G.R. No.

111651 March 15, 1996

OSMALIK S. BUSTAMANTE, PAULINO A. BANTAYAN, FERNANDO L. BUSTAMANTE, MARIO D. SUMONOD, and

SABU J. LAMARAN v. NATIONAL LABOR RELATIONS COMMISSION, FIFTH DIVISION and EVERGREEN FARMS, INC.

PADILLA, J.:

FACTS: Respondent company is engaged in the business of producing high grade bananas in its plantation in Davao
del Norte. Petitioners Paulino Bantayan, Fernando Bustamante, Mario Sumonod and Osmalik Bustamante were
employed as laborers and harvesters while petitioner Sabu Lamaran was employed as a laborer and sprayer in
respondent company’s plantation. All the petitioners signed contracts of employment for a period of six (6)
months from 2 January 1990 to 2 July 1990, but they had started working sometime in September 1989.
Previously, they were hired to do the same work for periods lasting a month or more, from 1985 to 1989. Before
the contracts of employment expired on 2 July 1990, petitioners’ employments were terminated on 25 June 1990
on the ground of poor performance on account of age, as not one of them was allegedly below forty (40) years old.

Petitioners filed a complaint for illegal dismissal.

ISSUE: Whether or not private respondent exercises its power to terminate in good faith so as to make the award
of backwages improper in this case.

RULING: We do not sustain public respondent’s theory that private respondent should not be made to
compensate petitioners for backwages because its termination of their employment was not made in bad faith.
The act of hiring and re-hiring the petitioners over a period of time without considering them as regular employees
evidences bad faith on the part of private respondent. The public respondent made a finding to this effect when it
stated that the subsequent rehiring of petitioners on a probationary status “clearly appears to be a convenient
subterfuge on the part of management to prevent complainants (petitioners) from becoming regular employees.”

In the case at bar, there is no valid cause for dismissal. The employees (petitioners) have not performed any act
to warrant termination of their employment. Consequently, petitioners are entitled to their full backwages and
other benefits from the time their compensation was withheld from them up to the time of their actual
reinstatement.
 Pioneer texturizing Corp. Vs, NLRC
GR 118651, October 16, 1997

Facts: As reviser/trimmer, respondent de Jesus based her assigned work on a paper note posted by petitioners. The
posted paper which contains the corresponding price for the work to be accomplished by a worker is identified by
its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853. Three days later, de Jesus received from
petitioners' personnel manager a memorandum requiring her to explain why no disciplinary action should be taken
against her for dishonesty and tampering of official records and documents with the intention of cheating as P.O.
No. 3853 allegedly required no trimming. In her handwritten explanation, de Jesus maintained that she merely
committed a mistake in trimming and that she may have been negligent in presuming that the same work was to be
done with P.O. No. 3853, but not for dishonesty or tampering. Nonetheless, respondent was terminated from
employment. On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. Labor
Arbiter held petitioners guilty of illegal dismissal. And so petitioners appealed to public respondent National Labor
Relations Commission (NLRC). The NLRC declared that the status quo between them should be maintained and
affirmed the Labor Arbiter's order of reinstatement, but without backwages. Petitioners insist that the NLRC gravely
abused its discretion in holding that de Jesus is entitled to reinstatement to her previous position for she was not
illegally dismissed in the first place. In support thereof, petitioners quote portions of the NLRC decision which stated
that "respondents [petitioners herein] cannot be entirely faulted for dismissing the complainant" 3 and that there
was "no illegal dismissal to speak of in the case at bar".

The arguments lack merit. It distinctly appears that petitioners' accusation of dishonesty and tampering of official
records and documents with intention of cheating against de Jesus was not substantiated by clear and convincing
evidence. Petitioners simply failed, both before the Labor Arbiter and the NLRC, to discharge the burden of proof
and to validly justify de Jesus' dismissal from service. The law, in this light, directs the employers, such as herein
petitioners, not to terminate the services of an employee except for a just or authorized cause under the Labor Code.
Lack of a just cause in the dismissal from service of an employee, as in this case, renders the dismissal illegal, despite
the employer's observance of procedural due process. And while the NLRC stated that "there was no illegal dismissal
to speak of in the case at bar" and that petitioners cannot be entirely faulted therefor, said statements are inordinate
pronouncements which did not remove the assailed dismissal from the realm of illegality. Neither can these
pronouncements preclude us from holding otherwise.
Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her immediately after
the decision of the Labor Arbiter ordering her reinstatement was promulgated since the law mandates that an order
for reinstatement is immediately executory. An appeal, she says, could not stay the execution of a reinstatement
order for she could either be admitted back to work or merely reinstated in the payroll without need of a writ of
execution. De Jesus argues that a writ of execution is necessary only for the enforcement of decisions, orders, or
awards which have acquired finality. In effect, de Jesus is urging the Court to re-examine the ruling laid down
in Maranaw.
PIZZA INN/CONSOLIDATED FOODS CORPORATION, petitioner,
vs.
NLRC, NLRC SHERIFF and FELICIDAD FONTANILLA, respondents.

PARAS, J.:

Before Us is a Petition questioning the ruling of the National Labor Relations Commission (NLRC for short) affirming
the ruling of the Labor Arbiter in a case for illegal dismissal for unpaid wages, underpaid overtime pay and
emergency living allowance, non-payment of legal holiday pay and premium pay for holidays and rest days filed by
private respondent Felicidad Pontanilla against petitioner. The Labor Arbiter directed the reinstatement of
complainant Felicidad Fontanilla to her former or equivalent position with full back wages from date of dismissal
on April 24,1982 up to actual date of reinstatement without loss of seniority rights and privileges as she would
receive had she not been dismissed, and to pay her unpaid wages from April 1 up to April 23, 1982 in the amount
of P761.24.

Private respondent was employed by petitioner in its Quad Carpark Makati outlet on a probationary status with a
monthly basic salary of P500.00. Before the expiration of the 6-month probationary period, Felicidad Fontanilla
resigned. Claiming that she was forced to resign by the petitioner, the former filed a complaint against the latter.

Petitioner appealed from the decision of the Labor Arbiter favoring private respondent. Petitioner's appeal was
dismissed by the NLRC for lack of merit in its resolution promulgated on May 17,1983. Petitioner filed its Motion
for Reconsideration, a motion which was not entertained by the NLRC in its resolution dated August 15, 1983, thru
Labor Arbiter Pedro C. Ramos (Annex "B," p. 69, Rollo).

Petitioner came to Us by filing a petition for certiorari docketed as G.R. No. 65535. But before any responsive
pleading was filed, petitioner withdrew said petition and instead filed a second motion for reconsideration with
the NLRC which was likewise denied by the NLRC.

Petitioner filed a motion to elevate the case to the Commission en banc which likewise denied said motion for lack
of merit in its resolution dated May 23,1984.

Petitioner filed anew before Us a petition for certiorari with preliminary injunction docketed as G.R. No. 67619. In
Our resolution dated June 25, 1984 We resolved to dismiss the petition for lack of merit. Petitioner filed a motion
for reconsideration which was denied in Our resolution dated September 10, 1984, ordering entry of final
judgment of Our denial. Again, petitioner filed its second motion for reconsideration which We resolved to deny
and to expunge from the records of this case (G.R. No. 67619). The order of dismissal of the petition for certiorari
(In G.R. No. 67619) became final and executory on September 25, 1984 as per Entry of Judgment (Annex "A" p. 68,
Rollo).

Due to the finality of the judgment in this case, the Labor Arbiter below issued a second alias Writ of Execution
dated September 8, 1984 against petitioner wherein the amount involved (representing backwages of private
respondent among others, from April 24, 1982 to September 30, 1984) amounted to P29,001.00 as per
computation of the Socio-Economic Analyst of the Commission.

Petitioner filed a Motion to Recompute and to quash/stay writ of execution, notice of garnishment under
supersedeas bond on October 19, 1984. Respondent opposed said motion in both their Urgent Ex-
parteManifestation and ex parte manifestation dated October 22,1984 and December 5,1984 respectively.
The Labor Arbiter Pelagio A. Carpio issued on January 21, 1985, an order dismissing the motion of petitioner for
lack of merit and ordered it to proceed with the enforcement of the second alias writ of execution dated October
8, 1984 (Annex "H," p. 70, Rollo).

Petitioner filed an appeal from said order of the Labor Arbiter. In reply, respondent Felicidad Fontanilla stated that
the petitioner was appealing only on the order of the Labor Arbiter denying the motion to recompute which is only
an interlocutory order and should not be entertained on appeal.

The third alias writ of execution of the original decision dated August 31, 1982 was partially satisfied on April 3,
1985, when complainant received the amount of P29,001.00 (Annex "J," p. 82, Rollo) as computed and prepared by
the Socio-Economic Analyst covering the period from April 25, 1982 to September 30, 1984 which amount included
the emergency allowance, 13th month pay and other privileges which complainant would have received, had she
not been dismissed.

Thereafter, counsel for petitioner filed a Manifestation dated September 16, 1985 seeking to stop the running of
subsequent back wages from the time the business allegedly closed shop on January 1984.

Felicidad Fontanilla filed her counter manifestation alleging that petitioner refused to reinstate complainant
despite several representations of private respondent to the petitioner by the NLRC Sheriff at the latter's outlet in
Cinema Square, Legaspi Street, Makati, Metro Manila or Greenbelt Park, Makati, contending that the Quad Park
outlet wherein Felicidad Fontanilla worked was merely transferred and not really closed contrary to the allegations
of petitioner (Annex "K," p. 83, Rollo).

On October 10, 1985, the NLRC en banc denied appeal of petitioner. A motion for Reconsideration filed on October
31, 1985 by petitioner was likewise denied by the same body for lack of merit. Such denial is now the subject on
appeal by certiorari to Us raising the:

Issue: May an employer be ordered to reinstate private respondent after the closure of its
branch or outlet where private respondent was employed, and to pay private respondent back
wages even after the date of closure and continuously without limit considering that there was
no way to reinstate the workers anymore?

Be it noted that it would now be idle to dispute the legality of the order to reinstate and pay back wages to the
complainant, it appearing that said order has become final. All that remain to be determined are the matter of
reinstatement, and the amount of backwages to be paid.

Petitioner maintains that complainant should not be paid her backwages beyond the date of closure of business on
January 31, 1984. The records show that the petitioner's Pizza-Inn Quad Carpark outlet ceased its business
operations due to poor business sales of pizzas. The fact of closure was properly reported to the Municipal
Treasurer of Makati wherein petitioner paid the required closure fee under O.R. No. 7890507 on January 20, 1984
(Annex "G," p. 37, Rollo). Their contract of lease with Ayala Corporation over said premises was also terminated as
of January 31,1984 as per letter of Mr. Simon C. Mossesgeld, Area Manager of the Ayala Corporation, Commercial
Center Division (Annex "H," p. 38, Rollo). Subsequently, Pizza's only two other remaining outlets in the Philippines
were also closed and its franchise surrendered to Pizza-Inn Texas, U.S.A. as evidenced by a letter dated April 8,
1986 (Annex "F," p. 180, Rollo). Hence, the closure of the business rendered the reinstatement of complainant to
her previous position impossible but she is still entitled to the payment of backwages up to the date of dissolution
or closure. We have ruled that:

An employer found guilty of unfair labor practice in dismissing his employee may not be ordered
so to pay backwages beyond the date of closure of business where such closure was due to
legitimate business reasons and not merely an attempt to defeat the order of reinstatement"
 (Colombian Rope Co. of the Phil. v. Tacloban Association of Laborers and Employees, No. L-
14848, October 31, 1982, 6 SCRA 425, also citing Durable Shoe Factory vs. CIR, L-77831, May 31,
1956).

Claimant imputes bad faith on the part of petitioner in refusing to reinstate her in petitioner's other Pizza Inn
outlets or branches then still existing. There is indeed authority for the proposition that complainant be reinstated
to her former position or substantially equivalent employment, if available. However, where an employer suffered
business recession, as in the case at bar, such that its commercial or financial circumstances have changed forcing
it to close one outlet or branch (and subsequently all other outlets also closed shop), respondent Commission,
assuming that petitioner was guilty of unfair labor practice cannot compel the employer to reinstate private
respondent if such reinstatement may exceed the petitioner's needs under the altered conditions. Normally each
outlet had only a sufficient number of employees who served pizzas. It has its own "plantilla" and by
accommodating complainant, it might prejudice and displace other employees. Reinstatement pre-supposes that
the previous position from which one had been removed still exists or that there is an unfilled position more or
less of similar nature as the one previously occupied by the employee. Admittedly, no such position is available.
Reinstatement therefore becomes a legal impossibility. The law cannot exact compliance with what is impossible.
Moreover an employer is privileged to go out of business by closing the same regardless of his reasons especially if
done in good faith and due to causes beyond his control like heavy business losses. To deprive him of such
privilege would be oppressive and inhuman. In such cases, the dismissed employee can no longer be reinstated but
shall be entitled to backwages up to the date of dissolution or closure (but not exceeding three years).

It is on record that the Socio-Economic Analyst of the public respondent computed that award of P29,001.00
covering the period from April, 1982 to September, 1984, which amount complainant admittedly received after
the NLRC Sheriff garnished from the amount deposited at the Philippine Commercial and International Bank
despite the pendency of petitioner's appeal questioning the order of the Labor Arbiter's denial of petitioner's
Motion to Recompute and to Quash/Stay Writ of Execution/Notice of Garnishment under Supersedeas Bond.
Petitioner alleged in said appeal that it was not furnished a copy of such computation nor a chance to refute the
same. Petitioner insisted too that award of backwages should be reasonably limited up to January, 1984 only.
Notwithstanding such contentions, private respondent immediately caused the further computation of backwages
from October 1, 1984 up to November 15, 1985 in the additional sum of P23,188.21 under the pretext that
petitioner has not yet reinstated private respondent (Annex "A," p. 114, Rollo).

As aforementioned the order of reinstatement becomes a legal impossibility as the outlet closed on January 31,
1984. Computing backwages beyond January 1984, the date of closure, would not only be unjust but confiscatory
as well as violative of the Constitution depriving the petitioner of his property rights. The unlimited award would
not only prejudice the herein petitioner but would, as well, impose a crushing financial burden on the already
financially distressed petitioner corporation. The fact that the computation of the backwages was done ex-
parte without giving petitioner a chance or opportunity to comment on said computation is clearly a denial of due
process.

WHEREFORE, the assailed order is hereby SET ASIDE and the case REMANDED to the NLRC for a determination of
the amount of backwages to be paid to the complainant with instructions to receive or require such further
evidence as may be necessary.
CONSUELO B. KUNTING, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (Fifth Division), CAGAYAN DE ORO CITY, ST. JOSEPH SCHOOL,
FR. ALOYSIUS CHANG and/or JOSEFINA MANUEL, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Castillo & Castillo Law Offices for private respondents.

BIDIN, J.:

This special civil action for certiorari seeks to set aside the decision promulgated on October 20, 1989 by the
respondent National Labor Commission (NLRC) which modified the decision dated March 1, 1989 of the Executive
Labor Arbiter declaring illegal petitioner Consuelo B. Kunting's dismissal from employment and ordering
respondent St. Joseph School to pay her backwages equivalent to six months' pay, separation pay, emergency cost
of living allowance differentials, 13th month pay and service incentive leave pay.

In 1969, Consuelo B. Kunting was employed as a teacher by respondent St. Joseph School in Gov. Camins Avenue,
Zamboanga City. She was paid a basic pay and emergency cost of living allowance (ECOLA) except during summer
period when she was paid only the basic pay. Effective January, 1988, her monthly salary was One Thousand Eight
Hundred and Twenty Pesos (P1,820.00) including ECOLA integrated into the basic wage. She was also paid the 13th
month pay up to 1987 but not her service incentive leave pay (Rollo, p. 30).

Every year from 1969 until, the school year 1987-1988, Consuelo and St. Joseph executed a Teacher's Contract. For
the school year 1987-1988, her performance rating was very satisfactory (Rollo, pp. 45-47). In spite of this, St.
Joseph School did not renew her employment contract for the school year 1988-89, thereby terminating her
employment with the school. The termination letter dated April 4, 1988 reads:

Your teaching contract with this school has already expired at the close of this school year 1987-
1988.

We regret to inform you that the administration is not renewing your contract this coming school
year 1988-1989. This notice is served upon you so that you will have time to look for another
employment or to give you full time in your business. (Ibid, p. 4).

On April 14, 1988 (Ibid, p. 31), Consuelo filed a complaint against the St. Joseph School, its Director, Fr. Aloysius
Chang, and Principal, Sister Josephine Manuel, for illegal dismissal, reinstatement and backwages, wage
differentials, 13th month pay, emergency cost of living allowance (ECOLA) and service incentive leave pay.

With only position and supporting documents submitted by the parties as basis, Executive Labor Arbiter Rhett
Julius J. Plagata rendered the decision of March 1, 1989 declaring that Consuelo was illegally dismissed. The
dispositive portion of the decision states:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered in the above-
entitled case:

(1) declaring the dismissal of Consuelo B. Kunting to be illegal, and ordering St. Joseph School to
pay her backwages in the sum of TEN THOUSAND NINE HUNDRED TWENTY PESOS (P10,920.00)
 and separation pay in the sum of FOURTEEN THOUSAND FIVE HUNDRED SIXTY PESOS
(P14,560.00); (2) Further ordering St. Joseph School to pay Consuelo B. Kunting emergency cost
of living allowance differentials in the sum of FOUR HUNDRED FIFTY FIVE PESOS (P455.00); and
service incentive leave pay, in the sum of SEVEN HUNDRED SIX & 45/100 PESOS (P706.45); and
(3) Dismissing the complainant's claim for wage differentials, for lack of merit.

SO ORDERED.

Dissatisfied, petitioner appealed to the respondent NLRC. She prayed that the Executive Labor Arbiter's decision be
modified so as to include her re-instatement to her former position without loss of seniority rights with option to
accept separation benefits and payment of full backwages from April 4, 1988 up to the actual date of re-
instatement, the 13th month pay to cover the period between April 4, 1988 and her actual reinstatement, and
moral damages of P25,000.00 plus attorney's fees.

In its decision, the NLRC affirmed the finding of the Executive Labor Arbiter that Consuelo was illegally dismissed
on the ground that the twin requirements of notice and hearing, which constitute essential elements of due
process in cases of dismissal of employees, were not complied with. Inasmuch as Consuelo was a regular employee
under Art. 280 of the Labor Code, the NLRC opined that her employment for more than sixteen (16) years could
not be terminated by the school on the pretext that her "teaching Contract" had expired.

Notwithstanding its findings of illegal dismissal, the NLRC nonetheless sustained the Executive Labor Arbiter's
ruling as regards the payment of separation pay in lieu of reinstatement due to the alleged "strained relations"
between the parties which existed as a result of the illegal dismissal, and the alleged failure of Consuelo to refute
the accusations leveled against her by her employer. However, the NLRC modified the grant of six (6) months
backwages and ordered instead the payment of backwages without qualification and deduction, computed from
the date of promulgation of its decision, i.e. October 20, 1989. It further ordered that petitioner's length of service
be reckoned from 1969 up to the promulgation of its decision.

The NLRC further upheld the Executive Labor Arbiter's decision with respect to the payment of the 13th month pay
and service incentive pay and the disallowance of claim for wage differentials. However, the NLRC, like the
Executive Labor Arbiter, denied Consuelo's claims for moral damages and attorney's fees on the ground that
although they were set out in her position paper, they had not been alleged in the complaint.

Consuelo moved for the reconsideration of the above decision but the same was denied. Dissatisfied, she filed the
instant petition.

In this petition, petitioner contends that respondent NLRC committed grave abuse of discretion amounting to lack
of jurisdiction in: (a) awarding separation pay in lieu of reinstatement after a "clear" finding of illegal dismissal; (b)
failing to award full backwages from the time of her dismissal until actual reinstatement; (c) denying her claim for
moral damages and attorney's fees, and (d) failing to award 13th month pay for school year 1988-1989.

Before considering the merits of the substantive issues raised in this petition, private respondents' contention that
the instant petition for certiorari is not the proper remedy since the NLRC did not commit grave abuse of discretion
and that only questions of facts are involved in this case. (Ibid, p. 79), should be dealt with first.

Petitioner did not err in filing the instant petition. In Pearl S. Buck Foundation v. NLRC, 182 SCRA 446 [1990], the
Court held that the only way it can review the decision of the NLRC is by way of petition for certiorari under Rule
65 of the Rules of Court. * While factual findings of the NLRC are accorded not only respect but also finality if
supported by substantial evidence (Reyes & Lim Co., Inc. v. NLRC, 201 SCRA 772 [1991]) considering the NLRC's
expertise in their field (Chua v. NLRC, 182 SCRA 353 [1990]; Lopez Sugar Corporation v. FFW, 189 SCRA 179 [1990]),
any allegations of fact may still be considered by this Court but only to determine whether the NLRC had no
jurisdiction, gravely abused its discretion, violated due process, denied substantial justice or erroneously
interpreted the law (Liberty Flour Mills Employees v. Liberty Flour Mills, Inc., 180 SCRA 689 [1989]).
Hence, certiorari is the proper remedy in this case.

We now come to the merits of the issues raised by petitioner. She contends that the NLRC gravely abused its
discretion in ordering the payment of separation pay in lieu of reinstatement notwithstanding its finding that she
had been illegally dismissed. Interrelated with this contention is her allegation that as a consequence of the NLRC's
finding of illegal dismissal, she is entitled to reinstatement with full backwages from the time of her illegal
dismissal on April 4, 1988 up to the date of actual reinstatement in consonance with Art. 279 of the Labor Code.
She argues that under said provision of the law and the Constitution, her right to security of tenure should be
upheld over and above the perceived "strained relations" between her and private respondents.

On the other hand, public respondent maintains that the right of an unjustly dismissed employee to reinstatement
and backwages under Article 279 of the Labor Code is not without exceptions under the prevailing jurisprudence.
Thus, it is argued, reinstatement may not be ordered when it has become a legal impossibility or to spare both
employer and employee from an atmosphere of antipathy and antagonism (Galindez v. Rural Bank of Llanera, Inc.,
175 SCRA 132 [1989]; Commercial Motors Corporation v. NLRC, 192 SCRA 191 [1990]).

Indeed, an illegally dismissed employee's right to reinstatement is not absolute. The Court has a long line of
decisions concerning non-reinstatement of illegally dismissed employees on various grounds (Divine Word High
School, et al. v. NLRC, et al., 143 SCRA 346 [1986]; Asiaworld Publishing House, Inc, v. Hon. Blas Ople. 152 SCRA
[1987]; Flores v. Nuestro, 160 SCRA 568 [1988]; Galindez v. Rural Bank of Llanera, Inc. supra; Century Textile Mills
v. NLRC, 161 SCRA 528 [1988]). One of these grounds is when there is a finding that the relationship between the
parties has become so strained and ruptured as to preclude a harmonious working relationship (Citytrust Finance
Corp. v. NLRC, et al., G.R. 75740, January 15, 1988, 157 SCRA 87; Commercial Motors Corp. v, NLRC, supra). In the
case at bar, however, the peculiar circumstances surrounding the dismissal of petitioner simply do not show such
kind of strained relationship as to warrant the severance of the working relationship between the parties.

The order to grant petitioner separation pay instead of reinstatement is predicated on the following finding of
strained relations by the Executive Labor Arbiter which was sustained by the NLRC:

. . . . In the instant case, while the manner of dismissal was patently illegal, still complainant
failed to refute the charges or lapses in her conduct as a teacher, i.e. disrespectful at time, acts of
insubordination, non-improvement in her teaching methods, etc. (Affidavit of Sister Josefina
Manuel, O.P., Annex "7" respondent's position paper, p. 7, Record). As aptly put by the Executive
Labor Arbiter, reinstatement would bring the parties in close or frequent contact in work that
may only serve to further aggravate and inflame the existing animosity and antagonism between
them. (Rollo, p. 26; Emphasis supplied).

As shown by the above-quoted portion of the decision of the NLRC, conclusion on the "strained relations" between
petitioner and private respondents was merely gathered from the latter's evidence on the former's less than ideal
conduct and nothing more. There is no proof that such conduct actually caused animosity between her and private
respondents. Besides, there is no clear showing that the perceived "strained relations" between the parties is of so
serious a nature or of such a degree as to justify petitioner's dismissal.

"Strained relations," as amplified in Employee's Association of the Philippine American Life Insurance Company v.
NLRC, 199 SCRA 628 [1991], must be of such a nature or degree as to preclude reinstatement. But, where the
differences between the parties are neither personal nor physical, nor serious, then there is no reason why the
illegally dismissed employee should not be reinstated rather than simply given separation pay and backwages.
More so if the cause of the perceived 'strained relations' is the filing of a complaint for illegal dismissal. As the
Court held in Globe-Mackay Cable and Radio Corporation v. NLRC, 206 SCRA 701 [1992], citing Anscor Transport
and Terminals v. NLRC, 190 SCRA 147 [1990]; Sibal v. Notre Dame of Greater Manila, 182 SCRA 538 [1990]:
 Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwise
reinstatement can never be possible simply because some hostility is invariably engendered
between the parties as a result of litigation. That is human nature.

Besides, no strained relations should arise from a valid and legal act of asserting one's right;
otherwise an employee who shall assert his right could be easily separated from the service, by
merely paying his separation pay on the pretext that his relationship with his employer had
already been strained.

Whatever resentments had been harbored by petitioner upon her unceremonious dismissal after having been
employed by St. Joseph School for more than sixteen (16) years is understandable. Such resentments, however,
would not suffice to deny her reemployment because to do so would render for naught her constitutional right to
security of tenure and her corollary right to reinstatement under Article 279 of the Labor Code. Petitioner is, after
all, a permanent teacher as she had rendered more than three years of satisfactory service (St. Theresita's
Academy v. NLRC, 215 SCRA 181 [1992]). Given the fact that her employer is a religious institution, there can be no
room for antagonism between the parties even after the termination of this litigation. Furthermore, this Court
in Tolentino v. NLRC, (152 SCRA 717 [1987]) held:

Security of tenure is a right of paramount value as recognized and guaranteed under our new
constitution. The state shall afford full protection to labor, . . . and promote full employment and
equality of employment opportunities for all. It shall guarantee the right of all workers to . . .
security of tenure. . . . (Sec. 3 Art. XIII on Social Justice and Human Rights, 1987 Constitution of
the Republic of the Philippines.) Such Constitutional Right should not be denied on mere
speculation of any similar unclear and nebulous basis.

Closely related to the right to reinstatement is the employee's right to receive backwages which represent the
compensation that an unjustly dismissed employee should have received had said employee not bee dismissed.
Petitioner claims that she is entitled to full backwages (computed from the date of dismissal until actual
reinstatement) under Article 279 of the Labor Code. This contention, however, is not supported by prevailing
jurisprudence which limits the award of backwages to three (3) years without qualification and deduction
(Maranaw Hotels and Resorts Corp. v. Court of Appeals, 215 SCRA 501 [1992], citing Sealand Service, Inc. v. NLRC,
190 SCRA 347 [1990]).

While Republic Act No. 6715 amending Sec. 279, of the Labor Code grants full backwages to dismissed employees
computed from the date of their illegal dismissal up to the date of actual reinstatement, the same cannot be
applied in the case at bar. This is because petitioner was illegally dismissed on April 4, 1988, or before the
effectivity of R.A. 6715 on March 21, 1989.

In Lantion v. NLRC (181 SCRA 513 [1990]), We held that nothing in R.A. 6715 provides for its retroactive
application. Necessarily, awards of backwages in cases of illegal dismissal initiated before the effectivity of R.A.
6715 will have to be resolved by applying the three-year limit formulated in the case of Mercury, Drug Co., Inc. v.
CIR (56 SCRA 694 [1974]; see Ferrer v. NLRC, G.R. No. 100898, July 5. 1993).

Petitioner's claim for the thirteenth month pay is mandated by Presidential Decree No. 851 which has been
modified by Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986 so as to
remove the salary ceiling of P1,000 of employees entitled. The "Revised Guidelines on the Implementation of the
13th Month Pay Law" which was issued on November 16, 1987 by then Labor Secretary Franklin M. Drilon,
specifically singles out the case of private school teachers like the petitioner herein. The guidelines state:

(c) Private School Teachers. — Private school teachers, including faculty members of universities
and colleges, are entitled to the required 13th month pay, regardless of the number of months
 they teach or are paid within a year, if they have rendered service for at least one (1) month
within a year.

Applying this guideline to the petitioner, she is entitled to a 13th month pay for 1988 as she served more than
three months for that year. Although P.D. No. 851 was conceived "to further protect the level of real wages from
the ravage of world-wide inflation," it would be unfair for the employer to grant petitioner 13th month pay for the
years she had not rendered service. Thus, upon her reinstatement, payment of the 13th pay should be in
accordance with the aforequoted guideline and that set forth in UST Faculty Union v. NLRC, 190 SCRA 215
[1990]), i.e., it shall not be granted if St. Joseph School gives its equivalent or when the said employer shall be
subjected to "double-burden."

As to the claims for moral damages and attorney's fees, there appears to be no sufficient evidence thereon as its
denial was due to petitioner's failure to aver the same in her complaint, although they were set out in her position
paper. Nonetheless, the Solicitor General correctly supported petitioner's allegation that rules of procedures
should not be applied in a very rigid and technical sense in labor cases (Rollo., p. 90). This allegation is supported
by Art. 221 the Labor Code which provides that the rules of evidence prevailing in courts of law and equity are not
controlling in labor proceedings.

Thus, instead of disregarding petitioner's claims for moral damages and attorney's fees, the Executive Labor
Arbiter should have ascertained the facts alleged by petitioner in her position paper. The Labor Code is a social
legislation intended primarily to promote and protect the rights of the laborers. Hence, labor officials should use
all reasonable means to ascertain the facts in each case speedily and objectively without regard to technicalities of
law or procedure, all in the interest of due process (211 SCRA 509 [1992], citing Philippine Telegraph and
Telephone Corporation v. NLRC, (183 SCRA 451 [1990]). Thus, by their failure to rule on this particular claims, the
Executive Labor Arbiter and NLRC committed grave abuse of discretion as they failed to avert further delay in the
disposition of this case.

We cannot, however, subscribe to petitioner's assertion that, the issue of damages can be ruled upon by this Court
without the necessity of' remanding the same to public respondent for determination (Rollo, pp. 101-102). While,
it is true that "sound practice seeks to accommodate the theory which avoids waste of time, effort and expense, to
the parties and government, not to speak of the delay in the disposal of the case"' (De Guzman v. NLRC, G.R. No.
90856, July 23, 1992, citing Fernandez v. Garcia, 92 Phil. 592 [1953]), nevertheless, it is in the best interest of both
parties that the determination of whether or not moral damages and/or attorney's fees should be awarded, be left
to the Executive Labor Arbiter who is in a better position to rule on said issue.

WHEREFORE, the decision of public respondent National Labor Relations Commission is hereby AFFIRMED with
modifications as follows: Private respondent is hereby ordered to reinstate petitioner Consuelo B. Kunting to her
former or equivalent position without loss of seniority rights with payment of backwages for three (3) years and
the13th month pay for 1988. The Executive Labor Arbiter is likewise ordered to determine with dispatch
petitioner's claims for moral damages and attorney's fees. No costs.
Acesite Corporation vs. NLRC

Facts: * Leo A. Gonzales (Gonzales) was a Chief of Security of Acesite Corporation. * Gonzales took several
leaves (sick leave, emergency leave, and vacation leave), thereby using up all leaves that he was entitled for
the year. * Before the expiration of his 12-day vacation leave, Gonzales filed an application for emergency
leave for 10 days commencing on April 30 up to May 13, 1998. The application was not, however, approved.
* He received a telegram informing him of the disapproval and asking him to report back for work on April
30, 1998.

However Gonzales did not report for work on the said date. * On May 5, 1998, Acesite sent him a final telegram
in his provincial address containing in order for Gonzales to report back to work. * Gonzales, who claims to
have received the May 5, 1998 telegram only in the afternoon of May 7, 1998, immediately repaired back to
Manila on May 8, 1998 only to be “humiliatingly and ignominiously barred by the guard (a subordinate of
[Gonzales]) from entering the premises. * It appears that on May 7, 1998, the issued notice of termination
was thru an inter-office memo. * Gonzales thus filed on May 27, 1998 a complaint against Acesite for illegal
dismissal with prayer for reinstatement and payment of full backwages, etc. * Acesite claims, Gonzales
“showed no respect for the lawful orders for him to report back to work and repeatedly ignored all telegrams
sent to him,” and it merely exercised its legal right to dismiss him under the House Code of Discipline. LA –
the complaint for lack of merit, its holding that Gonzales was dismissed for just cause an d was not denied of
due process. * NLRC – reversed that of the Labor Arbiter. * CA – finding that Gonzales was illegally dismissed,
affirmed with modification the NLRC decision.

Issue: * WON Gonzales was legally dismissed for just cause.

Held: * No. there appears to have been no just cause to dismiss Gonzales from employment.

As correctly ruled by the Court of Appeals, Gonzales cannot be considered to have willfully disobeyed his
employer. Willful disobedience entails the concurrence of at least two (2) r equisites: the employee’s assailed
conduct has been willful or intentional, the willfulness being characterized by a “wrongful and perverse
attitude;” and the order violated must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he had been engaged to discharge. In Gonzales’ case, his assailed conduct has not
been shown to have been characterized by a perverse attitude, hence, the first requisite is wanting. His receipt
of the telegram disapproving his application for emergency leave starting April 30, 1998 has not been shown.
And it cannot be said that he disobeyed the May 5, 1998 telegram since he received it only on May 7, 1998.
On the contrary, that he immediately hired back to Manila upon receipt thereof negat es a perverse attitude.
Manila Diamond Hotel Ee Union vs CA
GR 140518
Facts:
The Union filed a petition for a certification election, which was dismissed by the DOLE. Despite the dismissal of
their petition, the Union sent a letter to the Hotel informing the latter of its desire to negotiate for a collective
bargaining agreement. The Hotel, however, refused to
negotiate with the Union, citing the earlier dismissal of the Union’s petition for certification by DOLE.

Failing to settle the issue, the Union staged a strike against the Hotel. Numerous confrontations followed, further
straining the relationship between the Union and the Hotel. The Hotel claims that the strike was illegal and
dismissed some employees for their participation in the allegedly illegal concerted activity. The Union, on the other
hand, accused the Hotel of illegally dismissing the workers.

A Petition for Assumption of Jurisdiction under Article 263(g) of the Labor Code was later filed by the Union before
the Secretary of Labor. Thereafter, Secretary of Labor Trajano issued an Order directing the striking officers and
members of the Union to return to work within twenty-four (24) hours and the Hotel to accept them back under
the same terms and conditions prevailing prior to the strike.

After receiving the above order the members of the Union reported for work, but the Hotel refused to accept
them and instead filed a Motion for Reconsideration of the Secretary’s Order.Acting on the motion for
reconsideration, then Acting Secretary of Labor Español modified the one earlier issued by Secretary Trajano and
instead directed that the strikers be reinstated only in the payroll.

Issue: WON payroll reinstatement is proper in lieu of actual reinstatement under Article 263(g)
of the Labor Code.
Held:Payroll reinstatement in lieu of actual reinstatement is not sanctioned under the provision of the said article.
The Court noted the difference between UST vs. NLRC and the instant case. In UST case the teachers could not be
given back their academic assignments since the order of the Secretary for them to return to work was given in the
middle of the first semester of the academic year.
The NLRC was, therefore, faced with a situation where the striking teachers were entitled to a return to work
order, but the university could not immediately reinstate them since it would be impracticable and detrimental to
the students to change teachers at that point in time.

In the present case, there is no similar compelling reason that called for payroll reinstatement as an alternative
remedy. A strained relationship between the striking employees and management is no reason for payroll
reinstatement in lieu of actual reinstatement.Under Article 263(g), all workers must immediately return to work
and all employers must readmit all of them under the same terms and conditions prevailing before the strike or
lockout.The Court pointed out that the law uses the precise phrase of “under the same terms and conditions,”
revealing that it contemplates only actual reinstatement. This is in keeping with the rationale that any work
stoppage or slowdown in that particular industry can be inimical to the
national economy.

The Court reiterates that Article 263(g) was not written to protect labor from the excesses of management, nor
was it written to ease management from expenses, which it normally incurs during a work stoppage or slowdown.
This law was written as a means to be used by the State to
protect itself from an emergency or crisis. It is not for labor, nor is it for management.

Petition granted.
ALEJANDRO ROQUERO, petitioner, vs. PHILIPPINE AIRLINES, INC., respondent.

FACTS

Roquero, along with Rene Pabayo, were ground equipment mechanics of respondent PAL. From the evidence on
record, it appears that Roquero and Pabayo were caught red-handed possessing and using Methampethamine
Hydrochloride or shabu in a raid conducted by PAL security officers and NARCOM personnel. Roquero and Pabayo
received a “notice of administrative charge” for violating the PAL Code of Discipline. They were required to answer
the charges and were placed under preventive suspension. Roquero and company alleged that they were set up by
PAL to take the drugs through a certain trainee. In a Memorandum dated July 14, 1994, Roquero and Pabayo were
dismissed by PAL. Thus, they filed a case for illegal dismissal.

The Labor Arbiter ruled against Roquero and upheld the validity of their dismissal, but awarded separation pay.

While the case was on appeal with the NLRC, the complainants were acquitted by the RTC, in the criminal case which
charged them with “conspiracy for possession and use of a regulated drug in violation of Section 16, Article III of
Republic Act 6425,” on the ground of instigation.

The NLRC ruled in favor of complainants as it likewise found PAL guilty of instigation. It ordered reinstatement to
their former positions but without backwages. Complainants did not appeal from the decision but filed a motion for
a writ of execution of the order of reinstatement. The Labor Arbiter granted the motion but PAL refused to execute
the said order on the ground that they have filed a Petition for Review before this Court. In accordance with the case
of St. Martin Funeral Home vs. NLRC and Bienvenido Aricayos, PAL’s petition was referred to the Court of Appeals.

The CA reversed the decision of the NLRC and held that petitioner’s dismissal was valid, but it denied the award of
separation pay. Hence, petitioner filed this petition for review under Rule 45.

ISSUE

Whether or not PAL can validly refuse to execute an order for reinstatement on the ground that the case is still on
appeal.

HELD

The SC held that PAL cannot refuse to execute an order for reinstatement on the ground that the case is still on
appeal.

Article 223(3) of the Labor Code (as amended by Section 12 of Republic Act No. 6715, and Section 2 of the NLRC
Interim Rules on Appeals under RA No. 6715, Amending the Labor Code) provide that an order of reinstatement by
the Labor Arbiter is immediately executory even pending appeal.

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a
dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies and
enhances the provisions of the 1987 Constitution on labor and the working man. These duties and responsibilities
of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully
underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal
intensity. Labor is an indispensable partner for the nation’s progress and stability. In short, with respect to decisions
reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending
appeal.

Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation,
pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop,
although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the
survival or even the life of the dismissed or separated employee and his family.

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite
the issuance of a writ of execution. Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter
to implement the order of reinstatement. In the case at bar, no restraining order was granted.

Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so,
PAL must pay Roquero the salary he is entitled to, as if he was reinstated, from the time of the decision of the NLRC
until the finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied only in a
suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat them. Hence, even if
the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to
reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court.
On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to
such, more so if he actually rendered services during the period.

Dismissal of Petitioner is affirmed, but respondent PAL is ordered to pay the wages to which Roquero is entitled from
the time the reinstatement order was issued until the finality of this decision.
JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners,
vs.
PHILIPPINE AIRLINES, INC., Respondent.

DECISION

QUISUMBING, J.:

This petition for review assails both the Decision1 dated December 5, 2003 and the Resolution2 dated April 16,
2004 of the Court of Appeals in CA-G.R. SP No. 69540, which had annulled the Resolutions3 dated November 26,
2001 and January 28, 2002 of the National Labor Relations Commission (NLRC) in NLRC Injunction Case No.
0001038-01, and also denied the motion for reconsideration, respectively.

The antecedent facts of the case are as follows:

Petitioners Alberto J. Dumago and Juanito A. Garcia were employed by respondent Philippine Airlines, Inc. (PAL) as
Aircraft Furnishers Master "C" and Aircraft Inspector, respectively. They were assigned in the PAL Technical Center.

On July 24, 1995, a combined team of the PAL Security and National Bureau of Investigation (NBI) Narcotics
Operatives raided the Toolroom Section – Plant Equipment Maintenance Division (PEMD) of the PAL Technical
Center. They found petitioners, with four others, near the said section at that time. When the PAL Security
searched the section, they found shabu paraphernalia inside the company-issued locker of Ronaldo Broas who was
also within the vicinity. The six employees were later brought to the NBI for booking and proper investigation.

On July 26, 1995, a Notice of Administrative Charge4 was served on petitioners. They were allegedly "caught in the
act of sniffing shabu inside the Toolroom Section," then placed under preventive suspension and required to
submit their written explanation within ten days from receipt of the notice.

Petitioners vehemently denied the allegations and challenged PAL to show proof that they were indeed "caught in
the act of sniffing shabu." Dumago claimed that he was in the Toolroom Section to request for an allen wrench to
fix the needles of the sewing and zigzagger machines. Garcia averred he was in the Toolroom Section to inquire
where he could take the Trackster’s tire for vulcanizing.

On October 9, 1995, petitioners were dismissed for violation of Chapter II, Section 6, Article 46 (Violation of
Law/Government Regulations) and Chapter II, Section 6, Article 48 (Prohibited Drugs) of the PAL Code of
Discipline.5 Both simultaneously filed a case for illegal dismissal and damages.

In the meantime, the Securities and Exchange Commission (SEC) placed PAL under an Interim Rehabilitation
Receiver due to severe financial losses.

On January 11, 1999, the Labor Arbiter rendered a decision 6 in petitioners’ favor:

WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the respondents guilty of
illegal suspension and illegal dismissal and ordering them to reinstate complainants to their former position
without loss of seniority rights and other privileges. Respondents are hereby further ordered to pay jointly and
severally unto the complainants the following:

Alberto J. Dumago - P409,500.00 backwages as of 1/10/99

34,125.00 for 13th month pay

Juanito A. Garcia - P1,290,744.00 backwages as of 1/10/99

107,562.00 for 13th month pay

The amounts of P100,000.00 and P50,000.00 to each complainant as and by way of moral and exemplary damages;
and

The sum equivalent to ten percent (10%) of the total award as and for attorneys fees.

Respondents are directed to immediately comply with the reinstatement aspect of this Decision. However, in the
event that reinstatement is no longer feasible, respondent[s] are hereby ordered, in lieu thereof, to pay unto the
complainants their separation pay computed at one month for [e]very year of service.

SO ORDERED.7

Meanwhile, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.

On appeal, the NLRC reversed the Labor Arbiter’s decision and dismissed the case for lack of
merit.8Reconsideration having been denied, an Entry of Judgment9 was issued on July 13, 2000.

On October 5, 2000, the Labor Arbiter issued a Writ of Execution 10 commanding the sheriff to proceed:

xxxx

1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village, Makati City or to any of its
Offices in the Philippines and cause reinstatement of complainants to their former position and to cause
the collection of the amount of [₱]549,309.60 from respondent PAL representing the backwages of said
complainants on the reinstatement aspect;

2. In case you cannot collect from respondent PAL for any reason, you shall levy on the office equipment
and other movables and garnish its deposits with any bank in the Philippines, subject to the limitation that
equivalent amount of such levied movables and/or the amount garnished in your own judgment, shall be
equivalent to [₱]549,309.60. If still insufficient, levy against immovable properties of PAL not otherwise
exempt from execution.

x x x x11

Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter issued a Notice of
Garnishment12addressed to the President/Manager of the Allied Bank Head Office in Makati City for the amount of
₱549,309.60.

PAL moved to lift the Notice of Garnishment while petitioners moved for the release of the garnished amount. PAL
opposed petitioners’ motion. It also filed an Urgent Petition for Injunction which the NLRC resolved as follows:

WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly, the Writ of Execution dated
October 5, 2000 and related [N]otice of Garnishment [dated October 25, 2000] are DECLARED valid. However, the
instant action is SUSPENDED and REFERRED to the Receiver of Petitioner PAL for appropriate action.

SO ORDERED.13
PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ of execution and the notice of
garnishment valid, the NLRC gave petitioners undue advantage and preference over PAL’s other creditors and
hampered the task of the Permanent Rehabilitation Receiver; and (2) there was no longer any legal or factual basis
to reinstate petitioners as a result of the reversal by the NLRC of the Labor Arbiter’s decision.

The appellate court ruled that the Labor Arbiter issued the writ of execution and the notice of garnishment
without jurisdiction. Hence, the NLRC erred in upholding its validity. Since PAL was under receivership, it could not
have possibly reinstated petitioners due to retrenchment and cash-flow constraints. The appellate court declared
that a stay of execution may be warranted by the fact that PAL was under rehabilitation receivership. The
dispositive portion of the decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE.
The assailed November 26, 2001 Resolution, as well as the January 28, 2002 Resolution of public respondent
National Labor Relations Commission is hereby ANNULLED and SET ASIDE for having been issued with grave abuse
of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of
Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.

SO ORDERED.14

Hence, the instant petition raising a single issue as follows:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS ARE ENTITLED TO
THEIR ACCRUED WAGES DURING THE PENDENCY OF PAL’S APPEAL.15

Simply put, however, there are really two issues for our consideration: (1) Are petitioners entitled to their wages
during the pendency of PAL’s appeal to the NLRC? and (2) In the light of new developments concerning PAL’s
rehabilitation, are petitioners entitled to execution of the Labor Arbiter’s order of reinstatement even if PAL is
under receivership?

We shall first resolve the issue of whether the execution of the Labor Arbiter’s order is legally possible even if PAL
is under receivership.

We note that during the pendency of this case, PAL was placed by the SEC first, under an Interim Rehabilitation
Receiver and finally, under a Permanent Rehabilitation Receiver. The pertinent law on this matter, Section 5(d) of
Presidential Decree (P.D.) No. 902-A, as amended, provides that:

SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission
over corporations, partnerships and other forms of associations registered with it as expressly granted under
existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

xxxx

d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in

cases where the corporation, partnership or association possesses property to cover all of its debts but foresees
the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or
association has no sufficient assets to cover its liabilities, but is under the [management of a rehabilitation receiver
or] Management Committee created pursuant to this Decree.

The same P.D., in Section 6(c) provides that:

SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
xxxx

c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the
investing public and creditors:…Provided, finally, That upon appointment of a management committee,
rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court, tribunal, board or body
shall be suspended accordingly.

xxxx

Worth stressing, upon appointment by the SEC of a rehabilitation receiver, all actions for claims against the
corporation pending before any court, tribunal or board shall ipso jure be suspended. The purpose of the
automatic stay of all pending actions for claims is to enable the rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the
corporation.16

More importantly, the suspension of all actions for claims against the corporation embraces all phases of the suit,
be it before the trial court or any tribunal or before this Court. 17 No other action may be taken, including the
rendition of judgment during the state of suspension. It must be stressed that what are automatically stayed or
suspended are the proceedings of a suit and not just the payment of claims during the execution stage after the
case had become final and executory.18

Furthermore, the actions that are suspended cover all claims against the corporation whether for damages
founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary
nature.19 No exception in favor of labor claims is mentioned in the law. 201avvphi1

This Court’s adherence to the above-stated rule has been resolute and steadfast as evidenced by its oft-repeated
application in a plethora of cases involving PAL, the most recent of which is Philippine Airlines, Inc. v. Zamora. 21

Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal to the
NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC,
as well as the Court of Appeals should have abstained from resolving petitioners’ case for illegal dismissal and
should instead have directed them to lodge their claim before PAL’s receiver. 22

However, to still require petitioners at this time to re-file their labor claim against PAL under the peculiar
circumstances of the case – that their dismissal was eventually held valid with only the matter of reinstatement
pending appeal being the issue – this Court deems it legally expedient to suspend the proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are
SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is
hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.
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
ofthe 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 cost

TITLE: MAGTULAC VS NLRC; 189 SCRA 767
CASE NO. 26

FACTS:

Jose M. Maglutac, petitioner, (hereinafter referred to as complainant) was employed by Commart (Phils.), Inc.
(hereinafter referred to as Commart) sometime in February, 1980 and rose to become the Manager of its Energy
Equipment Sales. On October 3, 1984, he received a notice of termination signed by Joaquin S. Cenzon, Vice-
President-General Manager and Corporate Secretary of CMS International, a corporation controlled by Commart.

Thereafter, Jose Maglutac filed a complaint for illegal dismissal against Commart and Jesus T. Maglutac, President
and Chairman of the Board of Directors of Commart. The complainant alleged that his dismissal was part of a
vendetta drive against his parents who dared to expose the massive and fraudulent diversion of company funds to
the company president's private accounts, stressing that complainant's efficiency and effectiveness were never put
to question when very suddenly he received his notice of termination.

Commart and Jesus T. Maglutac, on the other hand, justified the dismissal for lack of trust and confidence brought
about by complainant and his family's establishment of a company, MM International, in direct competition with
Commart.

The Labor Arbiter, rendered a decision finding that complainant was illegally dismissed and to pay complainant
jointly and severally moral damages, exemplary damages and to pay ten per cent (10%) attorney's fees.

Commart and Jesus T. Maglutac filed a motion for reconsideration of the decision of the Labor Arbiter which was
treated as an appeal to the National Labor Relations Commission (NLRC). The NLRC affirmed the finding of the Labor
Arbiter that complainant was illegally dismissed by Commart but it deleted the award for moral and exemplary
damages in favor of complainant and absolved Jesus T. Maglutac from any personal liability to the complainant.

On August 29, 1988, Commart filed a manifestation stating that it had become insolvent and that it had suspended
operations since January, 1986.

ISSUE:
Whether Jesus T. Maglutac should be held liable in solidum with Commart.

RULING:

YES.

The Supreme Court ruled that the most ranking officer of the corporation can be held jointly and severally liable with
the corporation for the payment of the unpaid wages of its president.

In the case of Chua v. NLRC, G.R. 81450, Feb. 15, 1990, citing the case of A.C. Ransom Labor Union-CCLU v. NLRC,
142 SCRA 269, the court explained that:

(c) Employer includes any person acting in the interest of an employer directly or indirectly. The term shall
not include any labor organization or any of its officers or agents except when acting as employer.

...Since RANSOM is an artificial person, it must have an officer who can be presumed to be the employer,
being the 'person acting in the interest of employer,' RANSOM. The Corporation, only in the technical sense
is the employer.

The responsible officer of an employer corporation can be held personally, not to say even criminally, liable
for non-payment of backwages.
And, in the later case of Gudez, et al., v. NLRC, et al., G.R. No. 83023, March 23, 1990, the Supreme Court held the
president and treasurer, jointly and severally liable with the corporation. In the said case, the employer corporation
was ordered to cease operations and the corporation, on the same day when the Labor Arbiter promulgated its
decision, filed a petition for voluntary insolvency, the Supreme Court held:

The foregoing circumstances make it more necessary to hold respondent Crisologo liable for the claims due
to petitioners; otherwise, any decision that would be rendered in favor of the latter would be useless and
ineffective for there would no one against whom it can be enforced.

The same circumstances obtain in the instant case in the light of the manifestation of Commart that it had become
insolvent and that it had suspended operations.

Moreover, not only was Jesus T. Maglutac the most ranking officer of Commart at the time of the termination of the
complainant, it was likewise found that he had a direct hand in the latter's dismissal. The Labor Arbiter therefore,
correctly ruled that Jesus T. Maglutac was jointly and severally liable with Commart.

The decision of the Labor Arbiter is REINSTATED but the award of damages is reduced In lieu of reinstatement,
private respondents are ordered to pay complainant separation pay of one month salary for every year of service in
addition to his backwages equivalent to three years.
ATTY. WILFREDO TAGANAS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MELCHOR ESCULTURA, ET AL., respondents.

RESOLUTION

FRANCISCO, J.:

Petitioner Atty. Wilfredo E. Taganas represented herein private respondents in a labor suit for illegal dismissal,
underpayment and non-payment of wages, thirteenth-month pay, attorney's fees and damages conditioned upon
a contingent fee arrangement granting the equivalent of fifty percent of the judgment award plus three hundred
pesos appearance fee per hearing.1 The Labor Arbiter ruled in favor of private respondents and ordered Ultra
Clean Services (Ultra) and the Philippine Tuberculosis Society, Inc., (PTSI) respondents therein, jointly and severally
to reinstate herein private respondents with full backwages, to pay wage differentials, emergency cost of living
allowance, thirteenth-month pay and attorney's fee, but disallowed the claim for damages for lack of basis. 2 This
decision was appealed by Ultra and PTSI to the National Labor Relations Commission (NLRC), and subsequently by
PTSI to the Court but to no avail. During the execution stage of the decision, petitioner moved to enforce his
attorney's charging lien.3 Private respondents, aggrieved for receiving a reduced award due to the attorney's
charging lien, contested the validity of the contingent fee arrangement they have with petitioner, albeit four of the
fourteen private respondents have expressed their conformity thereto.4

Finding the arrangement excessive, the Labor Arbiter ordered the reduction of petitioner's contingent fee from
fifty percent of the judgment award to ten percent, except for the four private respondents who earlier expressed
their conformity.5 Petitioner appealed to NLRC which affirmed with modification the Labor Arbiter's order by ruling
that the ten percent contingent fee should apply also to the four respondents even if they earlier agreed to pay a
higher percentage.6 Petitioner's motion for reconsideration was denied, hence this petition for certiorari.

The sole issue in this petition is whether or not the reduction of petitioner's contingent fee is warranted. Petitioner
argues that respondent NLRC failed to apply the pertinent laws and jurisprudence on the factors to be considered
in determining whether or not the stipulated amount of petitioner's contingent fee is fair and reasonable.
Moreover, he contends that the invalidation of the contingent fee agreement between petitioner and his clients
was without any legal justification especially with respect to the four clients who manifested their conformity
thereto. We are not persuaded.

A contingent fee arrangement is an agreement laid down in an express contract between a lawyer and a client in
which the lawyer's professional fee, usually a fixed percentage of what may be recovered in the action is made to
depend upon the success of the litigation.7 This arrangement is valid in this jurisdiction.8 It is, however, under the
supervision and scrutiny of the court to protect clients from unjust charges.9 Section 13 of the Canons of
Professional Ethics states that "[a] contract for a contingent fee, where sanctioned by law, should be reasonable
under all the circumstances of the case including the risk and uncertainty of the compensation, but should always
be subject to the supervision of a court, as to its reasonableness". Likewise, Rule 138, Section 24 of the Rules of
Court provides:

Sec. 24. Compensation of attorneys; agreement as to fees. — An attorney shall be entitled to

have and recover from his client no more than a reasonable compensation for his services, with a
view to the importance of the subject-matter of the controversy, the extent of the services
rendered, and the professional standing of the attorney. No court shall be bound by the opinion
of attorneys as expert witnesses as to the proper compensation but may disregard such
testimony and base its conclusion on its own professional knowledge. A written contract for
 services shall control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable.

When it comes, therefore, to the validity of contingent fees, in large measure it depends on the
reasonableness of the stipulated fees under the circumstances of each case. The reduction of
unreasonable attorney's fees is within the regulatory powers of the courts. 10

We agree with the NLRC's assessment that fifty percent of the judgment award as attorney's fees is excessive and
unreasonable. The financial capacity and economic status of the client have to be taken into account in fixing the
reasonableness of the fee.11 Noting that petitioner's clients were lowly janitors who receive miniscule salaries and
that they were precisely represented by petitioner in the labor dispute for reinstatement and claim for backwages,
wage differentials, emergency cost of living allowance, thirteenth-month pay and attorney's fees to acquire what
they have not been receiving under the law and to alleviate their living condition, the reduction of petitioner's
contingent fee is proper. Labor cases, it should be stressed, call for compassionate justice.

Furthermore, petitioner's contingent fee falls within the purview of Article 111 of the Labor Code. This article fixes
the limit on the amount of attorney's fees which a lawyer, like petitioner, may recover in any judicial or
administrative proceedings since the labor suit where he represented private respondents asked for the claim and
recovery of wages. In fact, We are not even precluded from fixing a lower amount than the ten percent ceiling
prescribed by the article when circumstances warrant it.12 Nonetheless, considering the circumstances and the
able handling of the case, petitioner's fee need not be further reduced.

The manifestation of petitioner's four clients indicating their conformity with the contingent fee contract did not
make the agreement valid. The contingent fee contract being unreasonable and unconscionable the same was
correctly disallowed by public respondent NLRC even with respect to the four private respondents who agreed to
pay higher percentage. Petitioner is reminded that as a lawyer he is primarily an officer of the court charged with
the duty of assisting the court in administering impartial justice between the parties. When he takes his oath, he
submits himself to the authority of the court and subjects his professional fees to judicial control. 13

WHEREFORE, finding no grave abuse of discretion the assailed NLRC decision is hereby affirmed in toto.
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP) v. PHILIPPINE AIRLINES, INC.,
PATRIA CHIONG and COURT OF APPEALS

October 2, 2009/ G.R. No. 178083

YNARES-SANTIAGO, J.:

ISSUE: Cabin crew personnel were covered by the retrenchment and demotion scheme of PAL due to financial
distress which is evidenced by proof of its claimed losses in a petition for suspension of payments, as well as the
Order of the Securities and Exchange Commission (SEC) approving the said petition for suspension of payments,
together with proof of summary of its debts and other liabilities.
Exercising its management prerogative and sound business judgment, it decided to cut its fleet of aircraft in order
to minimize its operating losses and rescue itself from “total downfall;” which meant that a corresponding
company-wide reduction in manpower necessarily had to be made. As a result, 5,000 PAL employees (including
the herein 1,400 cabin attendants) were retrenched.
PAL, however, gave a whole different reason for retrenchment when the pilots went on strike. Accordingly, what
really brought about “the really perilous situation of closure was that on June 5, 1998, the pilots went on strike,
ninety (90%) per cent of the pilots went on strike, approximately six hundred (600).” These pilots’ strike was so
devastating x x x. Without any pilots no plane can fly, your Honor, that is the stark reality of the situation, and
without airplanes flying, there would be no place for employment of cabin attendants.
ISSUE: Whether or not the strike, which PAL used as basis to undertake the massive retrenchment under scrutiny,
is an authorized cause.
RULING: The strike was a temporary occurrence that did not necessitate the immediate and sweeping
retrenchment of 1,400 cabin or flight attendants.
There was no reason to drastically implement a permanent retrenchment scheme in response to a temporary
strike, which could have ended at any time, or remedied promptly, if management acted with alacrity. Juxtaposed
with its failure to implement the required cost-cutting measures, the retrenchment scheme was a knee-jerk
solution to a temporary problem that beset PAL at the time.
PAL must still prove that it implemented cost-cutting measures to obviate retrenchment, which under the law
should be the last resort. By PAL’s own admission, however, the cabin personnel retrenchment scheme was one
of the first remedies it resorted to, even before it could complete the proposed downsizing of its aircraft fleet.
The following elements under Article 283 of the Labor Code must concur or be present, to wit:
(1) That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred,
are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent
as perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at
least one-half (½) month pay for every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its
interest and not to defeat or circumvent the employees’ right to security of tenure; and,
(5) That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and who would
be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship
for certain workers.
In the absence of one element, the retrenchment scheme becomes an irregular exercise of management
prerogative.
The retrenchment scheme under scrutiny was not triggered directly by any financial difficulty PAL was
experiencing at the time, nor borne of an actual implementation of its proposed downsizing of aircraft.
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 isSunio 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.
Philippine Long Distance Telephone Company vs National Labor Relations Commission (1988)

164 SCRA 671 – Labor Law – Termination – Just and Authorized Causes – Separation Pay; When not available –
Equity
Marilyn Abucay has been an employee of the Philippine Long Distance Telephone Company (PLDT) for ten years
when it was discovered that she accepted “bribes” from certain customers in order to facilitate the phone
connections of said customers. PLDT terminated her employment. A labor case was filed by Abucay. The National
Labor Relations Commission (NLRC) found the dismissal to be valid but nevertheless, the NLRC ordered PLDT to pay
Abucay separation pay equivalent to one month pay for every year of service.
PLDT assailed the said decision. PLDT averred that separation pay is only available in cases where the employee
has been illegally dismissed and reinstatement is no longer possible. PLDT further argued that to award Abucay
separation pay is tantamount to rewarding her misdeeds.
The Solicitor General, arguing for the NLRC, cited numerous previous cases where separation pay has been
awarded by the Supreme Court even if the employee’s dismissal were due to just and authorized causes.

ISSUE: Whether or not Abucay is entitled to separation pay.

HELD: No. In this case, the Supreme Court finally set the rules as to when separation pay is proper in cases where
the employee is dismissed for valid reasons.
As a rule, and under the Labor Code, a person dismissed for just and authorized causes is not entitled to separation
pay. However, based on equity, an exception can be made if the employee is dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee separation pay, or financial assistance, or
whatever other name it is called, on the ground of social justice.
In the case at bar, the reason for Abucay’s dismissal is due to her acceptance of a “bribe” which is dishonesty and is
immoral. The fact that she has worked with the PLDT for more than a decade, if it is to be considered at all, should
be taken against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying
during all of her 10 years of service with the company. The court also made a pronouncement:
Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming
an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be
an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are
clean and their motives blameless and not simply because they happen to be poor
.
G.R. Nos. 100376-77 June 17, 1994

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, GODOFREDO MORILLO, JR., SUNDAY BACEA, ALFREDO
COS and ROGELIO VILLANUEVA, respondents.

Vicente T. Cuison for petitioner.

Tamondong, Wong, Cos, & Associates for private respondent.

PADILLA, J.:

This petition for review on certiorari (here treated as a petition for certiorari under Rule 65, Rules of Court) seeks to
reverse and set aside the Resolution dated 11 June 1991 of respondent National Labor Relations Commission
("NLRC") in NLRC NCR Case Nos. 00-09-03383-87 and 00-10-03562-87, denying petitioner’s motion for
reconsideration, the dispositive part of which reads:

Accordingly, the Bank’s motion for reconsideration is hereby denied. The responsible officers of the
Bank and its counsel are hereby warned, under pain of contempt, that we shall not tolerate their further
delaying the execution of the subject award. 1

Private respondents Godofredo Morillo, Sunday Bacea, Alfredo Cos and Rogelio Villanueva were hired as security
guards by Confidential Investigation and Security Corporation ("CISCOR") on 19 May 1981, 21 August 1984, 22
January 1985, and 27 November 1985, respectively. In the course of their employment, private respondents were
assigned to secure the premises of CISCOR’s clients, among them, the herein petitioner, Development Bank of the
Philippines ("DBP") which, in turn, assigned private respondents to secure one of its properties or assets, the
Riverside Mills Corporation.

On 11 August 1987, private respondent Villanueva resigned from CISCOR. On 15 August 1987, private respondents
Morillo, Bacea and Cos followed suit in resigning from CISCOR. Thereafter, private respondents claimed from
CISCOR the return of their cash bond and payment of their 13th month pay and service incentive leave pay. For
failure of CISCOR to grant their claims, private respondents Villanueva and Cos filed against CISCOR and its
President/Manager Ernesto Medina NLRC NCR Case No. 00-10-3562-87 on 13 October 1987, while private
respondents Morillo and Bacea filed NLRC NCR Case No. 00-09-3383-87 on 29 September 1987. In said two (2)
cases, private respondents sought recovery of their cash bond, payment of 13th month pay, and their five-day
service incentive leave pay. The two (2) cases were consolidated and assigned to Labor Arbiter Crescencio Iniego.

In their position paper filed on 23 November 1987, private respondents (as complainants) alleged that they tendered
their resignations in August 1987 upon the assurance of CISCOR that they would be paid the cash benefits due
them. For failure of CISCOR to comply, private respondents claimed violations committed by CISCOR and Medina,
specifically, the non-payment of their 13th month pay, five (5) day service incentive leave pay from the date of
employment to the time of their separation, non-refund of their cash bond, non-payment of legal holiday pay and
rest
day pay. On the other hand, CISCOR and Medina in their position paper filed on 3 March 1988 admitted that private
respondents were former security guards of CISCOR. They added, however, that sometime in 1987, petitioner
allegedly formed its own security agency and pirated private respondents who tendered their voluntary resignations
from CISCOR. Thereafter, when private respondents sought from CISCOR the return of their cash bond deposit,
payment of 13th month pay and service incentive leave pay, CISCOR explained to private respondents that in view
of the claim of petitioner that it incurred losses when private respondents and their other co-security guards secured
 the premises of Riverside Mills Corporation, private respondents, prior to the payment of their claims, were asked
to
first secure an individual/agency clearance from petitioner to show that no losses were incurred while they were
guarding Riverside Mills Corporation.

Instead of getting such clearance from the petitioner, private respondents secured their clearance from CISCOR’s
detachment commander. Hence, for failure to secure the required clearance, private respondents’ cash bond
deposit, their proportionate 13th month pay and service incentive leave pay were withheld to answer for liabilities
incurred while private respondents were guarding Riverside Mills Corporation.

On 10 March 1988, CISCOR filed a motion with leave to implead petitioner bank and averred therein that in view of
its contract with the petitioner whereby, for a certain service fee, CISCOR undertook to guard petitioner’s premises,
both CISCOR and petitioner, under the Labor Code, are jointly and severally liable to pay the salaries and other
statutory benefits due the private respondents, petitioner being an indispensable party to the case. On 11 March
1988, Labor Arbiter Iniego issued an order granting the aforesaid motion and including petitioner as one of the
respondents therein. To this, private respondents filed their opposition and alleged, among others, that petitioner,
not
being an employer of the private respondents, was not a proper, necessary or indispensable party to the case.

In answer, petitioner filed its position paper alleging therein that it was not made a respondent by the herein private
respondents in their complaint, and that none of the original parties to the case (private respondents and
CISCOR/Medina) interposed any claim against the petitioner. It further stated that it cannot be held liable to the
claim
of private respondents because there was no failure on the part of CISCOR and Medina to pay said claims. If
CISCOR had apparently failed to pay private respondents’ claims, it was only due to the failure of private
respondents to secure their individual clearance of accountability or agency clearance that there were no losses
incurred while they were guarding Riverside Mills Corporation.

On 12 July 1988, the Labor Arbiter rendered a decision, the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered ordering the respondents Confidential Investigation and
Security Corporation, Mr. Ernesto Medina and Development Bank of the Philippines to pay the
 complainants the corresponding salary differential due them to be computed for the last three (3) years
from the time they stopped working with the respondents sometime in August 1987. Confidential
Investigation and Security Corporation is further ordered to return to the complainants their respective
cash bond cited in this decision within a period of ten (10) days from receipt hereof. 2

From the above decision, CISCOR and Medina appealed to the NLRC. Petitioner likewise filed its Motion for
Reconsideration/Appeal and prayed for the Labor Arbiter to modify his decision and make CISCOR and
Medina solely liable for the claims of private respondents, and to declare the award for salary differentials as null
and
void.

In its Resolution of 24 January 1991, the NLRC held the petitioner DBP, CISCOR and Medina, as jointly and
severally liable, the pertinent part of which reads:

WHEREFORE, the decision appealed from is hereby modified. All the respondents (Confidential
Investigation and Security Corporation, Ernesto Medina and the Development Bank of the Philippines)
are hereby adjudged jointly and severally liable to the admitted claims for 13th month pay, 5 days
incentive leave, and refund of cash bond, and accordingly, immediate execution is hereby directed
against any of the aforesaid respondents without prejudice to their having lawful recourse against each
other.

Anent the award of wage differential and the claim for rest day and legal holiday pay, the same are
hereby remanded to the Arbitration Branch of origin for further hearing with the directive that it be
completed in 20 days from the Arbitration Branch’s receipt of this Order. 3

Hence, this petition for review on certiorari, with petitioner DBP raising the following issues:

1. Whether or not the DBP is really liable for any of the claims of private respondents;

2. Whether or not the NLRC (or the Labor Arbiter) correctly applied Article 106 of the Labor Code; and

3. Whether or not the wage differential, rest day and legal holiday pay could and should be adjudicated
in this case.

The threshold and, in the ultimate analysis, the decisive issue raised by the present petition is whether petitioner
was
correctly held jointly and severally liable, alongside CISCOR and Medina, for the payment of the private respondents’
salary differentials, 13th month pay, service incentive leave pay, rest day pay, legal holiday pay, and the refund of
their cash deposit.

Petitioner posits that it is not the employer of private respondents and should thus not be held liable for the latter’s
claims. In addition, it avers that it was not properly impleaded as it was CISCOR and Medina who filed the motion
to
implead petitioner, and not the private respondents, as complainants therein. Petitioner even goes further by
countering that, assuming arguendo, it was the indirect employer of private respondents, Article 106 of the Labor
Code 4 cannot be applied to the present case as there was no failure on the part of CISCOR and Medina, as direct
employer, to pay the claims of private respondents, but only a failure on the part of the latter to present the proper
clearance to pave the way for the payment of the claims. It emphasizes that the term "fails" in Article 106 of the
Labor Code implies insolvency or unwillingness of the direct employer to pay, which cannot be said of CISCOR and
Medina as they have manifested their willingness to pay private respondents’ claims after they have presented
proper clearance from accountability.
We are not persuaded by petitioner’s arguments.

Petitioner’s interpretation of Article 106 of the Labor Code is quite misplaced. Nothing in said Article 106 indicates
that insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several
liability of the principal or indirect employer. In fact, the rule is that in job contracting, the principal is jointly and
severally liable with the contractor. The statutory basis for this joint and several liability is set forth in Articles
107 5and 109 6 in relation to Article 106 of the Labor Code. 7 There is no doubt that private respondents are entitled
to the cash benefits due them. The petitioner is also, no doubt, liable to pay such benefits because the law mandates
the joint and several liability of the principal and the contractor for the protection of labor. In Eagle Security Agency,
Inc. vs. NLRC, this Court, explaining the aforesaid liability, held:

This joint and several liability of the contractor and the principal is mandated by the Labor Code to
assure compliance of the provisions therein including the statutory minimum wage [Article 99, Labor
Code]. The contractor is made liable by virtue of his status as direct employer. The principal, on the
other hand, is made the indirect employer of the contractor’s employees for purposes of paying the
employees their wages should the contractor be unable to pay them. This joint and several liability
facilitates, if not guarantees, payment of the workers’ performance of any work, task, job or project, thus
giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18 and
Article XIII Sec. 3]. 8

Neither may petitioner argue that it was not properly impleaded and hence, should not be made liable to the claims
of private respondents. On this matter, petitioner cannot be absolved from responsibility. We sustain respondent
Commission’s holding that:

Anent the Bank’s first issue, what we actually have here is a "Third-Party Complaint", defined by Section
12, Rule 6 of the Rules of Court as "a claim that a defending party may, with leave of court, file against a
person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation
or any other relief, in respect of his opponent’s claim" (emphasis ours). Since Rule I, Section 3 of our
1986 Revised NLRC Rules adopts suppletorily the Rules of Court "in the interest of expeditious labor
justice and whenever practicable and convenient" with the Security Agency’s impleading the Bank for
indemnity and subrogation considering that the complainants worked with the Bank "to safeguard their
premises, properties and their person" (Record, p. 76), such a third-party complaint would therefore be
 proper. That the bank has not disputed liability on the admitted claims, but professes merely subsidiary,
instead of solidary liability, we find its position here all the more, untenable. 9

Finally, petitioner submits that wage differential, rest day and legal holiday pay should not be adjudicated in this
case.
The respondent Commission, however, observed:

Regarding the question of wage differential, we note that the complaint (Record, p. 1), as well as the
complainants’ Position Paper (Record, pp. 5-10) do not mention about any wage differential claim. We
do not therefore see any basis with which we may, on sight, affirm the said award. We note though that
complainants’ position paper save technical arguments (that after all are not binding to us in this
jurisdiction), sufficiently claims rest day and legal holiday pay, claims that were not strongly refuted by
respondents. Impressed, although not convincingly, that the award on wage differential could have
referred to the complainants’ claim for rest day and legal holiday pay, we therefore see the need to have
the said claims subjected to further hearing but for a limited period of 20 days. 10

We note that in the present case, there is no claim for wage differentials either in the complaints or in the position
paper filed by private respondents before the labor arbiter. Accordingly, no relief may be granted on such matter.
We,
however, agree with the respondent Commission in its stand that private respondents are entitled to rest day and
holiday pay (aside from the refund of their cash bond and the payment of their 13th month pay and service incentive
leave pay for 1989). Private respondents’ position paper submitted before the labor arbiter properly raised the two
(2)
issues (rest and holiday pay) and included the same in their prayer for relief. The computation of the amount due
each individual security guard can be made during the additional hearings ordered by the Commission.

WHEREFORE, premises considered, the questioned resolution of the respondent NLRC is hereby AFFIRMED with
the modification that the additional hearing ordered by the NLRC shall not include wage differentials but shall be
confined to legal holiday and rest day pay. Execution shall forthwith proceed as to the NLRC awards of 13th month
pay, service incentive leave pay and return of private respondents’ cash bond. Petitioner and CISCOR/Medina are
ORDERED to pay jointly and severally the claims of private respondents, as finally awarded by the NLRC, without
prejudice to the right of reimbursement which petitioner or CISCOR/Medina may have against each other.

SO ORDERED.

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

DBP vs. NLRC and LEONOR A ANG G.R. No. 108031 March 1, 1995

Facts:
On 21 March 1977 private respondent Leonor A. Ang started employment as Executive Secretary with Tropical
Philippines Wood Industries, Inc. (TPWII), a corporation engaged in the manufacture and sale of veneer, plywood
and sawdust panel boards. In 1982 she was promoted to the position of Personnel Officer.
In September 1983 petitioner Development Bank of the Philippines, as mortgagee of TPWII, foreclosed its plant
facilities and equipment. Nevertheless TPWII continued its business operations interrupted only by brief
shutdowns for the purpose of servicing its plant facilities and equipment. In January 1986 petitioner took
possession of the foreclosed properties. From then on the company ceased its operations. As a consequence
private respondent was on 15 April 1986 verbally terminated from the service.
On 14 December 1987 aggrieved by the termination of her employment, private respondent filed with the Labor
Arbiter a complaint for separation pay, 13th month pay, vacation and sick leave pay, salaries and allowances
against TPWII, its General Manager, and petitioner.
After hearing the Labor Arbiter found TPWII primarily liable to private respondent but only for her separation pay
and vacation and sick leave pay because her claims for unpaid wages and 13th month pay were later paid after the
complaint was filed. The General Manager was absolved of any liability. But with respect to petitioner, it was held
subsidiarily liable in the event the company failed to satisfy the judgment. The Labor Arbiter rationalized that the
right of an employee to be paid benefits due him from the properties of his employer is superior to the right of the
latter's mortgage, citing this Court's resolution in PNB v. Delta Motor Workers Union.
On 16 November 1992 public respondent National Labor Relations Commission affirmed the ruling of the Labor
Arbiter.
Issue:
Whether public respondent committed grave abuse of discretion in holding that Art. 110 of the Labor Code, as
amended, which refers to worker preference in case of bankruptcy or liquidation of an employer's business is
applicable to the present case notwithstanding the absence of any formal declaration of bankruptcy or judicial
liquidation of TPWII
HELD:
Yes, We hold that public respondent gravely abused its discretion in affirming the decision of the Labor Arbiter.
Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent provisions of
the Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets of the debtor is
avoided. Art. 110, then prevailing, provides:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a
share in the assets of the employer.
In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would
be premature to enforce the worker's preference.
DECISION:
WHEREFORE, the petition is GRANTED. The decision of public respondent National Labor Relations Commission
affirming the decision of the Labor Arbiter insofar as it held petitioner Development Bank of the Philippines liable
for the monetary claims of private respondent Leonor A. Ang is SET ASIDE. The temporary restraining order we
issued on 8 February 1993 10 enjoining the execution of the decision of public respondent against petitioner is
made PERMANENT.
SO ORDERED.
SMC vs NLRC
FACTS:

Petitioner San Miguel Corporation (SMC) sponsored an Innovation Program which grants cash rewards to all “SMC
employees who submit to the corporation ideas and suggestions found to beneficial to the corporation.

Private Respondent Rustico Vega, who is a mechanic in the Bottling Department of the SMC submitted an innovation
proposal which supposed to eliminate certain defects in the quality and taste of the product “San Miguel Beer
Grande.”

Petitioner Corporation did not accept the said proposal

and refused Mr. Vega’s subsequentdemands for cash award under the innovation program. Hence, Vega filed a
complaint with the then Ministry of Labor and Employment in Cebu. He argued that his proposal had been accepted
by the methods analyst and was implemented by the SMC and it finally solved the problem of the Corporation in the
production of Beer Grande.

Petitioner denied of having approved Vega’s proposal. It stated that said proposal was turned down for “lack of
originality” and the same, even if implemented, could not achieve the
desire result.Further, petitioner Corporation alleged that theLabor Arbiter had no jurisdiction.

The Labor Arbiter dismissed the complaint for lack of jurisdiction because the claim of Vega is “not a necessary
incident of his employment” and does not fall under Article 217 of the Labor Code. However, in a gesture of
compassion and to show the government’s concern for the working man, the Labor Arbiter ordered petitioner to pay
Vega P2, 000 as “financial assistance.” Both parties assailed said decision of the Labor Arbiter. The NLRC set aside
the decision of the Labor Arbiter and ordered SMC to pay complainant the amount of P60, 000

Issue:
Whether the Labor Arbiter and the Commission has jurisdiction over the money claim filed by private respondent

HELD:
NO
The Labor Arbiter and the Commission has no jurisdiction over the money claim of Vega.
The court ruled that the money claim of private respondent Vega arose out of or in connection with his employment
with petitioner. However, it is not enough to bring Vega’s money claim within the original and exclusive jurisdiction
of Labor Arbiters. In the CAB, the undertaking of petitioner SMC to
grantcash awards to employees could ripen into anenforceable contractual obligation on the part of petitioner SMC
under certain circumstances. Hence, the issue whether an enforceable contract had arisen
between SMC and Vega, and whether it has been breached, are legal questions that labor legislations
cannot resolved because it’s recourse is the law on contracts. Where the claim is to be resolved not by reference to
the Labor Code or other labor relations statute or a collective bargaining agreement BUT by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and NLRC.
G.R. No. 101619 July 8, 1992 SANYO PHILIPPINES WORKERS UNION-PSSLU vs. CANIZARES, in his capacity as
Labor Arbiter, BERNARDO YAP, RENATO BAYBON, SALVADOR SOLIBEL, ALLAN MISTERIO, EDGARDO TANGKAY,
LEONARDO DIONISIO, ARNEL SALVO, REYNALDO RICOHERMOSO, BENITO VALENCIA, GERARDO LASALA AND
ALEXANDER ATANASIO

FACTS:

PSSLU had an existing CBA with Sanyo. The CBA contained a union security clause. PSSLU wrote Sanyo that the
private respondents/employees were notified that their membership with PSSLU were cancelled for anti-union,
activities, economic sabotage, threats, coercion and intimidation, disloyalty and for joining another union called
KAMAO. In accordance with the security clause of the CBA, Sanyo dismissed the employees. The dismissed
employees filed a complaint with the NLRC for illegal dismissal. Named respondent were PSSLU and Sanyo. PSSLU
filed a motion to dismiss the complaint alleging that the Labor Arbiter was without jurisdiction over the case,
relying on Article 217 (c) of the Labor Code which provides that cases arising from the interpretation or
implementation of the CBA shall be disposed of by the labor arbiter by referring the same to the grievance
machinery and voluntary arbitration. Nevertheless, the Labor Arbiter assumed jurisdiction. Public respondent
through the Sol Gen, argued that the case at bar does not involve an "interpretation or implementation" of a
collective bargaining agreement or "interpretation or enforcement" of company policies but involves a
"termination." Where the dispute is just in the interpretation, implementation or enforcement stage, it may be
referred to the grievance machinery set up in the CBA or by voluntary arbitration. Where there was already actual
termination, i.e., violation of rights, it is already cognizable by the Labor Arbiter.

ISSUE:

Whether or not the Labor Arbiter has jurisdiction over the case.

HELD:

We hold that the Labor Arbiter and not the Grievance Machinery provided for in the CBA has the jurisdiction to
hear and decide the case. While it appears that the dismissal of the private respondents was made upon the
recommendation of PSSLU pursuant to the union security clause provided in the CBA, We are of the opinion that
these facts do not come within the phrase "grievances arising from the interpretation or implementation of (their)
Collective Bargaining Agreement and those arising from the interpretation or enforcement of company personnel
policies," the jurisdiction of which pertains to the Grievance Machinery or thereafter, to a voluntary arbitrator or
panel of voluntary arbitrators. No grievance between them exists which could be brought to a grievance
machinery. The problem or dispute in the present case is between the union and the company on the one hand
and some union and non-union members who were dismissed, on the other hand. The dispute has to be settled
before an impartial body. The grievance machinery with members designated by the union and the company
cannot be expected to be impartial against the dismissed employees. Due process demands that the dismissed
workers grievances be ventilated before an impartial body. Since there has already been an actual termination, the
matter falls within the jurisdiction of the Labor Arbiter.
 SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES, MARCELA
PURIFICACION, ET AL., Petitioners, vs. HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF
BRANCH 166, RTC, PASIG, and SAN MIGUEL CORPORATION, Respondents.

Romeo C. Lagman for petitioners.chanrobles virtual law library

Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.

MELENCIO-HERRERA, J.:

Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in this special civil
action for certiorari and Prohibition for having issued the challenged Writ of Preliminary Injunction on 29 March
1989 in Civil Case No. 57055 of his Court entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als." chanrobles
virtual law library

Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse of discretion,
a labor dispute being involved. Private respondent San Miguel Corporation (SanMig. for short), for its part, defends
the Writ on the ground of absence of any employer-employee relationship between it and the contractual workers
employed by the companies Lipercon Services, Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the
fact that the Union is bereft of personality to represent said workers for purposes of collective bargaining. The
Solicitor General agrees with the position of SanMig.chanroblesvirtualawlibrarychanrobles virtual law library

The antecedents of the controversy reveal that:chanrobles virtual law library

Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with Lipercon and D'Rite
(Annexes K and I, SanMig's Comment, respectively). These companies are independent contractors duly licensed
by the Department of Labor and Employment (DOLE). SanMig entered into those contracts to maintain its
competitive position and in keeping with the imperatives of efficiency, business expansion and diversity of its
operation. In said contracts, it was expressly understood and agreed that the workers employed by the contractors
were to be paid by the latter and that none of them were to be deemed employees or agents of SanMig. There
was to be no employer-employee relation between the contractors and/or its workers, on the one hand, and
SanMig on the other.chanroblesvirtualawlibrarychanrobles virtual law library

Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly authorized
representative of the monthly paid rank-and-file employees of SanMig with whom the latter executed a Collective
Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of their
CBA specifically provides that "temporary, probationary, or contract employees and workers are excluded from the
bargaining unit and, therefore, outside the scope of this Agreement."chanrobles virtual law library

In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some Lipercon and D'Rite
workers had signed up for union membership and sought the regularization of their employment with SMC. The
Union alleged that this group of employees, while appearing to be contractual workers supposedly independent
contractors, have been continuously working for SanMig for a period ranging from six (6) months to fifteen (15)
years and that their work is neither casual nor seasonal as they are performing work or activities necessary or
desirable in the usual business or trade of SanMig. Thus, it was contended that there exists a "labor-only"
contracting situation. It was then demanded that the employment status of these workers be
regularized.chanroblesvirtualawlibrary chanrobles virtual law library

On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig, the Union
filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex D,
Petition).chanroblesvirtualawlibrary chanrobles virtual law library
On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex F,
Petition).chanroblesvirtualawlibrary chanrobles virtual law library

As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently, the two (2)
notices of strike were consolidated and several conciliation conferences were held to settle the dispute before the
National Conciliation and Mediation Board (NCMB) of DOLE (Annex G,
Petition).chanroblesvirtualawlibrary chanrobles virtual law library

Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and D'Rite workers in
various SMC plants and offices.chanroblesvirtualawlibrary chanrobles virtual law library

On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent Court to enjoin
the Union from:

a. representing and/or acting for and in behalf of the employees of LIPERCON and/or D'RITE for the purposes of
collective bargaining; chanrobles virtual law library

b. calling for and holding a strike vote, to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE; chanrobles virtual law library

c. inciting, instigating and/or inducing the employees or workers of LIPERCON and D'RITE to demonstrate and/or
picket at the plants and offices of plaintiff within the bargaining unit referred to in the CBA,...; chanrobles virtual
law library

d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE; chanrobles virtual
law library

e. using the employees or workers of LIPERCON AND D'RITE to man the strike area and/or picket lines and/or
barricades which the defendants may set up at the plants and offices of plaintiff within the bargaining unit referred
to in the CBA ...; chanrobles virtual law library

f. intimidating, threatening with bodily harm and/or molesting the other employees and/or contract workers of
plaintiff, as well as those persons lawfully transacting business with plaintiff at the work places within the
bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE; chanrobles virtual law library

g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to, and egress from, the work
places within the bargaining unit referred to in the CBA .., to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE; chanrobles virtual law library

h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the work places within the
bargaining unit referred to in the CBA, Annex 'C' hereof, to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE. (Annex H, Petition)

Respondent Court found the Complaint sufficient in form and substance and issued a Temporary Restraining Order
for the purpose of maintaining the status quo, and set the application for Injunction for
hearing.chanroblesvirtualawlibrary chanrobles virtual law library

In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the ground of lack
of jurisdiction over the case/nature of the action, which motion was opposed by SanMig. That Motion was denied
by respondent Judge in an Order dated 11 April 1989.chanroblesvirtualawlibrary chanrobles virtual law library
After several hearings on SanMig's application for injunctive relief, where the parties presented both testimonial
and documentary evidence on 25 March 1989, respondent Court issued the questioned Order (Annex A, Petition)
granting the application and enjoining the Union from Committing the acts complained of, supra. Accordingly, on
29 March 1989, respondent Court issued the corresponding Writ of Preliminary Injunction after SanMig had posted
the required bond of P100,000.00 to answer for whatever damages petitioners may sustain by reason
thereof.chanroblesvirtualawlibrary chanrobles virtual law library

In issuing the Injunction, respondent Court rationalized:

The absence of employer-employee relationship negates the existence of labor dispute. Verily, this court has
jurisdiction to take cognizance of plaintiff's grievance.chanroblesvirtualawlibrary chanrobles virtual law library

The evidence so far presented indicates that plaintiff has contracts for services with Lipercon and D'Rite. The
application and contract for employment of the defendants' witnesses are either with Lipercon or D'Rite. What
could be discerned is that there is no employer-employee relationship between plaintiff and the contractual
workers employed by Lipercon and D'Rite. This, however, does not mean that a final determination regarding the
question of the existence of employer-employee relationship has already been made. To finally resolve this
dispute, the court must extensively consider and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the presence or absence of a power of dismissal; and the
Presence or absence of a power to control the putative employee's conduct. This necessitates a full-blown trial. If
the acts complained of are not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the
other hand, a writ of injunction does not necessarily expose defendants to irreparable
damages.chanroblesvirtualawlibrary chanrobles virtual law library

Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)

Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the challenged Writ.
On 24 April 1989, we issued a Temporary Restraining Order enjoining the implementation of the Injunction issued
by respondent Court. The Union construed this to mean that "we can now strike," which it superimposed on the
Order and widely circulated to entice the Union membership to go on strike. Upon being apprised thereof, in a
Resolution of 24 May 1989, we required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62
Rollo).chanroblesvirtualawlibrary chanrobles virtual law library

In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the contractual
workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen (13) of the latter's plants
and offices.chanroblesvirtualawlibrary chanrobles virtual law library

On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to conciliation. The
Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite employees were recalled, and
discussion on their other demands, such as wage distortion and appointment of coordinators, were made. Effected
eventually was a Memorandum of Agreement between SanMig and the Union that "without prejudice to the
outcome of G.R. No. 87700 (this case) and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be
recalled effective 8 May 1989 to their former jobs or equivalent positions under the same terms and conditions
prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and return to
work.chanroblesvirtualawlibrary chanrobles virtual law library

After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and required the
parties to submit their memoranda simultaneously, the last of which was filed on 9 January
1990.chanroblesvirtualawlibrary chanrobles virtual law library
The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction over the
present controversy and properly issued the Writ of Preliminary Injunction to the resolution of that question, is the
matter of whether, or not the case at bar involves, or is in connection with, or relates to a labor dispute. An
affirmative answer would bring the case within the original and exclusive jurisdiction of labor tribunals to the
exclusion of the regular Courts.chanroblesvirtualawlibrary chanrobles virtual law library

Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves or arose out
of a labor dispute and is directly connected or interwoven with the cases pending with the NCMB-DOLE, and is thus
beyond the ambit of the public respondent's jurisdiction. That the acts complained of (i.e., the mass concerted
action of picketing and the reliefs prayed for by the private respondent) are within the competence of labor
tribunals, is beyond question" (pp. 6-7, Petitioners' Memo).chanroblesvirtualawlibrary chanrobles virtual law
library

On the other hand, SanMig denies the existence of any employer-employee relationship and consequently of any
labor dispute between itself and the Union. SanMig submits, in particular, that "respondent Court is vested with
jurisdiction and judicial competence to enjoin the specific type of strike staged by petitioner union and its officers
herein complained of," for the reasons that:

A. The exclusive bargaining representative of an employer unit cannot strike to compel the employer to hire and
thereby create an employment relationship with contractual workers, especially were the contractual workers
were recognized by the union, under the governing collective bargaining agreement, as excluded from, and
therefore strangers to, the bargaining unit.chanroblesvirtualawlibrary chanrobles virtual law library

B. A strike is a coercive economic weapon granted the bargaining representative only in the event of a deadlock in
a labor dispute over 'wages, hours of work and all other and of the employment' of the employees in the unit. The
union leaders cannot instigate a strike to compel the employer, especially on the eve of certification elections, to
hire strangers or workers outside the unit, in the hope the latter will help re-elect
them.chanroblesvirtualawlibrary chanrobles virtual law library

C. Civil courts have the jurisdiction to enjoin the above because this specie of strike does not arise out of a labor
dispute, is an abuse of right, and violates the employer's constitutional liberty to hire or not to hire. (SanMig's
Memorandum, pp. 475-476, Rollo).

We find the Petition of a meritorious character.chanroblesvirtualawlibrary chanrobles virtual law library

A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter concerning
terms and 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." chanrobles virtual law library

While it is SanMig's submission that no employer-employee relationship exists between itself, on the one hand,
and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can nevertheless exist "regardless
of whether the disputants stand in the proximate relationship of employer and employee" (Article 212 [1], Labor
Code, supra) provided the controversy concerns, among others, the terms and conditions of employment or a
"change" or "arrangement" thereof (ibid). Put differently, and as defined by law, the existence of a labor dispute is
not negative by the fact that the plaintiffs and defendants do not stand in the proximate relation of employer and
employee.chanroblesvirtualawlibrary chanrobles virtual law library

That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union seeks is to
regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they be absorbed into the
working unit of SanMig. This matter definitely dwells on the working relationship between said employees vis-a-vis
SanMig. Terms, tenure and conditions of their employment and the arrangement of those terms are thus involved
bringing the matter within the purview of a labor dispute. Further, the Union also seeks to represent those
workers, who have signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part,
resists that Union demand on the ground that there is no employer-employee relationship between it and those
workers and because the demand violates the terms of their CBA. Obvious then is that representation and
association, for the purpose of negotiating the conditions of employment are also involved. In fact, the injunction
sought by SanMig was precisely also to prevent such representation. Again, the matter of representation falls
within the scope of a labor dispute. Neither can it be denied that the controversy below is directly connected with
the labor dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-
093-83).chanroblesvirtualawlibrary chanrobles virtual law library

Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and D'Rite
constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may, in fact, be said
to exist; whether or not the Union can lawfully represent the workers of Lipercon and D'Rite in their demands
against SanMig in the light of the existing CBA; whether or not the notice of strike was valid and the strike itself
legal when it was allegedly instigated to compel the employer to hire strangers outside the working unit; - those
are issues the resolution of which call for the application of labor laws, and SanMig's cause's of action in the Court
below are inextricably linked with those issues.chanroblesvirtualawlibrary chanrobles virtual law library

The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon by SanMig is not
controlling as in that case there was no controversy over terms, tenure or conditions, of employment or the
representation of employees that called for the application of labor laws. In that case, what the petitioning union
demanded was not a change in working terms and conditions, or the representation of the employees, but that its
members be hired as stevedores in the place of the members of a rival union, which petitioners wanted discharged
notwithstanding the existing contract of the arrastre company with the latter union. Hence, the ruling therein, on
the basis of those facts unique to that case, that such a demand could hardly be considered a labor
dispute.chanroblesvirtualawlibrary chanrobles virtual law library

As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As explicitly
provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the
suit below was instituted on 6 March 1989, Labor Arbiters have original and exclusive jurisdiction to hear and
decide the following cases involving all workers including "1. unfair labor practice cases; 2. those that workers may
file involving wages, hours of work and other terms and conditions of employment; ... and 5. cases arising from any
violation of Article 265 of this Code, including questions involving the legality of striker and lockouts. ..." Article 217
lays down the plain command of the law.chanroblesvirtualawlibrary chanrobles virtual law library

The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil Code would not
suffice to keep the case within the jurisdictional boundaries of regular Courts. That claim for damages is
interwoven with a labor dispute existing between the parties and would have to be ventilated before the
administrative machinery established for the expeditious settlement of those disputes. To allow the action filed
below to prosper would bring about "split jurisdiction" which is obnoxious to the orderly administration of justice
(Philippine Communications, Electronics and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July
1968, 24 SCRA 321).chanroblesvirtualawlibrary chanrobles virtual law library

We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best
business judgment to determine whether it should contract out the performance of some of its work to
independent contractors. However, the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law (Section 3,
Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be
placed in proper perspective and equilibrium.chanroblesvirtualawlibrary chanrobles virtual law library
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March 1989 and 29
March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent Judge is enjoined from taking any
further action in Civil Case No. 57055 except for the purpose of dismissing it. The status quo ante declaration of
strike ordered by the Court on 24 May 1989 shall be observed pending the proceedings in the National Conciliation
Mediation Board-Department of Labor and Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-
NS-01-093-83. No costs.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-65377 May 28, 1984

MOLAVE MOTOR SALES, INC., petitioner,

vs.
HON. CRISPIN C. LARON, Presiding Judge of the Regional Trial Court of Pangasinan, Branch XLIV and PEDRO
GEMENIANO, respondents.

Nuelino B. Ranchez for petitioner.

Santos Areola for private respondent.

MELENCIO-HERRERA, J.:

Respondent Judge, presiding Branch XLIV of the Regional Trial Court in Dagupan City, had dismissed the case below
for lack of jurisdiction and had denied reconsideration for lack of merit.

Petitioner, PLAINTIFF in the case below, is a corporation engaged in the sale and repair of motor vehicles in
Dagupan City. Private respondent, the DEFENDANT in the case below, was, or is, the sales manager of PLAINTIFF.
Whether or not there was still a relationship of employer and employee between the parties when the complaint
was filed is an unsettled question which need not be resolved in this instance.

Alleging that DEFENDANT was a former employee, PLAINTIFF had sued him, on March 22, 1983, for payment of
accounts pleaded as follows:

That during his incumbency as such the defendant caused and without authority from the
plaintiff incurred accounts with the remaining balances in the total sum of P33,890.38 excluding
interests, arising from

the purchases of vehicles and parts,

repair jobs of his personal cars and

cash advances,

faithful reproductions of the Vehicle Invoice, Debit Memos, Deed of Absolute Sale, Repair Orders,
Charge Invoices, Vouchers, Promissory Notes, Acknowledgement Letter and Statement of
Account, hereto attached and marked as Annexes "A", "B", "C", "D", "E", "F", "G", "H", "I", "J",
"K", "L", "M", and "N" respectively and the contents of which being herein additionally pleaded
and made integral parts hereof; (Emphasis supplied)

In his Answer, DEFENDANT denied

 ... that he incurred any unpaid unauthorized accounts with the plaintiff in the total sum of
P33,890.38 excluding interests therefor, and,

specifically denies under oath that the annexed Vehicle Invoice, Debits Memos Deed of Absolute
Sale, Repair Orders, Charge Invoices, Vouchers, Promissory Notes, Acknowledgement Letter and
Statement of Account

have remained unpaid as in fact the truth of the matter is as follows, to wit: (Emphasis supplied)

DEFENDANT further alleged in a counterclaim that he should still be considered an employee of PLAINTIFF
inasmuch as there has been no application for clearance in regards to his separation.

At the pre-trial conference, the DEFENDANT raised the question of jurisdiction of the Court stating that PLAINTIFF's
complaint arose out of employer-employee relationship, and he subsequently moved for dismissal. It was then
when respondent Judge dismissed the case finding that the sum of money and damages sued upon arose from
employer-employee relationship and that jurisdiction belonged to the Labor Arbiter and the NLRC.

Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor
Code had jurisdiction over "all other cases arising from employer-employee relation, unless expressly excluded by
this Code." Even then, the principle followed by this Court was that, although a controversy is between an
employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs.
Castro-Bartolome, 116 SCRA 597, 604, in negating jurisdiction of the Labor Arbiter, although the parties were an
employer and two employees, Mr. Justice Abad Santos stated:

The pivotal question to Our mind is whether or not the Labor Code has any relevance to the
reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning
the statutes amending it and whether or not they have retroactive effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice.
Theirs is a simple action for damages for tortious acts allegedly committed by the defendants.
Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that
the orders under review are based on a wrong premise.

And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677, the following was said:

Stated differently, petitioner seeks protection under the civil laws and claims no benefits under
the Labor Code. The primary relief sought is for liquidated damages for breach of a contractual
obligation. The other items demanded are not labor benefits demanded by workers generally
taken cognizance of in labor disputes, such as payment of wages, overtime compensation or
separation pay. The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.

In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his
personal cars, and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance to
the Labor Code. The cause of action was one under the civil laws, and it does not breach any provision of the Labor
Code or the contract of employment of DEFENDANT. Hence, the civil courts, not the Labor Arbiters and the NLRC,
should have jurisdiction.

BP Blg. 227 has amended Article 217 of the Labor Code to read as follows:
 ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor Arbiters shall have
the original and exclusive jurisdiction to hear and decide within thirty (30) working days after
submission of the case by the parties for decision, the following cases involving all workers,
whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that ( involve) WORKERS MAY FILE INVOLVING wages, hours of work and other terms
and conditions of employment;

3. All money claims of workers, including those based on non-payment or underpayment of

wages, overtime compensation, separation pay and other benefits provided by law or
appropriate agreement, except claims for employees compensation, social security, and
maternity benefits;

4. Cases involving household services; and

5. CASES ARISING FROM ANY VIOLATION OF ARTICLE 265 OF THIS CODE, INCLUDING QUESTIONS
INVOLVING THE LEGALITY OF STRIKES AND LOCKOUTS.

6. All other claims arising from employer-employee relations, unless expressly excluded by this
Code]. (Italics and bracketed portions indicate the deletions, while the amendments introduced
are capitalized).

The dismissal of the case below on the ground that the sum of money and damages sued upon arose from
employer-employee relationship was erroneous. Claims arising from employer-employee relations are now limited
to those mentioned in paragraphs 2 and 3 of Article 217. There is no difficulty on our part in stating that those in
the case below should not be faulted for not being aware of the last amendment to the frequently changing Labor
Code.

The claim of DEFENDANT that he should still be considered an employee of PLAINTIFF, because the latter has not
sought clearance for his separation from the service, will not affect the jurisdiction of respondent Judge to resolve
the complaint of PLAINTIFF. DEFENDANT could still be liable to PLAINTIFF for payment of the accounts sued for
even if he remains an employee of PLAINTIFF.

WHEREFORE, the Petition is granted, and respondent Judge is hereby ordered to take cognizance of the case below
and to render judgment therein accordingly.

No costs.

SO ORDERED.

Teehankee (Chairman), Plana, Relova, Gutierrez, Jr., and De la Fuente, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Ernesto Medina Et Al., V. Hon. Floreliana Castro-Bartolome

G.R. No. L-59825 September 11, 1982

Lessons Applicable: Unjust dismissal (Torts and Damages)

FACTS:

 Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of the defendant Pepsi-Cola
Bottling Company of the Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro Manila
and without any provocation, shouted and maliciously humiliated Ernesto Medina and Jose G. Ong:
 GOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE BOTH SHIT TO ME! YOU ARE FIRED
(referring to Ernesto Medina). YOU TOO ARE FIRED! '(referring to Jose Ong ) for having allegedly delayed the
use of promotional crowns
 effected on the very day that plaintiffs were awarded rings of loyalty to the Company, 5 days before Christmas
and on the day when the employees' Christmas party was held so that when Medina and Ong went home
that day and found their wives and children already dressed up for the party, they didn't know what to do and
so they cried unashamedly
 A joint criminal complaint for oral defamation against Aboitiz
 Provincial Fiscal: dismissed the complaint since uttered not to slander but to express anger and displeasure
 Petition for Review with the office of the Secretary of Justice (now Ministry of Justice): reversed
 Aboitiz filed a motion to dismiss on the ground of lack of jurisdiction but it was dismissed since the complaint
for civil damages is clearly not based on an employer-employee relationship but on the manner of plaintiffs'
dismissal and the effects flowing therefrom
 This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978 and
which provides that Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for
moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically
under the plaintiff's causes of action
 alreadly settled by jurisprudence that mere asking for reinstatement does not remove from the CFI
jurisdiction over the damages
 The case must involve unfair labor practices to bring it within the jurisdiction of the CIR (now NLRC)
 A second motion to dismiss was filed because of the promulgation of P.D. No. 1691 amending Art. 217 of the
Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took effect on May 1, 1980, amending
Art. 248 of the Labor Code.
 jurisdiction over employee-employer relations and claims of workers have been removed from the Courts of
First Instance
ISSUE: W/N the Labor Code has any relevance to the reliefs sought

HELD: NO. petition is granted

 simple action for damages for tortuous acts is governed by the Civil Code and not the Labor Code
Separate Opinions
 AQUINO, J.,dissenting:
 I dissent with due deference to the opinion penned by Mr. Justice Abad Santos
 The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as
separation pay, respectively
 More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of
Labor, a complaint for illegal dismissal - dismissed that complaint because of their resignation and quitclaim.
 17 days after that order of dismissal, or on May 10, 1979, filed for damages
 In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong
were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217 of
the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause
of action against Aboitiz and Pepsi-Cola.