more than contractual in nature. The Constitution itself, in
Article XIII, Section 3, guarantees the special protection of workers, to wit:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. Theyshall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.

....

This public policy should be borne in mind in this case because to allow foreign employers to
determine for and by themselves whether an overseas contract worker may be dismissed on the
ground of illness would encourage illegal or arbitrary pretermination of employment
contracts.66 (Emphasis supplied, citation omitted)

Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping
Philippines, Inc. v. NLRC,67 to wit:

Petitioners admit that they did notinform private respondent in writing of the charges against him and
that they failed to conduct a formal investigation to give him opportunity to air his side. However,
petitioners contend that the twin requirements ofnotice and hearing applies strictly only when the
employment is within the Philippines and that these need not be strictly observed in cases of
international maritime or overseas employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether working within the Philippines or abroad.
Moreover, the principle of lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. In the present case, it is not disputed that the Contract of Employment
entered into by and between petitioners and private respondent was executed here in the Philippines
with the approval of the Philippine Overseas Employment Administration (POEA). Hence, the Labor
Code together with its implementing rules and regulations and other laws affecting labor apply in this
case.68 (Emphasis supplied, citations omitted)

By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized
cause and after compliance with procedural due process requirements.

Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:

Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representatives; and

(e) Other causes analogous to the foregoing.

Petitioner’s allegation that respondentwas inefficient in her work and negligent in her duties69 may,
therefore, constitute a just cause for termination under Article 282(b), but only if petitioner was able
to prove it.

The burden of proving that there is just cause for termination is on the employer. "The employer
must affirmatively show rationally adequate evidence that the dismissal was for a justifiable
cause."70 Failure to show that there was valid or just cause for termination would necessarily mean
that the dismissal was illegal.71

To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the
employer has set standards of conduct and workmanship against which the employee will be judged;
2) the standards of conduct and workmanship must have been communicated tothe employee; and
3) the communication was made at a reasonable time prior to the employee’s performance
assessment.

This is similar to the law and jurisprudence on probationary employees, which allow termination
ofthe employee only when there is "just cause or when [the probationary employee] fails to qualify as
a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his [or her] engagement."72

However, we do not see why the application of that ruling should be limited to probationary
employment. That rule is basic to the idea of security of tenure and due process, which are
guaranteed to all employees, whether their employment is probationary or regular.

The pre-determined standards that the employer sets are the bases for determining the probationary
employee’s fitness, propriety, efficiency, and qualifications as a regular employee. Due process
requires that the probationary employee be informed of such standards at the time of his or her
engagement so he or she can adjusthis or her character or workmanship accordingly. Proper
adjustment to fit the standards upon which the employee’s qualifications will be evaluated will
increase one’s chances of being positively assessed for regularization by his or her employer.

Assessing an employee’s work performance does not stop after regularization. The employer, on a
regular basis, determines if an employee is still qualified and efficient, based on work standards.
Based on that determination, and after complying with the due process requirements of notice and
hearing, the employer may exercise its management prerogative of terminating the employee found
unqualified.

The regular employee must constantlyattempt to prove to his or her employer that he or she meets
all the standards for employment. This time, however, the standards to be met are set for the
purpose of retaining employment or promotion. The employee cannot be expected to meet any
standard of character or workmanship if such standards were not communicated to him or her.
Courts should remain vigilant on allegations of the employer’s failure to communicatework standards
that would govern one’s employment "if [these are] to discharge in good faith [their] duty to
adjudicate."73

In this case, petitioner merely alleged that respondent failed to comply with her foreign employer’s
work requirements and was inefficient in her work.74 No evidence was shown to support such
allegations. Petitioner did not even bother to specify what requirements were not met, what
efficiency standards were violated, or what particular acts of respondent constituted inefficiency.

There was also no showing that respondent was sufficiently informed of the standards against which
her work efficiency and performance were judged. The parties’ conflict as to the position held by
respondent showed that even the matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support a claim that there is just cause for
termination. There is no proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements

Respondent’s dismissal less than one year from hiring and her repatriation on the same day show
not onlyfailure on the partof petitioner to comply with the requirement of the existence of just cause
for termination. They patently show that the employersdid not comply with the due process
requirement.

A valid dismissal requires both a valid cause and adherence to the valid procedure of
dismissal.75 The employer is required to give the charged employee at least two written notices
before termination.76 One of the written notices must inform the employee of the particular acts that
may cause his or her dismissal.77 The other notice must "[inform] the employee of the employer’s
decision."78 Aside from the notice requirement, the employee must also be given "an opportunity to
be heard."79

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started
working on June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the
same day and barely a month from her first workday. She was also repatriated on the same day that
she was informed of her termination. The abruptness of the termination negated any finding that she
was properly notified and given the opportunity to be heard. Her constitutional right to due process of
law was violated.

II

Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired
portion ofthe employment contract that was violated together with attorney’s fees and reimbursement
of amounts withheld from her salary.

Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and Overseas
Filipinos Act of1995, states thatoverseas workers who were terminated without just, valid, or
authorized cause "shall be entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less."

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 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.

The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provisions [sic] shall be incorporated in the contract
for overseas employment and shall be a condition precedent for its approval. The performance bond
to be filed by the recruitment/placementagency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the recruitment/placement agency
is a juridical being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation orpartnership for the aforesaid claims
and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and
shall not be affected by any substitution, amendment or modification made locally or in a foreign
country of the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of

damages under this section shall be paid within four (4) months from the approval of the settlement
by the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the workers shall be entitled to the full reimbursement of his placement fee with
interest of twelve (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.

....
(Emphasis supplied)

Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the transport of his
[or her] personal belongings shall be the primary responsibility of the agency which recruited or
deployed the worker overseas." The exception is when "termination of employment is due solely to
the fault of the worker,"80 which as we have established, is not the case. It reads: SEC. 15.
REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. – The repatriation of the
worker and the transport of his personal belongings shall be the primary responsibility of the agency
which recruited or deployed the worker overseas. All costs attendant to repatriation shall be borne by
or charged to the agency concerned and/or its principal. Likewise, the repatriation of remains and
transport of the personal belongings of a deceased worker and all costs attendant thereto shall be
borne by the principal and/or local agency. However, in cases where the termination of employment
is due solely to the fault of the worker, the principal/employer or agency shall not in any manner be
responsible for the repatriation of the former and/or his belongings.

....

The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorney’s
feeswhen the withholding is unlawful.

The Court of Appeals affirmedthe National Labor Relations Commission’s decision to award
respondent NT$46,080.00 or the threemonth equivalent of her salary, attorney’s fees of NT$300.00,
and the reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.

We uphold the finding that respondent is entitled to all of these awards. The award of the three-
month equivalent of respondent’s salary should, however, be increased to the amount equivalent to
the unexpired term of the employment contract.

In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that
the clause "or for three (3) months for every year of the unexpired term, whichever is less"83 is
unconstitutional for violating the equal protection clause and substantive due process.84

A statute or provision which was declared unconstitutional is not a law. It "confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is inoperative as if it has not been
passed at all."85

We are aware that the clause "or for three (3) months for every year of the unexpired term,
whichever is less"was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No.
10022 in 2010. Section 7 of Republic Act No. 10022 provides:

Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:

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
damage. Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with
the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to
de [sic] filed by the recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the recruitment/placement agency
is a juridical being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims
and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and
shall not be affected by any substitution, amendment or modification made locally or in a foreign
country of the said contract.

Any compromise/amicable settlement or voluntary agreement on money claims inclusive of

damages under this section shall be paid within thirty (30) days from approval of the settlement by
the appropriate authority.

In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, or any unauthorized deductions from the migrant worker’s salary, the worker shall be
entitled to the full reimbursement if [sic] his placement fee and the deductions made with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.

In case of a final and executory judgement against a foreign employer/principal, it shall be

automatically disqualified, without further proceedings, from participating in the Philippine Overseas
Employment Program and from recruiting and hiring Filipino workers until and unless it fully satisfies
the judgement award.

Noncompliance with the mandatory periods for resolutions of case providedunder this section shall
subject the responsible officials to any or all of the following penalties:

(a) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;

(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.

Provided, however,That the penalties herein provided shall be without prejudice to any liability which
any such official may have incured [sic] under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph. (Emphasis supplied)

Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of
the clause in Republic Act No. 8042 was not yet in effect at the time of respondent’s termination from
work in 1997.86 Republic Act No. 8042 before it was amended byRepublic Act No. 10022 governs this
case.

When a law is passed, this court awaits an actual case that clearly raises adversarial positions in
their proper context before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact clause
already declared as unconstitutional, without any perceived substantial change in the circumstances.

This may cause confusion on the part of the National Labor Relations Commission and the Court of
Appeals.At minimum, the existence of Republic Act No. 10022 may delay the execution of the
judgment in this case, further frustrating remedies to assuage the wrong done to petitioner.

Hence, there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules concerning the
protection and enforcement of constitutional rights."87 When cases become mootand academic, we
do not hesitate to provide for guidance to bench and bar in situations where the same violations are
capable of repetition but will evade review. This is analogous to cases where there are millions of
Filipinos working abroad who are bound to suffer from the lack of protection because of the
restoration of an identical clause in a provision previously declared as unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may
exercise its powers in any manner inconsistent with the Constitution, regardless of the existence of
any law that supports such exercise. The Constitution cannot be trumped by any other law. All laws
must be read in light of the Constitution. Any law that is inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is inconsistent with the Constitution,the
nullity cannot be cured by reincorporation or reenactment of the same or a similar law or provision. A
law or provision of law that was already declared unconstitutional remains as such unless
circumstances have sochanged as to warrant a reverse conclusion.

We are not convinced by the pleadings submitted by the parties that the situation has so changed so
as to cause us to reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and economy that attend to these cases.
The new law puts our overseas workers in the same vulnerable position as they were prior to
Serrano. Failure to reiterate the very ratio decidendi of that case will result in the same untold
economic hardships that our reading of the Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation thatwill reduce their hardearned wages as well as
add to the indignity of having been deprived of the protection of our laws simply because our
precedents have not been followed. There is no constitutional doctrine that causes injustice in the
face of empty procedural niceties. Constitutional interpretation is complex, but it is never
unreasonable.

Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor
General to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.

In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a
balance between the employers’ and the employees’ rights by not unduly burdening the local
recruitment agency.91 Petitioner is also of the view that the clause was already declared as
constitutional in Serrano.92

The Office of the Solicitor General also argued that the clause was valid and
constitutional.93 However, since the parties never raised the issue of the constitutionality of the clause
asreinstated in Republic Act No. 10022, its contention is that it is beyond judicial review.94
On the other hand, respondentargued that the clause was unconstitutional because it infringed on
workers’ right to contract.95

We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General
have failed to show any compelling changein the circumstances that would warrant us to revisit the
precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered
by anillegally dismissed overseas worker to three months is both a violation of due process and the
equal protection clauses of the Constitution.

Equal protection of the law is a guarantee that persons under like circumstances and falling within
the same class are treated alike, in terms of "privileges conferred and liabilities enforced."97 It is a
guarantee against "undue favor and individual or class privilege, as well as hostile discrimination or
the oppression of inequality."98

In creating laws, the legislature has the power "to make distinctions and classifications."99

In exercising such power, it has a wide discretion.100

The equal protection clause does not infringe on this legislative power.101 A law is void on this basis,
only if classifications are made arbitrarily.102 There is no violation of the equal protection clause if the
law applies equally to persons within the same class and if there are reasonable grounds for
distinguishing between those falling within the class and those who do not fall within the class.103 A
law that does not violate the equal protection clause prescribesa reasonable classification.104

A reasonable classification "(1) must rest on substantial distinctions; (2) must be germane to the
purposes of the law; (3) must not be limited to existing conditions only; and (4) must apply equally to
all members of the same class."105

The reinstated clause does not satisfy the requirement of reasonable classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between
fixed-period overseas workers and fixedperiod local workers.106 It also distinguished between
overseas workers with employment contracts of less than one year and overseas workers with
employment contracts of at least one year.107 Within the class of overseas workers with at least one-
year employment contracts, there was a distinction between those with at least a year left in their
contracts and those with less than a year left in their contracts when they were illegally dismissed.108

The Congress’ classification may be subjected to judicial review. In Serrano, there is a "legislative
classification which impermissibly interferes with the exercise of a fundamental right or operates to
the peculiar disadvantage of a suspect class."109

Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, "[i]mbued
with the same sense of ‘obligation to afford protection to labor,’ . . . employ[ed] the standard of strict
judicial scrutiny, for it perceive[d] in the subject clause a suspect classification prejudicial to
OFWs."111

We also noted in Serranothat before the passage of Republic Act No. 8042, the money claims of
illegally terminated overseas and local workers with fixed-term employment werecomputed in the
same manner.112 Their money claims were computed based onthe "unexpired portions of their
contracts."113 The adoption of the reinstated clause in Republic Act No. 8042 subjected the money
claims of illegally dismissed overseas workers with an unexpired term of at least a year to a cap of
three months worth of their salary.114 There was no such limitation on the money claims of illegally
terminated local workers with fixed-term employment.115

We observed that illegally dismissed overseas workers whose employment contracts had a term of
less than one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a
year were granted a cap equivalent to three months of their salary for the unexpired portions of their
contracts.117

Observing the terminologies used inthe clause, we also found that "the subject clause creates a sub-
layer of discrimination among OFWs whose contract periods are for more than one year: those who
are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries
for the entire unexpired portion thereof, while those who are illegally dismissed with one year or
more remaining in their contracts shall be covered by the reinstated clause, and their monetary
benefits limited to their salaries for three months only."118

We do not need strict scrutiny to conclude that these classifications do not rest on any real or
substantial distinctions that would justify different treatments in terms of the computation of money
claims resulting from illegal termination.

Overseas workers regardless of their classifications are entitled to security of tenure, at least for the
period agreed upon in their contracts. This means that they cannot be dismissed before the end of
their contract terms without due process. If they were illegally dismissed, the workers’ right to
security of tenure is violated.

The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater
than norless than the rights violated when a fixed-period overseas worker is illegally terminated. It is
state policy to protect the rights of workers withoutqualification as to the place of employment.119 In
both cases, the workers are deprived of their expected salary, which they could have earned had
they not been illegally dismissed. For both workers, this deprivation translates to economic insecurity
and disparity.120 The same is true for the distinctions between overseas workers with an employment
contract of less than one year and overseas workers with at least one year of employment contract,
and between overseas workers with at least a year left in their contracts and overseas workers with
less than a year left in their contracts when they were illegally dismissed.

For this reason, we cannot subscribe to the argument that "[overseas workers] are contractual
employeeswho can never acquire regular employment status, unlike local workers"121 because it
already justifies differentiated treatment in terms ofthe computation of money claims.122

Likewise, the jurisdictional and enforcement issues on overseas workers’ money claims do not justify
a differentiated treatment in the computation of their money claims.123 If anything, these issues justify
an equal, if not greater protection and assistance to overseas workers who generally are more prone
to exploitation given their physical distance from our government.

We also find that the classificationsare not relevant to the purpose of the law, which is to "establish a
higher standard of protection and promotion of the welfare of migrant workers, their families and
overseas Filipinos in distress, and for other purposes."124 Further, we find specious the argument that
reducing the liability of placement agencies "redounds to the benefit of the [overseas] workers."125
Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivizedby the
reinstated clause to enter into contracts of at least a year because it gives them more flexibility to
violate our overseas workers’ rights. Their liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they violated. Meanwhile, these overseas
workers who are impressed with an expectation of a stable job overseas for the longer contract
period disregard other opportunities only to be terminated earlier. They are left with claims that are
less than what others in the same situation would receive. The reinstated clause, therefore, creates
a situation where the law meant to protect them makes violation of rights easier and simply benign to
the violator.

As Justice Brion said in his concurring opinion in Serrano:

Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a
hidden twist affecting the principal/employer’s liability. While intended as an incentive accruing to
recruitment/manning agencies, the law, as worded, simply limits the OFWs’ recovery in
wrongfuldismissal situations. Thus, it redounds to the benefit of whoever may be liable, including the
principal/employer – the direct employer primarily liable for the wrongful dismissal. In this sense,
Section 10 – read as a grant of incentives to recruitment/manning agencies – oversteps what it aims
to do by effectively limiting what is otherwise the full liability of the foreign principals/employers.
Section 10, in short, really operates to benefit the wrong party and allows that party, without
justifiable reason, to mitigate its liability for wrongful dismissals. Because of this hidden twist, the
limitation ofliability under Section 10 cannot be an "appropriate" incentive, to borrow the term that
R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose clause.

What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to
encourage greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply
limits their liability for the wrongful dismissals of already deployed OFWs. This is effectively a legally-
imposed partial condonation of their liability to OFWs, justified solely by the law’s intent to encourage
greater deployment efforts. Thus, the incentive,from a more practical and realistic view, is really part
of a scheme to sell Filipino overseas labor at a bargain for purposes solely of attracting the market. .
..

The so-called incentive is rendered particularly odious by its effect on the OFWs — the benefits
accruing to the recruitment/manning agencies and their principals are takenfrom the pockets of the
OFWs to whom the full salaries for the unexpired portion of the contract rightfully belong. Thus, the
principals/employers and the recruitment/manning agencies even profit from their violation of the
security of tenure that an employment contract embodies. Conversely, lesser protection is afforded
the OFW, not only because of the lessened recovery afforded him or her by operation of law, but
also because this same lessened recovery renders a wrongful dismissal easier and less onerous to
undertake; the lesser cost of dismissing a Filipino will always bea consideration a foreign employer
will take into account in termination of employment decisions. . . .126

Further, "[t]here can never be a justification for any form of government action that alleviates the
burden of one sector, but imposes the same burden on another sector, especially when the favored
sector is composed of private businesses suchas placement agencies, while the disadvantaged
sector is composed ofOFWs whose protection no less than the Constitution commands. The idea
thatprivate business interest can be elevated to the level of a compelling state interest is odious."127

Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it
deprives overseas workers of their monetary claims without any discernable valid purpose.128
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in
accordance with Section 10 of Republic Act No. 8042. The award of the three-month equivalence of
respondent’s salary must be modified accordingly. Since she started working on June 26, 1997 and
was terminated on July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25,
1998. "To rule otherwise would be iniquitous to petitioner and other OFWs, and would,in effect, send
a wrong signal that principals/employers and recruitment/manning agencies may violate an OFW’s
security of tenure which an employment contract embodies and actually profit from such violation
based on an unconstitutional provision of law."129

III

On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which
revised the interest rate for loan or forbearance from 12% to 6% in the absence of stipulation,applies
in this case. The pertinent portions of Circular No. 799, Series of 2013, read: The Monetary Board, in
its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of
interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No.
905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of an express contract as to such rateof interest, shall be
six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing
legal interest in Nacar v. Gallery Frames:130

II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time
it is judicially demanded. In the absence of stipulation, the rate of interest shall be 6% per
annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages, except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code), but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged. 3. When the judgment of the court awarding a sum of money
 becomes final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed
therein.131

Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in
judgments when there is no stipulation on the applicable interest rate. Further, it is only applicable if
the judgment did not become final and executory before July 1, 2013.132

We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the
Bangko Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not
apply when the law provides that a different interest rate shall be applied. "[A] Central Bank Circular
cannot repeal a law. Only a law can repeal another law."134

For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas
workers are entitled to the reimbursement of his or her placement fee with an interest of 12% per
annum. Since Bangko Sentral ng Pilipinas circulars cannotrepeal Republic Act No. 8042, the
issuance of Circular No. 799 does not have the effect of changing the interest on awards for
reimbursement of placement fees from 12% to 6%. This is despite Section 1 of Circular No. 799,
which provides that the 6% interest rate applies even to judgments.

Moreover, laws are deemed incorporated in contracts. "The contracting parties need not repeat
them. They do not even have to be referred to. Every contract, thus, contains not only what has
been explicitly stipulated, but the statutory provisions that have any bearing on the matter."135 There
is, therefore, an implied stipulation in contracts between the placement agency and the
overseasworker that in case the overseas worker is adjudged as entitled to reimbursement of his or
her placement fees, the amount shall be subject to a 12% interest per annum. This implied
stipulation has the effect of removing awards for reimbursement of placement fees from Circular No.
799’s coverage.

The same cannot be said for awardsof salary for the unexpired portion of the employment contract
under Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does
not provide for a specific interest rate that should apply.

In sum, if judgment did not become final and executory before July 1, 2013 and there was no
stipulation in the contract providing for a different interest rate, other money claims under Section 10
of Republic Act No. 8042 shall be subject to the 6% interest per annum in accordance with Circular
No. 799.

This means that respondent is also entitled to an interest of 6% per annum on her money claims
from the finality of this judgment.

IV

Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment agency that
facilitated respondent’s overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign
employer and the local employment agency are jointly and severally liable for money claims
including claims arising out of an employer-employee relationship and/or damages. This section also
provides that the performance bond filed by the local agency shall be answerable for such money
claims or damages if they were awarded to the employee.

This provision is in line with the state’s policy of affording protection to labor and alleviating workers’
plight.136

In overseas employment, the filing of money claims against the foreign employer is attended by
practical and legal complications. The distance of the foreign employer alonemakes it difficult for an
1âwphi 1

overseas worker to reach it and make it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural rules that may be raised to frustrate an
overseas worker’sattempt to advance his or her claims.

It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137

The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
assures overseas workers that their rights will not be frustrated with these complications. The
fundamental effect of joint and several liability is that "each of the debtors is liable for the entire
obligation."138 A final determination may, therefore, be achieved even if only oneof the joint and
several debtors are impleaded in an action. Hence, in the case of overseas employment, either the
local agency or the foreign employer may be sued for all claims arising from the foreign employer’s
labor law violations. This way, the overseas workers are assured that someone — the foreign
employer’s local agent — may be made to answer for violationsthat the foreign employer may have
committed.

The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have
recourse in law despite the circumstances of their employment. By providing that the liability of the
foreign employer may be "enforced to the full extent"139 against the local agent,the overseas worker is
assured of immediate and sufficientpayment of what is due them.140

Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in
the Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign
employer from the overseas worker to the local employment agency. However, it must be
emphasized that the local agency that is held to answer for the overseas worker’s money claims is
not leftwithout remedy. The law does not preclude it from going after the foreign employer for
reimbursement of whatever payment it has made to the employee to answer for the money claims
against the foreign employer.

A further implication of making localagencies jointly and severally liable with the foreign employer is
thatan additional layer of protection is afforded to overseas workers. Local agencies, which are
businesses by nature, are inoculated with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their reputation or finances, local
agenciesmust already have mechanisms for guarding against unscrupulous foreign employers even
at the level prior to overseas employment applications.

With the present state of the pleadings, it is not possible to determine whether there was indeed a
transfer of obligations from petitioner to Pacific. This should not be an obstacle for the respondent
overseas worker to proceed with the enforcement of this judgment. Petitioner is possessed with the
resources to determine the proper legal remedies to enforce its rights against Pacific, if any.
 V

Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest
and mostdifficult reaches of our planet to provide for their families. In Prieto v. NLRC:141

The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land
where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of
contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms
of debasement, are only a few of the inhumane acts towhich they are subjected by their foreign
employers, who probably feel they can do as they please in their own country. Whilethese workers
may indeed have relatively little defense against exploitation while they are abroad, that
disadvantage must not continue to burden them when they return to their own territory to voice their
muted complaint. There is no reason why, in their very own land, the protection of our own laws
cannot be extended to them in full measure for the redress of their grievances.142

But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over;
each of their stories as real as any other. Overseas Filipino workers brave alien cultures and the
heartbreak of families left behind daily. They would count the minutes, hours, days, months, and
years yearning to see their sons and daughters. We all know of the joy and sadness when they
come home to see them all grown up and, being so, they remember what their work has cost them.
Twitter accounts, Facetime, and many other gadgets and online applications will never substitute for
their lost physical presence.

Unknown to them, they keep our economy afloat through the ebb and flow of political and economic
crises. They are our true diplomats, they who show the world the resilience, patience, and creativity
of our people. Indeed, we are a people who contribute much to the provision of material creations of
this world.

This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by
limiting the contractual wages that should be paid to our workers when their contracts are breached
by the foreign employers. While we sit, this court will ensure that our laws will reward our overseas
workers with what they deserve: their dignity.

Inevitably, their dignity is ours as weil.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with
modification. Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy
C. Cabiles the amount equivalent to her salary for the unexpired portion of her employment contract
at an interest of 6% per annum from the finality of this judgment. Petitioner is also ORDERED to
reimburse respondent the withheld NT$3,000.00 salary and pay respondent attorney's fees of
NT$300.00 at an interest of 6% per annum from the finality of this judgment.

The clause, "or for three (3) months for every year of the unexpired term, whichever is less" in
Section 7 of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared
unconstitutional and, therefore, null and void.

SO ORDERED.

G.R. No. 162419 July 10, 2007

PAUL V. SANTIAGO, petitioner,
vs.
CF SHARP CREW MANAGEMENT, INC., respondent.

DECISION

TINGA, J.:

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

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

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

A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondent’s Vice
President, sent a facsimile message to the captain of "MSV Seaspread," which reads:

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

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

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

Kindly advise.3

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

Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for him to
return to Seaspread.4
On 9 February 1998, petitioner was thus told that he would not be leaving for Canada anymore, but
he was reassured that he might be considered for deployment at some future date.

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

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

WHEREFORE, premises considered, respondent is hereby Ordered to pay complainant

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

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

SO ORDERED.6

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

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

SO ORDERED.9

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

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

According to the appellate court, petitioner is not entitled to actual damages because damages are
not recoverable by a worker who was not deployed by his agency within the period prescribed in
the POEA Rules.13 It agreed with the NLRC’s finding that petitioner’s non-deployment was a valid
exercise of respondent’s management prerogative.14 It added that since petitioner had not departed
from the Port of Manila, no employer-employee relationship between the parties arose and any claim
for damages against the so-called employer could have no leg to stand on.15

Petitioner’s subsequent motion for reconsideration was denied on 19 February 2004.16

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

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

B. The Honorable Court of Appeals committed a serious error when it disregarded the
required quantum of proof in labor cases, which is substantial evidence, thus a total
departure from established jurisprudence on the matter.17

Petitioner maintains that respondent violated the Migrant Workers Act and the POEA Rules when it
failed to deploy him within thirty (30) calendar days without a valid reason. In doing so, it had
unilaterally and arbitrarily prevented the consummation of the POEA- approved contract. Since it
prevented his deployment without valid basis, said deployment being a condition to the
consummation of the POEA contract, the contract is deemed consummated, and therefore he should
be awarded actual damages, consisting of the stipulated salary and fixed overtime pay.18 Petitioner
adds that since the contract is deemed consummated, he should be considered an employee for all
intents and purposes, and thus the labor arbiter and/or the NLRC has jurisdiction to take cognizance
of his claims.19

Petitioner additionally claims that he should be considered a regular employee, having worked for
five (5) years on board the same vessel owned by the same principal and manned by the same local
agent. He argues that respondent’s act of not deploying him was a scheme designed to prevent him
from attaining the status of a regular employee.20

Petitioner submits that respondent had no valid and sufficient cause to abandon the employment
contract, as it merely relied upon alleged phone calls from his wife and other unnamed callers in
arriving at the conclusion that he would jump ship like his brother. He points out that his wife had
executed an affidavit21 strongly denying having called respondent, and that the other alleged callers
did not even disclose their identities to respondent.22 Thus, it was error for the Court of Appeals to
adopt the unfounded conclusion of the NLRC, as the same was not based on substantial evidence.23

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

There is some merit in the petition.

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

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

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

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

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

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

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

Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of
the complaint, the claims arising out of an employer-employee relationship or by virtue of any
law or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages. x x x [Emphasis supplied]
Since the present petition involves the employment contract entered into by petitioner for overseas
employment, his claims are cognizable by the labor arbiters of the NLRC.

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

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

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

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

We likewise do not see respondent’s failure to deploy petitioner as an act designed to prevent the
latter from attaining the status of a regular employee. Even if petitioner was able to depart the port of
Manila, he still cannot be considered a regular employee, regardless of his previous contracts of
employment with respondent. In Millares v. National Labor Relations Commission,33 the Court ruled
that seafarers are considered contractual employees and cannot be considered as regular
employees under the Labor Code. Their employment is governed by the contracts they sign every
time they are rehired and their employment is terminated when the contract expires. The exigencies
of their work necessitates that they be employed on a contractual basis.34
WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the
Resolution dated 19 February 2004 of the Court of Appeals are REVERSED and SET ASIDE. The
Decision of Labor Arbiter Teresita D. Castillon-Lora dated 29 January 1999 is REINSTATED with the
MODIFICATION that respondent CF Sharp Crew Management, Inc. is ordered to pay actual or
compensatory damages in the amount of US$4,635.00

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

SO ORDERED.

Carpio, Carpio-Morales, Velasco, Jr., JJ., concur.

Quisumbing, J., on official leave.

G.R. No. 77828 February 8, 1989

EASTERN SHIPPING LINES, INC. petitioner,

vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, SECRETARY OF LABOR AND
EMPLOYMENT, HEARING OFFICER CHERYL AMPIL and MA. LOURDES A.
ZARAGOZA, respondents.

FELICIANO, J.:

This Petition for certiorari and Prohibition seeks to set aside the Decision dated 19 March 1987 of
the public respondent Philippine Overseas Employment Administration (POEA), in POEA Case No.
L-86-01-026.

The pertinent facts follow:

Manuel Zaragoza had been an employee of petitioner Eastern Shipping Lines, Inc. ("Eastern") for
several years, having served as engineer on board several of Eastern's vessels since 1973. At the
time of his death on 18 September 1983, Manuel Zaragoza was in Kakogawa, Japan serving as
Chief Engineer of the M/V Eastern Meteor, a vessel then owned by Freesia Shipping Company S.A.
and chartered by Eastern. A Death Certificate 1 issued by Dr. Masayuki Inoue of the Kakogawa
Hospital stated that Zaragoza's death had been caused by "myocardial infarction."

On 17 December 1985, Manuel Zaragoza's widow, private respondent Ma. Lourdes A. Zaragoza,
filed with the public respondent POEA a formal Complaint 2 (docketed as POEA Case No. L-86-01-
026) against Eastern, after the latter allegedly had refused to act favorably on the widow's claim for
gratuity arising from the death of her husband. Mrs. Zaragoza alleged that the M/V Eastern
Meteor having been registered with the Ministerio de Hacienda y Tesoro of the Republic of Panama
at the time of her husband's death, she was entitled to receive from Eastern death benefits in the
amount of P100,000.00 as provided under Memorandum Circular No. 71 issued on 18 November
1981 by the former National Seamen Board. Moral damages or P50,000.00 and attorney's fees were
likewise sought by the widow.

In its Answer, 3 Eastern alleged, among other things, that no cause of ac ' petition existed against it
as the company had already paid Mrs. Zaragoza a cash benefit of P12,000.00 for the death of her
husband and an amount of P5,000.00 for funeral expenses. Eastern further denied having incurred
any additional liability under NSB Memorandum Circular No. 71, alleging that "[the M/V Eastern
Meteor] had been then also considered a vessel of the Philippine registry." Eastern assailed the
jurisdiction of the POEA over the complaint, asserting that the company "is not engaged in overseas
employment even as [it] admits that [its] vessels are ocean-going vessels."

On 19 March 1987, public respondent POEA rendered a Decision4 requiring petitioner to pay to
private respondent Mrs. Zaragoza P88,000.00 as the unpaid balance of her deceased husband's
death benefits, and dismissing the claim for moral damages for want of jurisdiction.

From this judgment, Eastern came directly to this Court. We issued a Temporary Restraining Order
on 8 April 1987. 5

A preliminary point was raised by the Solicitor General in his Comment 6 on the Petition, that Eastern
had failed to exhaust administrative remedies in this case i.e., that petitioner Company did not
interpose an appeal with the National Labor Relations Commission before coming to this Court on
certiorari. Inasmuch, however, as the petition at bar raises questions essentially legal in nature, we
do not consider the same as having been prematurely filed with this Court. 7

We address first the issue of jurisdiction. Petitioner Company does not deny that Manuel Zaragoza
was its employee at the time of his death on 18 September 1983. Petitioner would contend,
however, that the company had neither been nor acted as an "overseas employer" of Manuel
Zaragoza, and that the latter had never been its "overseas employee." Hence, petitioner concludes,
private respondent's claim for death benefits should have been filed with the Social Security System,
not with the POEA.

The argument does not persuade. Applicable here and petitioner admits this in its Petition is
Executive Order No. 797 (promulgated 1 May 1982), which abolished the former National Seamen
Board and created in its place the present Philippine Overseas Employment Administration. Section
4 (a) of Executive Order No. 797 expressly provides that the POEA "shall have original and
exclusive jurisdiction over all cases, including money claims, involving employer-employee relations
arising out of or by virtue of any law or contract involving Filipino workers for overseas employment,
including seamen. " This provision is clarified substantially in the Rules and Regulations on
Overseas Employment issued by the POEA, Section 1 (d), Rule 1, Book VI of which provides that
"claims for death, disability and other benefits arising out of [overseas] employment" fall within the
POEA's original and exclusive jurisdiction. The following definitions contained in Section 1, Rule II,
Book I of said POEA Rules and Regulations are also useful:

g. Contract Worker-means any person working or who has worked overseas under a
valid employment contract and shall include seamen.

xxx xxx xxx

x. Overseas Employment-means employment of a worker outside the Philippines,

including employment on board vessels plying international waters, covered by a
valid employment contract.

xxx xxx xxx

(Emphasis supplied)
We note that the statute and the relevant regulations refer to employment of Filipino workers
overseas, i.e., outside the Philippines. The statute and regulations do not limit their coverage to non-
Filipino employers. Filipinos working overseas share the same risks and burdens whether their
employers be Filipino or foreign.

Neither party disputes that Manuel Zaragoza, at the time of his death, was covered by an existing
contract of employment with Eastern and that the deceased was at that time employed as a seaman
(Chief Engineer) on board the M/V Eastern Meteor, which vessel-then chartered by Eastern-was
engaged in plying ocean routes, outside Philippine waters and which, at the time of Zaragoza's
demise, was berthed in a foreign port (Japan). In addition, the record shows that Eastern submitted
its shipping articles to public respondent POEA for processing, formalization and
approval, 8 apparently in recognition of POEA!s regulatory authority over overseas employment
under Executive Order No. 797. While not in itself conclusive proof of employment by Eastern of
people overseas, nevertheless, this latter circumstance strongly suggests that Eastern must have
regarded itself as engaged in such employment, otherwise, it would not have found it necessary or
useful to submit its shipping articles to the POEA. We hold that the complaint of private respondent
widow of Manuel Zaragoza falls well within the original and exclusive jurisdiction of public
respondent POEA. 9

We come to the issue regarding the amount of death benefits for which Eastern may be held liable to
private respondent. In assessing such amount, the POEA relied upon Memorandum Circular No. 71
(effective 1 December 1981) issued by the now defunct National Seamen Board (NSB):

SECTION D. COMPENSATION AND BENEFITS DURING THE, TERM OF THE

CONTRACT.

1. In case of total and permanent disability or death of the seaman during the term of
his contract, the company II pay the ,seaman or his beneficial the amount of:

P100,000.00-for masters and Chief Engineers

75,000.00 - for other officers

50,000.00 - for ratings

over and above the benefits which are provided for abd are the liabilities of the
Philippine government under the Philippine laws. Provided that when the
employment of a seaman is also covered by a collective bargaining agreement or
death/disability insurance which provides for higher benefits than those enumerated
above, in which case, the seaman or his heirs/beneficiaries may elect under what
scheme he is they are claiming. Recovery under one scheme is a bar to any farther
recovery; except where there is a clear showing in the collective bargaining
agreement and/or death/disability insurance that benefits provided for in the
collective bargaining agreement and death/disability insurance are separate and
distinct from the abovementioned benefits. The exact amount of insurance that each
seaman is covered under this contract are as stipulated in Column J of Appendix 2 of
this contract. In addition to the above, the expenses for hospitalization of the seaman
shall be borne by the employer.

2. In lieu of paragraph 1 above, the liability of [an] employer of a Philippine registered

vessel (except foreign- owned vessels bareboat-chartered to a Philippine shipping
company) shall be governed by existing Philippine Laws over and above the benefits
 granted [under] Philippine laws on social security and employees' compensation
benefits provided that the Philippine registered vessel and any vessel bareboat-
chartered to a Philippine Shipping Company shall be manned by full Filipino crews.
(Emphasis and brackets supplied).

It is the argument of Eastern here that NSB Memorandum Circular No. 71 collides with the public law
principle of non-delegation of legislative power. Eastern also argues that assuming the validity of the
Circular, its provisions (specifically paragraph 1) do not cover Eastern.

These arguments again do not persuade. Concerning the alleged unconstitutionality of NSB
Memorandum Circular No. 71, Article 20 of the Labor Code before its repeal by Executive Order No.
797, provided in salient part:

Art. 20. National Seamen Board.-A National Seamen Board is hereby created which
shall develop and maintain a comprehensive program for Filipino seamen employed
overseas. It shall have the power and duty:

xxx xxx xxx

2. To regulate and supervise the activities of agents or representatives of shipping

companies in the hiring of seamen for overseas employment; and secure the best
possible terms of employment for contract seamen workers and secure compliance
therewith;

xxx xxx xxx.

(Emphasis supplied)

The question of validity of the delegation of quasi-legislative power in favor of NSB's successor,
respondent POEA, embodied in the article quoted above, was addressed and resolved in the
affirmative by the Court in Eastern Shipping Lines, Inc. v. Philippine Overseas Employment
Administration, et al. 10 On the authority of this case, we hold that NSB Memorandum Circular No. 71
was issued in a valid exercise by the NSB of its "power and duty ... [to] secure the best possible
terms of employment for contract seamen workers and [to] secure compliance therewith."

We consider next petitioner's argument that it is not covered by the provisions of NSB Memorandum
Circular No. 71. Eastern submitted in evidence Certificate of Philippine Register Nos. ICGD-78-0428
dated 28 December 1978 11 and ICGD-84-0288 dated 7 August 1984 12 to show that this M/V Eastern
Meteor was registered with the Philippine Coast Guard in 1978 and again in 1984. Eastern further
maintained that M/V Eastern Meteor had always been fully manned by a Philippine crew. The record
also shows, however, that this vessel was at the same time also registered in the Republic of
Panama as evidenced by the Patente Permanente de Navegacion Servicio Internacional Nos. 7708-
77 (dated 31 March 1977) 13 and 770877-A (dated 27 February 1987). 14 Petitioner had in fact paid
taxes to the Panamanian government in 1978, 1979 1981, 1982 and 1983, 15 presumably because
the M/V Eastern Meteor was during those years operating under a valid Panamanian navigation
license. It, therefore, appears that at the time of the death of Manuel Zaragoza, the Eastern
Meteor was both foreign-owned and foreign-registered on one hand and upon the other band,
simultaneously registered in the Philippines. Interpreting Section D of Memorandum Circular No. 71,
it appears clear that paragraph 1 covers Philippine seamen working in foreign-registered ships while
paragraph 2 applies to Philippine seamen working on Philippine-registered vessels. The
parenthetical phrase "except foreign-owned vessels bareboat-chartered to a Philippine shipping
company" in paragraph 2 precisely covers the situation of the Eastern Meteor, that is, a foreign-
owned vessel registered in a foreign country (Panama), with a second registration in the Philippines;
such a vessel is excepted from coverage by paragraph 2, and hence covered by paragraph 1
instead. If the MN Eastern Meteor had been registered only in Panama, there would have been no
question that it was covered by paragraph 1 of NSB Memorandum Circular No. 71. It is well- known
that foreign-owned and foreign-registered vessels have frequently also secured Philippine
registration where the interest or convenience of the owners dictated such second or dual
registration. The effect of the parenthetical phrase in paragraph 2 is, as already indicated, to bring
such dual-registered vessel within the scope not of paragraph 2, but of paragraph 1. The fact that
POEA Memorandum Circular No. 6 (Series of 1986) in upgrading death benefits (P250,000.00 for
master and chief engineers) specified that such upgraded benefits "shall be applicable to all Filipino
seamen on board any ocean-going vessel provided the cause of action occurs on March 1, 1986
and thereafter" suggests to us the correctness of our above reading of NSB Memorandum Circular
No. 71. The underlying regulatory policy, as we see it, is that Filipino seamen working on ocean-
going vessels should receive the same wages and benefits, without regard to the nationality or
nationalities of the vessels on which they serve. We hold that the POEA correctly held private
respondent Mrs. Zaragoza entitled to the benefits given to Philippine seamen under the provisions of
Section D. paragraph 1 of NSB Memorandum Circular No. 71, i.e. (1) P100,000.00 death benefit,
and in addition, (2) death and related benefits provided under applicable ordinary laws of the
Philippines administered by the Social Security System.

WHEREFORE, the Petition for certiorari is DISMISSED and the Decision of the POEA in POEA
Case No. L-86-01-026 is hereby AFFIRMED. The Temporary Restraining Order of 8 April 1987 is
hereby LIFTED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

G.R. No. 80685 March 16, 1989

ALFREDO S. MARQUEZ, doing business under the name and style of LITTLE FOLKS SNACK
MOBILE, petitioner,
vs.
HON. SECRETARY OF LABOR AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPIL-
KATIPUNAN) AND IN BEHALF OF ITS 79 MEMBERS, respondents.

Caguioa, Aligada & Associates for petitioner.

The Solicitor General for public respondent.

Esteban M. Mendoza for private respondent.

CORTES, J.:

Private respondent Kaisahan ng Manggagawang Pilipino (KAMPIL-KATIPUNAN) in behalf of

seventy nine (79) of its members who are employed at the Little Folks Snack Mobile owned by
petitioner, filed on July 16, 1986 with the Office of the Director of the National Capital Region,
Department of Labor and Employment (DOLE) a complaint for underpayment of minimum wage,
non-payment of ECOLA, non-payment of incentive leave benefits and non-payment of overtime pay
[Rollo, p. 22, Petition, Annex "C".] The complaint was later amended to include non-payment of
holiday pay, non-payment of premium pay on rest day, non-payment of maternity leave benefits and
illegal exaction [Rollo, p. 23, Petition, Annex "D".]

During the initial hearing, the employees were required to submit a computation of their claims while
petitioner was ordered to submit his comment thereon immediately upon receipt. After several
hearings, both parties were required to submit their respective position papers. While the employees
were able to submit a position paper, petitioner failed to do so. Hence, the case was submitted for
resolution.

On October 30, 1986, Minerva Peran, the representative of the employees during the proceedings
before the hearing of ficer filed a motion to dismiss claiming that Samahan ng mga Manggagawa sa
Little Folks Snack Mobile (SAMAHAN) a local chapter of respondent KAMPIL-KATIPUNAN, to which
the seventy nine (79) employees allegedly belong, and petitioner employer were able to settle
amicably their dispute through a compromise agreement [Rollo, p. 24, Petition, Annex "E".] The
employees opposed the motion on the ground that Minerva Peran was not authorized to enter into
the alleged compromise agreement and much less to move for the dismissal of the complaint. On
January 20, 1987, the Regional Director rendered a decision [Rollo, p. 37, Petition, Annex "H"]
denying the motion to dismiss and directing petitioner to pay the employees their various claims
amounting to P625,000.94. On appeal, the Secretary of Labor affirmed the decision of the Regional
Director. The two motions for reconsideration of the order of the Secretary having been denied, the
present petition was filed on November 24, 1987 before the Court, alleging lack of jurisdiction and/or
grave abuse of discretion on the part of the Secretary of Labor in affirming the decision of the
Regional Director. The prayer in the petition for the issuance of temporary restraining order to
prohibit the enforcement of the order of the Secretary of Labor was granted by the Court on
December 2, 1987.

Petitioner relies heavily on the amicable settlement which was allegedly entered into with the
employees through their representative Minerva Peran. According to petitioner, with the execution of
the amicable settlement, the employees' complaint was rendered moot and academic and
petitioner's submission of a position paper became unnecessary.

Indeed, on October 29, 1986, Minerva Peran signed an agreement with petitioner reducing their
claims from a total amount of P625,000 to only P80,000 to be paid in several installments [Rollo, pp.
24-26.] Peran signed as president of the SAMAHAN whichhad allegedly disaffiliated from
respondent KAMPIL-KATIPUNAN. However, Peran failed to show any evidence that SAMAHAN had
indeed disaffiliated from KAMPIL-KATIPUNAN. More importantly, the employees denied giving
Peran the authority to enter into the amicable settlement and to move for the dismissal of the
complaint.

The rule in this jurisdiction is that money claims due to laborers cannot be the object of settlement or
compromise effected by the union, union officers or counsel without the specific individual consent of
each laborer concerned [Danao Development Corp. v. NLRC, G.R. Nos. L-40706-7, February 16,
1978, 81 SCRA 487.] This is so because the aggrieved parties are the individual complainants
themselves. Their representative can only assist but not decide for them [Kaisahan ng mga
Manggagawa sa La Campana v. Sarmiento, G.R. No. L-47853, November 16, 1984, 133 SCRA
220.] In the light of the categorical denial by the employees that Peran was authorized to enter into
an amicable settlement as regards their claims, the Court holds that public respondent Secretary of
Labor ruled correctly in upholding the Regional Director's rejection of the agreement.

Petitioner next alleges denial of due process. It is claimed that when the Regional Director awarded
the employees' claims in the same order denying Peran's motion to dismiss, even in the absence of
petitioner's position paper, the latter was deprived of the right to be heard. However, the antecedent
facts prove otherwise.

After the submission by the employees of their position paper on September 30, 1986, petitioner was
required by the hearing officer to submit his own position paper and supporting documents on or
before October 7, 1986. On said date, petitioner failed to submit his position paper but instead asked
for an extension of seven days within which to submit the same. On October 14, 1986, petitioner's
representative failed to appear but the hearing officer accorded him leniency by resetting the hearing
to October 21, 1986. Despite due notice, petitioners representative again failed to appear and submit
a position paper. Consequently, the case was deemed submitted for resolution. It was then on
October 30, 1986 that Minerva Peran filed a motion to dismiss invoking the disputed amicable
settlement.

There is denial of due process when a party is not accorded an opportunity to be heard in a case
filed against him [Macabingkil v. Yatco, G.R. No. L-23174, September 18, 1967, 21 SCRA 150, citing
the cases U.S. v. Ling Su Fun, 10 Phil. 104 (1908) and Lopez v. Director of Lands, 47 Phil. 23
(1924).] However, what the law prohibits is the absolute lack of an opportunity to be heard
[Batangas, Laguna, Tayabas and Co. v. Comm-Cadiao, G.R. No. L-28725, March 12,1968,22 SCRA
987; Superior Concrete Products v. WCC, G.R. No. L-42020, March 31, 1978, 82 SCRA 270.]
Hence, it has been ruled that there was no denial of due process where the employer was duly
represented by counsel and given sufficient opportunity to be heard and present his evidence
[Pantranco v. NLRC, G.R. No. 64152, December 29, 1983, 126 SCRA 526] nor where the
employer's failure to be heard was due to the various postponements granted to it [Kick Loy v.
NLRC, G.R. No. 54334, January 22, 1986, 141 SCRA 179] or to his repeated failure to appear
during the hearings [Divine Word High School v. NLRC, G.R. No. 72207, August 6, 1986, 143 SCRA
346.]

Petitioner, in this case, was given at least three chances by the hearing officer to submit his position
paper but failed each time. Even prior to the hearing officer's order for the submission of the position
paper, petitioner was given the opportunity to traverse the employees' complaint when he was
ordered to comment on the employees' computation of their claims submitted on August 20, 1986.
The comment was never submitted since petitioner failed to appear during the two hearings set for
the purpose despite due notice. Clearly, petitioner was granted ample opportunity to present his
case before the Regional Director.

Moreover, petitioner appealed the decision of the Regional Director with the Secretary of Labor. Two
motions for reconsideration were likewise filed from the Secretary of Labor's order of affirmance.
Whatever defect the Regional Director committed based on an alleged denial of due process was
deemed cured by the filing of an appeal and the motions for reconsideration [De Leon v.
Commission on Elections, G.R. No. 56968, April 30, 1984, 129 SCRA 117; Remerco Garments
Manufacturing v. Minister of Labor and Employment, G.R. Nos. 56176-77, February 28, 1985, 135
SCRA 167; Sampang v. Inciong, G.R. No. 50992, June 19, 1985, 137 SCRA 56; Cebu Stevedoring
Co., Inc., v. The Honorable Regional Director/ Minister of Labor, G.R. No. 54285, December 8,
1988.]

Finally, petitioner impugns the jurisdiction of the Secretary of Labor and the Regional Director to
award the money claims of the employees contending that all money claims of workers arising from
an employer-employee relationship are within the exclusive jurisdiction of the Labor Arbiter as
provided by Art. 217 of the Labor Code, as amended.
This contention, which is being raised for the first time in this petition, can no longer be considered
by the Court at this stage, consistent with the ruling in Tijam v. Sibonghanoy, G.R. No. L-21450, April
15, 1968, 23 SCRA 29, 35-36, that

... a party can not invoke the jurisdiction of a court to secure affirmative relief against
his opponent and, after obtaining or failing to obtain such relief, repudiate or question
that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just
cited, by way of explaining the rule, it was further said that the question whether the
court had jurisdiction either of the subject-matter of the action or of the parties is
barred from such conduct not because the judgment or order of the court is valid and
conclusive as an adjudication, but for the reason that such a practice can not be
tolerated obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and
encountering an adverse decision on the merits, it is to late for the loser to question
the jurisdiction or power of the court

... And in Littleton vs. Burges, 16 Wyo 58, the Court said that it is not right for a party
who has affirmed and invoked the jurisdiction of a court in a particular matter to
secure an affirmative relief, to afterwards deny that same jurisdiction to escape a
penalty.

Elaborating on this ruling, the Court in Crisostomo v. CA, G.R. No. L-27166, March 25, 1970, 32
SCRA 54, 60, stated that:

xxx

The petitioners, to borrow the language of Mr. Justice Bautista Angelo (People vs.
Archilla, G.R. No. L-15632, February 28, 1961, 1 SCRA 699, 700-701), cannot adopt
a posture of double-dealing without running afoul of the doctrine of estoppel. The
principle of estoppel is in the interest of a sound administration of the laws. It should
deter those who are disposed to trifle with the courts by taking inconsistent positions
contrary to the elementary principles of right dealing and good faith (People vs.
Acierto, 92 Phil. 534, 541 [1953]). For this reason, this Court closes the door to the
petitioners' challenge against the jurisdiction of the Court of Appeals and will not
even honor the question with a pronouncement.

A reading of the above-quoted statements may give the impression that the doctrine applies only to
the plaintiff or the party who, by bringing the action, initially invoked but later repudiated the
jurisdiction of the court. But while the rule has been applied to estop the plaintiff from raising the
issue of jurisdiction [Tolentino v. Escalona, G.R. No. L-26886, January 24, 1969, 26 SCRA 613;
Rodriguez v. Court of Appeals, G.R. No. L- 29264, August 29, 1969, 29 SCRA 419; Crisostomo v.
Reyes, G.R. No. L-27166, March 25, 1970, 32 SCRA 54; Ong Ching v. Ramolete, G.R. No. L-35356,
May 18, 1973, 51 SCRA 13; Capilitan v. Dela Cruz, G.R. Nos. L-29536-7, February 28, 1974, 55
SCRA 706; Florendo v. Coloma, G.R. No. 60544, May 19, 1984, 129 SCRA 304; Solicitor General v.
Coloma, Adm. Matter No. 84-3-886-0, July 7, 1986, 142 SCRA 511; Sy v. Tuvera, G.R. No. L-76639,
July 16, 1987, 152 SCRA 103] it has likewise been applied to the defendant [Carillo v. Allied
Worker's Association of the Phils., G.R. No. L-23689, July 31, 1968, 24 SCRA 566; People v. Munar,
G.R. No. L-37642, October 22, 1973, 53 SCRA 278; Solano v. Court of Appeals, G.R. No. L-41971,
November 29,1983,126 SCRA 122; Royales v. Intermediate Appellate Court, G.R. No. 65072,
January 31, 1984, 127 SCRA 470] and more specifically, to the respondent employer in a labor case
[Tajonera v. Lamaroza, G.R. Nos. L-4890749035, December 19, 1981, 110 SCRA 447; Akay
Printing Press v. Ministry of Labor and Employment, G.R. No. 56951, December 6, 1985, 140 SCRA
381; Philippine Overseas Drilling December 6, 1985, 14 and Oil Development Corporation v.
Minister of Labor, G.R. No. 55703, November 27, 1986, 146 SCRA 79; Cebu Institute of Technology
v. Ople, G.R. Nos. 58870, 68345, 692245, 70832, 76521, 76596, December 18, 1987; 156 SCRA
629.]

The active participation of the 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.

When the complaint was pending before the Regional Director, petitioner did not raise the issue of
jurisdiction but instead actively participated in the hearings. After the adverse decision of the
Regional Director and upon the elevation of the case on appeal to the Secretary of Labor, still no
jurisdictional challenge was made. Even in the two motions for reconsideration of the DOLE decision
of affirmance, petitioner did not assail the jurisdiction of the Secretary of Labor or the Regional
Director. The Court will not now allow petitioner to raise this issue, estoppel having already set in to
bar the challenge.

To be sure, the Court is not unaware of the ruling in Calimlim v. Ramirez, G.R. No. L-34362,
November 19, 1982, 118 SCRA 399, reiterated in Dy v. NLRC, G.R. No. 68544, October 27, 1986,
145 SCRA 211, to the effect that the ruling in Sibonghanoy being an exception to the general rule
that the lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal
should not be applied in the absence of the pivotal element of laches. The Court, however, will not
hesitate to apply the doctrine laid down in the Sibonghanoy case even absent the extraordinary
circumstances therein [See Akay Printing Press v. Minister of Labor and Employment, supra; Cebu
Institute of Technology v. Ople, supra] where the entertainment of the jurisdictional issue at a
belated stage of the proceedings will result in a failure of justice and render nugatory the
constitutional imperative of protection to labor [See Article II, Section 18 and Article MXIII, Section 3
of the 1987 Constitution.)

Illustrative is the case of Carillo v. Allied Worker's Association of the Philippines, supra, where
certain employees filed a case with the Court of Agrarian Reform against their employer seeking
reinstatement to their positions as security guards. When the Court of Agrarian Reform decided in
favor of the workers, the employer filed a petition with the Supreme Court questioning for the first
time the jurisdiction of the Court of Agrarian Reform invoking Dequito v. Lopez, G.R. No. L-27767,
March 28, 1968, 22 SCRA 1352, which held that the work performed by a security guard is not
embraced in the term "agrarian relations" and that a matter of this character should be litigated either
in an ordinary judicial tribunal or where a reinstatement is sought, in the Court of Industrial Relations.
The Court in rejecting the jurisdictional challenge applied the Sibonghanoy ruling adding that:

xxx

Social justice would be a meaningless term if in a situation like the present, an

element of rigidity would be affixed to procedural precepts and made to cover the
matter. Flexibility should not be ruled out. Precisely, what is sought to be
accomplished by such a fundamental principle expressly so declared by the
Constitution (Article, II Section 5, [1935] Constitution of the Philippines) is the
effectiveness of the community's effort to assist the economically underprivileged.
For under existing conditions, without such succor and support, they might not,
unaided, be able to secure justice for themselves. To make them suffer, even
inadvertently, from the effect of a judicial ruling, which perhaps they could not have
 anticipated, the Dequito decision having been promulgated only last March 28th,
when such a deplorable result could be avoided, would be to disregard what the
social justice concept stands for.

Moreover, there is equally the obligation on the part of the State to afford protection
to labor (Article XIV, Section 5, [1935] Constitution of the Philippines). The
responsibility is incumbent then, not only on the legislative and executive branches
but also on the judiciary, to translate this pledge into a living reality. The present case
is an appropriate occasion for the discharge of such a trust. To preclude relief under
the circumstances herein disclosed would be to fail to submit to the dictates of a plain
constitutional command. That we should not allow to happen. [Carillo v. Allied
Worker's Association of the Philippines, supra, at pp. 573-574.]

In the case at bar, the various money claims of the employees were never disputed by petitioner
during the proceedings before the Regional Director and the Secretary of Labor. What was sought
was the reduction of petitioner's liability by entering into an amicable settlement with the
representative of the employees who turned out to be not authorized. Having failed in his attempt to
reduce the claims of the employees, the ends of justice and equity require that petitioner be not
allowed to defeat the employees' right by the expedient of raising the issue of jurisdiction.

WHEREFORE, in view of the foregoing, the petition is DISMISSED for lack of merit. The Temporary
Restraining Order issued by the Court on December 2, 1987 enjoining the enforcement of the order
of the Secretary of Labor dated November 12, 1987 is hereby LIFTED and SET ASIDE.

SO ORDERED.

Fernan C.J., Gutierrez, Jr., and Bidin, JJ., concur.

Feliciano, J., on leave.

G.R. Nos. L-53364-65 March 16, 1987

DOMICIANO SOCO, petitioner,

vs.
MERCANTILE CORPORATION OF DAVAO AND THE HONORABLE AMADO G. INCIONG,
DEPUTY MINISTER, MINISTRY OF LABOR, respondents.

Antonio Ladlao for petitioner.

Rodolfo A. Ta-asan for private respondent.

ALAMPAY, J.:

Petition for certiorari to annul the order dated October 25, 1979 of the former Deputy Minister of
Labor in Case No. ROXI-C-209-79 and Case No. LR-30-79, which affirmed the order dated May 31,
1979 of the Regional Director, granting the application of private respondent Mercantile Corporation
of Davao (MERCO), for clearance to terminate petitioner Domiciano Soco and dismissing the latter's
complaint for unfair labor practice.
Private respondent is engaged in the sale and distribution of ice cream in Davao City. Petitioner who
was employed as driver of MERCO's delivery van, was the President of the MERCO Employees
Labor Union (MELU), an affiliate of the Federation of Free Workers (FFW). In the last week of
January, 1979, the personnel officer of private respondent conducted an investigation due to reports
that petitioner was carrying on his union MELU activities during his working hours for the purpose of
transferring his Union's affiliation from the FFW to the Southern Philippines Federation of Labor
(SPFL) and for this purpose he was even utilizing the company vehicle of MERCO, in violation of the
Company's Rule No. 19(a) which prescribes a penalty of suspension of 15 days for the first offense
and dismissal for succeeding offenses.

It appears that on January 25, 1979, petitioner was ordered to deliver ice cream to the Imperial Hotel
and Maguindanao Hotel at CM Recto Avenue and to Your Goody Mart at Anda Street, all in Davao
City, but he deviated from the usual route and went to Kiosk No. 4 on San Pedro Street to talk to
Bartolome Calago, a co-employee, but who was then off-duty. The personnel officer of MERCO
advised petitioner to report to his office to explain his unauthorized deviation in connection with said
incident but petitioner did not comply. On January 30, 1979, MERCO wrote the FFW to which MELU
was affiliated and wherein petitioner Domiciano Soco was the President asking for a grievance
conference to be scheduled not later than February 13, 1979. When petitioner manifested his
unwillingness to attend the grievance conference in his belief that such is not necessary, FFW
relayed this information to MERCO. Due to the refusal of petitioner to submit himself to a formal
conference, MERCO, in a memorandum dated February 13, 1979 suspended petitioner for five (5)
days, effective February 15, 1979, for violation of Company Rule No. 19(a). Then a report of this
action taken was filed with the Ministry of Labor.

On February 13, 1979, at 10:30 A.M., petitioner was instructed to deliver ice cream to the New City
Commercial Corporation at R. Magsaysay Avenue and Gempesaw Store at Gempesaw Street,
Davao City. After making these deliveries, petitioner then proceeded to the Office of SPFL Union at
the Puericulture Center building located on Alvarez Street. John Ferrazzini, Manager of MERCO saw
the company vehicle parked along the street, After verifying that petitioner was the driver of the
MERCO Ford Fiera van, he then called for Rogelio Galagar, Secretary of the MELU and another
employee and in their presence, the MERCO manager took out the rotor of the van. Later that
morning, when petitioner came out of the building he was unable to start the engine of the vehicle
and he called for company assistance. An officer of MERCO advised petitioner to report to his office
because of the said incident in order to explain his unauthorized deviation but petitioner did not do
so. On February 14, 1979, respondent MERCO wrote the FFW to which MELU was affiliated and the
petitioner herein was the President, for a grievance conference on February 15, 1979, but this was
reset to February 21, 1979 to afford FFW sufficient time to notify petitioner Domiciano Soco. On
February 20, 1979, FFW informed MERCO that the requested grievance conference would not be
held because petitioner Domiciano Soco finds it unnecessary to do so.

On his part, petitioner filed on February 14, 1979 a complaint for unfair labor practice against
MERCO, docketed by the Regional Office of the Ministry of Labor, Davao City, as LRD Case No.
LR-30-79. Petitioner alleged therein that the five (5) days suspension imposed on him by respondent
Company, was on account of his union activities.

On February 21, 1979, petitioner was placed on preventive suspension pending the approval of
MERCO's application for clearance to terminate the services of the former. This application was filed
with the Ministry of Labor on February 22, 1979 and docketed therein as LRD Case No. ROXI-C-
209-79. MERCO's application for clearance to terminate was opposed by petitioner even as MERCO
filed its Answer to the complaint against it for unfair labor practice, on March 7, 1979.
The two cases were consolidated and tried jointly as agreed to by the contending parties. In an order
dated May 21, 1979, the Regional Director granted private respondent's application to terminate the
employment of petitioner. He upheld the preventive suspension imposed by MERCO on herein
petitioner and dismissed the latter's complaint for unfair labor practice. Said order was then appealed
by herein petitioner but the Deputy Minister of Labor, on October 25, 1979, affirmed the appealed
order. The dismissal of petitioner's appeal led to the filing of the instant petition for certiorari.

Petitioner assails the action taken by the respondent Deputy Minister of Labor as done with grave
abuse of discretion amounting to lack of or in excess of jurisdiction. Petitioner contends that Policy
Instruction No. 6 of the Ministry of Labor and Employment (MOLE) indicates that the Regional
Director has no jurisdiction to hear and decide unfair labor practice cases because the exclusive
original jurisdiction over such labor cases belongs to the Conciliation Section of the Regional Office
of the MOLE. Petitioner avers, that such cases, therefore, should be first resolved by the Labor
Arbiter and not the Regional Director.

This contention is undeserving of the Court's favor.

The fact appears that at the initial hearing conducted on March 7, 1979 by the Regional Director, it
was agreed upon by the parties to consolidate the two cases being litigated considering that both
cases concern the same parties and the issues involved are interrelated (Decision of the Regional
Director, p. 20, Rollo). Petitioner obviously accepted the jurisdiction of the Regional Director by
presenting his evidence. By having asked for affirmative relief, without challenging the Regional
Director's power to hear and try his complaint for unfair labor practice, he cannot rightfully now
challenge the resolution made in said cases by the same Director, based on the latter's alleged lack
of jurisdiction.

In the case of Tijam vs. Sibonghanoy, 23 SCRA 29, it has been stated that "after voluntarily
submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to
question the jurisdiction or power of the court." Therein, We stated that the Court "frowns upon the
undesirable practice of a party submitting his case for decision and then accepting the judgment,
only if favorable, and attacking it for lack of jurisdiction when adverse."

In Ching vs. Ramolete, 51 SCRA 14, this view was reiterated, and We quote:

xxx xxx xxx

Having invoked the jurisdiction of the trial court to secure an affirmative relief against
his opponents, petitioner may not now be allowed to repudiate or question the same
jurisdiction after failing to obtain such relief. While jurisdiction of a tribunal may be
challenged at any time, sound public policy bars petitioner from doing so after having
procured that jurisdiction himself, speculating on the fortunes of litigation.

Petitioner avers that respondent Minister of Labor erred in affirming the findings of the Regional
Director that he violated Company Rules No. 19(a) twice and his dismissal was, therefore,
unwarranted. This issue raised by petitioner relates to questions of fact. It has been held, however,
in numerous cases, that as a general rule, the findings of fact of the trial court or quasi-judicial
bodies are binding on this Court. This principle should be applied in the instant cases, considering
that the findings of respondent Deputy Minister of Labor are supported by the evidence he
appreciated. As a matter of fact, the petitioner was caught for the second time by no less than the
Manager of respondent's company, in actual violation of the rule prohibiting the use of the company
vehicle for private purposes.
Lastly, petitioner asserts that in affirming his dismissal, the Deputy Minister of Labor violated the
constitutional provision of the security of tenure of employees and that assuming that he indeed
violated the company rule, the fact remains that the damage caused by him, if any, to the company,
is only very minimal which should not warrant the imposition of a penalty of dismissal. Petitioner
submits that he has been employed in the company for eighteen (18) years. Petitioner avers that the
damage inflicted on MERCO by his activities due to his misuse of the company vehicle during
working hours did not hamper the smooth business operations of MERCO.

However, what should not be overlooked is the prerogative of an employer company to prescribe
reasonable rules and regulations necessary or proper for the conduct of its business and to provide
certain disciplinary measures in order to implement said rules and to assure that the same would be
complied with. A rule prohibiting employees from using company vehicles for private purpose without
authority from management is, from our viewpoint, a reasonable one. This regulation cannot be
faulted by petitioner because this is proper and necessary even if only for an orderly conduct of
MERCO's business. From the evidence presented, petitioner twice used the company vehicle in
pursuing his own personal interests, on company time and deviating from his authorized route, all
without permission. To cap off his infractions, petitioners stubbornly declined even to satisfy
MERCO's request for an explanation or to attend a grievance conference to discuss violations.
Certainly, to condone petitioner's own conduct will erode the discipline that an employer should
uniformly apply so that it can expect compliance to the same rules and regulations by its other
employees. Otherwise, the rules necessary and proper for the operation of its business, would be
gradually rendered ineffectual, ignored, and eventually become meaningless.

The Court agrees fully with the comment made by the respondent Deputy Minister of Labor,
represented by the office of the Solicitor General, that-

xxx xxx xxx

The filing by petitioner of the complaint for Unfair Labor Practice case on February
14, 1979 was brought about by the fact that he was caught for the second time on
February 13, 1979 violating Company Rule 19(a). It was more of an anticipatory
move on the part of petitioner. (Rollo, pp. 82-83).

The Court is not unmindful of the fact that petitioner has, as he says, been employed with petitioner
Company for eighteen (18) years. On this singular consideration, the Court deems it proper to afford
some equitable relief to petitioner due to the past services rendered by him to MERCO. Thus, it is
but appropriate that petitioner should be given by respondent MERCO, separation pay, equivalent to
one month salary for every year of his service to said Company.

WHEREFORE, the petition is hereby DISMISSED but respondent Mercantile Corporation of Davao
(MERCO) is, nevertheless, ordered to grant the petitioner herein separation pay, equivalent to one
(1) month salary for every year of his service.

No pronouncement as to costs.

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Paras, Padilla, Bidin and Cortes, JJ., concur.

G.R. No. 154295. July 29, 2005

METROMEDIA TIMES CORPORATION and/or ROBINA GOKONGWIE-PE, Petitioners,
vs.
Johnny Pastorin, Respondent.

DECISION

TINGA, J.:

At issue in this Petition for Review1 on certiorari under Rule 45 is whether or not lack of jurisdiction
over the subject matter of the case, heard and decided by the labor arbiter, may be raised for the
first time before the National Labor Relations Commission (NLRC) by a litigant who had actively
participated in the proceedings, which it belatedly questioned.

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

Johnny Pastorin (Respondent) was employed by Metromedia Times Corporation (Petitioner) on 10

December 1990 as a Field Representative/Collector. His task entailed the periodic collection of
receivables from dealers of petitioner's newspapers. Prior to the subject incident, respondent
claimed to have received a termination letter dated 7 May 1998 from management terminating his
services for tardiness effective 16 June 1988. Respondent, member of Metro Media Times
Employees Union, was not dismissed due to the intervention of the labor union, the collective
bargaining agent in the company.

In May 1998, he obtained a loan from one of the dealers whom he dealt with, Gloria A. de Manuel
(De Manuel), amounting to Nine Thousand Pesos (₱9,000.00). After paying One Thousand One
Hundred Twenty-five Pesos (₱1,125.00), respondent reneged on the balance of his loan. De Manuel
wrote a letter dated 6 July 1998 to petitioner, and seeking assistance for collection on the remainder
of the loan. She claimed that when respondent became remissed on his personal obligation, he
stopped collecting periodically the outstanding dues of De Manuel2

On 9 July 1998, petitioner sent a letter addressed to respondent, requiring an explanation for the
transaction with De Manuel, as well as for his failure to pay back the loan according to the conditions
agreed upon. In his reply letter3 dated 13 July 1998, respondent admitted having incurred the loan,
but offered no definitive explanation for his failure to repay the same.

Petitioner, through a Memorandum4 dated 24 August 1998, imposed the penalty of suspension on
respondent for 4 days, from 27 August to 1 September 1998, for violating Company Policy No.
2.175 and ordered his transfer to the Administration Department.

On 2 September 1998, respondent wrote a letter6 to petitioner, stating that he wanted to sign a
transfer memo before assuming his new position.

On September 7, 1998, he was handed the Payroll Change Advice7 (PCA), indicating his new
assignment to the Traffic and Order Department of Metromedia. Nonetheless, respondent stopped
reporting for work. On 16 September 1998, he sent a letter8 to petitioner communicating his refusal
to accept the transfer.

Respondent duly filed a complaint for constructive dismissal, non-payment of backwages and other
money claims with the labor arbiter, a copy of which petitioner received on 28 September 1998. The
complaint was resolved in favor of respondent. In a Decision9 dated 28 May 1999, Labor Arbiter
Manuel P. Asuncion concluded that respondent did not commit insubordination or disobedience so
as to warrant his transfer, and that petitioner was not aggrieved by respondent’s failure to settle his
obligation with De Manuel. The dispositive portion read:

WHEREFORE, the respondents are hereby ordered to reinstate the complainant to his former
position, with full backwages from the time his salary was withheld until he is actually reinstated. As
of this date, the complainant’s backwages has reached the sum of ₱97,324.17. The respondents are
further directed to pay the complainant his 13th month pay for 1998 in the sum of ₱3,611.89. The
claims for allowance and unpaid commission are dismissed for lack of sufficient basis to make an
award.

SO ORDERED.10

Petitioner lodged an appeal with the NLRC, raising as a ground the lack of jurisdiction of the labor
arbiter over respondent’s complaint. Significally, this issue was not raised by petitioner in the
proceedings before the Labor Arbiter. In its Decision11 dated 16 March 2001, the NLRC reversed the
Labor Arbiter on the ground that thee latter had no jurisdiction over the case, it being a grievance
issue properly cognizable by the voluntary arbitrator. The decretal portion of the
NLRC Decision reads:

WHEREFORE, the decision under review is REVERSED and SET ASIDE, and a new one entered,
DISMISSING the complaint for lack of jurisdiction.

SO ORDERED.12

The motion for reconsideration having been denied on 18 May 2001, respondent elevated the case
before the Court of Appeals (CA) through a petition for certiorari13 under Rule 65.

The CA Fifteenth Division reversed the Decision of NLRC, and reinstated the earlier ruling of the
Labor Arbiter. Adopting the doctrines by this Court in the cases of Alfredo Marquez v. Sec. of
Labor14 and ABS-CBN Supervisors Employees Union Members v. ABS-CBN Broadcasting
Corporation,15 the CA ruled that the active participation of the 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. The appellate court then disposed the case in this wise:

WHEREFORE, foregoing premises considered, the petition having merit, in fact and in law,
is hereby GIVEN DUE COURSE. Accordingly, the challenged resolution/decision and orders of
public respondent NLRC are hereby REVERSED and SET ASIDE and the decision of the Labor
Arbiter dated May 28, 1999 REINSTATED with a slight modification, that the 13th month pay
be in the amount of ₱7,430.50. No costs.

SO ORDERED.16

Petitioner sought reconsideration17 of the above Decision18 but the CA denied the motion in the
assailed Resolution19 dated 27 June 2002. Hence, its recourse to this Court, elevating the following
issues:

I.
WHETHER OR NOT METROMEDIA IS ESTOPPED FROM QUESTIONING THE JURISDICTION
OF THE LABOR ARBITER OVER THE SUBJECT MATTER OF THE CASE FOR THE FIRST TIME
ONLY IN THEIR APPEAL BEFORE THE NLRC.

II.

WHETHER OR NOT THE AWARD OF 13TH MONTH PAY BY THE LABOR ARBITER MAY BE
MODIFIED, NOTWITHSTANDING THAT THE SAME WAS NEVER ASSIGNED AS AN ERROR.

Anent the first assignment of error, there are divergent jurisprudential doctrines touching on this
issue. On the one hand are the cases of Martinez v. Merced,20 Marquez v. Secretary of
Labor,21 Ducat v. Court of Appeals,22 Bayoca v. Nogales,23 Jimenez v. Patricia,24 Centeno v.
Centeno,25 and ABS-CBN Supervisors Employee Union Members v. ABS-CBN Broadcasting
Corporation,26 all adhering to the doctrine that a party’s active participation in the actual proceedings
before a court without jurisdiction will estop him from assailing such lack of jurisdiction. Respondent
heavily relies on this doctrinal jurisprudence.

On the other hand, the cases of Dy v. NLRC,27 La Naval Drug v. CA,28 De Rossi vs. CA29 and Union
Motors Corporation v. NLRC30 buttress the position of petitioner that jurisdiction is conferred by law
and lack of jurisdiction may be questioned at any time even on appeal.

The Court of Appeals adopted the principles in the cases of Martinez, Marquez and ABS-CBN in
resolving the jurisdictional issue presented for its resolution, to wit:

Indeed, we agree with petitioner that private respondent was estopped from raising the question of
jurisdiction before public respondent NLRC and the latter gravely abused its discretion in addressing
said question in private respondents’ favor. As early as Martinez vs. De la Merced, 174 SCRA 182,
the Supreme Court has clearly ruled thus: "For it has been consistently held by this Court that while
lack of jurisdiction may be assailed at any stage, a party’s active participation in the proceedings
before a court without jurisdiction will estop such party from assailing such lack of jurisdiction."

....

The same principle was adopted by the Highest Tribunal in the case of Alfredo Marquez vs. Sec. of
Labor, 171 SCRA 337 and quoted in the latter case of ABS-CBN Supervisors Employees Union
Members vs. ABS-CBN Broadcasting Corporation, 304 SCRA 497, where it was ruled that: "The
active participation of the 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."31

We rule differently. A cursory glance at these cases will lead one to the conclusion that a party who
does not raise the jurisdictional question at the outset will be estopped to raise it on appeal.
However, a more circumspect analysis would reveal that the cases cited by respondent do not fall
squarely within the issue and factual circumstances of the instant case. We proceed to demonstrate.

The notion that the defense of lack of jurisdiction may be waived by estoppel on the party invoking
the same most prominently emerged in Tijam v. Sibonghanoy.32 Indeed, the Marquez case relied
upon by the CA is in turn grounded on Tijam, where We held that:
. . . a party can not invoke the jurisdiction of a court to secure affirmative relief against his opponent
and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Dean
vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the rule, it was
further said that the question whether the court had jurisdiction either of the subject-matter of the
action or of the parties is barred from such conduct not because the judgment or order of the court is
valid and conclusive as an adjudication, but for the reason that such a practice can not be
tolerated—obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an
adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the
court . . . And in Littleton vs. Burges, 16 Wyo, 58, the Court said that it is not right for a party who
has affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative
relief, to afterwards deny that same jurisdiction to escape a penalty.33

However, Tijam represented an exceptional case wherein the party invoking lack of jurisdiction did
so only after fifteen (15) years, and at a stage when the proceedings had already been elevated to
the Court of Appeals. Even Marquez recognizes that Tijam stands as an exception, rather than a
general rule.34 The CA perhaps though felt comfortable citing Marquez owing to the pronouncement
therein that the Court would not hesitate to apply Tijam even absent the extraordinary circumstances
therein:

". . . where the entertainment of the jurisdictional issue at a belated stage of the proceedings will
result in a failure of justice and render nugatory the constitutional imperative of protection to labor."35

In this case, jurisdiction of the labor arbiter was questioned as early as during appeal before the
NLRC, whereas in Marquez, the question of jurisdiction was raised for the first time only before this
Court. The viability of Marquez as controlling doctrine in this case is diminished owing to the radically
different circumstances in these two cases. A similar observation can be made as to
the Bayoca and Jimenez cases.36

Neither do the other like-minded cases squarely settle the issue in favor of the respondent. In the
case of Martinez, the issue is not jurisdiction by estoppel but waiver of preliminary conference. In
that case, we said:

As pointed out by petitioners, private respondents had at least three opportunities to raise the
question of lack of preliminary conference first, when private respondents filed a motion for
extension of time to file their position paper; second, at the time when they actually filed their
position paper in which they sought affirmative relief from the Metropolitan Trial Court; and third;
when they filed a motion for reconsideration of the order of the Metropolitan Trial Court expunging
from the records the position paper of private respondents, in which motion private respondents
even urged the court to sustain their position paper. And yet, in none of these instances was the
issue of lack of preliminary conference raised or even hinted at by private respondents. In fine, these
are acts amounting to a waiver of the irregularity of the proceedings. For it has been consistently
held by this Court that while lack of jurisdiction may be assailed at any stage, a party's active
participation in the proceedings before a court without jurisdiction will estop such party from assailing
such lack of jurisdiction.37

The case of Ducat was categorical in saying that if the parties acquiesced in submitting an issue for
determination by the trial court, they are estopped from questioning the jurisdiction of the same court
to pass upon the issue. But this should be taken in the context of the "agreement" of the parties. We
quote from said case:
Petitioner’s filing of a Manifestion and Urgent Motion to Set Parameters of Computation is indicative
of its conformity with the questioned order of the trial court referring the matter of computation of the
excess to SGV and simultaneously thereafter, the issuance of a writ of possession. If petitioner
thought that subject order was wrong, it could have taken recourse to the Court of Appeals but
petitioner did not. Instead he manifested his acquiescence in the said order by seeking parameters
before the trial court. It is now too late for petitioner to question subject order of the trial court.
Petitioner cannot be allowed to make a mockery of judicial processes, by changing his position from
one of the agreement to disagreement, to suit his needs. If the parties acquiesced in submitting an
issue for determination by the trial court, they are estopped from questioning the jurisdiction of the
same court to pass upon the issue. Petitioner is consequently estopped from questioning subject
order of the trial court.38

Centeno involved the question of jurisdiction of the Department of Agrarian Reform Arbitration Board
(DARAB). The Court did rule therein that "participation by certain parties in the administrative
proceedings without raising any objection thereto, bars them from any jurisdictional infirmity after an
adverse decision is rendered against them."39 Still, the Court did recognize therein that the movants
questioning jurisdiction had actually sought and litigated for affirmative reliefs before the DARAB in
support of a submitted counterclaim. No similar circumstance obtains in this case concerning the
petitioner.

Evidently, none of these cited precedents squarely operates as stare decisis on this case, involving
as they did different circumstances. The question now lies as to whether the precedents cited by
petitioner are more apropos to this case.

Petitioner seeks to convince this Court that the instant case falls squarely within the purview of this
Court’s ruling in the case of Dy. Admittedly, a different factual mileu was present insofar as the
questioned jurisdiction was alleged to have been properly lodged in the SEC instead of NLRC. Yet
the rationale employed by the Court therein warrants serious consideration. The aforementioned
case was ruled in this wise:

. . . .More importantly, estoppel cannot be invoked to prevent this Court from taking up the question
of jurisdiction, which has been apparent on the face of the pleadings since the start of litigation
before the Labor Arbiter. It is well settled that the decision of a tribunal not vested with appropriate
jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held:

"A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to
cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and may
not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be
raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent
pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to
be regretted, however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which
justified the departure from the accepted concept of non-waivability of objection to jurisdiction has
been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the
supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually
overthrowing altogether the time honored principle that the issue of jurisdiction is not lost by waiver
or by estoppel.

....

"It is neither fair nor legal to bind a party by the result of a suit or proceeding which was taken
cognizance of in a court which lacks jurisdiction over the same irrespective of the attendant
circumstances. The equitable defense of estoppel requires knowledge or consciousness of the facts
upon which it is based. The same thing is true with estoppel by conduct which may be asserted only
when it is shown, among others, that the representation must have been made with knowledge of
the facts and that the party to whom it was made is ignorant of the truth of the matter (De Castro vs.
Gineta, 27 SCRA 623). The filing of an action or suit in a court that does not possess jurisdiction to
entertain the same may not be presumed to be deliberate and intended to secure a ruling which
could later be annulled if not favorable to the party who filed such suit or proceeding in a court that
lacks jurisdiction to take cognizance of the same, such act may not at once be deemed sufficient
basis of estoppel. It could have been te result of an honest mistake or of divergent interpretation of
doubtful legal provisions. If any fault is to be imputed to a party taking such course of action, part of
the blame should be placed on the court which shall entertain the suit, thereby lulling the parties into
believing that they pursued their remedies in the correct forum. Under the rules, it is the duty of the
court to dismiss an action `whenever it appears that court has no jurisdiction over the subject matter.'
(Section 2, Rule 9, Rules of Court) Should the Court render a judgment without jurisdiction, such
judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid), within ten
(10) years from the finality of the same (Art. 1144, par. 3, Civil Code)."40

The jurisdiction of the Labor Arbiter was assailed in the cases of De Rossi v. NLRC41 and Union
Motors Corporation v. NLRC42 during appeal to the NLRC. Since the same circumstance obtains in
this case, the rulings therein, favorable as they are to the petitioner, are germane.

In De Rossi, this Court elucidated:

Petitioner maintains that MICC can not question now the issue of jurisdiction of the NLRC,
considering that MICC did not raise this matter until after the case had been brought on appeal to
the NLRC. However, it has long been established as a rule, that jurisdiction of a tribunal, agency, or
office, is conferred by law, and its lack of jurisdiction may be questioned at any time even on appeal.
In La Naval Drug Corporation vs. Court of Appeals, 236 SCRA 78, 90, this Court said:

"Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears
that the court has no jurisdiction over the subject matter, the action shall be dismissed. This defense
may be interposed at any time, during appeal or even after final judgment. Such is understandable,
as this kind of jurisdiction is conferred by law and not within the courts, let alone the parties, to
themselves determine or conveniently set aside."43

We held in the Union Motors Case:

The long-established rule is that jurisdiction over a subject matter is conferred by law. [Ilaw at Buklod
ng Manggaggawa v. NLRC, 219 SCRA 536 (1993); Atlas Developer & Steel Industries, Inc. v.
Sarmiento Enterprises, Inc., 184 SCRA 153 (1990); Tijam v. Sibonghanoy, 23 SCRA 29, 30 (1968)].
Estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of action.
Where it appears that the court or tribunal has no jurisdiction, then the defense may be interposed at
any time, even on appeal or even after final judgment. Moreover, the principle of estoppel cannot be
invoked to prevent this court from taking up the question of jurisdiction.44

The rulings in Lozon v. NLRC45 addresses the issue at hand. This Court came up with a clear rule as
to when jurisdiction by estoppel applies and when it does not:

Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it appears that
the court has no jurisdiction over the subject matter, the action shall be dismissed (Section 2, Rule 9,
Rules of Court). This defense may be interposed at any time, during appeal (Roxas vs. Rafferty, 37
Phil. 957) or even after final judgment (Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146). Such
is understandable, as this kind of jurisdiction is conferred by law and not within the courts, let alone
the parties, to themselves determine or conveniently set aside. In People vs. Casiano (111 Phil. 73,
93-94), this Court, on the issue of estoppel, held:

"The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon
whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was
tried and decided upon the theory that it had jurisdiction, the parties are not barred, on
appeal, from assailing such jurisdiction, for the same 'must exist as a matter of law, and may
not be conferred by consent of the parties or by estoppel' (5 C.J.S., 861-863). However, if the
lower court had jurisdiction, and the case was heard and decided upon a given theory, such,
for instance, as that the court had no jurisdiction, the party who induced it to adopt such
theory will not be permitted, on appeal, to assume an inconsistent position—that the lower
court had jurisdiction. Here, the principle of estoppel applies. The rule that jurisdiction is conferred
by law, and does not depend upon the will of the parties, has no bearing thereon.46 (Emphasis
supplied)

Verily, Lozon, Union Motors, Dy and De Rossi aptly resolve the jurisdictional issue obtaining in this
case. Applying the guidelines in Lozon, the labor arbiter assumed jurisdiction when he should not. In
fact, the NLRC correctly reversed the labor arbiter’s decision and ratiocinated:

What appears at first blush to be an issue which pertains to the propriety of complainant’s
reassignment to another job on account of his having contracted a private loan, is one which may be
considered as falling within the jurisdiction of the Office of the Labor Arbiter. Nevertheless, since the
complainant is a union member, he should be bound by the covenants provided for in the Collective
Bargaining Agreement.47

....

Based on the foregoing considerations, it appears that the issue of validity of complainant’s
reassignment stemmed from the exercise of a management prerogative which is a matter apt for
resolution by a Grievance Committee, the parties having opted to consider such as a grievable
issue. Further, a review of the records would show that the matter of reassignment is one not directly
related to the charge of complainant’s having committed an act which is inimical to respondents’
interest, since the latter had already been addressed to by complainant’s service of a suspension
order. The transfer, in effect, is one which properly falls under Section 1, Article IV of the Collective
Bargaining Agreement and, as such, questions as to the enforcement thereof is one which falls
under the jurisdiction of the labor arbiter."48

In line with the cases cited above and applying the general rule that estoppel does not confer
jurisdiction, petitioner is not estopped from assailing the jurisdiction of the labor arbiter before the
NLRC on appeal.

Respondent relied solely on estoppel to oppose petitioner’s claim of lack of jurisdiction on the part of
the labor arbiter. He adduced no other legal ground in support of his contention that the Labor
Arbiter had jurisdiction over the case. Thus, his claim falls flat in light of our pronouncement, and
more so considering the NLRC’s correct observation that jurisdiction over grievance issues, such as
the propriety of the reassignment of a union member falls under the jurisdiction of the voluntary
arbitrator.

Since jurisdiction does not lie with the Labor Arbiter, it is futile to discuss about the computation of
the 13th month pay.
WHEREFORE, the questioned decision of the Labor Arbiter and the Court of Appeals are hereby
REVERSED and SET ASIDE, and the decision of the NLRC in dismissing the complaint for lack of
jurisdiction REINSTATED.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

G.R. No. 108813 December 15, 1994

JUSMAG PHILIPPINES, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION (Second Division) and FLORENCIO
SACRAMENTO, Union President, JPFCEA, respondents.

Juan, Luces, Luna and Associates for petitioner.

Galutera & Aguilar Law Offices for private respondent.

PUNO, J.:

The immunity from suit of the Joint United States Military Assistance Group to the Republic of the
Philippines (JUSMAG-Philippines) is the pivotal issue in the case at bench.

JUSMAG assails the January 29, 1993 Resolution of the NATIONAL LABOR RELATIONS
COMMISSION (public respondent), in NLRC NCR CASE NO. 00-03-02092-92, reversing the July
30, 1991 Order of the Labor Arbiter, and ordering the latter to assume jurisdiction over the complaint
for illegal dismissal filed by FLORENCIO SACRAMENTO (private respondent) against petitioner.

First, the undisputed facts.

Private respondent was one of the seventy-four (74) security assistance support personnel (SASP)
working at JUSMAG-Philippines. 1 He had been with JUSMAG from December 18, 1969, until his
dismissal on April 27, 1992. When dismissed, he held the position of Illustrator 2 and was the
incumbent President of JUSMAG PHILIPPINES-FILIPINO CIVILIAN EMPLOYEES ASSOCIATION
(JPFCEA), a labor organization duly registered with the Department of Labor and Employment. His
services were terminated allegedly due to the abolition of his position.2 He was also advised that he
was under administrative leave until April 27, 1992, although the same was not charged against his
leave.

On March 31, 1992, private respondent filed a complaint with the Department of Labor and
Employment on the ground that he was illegally suspended and dismissed from service by
JUSMAG. 3 He asked for his reinstatement.

JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of the United
States. It further alleged lack of employer-employee relationship and that it has no juridical
personality to sue and be sued.4
In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject complaint " for
want of jurisdiction."5 Private respondent appealed6 to the National Labor Relations Commission
(public respondent), assailing the ruling that petitioner is immune from suit for alleged violation of our
labor laws. JUSMAG filed its Opposition, 7 reiterating its immunity from suit for its non-contractual,
governmental and/or public acts.

In a Resolution, dated January 29, 1993, the NLRC8 reversed the ruling of the Labor Arbiter as it
held that petitioner had lost its right not to be sued. The resolution was predicated on two grounds:
(1) the principle of estoppel — that JUSMAG failed to refute the existence of employer-employee
relationship under the "control test"; and (2) JUSMAG has waived its right to immunity from suit
when it hired the services of private respondent on December 18, 1969.

The NLRC relied on the case of Harry Lyons vs. United States of America,9 where the "United States
Government (was considered to have) waived its immunity from suit by entering into (a) contract of
stevedoring services, and thus, it submitted itself to the jurisdiction of the local courts."

Accordingly, the case was remanded to the labor arbiter for reception of evidence as to the issue on
illegal dismissal.

Hence, this petition, JUSMAG contends:

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. IN REVERSING THE DECISION OF THE LABOR ARBITER AND

IN NOT AFFIRMING THE DISMISSAL OF THE COMPLAINT IT
BEING A SUIT AGAINST THE UNITED STATES OF AMERICA
WHICH HAD NOT GIVEN ITS CONSENT TO BE SUED; AND

B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY FROM SUIT;

II

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE RELATIONSHIP

BETWEEN JUSMAG AND PRIVATE RESPONDENT; AND

B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYING

THAT PRIVATE RESPONDENT IS ITS EMPLOYEE FOR FAILURE
TO PRESENT PROOF TO THE CONTRARY.

We find the petition impressed with merit.

It is meet to discuss the historical background of the JUSMAG to determine its immunity from suit.

JUSMAG was created pursuant to the Military Assistance Agreement 10 dated March 21, 1947,
between the Government of the Republic of the Philippines and the Government of the United States
of America. As agreed upon, JUSMAG shall consist of Air, Naval and Army group, and its primary
task was to advise and assist the Philippines, on air force, army and naval matters. 11

Article 14 of the 1947 Agreement provides, inter alia, that "the cost of all services required by the
Group, including compensation of locally employed interpreters, clerks, laborers, and other
personnel, except personal servants, shall be borne by the Republic of the Philippines."

This set-up was to change in 1991. In Note No 22, addressed to the Department of Foreign Affairs
(DFA) of the Philippines, dated January 23, 1991, the United States Government, thru its Embassy,
manifested its preparedness "to provide funds to cover the salaries of security assistance support
personnel" and security guards, the rent of JUSMAG occupied buildings and housing, and the cost
of utilities. 12 This offer was accepted by our Government, thru the DFA, in Note No. 911725, dated
April 18, 1991.13

Consequently, a Memorandum of Agreement 14 was forged between the Armed Forces of the
Philippines and JUSMAG-Philippines, thru General Lisandro C. Abadia and U.S. Brigadier General
Robert G. Sausser. The Agreement delineated the terms of the assistance-in-kind of JUSMAG for
1991, the relevant parts of which read:

a. The term salaries as used in this agreement include those for the security guards
currently contracted between JUSMAG and A' Prime Security Services Inc., and
the Security Assistance Support Personnel (SASP). . . . .

b. The term Security Assistance Support Personnel (SASP) does not include active
duty uniformed members of the Armed Forces of the Philippines performing duty at
JUSMAG.

c. It is understood that SASP are employees of the Armed Forces of the

Philippines (AFP). Therefore, the AFP agrees to appoint, for service with JUSMAG,
no more than 74 personnel to designated positions with JUSMAG.

d. SASP are under the total operational control of the Chief, JUSMAG-Philippines.
The term "Operational Control" includes, but is not limited to, all personnel
administrative actions, such as: hiring recommendations; firing recommendations;
position classification; discipline; nomination and approval of incentive awards; and
payroll computation. Personnel administration will be guided by Annex E of
JUSMAG-Philippines Memo 10-2. For the period of time that there is an exceptional
funding agreement between the government of the Philippines and the United States
Government (USG), JUSMAG will pay the total payroll costs for the SASP
employees. Payroll costs include only regular salary; approved overtime, costs of
living allowance; medical insurance; regular contributions to the Philippine Social
Security System, PAG-IBIG Fund and Personnel Economic Relief Allowance
(PERA); and the thirteenth-month bonus. Payroll costs do not include gifts or other
bonus payments in addition to those previously defined above. Entitlements not
considered payroll costs under this agreement will be funded and paid by the AFP.

e. All SASP employed as of July 1, 1990 will continue their service with JUSMAG at
their current rate of pay and benefits up to 30 June 1991, with an annual renewal of
employment thereafter subject to renewal of their appointment with the AFP
(employees and rates of pay are indicated at Enclosure 3). No promotion or transfer
internal to JUSMAG of the listed personnel will result in the reduction of their pay and
benefits.
 f. All SASP will, after proper classification, be paid salaries and benefits at
established AFP civilian rates. Rules for computation of pay and allowances will be
made available to the Comptroller, JUSMAG, by the Comptroller, GHQ, AFP.
Additionally, any legally mandated changes in salary levels or methods of
computation shall be transmitted within 48 hours of receipt by Comptroller, GHQ to
Comptroller, JUSMAG.

g. The AFP agrees not to terminate SASP without 60 days prior written notice to
Chief, JUSMAG-Philippines. Any termination of these personnel thought to be
necessary because of budgetary restrictions or manpower ceiling will be subject to
consultations between AFP and JUSMAG to ensure that JUSMAG's mission of
dedicated support to the AFP will not be degraded or harmed in any way.

h. The AFP agrees to assume the severance pay/retirement pay liability for all
appointed SASP. (Enclosure 3 lists the severance pay liability date for current
SASP). Any termination of services, other than voluntary resignations or termination
for cause, will result in immediate payments of AFP of all termination pay to the
entitled employee. Vouchers for severance/retirement pay and accrued bonuses and
annual leave will be presented to the Comptroller, GHQ, AFP, not later than 14
calendar days prior to required date of payment.

i. All SASP listed in Enclosure 3 will continue to participate in the Philippine Social
Security System.

A year later, or in 1992, the United States Embassy sent another note of similar import to the
Department of Foreign Affairs (No. 227, dated April 8, 1992), extending the funding agreement for
the salaries of SASP and security guards until December 31, 1992.

From the foregoing, it is apparent that when JUSMAG took the services of private respondent, it was
performing a governmental function on behalf of the United States pursuant to the Military
Assistance Agreement dated March 21, 1947. Hence, we agree with petitioner that the suit is, in
effect, one against the United States Government, albeit it was not impleaded in the complaint.
Considering that the United States has not waived or consented to the suit, the complaint against
JUSMAG cannot not prosper.

In this jurisdiction, we recognize and adopt the generally accepted principles of international law as
part of the law of the land. 15 Immunity of State from suit is one of these universally recognized
principles. In international law, "immunity" is commonly understood as an exemption of the state and
its organs from the judicial jurisdiction of another state. 16 This is anchored on the principle of the
sovereign equality of states under which one state cannot assert jurisdiction over another in violation
of the maxim par in parem non habet imperium (an equal has no power over an equal).17

Under the traditional rule of State immunity, a state cannot be sued in the courts of another State,
without its consent or waiver. However, in Santos, et al., vs. Santos, et al., 18 we recognized an
exception to the doctrine of immunity from suit by a state, thus:

. . . . Nevertheless, if, where and when the state or its government enters into a
contract, through its officers or agents, in furtherance of a legitimate aim and purpose
and pursuant to constitutional legislative authority, whereby mutual or reciprocal
benefits accrue and rights and obligations arise therefrom, and if the law granting the
authority to enter into such contract does not provide for or name the officer against
whom action may be brought in the event of a breach thereof, the state itself may be
 sued, even without its consent, because by entering into a contract, the sovereign
state has descended to the level of the citizen and its consent to be sued is implied
from the very act of entering into such contract. . . . . (emphasis ours)

It was in this light that the state immunity issue in Harry Lyons, Inc., vs. United States of
America 19 was decided.

In the case of Harry Lyons, Inc., the petitioner entered into a contract with the United States
Government for stevedoring services at the U.S. Naval Base, Subic Bay, Philippines. It then sought
to collect from the US government sums of money arising from the contract. One of the issues posed
in the case was whether or not the defunct Court of First Instance had jurisdiction over the defendant
United States, a sovereign state which cannot be sued without its consent. This Court upheld the
contention of Harry Lyons, Inc., that "when a sovereign state enters into a contract with a private
person, the state can be sued upon the theory that it has descended to the level of an individual from
which it can be implied that it has given its consent to be sued under the contract."

The doctrine of state immunity from suit has undergone further metamorphosis. The view evolved
that the existence of a contract does not, per se, mean that sovereign states may, at all times, be
sued in local courts. The complexity of relationships between sovereign states, brought about by
their increasing commercial activities, mothered a more restrictive application of the doctrine. 20 Thus,
in United States of America vs. Ruiz, 21 we clarified that our pronouncement in Harry Lyons, supra,
with respect to the waiver of State immunity, was obiter and "has no value as an imperative
authority."

As it stands now, the application of the doctrine of immunity from suit has
been restricted to sovereign or governmental activities ( jure imperii). 22 The mantle of state
immunity cannot be extended to commercial, private and proprietary acts ( jure gestionis). As aptly
stated by this Court (En banc) in US vs. Ruiz, supra:

The restrictive application of State immunity is proper when the proceedings arise out
of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have descended to the
level of an individual and thus can be deemed to have tacitly given its consent to be
used only when it enters into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions. (emphasis ours)

We held further, that the application of the doctrine of state immunity depends on the legal nature of
the act. Ergo, since a governmental function was involved — the transaction dealt with the
improvement of the wharves in the naval installation at Subic Bay — it was held that the United
States was not deemed to have waived its immunity from suit.

Then came the case of United States vs. Hon. Rodrigo, et al. 23 In said case, Genove was employed
as a cook in the Main Club located at U.S. Air Force Recreation Center, John Hay Air Station. He
was dismissed from service after he was found to have polluted the stock of soup with urine. Genove
countered with a complaint for damages. Apparently, the restaurant services offered at the John Hay
Air Station partake of the nature of a business enterprise undertaken by the United States
government in its proprietary capacity. The Court then noted that the restaurant is well known and
available to the general public, thus, the services are operated for profit, as a commercial and not a
governmental activity. Speaking through Associate Justice Isagani Cruz, the Court (En Banc) said:

The consequence of this finding is that the petitioners cannot invoke the doctrine of
state immunity to justify the dismissal of the damage suit against them by Genove.
 Such defense will not prosper even if it be established that they were acting as
agents of the United States when they investigated and later dismissed Genove. For
the matter, not even the United States government itself can claim such immunity.
The reason is that by entering into the employment contract with Genove in the
discharge of its proprietary functions, it impliedly divested itself of its sovereign
immunity from suit. (emphasis ours)

Conversely, if the contract was entered into in the discharge of its governmental functions, the
sovereign state cannot be deemed to have waived its immunity from suit. 24 Such is the case at
bench. Prescinding from this premise, we need not determine whether JUSMAG controls the
employment conditions of the private respondent.

We also hold that there appears to be no basis for public respondent to rule that JUSMAG is
stopped from denying the existence of employer-employee relationship with private respondent. On
the contrary, in its Opposition before the public respondent, JUSMAG consistently contended that
the (74) SASP, including private respondent, working in JUSMAG, are employees of the Armed
Forces of the Philippines. This can be gleaned from: (1) the Military Assistance Agreement, supra,
(2) the exchange of notes between our Government, thru Department of Foreign Affairs, and the
United States, thru the US Embassy to the Philippines, and (3) the Agreement on May 21,
1991, supra between the Armed Forces of the Philippines and JUSMAG.

We symphatize with the plight of private respondent who had served JUSMAG for more than twenty
(20) years. Considering his length of service with JUSMAG, he deserves a more compassionate
treatment. Unfortunately, JUSMAG is beyond the jurisdiction of this Court. Nonetheless, the
Executive branch, through the Department of Foreign Affairs and the Armed Forces of the
Philippines, can take the cudgel for private respondent and the other SASP working for JUSMAG,
pursuant to the aforestated Military Assistance Agreement.

IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED. Accordingly, the impugned
Resolution dated January 29, 1993 of the National Labor Relations Commission is REVERSED and
SET ASIDE. No costs.

SO ORDERED.

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

G.R. No. 104269 November 11, 1993

DEPARTMENT OF AGRICULTURE, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

Roy Lago Salcedo for private respondents.

VITUG, J.:

For consideration are the incidents that flow from the familiar doctrine of non-suability of the state.
In this petition for certiorari, the Department of Agriculture seeks to nullify the Resolution, 1 dated 27
November 1991, of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de
Oro City, denying the petition for injunction, prohibition and mandamus that prays to enjoin
permanently the NLRC's Regional Arbitration Branch X and Cagayan de Oro City Sheriff from
enforcing the decision 2 of 31 May 1991 of the Executive Labor Arbiter and from attaching and
executing on petitioner's property.

The Department of Agriculture (herein petitioner) and Sultan Security Agency entered into a
contract3 on 01 April 1989 for security services to be provided by the latter to the said governmental
entity. Save for the increase in the monthly rate of the guards, the same terms and conditions were
also made to apply to another contract, dated 01 May 1990, between the same parties. Pursuant to
their arrangements, guards were deployed by Sultan Agency in the various premises of the
petitioner.

On 13 September 1990, several guards of the Sultan Security Agency filed a complaint for
underpayment of wages, non-payment of 13th month pay, uniform allowances, night shift differential
pay, holiday pay and overtime pay, as well as for damages,4 before the Regional Arbitration Branch
X of Cagayan de Oro City, docketed as NLRC Case No. 10-09-00455-90 (or 10-10-00519-90, its
original docket number), against the Department of Agriculture and Sultan Security Agency.

The Executive Labor Arbiter rendered a decision on 31 May finding herein petitioner
and jointly and severally liable with Sultan Security Agency for the payment of money claims,
aggregating P266,483.91, of the complainant security guards. The petitioner and Sultan Security
Agency did not appeal the decision of the Labor Arbiter. Thus, the decision became final and
executory.

On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding the City Sheriff to
enforce and execute the judgment against the property of the two respondents. Forthwith, or on 19
July 1991, the City Sheriff levied on execution the motor vehicles of the petitioner, i.e. one (1) unit
Toyota Hi-Ace, one (1) unit Toyota Mini Cruiser, and one (1) unit Toyota Crown.6 These units were
put under the custody of Zacharias Roa, the property custodian of the petitioner, pending their sale
at public auction or the final settlement of the case, whichever would come first.

A petition for injunction, prohibition and mandamus, with prayer for preliminary writ of injunction was
filed by the petitioner with the National Labor Relations Commission (NLRC), Cagayan de Oro,
alleging, inter alia, that the writ issued was effected without the Labor Arbiter having duly acquired
jurisdiction over the petitioner, and that, therefore, the decision of the Labor Arbiter was null and void
and all actions pursuant thereto should be deemed equally invalid and of no legal, effect. The
petitioner also pointed out that the attachment or seizure of its property would hamper and
jeopardize petitioner's governmental functions to the prejudice of the public good.

On 27 November 1991, the NLRC promulgated its assailed resolution; viz:

WHEREFORE, premises considered, the following orders are issued:

1. The enforcement and execution of the judgments against petitioner in NLRC

RABX Cases Nos. 10-10-00455-90; 10-10-0481-90 and 10-10-00519-90 are
temporarily suspended for a period of two (2) months, more or less, but not
extending beyond the last quarter of calendar year 1991 to enable petitioner to
source and raise funds to satisfy the judgment awards against it;
 2. Meantime, petitioner is ordered and directed to source for funds within the period
above-stated and to deposit the sums of money equivalent to the aggregate amount.
it has been adjudged to pay jointly and severally with respondent Sultan Security
Agency with the Regional Arbitration Branch X, Cagayan de Oro City within the same
period for proper dispositions;

3. In order to ensure compliance with this order, petitioner is likewise directed to put
up and post sufficient surety and supersedeas bond equivalent to at least to fifty
(50%) percent of the total monetary award issued by a reputable bonding company
duly accredited by the Supreme Court or by the Regional Trial Court of Misamis
Oriental to answer for the satisfaction of the money claims in case of failure or default
on the part of petitioner to satisfy the money claims;

4. The City Sheriff is ordered to immediately release the properties of petitioner

levied on execution within ten (10) days from notice of the posting of sufficient surety
or supersedeas bond as specified above. In the meanwhile, petitioner is assessed to
pay the costs and/or expenses incurred by the City Sheriff, if any, in connection with
the execution of the judgments in the above-stated cases upon presentation of the
appropriate claims or vouchers and receipts by the city Sheriff, subject to the
conditions specified in the NLRC Sheriff, subject to the conditions specified in the
NLRC Manual of Instructions for Sheriffs;

5. The right of any of the judgment debtors to claim reimbursement against each
other for any payments made in connection with the satisfaction of the judgments
herein is hereby recognized pursuant to the ruling in the Eagle Security case,
(supra). In case of dispute between the judgment debtors, the Executive Labor
Arbiter of the Branch of origin may upon proper petition by any of the parties conduct
arbitration proceedings for the purpose and thereby render his decision after due
notice and hearings;

7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of
preliminary injunction previously issued is Lifted and Set Aside and in lieu thereof,
a Temporary Stay of Execution is issued for a period of two (2) months but not
extending beyond the last quarter of calendar year 1991, conditioned upon the
posting of a surety or supersedeas bond by petitioner within ten (10) days from
notice pursuant to paragraph 3 of this disposition. The motion to admit the complaint
in intervention is Denied for lack of merit while the motion to dismiss the petition filed
by Duty Sheriff is Noted

SO ORDERED.

In this petition for certiorari, the petitioner charges the NLRC with grave abuse of discretion for
refusing to quash the writ of execution. The petitioner faults the NLRC for assuming jurisdiction over
a money claim against the Department, which, it claims, falls under the exclusive jurisdiction of the
Commission on Audit. More importantly, the petitioner asserts, the NLRC has disregarded the
cardinal rule on the non-suability of the State.

The private respondents, on the other hand, argue that the petitioner has impliedly waived its
immunity from suit by concluding a service contract with Sultan Security Agency.

The basic postulate enshrined in the constitution that "(t)he State may not be sued without its
consent," 7 reflects nothing less than a recognition of the sovereign character of the State and an
express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. 8 It is
based on the very essence of sovereignty. As has been aptly observed, by Justice Holmes, a
sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the
logical and practical ground that there can be no legal right as against the authority that makes the
law on which the right depends. 9 True, the doctrine, not too infrequently, is derisively called "the
royal prerogative of dishonesty" because it grants the state the prerogative to defeat any legitimate
claim against it by simply invoking its non-suability. 10 We have had occasion, to explain in its
defense, however, that a continued adherence to the doctrine of non-suability cannot be deplored,
for the loss of governmental efficiency and the obstacle to the performance of its multifarious
functions would be far greater in severity than the inconvenience that may be caused private parties,
if such fundamental principle is to be abandoned and the availability of judicial remedy is not to be
accordingly restricted. 11

The rule, in any case, is not really absolute for it does not say that the state may not be sued under
any circumstances. On the contrary, as correctly phrased, the doctrine only conveys, "the state may
not be sued without its consent;" its clear import then is that the State may at times be sued. 12 The
States' consent may be given expressly or impliedly. Express consent may be made through a
general law13 or a special law. 14 In this jurisdiction, the general law waiving the immunity of the state
from suit is found in Act No. 3083, where the Philippine government "consents and submits to be
sued upon any money claims involving liability arising from contract, express or implied, which could
serve as a basis of civil action between private parties." 15 Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a counterclaim16 or when
it enters into a contract. 17 In this situation, the government is deemed to have descended to the level
of the other contracting party and to have divested itself of its sovereign immunity. This rule, relied
upon by the NLRC and the private respondents, is not, however, without qualification. Not all
contracts entered into by the government operate as a waiver of its non-suability; distinction must
still be made between one which is executed in the exercise of its sovereign function and another
which is done in its proprietary capacity. 18

In the Unites States of America vs. Ruiz, 19 where the questioned transaction dealt with
improvements on the wharves in the naval installation at Subic Bay, we held:

The traditional rule of immunity exempts a State from being sued in the courts of
another State without its consent or waiver. This rule is a necessary consequence of
the principles of independence and equality of States. However, the rules of
International Law are not petrified; they are constantly developing and evolving. And
because the activities of states have multiplied, it has been necessary to distinguish
them — between sovereign and governmental acts ( jure imperii) and private,
commercial and proprietary act ( jure gestionisis). The result is that State immunity
now extends only to acts jure imperii. The restrictive application of State immunity is
now the rule in the United States, the United Kingdom and other states in Western
Europe.

xxx xxx xxx

The restrictive application of State immunity is proper only when the proceedings
arise out of commercial transactions of the foreign sovereign, its commercial
activities or economic affairs. Stated differently, a state may be said to have
descended to the level of an individual and can this be deemed to have actually
given its consent to be sued only when it enters into business contracts. It does not
apply where the contracts relates to the exercise of its sovereign functions. In this
case the projects are an integral part of the naval base which is devoted to the
 defense of both the United States and the Philippines, indisputably a function of the
government of the highest order; they are not utilized for not dedicated to commercial
or business purposes.

In the instant case, the Department of Agriculture has not pretended to have assumed a capacity
apart from its being a governmental entity when it entered into the questioned contract; nor that it
could have, in fact, performed any act proprietary in character.

But, be that as it may, the claims of private respondents, i.e. for underpayment of wages, holiday
pay, overtime pay and similar other items, arising from the Contract for Service, clearly constitute
money claims. Act No. 3083, aforecited, gives the consent of the State to be "sued upon any
moneyed claim involving liability arising from contract, express or implied, . . . Pursuant, however, to
Commonwealth Act ("C.A.") No. 327, as amended by Presidential Decree ("P.D.") No. 1145, the
money claim first be brought to the Commission on Audit. Thus, in Carabao, Inc., vs. Agricultural
Productivity Commission, 20 we ruled:

(C)laimants have to prosecute their money claims against the Government under
Commonwealth Act 327, stating that Act 3083 stands now merely as the general law
waiving the State's immunity from suit, subject to the general limitation expressed in
Section 7 thereof that "no execution shall issue upon any judgment rendered by any
Court against the Government of the (Philippines), and that the conditions provided
in Commonwealth Act 327 for filing money claims against the Government must be
strictly observed."

We fail to see any substantial conflict or inconsistency between the provisions of C.A. No. 327 and
the Labor Code with respect to money claims against the State. The Labor code, in relation to Act
No. 3083, provides the legal basis for the State liability but the prosecution, enforcement or
satisfaction thereof must still be pursued in accordance with the rules and procedures laid down in
C.A. No. 327, as amended by P.D. 1445.

When the state gives its consent to be sued, it does thereby necessarily consent to unrestrained
execution against it. tersely put, when the State waives its immunity, all it does, in effect, is to give
the other party an opportunity to prove, if it can, that the State has a liability. 21 In Republic vs.
Villasor 22 this Court, in nullifying the issuance of an alias writ of execution directed against the funds
of the Armed Forces of the Philippines to satisfy a final and executory judgment, has explained, thus
—

The universal rule that where the State gives its consent to be sued by private parties
either by general or special law, it may limit the claimant's action "only up to the
completion of proceedings anterior to the stage of execution" and that the power of
the Courts ends when the judgment is rendered, since government funds and
properties may not be seized under writs or execution or garnishment to satisfy such
judgments, is based on obvious considerations of public policy. Disbursements of
public funds must be covered by the correspondent appropriation as required by law.
The functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.23

WHEREFORE, the petition is GRANTED. The resolution, dated 27 November 1991, is hereby
REVERSED and SET ASIDE. The writ of execution directed against the property of the Department
of Agriculture is nullified, and the public respondents are hereby enjoined permanently from doing,
issuing and implementing any and all writs of execution issued pursuant to the decision rendered by
the Labor Arbiter against said petitioner.

SO ORDERED.

Feliciano, Bidin, Romero and Melo, JJ., concur.

G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO,

MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO,
SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B. ESPINA, all
represented by MARIANO R. ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION
(UNRFNRE) represented by its operations manager, DR. KYRIACOS LOUCA, OSCAR N.
ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT, Commissioners of National Labor
Relations Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING PETILLA,
Labor Arbiter of Butuan City, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the
Resolution dated January 25, 1993 of the National Labor Relations Commission (NLRC), Fifth
Division, Cagayan de Oro City.

We dismiss the petition.

Petitioners were dismissed from their employment with private respondent, the United Nations
Revolving Fund for Natural Resources Exploration (UNRFNRE), which is a special fund and
subsidiary organ of the United Nations. The UNRFNRE is involved in a joint project of the Philippine
Government and the United Nations for exploration work in Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91
and SRAB 10-07-00159-91 for illegal dismissal and damages.

In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction
over its personality since it enjoyed diplomatic immunity pursuant to the 1946 Convention on the
Privileges and Immunities of the United Nations. In support thereof, private respondent attached a
letter from the Department of Foreign Affairs dated August 26, 1991, which acknowledged its
immunity from suit. The letter confirmed that private respondent, being a special fund administered
by the United Nations, was covered by the 1946 Convention on the Privileges and Immunities of the
United Nations of which the Philippine Government was an original signatory (Rollo, p. 21).

On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the
ground that private respondent was protected by diplomatic immunity. The dismissal was based on
the letter of the Foreign Office dated September 10, 1991.
Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which
affirmed the dismissal of the complaints in its Resolution dated January 25, 1993.

Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC
resolution.

II

Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC
are final and executory. Thus, they may only be questioned through certiorari as a special civil action
under Rule 65 of the Revised Rules of Court.

Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first
filed before the respondent tribunal, to allow it an opportunity to correct its assigned errors (Liberty
Insurance Corporation v. Court of Appeals, 222 SCRA 37 [1993]).

In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant
petition. Moreover, the petition lacks any explanation for such omission, which may merit its being
considered as falling under the recognized exceptions to the necessity of filing such motion.

Notwithstanding, we deem it wise to give due course to the petition because of the implications of
the issue in our international relations.

Petitioners argued that the acts of mining exploration and exploitation are outside the official
functions of an international agency protected by diplomatic immunity. Even assuming that private
respondent was entitled to diplomatic immunity, petitioners insisted that private respondent waived it
when it engaged in exploration work and entered into a contract of employment with petitioners.

Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to
labor and promote full employment and equality of employment opportunities for all (1987
Constitution, Art. XIII, Sec. 3).

The Office of the Solicitor General is of the view that private respondent is covered by the mantle of
diplomatic immunity. Private respondent is a specialized agency of the United Nations. Under Article
105 of the Charter of the United Nations:

1. The Organization shall enjoy in the territory of its Members such privileges and
immunities as are necessary for the fulfillment of its purposes.

2. Representatives of the Members of the United Nations and officials of the

Organization shall similarly enjoy such privileges and immunities as are necessary
for the independent exercise of their functions in connection with the organization.

Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, to which the Philippines was a signatory (Vol. 1, Philippine Treaty
Series, p. 621). We quote Sections 4 and 5 of Article III thereof:

Sec. 4. The specialized agencies, their property and assets, wherever located and by
whomsoever held shall enjoy immunity from every form of legal process except
insofar as in any particular case they have expressly waived their immunity. It is,
 however, understood that no waiver of immunity shall extend to any measure of
execution (Emphasis supplied).

Sec. 5. The premises of the specialized agencies shall be inviolable. The property
and assets of the specialized agencies, wherever located and by whomsoever held,
shall be immune from search, requisition, confiscation, expropriation and any other
form of interference, whether by executive, administrative, judicial or legislative
action (Emphasis supplied).

As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the
generally accepted principles of international law (1987 Constitution, Art. II, Sec. 2). Being a member
of the United Nations and a party to the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, the Philippine Government adheres to the doctrine of
immunity granted to the United Nations and its specialized agencies. Both treaties have the force
and effect of law.

In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:

It is a recognized principle of international law and under our system of separation of

powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government,
and where the plea of diplomatic immunity is recognized and affirmed by the
executive branch of the government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate suggestion by the principal
law officer of the government, the Solicitor General or other officer acting under his
direction. Hence, in adherence to the settled principle that courts may not so exercise
their jurisdiction by seizure and detention of property, as to embarrass the executive
arm of the government in conducting foreign relations, it is accepted doctrine that "in
such cases the judicial department of (this) government follows the action of the
political branch and will not embarrass the latter by assuming an antagonistic
jurisdiction (Emphasis supplied).

We recognize the growth of international organizations dedicated to specific universal endeavors,

such as health, agriculture, science and technology and environment. It is not surprising that their
existence has evolved into the concept of international immunities. The reason behind the grant of
privileges and immunities to international organizations, its officials and functionaries is to secure
them legal and practical independence in fulfilling their duties (Jenks, International Immunities 17
[1961]).

Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield
the affairs of international organizations, in accordance with international practice, from political
pressure or control by the host country to the prejudice of member States of the organization, and to
ensure the unhampered performance of their functions" (International Catholic Migration
Commission v. Calleja, 190 SCRA 130 [1990]).

In the International Catholic Migration Commission case, we held that there is no conflict between
the constitutional duty of the State to protect the rights of workers and to promote their welfare, and
the grant of immunity to international organizations. Clauses on jurisdictional immunity are now
standard in the charters of the international organizations to guarantee the smooth discharge of their
functions.
The diplomatic immunity of private respondent was sufficiently established by the letter of the
Department of Foreign Affairs, recognizing and confirming the immunity of UNRFNRE in accordance
with the 1946 Convention on Privileges and Immunities of the United Nations where the Philippine
Government was a party. The issue whether an international organization is entitled to diplomatic
immunity is a "political question" and such determination by the executive branch is conclusive on
the courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No.
101949, Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).

Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity,
which is not so in the case at bench (Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, Art. III, Sec. 4).

Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is
by virtue of a joint project entered into by the Philippine Government and the United Nations for
mineral exploration in Dinagat Island. Its mission is not to exploit our natural resources and gain
pecuniarily thereby but to help improve the quality of life of the people, including that of petitioners.

This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges
and Immunities of the Specialized Agencies of the United Nations states that "each specialized
agency shall make a provision for appropriate modes of settlement of: (a) disputes arising out of
contracts or other disputes of private character to which the specialized agency is a party."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

G.R. No. L-63742 April 17, 1989

TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, petitioner,

vs.
HON. PEDRO GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS,
WENCESLAO DURAN, SERGIO SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO
ZERNA, ANTONIO DIVINAGRACIA, PEDRO SINCERO, DIONISIO TABALOC, ROMEO
RAMIREZ, FRANCISCO CABILAO and ESPERIDION MOSO, respondents.

G.R. No. 84300 April 17, 1989

JOSEFINO DATUIN, petitioner,

vs.
TARLAC WATER DISTRICT, respondent.

Rodulfo O. Navarro and Baldomero Limbaga for petitioner in G.R. No. 63742.

Joaquin R. Hitosis for respondents in G.R. No. 63742.

Isabelo C. Salamida for petitioner in G.R. No. 84300.

Conrado C. Ginelo Jr. for respondent in G.R. No. 84300.

Bernardito A. Florido for Philippine Association of Water Districts.

Reuben A. Espancho for Esperidion Moso.

GRIÑO-AQUINO, J.:

The common issue in these consolidated cases is whether or not water districts created under PD
No. 198, as amended, are private corporations or government-owned or controlled corporations.
Another issue in G.R. No. 63742 is whether respondent Judge acted without, or in excess of,
jurisdiction or with grave abuse of discretion in dismissing Civil Case No. 8144 for alleged lack of
jurisdiction over the subject matter.

I. G.R. No. 63742

On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo,
filed in the Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case
No. 8144, an action for injunction with preliminary mandatory injunction and damages, against
respondent Municipality of Pamplona and its officials to prevent them from interfering in the
management of the Tanjay Waterworks System.

Respondent Judge set the hearing of the application for injunction on March 16, 1983. The
Municipality and its officials answered the complaint. Esperidion Moso filed a separate answer.

When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five
(5) days to submit their respective position papers on the issue of the court's jurisdiction (or lack of
it), over the action. The respondents' position paper questioned the court's jurisdiction over the case
and asked for its dismissal of the complaint (Annex F). Instead of a position paper, the petitioner filed
a reply with opposition to the motion to dismiss (Annex G).

On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of
jurisdiction over the subject matter (water) and over the parties (both being government
instrumentalities) by virtue of Art. 88 of PD No. 1067 and PD No. 242. He declared that the
petitioner's recourse to the court was premature because the controversy should have been
ventilated first before the National Water Resources Council pursuant to Arts. 88 and 89 of PD No.
1067. He further ruled that as the parties are government instrumentalities, the dispute should be
administratively settled in accordance with PD No. 242.

Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in
excess of jurisdiction or with grave abuse of discretion in dismissing the case.

II. G.R. No. 84300

Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water
District in the Department of Labor and Employment (DOLE) which decided in his favor. However,
upon respondent's motion for reconsideration (which was treated as an appeal) the National Labor
Relations Commission (NLRC) reversed the decision and dismissed the complaint "for lack of
jurisdiction," holding that as the respondent Tarlac Water District is a corporation created by a
special law (PD No. 198), its officers and employees belong to the civil service and their separation
from office should be governed by Civil Service Rules and Regulations.
Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro
C. Gabaton, et al., G.R. No. 63742, because the lone issue in both cases is whether or not water
districts created under PD No. 198, as amended, are private corporations or government-owned or
controlled corporations. The two cases were consolidated pursuant to the resolution dated July 25,
1988 of this Court.

Actually the question of the corporate personality of local water districts is not new. The Court ruled
in the recent case of Hagonoy Water District vs. NLRC, G.R. No. 81490, August 31, 1988, that they
are quasi public corporations whose employees belong to the civil service, hence, the dismissal of
those employees shall be governed by the civil service law, rules and regulations. The pertinent part
of this Court's decision reads as follows:

The only question here is whether or not local water districts are government owned
or controlled corporations whose employees are subject to the provisions of the Civil
Service Law. The Labor Arbiter asserted jurisdiction over the alleged illegal dismissal
of private respondent Villanueva by relying on Section 25 of Presidential Decree No.
198, known as the 'Provincial Water Utilities Act of 1973' which went into effect on 25
May 1973, and which provides as follows:

Exemption from Civil Service. — The district and its employees, being engaged in a
proprietary function, are hereby exempt from the provisions of the Civil Service Law.
Collective Bargaining shall be available only to personnel below supervisory
levels: Provided, however, That the total of all salaries, wages, emoluments, benefits
or other compensation paid to all employees in any month shall not exceed fifty
percent (50%) of average net monthly revenue, said net revenue representing
income from water sales and sewerage service charges, less pro-rata share of debt
service and expenses for fuel or energy for pumping during the preceding fiscal year.

The Labor Arbiter failed to take into account the provisions of Presidential, Decree
No. 1479, which went into effect on 11 June 1978. P.D. No. 1479 wiped away
Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was renumbered
as Section 25 in the following manner:

Section 26. of the same decree P.D. 198 is hereby amended to read as Section 25
as follows:

Section 25. Authorization. — The district may exercise all the powers which are
expressly granted by this Title or which are necessarily implied from or incidental to
the powers and purposes herein stated. For the purpose of carrying out the
objectives of this Act, a district is hereby granted the power of eminent domain, the
exercise thereof shall, however, be subject to review by the Administration.

Thus, Section 25 of P.D. 198 exempting the employees of water districts from the
application of the Civil Service Law was removed from the statute books.

This is not the first time that officials of the Department of Labor and Employment
have taken the position that the Labor Arbiter here adopted. In Baguio Water District
vs. Cresenciano B. Trajano etc., et al. (127 SCRA 730 [1984]), the petitioner Water
District sought review of a decision of the Bureau of Labor Relations which affirmed
that of a Med-Arbiter calling for a certification election among the regular rank-and-
file employees of the Baguio Water District (BWD). In granting the petition, the Court
said
 The Baguio Water District was formed pursuant to Title II — Local Water District Law
— of P.D. No. 198, as amended. The BWD is by Sec. 6 of that decree 'a quasi-public
corporation performing public service and supplying public wants'.

xxxxxx

We grant the petition for the following reasons:

I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of
P.E. No. 198 was amended to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The
amendatory decree took effect on June 11, 1978.

xxxxxxxxx

3. The BWD is a corporation created pursuant to a special law — P.D. No. 198, as
amended. As such its officers and employees are part of the Civil Service. (Sec. 1,
Art. XII-B, [1973] Constitution; P.D. No. 868.)

The hiring and firing of employees of government-owned or controlled corporations are governed by
the Civil Service Law and Civil Service Rules and Regulations. In National Housing Corporation vs.
Juco, 134 SCRA 172,176, We held:

There should no longer be any question at this time that employees of government-
owned or controlled corporations are governed by the civil service law and civil
service rules and regulations.

Section 1, Article XII-B of the [1973] Constitution specifically provides:

The Civil Service embraces every branch, agency, subdivision, and instrumentality of
the Government, including every government-owned or controlled corporation ... .

The 1935 Constitution had a similar provision in its Section 1, Article XII which
stated:

A Civil Service embracing all branches and subdivisions of the Government shall be
provided by law.

The inclusion of 'government-owned or controlled corporations' within the embrace of

the civil service shows a deliberate effort of the framers to plug an earlier loophole
which allowed government-owned or controlled corporations to avoid the full
consequences of the all-encompassing coverage of the civil service system. The
same explicit intent is shown by the addition of 'agency' and 'instrumentality' to
branches and subdivisions of the Government. All offices and firms of the
government are covered.

The amendments introduced in 1973 are not Idle exercises or meaningless gestures.
They carry the strong message that civil service coverage is broad and all-embracing
insofar as employment in the government in any of its governmental or corporate
arms is concerned.

xxxxxxxxx
 Section 1 of Article XII-B, 1973 Constitution uses the word 'every' to modify the
phrase 'government-owned or controlled corporation'

'Every' means each one of a group, without exception. It means all possible and all,
taken one by one. Of course, our decision in this case refers to a corporation created
as a government-owned or controlled entity. It does not cover cases involving private
firms taken over by the government in foreclosure or similar proceedings. We reserve
judgment on these latter cases when the appropriate controversy is brought to this
Court. (Emphasis ours)

Significantly, Article XIB Section 2(l) of the 1987 Constitution provides that "(t)he civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the government, including
government-owned or controlled corporations with original charters." Inasmuch as PD No. 198, as
amended, is the original charter of the petitioner, Tanjay Water District, and respondent Tarlac Water
District and all water districts in the country, they come under the coverage of the civil service law,
rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807.)

In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was
water, the case should have been brought first to the National Water Resources Council in
accordance with Articles 88 and 89 of PD No. 1067, and, as the parties are government
instrumentalities (The Tanjay Water District and the Municipality of Pamplona), the dispute should be
administratively settled in accordance with PD No. 242.

Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as
follows:

ART. 88. The [Water Resources] Council shall have original jurisdiction over all
disputes relating to appropriation, utilization, exploitation, development, control,
conservation and protection of waters within the meaning and context of the
provisions of this Code.

The decisions of the Council on water rights controversies shall be immediately

executory and the enforcement thereof may be suspended only when a bond, in an
amount fixed by the Council to answer for damages occasioned by the suspension or
stay of execution, shall have been filed by the appealing party, unless the
suspension is by virtue of an order of a competent court.

All disputes shall be decided within sixty (60) days after the parties submit the same
for decision or resolution.

The Council shall have the power to issue writs of execution and enforce its
decisions with the assistance of local or national police agencies.

ART. 89. The decisions of the Council on water rights controversies may be
appealed to the Court of First Instance of the province where the subject matter of
the controversy is situated within fifteen (15) days from the date the party appealing
receives a copy of the decision, on any of the following grounds: (2) grave abuse of
discretion question of law; and (3) questions of fact and law. (Emphasis supplied.)

Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold
that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water
Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of
First Instance (now Regional Trial Court) has only appellate jurisdiction over the case.

P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the
settlement of:

.... all disputes, claims and controversies solely between or among the departments,
bureaus, offices, agencies and instrumentalities of the National Government,
including government-owned or controlled corporations but excluding constitutional
offices or agencies, arising from the interpretation and application of statutes,
contracts or agreements.

by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel,
depending on the parties involved and whether the case raises pure questions of law or mixed
questions of law and fact.

P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the
"interpretation and application of statutes, contracts, or agreements" of the parties herein. As
previously stated, it involves the appropriation, utilization, and control of water.

Our determination in the earlier cases (Baguio Water District vs. Trajano, 127 SCRA 730; Hagonoy
Water District vs. NLRC, G.R. No. 81490, August 31, 1988) that water districts are government
instrumentalities and that their employees belong to the civil service, disposes of Datuin's petition in
G.R. No. 84300. The National Labor Relations Commission has no jurisdiction over his complaint for
illegal dismissal.

WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the
petitioners in G.R. No. 63742 filing their complaint in the National Water Resources Council and the
petitioner in G.R. No. 84300 seeking redress in the Civil Service Commission. No costs.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

G.R. No. 104389 May 27, 1994

ZAMBOANGA CITY WATER DISTRICT, petitioner,

vs.
PRESIDING COMMISSIONER MUSIB M. BUAT, COMMISSIONERS LEON G. GONZAGA, JR.,
and OSCAR N. ABELLA, and PRIVATE RESPONDENTS LUIS C. MARIANO, FELIX G. LAQUIO,
FRANCISCO C. OLIVEROS, MARITTA S. DELOS REYES, FRANCISBELLO D. CRUZ,
EXEQUIEL M. DAYOT, JR., ERIC A. DELGADO, RICARDO M. FERRER, JOVITO
DUHAYLUNGSOD, ANTONIO F. ALCANTARA, RICARDO M. CORTEZ, TEOBALDO M.
FLORES, ZOILO J. CAPUY, BERNARDINO T. ALDINETE, ANGIEL M. ESPINA, WINIFRIDO P.
CASIMIRO, ENRIQUE M. MANUEL, JR., JOSE P. ATILANO, ANTONIO F. DELOS REYES, JR.,
ELEUTERIO S. TARROZA, ANTONIO B. DESPALO, ROLANDO B. GARCIA, CESAR P. REYES,
GENEROSO L. CODINO, MARIO E. FERNANDO, BERNARDO B. GEROLAGA, ANTONIO F.
VESAGAS, ANTONIO L. TUBIG, SAILILLA A. ABDULLA, NOEL A. FERNANDO, SEVERIANO
CASIMIRO, RODOLFO DESCALZO, ARTEMIO DE LEON, and SANTIAGO
FERRER, respondents.
Virginia M. Ramos for petitioner.

Abelardo Climaco, Jr. for private respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside
the Resolutions dated October 24, 1991 and February 19, 1992 of the National Labor Relations
Commission (NLRC) in NLRC CA No. M-000352.

The Zamboanga City Water District, petitioner herein, is a government-owned and controlled
corporation engaged in the business of supplying water in the City of Zamboanga. Private
respondents are all employees of petitioner.

In March 1987, a strike occurred in the company. It was conducted and participated in by private
respondents, for which reason they were separated from their employment. Petitioner thereafter filed
on March 17, 1987 a complaint. before the Labor Arbiter to declare the said strike illegal (NLRC
Case No. RAB-IX-03-0090-87). The following day, March 18, the Zamboanga Utilities Labor Union
(ZULU), to which private respondents belonged, filed before the Labor Arbiter, a complaint against
petitioner for illegal dismissal and unpaid wages (NLRC Case No. RAB-IX-03-0092-87).

The two cases were consolidated and heard together, and on April 19, 1988, a consolidated decision
was rendered by the Executive Labor Arbiter declaring both the strike and the dismissal of private
respondents illegal and ordering the reinstatement of private respondents to their former positions,
without loss of seniority rights and privileges, but without back wages.

Petitioner appealed to the NLRC. On July 17, 1990, the NLRC, through respondent Commissioners,
affirmed the decision of the Executive Labor Arbiter, with the sole modification that the strike leader,
respondent Felix Laquio herein, be suspended from work without pay for a period of six months,
effective ten days from receipt of the decision.

Petitioner received a copy of the decision of the NLRC on August 27 (Rollo, p. 32). Three days later,
private respondents filed with the Executive Labor Arbiter a motion for execution of the said decision.
On September 24, the Executive Labor Arbiter granted the writ of execution and ordered petitioner to
reinstate all private respondents.

On September 28, this Court issued a restraining order in G.R. Nos. 95219-20 enjoining, until further
orders, the execution of the NLRC Decision dated July 17, 1990. However, on March 13, 1991, we
dismissed the petition, affirmed the NLRC Decision dated July 17, 1990 and lifted the restraining
order granted earlier.

Petitioner received a copy of the decision of the Supreme Court on April 10 and on April 16, it
reinstated 27 of the respondent employees. On the same day, petitioner informed the Executive
Labor Arbiter that respondent Laquio would be reinstated on October 16 after the expiration of
Laquio's six-month suspension.
On April 17, private respondents filed a motion to compel the immediate reinstatement of respondent
Laquio and the payment of their back wages. According to private respondents, the decision of the
NLRC was executory immediately upon receipt by petitioner of a copy thereof on August 27, 1990.

On May 17, the Executive Labor Arbiter issued an order denying private respondents' motion.
Private respondents then appealed to the NLRC (NLRC CA No. M-00352). On October 24, the
NLRC set aside the questioned order of the Executive Labor Arbiter and ordered respondent
Laquio's reinstatement, if not yet reinstated, and granted full back wages to him from March 6, 1991
up to the day prior to his actual reinstatement; and to the other private respondents from March 21,
1989 up to April 15, 1991, including the period of effectivity of the temporary restraining order of this
Court in G.R. Nos. 95219-20.

Petitioner moved for a reconsideration, which the NLRC however denied on February 19, 1992.

Hence, this petition.

II

Petitioner contends that the NLRC had no jurisdiction to issue the resolutions in question because
jurisdiction over labor disputes is vested in the Civil Service Commission. It also argues that the
NLRC committed grave abuse of discretion amounting to lack or in excess of jurisdiction when it
ordered the payment of the salaries of private respondent during the effectivity of the restraining
order of this Court in G.R. Nos. 95219-20.

There is no dispute that petitioner, a water district with an original charter, is a government-owned
and controlled corporation. The established rule is that the hiring and firing of employees of
government-owned and controlled corporations are governed by the provisions of the Civil Service
Law and Civil Service Rules and Regulations (Tanjay Water District v. Gabaton, 172 SCRA 253
[1989]; Hagonoy Water District v. National Labor Relations Commission, 165 SCRA 272 [1988];
National Housing Corporation v. Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano, 127
SCRA 730 [1984]. Jurisdiction over the strike and the dismissal of private respondents is therefore
lodged not with the NLRC but with the Civil Service Commission.

Nevertheless, petitioner never raised the issue of lack of jurisdiction before the Executive Labor
Arbiter, the NLRC or even this Court in G.R. Nos. 95219-20. In fact, petitioner itself filed the
complaint before the Executive Labor Arbiter in NLRC Case No. RAB-IX-03-0090-87, sought
affirmative relief therefrom and even participated actively in the proceedings below. It is only now in
this case before us, after the NLRC ordered payment of back wages, that petitioner raises the issue
of lack of jurisdiction. Indeed, it is not fair for a party who has voluntarily invoked the jurisdiction of a
tribunal in a particular matter to secure an affirmative relief therefrom, to afterwards repudiate and
deny that very same jurisdiction to escape a penalty (Ocheda v. Court of Appeals, 214 SCRA 629
[1992]; Royales v. Intermediate Appellate Court, 127 SCRA 470 [1984]; Tijam v. Sibonghanoy, 23
SCRA 29 [1968]).

Petitioner is thus estopped from assailing the jurisdiction of the NLRC and is bound to respect all the
proceedings below.

The second issue involves the determination of when private respondents should be reinstated as
ordered by the decision of the Executive Labor Arbiter dated April 19, 1988. Their salaries start to toll
from said date.
Petitioner claims that private respondents, except respondent Laquio, were entitled to reinstatement
only after April 10, 1991 when it received a copy of the decision of the Supreme Court in G.R. Nos.
95219-20. Petitioner reinstated said private respondents on April 16, 1991. In the case of respondent
Laquio, petitioner reinstated him on October 16, 1991 after the expiration of the six-month
suspension.

Petitioner argues that the execution of the NLRC decision dated July 17, 1990 was suspended by
the temporary restraining order issued by this Court in G.R. Nos. 95219-20.

The Executive Labor Arbiter agreed with petitioner's contention.

The NLRC was of the view that private respondents should have been reinstated on March 21, 1989
and paid their back wages from that date to April 15, 1991 including the period of effectivity of the
temporary restraining order of this Court in G.R. Nos. 95219-20. Respondent Laquio on the other
hand, should have been reinstated on March 6, 1991 and paid his back wages from said date up to
the day prior to his actual reinstatement.

The reckoning date of March 21, 1989 used by the NLRC was the date of effectivity of R.A. No.
6715, amending the third paragraph of Article 223 of the Labor Code which provides.

xxx xxx xxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation
or, at the option of the employer, merely reinstated in the payroll. The posting of a
bond by the employer shall not stay the execution for reinstatement provided herein
(Emphasis supplied).

xxx xxx xxx

Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or
separated employee insofar as the reinstatement aspect is concerned, shall be immediately
executory, even pending appeal. The employer shall reinstate the employee concerned either by: (a)
actually admitting him back to work under the same terms and conditions prevailing prior to his
dismissal or separation; or (b) at the option of the employer, merely reinstating him in the payroll.
Immediate reinstatement is mandated and is not stayed by the fact that the employer has appealed,
or has posted a cash or surety bond pending appeal.

The issuance of the temporary restraining order in G.R. Nos. 95219-20 did not nullify the rights of
private respondents to their reinstatement and to collect their wages during the period of the
effectivity of the order but merely suspended the implementation thereof pending the determination
of the validity of the NLRC resolutions subject of the petition. Naturally, a finding of this Court that
private respondents were not entitled to reinstatement would mean that they had no right to collect
any back wages. On the other hand, where the Court affirmed the decision of the NLRC and
recognized the right of private respondents to reinstatement, as in G.R. Nos. 95219-20, private
respondents are entitled to the wages accruing during the effectivity of the temporary restraining
order.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Davide, Jr., and Bellosillo JJ., concur.

Cruz and Kapunan JJ., are on leave.

G.R. No. 85517 October 16, 1992

DOROTEO OCHEDA, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and THE HEIRS OF EDUARDO
SANTOS, respondents.

DAVIDE, JR., J.:

The trial court's jurisdiction over an action for damages arising from a quasi-delict which resulted in
the death of an employee while in the performance of his duty is challenged in this case.

The late Eduardo Santos was, at the time of his death, employed as a painter by the petitioner who
was a sub-contractor for the painting job on M.J. Building then being constructed along Salcedo
Street, Makati, Metro Manila. The C.E. Construction Corporation, Inc. (CECCI) was the principal
contractor thereof by virtue of a contract it entered into with M.J. Development Corporation, the
owner of the building. Another corporation, Fujitec Philippines Industrial Company, Inc. (FUJITEC),
was contracted by M.J. Development Corporation to install two (2) standard scenic elevator units in
the building.

When the painting job was almost complete, i.e., all that remained to be painted was the wall of the
shaft for the second elevator, the petitioner trimmed his work forces to two (2) employees, Hernani
Gozun and Eduardo Santos; these employees were tasked to finish the painting. On 5 February
1981, they started work on the inner wall of the elevator shaft; to paint the same, they had to stand
on top of the elevator which was then on the second floor of the building. After they finished, they
called on the boy operating the elevator to ask him to bring the same down to the first floor. Instead
of lowering the elevator, however, the boy brought it up to the sixth floor. The sudden upward
movement caused the elevator to jerk and the two (2) painters to lose their balance. Hernani was
able to cling to the cable but Eduardo fell off the top, found himself pinned between the shaft and the
elevator as the latter was moving upward and then fell to the ground when the elevator finally
stopped on the sixth floor. Hernani rushed to Eduardo's aid upon hearing the latter's cry for help. The
former lifted Eduardo in his arms and, with the help of another man, brought him to the Makati
Medical Center where he later died. While the elevator boy was never identified, it is alleged that he
worked for CECCI.

On 11 September 1981, the spouses Catalino and Ester Santos, together with Wilma Palabasan-
Santos, parents and widow, respectively, of Eduardo, filed a Complaint 1 for damages against
Doroteo Ocheda and CECCI before the then Court of First instance (now Regional Trial Court) of
Pampanga. The case was docketed as Civil Case No. 6263 and was assigned to Branch 42 thereof.
The complaint alleges the foregoing facts and, in addition, specifically states that while Eduardo was
employed by the petitioner in 1979 and received a daily wage of P35.00, the petitioner did not place
him within "any SSS, Medicare and Workmen's Compensation coverage." It is further averred that
the elevator boy was inexperienced for the work assigned to him. Then they asked for judgment
ordering the defendants, jointly and severally, to pay P10,000.00 as burial expenses, P30,000.00 as
moral damages, attorney's fees and compensatory damages as may be proved at the trial and costs.

Petitioner filed an Answer with a Counterclaim against the plaintiff, and a Cross-Claim against
CECCI. 2 He alleges therein that Eduardo was employed by him only a week before the accident and
purely on a casual basis for the particular painting job. As affirmative defense, he avers that
Eduardo's death was due to the negligence and carelessness of the elevator boy, an employee of
CECCI. Thus, the latter is solely liable for the said death and no cause of action exists against him.
Moreover, it is postulated that the trial court has no jurisdiction over the claims involving SSS,
Medicare, Workmen's Compensation and insurance benefits. Such jurisdiction is vested in other
administrative or quasi-judicial bodies; furthermore, he avers that the allegation concerning such
claims (paragraph 8 of the complaint) is not essential to the plaintiffs' cause of action which is the
negligent operation of the elevator. In this counterclaim, petitioner asks for an award of attorney's
fees in the amount of P10,000.00, and the expenses of litigation.

In due course, CECCI likewise filed its Answer with a Third-Party Complaint 3 against FUJITEC
which it alleged to be liable, being the employer of the elevator boy. FUJITEC filed its Answer to the
said Third-Party Complaint 4 denying the allegations made therein and asserting that the operation of
the elevator was turned over the building owner long before the fatal accident.

Pre-trial was conducted on 23 September 1983. The pre-trial order issued by the trial court
embodies the respective positions of the parties. As to herein petitioners, the Pre-trial order
summarized his stand as follows:

2. Defendant Ocheda's Case:

Defendant Doroteo Ocheda denies liability. He claims that the complaint states no
cause of action against him; that the death of the deceased Eduardo Santos resulted
from the operation of the elevator at the construction site; that he had nothing to do
with the operation, or control, or management of the elevator in question, hence, the
death of Eduardo Santos is not attributable to him; that his participation in the
construction of the building was limited solely to painting specific portions thereof;
that he filed a cross-claim against defendant C.E. Construction Corp. because the
said corporation was the general contractor of the building, operator/maintainer of the
elevator, and employer of the elevator boy. 5

During the trial of the case on the merits, petitioner presented two (2) witnesses — Josefino Rivera
and himself. 6

On 24 February 1986, the trial court rendered its decision 7 finding both the petitioner and CECCI
liable for the death of Eduardo. The dispositive portion of the decision reads as follows:

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

as follows:

1. The defendant (sic) Doroteo Ocheda and C.E. Construction Corporation, Inc. are
ordered to pay jointly and severally the plaintiffs the following amounts:

a) Seven Thousand Three Hundred Fifty Pesos (P7,350.00) as burial

expenses;
 b) Thirty Thousand Pesos (P30,000.00) as moral damages;

c) Five Thousand pesos (P5,000.00) as attorney's fees; and

d) Costs of suit.

2. The third-party complaint is hereby dismissed and the third-party plaintiff C.E.
Construction Corporation, Inc. is ordered to pay the third-party defendant Fujitec the
sum of Fifteen Thousand Pesos (P15,000.00) as attorney's fees plus the cost of suit;

3. The cross-claim and counterclaim of defendant Ocheda and the counterclaim of

defendant C.E. Construction are hereby dismissed.

SO ORDERED. 8

This determination of liability is based on the trial court's findings that:

It has been sufficiently established that it was defendant Ocheda who caused the
accident to happen. It was defendant Ocheda who ordered the late Eduardo Santos
and Hernani Gozun to use the top of the elevator as stepping board while painting
the wall of the elevator shaft. And defendant Ocheda failed to exercise the diligence
of a good father of a family in the supervision of his employees.

It has likewise been shown that C.E. Construction was, at the time of the incident in
question, in full control of the building since the same was not yet accepted by the
owner thereof. C.E. Construction was the general contractor of the building, hence it
was in full management and control of the elevator because the same was already
turned over to and accepted by the building owner from Fujitec. As such C.E.
Construction should have guarded against the unauthorized use of the elevator by
people working in the building. At the time of the incident, the late Eduardo Santos
was an employee of defendant Ocheda, a sub-contractor of C.E. Construction. In
view of all these, C.E. Construction is equally liable with defendant Ocheda pursuant
to Article 2180, in conjunction with Article 2176 of the civil Code. The elevator which
caused the injury and subsequent death of Eduardo Santos was under the
management and control of C.E. Construction. Consequently, had C.E. Construction
used proper care in the management and operation of the elevator, and had it
exercised the diligence of a good father of a family in the supervision of its
employees, then the fatal incident would not have happened. 9

Petitioner and CECCI appealed this adverse decision to the respondent Court of Appeals which
docketed the case as C.A.-G.R. CV No. 09574. In the Brief he submitted, petitioner made the
following assignment of errors:

THE LOWER COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT
HAD JURISDICTION OVER THE COMPLAINT;

II
 THE LOWER COURT ERRED IN HOLDING THAT OCHEDA WAS GUILTY OF
NEGLIGENCE FOR THE DEATH OF SANTOS;

III

THE LOWER COURT ERRED IN APPLYING ARTICLE 2180 OF THE NEW CIVIL
CODE TO OCHEDA;

IV

THE LOWER COURT ERRED IN HOLDING OCHEDA JOINTLY AND SEVERALLY

LIABLE WITH C.E. CONSTRUCTION CORP. TO THE PLAINTIFFS FOR
DAMAGES. 10

On the other hand, CECCI, in its Brief, contended that the trial court gravely erred in finding it
solidarily liable with the herein petitioner for the death of Eduardo, in awarding moral damages, in
dismissing the third-party complaint and in not holding the plaintiffs therein liable for damages,
attorney's fees and costs of the suit. 11

On 1 September 1988, the respondent Court promulgated its decision 12 upholding the findings of the
trial court but reducing the amount of damages; it likewise eliminated the grant of attorney's fees in
favor of FUJITEC. Thus:

WHEREFORE, the decision appealed from is hereby AFFIRMED in all respects,

except as modified herein by reducing the award for actual or compensatory
damages to only P5,880.00; reducing the damage caused by death to only
P24,000.00; and eliminating the award of P15,000.00 attorney's fees to third party
defendant Fujitec. No costs.

SO ORDERED. 13

The reduction in the award of damages was based on the respondent Court's finding of contributory
negligence on the part of Eduardo Santos when he failed to heed the order to tie a rope around his
waist while working.

As to the issue of lack of jurisdiction on the part of the trial court, the respondent Court held:

The case at bar is being prosecuted in behalf of a deceased, not dismissed,

employee for damages arising from the death of the employee based on quasi-delict
founded on an undoubted principle of justice recognized by all legislations that every
injury, loss or damage which a person received in his right (sic), be it by act or by
omission, creates a juridical relation from which is derived the right which the
aggrieved party has to be indemnified and the consequent obligation by the other
party.

In the present case of Floresca vs. Philex Mining Corporation, 136 SCRA 141, the
Supreme Court ruled that recovery under the new Civil Code for damages arising
from negligence is not barred by Article 173 of the New Labor Code. In this case, it
was further held that an ordinary court has jurisdiction over complaints for damages
filed by heirs of mining employees against the mining corporation for the death of the
former allegedly caused by the negligence of their employer. 14
His motion to reconsider the decision having been denied in the resolution of the respondent Court
dated 18 October 1988, 15 petitioner took this recourse under Rule 45 of the Rules of Court. He
reiterates in the instant petition for review the assignment of errors submitted before the respondent
Court.

This Court grave due course to the petition and required the parties to submit their respective
Memoranda 16 after the submission of the Comment to the petition by the private respondent, the
Reply thereto by the petitioner and the Rejoinder to the latter by the private respondents.

We find no merit in the petition.

Regarding the issue of the factual findings upon which the second, third and fourth assigned errors
are based. We find no cogent reason to disturb such findings of both the trial and respondent courts.
Petitioner does not even attempt to show that this case falls under any of the accepted exceptions to
the well-settled and oft-repeated rule that findings of facts of the Court of Appeals are biding upon
this Court. 17

Anent the alleged lack of jurisdiction on the part of the trial court, petitioner admits that the private
respondents cause of action, as expressed in the complaint, is based on a quasi-delict. The former
submits, however, that since the monetary award is sought in connection with the employer-
employee relationship which existed between him and the late Eduardo Santos, only Labor Arbiters,
pursuant to Article 217 of the Labor Code of the Philippines as it was then worded, 18 have original
and exclusive jurisdiction over them. Under the said provision, "all money claims of workers" and "all
other claims arising from employer-employee relations" are exclusively cognizable by Labor Arbiters.
We ruled in Getz Corp. vs. Court of Appeals 19 that pursuant to P.D. No. 1691, such claims include
moral and exemplary damages. Petitioner further contends that Floresca vs. Philex Mining
Corp., 20 which the respondent Court relied upon, is not applicable because the cause of action
involved therein accrued on 28 June 1967, or before the enactment of the Labor Code and P.D. No.
1691; he asserts that the decision therein constituted "judicial legislation".

Petitioner's unusual patience and tenacity on the first assigned error merits him no reward. In the
first place, he did not raise in his answer that defense with respect to the claim for damages arising
from a quasi-delict. His affirmative defense of lack of jurisdiction specifically refers to the allegation in
paragraph 8 of the complaint concerning the SSS, Medicare, Workmen's Compensation and
insurance benefits the award of which, according to him, falls within the competence and jurisdiction
of other administrative or quasi-judicial bodies. In fact, he even considers such allegation to be non-
essential to the complaint's cause of action — the negligent operation of the elevator. This is how he
worded that particular affirmative defense:

SECOND AFFIRMATIVE DEFENSE

12. He need not deny nor (sic) admit the allegations in paragraph 8 regarding the
alleged SSS, Medicare, Workmen's Compensation, and insurance coverage since
this Honorable Court has no jurisdiction over disputes involving cases of these sorts,
jurisdiction thereof being vested in other administrative or quasi-judicial bodies.
Furthermore, the allegations in said paragraph 8 of the plaintiff's cause of action
which is the negligent operation of the elevator resulting in the death of Eduardo (sic)
Santos. 21

Obviously, he did not even have Labor Arbiters in mind for such cases. He knew, or at least ought to
have known, that expressly excepted from the broad jurisdiction of labor Arbiters in Section 217 of
the Labor Code are "claims for employees compensation, social security, medicate and maternity
benefits."

In the second place, during the pre-trial conference, petitioner failed to raise the issue of jurisdiction.
He instead harped on the lack of a cause of action — his first affirmative defense — which was
based on the theory that the proximate cause of Eduardo's death was the negligence of the elevator
boy who was an employee of CECCI; in fact, it was against the latter that he filed a cross-claim.

In the third place, petitioner openly and unqualifiedly involved and submitted to the jurisdiction of the
trial court by setting up a counterclaim, asking for relief in the concept of attorney's fees and
expenses of litigation against the private respondents and filing a cross-claim against CECCI, whom
he alleged to be the employer of the elevator boy.

Finally, he presented evidence to prove that the proximate cause of the accident and resulting death
of Eduardo was the negligence of the elevator boy. He concludes that as employer of the said boy,
CECCI is solely liable to the private respondents for the damages claimed by the latter.

Petitioner was, therefore, effectively estopped from raising the issue of jurisdiction with respect to the
damages arising from a quasi-delict. While it is true that jurisdiction over the subject matter of a case
may be raised at any stage of the proceedings as the same is conferred by law, 22 it is nevertheless
settled that a party may be barred from arising it on the ground of estoppel. 23 The reason for this is
that after voluntarily submitting a cause and encountering an adverse decision on the merits, it would
be improper and too late, to say the least, for the lower to question the jurisdiction or power of the
court. It is not correct for a party who has invoked the jurisdiction of a court in a particular matter to
secure affirmative relief, to afterwards deny that very jurisdiction to escape penalty.

And even granting, for the sake of argument, that the issue of jurisdiction can still be raised in
connection with its specific reference to the damages arising out of a quasi-delict, petitioner's thesis
would still fail. Such damages may not be awarded in accordance with Section 217 of the Labor
Code, as amended, for there is no reasonable causal connection with the employer-employee
relationship. At the time the cause of action accrued, Article 217 of the Labor Code required that in
order that the Labor Arbiter may adjudicate claims not included in the other paragraphs, the same
must arise out of employer-employee relations.

In San Miguel Corporation vs. National Labor Relations Commission, 24 this Court ruled, with respect
to Article 217, as amended by B.P. Blg. 227:

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. In the first place, paragraph 3 should be read not in
isolation from but rather within the context formed by paragraph 1 (relating to unfair
labor practices), paragraph 2 (relating to claims concerning terms and conditions of
employment), paragraph 4 (claims relating to household services, a particular
species of employer-employee relations), and paragraph 5 (relating to certain
activities prohibited to employees or to employers). It is evident that there is a
unifying element which runs through paragraphs 1 to 5 and that is, that they all refer
to cases or disputes arising out of or in connection with an employer-employee
relationship. This is, in other words, a situation where the rule of noscitur a
sociis may be usefully invoked in clarifying the scope of paragraph 3, and any other
paragraph of Article 217 of the Labor Code, as amended. We reach the above
conclusion from an examination of the terms themselves of Article 217, as last
 amended by B.P. Blg. 227, and even though earlier versions of Article 217 of the
Labor Code expressly brought within the jurisdiction of the Labor Arbiters and the
NLRC "cases arising from employer-employee relations," which clause was not
expressly carried over, in printer's ink, in Article 217 as it exists today. For it cannot
be presumed that money claims of workers which do not arise out of or in connection
with their employer-employee relationships, and which would therefore fall within the
general jurisdiction of the 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.

Said article presently reads as follows: 25

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 of 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 strike 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.

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

(c) Cases involving from the interpretation or implementation of collective bargaining

agreement and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same to
 the grievance machinery and voluntary arbitration as may be provided in said
agreements.

In the instant case, the source of the obligation upon which the private respondents' cause of action
is based is a quasi-delict or tort which has no reasonable connection with any of the claims provided
for in the aforesaid Article 217 of the Labor Code. It would have been entirely different if the claim for
damages arose out of, for instance, the illegal dismissal of Eduardo, in which case the Labor Arbiter
would have exclusive jurisdiction thereon. 26

It would have also been different if the petitioner had grounded his claim of lack of jurisdiction on the
basis of the Workmen's Compensation Law. Unfortunately, he adroitly avoided this issue from the
very beginning not only because of his claim that the allegation on this matter is irrelevant to the
private respondents' theory but, and more importantly, he did not, as revealed by the latter, register
Eduardo with the Social Security System pursuant to the Amended Rules on Employees
Compensation in relation to Chapter II, Title II, Book IV of the Labor Code of the Philippines (P.D.
No. 442), as amended. To avoid possible liability thereunder, and more particularly the criminal and
civil sanctions under Section 4, Rule II of said Rules which reads:

Sec. 4. Penalty. — Any violation of this Rule shall be penalized as follows:

(1) In case of failure or refusal to register employees, the employer or responsible

official who committed the violation shall be punished with a fine of not less than
P1,000 nor more than P10,000 and/or imprisonment for the duration of the violation
or noncompliance or until such time that rectification of the violation has been made,
at the discretion of the court.

(2) In case a compensable contingency occurs after 30 days from employment and
before the System receives any report for coverage about the employee or EC
contribution on his behalf, his employer shall be liable to the System for the lump
sum equivalent to the benefits to which he or his dependents may be entitled.

petitioner unabashedly asserted in his Answer that the late Eduardo Santos was his
employee for barely a week and that he was hired on a casual basis only for the particular
painting job on the M.J. Building. Having done so, he cannot now be heard to make a
strained and tenuous analysis of Floresca vs. Philex mining Corporation. 27

WHEREFORE, for lack of merit, the instant petition is DENIED with costs against the petitioner.

This decision is immediately executory.

SO ORDERED.

Gutierrez, Jr., Bidin, Romero and Melo, JJ., concur.