KOREA TECHNOLOGIES CO. LTD VS LERMA (GR NO.

143581 JANUARY 7, 2008)

Korea Technologies Co. Ltd vs Lerma
GR No. 143581 January 7, 2008
Facts: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean
corporation which is engaged in the supply and installation of Liquefied
Petroleum Gas (LPG) Cylinder manufacturing plants, while private
respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic
corporation. On March 5, 1997, PGSMC and KOGIES executed a Contract
whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in
Carmona, Cavite. The contract was executed in the Philippines. On April 7,
1997, the parties executed, in Korea, an Amendment for Contract No. KLP-
970301 dated March 5, 1997 amending the terms of payment. The contract
and its amendment stipulated that KOGIES will ship the machinery and
facilities necessary for manufacturing LPG cylinders for which PGSMC would
pay USD 1,224,000. KOGIES would install and initiate the operation of the
plant for which PGSMC bound itself to pay USD 306,000 upon the plants
production of the 11-kg. LPG cylinder samples. Thus, the total contract price
amounted to USD 1,530,000. On October 14, 1997, PGSMC entered into a
Contract of Lease with Worth Properties, Inc. (Worth) for use of Worths
5,079-square meter property with a 4,032-square meter warehouse building
to house the LPG manufacturing plant. The monthly rental was PhP 322,560
commencing on January 1, 1998 with a 10% annual increment clause.
Subsequently, the machineries, equipment, and facilities for the
manufacture of LPG cylinders were shipped, delivered, and installed in the
Carmona plant. PGSMC paid KOGIES USD 1,224,000. However, gleaned from
the Certificate executed by the parties on January 22, 1998, after the
installation of the plant, the initial operation could not be conducted as
PGSMC encountered financial difficulties affecting the supply of materials,
thus forcing the parties to agree that KOGIES would be deemed to have
completely complied with the terms and conditions of the March 5, 1997
contract. For the remaining balance of USD306,000 for the installation and
initial operation of the plant, PGSMC issued two postdated checks: (1) BPI
Check No. 0316412 dated January 30, 1998 for PhP 4,500,000; and (2) BPI
Check No. 0316413 dated March 30, 1998 for PhP 4,500,000. When KOGIES
deposited the checks, these were dishonored for the reason PAYMENT
STOPPED. Thus, on May 8, 1998, KOGIES sent a demand letter to PGSMC
threatening criminal action for violation of Batas Pambansa Blg. 22 in case of
nonpayment. On the same date, the wife of PGSMCs President faxed a letter
dated May 7, 1998 to KOGIES President who was then staying at a Makati
City hotel. She complained that not only did KOGIES deliver a different brand
of hydraulic press from that agreed upon but it had not delivered several
equipment parts already paid for.
Issue: Whether or not the arbitration clause in the contract of the parties
should govern.
Held: Yes. Established in this jurisdiction is the rule that the law of the place
where the contract is made governs. Lex loci contractus. The contract in this
case was perfected here in the Philippines. Therefore, our laws ought to
govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of
mutually agreed arbitral clause or the finality and binding effect of an
arbitral award. Art. 2044 provides, Any stipulation that the arbitrators award
or decision shall be final, is valid, without prejudice to Articles 2038, 2039
and 2040.
The arbitration clause was mutually and voluntarily agreed upon by the
parties. It has not been shown to be contrary to any law, or against morals,
good customs, public order, or public policy. There has been no showing that
the parties have not dealt with each other on equal footing. We find no
reason why the arbitration clause should not be respected and complied
with by both parties. In Gonzales v. Climax Mining Ltd., we held that
submission to arbitration is a contract and that a clause in a contract
providing that all matters in dispute between the parties shall be referred to
arbitration is a contract. Again in Del Monte Corporation-USA v. Court of
Appeals, we likewise ruled that [t]he provision to submit to arbitration any
dispute arising therefrom and the relationship of the parties is part of that
contract and is itself a contract.
Having said that the instant arbitration clause is not against public policy,
we come to the question on what governs an arbitration clause specifying
that in case of any dispute arising from the contract, an arbitral panel will be
constituted in a foreign country and the arbitration rules of the foreign
country would govern and its award shall be final and binding.
Thus, it can be gleaned that the concept of a final and binding arbitral award
is similar to judgments or awards given by some of our quasi-judicial bodies,
like the National Labor Relations Commission and Mines Adjudication Board,
whose final judgments are stipulated to be final and binding, but not
immediately executory in the sense that they may still be judicially
reviewed, upon the instance of any party. Therefore, the final foreign arbitral
awards are similarly situated in that they need first to be confirmed by the
RTC

MCC INDUSTRIAL SALES CORPORATION, petitioner, vs.

SSANGYONG CORPORATION, respondents.

G.R. No. 170633; October 17, 2007

Facts:

Petitioner is engaged in the business of importing and wholesaling stainless steel products. One of its suppliers is the
responded, an international trading company with head office in Seoul, South Korea and regional headquarters in
Makati City, Philippines. The two corporations conducted business through telephone calls and facsimile or telecopy
transmissions. Respondent would send the pro forma invoices containing the details of the steel product order to
petitioner; if the latter conforms thereto, its representative affixes his signature on the faxed copy and sends it back to
the respondent, again by fax.

Respondent filed a civil action for damages due to breach of contract against petitioner before the Regional Trial Court
of Makati City. In its complaint, respondent alleged that defendants breached their contract when they refused to open
the letter of credit in the amount of US$170,000.00 for the remaining 100MT of steel under Pro Forma Invoice Nos. ST2-
POSTS0401-1 and ST2-POSTS0401-2.
After respondent rested its case, petitioner filed a Demurrer to Evidence alleging that respondent failed to present the
original copies of the pro forma invoices on which the civil action was based. Petitioner contends that the photocopies of
the pro forma invoices presented by respondent Ssangyong to prove the perfection of their supposed contract of sale
are inadmissible in evidence and do not fall within the ambit of R.A. No. 8792, because the law merely admits as the
best evidence the original fax transmittal. On the other hand, respondent posits that, from a reading of the law and the
Rules on Electronic Evidence, the original facsimile transmittal of the pro forma invoice is admissible in evidence since it
is an electronic document and, therefore, the best evidence under the law and the Rules. Respondent further claims that
the photocopies of these fax transmittals (specifically ST2-POSTS0401-1 and ST2-POSTS0401-2) are admissible under
the Rules on Evidence because the respondent sufficiently explained the non-production of the original fax transmittals.

Issue:

Whether the print-out and/or photocopies of facsimile transmissions are electronic evidence and admissible as such?

Held:

Electronic document shall be regarded as the equivalent of an original document under the Best Evidence Rule, as long
as it is a printout or output readable by sight or other means, showing to reflect the data accurately. Thus, to be
admissible in evidence as an electronic data message or to be considered as the functional equivalent of an original
document under the Best Evidence Rule, the writing must foremost be an electronic data message or an electronic
document.

The Implementing Rules and Regulations (IRR) of R.A. No. 8792 defines the Electronic Data Message refers to
information generated, sent, received or stored by electronic, optical or similar means, but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy.

The phrase but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy in the
IRRs definition of electronic data message is copied from the Model Law on Electronic Commerce adopted by the
United Nations Commission on International Trade Law (UNCITRAL), from which majority of the provisions of R.A. No.
8792 were taken. While Congress deleted this phrase in the Electronic Commerce Act of 2000, the drafters of the IRR
reinstated it. The deletion by Congress of the said phrase is significant and pivotal.

Moreover, when Congress formulated the term electronic data message, it intended the same meaning as the term
electronic record in the Canada law. This construction of the term electronic data message, which excludes telexes
or faxes, except computer-generated faxes, is in harmony with the Electronic Commerce Laws focus on paperless
communications and the functional equivalent approach that it espouses. Facsimile transmissions are not, in this
sense, paperless, but verily are paper-based.

[I]n an ordinary facsimile transmission, there exists an original paper-based information or data that is scanned, sent
through a phone line, and re-printed at the receiving end. [I]n a virtual or paperless environment, technically, there is
no original copy to speak of, as all direct printouts of the virtual reality are the same, in all respects, and are considered
as originals. Ineluctably, the laws definition of electronic data message, which, as aforesaid, is interchangeable with
electronic document, could not have included facsimile transmissions, which have an original paper-based copy as
sent and a paper-based facsimile copy as received. These two copies are distinct from each other, and have different
legal effects. While Congress anticipated future developments in communications and computer technology when it
drafted the law, it excluded the early forms of technology, like telegraph, telex and telecopy (except computer-generated
faxes, which is a newer development as compared to the ordinary fax machine to fax machine transmission), when it
defined the term electronic data message.

[T]he terms electronic data message and electronic document, as defined under the Electronic Commerce Act of
2000, do not include a facsimile transmission. Accordingly, a facsimile transmission cannot be considered as electronic
evidence. It is not the functional equivalent of an original under the Best Evidence Rule and is not admissible as
electronic evidence.

4. Transfield Philippines vs Luzon Hydro Electric Corp. GR No 146717, Nov 22, 2004

MARCH 15, 2014LEAVE A COMMENT

The independent nature of the letter of credit may be: (a) independence in toto where the
credit is independent from the justification aspect and is a separate obligation from the
underlying agreement like for instance a typical standby; or (b) independence may be only as
to the justification aspect like in a commercial letter of credit or repayment standby, which is
identical with the same obligations under the underlying agreement. In both cases the
payment may be enjoined if in the light of the purpose of the credit the payment of the credit
would constitute fraudulent abuse of the credit.
Facts: Transfield Philippines (Transfield) entered into a turn-key contract with Luzon Hydro
Corp. (LHC).Under the contract, Transfield were to construct a hydro-electric plants in
Benguet and Ilocos. Transfield was given the sole responsibility for the design, construction,
commissioning, testing and completion of the Project. The contract provides for a period for
which the project is to be completed and also allows for the extension of the period provided
that the extension is based on justifiable grounds such as fortuitous event. In order to
guarantee performance by Transfield, two stand-by letters of credit were required to be
opened. During the construction of the plant, Transfield requested for extension of time citing
typhoon and various disputes delaying the construction. LHC did not give due course to the
extension of the period prayed for but referred the matter to arbitration committee. Because of
the delay in the construction of the plant, LHC called on the stand-by letters of credit because
of default. However, the demand was objected by Transfield on the ground that there is still
pending arbitration on their request for extension of time.

Issue: Whether or not LHC can collect from the letters of credit despite the pending arbitration
case

Held: Transfields argument that any dispute must first be resolved by the parties, whether
through negotiations or arbitration, before the beneficiary is entitled to call on the letter of
credit in essence would convert the letter of credit into a mere guarantee.

The independent nature of the letter of credit may be: (a) independence in toto where the
credit is independent from the justification aspect and is a separate obligation from the
underlying agreement like for instance a typical standby; or (b) independence may be only as
to the justification aspect like in a commercial letter of credit or repayment standby, which is
identical with the same obligations under the underlying agreement. In both cases the
payment may be enjoined if in the light of the purpose of the credit the payment of the credit
would constitute fraudulent abuse of the credit.

Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in
that the settlement of a dispute between the parties is not a pre-requisite for the release of
funds under a letter of credit. In other words, the argument is incompatible with the very
nature of the letter of credit. If a letter of credit is drawable only after settlement of the dispute
on the contract entered into by the applicant and the beneficiary, there would be no practical
and beneficial use for letters of credit in commercial transactions.
The engagement of the issuing bank is to pay the seller or beneficiary of the credit once the
draft and the required documents are presented to it. The so-called independence principle
assures the seller or the beneficiary of prompt payment independent of any breach of the main
contract and precludes the issuing bank from determining whether the main contract is
actually accomplished or not. Under this principle, banks assume no liability or responsibility
for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents,
or for the general and/or particular conditions stipulated in the documents or superimposed
thereon, nor do they assume any liability or responsibility for the description, quantity, weight,
quality, condition, packing, delivery, value or existence of the goods represented by any
documents, or for the good faith or acts and/or omissions, solvency, performance or standing
of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever.

5. HI-PRECISION STEEL CENTER INC. v LIM KIM STEEL BUILDERS INC.

G.R No. 110434 December 13, 1993

FACTS:

Hi-Precision (Petitioner) entered into a contract with Steel Builders (Private Respondent) under
which the latter as Contractor was to complete a 21 Million Pesos construction project owned by Hi-
Precision with a period of 153 days. The said completion of the project was then moved, however, when the
date came, only 75.8674% of the project was actually completed. Petitioner attributed this non-completion
to Steel Builders which allegedly incurred delays both during the original contract and period of extension.
On the other hand, the Steel Builders claimed that the said non-completion of the project was either
excusable or was due to Hi-Precisions own fault and issuance of change orders. The said project was
taken over and completed by Hi-Precision.

Steel Builders requested for an adjudication with CIAC (Public Respondent) and sought payment of
its unpaid billings, alleged unearned profits and other receivables. Hi-Precision on the other hand claimed
for damages and reimbursement of alleged additional costs. The CIAC formed an Arbitral Tribunal with 3
members and such tribunal rendered a decision in favor of Steel Builders Inc ordering Hi-Precision to pay
Steel Builders their claim. Hi-Precision then asks the court to set aside the award on the basis of
misapprehension of facts.

ISSUE:

Whether or not it was correct should set aside the ruling of the Arbitral Tribunal.

RULING:

No. The court said that it will not assist one or the other or even both parties in an effort to subvert
or defeat the objective for their private purposes and also, that it will not review the factual findings of an
arbitral tribunal upon the allegation that such body misapprehended facts. The court will not, therefore,
permit the parties to relitigate before it the issues of facts previously presented and argued before the
Arbitral Tribunal, save only where a vey clear showing is made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so hurtful to one party as to constitute a grave abuse of discretion
resulting on lack or loss of jurisdiction.

6. BARAMEDA VS. ATIENZA

DECISION
PARDO, J.:

The key issue is whether or not petitioners are the rightful directors of Camarines Norte Electric Cooperative
(CANORECO) as against respondents, who were elected in a general assembly of members called by a presidential ad
hoc committee.
CANORECO is an electric cooperative organized under the provisions of P. D. No. 269, otherwise known as the
National Electrification Administration Decree, as amended by P. D. No. 1645. On July 10, 1996, the Cooperative
Development Authority (CDA) certified that CANORECO is registered as a full-fledged cooperative under R. A. No.
6938.
On March 1, 1988, the National Electrification Administration (NEA) and CANORECO entered into a Contract of
Loan[1] and First Mortgage[2] of CANORECO properties for the improvement of the cooperatives electrification program.
One provision in the loan agreement is embodied in Article VI, Section 2, which provides:

Section 2. In the event of default, the NEA may, in addition to the rights, privileges, powers and remedies granted to it
under Presidential Decree No. 269 and other pertinent laws, exercise any or all of the following remedies.
a. xxx
b. xxx
c. Assign or appoint a Project Supervisor and/or General Manager
d. Take over the construction, operation, management and control of the SYSTEM
e. Take any other lawful remedial measure

On March 10, 1990, Congress enacted into law Republic Act No. 6938 (the Cooperative Code of the Philippines)
and Republic Act No. 6939 (creating the Cooperative Development Authority [CDA]).The latter act vested the power to
register cooperatives solely on CDA.
One of the signatories to the loan contract was petitioner Reynaldo V. Abundo, the general manager of
CANORECO at that time.
During Abundos incumbency, he failed to pay the loan obligations as they fell due. Thus, as of March 31, 1995,
CANORECOs outstanding loan with NEA amounted to seventy four (74) million pesos. [3]
In 1995, NEA enforced the provisions of the mortgage contract by designating an acting general manager of
CANORECO to protect state funds invested therein.
On May 28, 1995, during the annual general membership assembly of CANORECO, the members elected a new
set of members of the board of directors. [4] Thereafter, NEA appointed a new general manager, Felix Rolando G. Zaldua,
and declared former manager Reynaldo V. Abundo as pesona non grata.
Shortly, the group of Reynaldo V. Abundo contested the authority of NEA to supervise and control CANORECO,
filing with CDA several cases, including CDA-CO Case No. 95-910.
On February 15, 1996, CDA declared the board meeting of May 28, 1995, void ab initio because there was
no quorum considering that there were only three (3) incumbent board members who were present. Thus, the
resolutions issued during the meeting were all declared null and void. The CDA ruled:

WHEREFORE, premises considered, the Board Meeting of May 28, 1995, participated by respondents, and all the
Resolutions issued on such occasions, are hereby declared NULL AND VOID AB INITIO.
Likewise, the election of respondents Norberto Ochoa, Antonio Obias, Felicito Ilan, and Luis Pascua, as President, Vice-
President, Secretary, and Treasurer, respectively, of CANORECO is hereby declared NULL AND VOID AB INITIO.
Hence, respondents Norberto Ochoa, Antonio Obias, Felicito Ilan, and Luis Pascua are hereby ordered to refrain from
representing themselves as President, Vice-President, Secretary, and Treasurer, respectively, of CANORECO. The
same respondents are further ordered to refrain from acting as authorized signatories to the bank accounts of
CANORECO.
Further respondent Felicito Ilan is hereby ordered to refrain from exercising the duties and functions of a member of the
Board of CANORECO until the election protest is resolved in a proper forum. In the meantime, the incumbency of
petitioner Merardo Enero, Jr. as Director of CANORECO Board is hereby recognized.
A status quo is hereby ordered as regards the position of General Manager, being held by Mr. Reynaldo Abundo,
considering that the recall of his appointment was done under a void Resolution, and that the designation of Mr. Oscar
Acodera as Officer-In-Charge, under the same void Resolution, has no force and effect.
Finally, respondents Antonio Obias, Norberto Ochoa, Luisito Pascua, and petitioners Ruben Barrameda, Elvis Espiritu,
Marcelito Abas and Merardo Enero, Jr. are hereby ordered to work together as Board of Directors, for the common good
of CANORECO and its consumer-members, and to maintain an atmosphere of sincere cooperation among the officers
and members of CANORECO.[5]

On February 27, 1996, petitioner Abundo resigned as general manager of CANORECO. [6]
In turn, NEA recognized the appointment of acting general manager Felix Rolando G. Zaldua. On September 23,
1996, Juanito M. Irabon replaced Rolando G. Zaldua. [7]
On September 26, 1996, CDA issued a writ of execution and order to vacate thereby enabling petitioners to resume
control of CANORECO.
On December 3, 1996, President Fidel V. Ramos issued Memorandum Order No. 409, [8] in response to letters from
the Governor of Camarines Norte and the Office of the Sangguniang Panlalawigan regarding the conflict between the
NEA group and the CDA group.[9]
The order constituted an ad hoc committee to temporarily take over and manage the affairs of CANORECO. NEA
and CDA are both under the supervision and control of the Office of the President.

The ad hoc committee was composed of:

Rex Tantiongco Chairman Presidential Assistant on Energy Affairs
(Member)
Honesto de Jesus Cooperative Development Authority Nominee
(Member)
Andres Ibasco Cooperative Development Authority Nominee
(Member)
Teodulo M. Mea National Electrification Administration Nominee
(Member)
Vicente Lukban National Electrification Administration Nominee
(Member)

On February 16, 1997, the ad hoc committee presided over by Chairman Rex Tantiongco called for a special
general membership meeting of CANORECO. The purpose of the meeting was to determine whether there was a need
to change the composition of CANORECOs board of directors. An overwhelming majority voted in favor of replacing the
board of directors of CANORECO.[10]
Accordingly, CANORECO conducted a general election for directors.
On March 23, 1997, CANORECO elected as new board members the following:

1. Milagros Estrellado
2. Jesus Thomas Fernandez
3. Bernardo Diezmo
4. Raul Carranceja
5. Romeo Atienza
6. Edgar Dasco
7. Artemio Indias[11]

On April 19, 1997, the board passed Resolution No. 01, series of 1997, declaring the position of general manager
vacant,[12] and Resolution No. 02, series of 1997, appointing Mary Ann C. Asor general manager. [13]
Hence, this petition for quo warranto.[14]
On February 27, 1998, we declared invalid Memorandum Order No. 409 of the President. [15]
We said:
Having registered itself with the CDA pursuant to Section 128 of R.A. No. 6938 and Section 17 of R.A. No. 6939,
CANORECO was brought under the coverage of said laws. Article 38 of R.A. No. 6938 vests upon the board of directors
the conduct and management of the affairs of cooperatives, and Article 39 provides for the powers of the board of
directors. These sections read:
Article 38. Composition of the Board of Directors. -- The conduct and management of the affairs of a cooperative shall
be vested in a board of directors which shall be composed of not less than five (5) nor more than fifteen (15) members
elected by the general assembly for a term fixed in the by-laws but not exceeding a term of two (2) years and shall hold
office until their successors are duly elected and qualified, or until duly removed. However, no director shall serve for
more than three (3) consecutive terms.
Article 39. Powers of the Board of Directors. -- The board of directors shall direct and supervise the business, manage
the property of the cooperative and may, by resolution, exercise all such powers of the cooperative as are not reserved
for the general assembly under this Code and the by-laws.
As to the officers of cooperatives, Article 43 of the Code provides:
ART. 43. Officers of the Cooperatives. The board of directors shall elect from among themselves only the chairman and
vice-chairman, and elect or appoint other officers of the cooperative from outside of the board in accordance with their
by-laws. All officers shall serve during good behavior and shall not be removed except for cause and after due
hearing. Loss of confidence shall not be a valid ground for removal unless evidenced by acts or omissions causing loss
of confidence in the honesty and integrity of such officer. No two (2) or more persons with relationship up to the third
degree of consanguinity or affinity shall serve as elective or appointive officers in the same board.
Under Article 34 of the Code, the general assembly of cooperatives has the exclusive power, which cannot be
delegated, to elect or appoint the members of the board of directors and to remove them for cause. Article 51 thereof
provides for removal of directors and officers as follows:

ART. 51. Removal. -- An elective officer, director, or committee member may be removed by a vote of two-thirds (2/3) of
the voting members present and constituting a quorum, in a regular or special general assembly meeting called for the
purpose. The person involved shall be given an opportunity to be heard at said assembly.

Memorandum Order No. 409 clearly removed from the Board of Directors of CANORECO the power to manage the
affairs of CANORECO and transferred such power to the Ad Hoc Committee, albeit temporarily. Considering that (1) the
take-over will be until such time that a general membership meeting can be called to decide the serious issues affecting
the said cooperative and normalcy in operations is restored, and (2) the date such meeting shall be called and the
determination of whether there is a need to change the composition of the membership of CANORECOs Board of
Directors are exclusively left to the Ad Hoc Committee, it necessarily follows that the incumbent directors were, for all
intents and purposes, suspended at the least, and removed, at the most, from their office. The said Memorandum did
no less to the lawfully appointed General Manager by directing that upon the settlement of the issue concerning the
composition of the board of directors the Committee shall decide on the appointment of a general manager. In the
meantime, it authorized the Committee to designate upon the recommendation of the Chairman an Acting Manager,
with the lawfully appointed Manager considered on leave, but who is, however, entitled to the payment of his salaries.
Nothing in law supported the take-over of the management of the affairs of CANORECO, and the suspension, if not
removal, of the Board of Directors and the officers thereof.
It must be pointed out that the controversy which resulted in the issuance of the Memorandum Order stemmed from a
struggle between two groups vying for control of the management of CANORECO. One faction was led by the group of
Norberto Ochoa, while the other was petitioners group whose members were, at that time, the incumbent directors and
officers. It was the action of Ochoa and his cohorts in holding a special meeting on 28 May 1995 and then declaring
vacant the positions of cooperative officers and thereafter electing themselves to the positions of president, vice-
president, treasurer, and secretary of CANORECO which compelled the petitioners to file a petition with the CDA. The
CDA thereafter came out with a decision favorable to the petitioners.
Obviously there was a clear case of intra-cooperative dispute. Article 121 of the Cooperative Code is explicit on how the
dispute should be resolved; thus:
ART. 121. Settlement of Disputes. -- Disputes among members, officers, directors, and committee members, and intra-
cooperative disputes shall, as far as practicable, be settled amicably in accordance with the conciliation or mediation
mechanisms embodied in the by-laws of the cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent jurisdiction.
Complementing this Article is Section 8 of R. A. No. 6939, which provides:

SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties, the [CDA] shall mediate and
conciliate disputes with the cooperative or between cooperatives: Provided, That if no mediation or conciliation
succeeds within three (3) months from request thereof, a certificate of non-resolution shall be issued by the commission
prior to the filing of appropriate action before the proper courts.

Even granting for the sake of argument that the party aggrieved by a decision of the CDA could pursue an administrative
appeal to the Office of the President on the theory that the CDA is an agency under its direct supervision and control,
still the Office of the President could not in this case, motu proprio or upon request of a party, supplant or overturn the
decision of the CDA. The record does not disclose that the group of Norberto Ochoa appealed from the decision of the
CDA in CDA-CO Case No. 95-010 to the Office of the President as the head of the Executive Department exercising
supervision and control over said agency. In fact the CDA had already issued a Cease and Desist Order dated 14
August 1996 ordering Antonio Obias, Norberto Ochoa, Luis Pascua, Felicito Ilan and their followers to cease and desist
from acting as the Board of Directors and Officers of Camarines Norte Electric Cooperative (CANORECO) and to refrain
from implementing their Resolution calling for the District V Election on August 17 and 24, 1996. Consequently, the said
decision of the CDA had long become final and executory when Memorandum Order No. 409 was issued on 3
December 1996. That Memorandum cannot then be considered as one reversing the decision of the CDA which had
attained finality.
Under Section 15, Chapter III of Book VII of the Administrative Code of 1987 (Executive Order No. 292), decisions of
administrative agencies become final and executory fifteen days after receipt of a copy thereof by the party adversely
affected unless within that period an administrative appeal or judicial review, if proper, has been perfected. One motion
for reconsideration is allowed. A final resolution or decision of an administrative agency also binds the Office of the
President even if such agency is under the administrative supervision and control of the latter.
xxx xxx xxx
Neither can police power be invoked to clothe with validity the assailed Memorandum Order No. 409. Police power is
the power inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health,
morals, and general welfare of society. It is lodged primarily in the legislature. By virtue of a valid delegation of
legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies
on all municipal levels, including the barangay. Delegation of legislative powers to the President is permitted in Sections
23(2) and 28(2) of Article VI of the Constitution. The pertinent laws on cooperatives, namely, R. A. No. 6938, R. A. No.
6939, and P. D. No. 269 as amended by P. D. No. 1645 do not provide for the President or any other administrative body
to take over the internal management of a cooperative. Article 98 of R. A. No. 6938 instead provides:

ART. 98. Regulation of Public Service Cooperatives. -- (1) The internal affairs of public service cooperatives such as the
rights and privileges of members, the rules and procedures for meetings of the general assembly, board of directors and
committees; for the election and qualification of officers, directors, and committee members; allocation and distribution
of surpluses, and all other matters relating to their internal affairs shall be governed by this Code.

We do not then hesitate to rule that Memorandum Order No. 409 has no constitutional and statutory basis. It violates
the basic underlying principle enshrined in Article 4(2) of R.A. No. 6938 that cooperatives are democratic organizations
and that their affairs shall be administered by persons elected or appointed in a manner agreed upon by the
members. Likewise, it runs counter to the policy set forth in Section 1 of R.A. No. 6939 that the State shall, except as
provided in said Act, maintain a policy of non-interference in the management and operation of cooperatives. (Italics
ours)
 In our resolution dated November 16, 1998, we said that the decision in G. R. No. 127249 declared invalid
Memorandum Order No. 409, but did not delve on the issue of who are the rightful directors of the cooperative. [16]
Until the merits of the quo warranto proceedings have been decided, petitioners cannot unilaterally assume their
former positions in the cooperative.[17]
On November 16, 1998, we issued a temporary restraining order [18] enjoining the Cooperative Development
Authority, its agents and representatives from executing the alias writ of execution dated July 27, 1998, issued in CDA-
CO Case No. 95-010.
As said at the outset, the question is whether petitioners are entitled to their positions in the cooperative.

Memorandum Order No. 409

M. O. No. 409 caused the interruption of petitioners functions.

In Akbayan v. Philippine National Bank, citing a US Supreme Court decision, we said:

"The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may
have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial
declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with
respect to particular relations, individual and corporate, and particular conduct private and official." [19]

This has been quoted with approval in a resolution in Araneta v. Hill, 93 Phil. 1002 (1953), in Manila Motor Co.,
Inc. v. Flores, 99 Phil. 738 (1956), and in Fernandez v. Cuerva and Co., 129 Phil. 332 (1967).[20]
In the case of Municipality of Malabang v. Benito, [21] we said:

"An unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no
office; it is, in legal contemplation, as inoperative as though it had never been passed." [22]

In that case, Executive Order No. 386, creating the Municipality of Balabagan was declared unconstitutional.
In the same wise, M. O. No. 409 "created no office." The existence of M. O. No. 409 is "an operative fact which
cannot justly be ignored."[23] Therefore, M. O. No. 409 conferred no rights. The board of directors, elected through the ad
hoc committees exercise of its functions while the law was in force, did not exist, as if no election was held.
In Malabag, the court declared Executive Order 386 void, and permanently restrained the respondents from
performing the duties and functions of their respective offices.
In this case, however, the situation was complicated by certain events. While we declared M. O. No. 409
unconstitutional, the election of respondents before such event is presumed valid until nullified.
The law expressly confers on the board of directors the power to manage the affairs of the cooperative, according
to the Cooperative Code.
However, CANORECO entered into a contract of loan with NEA.

The National Electrification Administration

As far as NEA is concerned, Article VI, Section 2 of the loan agreement was clear that in the event of default in the
payment of the loan, NEA may assign or appoint a project supervisor or a general manager. This provision finds support
in Section 10, Chapter II, P. D. No. 269, as amended by P. D. No. 1645.
A contract is the law between the parties. [24] Obligations arising from contracts have the force of law between the
contracting parties and shall be complied with in good faith. [25]
At the time NEA took over the management of CANORECO, it exercised its rights under the law and the loan
agreement entered into by CANORECO and NEA.

The Cooperative Development Authority

 However, as we said,[26] having registered itself with the CDA, pursuant to Section 128 of R. A. No. 6938 and
Section 17 of R. A. No. 6939, CANORECO was under the coverage of said laws. Article 38 of R. A. No. 6938 vests upon
the board of directors the conduct and management of the affairs of cooperatives, and Article 39 prescribes the powers
of the board of directors.

Article 38. Composition of the Board of Directors. -- The conduct and management of the affairs of a cooperative shall
be vested in a board of directors which shall be composed of not less than five (5) nor more than fifteen (15) members
elected by the general assembly for a term fixed in the by-laws but not exceeding a term of two (2) years and shall hold
office until their successors are duly elected and qualified, or until duly removed. However, no director shall serve for
more than three (3) consecutive terms.
Article 39. Powers of the Board of Directors. -- The board of directors shall direct and supervise the business, manage
the property of the cooperative and may, by resolution, exercise all such powers of the cooperative as are not reserved
for the general assembly under this Code and the by-laws.

As to the officers of cooperatives, Article 43 of the Code provides:

ART. 43. Officers of the Cooperatives. The board of directors shall elect from among themselves only the chairman and
vice-chairman, and elect or appoint other officers of the cooperative from outside of the board in accordance with their
by-laws. All officers shall serve during good behavior and shall not be removed except for cause and after due
hearing. Loss of confidence shall not be a valid ground for removal unless evidenced by acts or omissions causing loss
of confidence in the honesty and integrity of such officer. No two (2) or more persons with relationship up to the third
degree of consanguinity or affinity shall serve as elective or appointive officers in the same board.

Under Article 34 of the Code, the general assembly of cooperatives has the exclusive power, which cannot be
delegated, to elect or appoint the members of the board of directors and to remove them for cause. Article 51 provides
for removal of directors and officers as follows:

ART. 51. Removal. -- An elective officer, director, or committee member may be removed by a vote of two-thirds (2/3) of
the voting members present and constituting a quorum, in a regular or special general assembly meeting called for the
purpose. The person involved shall be given an opportunity to be heard at said assembly.

Nevertheless, this is without prejudice to the holding of a general assembly for the purpose of conducting another
election of directors since the term of office of the directors expired sometime in 1996.In the meantime, respondents
shall hold office until their successors shall have been elected and qualified.
WHEREFORE, the petition is hereby DENIED. Respondents are allowed to continue occupying their positions
pending the holding of a general assembly for the purpose of electing directors.
No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman),

7. MARINO VS. GIL GAMILLA
DECISION
TINGA, J.:
This is a petition for review under Rule 45 assailing the Decision1 of the Court of Appeals in CA-G.R. SP No.
43701,2 setting aside the order and the writ of preliminary mandatory injunction issued by the lower court.
The facts of the case are as follows:
Sometime in May 1986, the UST Faculty Union (USTFU) entered into an initial collective bargaining agreement with the
University of Santo Tomas (UST) wherein UST undertook to provide USTFU with a free office space at Room 302 of its
Health Center Building.3
On 21 September 1996, the officers and directors of USTFU scheduled a general membership meeting on 5 October
1996 for the election of the union officers. However, respondent Gamilla and some faculty members filed a Petition4 with
the Med-Arbitration Unit of the Department of Labor and Employment (DOLE) seeking to stop the holding of the USTFU
election.5
Meanwhile, on 2 October 1996, Rev. Fr. Rodel Aligan, O.P., Secretary General of the UST, issued a Memorandum to the
Deans, Regents, Principals and Heads of Departments regarding the holding of a faculty convocation on 4 October
1996.6
On 4 October 1996, Med-Arbiter Tomas Falconitin issued a temporary restraining order (TRO) in Case No. NCR-OD-M-
9610-001, enjoining the holding of the election of the USTFU officers and directors. However, denying the TRO they
themselves sought, Gamilla and some of the faculty members present in the 4 October 1996 faculty convocation
proceeded with the election of the USTFU officers. On the other hand, the scheduled election for 5 October 1996 did not
push through by virtue of the TRO.7
In the succeeding week, on 11 October 1996, petitioners filed with the DOLE a petition for prohibition, injunction, with
prayer for preliminary injunction and temporary restraining order, 8 seeking to invalidate the election held on 4 October
1996.
Two months later, on 4 December 1996, UST and USTFU, represented by Gamilla and his co-officers, entered into a
collective bargaining agreement (CBA) for a period of five (5) years from 1 June 1996 up to 31 May 2001. The CBA was
ratified on 12 December 1996.9
In another front, the Med-Arbiter issued a TRO dated 11 December 1996, enjoining Gamilla and his fellow officers to
"cease and desist from performing any and all acts pertaining to the duties and functions of the officers and directors" of
USTFU.10
On 27 January 1997, at around eleven in the morning (11:00 a.m.), respondents Gamilla, Cardenas and Aseron, with
some other persons, served a letter of even date on petitioners Mario and Alamis, demanding that the latter vacate the
premises located at Room 302, Health Center Building, USTthe Office of USTFU. However, only the office messenger
was in the office at the time. After coercing the office messenger to step out of the office, Gamilla and company
padlocked the door leading to the unions office. 11
On 5 February 1997, petitioners filed with the Regional Trial Court (RTC) of Manila a Complaint12 for injunction and
damages with a prayer for preliminary injunction and temporary restraining order over the use of the USTFU office.
At the 11 February 1997 hearing on the application for TRO before the trial court, respondents through a consolidated
motion to dismiss sought the dismissal of the complaint on the ground of forum-shopping and prayed that the trial court
suspend the application for injunctive relief until it shall have resolved the motion to dismiss. 13l^vvphi1.net
On the same date, Med-Arbiter Falconitin rendered a decision, 14 declaring the 4 October 1996 election and its results
null and void ab initio. The decision was appealed to the Bureau of Labor Relations which affirmed the
same.15 Respondents brought the matter to this Court via a special civil action for certiorari.16 The Court promulgated its
decision,17 dismissing the petition on 16 November 1999.
On 3 March 1997, the RTC issued the assailed order, 18 to wit:
WHEREFORE, upon plaintiffs filing a bond in the amount of P50,000.00, let a writ of preliminary mandatory injunction
issue requiring defendants their representatives and agents or other persons acting in their behalf to remove the
padlocks on the door of the UST Faculty Union office located at Room 302, Health Center Bldg., UST, Espaa, Manila
and to refrain from preventing/disturbing in any manner whatsoever the plaintiffs in entering the said premises.
In the meantime, defendants are hereby ordered to submit their answer to the complaint within fifteen (15) days from
receipt hereof.
On 5 March 1997, after petitioners as plaintiffs therein had posted the requisite bond, the RTC issued a writ of
preliminary mandatory injunction.19
On 19 March 1997, respondents filed a Petition for Certiorari20 before the Court of Appeals, claiming that the orders
dated 3 and 5 March 1997 were void ab initio for lack of jurisdiction and on the ground that they were issued in violation
of due process of law.21 The Court of Appeals stated that the basic issue of the case was whether the RTC of Manila had
jurisdiction over the subject matter of Civil Case No. 97-81928. 22 It agreed with respondents disquisition that petitioners
cause of action in the complaint before the trial court is inextricably linked and intertwined with the issue of who are the
legitimate officers of the USTFU, which issue was then being litigated before the DOLE. The appellate court held that
Civil Case No. 97-81928 and Case No. NCR-OD-M-9610-016 appear to be the same, with the observation that the civil
case merely "grew out" from the labor case. It also cited the prohibition against the issuance of injunction in any case
involving or growing out of a labor dispute, unless otherwise provided by law. 23 It added that it would have been more
appropriate for the RTC to determine whether it had jurisdiction over the subject case before issuing the assailed
orders.24 The dispositive portion of the decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTEDand the assailed order (dated March 3, 1997)
and the writ of preliminary mandatory injunction (dated March 5, 1997) SET ASIDEand the respondent judge ordered
to DISMISS Civil Case No. 97-81928.
SO ORDERED.25 (Emphasis in the original.)
Petitioners Motion for Reconsideration26 was denied. Hence, this petition.
Petitioners assert that the RTC has jurisdiction to decide Civil Case No. 97-81928, as the determination of the legality
and propriety of padlocking the doors of the USTFU office and preventing the free and unhampered ingress to and
egress from the said premises, as alleged in the complaint, are matters incapable of pecuniary estimation. 27 Moreover,
they claim that the civil case was premised on causes of action belonging to the USTFU which are to be resolved not by
reference to the Labor Code or other labor relations statutes. They stress that the causes of action involve a tortious act
and the corresponding claim for damages that are both governed by the civil law and fall under the jurisdiction of regular
courts.28
Petitioners add that not all controversies involving members of the same union are to be decided by the labor tribunal.
They add that in the instant case, the pendency of the labor case should not militate against the civil case they filed
since the criminal and civil aspects of a violation of Article 241 of the Labor Code 29 can be litigated separately and
independently from the administrative aspect of a breach of the rights and conditions of membership. 30
Anent the ruling of the Court of Appeals on the writ of injunction issued by the trial court, petitioners state that Art. 254 of
the Labor Code31 on prohibition against injunctions is not applicable to the instant case since the controversy cannot be
categorized as a labor dispute. They argue that the injunction was called for considering that they "have rights to be
protected and preserved," which however, "were violated, invaded and trampled upon" by respondents through the acts
complained of.32
Petitioners claim that respondents were not denied their day in court when the trial court did not resolve the issue of
jurisdiction before proceeding with the hearing on the application for injunctive order. According to them, respondents
were given the chance to present their evidence in support of their opposition to the injunction and TRO, but
respondents chose not to avail of this opportunity. 33
Lastly, they add that respondents Gamilla, Cardenas and Aseron had no right to act for and in behalf of the USTFU for
the following reasons, to wit: Gamillas claim to the USTFU presidency was declared non-existent by the labor tribunals;
Cardenas was the chief of the security force in the university and not a faculty member; and, Aseron was a Barangay
Chairman and not a member of the UST faculty. 34 Thus, petitioners claim that USTFU was improperly included as
petitioner in the petition35 before the Court of Appeals.
Accordingly, petitioners assert that the Court of Appeals erred and gravely abused its discretion when:
I. It ruled that the regional trial court had no jurisdiction over Civil Case No. 97-81928;
II. It ruled that Civil Case No. 97-81928 is a labor dispute cognizable by the DOLE;
III. It granted the petition for certiorari in CA-G.R. SP No. 43701, set aside the orders issued by the trial court, and
ordered the dismissal of the civil case;
IV. It ruled that Art. 254 of the Labor Code is applicable to the matters involved in Civil Case No. 97-81928;
V. It ruled that respondents were denied their day in court; and
VI. It ruled that the Motion for Reconsideration filed in CA-G.R. SP No. 43701 was pro-forma. 36
On the other hand, respondents maintain that the regional trial court had no jurisdiction over the issue as to who has the
right to use the union office because the same is inextricably linked and intertwined with the issue as to who are the
legitimate and duly elected officers of the USTFU, which was then the subject of another case before the
DOLE.37 Furthermore, respondents insist that the trial court violated their right to due process when it refused to
determine the issue of jurisdiction before issuing its assailed orders. 38 Respondents submit that the only issue in the
instant petition is whether the RTC has jurisdiction over Civil Case No. 97-81928. 39
There is merit in the petition but only in part.
Jurisdiction over a subject matter is conferred by law and determined by the allegations in the complaint 40 and the
character of the relief sought, irrespective of whether the plaintiff is entitled to all or some of the claims asserted
therein.41
Central to the assailed decision of the Court of Appeals is its adoption of respondents argument that the issue in Civil
Case No. 97-81928 is "inextricably linked and intertwined with the issue as to who are the lawful officers of the USTFU,"
which is within the exclusive jurisdiction of the Secretary of Labor; and that "the use of the union office is a mere incident
of the labor dispute." 42 Specifically, the Court of Appeals held:
. . . .The two cases (Civil Case No. 97-81928 and Case No. NCR-OD-M-9610-016) appear the same. While ostensibly,
the complaint filed with the trial court was branded injunction and damages, the action challenged the legitimacy of
petitioners election as officers of the UST Faculty Union, with the plaintiff therein (respondent herein) seeking to enjoin
them (petitioners herein) from claiming and acting as such (elected officers of the union) and to have the election
proceedings of October 4, 1996 invalidated and declared null and void. Taking note of plaintiffs (private respondents)
previous moves before the Department of Labor, Civil Case No. 97-81928 appear (sic) to have grown out therefrom
hence, said case clearly falls outside of the competence of the trial court. 43
Another reason that militates against the trial courts assumption of jurisdiction over the case is Article 254 of the Labor
Code that states:
Art. 254. Injunction prohibited.No temporary or permanent injunction or restraining order in any case involving or
growing out of labor disputes shall be issued by any court or other entity, except as otherwise provided in Articles 218
and 264 of this Code.441awphi1.nt
As pointed out by petitioners, the Court of Appeals erroneously categorized the instant matter as a labor dispute. Such
labor dispute includes any controversy or matter concerning terms or conditions of employment or the association or
representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the proximate relation of employer and
employee.45 Jurisdiction over labor disputes, including claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations is vested in Labor Arbiters and the National Labor Relations Commission
(NLRC).46
On the other hand, an intra-union dispute refers to any conflict between and among union members. It encompasses all
disputes or grievances arising from any violation of or disagreement over any provision of the constitution and by-laws
of a union, not excepting cases arising from chartering or affiliation of labor organizations or from any violation of the
rights and conditions of union membership provided for in the Labor Code. 47 In contrast, an inter-union dispute refers to
any conflict between and among legitimate labor organizations involving questions of representation for purposes of
collective bargaining; it includes all other conflicts which legitimate labor organizations may have against each other
based on any violations of their rights as labor organizations. 48Like labor disputes, jurisdiction over intra-union and inter-
union disputes does not pertain to the regular courts. It is vested in the Bureau of Labor Relations Divisions in the
regional offices of the Department of Labor.
Case No. NCR-OD-M-9610-016 entitled "Eduardo J. Mario, Jr., et al. v. Gil Gamilla, et al." before the BLR is neither a
labor nor an inter-union dispute. It is clearly an intra-union dispute.
The case before the trial court, Civil Case No. 97-81928 entitled Eduardo J. Mario, Jr. et al. v. Gil Gamilla, et al.,49 on
the other hand, is a simple case for damages, with an accompanying application for injunction. The complaint
essentially bears the following allegations: that despite an outstanding temporary restraining order prohibiting the
holding of an election of officers, respondent Gamilla and others proceeded to hold a purported election; that there was
a case pending before the DOLE questioning the validity of the supposed election; and, that respondent Gamilla with
two other persons (later learned to be respondents Aseron and Cardenas) compelled the office messenger to vacate the
premises of the USTFU office, and thereafter padlocked the room. Petitioners alleged respondents act of padlocking the
office was without lawful basis, and had prevented them from entering the office premises, thereby denying them access
to personal effects, documents and records needed in the on-going cases both in the DOLE and in the complaint a quo,
and ultimately precluding the union from serving its members.
Fundamentally, the civil case a quo seeks two reliefsone is for the removal of the padlocks on the office door and
restraining respondents from blocking petitioners access to the premises, while the other is for the recovery of moral
and exemplary damages.
Prior to the institution of the civil case, petitioners filed before the Med-Arbitration Unit of the DOLE-NCR a petition for
prohibition, injunction with a prayer for preliminary injunction and temporary restraining order against herein respondents
for the latters assumption of office as elected USTFU officers. Specifically, they prayed that respondents be enjoined
from claiming to be the duly elected officers of the union and from performing acts for and in behalf of the union.
The propriety of padlocking the unions office, the relief sought by the petitioner in the civil case, is interwoven with the
issue of legitimacy of the assumption of office by the respondents in light of the violation of the unions constitution and
by-laws, which was then pending before the Med-Arbiter. Necessarily, therefore, the trial court has no jurisdiction over
the case insofar as the prayer for the removal of the padlocks and the issuance of an injunctive writ is concerned.
It is a settled rule that jurisdiction, once acquired, continues until the case is finally terminated. 50 The petition with the
Med-Arbiter was filed ahead of the complaint in the civil case before the RTC. As such, when the petitioners filed their
complaint a quo, jurisdiction over the injunction and restraining order prayed for had already been lodged with the Med-
Arbiter. The removal of padlocks and the access to the office premises is necessarily included in petitioners prayer to
enjoin respondents from performing acts pertaining to union officers and on behalf of the union. In observance of the
principle of adherence of jurisdiction, it is clear that the RTC should not have exercised jurisdiction over the provisional
reliefs prayed for in the complaint. A review of the complaint shows that petitioners disclosed the existence of the
petition pending before the Med-Arbiter and even attached a copy thereof. 51 The trial court was also aware of the
decision of the Med-Arbiter dated 11 February 1997, declaring the supposed union officers election void ab initio and
ordering respondents to cease and desist from discharging the duties and functions of the legitimate officers of the
USTFU. The trial court even obtained a copy of the said decision two (2) days after its promulgation. 52 Still, it continued
the hearing on the application for injunction and eventually issued the assailed orders.
At this juncture, the Court notes that a key question in this case has already been settled by the Court in its decision
in UST Faculty Union, et al. v. Bitonio, Jr., et al.53 In that case, it was ruled that the 04 October 1996 election was void for
having been conducted in violation of the unions constitution and by-laws. Nevertheless, the complaint a quo could not
have validly proceeded at the time of its filing of the said case due to petitioners lack of cause of action.
As to the alleged inclusion of the USTFU as petitioner in the petition before the Court of Appeals, suffice it to say that
the right to use the unions name as well as to represent it has been settled by our decision in UST Faculty Union, et al.
v. Bitonio, Jr., et al. Petitioners, as the rightful officers of the USTFU, and not respondents, have the right to represent
USTFU in the proceedings.
Let us go back to the claim for damages before the lower court. Art. 226 of the Labor Code provides, thus:
The Bureau of Labor Relations and the Labor Relations Divisions in the regional offices of the Department of Labor shall
have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-
union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management
relations in all workplaces whether agricultural or non-agricultural, except those arising from the implementation or
interpretation of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary
arbitration.
Thus, unlike the NLRC which is explicitly vested with the jurisdiction over claims for actual, moral, exemplary and other
forms of damages,54 the BLR is not specifically empowered to adjudicate claims of such nature arising from intra-union
or inter-union disputes. In fact, Art. 241 of the Labor Code ordains the separate institution before the regular courts of
criminal and civil liabilities arising from violations of the rights and conditions of union membership. The Court has
consistently held that where no employer-employee exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes, or any collective bargaining agreement, it is the regional
trial court that has jurisdiction.551awphi1.nt
Administrative agencies are tribunals of limited jurisdiction and as such, can exercise only those powers which are
specifically granted to them by their enabling statutes. Consequently, matters over which they are not granted authority
are beyond their competence.56 While the trend is towards vesting administrative bodies with the power to adjudicate
matters coming under their particular specialization, to ensure a more knowledgeable solution of the problems submitted
to them, this should not deprive the courts of justice their power to decide ordinary cases in accordance with the general
laws that do not require any particular expertise or training to interpret and apply. 57In their complaint in the civil case,
petitioners do not seek any relief under the Labor Code but the payment of a sum of money as damages on account of
respondents alleged tortuous conduct. The action is within the realm of civil law and, hence, jurisdiction over the case
belongs to the regular courts.58
WHEREFORE, the Petition is hereby GRANTED IN PART. The Decision of the Court of Appeals setting aside the Order
dated 3 March 1997 and the writ of preliminary mandatory injunction dated 5 March 1997 is hereby AFFIRMED. The
case is REMANDED to the trial court for further proceedings in accordance with this Decision. No costs.
SO ORDERED.

8. GOTHONG THE UNION VS. HON NIEVES &THE COMPANY

Petitioner A. D. Gothong Manufacturing Corporation Employees Union-ALU seeks

to reverse and set aside the decision of the Secretary of Labor promulgated on
September 30, 1993 affirming in totothe Resolution of Mediator-Arbiter, Achilles V.
Manit declaring Romulo Plaza and Paul Michael Yap as rank- and-file employees of A.
D. Gothong Manufacturing Corporation.

On May 12, 1993, petitioner A. D. Gothong Manufacturing Corporation Employees

Union-ALU (Union) filed a petition for certification election in its bid to represent the
unorganized regular rank-and-file employees of respondent A. D. Gothong
Manufacturing Corporation (Company) excluding its office staff and
personnel. Respondent Company opposed the petition as it excluded office personnel
who are rank and file employees. In the inclusion-exclusion proceedings, the parties
agreed to the inclusion of Romulo Plaza and Paul Michael Yap in the list of eligible
voters on condition that their votes are considered challenged on the ground that they
were supervisory employees.

The certification election was conducted as scheduled and yielded the following
results:

YES - - - - - - - - - - - - - - - 20

NO - - - - - - - - - - - - - - - - 19

Spoiled - - - - - - - - - - - - - - 0

Challenged - - -- - - - - - - - _2
Total votes cast - - - - - - - -41

Both Plaza and Yap argued that they are rank-and-file employees. Plaza claimed
that he was a mere salesman based in Cebu, and Yap argued that he is a mere
expediter whose job includes the facilitation of the processing of the bills of lading of
all intended company shipments.

Petitioner Union maintains that both Plaza and Yap are supervisors who are
disqualified to join the proposed bargaining unit for rank-and-file employees. In
support of its position paper, the petitioner Union submitted the following:

1. Joint affidavit of Ricardo Caete, et al. which alleges that Michael Yap is a
supervisory employee of A. D. Gothong Manufacturing Corporation and can
effectively recommend for their suspension/dismissal.

2. Affidavit of Pedro Diez which alleges that the affiant is a supervisor in the
production department of A. D. Gothong Manufacturing Corporation; that
the affiant knows the challenged voters because they are also supervisory
employees of the same corporation; that the challenged voters used to
attend the quarterly meeting of the staff employees of A. D. Gothong
Manufacturing Corporation;

3. Photocopy of the memorandum dated January 4, 1991 regarding the

compulsory attendance of department heads/supervisors to the regular
quarterly meeting of all regular workers of A. D. Gothong Manufacturing
Corporation on January 13, 1991. Appearing therein are the names ROMULO
PLAZA and MICHAEL YAP;

4. A not-so-legible photocopy of a memorandum dated March 1, 1989 wherein

the name ROMY PLAZA is mentioned as the acting OIC of GT Marketing in
Davao; and

5. Photocopy of the minutes of the regular quarterly staff meeting on August

13, 1989 at Mandaue City wherein Michael Yap is mentioned as a shipping
assistant and a newly hired member of the staff.[1]

The Med-Arbiter declared that the challenged voters Yap and Plaza are rank-and-
file employees.

Petitioner Union appealed to the Secretary of Labor insisting that Yap and Plaza
are supervisor and manager respectively of the corporation and are prohibited from
joining the proposed bargaining unit of rank-and-file employees. In an attempt to
controvert the arguments of petitioner, respondent Company stressed that Pacita
Gothong is the companys corporate secretary and not Baby L. Siador, who signed the
minutes of the meeting submitted in evidence. Respondent also argued that Romulo
Plaza could not qualify as a manager of the Davao Branch the opening of which
branch never materialized.
 Respondent Secretary of Labor affirmed the finding of the Med-Arbiter. Motion for
Reconsideration of the above resolution having been denied, petitioner Union appeals
to this Court by petition for review on certiorari alleging the following grounds:

I. THAT THE SECRETARY OF LABOR AND EMPLOYMENT CLEARLY COMMITTED

MISAPPREHENSION OF FACTS/EVIDENCE AND IF IT WERE NOT FOR SUCH
MISAPPREHENSION IT WOULD HAVE ARRIVED AT DIFFERENT CONCLUSION
FAVORABLE TO PETITIONER.

II. THAT THE SECRETARY OF LABOR AND EMPLOYMENT ACTED WITH GRAVE
ABUSE OF DISCRETION AND CONTRARY TO LAW IN AFFIRMING IN TOTO
THE DECISION OF HONORABLE ACHILLES V. MANIT, DEPARTMENT OF
LABOR AND EMPLOYMENT, REGIONAL OFFICE No. 7, CEBU CITY IN
DENYING PETITIONERS MOTION FOR RECONSIDERATION.[2]

We find no merit in the instant petition.

The Labor Code recognizes two (2) principal groups of employees, namely, the
managerial and the rank and file groups. Article 212 (m) of the Code provides:

(m) Managerial employee is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer, effectively recommend such managerial actions
if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of the
above definitions are considered rank-and-file employees for purposes of this Book.

Under Rule I, Section 2 (c), Book III of the Implementing Rules of the Labor Code,
to be a member of managerial staff, the following elements must concur or co-exist,
to wit: (1) that his primary duty consists of the performance of work directly related
to management policies; (2) that he customarily and regularly exercises discretion
and independent judgment in the performance of his functions; (3) that he regularly
and directly assists in the management of the establishment; and (4) that he does
not devote more than twenty percent of his time to work other than those described
above.

In the case of Franklin Baker Company of the Philippines vs. Trajano [3], this Court
stated:

The test of supervisory or managerial status depends on whether a person possess

authority to act in the interest of his employer in the matter specified in Article 212
(k) of the Labor Code and Section 1 (m) of its Implementing Rules and whether such
authority is not merely routinary or clerical in nature, but requires the use of
independent judgment. Thus, where such recommendatory powers as in the case at
bar, are subject to evaluation, review and final action by the department heads and
other higher executives of the company, the same, although present, are not exercise
of independent judgment as required by law.[4]

It has also been established that in the determination of whether or not certain
employees are managerial employees, this Court accords due respect and therefore
sustains the findings of fact made by quasi-judicial agencies which are supported by
substantial evidence considering their expertise in their respective fields. [5]

The petition has failed to show reversible error in the findings of the Med-Arbiter
and the Secretary of the Department of Labor.

In ruling against petitioner Union, the Med-Arbiter ruled that the petitioner Union
failed to present concrete and substantial evidence to establish the fact that
challenged voters are either managerial or supervising employees; the Med-Arbiter
evaluated the evidence as follows:

The said joint affidavit of Ricardo Caete, et al. and that of Pedro Diez merely tagged
the challenged voters as supervisors, but nothing is mentioned about their respective
duties, powers and prerogatives as employees which would have indicated that they
are indeed supervisory employees. There is no statement about an instance where
the challenged voters effectively recommended such managerial action which required
the use of independent judgment.

The aforementioned documents have not been properly identified which renders them
inadmissible in evidence. But, granting that they are the exact replica of a genuine
and authentic original copy, there is nothing in them which specifically and precisely
tells that the challenged voters can exercise the powers and prerogatives to
effectively recommended such managerial actions which require the use of
independent judgment.[6]

In upholding the above findings, the respondent Secretary of Labor rationalized:

Based on the foregoing, Romulo Plaza and Paul Michael Yap can not qualify as
managerial and supervisory employees, respectively, because there is nothing in the
documentary evidence offered by herein petitioner-appellant showing that they are
actually conferred or actually exercising the said managerial/supervisory attributes.

In the case of Romulo Plaza, we note that indeed there is nothing in the minutes of
the staff meeting held on 05 March 1993, particularly on the report of the Sales
Department, indicating that said appellee had been exercising managerial
prerogatives by hiring workers and issuing a check for the payment of rentals of a
warehouse, relative to the company branch in Davao City. The imputation on the
exercise of the said prerogative is misleading if not malicious because a plain reading
of that portion of the report shows in clear and simple language that one who made
the said hiring and payment was no other than Mr. John Chua, the Sales Manager. The
only instance when the name of Romy Plaza was mentioned in the said report was in
reference to his designation as an OIC of the Davao City Branch while all the aspect of
the creation of the said branch is awaiting final approval by the Company president
and general manager (p. 197, last paragraph, records). The setting up of said branch
however, did not materialize, as evidenced by the certification issued by the Revenue
District Office and Office of the Mayor in Davao City (pp. 198-199, records).

Likewise, evidence pinpointing that Paul Michael Yap is a supervisory employee is

altogether lacking. The fact that he was designated as shipping assistant/expediter is
of no moment, because titles or nomenclatures attached to the position is not
controlling.

Finally, the job descriptions extant on records vividly exhibit no trace of the
performance of managerial or supervisory functions (pp. 124-126, records). [7]

In this petition, petitioner Union claims that the documentary evidence was
misapprehended by public respondent. Petitioner Union reiterates that: (1) in minutes
of the staff meeting of respondent Company on August 13, 1989, duly signed by the
President Albino Gothong and attested by Jose F. Loseo presiding officer/VP and
Gertrudo Lao, Assistant General Manager, Paul Michael Yap was listed as one of the
staff; (2) in the regular quarterly meeting on January 4, 1991, the names of Yap and
Plaza are listed under the heading Department Heads/Supervisors duly signed by
President/General Manager Albino Gothong and Asst. General Manager Gertrudo Lao;
and (3) in the staff meeting of March 5, 1993, Plaza was assigned as officer-in-charge
of the companys branch in Davao.

We find no cogent reason to disturb the finding of the Med-Arbiter and the
Secretary of Labor that the copies of the minutes presented in evidence do not prove
that Yap and Plaza were managerial or supervisory employees. We have examined the
documentary evidence, and nowhere is there a statement therein about any instance
where the challenged voters effectively recommended any managerial action which
would require the use of independent judgment. The last piece of evidence was not
discussed by the Med-Arbiter; however a perusal thereof would show that while one J.
Chua of the Sales Department reported that Romy Plaza was in Davao right now
acting as OIC, the same document states that the Davao operations still had to be
finalized. On the other hand, the claim of respondent Company that Plaza is the head
of the Davao branch is belied by the certification of the City Treasurer of Davao and of
the Bureau of Internal Revenue of Mandaue City that the plan to open a branch in
Davao City did not materialize.[8]

The reliance of petitioner on the affidavit of Jose Loseo, Personnel Manager, that
Plaza and Yap were hired by him as department head and supervisor of the
respondent Company cannot be sustained in light of the affidavit of said Loseo dated
September 28, 1993, attesting that he was forced to sign the earlier memorandum on
the job assignment of Yap and Plaza. This affidavit is sought to be discarded by
respondent Company for being perjurious and ill-motivated. [9] Petitioner Union
however reiterates that Loseos affidavit is corroborated by the other public documents
indicating that Plaza and Yap are not rank-and-file employees. [10]
 The issue raised herein is basically one of fact: whether in the light of the
evidence submitted by both parties, Plaza and Yap are managerial employees or rank-
and-file employees.

This Court is not a trier of facts. As earlier stated, it is not the function of this
Court to examine and evaluate the probative value of all evidence presented to the
concerned tribunal which formed the basis of its impugned decision or
resolution. Following established precedents, it is inappropriate to review that factual
findings of the Med-Arbiter regarding the issue whether Romulo Plaza and Paul
Michael Yap are or are not rank-and-file employees considering that these are matters
within their technical expertise. [11] They are binding on this Court as we are satisfied
that they are supported by substantial evidence, and we find no capricious exercise of
judgment warranting reversal by certiorari.

WHEREFORE, the petition is denied for lack of merit.

No pronouncement as to costs.

SO ORDERED.