G.R. No. 120567.

March 20, 1998

PHILIPPINE AIRLINES, INC., Petitioner, v. , NATIONAL LABOR RELATIONS COMMISSION, FERDINAND
PINEDA and GODOFREDO CABLING, Respondents.
DECISION
MARTINEZ, J.:
Can the National Labor Relations Commission (NLRC), even without a complaint for illegal dismissal filed
before the labor arbiter, entertain an action for injunction and issue such writ enjoining petitioner Philippine
Airlines, Inc. from enforcing its Orders of dismissal against private respondents, and ordering petitioner to
reinstate the private respondents to their previous positions?
This is the pivotal issue presented before us in this petition for certiorari under Rule 65 of the Revised Rules
of Court which seeks the nullification of the injunctive writ dated April 3,1995 issued by the NLRC and the
Order denying petitioner's motion for reconsideration on the ground that the said Orders were issued in
excess of jurisdiction.
Private respondents are flight stewards of the petitioner. Both were dismissed from the service for their
alleged involvement in the April 3, 1993 currency smuggling in Hong Kong.
Aggrieved by said dismissal, private respondents filed with the NLRC a petition 1 for injunction praying that:
"I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting respondents (petitioner
herein) from effecting or enforcing the Decision dated Feb. 22, 1995, or to reinstate petitioners temporarily
while a hearing on the propriety of the issuance of a writ of preliminary injunction is being undertaken;
"II. After hearing, a writ of preliminary mandatory injunction be issued ordering respondent to reinstate
petitioners to their former positions pending the hearing of this case, or, prohibiting respondent from
enforcing its Decision dated February 22,1995 while this case is pending adjudication;
"III. After hearing, that the writ of preliminary injunction as to the reliefs sought for be made permanent, that
petitioners be awarded full backwages, moral damages of PHP 500,000.00 each and exemplary damages of
PHP 500,000.00 each, attorneys fees equivalent to ten percent of whatever amount is awarded, and the costs
of suit."
On April 3, 1995, the NLRC issued a temporary mandatory injunction 2 enjoining petitioner to cease and desist
from enforcing its February 22, 1995 Memorandum of dismissal. In granting the writ, the NLRC considered
the following facts, to wit:
x x x that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were instructed to attend an
investigation by respondents Security and Fraud Prevention Sub-Department regarding an April 3, 1993
incident in Hongkong at which Joseph Abaca, respondents Avionics Mechanic in Hongkong was intercepted
by the Hongkong Airport Police at Gate 05 xxx the ramp area of the Kai Tak International Airport while xxx
about to exit said gate carrying a xxx bag said to contain some 2.5 million pesos in Philippine Currencies.
That at the Police Station, Mr. Abaca claimed that he just found said plastic bag at the Skybed Section of the
arrival flight PR300/03 April 93, where petitioners served as flight stewards of said flight PR300; x x the
petitioners sought a more detailed account of what this HKG incident is all about; but instead, the petitioners
were administratively charged, a hearing on which did not push through until almost two (2) years after, i.e.
on January 20, 1995 xxx where a confrontation between Mr. Abaca and petitioners herein was compulsorily
arranged by the respondents disciplinary board at which hearing, Abaca was made to identify petitioners as
co-conspirators; that despite the fact that the procedure of identification adopted by respondents
Disciplinary Board was anomalous as there was no one else in the line-up (which could not be called one)
but petitioners xxx Joseph Abaca still had difficulty in identifying petitioner Pineda as his co-conspirator, and
as to petitioner Cabling, he was implicated and pointed by Abaca only after respondents Atty. Cabatuando
pressed the former to identify petitioner Cabling as co-conspirator; that with the hearing reset to January 25,
1995, Mr. Joseph Abaca finally gave exculpating statements to the board in that he cleared petitioners from
any participation or from being the owners of the currencies, and at which hearing Mr. Joseph Abaca
volunteered the information that the real owner of said money wasone who frequented his headquarters in
Hongkong to which information, the Disciplinary Board Chairman, Mr. Ismael Khan, opined forthe need
foranother hearing to go to the bottom of the incident; that from said statement, it appeared that Mr. Joseph
Abaca was the courier, and had another mechanic in Manila who hid the currency at the planes skybed for
Abaca to retrieve in Hongkong, which findings of how the money was found was previously confirmed by Mr.
Joseph Abaca himself when he was first investigated by the Hongkong authorities; that just as petitioners
thought that they were already fully cleared of the charges, as they no longer received any summons/notices
on the intended additional hearings mandated by the Disciplinary Board, they were surprised to receive on
February 23, 1995 xxx a Memorandum dated February 22, 1995 terminating their services for alleged violation
of respondents Code of Discipline effective immediately; that sometime xxx first week of March, 1995,
petitioner Pineda received another Memorandum from respondent Mr. Juan Paraiso, advising him of his
termination effective February 3, 1995, likewise for violation of respondents Code of Discipline; x x x"
In support of the issuance of the writ of temporary injunction, the NLRC adopted the view that: (1) private
respondents cannot be validly dismissed on the strength of petitioner's Code of Discipline which was
declared illegal by this Court in the case of PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated August 13,
1993, for the reason that it was formulated by the petitioner without the participation of its employees as
required in R.A. 6715, amending Article 211 of the Labor Code; (2) the whimsical, baseless and premature
dismissals of private respondents which "caused them grave and irreparable injury" is enjoinable as private
respondents are left "with no speedy and adequate remedy at law'"except the issuance of a temporary
mandatory injunction; (3) the NLRC is empowered under Article 218 (e) of the Labor Code not only to restrain
any actual or threatened commission of any or all prohibited or unlawful acts but also to require the
performance of a particular act in any labor dispute, which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party; and (4) the temporary mandatory power of the NLRC was
recognized by this Court in the case of Chemo-Technicshe Mfg., Inc. Employees Union,DFA, et.al. vs. Chemo-
Technische Mfg., Inc. [G.R. No. 107031, January 25,1993].
On May 4,1995, petitioner moved for reconsideration3 arguing that the NLRC erred:
1. in granting a temporary injunction order when it has no jurisdiction to issue an injunction or restraining
order since this may be issued only under Article 218 of the Labor Code if the case involves or arises from
labor disputes;
2. in granting a temporary injunction order when the termination of private respondents have long been
carried out;
3. ..in ordering the reinstatement of private respondents on the basis of their mere allegations, in violation of
PAL's right to due process;
4. ..in arrogating unto itself management prerogative to discipline its employees and divesting the labor
arbiter of its original and exclusive jurisdiction over illegal dismissal cases;
5. ..in suspending the effects of termination when such action is exclusively within the jurisdiction of the
Secretary of Labor;
6. ..in issuing the temporary injunction in the absence of any irreparable or substantial injury to both private
respondents.
On May 31,1995, the NLRC denied petitioner's motion for reconsideration, ruling:
The respondent (now petitioner), for one, cannot validly claim that we cannot exercise our injunctive power
under Article 218 (e) of the Labor Code on the pretext that what we have here is not a labor dispute as long
as it concedes that as defined by law, a(l) Labor Dispute includes any controversy or matter concerning
terms or conditions of employment. . If security of tenure, which has been breached by respondent and
which, precisely, is sought to be protected by our temporary mandatory injunction (the core of controversy
in this case) is not a term or condition of employment, what then is?
xxx
Anent respondents second argument x x x, Article 218 (e) of the Labor Code x x x empowered the
Commission not only to issue a prohibitory injunction, but a mandatory (to require the performance) one as
well. Besides, as earlier discussed, we already exercised (on August 23,1991) this temporary mandatory
injunctive power in the case of Chemo-Technische Mfg., Inc. Employees Union-DFA et.al. vs. Chemo-
Technishe Mfg., Inc., et. al. (supra) and effectively enjoined one (1) month old dismissals by Chemo-
Technische and that our aforesaid mandatory exercise of injunctive power, when questioned through a
petition for certiorari, was sustained by the Third Division of the Supreme court per its Resolution dated
January 25,1993.
xxx
Respondents fourth argument that petitioner's remedy for their dismissals is 'to file an illegal dismissal case
against PAL which cases are within the original and exclusive jurisdiction of the Labor Arbiter' is ignorant . In
requiring as a condition for the issuance of a 'temporary or permanent injunction'- '(4) That complainant has
no adequate remedy at law;' Article 218 (e) of the Labor Code clearly envisioned adequacy , and not plain
availability of a remedy at law as an alternative bar to the issuance of an injunction. An illegal dismissal suit
(which takes, on its expeditious side, three (3) years before it can be disposed of) while available as a remedy
under Article 217 (a) of the Labor Code, is certainly not an 'adequate; remedy at law. Ergo, it cannot, as an
alternative remedy, bar our exercise of that injunctive power given us by Article 218 (e) of the Code.
xxx xxx xxx
Thus, Article 218 (e), as earlier discussed [which empowers this Commission 'to require the performance of a
particular act' (such as our requiring respondent 'to cease and desist from enforcing' its whimsical
memoranda of dismissals and 'instead to reinstate petitioners to their respective position held prior to their
subject dismissals') in 'any labor dispute which, if not xxx performed forthwith, may cause grave and
irreparable damage to any party'] stands as the sole 'adequate remedy at law' for petitioners here.
Finally, the respondent, in its sixth argument claims that even if its acts of dismissing petitioners 'may be
great, still the same is capable of compensation', and that consequently, 'injunction need not be issued
where adequate compensation at law could be obtained'. Actually, what respondent PAL argues here is that
we need not interfere in its whimsical dismissals of petitioners as, after all, it can pay the latter its
backwages. x x x
But just the same, we have to stress that Article 279 does not speak alone of backwages as an obtainable
relief for illegal dismissal; that reinstatement as well is the concern of said law, enforceable when necessary,
through Article 218 (e) of the Labor Code (without need of an illegal dismissal suit under Article 217 (a) of the
Code) if such whimsical and capricious act of illegal dismissal will 'cause grave or irreparable injury to a
party'. x x x " 4cräläwvirtualibräry
Hence, the present recourse.
Generally, injunction is a preservative remedy for the protection of one's substantive rights or interest. It is
not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. It is resorted to only
when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any
standard of compensation. The application of the injunctive writ rests upon the existence of an emergency or
of a special reason before the main case be regularly heard. The essential conditions for granting such
temporary injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute a
proper basis for injunction and that on the entire showing from the contending parties, the injunction is
reasonably necessary to protect the legal rights of the plaintiff pending the litigation. 5 Injunction is also a
special equitable relief granted only in cases where there is no plain, adequate and complete remedy at
law.6cräläwvirtualibräry
In labor cases, Article 218 of the Labor Code empowers the NLRC-
"(e) To enjoin or restrain any actual or threatened commission of any or all prohibited or unlawful acts or to
require the performance of a particular act in any labor dispute which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any party or render ineffectual any decision in favor of
such party; x x x." (Emphasis Ours)
Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of Procedure of the NLRC,
pertinently provides as follows:
"Section 1. Injunction in Ordinary Labor Dispute.-A preliminary injunction or a restraining order may be
granted by the Commission through its divisions pursuant to the provisions of paragraph (e) of Article 218 of
the Labor Code, as amended, when it is established on the bases of the sworn allegations in the petition that
the acts complained of, involving or arising from any labor dispute before the Commission, which, if not
restrained or performed forthwith, may cause grave or irreparable damage to any party or render ineffectual
any decision in favor of such party.
xxx xxx xxx
The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident to the cases
pending before them in order to preserve the rights of the parties during the pendency of the case, but
excluding labor disputes involving strikes or lockout. 7 (Emphasis Ours)
From the foregoing provisions of law, the power of the NLRC to issue an injunctive writ originates from "any
labor dispute" upon application by a party thereof, which application if not granted "may cause grave or
irreparable damage to any party or render ineffectualany decision in favor of such party."
The term "labor dispute" is defined as "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 or not the disputants stand in the
proximate relation of employers and employees."8cräläwvirtualibräry
The term "controversy" is likewise defined as "a litigated question; adversary proceeding in a court of law; a
civil action or suit, either at law or in equity; a justiciable dispute." 9cräläwvirtualibräry
A "justiciable controversy" is "one involving an active antagonistic assertion of a legal right on one side and
a denial thereof on the other concerning a real, and not a mere theoretical question or
issue."10cräläwvirtualibräry
Taking into account the foregoing definitions, it is an essential requirement that there must first be a labor
dispute between the contending parties before the labor arbiter. In the present case, there is no labor dispute
between the petitioner and private respondents as there has yet been no complaint for illegal dismissal filed
with the labor arbiter by the private respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in reality an action for illegal dismissal. This is
clear from the allegations in the petition which prays for: reinstatement of private respondents; award of full
backwages, moral and exemplary damages; and attorney's fees. As such, the petition should have been filed
with the labor arbiter who has the original and exclusive jurisdiction to hear and decide the following cases
involving all workers, whether agricultural or non-agricultural:
(1) Unfair labor practice;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of
pay, hours of work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;
(5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and
(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other
claims arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P 5,000.00), whether or not accompanied with a
claim for reinstatement.11cräläwvirtualibräry
The jurisdiction conferred by the foregoing legal provision to the labor arbiter is both original and exclusive,
meaning, no other officer or tribunal can take cognizance of, hear and decide any of the cases therein
enumerated. The only exceptions are where the Secretary of Labor and Employment or the NLRC exercises
the power of compulsory arbitration, or the parties agree to submit the matter to voluntary arbitration
pursuant to Article 263 (g) of the Labor Code, the pertinent portions of which reads:
"(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an
industry indispensable to the national interest, the Secretary of Labor and Employment may assume
jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration.
Such assumption or certification shall have the effect of automatically enjoining the intended or impending
strike or lockout as specified in the assumption or certification order. If one has already taken place at the
time of assumption or certification, all striking or locked out employees shall immediately resume operations
and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The
Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement
agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce
the same.
xxx"
On the other hand, the NLRC shall have exclusive appellate jurisdiction over all cases decided by labor
arbiters as provided in Article 217(b) of the Labor Code. In short, the jurisdiction of the NLRC in illegal
dismissal cases is appellate in nature and, therefore, it cannot entertain the private respondents' petition for
injunction which challenges the dismissal orders of petitioner. Article 218(e) of the Labor Code does not
provide blanket authority to the NLRC or any of its divisions to issue writs of injunction, considering that
Section 1 of Rule XI of the New Rules of Procedure of the NLRC makes injunction only an ancillary remedy in
ordinary labor disputes"12cräläwvirtualibräry
Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting private respondents'
petition for injunction and ordering the petitioner to reinstate private Respondents.
The argument of the NLRC in its assailed Order that to file an illegal dismissal suit with the labor arbiter is
not an "adequate" remedy since it takes three (3) years before it can be disposed of, is patently erroneous.
An "adequate" remedy at law has been defined as one "that affords relief with reference to the matter in
controversy, and which is appropriate to the particular circumstances of the case." 13 It is a remedy which is
equally beneficial, speedy and sufficient which will promptly relieve the petitioner from the injurious effects
of the acts complained of.14cräläwvirtualibräry
Under the Labor Code, the ordinary and proper recourse of an illegally dismissed employee is to file a
complaint for illegal dismissal with the labor arbiter.15 In the case at bar, private respondents disregarded this
rule and directly went to the NLRC through a petition for injunction praying that petitioner be enjoined from
enforcing its dismissal orders. In Lamb vs. Phipps,16 we ruled that if the remedy is specifically provided by
law, it is presumed to be adequate. Moreover, the preliminary mandatory injunction prayed for by the private
respondents in their petition before the NLRC can also be entertained by the labor arbiter who, as shown
earlier, has the ancillary power to issue preliminary injunctions or restraining orders as an incident in the
cases pending before him in order to preserve the rights of the parties during the pendency of the
case.17cräläwvirtualibräry
Furthermore, an examination of private respondents' petition for injunction reveals that it has no basis since
there is no showing of any urgency or irreparable injury which the private respondents might suffer. An
injury is considered irreparable if it is of such constant and frequent recurrence that no fair and reasonable
redress can be had therefor in a court of law, 18 or where there is no standard by which their amount can be
measured with reasonable accuracy, that is, it is not susceptible of mathematical computation. It is
considered irreparable injury when it cannot be adequately compensated in damages due to the nature of the
injury itself or the nature of the right or property injured or when there exists no certain pecuniary standard
for the measurement of damages.19cräläwvirtualibräry
In the case at bar, the alleged injury which private respondents stand to suffer by reason of their alleged
illegal dismissal can be adequately compensated and therefore, there exists no "irreparable injury," as
defined above which would necessitate the issuance of the injunction sought for. Article 279 of the Labor
Code provides that an employee who is unjustly dismissed from employment shall be entitled to
reinstatement, without loss of seniority rights and other privileges, and to the payment of full backwages,
inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
The ruling of the NLRC that the Supreme Court upheld its power to issue temporary mandatory injunction
orders in the case of Chemo-Technische Mfg., Inc. Employees Union-DFA, et.al. vs. Chemo-Technische Mfg.,
Inc. et.al., docketed as G.R. No. 107031, is misleading. As correctly argued by the petitioner, no such
pronouncement was made by this Court in said case. On January 25,1993, we issued a Minute Resolution in
the subject case stating as follows:
"Considering the allegations contained, the issues raised and the arguments adduced in the petition for
certiorari , as well as the comments of both public and private respondents thereon, and the reply of the
petitioners to private respondent's motion to dismiss the petition, the Court Resolved to DENY the same for
being premature."
It is clear from the above resolution that we did not in anyway sustain the action of the NLRC in issuing such
temporary mandatory injunction but rather we dismissed the petition as the NLRC had yet to rule upon the
motion for reconsideration filed by peitioner. Thus, the minute resolution denying the petition for being
prematurely filed.
Finally, an injunction, as an extraordinary remedy, is not favored in labor law considering that it generally has
not proved to be an effective means of settling labor disputes. 20 It has been the policy of the State to
encourage the parties to use the non-judicial process of negotiation and compromise, mediation and
arbitration.21 Thus, injunctions may be issued only in cases of extreme necessity based on legal grounds
clearly established, after due consultations or hearing and when all efforts at conciliation are exhausted
which factors, however, are clearly absent in the present case.
WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April 3,1995 and May 31,1995,
issued by the National Labor Relations Commission (First Division), in NLRC NCR IC No. 000563-95, are
hereby REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 108961 November 27, 1998

CITIBANK, N.A., petitioner,Â
vs.
COURT OF APPEALS (Third Division), and CITI-BANK INTEGRATED GUARDS LABOR
ALLIANCE (CIGLA) SEGA-TUPAS/FSM LOCAL CHAPTER No. 1394, respondents.

PARDO, J.:
The Case
The case before the Court is a petition for review on certiorari seeking to reverse and set aside the decision
of the Court of Appeals1 and its resolution denying reconsideration 2, ruling that it is the labor tribunal, not the
regional trial court, that has jurisdiction over the complaint for injunction and damages filed by petitioner
with the regional trial court.
The Facts
In 1983, Citibank and El Toro Security Agency, Inc. (hereafter El Toro) entered into a contract for the latter to
provide security and protective services to safeguard and protect the bank's premises, situated at 8741
Paseo de Roxas, Makati, Metro Manila. Under the contract, El Toro obligated itself to provide the services of
security guards to safeguard and protect the premises and property of Citibank against theft, robbery or any
other unlawful acts committed by any person or persons, and assumed responsibility for losses and/or
damages that may be incurred by Citibank due to or as a result of the negligence of El Toro or any of its
assigned personnel.4
Citibank renewed the security contract with El Toro yearly until 1990. On April 22, 1990, the
contract between Citibank and El Toro expired.
On June 7, 1990, respondent Citibank Integrated Guards Labor Alliance-SEGA-TUPAS/FSM
(hereafter CIGLA) filed with the National Conciliation and Mediation Board (NCMB) a request
for preventive mediation citing Citibank as respondent therein giving as issues for preventive
mediation the following:
a) Unfair labor practice;
b) Dismissal of union officers/members; and
c) Union bust.
On June 10, 1990, petitioner Citibank served on El Toro a written notice that the bank would
not renew anymore the service agreement with the latter. Simultaneously, Citibank hired
another security agency, the Golden Pyramid Security Agency, to render security services at
Citibank's premises.
On the same date, June 10, 1990, respondent CIGLA filed a manifestation with the NCMB that
it was converting its request for preventive mediation into a notice of strike for failure of the
parties to reach a mutually acceptable settlement of the issues, which it followed with a
supplemental notice of strike alleging as supplemental issue the mass dismissal of all union
officers and members.
On June 11, 1990, security guards of El Toro who were replaced by guards of the Golden
Pyramid Security Agency considered the non-renewal of El Toro's service agreement with
Citibank as constituting a lockout and/or a mass dismissal. They threatened to go on strike
against Citibank and picket its premises.
In fact, security guards formerly assigned to Citibank under the expired agreement loitered
around and near the Citibank premises in large groups of from twenty (20) and at times fifty
(50) persons.
On June 14, 1990, respondent CIGLA filed a notice of strike directed at the premises of the
Citibank main office.
Faced with the prospect of disruption of its business operations, on June 5, 1990, petitioner Citibank filed
with the Regional Trial Court Makati, a complaint for injunction and damages. 5 The complaint sought to
enjoin CIGLA and any person claiming membership therein from striking or otherwise disrupting the
operations of the bank.
On June 18, 1990, respondent CIGLA filed with the trial court a motion to dismiss the
complaint. The motion alleged that:
a) The Court had no jurisdiction, this being labor dispute.
b) The guards were employees of the bank.
c) There were pending cases/labor disputes between the guards and the bank at the different
agencies of the Department of Labor and Employment (DOLE).
d) The bank was guilty of forum shopping in filing the complaint with the Regional Trial Court
after submitting itself voluntarily to the jurisdiction of the different agencies of the DOLE.
By order dated August 19, 1990, the trial court denied respondent CIGLA's motion to dismiss.
The relevant portion of the order reads as follows:
Plaintiff in its Opposition alleged that jurisdiction of the court is determined by the
allegations of the complaints. In the plaintiff's complaint there are allegations, which negate
any employer-employee relationship between it and the CIGLA members; however the Court
could not dismiss the case and lift the restraining order without first threshing out the same
at the trial of the case.
The Court finding the grounds alleged in the defendant's motion well taken, the motion is
hereby denied.
SO ORDERED.
In due time, respondent CIGLA filed with the trial court a motion for reconsideration of the
above-mentioned order. On October 1, 1990, the trial court denied the motion.
Subsequently, respondent CIGLA filed with the trial court its answer to the complaint, and
averred as special and affirmative defense lack of jurisdiction of the court over the subject
matter of the case. Treating the averment as motion to dismiss, on April 27, 1991, the lower
court issued an order denying the motion. The lower court stated:
The Court noted in defendant's Memorandum of Authorities that they made no mention who
among the parties — the plaintiff bank or the defendants union — paid their wages or
salaries and who has the power to dismiss them.
Defendants also alleged that the complaint states no valid cause of action as plaintiffs
allegations are purely anchored on conjectures and conclusions and not based on ultimate
facts.
Plaintiff in its Opposition alleged that it is a well-settled rule, that in a motion to dismiss
based on the ground that the complaint fails to state a cause of action, the question
submitted to the court for determination is the sufficiency of the allegation in the complaint
itself. Plaintiff also alleged that the defendants disputed the jurisdiction of the court, the
parties having employer-employee relationship; this mere allegation did not serve to
automatically deprive the court of its jurisdiction duly conferred by the allegations of the
complaint; in the opinion of the defendants, a labor dispute exists, the court is duty bound to
find out if such circumstances really exist.
The Court weighing the evidence and jurisprudence in support in support of the respective
contention of the parties, and finding that in the case at bar, plaintiff seeks to recover
pecuniary damages, the Court gives more credence to the decisions cited by the plaintiff,
hence the special and affirmative defenses alleged in the answer treated as a "Motion to
Dismiss" is hereby denied.
On May 24, 1991, respondent CIGLA filed with the Court of Appeals a petition for certiorari with preliminary
injunction6 assailing the validity of the proceedings had before the regional trial court.
After due proceedings, on March 31, 1992, the Court of Appeals promulgated its decision in
CIGLA's favor, the dispositive portion of which states:
WHEREFORE, the Writ of Certiorari is GRANTED, and the proceedings before respondent
Judge more particularly the challenged orders are declared null and void and respondent
Judge is enjoined from taking any further action in Civil Case No. 90-1612 except for the
purpose of dismissing it. Following, however, the disposition in San Miguel Corporation
Employees Union vs. Bersamira, the status quo ante declaration of strike shall be observed
pending the proceedings in the National Conciliation and Mediation Board, Department of
Labor and Employment, National Capital Region (Annex A of Petition). No Costs.
SO ORDERED.
On April 29, 1992, petitioner Citibank filed a motion for reconsideration of the decision. On
February 12, 1993, the Court of Appeals denied the motion, finding that the arguments in the
motion for reconsideration are but a rehash, if not a repetition, of the arguments in its
comments, which had been considered by the Court in its decision.
Hence, the petitioner's recourse to this Court.
The Issue
The basic issue involved is whether it is the labor tribunal or the regional trial court that has
jurisdiction over the subject matter of the complaint filed by Citibank with the trial court.
Petitioner's Submission
Petitioner Citibank contends that there is no employer-employee relationship between
Citibank and the security guards represented by respondent CIGLA and that there is no
"labor dispute" in the subject controversy. The security guards were employees of El Toro
security agency, not of Citibank. Its service contract with Citibank had expired and not
renewed.
The Court's Ruling
We sustain the petitioner's contention. This Court has held in many cases that "in determining the existence
of an employer-employee relationship, the following elements are generally considered: 1) the selection and
engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the employer's
power to control the employee with respect to the means and methods by which the work is to be
accomplished".7 It has been decided also that the Labor Arbiter has no jurisdiction over a claim filed where
no employer-employee relationship existed between a company and the security guards assigned to it by a
security service contractor.8 In this case, it was the security agency El Toro that recruited, hired and
assigned the watchmen to their place of work. It was the security agency that was answerable to Citibank for
the conduct of its guards.
The question arises. Is there a labor dispute between Citibank and the security guards,
members of respondent CIGLA, regardless of whether they stand in the relation of employer
and employees? Article 212, paragraph 1 of the Labor Code provides the definition of a "labor
dispute". It "includes any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating, fixing,
maintaining, changing or arranging the terms and conditions of employment, regardless of
whether the disputants stand in the proximate relation of employer and employee.
If at all, the dispute between Citibank and El Toro security agency is one regarding the termination or non-
renewal of the contract of services. This is a civil dispute. 9 El Toro was an independent contractor. Thus, no
employer-employee relationship existed between Citibank and the security guard members of the union in
the security agency who were assigned to secure the bank's premises and property. Hence, there was no
labor dispute and no right to strike against the bank.
It is a basic rule of procedure that "jurisdiction of the court over the subject matter of the action is
determined by the allegations of the complaint, irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein. The jurisdiction of the court can not be made to
depend upon the defenses set up in the answer or upon the motion to dismiss, for otherwise, the question of
jurisdiction would almost entirely depend upon the defendant." 10 "What determines the jurisdiction of the
court is the nature of the action pleaded as appearing from the allegations in the complaint. The averments
therein and the character of the relief sought are the ones to be consulted." 11
In the complaint filed with the trial court, petitioner alleged that in 1983, it entered into a
contract with El Toro, a security agency, for security and protection service. The parties
renewed the contract yearly until April 22, 1990. Petitioner further alleged that from June 11,
1990, until the filing of the complaint, El Toro security guards formerly assigned to guard
Citibank premises loitered around the bank's premises in large groups and threatened to
stage a strike, which would hamper its operations and the normal conduct of its business
and that the bank would suffer damages should a strike push through.
On the basis of the allegations of the complaint, it is safe to conclude that the dispute involved is a civil one,
not a labor dispute.12 Consequently, we rule that jurisdiction over the subject matter of the complaint lies with
the regional trial court.
Relief
WHEREFORE, the Court hereby GRANTS the petition for review on certiorari. We REVERSE
and SET ASIDE the decision of the Court of Appeals and its resolution denying
reconsideration in CA-G. R. SP No. 25584, and REMAND the records of the case to the
Regional Trial Court, Makati, for further proceedings in line with the ruling herein that
jurisdiction over the subject matter of the complaint in Civil Case No. 90-1612, is vested
therein.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 159577 Â Â Â Â Â Â May 3, 2006
CHARLITO PEÑARANDA, Petitioner,Â
vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.
DECISION
PANGANIBAN, CJ:
Managerial employees and members of the managerial staff are exempted from the
provisions of the Labor Code on labor standards. Since petitioner belongs to this class of
employees, he is not entitled to overtime pay and premium pay for working on rest days.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the January 27, 2003 2 and
July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 74358. The earlier Resolution
disposed as follows:Â
"WHEREFORE, premises considered, the instant petition is hereby DISMISSED." 4
The latter Resolution denied reconsideration.
On the other hand, the Decision of the National Labor Relations Commission (NLRC)
challenged in the CA disposed as follows:Â
"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime pay and
premium pay for rest day to complainant is hereby REVERSED and SET ASIDE, and the complaint in the
above-entitled case dismissed for lack of merit.5
The Facts
Sometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee of Baganga Plywood
Corporation (BPC) to take charge of the operations and maintenance of its steam plant boiler. 6 In May 2001,
Peñaranda filed a Complaint for illegal dismissal with money claims against BPC and its general manager,
Hudson Chua, before the NLRC.7
After the parties failed to settle amicably, the labor arbiter 8 directed the parties to file their position papers
and submit supporting documents. 9 Their respective allegations are summarized by the labor arbiter as
follows:
"[Peñaranda] through counsel in his position paper alleges that he was employed by
respondent [Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as
Foreman/Boiler Head/Shift Engineer until he was illegally terminated on December 19, 2000.
Further, [he] alleges that his services [were] terminated without the benefit of due process
and valid grounds in accordance with law. Furthermore, he was not paid his overtime pay,
premium pay for working during holidays/rest days, night shift differentials and finally claims
for payment of damages and attorney’s fees having been forced to litigate the present
complaint.
"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under
Philippine laws and is represented herein by its General Manager HUDSON CHUA, [the] individual
respondent. Respondents thru counsel allege that complainant’s separation from service was done
pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on temporary closure due to repair and
general maintenance and it applied for clearance with the Department of Labor and Employment, Regional
Office No. XI to shut down and to dismiss employees (par. 2 position paper). And due to the insistence of
herein complainant he was paid his separation benefits (Annexes C and D, ibid). Consequently, when
respondent [BPC] partially reopened in January 2001, [Peñaranda] failed to reapply. Hence, he was not
terminated from employment much less illegally. He opted to severe employment when he insisted payment
of his separation benefits. Furthermore, being a managerial employee he is not entitled to overtime pay and if
ever he rendered services beyond the normal hours of work, [there] was no office order/or authorization for
him to do so. Finally, respondents allege that the claim for damages has no legal and factual basis and that
the instant complaint must necessarily fail for lack of merit."10
The labor arbiter ruled that there was no illegal dismissal and that petitioner’s Complaint was premature
because he was still employed by BPC.11 The temporary closure of BPC’s plant did not terminate his
employment, hence, he need not reapply when the plant reopened.
According to the labor arbiter, petitioner’s money claims for illegal dismissal was also weakened by his
quitclaim and admission during the clarificatory conference that he accepted separation benefits, sick and
vacation leave conversions and thirteenth month pay.12
Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on rest
days, and attorney’s fees in the total amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium pay for
working on rest days. According to the Commission, petitioner was not entitled to these awards because he
was a managerial employee.14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed Peñaranda’s Petition for Certiorari. The
appellate court held that he failed to: 1) attach copies of the pleadings submitted before the labor arbiter and
NLRC; and 2) explain why the filing and service of the Petition was not done by personal service. 15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner still
failed to submit the pleadings filed before the NLRC.16
Hence this Petition.17
The Issues
Petitioner states the issues in this wise:Â
"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it
entertained the APPEAL of the respondent[s] despite the lapse of the mandatory period of TEN
DAYS.1avvphil.net
"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of
jurisdiction when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16,
2002 REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor
arbiter] with respect to the following:
"I. The finding of the [labor arbiter] that [Peñaranda] is a regular, common employee entitled
to monetary benefits under Art. 82 [of the Labor Code].
"II. The finding that [Peñaranda] is entitled to the payment of OVERTIME PAY and OTHER MONETARY
BENEFITS."18
The Court’s Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Peñaranda’s Petition on purely technical grounds, particularly with
regard to the failure to submit supporting documents.Â
In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying the
petition before the CA sufficiently supported the allegations therein. Citing this case, Piglas-Kamao v. NLRC 20
stayed the dismissal of an appeal in the exercise of its equity jurisdiction to order the adjudication on the
merits.
The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to challenge the
finding that he was a managerial employee.21 In his Motion for Reconsideration, petitioner also submitted the
pleadings before the labor arbiter in an attempt to comply with the CA rules. 22 Evidently, the CA could have
ruled on the Petition on the basis of these attachments. Petitioner should be deemed in substantial
compliance with the procedural requirements.
Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of petitioner
and to tackle his substantive arguments in the present case. Rules of procedure must be adopted to help
promote, not frustrate, substantial justice. 23 The Court frowns upon the practice of dismissing cases purely
on procedural grounds.24 Considering that there was substantial compliance,25 a liberal interpretation of
procedural rules in this labor case is more in keeping with the constitutional mandate to secure social
justice.26
First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should be filed
within 10 days from receipt thereof.27
Petitioner’s claim that respondents filed their appeal beyond the required period is not substantiated. In
the pleadings before us, petitioner fails to indicate when respondents received the Decision of the labor
arbiter. Neither did the petitioner attach a copy of the challenged appeal. Thus, this Court has no means to
determine from the records when the 10-day period commenced and terminated. Since petitioner utterly
failed to support his claim that respondents’ appeal was filed out of time, we need not belabor that point.
The parties alleging have the burden of substantiating their allegations. 28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore, entitled to the award
granted by the labor arbiter.Â
Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor
standards provide the working conditions of employees, including entitlement to overtime pay and premium
pay for working on rest days.29 Under this provision, managerial employees are "those whose primary duty
consists of the management of the establishment in which they are employed or of a department or
subdivision."30
The Implementing Rules of the Labor Code state that managerial employees are those who
meet the following conditions:
"(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof;
"(2) They customarily and regularly direct the work of two or more employees therein;
"(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of other
employees are given particular weight."31
The Court disagrees with the NLRC’s finding that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also takes him out of the coverage of labor
standards. Like managerial employees, officers and members of the managerial staff are not entitled to the
provisions of law on labor standards. 32 The Implementing Rules of the Labor Code define members of a
managerial staff as those with the following duties and responsibilities:
"(1) The primary duty consists of the performance of work directly related to management
policies of the employer;
"(2) Customarily and regularly exercise discretion and independent judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of the management of the establishment in which he is employed or
subdivision thereof; or (ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii) execute under
general supervision special assignments and tasks; and
"(4) who do not devote more than 20 percent of their hours worked in a workweek to activities which are not
directly and closely related to the performance of the work described in paragraphs (1), (2), and (3) above." 33
As shift engineer, petitioner’s duties and responsibilities were as follows:
"1. To supply the required and continuous steam to all consuming units at minimum cost.
"2. To supervise, check and monitor manpower workmanship as well as operation of boiler
and accessories.
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or disciplinary action.
"8. To check water from the boiler, feedwater and softener, regenerate softener if beyond
hardness limit.
"9. Implement Chemical Dosing.
"10. Perform other task as required by the superior from time to time."34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a
member of the managerial staff. His duties and responsibilities conform to the definition of a
member of a managerial staff under the Implementing Rules.Â
Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the
operation of the machines and the performance of the workers in the engineering section. This work
necessarily required the use of discretion and independent judgment to ensure the proper functioning of the
steam plant boiler. As supervisor, petitioner is deemed a member of the managerial staff. 35
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he was
the foreman responsible for the operation of the boiler. 36 The term foreman implies that he was the
representative of management over the workers and the operation of the department. 37 Petitioner’s
evidence also showed that he was the supervisor of the steam plant. 38 His classification as supervisor is
further evident from the manner his salary was paid. He belonged to the 10% of respondent’s 354
employees who were paid on a monthly basis; the others were paid only on a daily basis. 39
On the basis of the foregoing, the Court finds no justification to award overtime pay and
premium pay for rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.Â
SO ORDERED.

[G.R. NO. 152396 : November 20, 2007]

EX-BATAAN VETERANS SECURITY AGENCY, INC., Petitioner, v. THE SECRETARY OF LABOR

BIENVENIDO E. LAGUESMA, REGIONAL DIRECTOR BRENDA A. VILLAFUERTE, ALEXANDER
POCDING, FIDEL BALANGAY, BUAGEN CLYDE, DENNIS EPI, DAVID MENDOZA, JR., GABRIEL
TAMULONG, ANTON PEDRO, FRANCISCO PINEDA, GASTON DUYAO, HULLARUB, NOLI DIONEDA,
ATONG CENON, JR., TOMMY BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY MINO,
ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO, and P. C. DINTAN, Respondents.

DECISION

CARPIO, J.:

The Case

This is a Petition for Review 1 with prayer for the issuance of a temporary restraining order or writ of
preliminary injunction of the 29 May 2001 Decision 2 and the 26 February 2002 Resolution 3 of the Court of
Appeals in CA-G.R. SP No. 57653. The 29 May 2001 Decision of the Court of Appeals affirmed the 4 October
1999 Order of the Secretary of Labor in OS-LS-04-4-097-280. The 26 February 2002 Resolution denied the
motion for reconsideration.

The Facts

Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing security services while
private respondents are EBVSAI's employees assigned to the National Power Corporation at Ambuklao Hydro
Electric Plant, Bokod, Benguet (Ambuklao Plant).

On 20 February 1996, private respondents led by Alexander Pong (Pong) instituted a complaint 4 for
underpayment of wages against EBVSAI before the Regional Office of the Department of Labor and
Employment (DOLE).

On 7 March 1996, the Regional Office conducted a complaint inspection at the Ambuklao Plant where the
following violations were noted: (1) non-presentation of records; (2) non-payment of holiday pay; (3) non-
payment of rest day premium; (4) underpayment of night shift differential pay; (5) non-payment of service
incentive leave; (6) underpayment of 13 th month pay; (7) no registration; (8) no annual medical report; (9)
no annual work accidental report; (10) no safety committee; and (11) no trained first aider. 5On the same
date, the Regional Office issued a notice of hearing 6 requiring EBVSAI and private respondents to attend the
hearing on 22 March 1996. Other hearings were set for 8 May 1996, 27 May 1996 and 10 June 1996.

On 19 August 1996, the Director of the Regional Office (Regional Director) issued an Order, the dispositive
portion of which reads:

WHEREFORE, premises considered, respondent EX-BATAAN VETERANS SECURITY

AGENCY is hereby ORDERED to pay the computed deficiencies owing to the affected
employees in the total amount of SEVEN HUNDRED SIXTY THREE THOUSAND NINE
HUNDRED NINETY SEVEN PESOS and 85/PESOS within ten (10) calendar days upon
receipt hereof. Otherwise, a Writ of Execution shall be issued to enforce compliance of this
Order.

NAME D
E
F
I
C
I
E
N
C
Y

1. ALEXANDER P
POCDING
3
6
,
3
8
0
.
8
5

2. FIDEL 3
BALANGAY 6
,
3
8
0
.
8
 5

3. BUAGEN 3
CLYDE 6
,
3
8
0
.
8
5

4. DENNIS EPI 3
6
,
3
8
0
.
8
5

5. DAVID 3
MENDOZA, JR. 6
,
3
8
0
.
8
5

6. GABRIEL 3
TAMULONG 6
,
3
8
0
.
8
5

7. ANTON 3
PEDRO 6
,
3
8
0
.
 8
5

8. FRANCISCO 3
PINEDA 6
,
3
8
0
.
8
5

9. GASTON 3
DUYAO 6
,
3
8
0
.
8
5

10. HULLARUB 3
6
,
3
8
0
.
8
5

11. NOLI 3
D[EO]NIDA 6
,
3
8
0
.
8
5

12. ATONG 3
CENON, JR. 6
,
3
8
0
 .
8
5

13. TOMMY 3
BAUCAS 6
,
3
8
0
.
8
5

14. WILIAM 3
PAPSONGAY 6
,
3
8
0
.
8
5

15. RICKY 3
DORIA 6
,
3
8
0
.
8
5

16. GEOFREY 3
MINO 6
,
3
8
0
.
8
5

17. ORLANDO 3
R[IL]LASE 6
,
3
8
 0
.
8
5

18. SIMPLICO 3
TELLO 6
,
3
8
0
.
8
5

19. NOCES, 3
M.G. 6
,
3
8
0
.
8
5

20. ALEJO, R.D. 3

6
,
3
8
0
.
8
5

21. D[I]NTAN, 3
P.C. 6
,
3
8
0
.
8
5

TOTAL P

7
 6
3
,
9
9
7
.
8
5

xxx

SO ORDERED.7

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

In a supplemental motion for reconsideration, 9 EBVSAI questioned the Regional Director's basis for the
computation of the deficiencies due to each private respondent.

In an Order10 dated 16 January 1997, the Regional Director denied EBVSAI's motion for reconsideration and
supplemental motion for reconsideration. The Regional Director stated that, pursuant to Republic Act No.
7730 (RA 7730),11 the limitations under Articles 12912 and 217(6)13 of the Labor Code no longer apply to the
Secretary of Labor's visitorial and enforcement powers under Article 128(b). 14 The Secretary of Labor or his
duly authorized representatives are now empowered to hear and decide, in a summary proceeding, any
matter involving the recovery of any amount of wages and other monetary claims arising out of employer-
employee relations at the time of the inspection.

EBVSAI appealed to the Secretary of Labor.

The Ruling of the Secretary of Labor

In an Order15 dated 4 October 1999, the Secretary of Labor affirmed with modification the Regional
Director's 19 August 1996 Order. The Secretary of Labor ordered that the P1,000 received by private
respondents Romeo Alejo, Atong Cenon, Jr., Geofrey Mino, Dennis Epi, and Ricky Doria be deducted from
their respective claims. The Secretary of Labor ruled that, pursuant to RA 7730, the Court's decision in the
Servando16 case is no longer controlling insofar as the restrictive effect of Article 129 on the visitorial and
enforcement power of the Secretary of Labor is concerned.

The Secretary of Labor also stated that there was no denial of due process because EBVSAI was accorded
several opportunities to present its side but EBVSAI failed to present any evidence to controvert the findings
of the Regional Director. Moreover, the Secretary of Labor doubted the veracity and authenticity of EBVSAI's
documentary evidence. The Secretary of Labor noted that these documents were not presented at the initial
stage of the hearing and that the payroll documents did not indicate the periods covered by EBVSAI's
alleged payments.

EVBSAI filed a motion for reconsideration which was denied by the Secretary of Labor in his 3 January 2000
Order.17

EBVSAI filed a petition for certiorari before the Court of Appeals.

The Ruling of the Court of Appeals

In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and affirmed the Secretary of
Labor's decision. The Court of Appeals adopted the Secretary of Labor's ruling that RA 7730 repealed the
jurisdictional limitation imposed by Article 129 on Article 128 of the Labor Code. The Court of Appeals also
agreed with the Secretary of Labor's finding that EBVSAI was accorded due process.

The Court of Appeals also denied EBVSAI's motion for reconsideration in its 26 February 2002 Resolution.

Hence, this petition.

 The Issues

This case raises the following issues:

1. Whether the Secretary of Labor or his duly authorized representatives acquired jurisdiction
over EBVSAI; and cralawlibrary

2. Whether the Secretary of Labor or his duly authorized representatives have jurisdiction over
the money claims of private respondents which exceed P5,000.

The Ruling of the Court

The petition has no merit.

On the Regional Director's Jurisdiction over EBVSAI

EBVSAI claims that the Regional Director did not acquire jurisdiction over EBVSAI because he failed to
comply with Section 11, Rule 14 of the 1997 Rules of Civil Procedure. 18 EBVSAI points out that the notice of
hearing was served at the Ambuklao Plant, not at EBVSAI's main office in Makati, and that it was addressed
to Leonardo Castro, Jr., EBVSAI's Vice-President.

The Rules on the Disposition of Labor Standards Cases in the Regional Offices 19 (rules) specifically state that
notices and copies of orders shall be served on the parties or their duly authorized representatives at their
last known address or, if they are represented by counsel, through the latter. 20 The rules shall be liberally
construed21 and only in the absence of any applicable provision will the Rules of Court apply in a suppletory
character.22

In this case, EBVSAI does not deny having received the notices of hearing. In fact, on 29 March and 13 June
1996, Danilo Burgos and Edwina Manao, detachment commander and bookkeeper of EBVSAI, respectively,
appeared before the Regional Director. They claimed that the 22 March 1996 notice of hearing was received
late and manifested that the notices should be sent to the Manila office. Thereafter, the notices of hearing
were sent to the Manila office. They were also informed of EBVSAI's violations and were asked to present
the employment records of the private respondents for verification. They were, moreover, asked to submit,
within 10 days, proof of compliance or their position paper. The Regional Director validly acquired
jurisdiction over EBVSAI. EBVSAI can no longer question the jurisdiction of the Regional Director after
receiving the notices of hearing and after appearing before the Regional Director.

On the Regional Director's Jurisdiction over the Money Claims

EBVSAI maintains that under Articles 129 and 217(6) of the Labor Code, the Labor Arbiter, not the Regional
Director, has exclusive and original jurisdiction over the case because the individual monetary claim of
private respondents exceeds P5,000. EBVSAI also argues that the case falls under the exception clause in
Article 128(b) of the Labor Code. EBVSAI asserts that the Regional Director should have certified the case to
the Arbitration Branch of the National Labor Relations Commission (NLRC) for a full-blown hearing on the
merits.

In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:

While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the aggregate money claims of each employee
exceeds P5,000.00, said provisions of law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his duly authorized representatives.

Rather, said powers are defined and set forth in Article 128 of the Labor Code (as amended by
R.A. No. 7730) thus:

Art. 128 Visitorial and enforcement power. - - - x x x

(b) Notwithstanding the provisions of Article[s] 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists,
the Secretary of Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect to [the labor
standards provisions of this Code and other] labor legislation based on the
findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate authority for the
 enforcement of their orders, except in cases where the employer contests the
findings of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of
inspection.

xxx

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

This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v. Sensing, 24 where we sustained the
jurisdiction of the DOLE Regional Director and held that "the visitorial and enforcement powers of the
DOLE Regional Director to order and enforce compliance with labor standard laws can be
exercised even where the individual claim exceeds P5,000."

However, if the labor standards case is covered by the exception clause in Article 128(b) of the Labor Code,
then the Regional Director will have to endorse the case to the appropriate Arbitration Branch of the NLRC.
In order to divest the Regional Director or his representatives of jurisdiction, the following elements must be
present: (a) that the employer contests the findings of the labor regulations officer and raises issues
thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary matters; and (c)
that such matters are not verifiable in the normal course of inspection. 25 The rules also provide that the
employer shall raise such objections during the hearing of the case or at any time after receipt of the notice
of inspection results.26

In this case, the Regional Director validly assumed jurisdiction over the money claims of private respondents
even if the claims exceeded P5,000 because such jurisdiction was exercised in accordance with Article
128(b) of the Labor Code and the case does not fall under the exception clause.

The Court notes that EBVSAI did not contest the findings of the labor regulations officer during the hearing
or after receipt of the notice of inspection results. It was only in its supplemental motion for reconsideration
before the Regional Director that EBVSAI questioned the findings of the labor regulations officer and
presented documentary evidence to controvert the claims of private respondents. But even if this was the
case, the Regional Director and the Secretary of Labor still looked into and considered EBVSAI's
documentary evidence and found that such did not warrant the reversal of the Regional Director's order. The
Secretary of Labor also doubted the veracity and authenticity of EBVSAI's documentary evidence. Moreover,
the pieces of evidence presented by EBVSAI were verifiable in the normal course of inspection because all
employment records of the employees should be kept and maintained in or about the premises of the
workplace, which in this case is in Ambuklao Plant, the establishment where private respondents were
regularly assigned.27

WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001 Decision and the 26 February 2002
Resolution of the Court of Appeals in CA-G.R. SP No. 57653.

SO ORDERED.

G.R. No. 169717 March 16, 2011

SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR
EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY VICTORIO-Union President, Petitioner,
vs.
CHARTER CHEMICAL and COATING CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
The right to file a petition for certification election is accorded to a labor organization provided that it complies with the
requirements of law for proper registration. The inclusion of supervisory employees in a labor organization seeking to
represent the bargaining unit of rank-and-file employees does not divest it of its status as a legitimate labor
organization. We apply these principles to this case.
This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeal’s March 15, 2005 Decision1
in CA-G.R. SP No. 58203, which annulled and set aside the January 13, 2000 Decision2 of the Department of Labor
and Employment (DOLE) in OS-A-6-53-99 (NCR-OD-M-9902-019) and the September 16, 2005 Resolution3 denying
petitioner union’s motion for reconsideration.
Factual Antecedents
On February 19, 1999, Samahang Manggagawa sa Charter Chemical Solidarity of Unions in the Philippines for
Empowerment and Reforms (petitioner union) filed a petition for certification election among the regular rank-and-file
employees of Charter Chemical and Coating Corporation (respondent company) with the Mediation Arbitration Unit of
the DOLE, National Capital Region.
On April 14, 1999, respondent company filed an Answer with Motion to Dismiss4 on the ground that petitioner union is
not a legitimate labor organization because of (1) failure to comply with the documentation requirements set by law,
and (2) the inclusion of supervisory employees within petitioner union.5
Med-Arbiter’s Ruling
On April 30, 1999, Med-Arbiter Tomas F. Falconitin issued a Decision6 dismissing the petition for certification election.
The Med-Arbiter ruled that petitioner union is not a legitimate labor organization because the Charter Certificate,
"Sama-samang Pahayag ng Pagsapi at Authorization," and "Listahan ng mga Dumalo sa Pangkalahatang Pulong at
mga Sumang-ayon at Nagratipika sa Saligang Batas" were not executed under oath and certified by the union
secretary and attested to by the union president as required by Section 235 of the Labor Code7 in relation to Section
1, Rule VI of Department Order (D.O.) No. 9, series of 1997. The union registration was, thus, fatally defective.
The Med-Arbiter further held that the list of membership of petitioner union consisted of 12 batchman, mill operator
and leadman who performed supervisory functions. Under Article 245 of the Labor Code, said supervisory employees
are prohibited from joining petitioner union which seeks to represent the rank-and-file employees of respondent
company.
As a result, not being a legitimate labor organization, petitioner union has no right to file a petition for certification
election for the purpose of collective bargaining.
Department of Labor and Employment’s Ruling
On July 16, 1999, the DOLE initially issued a Decision8 in favor of respondent company dismissing petitioner union’s
appeal on the ground that the latter’s petition for certification election was filed out of time. Although the DOLE ruled,
contrary to the findings of the Med-Arbiter, that the charter certificate need not be verified and that there was no
independent evidence presented to establish respondent company’s claim that some members of petitioner union
were holding supervisory positions, the DOLE sustained the dismissal of the petition for certification after it took
judicial notice that another union, i.e., Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating
Corporation, previously filed a petition for certification election on January 16, 1998. The Decision granting the said
petition became final and executory on September 16, 1998 and was remanded for immediate implementation. Under
Section 7, Rule XI of D.O. No. 9, series of 1997, a motion for intervention involving a certification election in an
unorganized establishment should be filed prior to the finality of the decision calling for a certification election.
Considering that petitioner union filed its petition only on February 14, 1999, the same was filed out of time.
On motion for reconsideration, however, the DOLE reversed its earlier ruling. In its January 13, 2000 Decision, the
DOLE found that a review of the records indicates that no certification election was previously conducted in
respondent company. On the contrary, the prior certification election filed by Pinag-isang Lakas Manggagawa sa
Charter Chemical and Coating Corporation was, likewise, denied by the Med-Arbiter and, on appeal, was dismissed
by the DOLE for being filed out of time. Hence, there was no obstacle to the grant of petitioner union’s petition for
certification election, viz:
WHEREFORE, the motion for reconsideration is hereby GRANTED and the decision of this Office dated 16 July 1999
is MODIFIED to allow the certification election among the regular rank-and-file employees of Charter Chemical and
Coating Corporation with the following choices:
1. Samahang Manggagawa sa Charter Chemical-Solidarity of Unions in the Philippines for Empowerment and
Reform (SMCC-SUPER); and
2. No Union.
Let the records of this case be remanded to the Regional Office of origin for the immediate conduct of a certification
election, subject to the usual pre-election conference.
SO DECIDED.9
Court of Appeal’s Ruling
On March 15, 2005, the CA promulgated the assailed Decision, viz:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution dated January 13, 2000 and
February 17, 2000 are hereby [ANNULLED] and SET ASIDE.
SO ORDERED.10
In nullifying the decision of the DOLE, the appellate court gave credence to the findings of the Med-Arbiter that
petitioner union failed to comply with the documentation requirements under the Labor Code. It, likewise, upheld the
Med-Arbiter’s finding that petitioner union consisted of both rank-and-file and supervisory employees. Moreover, the
CA held that the issues as to the legitimacy of petitioner union may be attacked collaterally in a petition for
certification election and the infirmity in the membership of petitioner union cannot be remedied through the
exclusion-inclusion proceedings in a pre-election conference pursuant to the ruling in Toyota Motor Philippines v.
Toyota Motor Philippines Corporation Labor Union.11 Thus, considering that petitioner union is not a legitimate labor
organization, it has no legal right to file a petition for certification election.
Issues
I
Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of jurisdiction
in granting the respondent [company’s] petition for certiorari (CA G.R. No. SP No. 58203) in spite of the fact that the
issues subject of the respondent company[’s] petition was already settled with finality and barred from being re-
litigated.
II
Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of jurisdiction
in holding that the alleged mixture of rank-and-file and supervisory employee[s] of petitioner [union’s] membership is
[a] ground for the cancellation of petitioner [union’s] legal personality and dismissal of [the] petition for certification
election.
III
Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of jurisdiction
in holding that the alleged failure to certify under oath the local charter certificate issued by its mother federation and
list of the union membership attending the organizational meeting [is a ground] for the cancellation of petitioner
[union’s] legal personality as a labor organization and for the dismissal of the petition for certification election.12
Petitioner Union’s Arguments
Petitioner union claims that the litigation of the issue as to its legal personality to file the subject petition for
certification election is barred by the July 16, 1999 Decision of the DOLE. In this decision, the DOLE ruled that
petitioner union complied with all the documentation requirements and that there was no independent evidence
presented to prove an illegal mixture of supervisory and rank-and-file employees in petitioner union. After the
promulgation of this Decision, respondent company did not move for reconsideration, thus, this issue must be
deemed settled.
Petitioner union further argues that the lack of verification of its charter certificate and the alleged illegal composition
of its membership are not grounds for the dismissal of a petition for certification election under Section 11, Rule XI of
D.O. No. 9, series of 1997, as amended, nor are they grounds for the cancellation of a union’s registration under
Section 3, Rule VIII of said issuance. It contends that what is required to be certified under oath by the local union’s
secretary or treasurer and attested to by the local union’s president are limited to the union’s constitution and by-laws,
statement of the set of officers, and the books of accounts.
Finally, the legal personality of petitioner union cannot be collaterally attacked but may be questioned only in an
independent petition for cancellation pursuant to Section 5, Rule V, Book IV of the Rules to Implement the Labor
Code and the doctrine enunciated in Tagaytay Highlands International Golf Club Incoprorated v. Tagaytay Highlands
Empoyees Union-PTGWO.13
Respondent Company’s Arguments
Respondent company asserts that it cannot be precluded from challenging the July 16, 1999 Decision of the DOLE.
The said decision did not attain finality because the DOLE subsequently reversed its earlier ruling and, from this
decision, respondent company timely filed its motion for reconsideration.
On the issue of lack of verification of the charter certificate, respondent company notes that Article 235 of the Labor
Code and Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9, series of 1997,
expressly requires that the charter certificate be certified under oath.
It also contends that petitioner union is not a legitimate labor organization because its composition is a mixture of
supervisory and rank-and-file employees in violation of Article 245 of the Labor Code. Respondent company
maintains that the ruling in Toyota Motor Philippines vs. Toyota Motor Philippines Labor Union14 continues to be good
case law. Thus, the illegal composition of petitioner union nullifies its legal personality to file the subject petition for
certification election and its legal personality may be collaterally attacked in the proceedings for a petition for
certification election as was done here.
Our Ruling
The petition is meritorious.
The issue as to the legal personality of petitioner union is not barred by the July 16, 1999 Decision of the DOLE.
A review of the records indicates that the issue as to petitioner union’s legal personality has been timely and
consistently raised by respondent company before the Med-Arbiter, DOLE, CA and now this Court. In its July 16,
1999 Decision, the DOLE found that petitioner union complied with the documentation requirements of the Labor
Code and that the evidence was insufficient to establish that there was an illegal mixture of supervisory and rank-and-
file employees in its membership. Nonetheless, the petition for certification election was dismissed on the ground that
another union had previously filed a petition for certification election seeking to represent the same bargaining unit in
respondent company.
Upon motion for reconsideration by petitioner union on January 13, 2000, the DOLE reversed its previous ruling. It
upheld the right of petitioner union to file the subject petition for certification election because its previous decision
was based on a mistaken appreciation of facts.15 From this adverse decision, respondent company timely moved for
reconsideration by reiterating its previous arguments before the Med-Arbiter that petitioner union has no legal
personality to file the subject petition for certification election.
The July 16, 1999 Decision of the DOLE, therefore, never attained finality because the parties timely moved for
reconsideration. The issue then as to the legal personality of petitioner union to file the certification election was
properly raised before the DOLE, the appellate court and now this Court.
The charter certificate need not be certified under oath by the local union’s secretary or treasurer and attested to by
its president.
Preliminarily, we must note that Congress enacted Republic Act (R.A.) No. 948116 which took effect on June 14,
2007.17 This law introduced substantial amendments to the Labor Code. However, since the operative facts in this
case occurred in 1999, we shall decide the issues under the pertinent legal provisions then in force (i.e., R.A. No.
6715,18 amending Book V of the Labor Code, and the rules and regulations 19 implementing R.A. No. 6715, as
amended by D.O. No. 9,20
series of 1997) pursuant to our ruling in Republic v. Kawashima Textile Mfg., Philippines, Inc.21
In the main, the CA ruled that petitioner union failed to comply with the requisite documents for registration under
Article 235 of the Labor Code and its implementing rules. It agreed with the Med-Arbiter that the Charter Certificate,
Sama-samang Pahayag ng Pagsapi at Authorization, and Listahan ng mga Dumalo sa Pangkalahatang Pulong at
mga Sumang-ayon at Nagratipika sa Saligang Batas were not executed under oath. Thus, petitioner union cannot be
accorded the status of a legitimate labor organization.
We disagree.
The then prevailing Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O. No. 9, series of
1997, provides:
Section 1. Chartering and creation of a local chapter — A duly registered federation or national union may directly
create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following:
(a) A charter certificate issued by the federation or national union indicating the creation or establishment of the
local/chapter;
(b) The names of the local/chapter’s officers, their addresses, and the principal office of the local/chapter; and
(c) The local/chapter’s constitution and by-laws provided that where the local/chapter’s constitution and by-laws [are]
the same as [those] of the federation or national union, this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the
local/chapter and attested to by its President.
As readily seen, the Sama-samang Pahayag ng Pagsapi at Authorization and Listahan ng mga Dumalo sa
Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas are not among the documents that
need to be submitted to the Regional Office or Bureau of Labor Relations in order to register a labor organization. As
to the charter certificate, the above-quoted rule indicates that it should be executed under oath. Petitioner union
concedes and the records confirm that its charter certificate was not executed under oath. However, in San Miguel
Corporation (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Corporation
Monthlies Rank-and-File Union-FFW (MPPP-SMPP-SMAMRFU-FFW),22 which was decided under the auspices of
D.O. No. 9, Series of 1997, we ruled –
In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma, 331 Phil. 356 (1996), the Court ruled that it was not
necessary for the charter certificate to be certified and attested by the local/chapter officers. Id. While this ruling
was based on the interpretation of the previous Implementing Rules provisions which were supplanted by
the 1997 amendments, we believe that the same doctrine obtains in this case. Considering that the charter
certificate is prepared and issued by the national union and not the local/chapter, it does not make sense to have
the local/chapter’s officers x x x certify or attest to a document which they had no hand in the preparation
of.23 (Emphasis supplied)
In accordance with this ruling, petitioner union’s charter certificate need not be executed under oath. Consequently, it
validly acquired the status of a legitimate labor organization upon submission of (1) its charter certificate, 24 (2) the
names of its officers, their addresses, and its principal office, 25 and (3) its constitution and by-laws 26— the last two
requirements having been executed under oath by the proper union officials as borne out by the records.
The mixture of rank-and-file and supervisory employees in petitioner union does not nullify its legal personality as a
legitimate labor organization.
The CA found that petitioner union has for its membership both rank-and-file and supervisory employees. However,
petitioner union sought to represent the bargaining unit consisting of rank-and-file employees. Under Article 245 27 of
the Labor Code, supervisory employees are not eligible for membership in a labor organization of rank-and-file
employees. Thus, the appellate court ruled that petitioner union cannot be considered a legitimate labor organization
pursuant to Toyota Motor Philippines v. Toyota Motor Philippines Corporation Labor Union28 (hereinafter Toyota).
Preliminarily, we note that petitioner union questions the factual findings of the Med-Arbiter, as upheld by the
appellate court, that 12 of its members, consisting of batchman, mill operator and leadman, are supervisory
employees. However, petitioner union failed to present any rebuttal evidence in the proceedings below after
respondent company submitted in evidence the job descriptions 29 of the aforesaid employees. The job descriptions
indicate that the aforesaid employees exercise recommendatory managerial actions which are not merely routinary
but require the use of independent judgment, hence, falling within the definition of supervisory employees under
Article 212(m)30 of the Labor Code. For this reason, we are constrained to agree with the Med-Arbiter, as upheld by
the appellate court, that petitioner union consisted of both rank-and-file and supervisory employees.
Nonetheless, the inclusion of the aforesaid supervisory employees in petitioner union does not divest it of its status as
a legitimate labor organization. The appellate court’s reliance on Toyota is misplaced in view of this Court’s
subsequent ruling in Republic v. Kawashima Textile Mfg., Philippines, Inc.31 (hereinafter Kawashima). In Kawashima,
we explained at length how and why the Toyota doctrine no longer holds sway under the altered state of the law and
rules applicable to this case, viz:
R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition [on the co-mingling of
supervisory and rank-and-file employees] would bring about on the legitimacy of a labor organization.
It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules) which supplied the
deficiency by introducing the following amendment to Rule II (Registration of Unions):
"Sec. 1. Who may join unions. - x x x Supervisory employees and security guards shall not be eligible for
membership in a labor organization of the rank-and-file employees but may join, assist or form separate
labor organizations of their own; Provided, that those supervisory employees who are included in an existing rank-
and-file bargaining unit, upon the effectivity of Republic Act No. 6715, shall remain in that unit x x x. (Emphasis
supplied) and Rule V (Representation Cases and Internal-Union Conflicts) of the Omnibus Rules, viz:
"Sec. 1. Where to file. - A petition for certification election may be filed with the Regional Office which has jurisdiction
over the principal office of the employer. The petition shall be in writing and under oath.
Sec. 2. Who may file. - Any legitimate labor organization or the employer, when requested to bargain collectively, may
file the petition.
The petition, when filed by a legitimate labor organization, shall contain, among others:
xxxx
(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise
require; and provided further, that the appropriate bargaining unit of the rank-and-file employees shall not
include supervisory employees and/or security guards. (Emphasis supplied)
By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered labor organization
from exercising its right to file a petition for certification election.
Thus, when the issue of the effect of mingling was brought to the fore in Toyota, the Court, citing Article 245 of the
Labor Code, as amended by R.A. No. 6715, held:
"Clearly, based on this provision, a labor organization composed of both rank-and-file and supervisory employees is
no labor organization at all. It cannot, for any guise or purpose, be a legitimate labor organization. Not being one, an
organization which carries a mixture of rank-and-file and supervisory employees cannot possess any of the
rights of a legitimate labor organization, including the right to file a petition for certification election for the
purpose of collective bargaining. It becomes necessary, therefore, anterior to the granting of an order allowing
a certification election, to inquire into the composition of any labor organization whenever the status of the
labor organization is challenged on the basis of Article 245 of the Labor Code.
xxxx
In the case at bar, as respondent union's membership list contains the names of at least twenty-seven (27)
supervisory employees in Level Five positions, the union could not, prior to purging itself of its supervisory employee
members, attain the status of a legitimate labor organization. Not being one, it cannot possess the requisite
personality to file a petition for certification election." (Emphasis supplied)
In Dunlop, in which the labor organization that filed a petition for certification election was one for supervisory
employees, but in which the membership included rank-and-file employees, the Court reiterated that such labor
organization had no legal right to file a certification election to represent a bargaining unit composed of supervisors
for as long as it counted rank-and-file employees among its members.
It should be emphasized that the petitions for certification election involved in Toyota and Dunlop were filed on
November 26, 1992 and September 15, 1995, respectively; hence, the 1989 Rules was applied in both cases.
But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by Department Order No. 9,
series of 1997 (1997 Amended Omnibus Rules). Specifically, the requirement under Sec. 2(c) of the 1989 Amended
Omnibus Rules – that the petition for certification election indicate that the bargaining unit of rank-and-file employees
has not been mingled with supervisory employees – was removed. Instead, what the 1997 Amended Omnibus Rules
requires is a plain description of the bargaining unit, thus:
Rule XI
Certification Elections
xxxx
Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall contain, among
others, the following: x x x (c) The description of the bargaining unit.
In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity of the 1997 Amended Omnibus
Rules, although the specific provision involved therein was only Sec. 1, Rule VI, to wit:
"Section. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union may directly
create a local/chapter by submitting to the Regional Office or to the Bureau two (2) copies of the following: a) a
charter certificate issued by the federation or national union indicating the creation or establishment of the
local/chapter; (b) the names of the local/chapter's officers, their addresses, and the principal office of the
local/chapter; and (c) the local/ chapter's constitution and by-laws; provided that where the local/chapter's constitution
and by-laws is the same as that of the federation or national union, this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the Treasurer of the
local/chapter and attested to by its President."
which does not require that, for its creation and registration, a local or chapter submit a list of its members.
Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-PGTWO in which the
core issue was whether mingling affects the legitimacy of a labor organization and its right to file a petition for
certification election. This time, given the altered legal milieu, the Court abandoned the view in Toyota and Dunlop
and reverted to its pronouncement in Lopez that while there is a prohibition against the mingling of supervisory and
rank-and-file employees in one labor organization, the Labor Code does not provide for the effects thereof. Thus, the
Court held that after a labor organization has been registered, it may exercise all the rights and privileges of a
legitimate labor organization. Any mingling between supervisory and rank-and-file employees in its membership
cannot affect its legitimacy for that is not among the grounds for cancellation of its registration, unless such mingling
was brought about by misrepresentation, false statement or fraud under Article 239 of the Labor Code.
In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel
Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW, the Court explained that since the 1997
Amended Omnibus Rules does not require a local or chapter to provide a list of its members, it would be improper for
the DOLE to deny recognition to said local or chapter on account of any question pertaining to its individual members.
More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which involved a petition for cancellation
of union registration filed by the employer in 1999 against a rank-and-file labor organization on the ground of mixed
membership: the Court therein reiterated its ruling in Tagaytay Highlands that the inclusion in a union of disqualified
employees is not among the grounds for cancellation, unless such inclusion is due to misrepresentation, false
statement or fraud under the circumstances enumerated in Sections (a) and (c) of Article 239 of the Labor Code.
All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as interpreted by the Court in
Tagaytay Highlands, San Miguel and Air Philippines, had already set the tone for it. Toyota and Dunlop no longer hold
sway in the present altered state of the law and the rules.32 [Underline supplied]
The applicable law and rules in the instant case are the same as those in Kawashima because the present petition for
certification election was filed in 1999 when D.O. No. 9, series of 1997, was still in effect. Hence, Kawashima applies
with equal force here. As a result, petitioner union was not divested of its status as a legitimate labor organization
even if some of its members were supervisory employees; it had the right to file the subject petition for certification
election.
The legal personality of petitioner union cannot be collaterally attacked by respondent company in the certification
election proceedings.
Petitioner union correctly argues that its legal personality cannot be collaterally attacked in the certification election
proceedings. As we explained in Kawashima:
Except when it is requested to bargain collectively, an employer is a mere bystander to any petition for certification
election; such proceeding is non-adversarial and merely investigative, for the purpose thereof is to determine which
organization will represent the employees in their collective bargaining with the employer. The choice of their
representative is the exclusive concern of the employees; the employer cannot have any partisan interest therein; it
cannot interfere with, much less oppose, the process by filing a motion to dismiss or an appeal from it; not even a
mere allegation that some employees participating in a petition for certification election are actually managerial
employees will lend an employer legal personality to block the certification election. The employer's only right in the
proceeding is to be notified or informed thereof.
The amendments to the Labor Code and its implementing rules have buttressed that policy even more.33
WHEREFORE, the petition is GRANTED. The March 15, 2005 Decision and September 16, 2005 Resolution of the
Court of Appeals in CA-G.R. SP No. 58203 are REVERSED and SET ASIDE. The January 13, 2000 Decision of the
Department of Labor and Employment in OS-A-6-53-99 (NCR-OD-M-9902-019) is REINSTATED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 187887 September 7, 2011

PAMELA FLORENTINA P. JUMUAD, Petitioner,
vs.
HI-FLYER FOOD, INC. and/or JESUS R. MONTEMAYOR, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari assailing the April 20, 2009 Decision1 of the Court of Appeals (CA) in CA-G.R.
SP No. 03346, which reversed the August 10, 2006 Decision2 and the November 29, 2007 Resolution3 of the National
Labor Relations Commission, 4th Division (NLRC), in NLRC Case No. V-000813-06. The NLRC Decision and
Resolution affirmed in toto the Decision4 of the Labor Arbiter Julie C. Ronduque (LA) in RAB Case No. VII-10-2269-05
favoring the petitioner.
The Facts:
On May 22, 1995, petitioner Pamela Florentina P. Jumuad (Jumuad) began her employment with respondent Hi-Flyer
Food, Inc. (Hi-Flyer), as management trainee. Hi-Flyer is a corporation licensed to operate Kentucky Fried Chicken
(KFC) restaurants in the Philippines. Based on her performance through the years, Jumuad received several
promotions until she became the area manager for the entire Visayas-Mindanao 1 region, comprising the provinces of
Cebu, Bacolod, Iloilo and Bohol.5
Aside from being responsible in monitoring her subordinates, Jumuad was tasked to: 1) be highly visible in the
restaurants under her jurisdiction; 2) monitor and support day-to-day operations; and 3) ensure that all the facilities
and equipment at the restaurant were properly maintained and serviced.6 Among the branches under her supervision
were the KFC branches in Gaisano Mall, Cebu City (KFC-Gaisano); in Cocomall, Cebu City (KFC-Cocomall); and in
Island City Mall, Bohol (KFC-Bohol).
As area manager, Jumuad was allowed to avail of Hi-Flyer’s car loan program,7 wherein forty (40%) percent of the
total loanable amount would be subsidized by Hi-Flyer and the remaining sixty (60%) percent would be deducted
from her salary. It was also agreed that in the event that she would resign or would be terminated prior to the
payment in full of the said car loan, she could opt to surrender the car to Hi-Flyer or to pay the full balance of the
loan.8
In just her first year as Area Manager, Jumuad gained distinction and was awarded the 3rd top area manager
nationwide. She was rewarded with a trip to Singapore for her excellent performance.9
On October 4, 2004, Hi Flyer conducted a food safety, service and sanitation audit at KFC-Gaisano. The audit,
denominated as CHAMPS Excellence Review (CER), revealed several sanitation violations, such as the presence of
rodents and the use of a defective chiller for the storage of food.10 When asked to explain, Jumuad first pointed out
that she had already taken steps to prevent the further infestation of the branch. As to why the branch became
infested with rodents, Jumuad faulted management’s decision to terminate the services of the branch’s pest control
program and to rely solely on the pest control program of the mall. As for the defective chiller, she explained that it
was under repair at the time of the CER.11 Soon thereafter, Hi-Flyer ordered the KFC-Gaisano branch closed.
Then, sometime in June of 2005, Hi-Flyer audited the accounts of KFC-Bohol amid reports that certain employees
were covering up cash shortages. As a result, the following irregularities were discovered: 1) cash shortage
amounting to ₱ 62,290.85; 2) delay in the deposits of cash sales by an average of three days; 3) the presence of two
sealed cash-for-deposit envelopes containing paper cut-outs instead of cash; 4) falsified entries in the deposit
logbook; 5) lapses in inventory control; and 6) material product spoilage.12 In her report regarding the incident,
Jumuad disclaimed any fault in the incident by pointing out that she was the one responsible for the discovery of this
irregularity.13
On August 7, 2005, Hi-Flyer conducted another CER, this time at its KFC-Cocomall branch. Grout and leaks at the
branch’s kitchen wall, dried up spills from the marinator, as well as a live rat under postmix, and signs of rodent
gnawing/infestation were found.14 This time, Jumuad explained to management that she had been busy conducting
management team meetings at the other KFC branches and that, at the date the CER was conducted, she had no
scheduled visit at the KFC-Cocomall branch.15
Seeking to hold Jumuad accountable for the irregularities uncovered in the branches under her supervision, Hi-Flyer
sent Jumuad an Irregularities Report16 and Notice of Charges17 which she received on September 5, 2005. On
September 7, 2005 Jumuad submitted her written explanation.18 On September 28, 2005, Hi-Flyer held an
administrative hearing where Jumuad appeared with counsel. Apparently not satisfied with her explanations, Hi-Flyer
served her a Notice of Dismissal19 dated October 14, 2005, effecting her termination on October 17, 2005.
This prompted Jumuad to file a complaint against Hi-Flyer and/or Jesus R. Montemayor (Montemayor) for illegal
dismissal before the NLRC on October 17, 2005, praying for reinstatement and payment of separation pay, 13th
month pay, service incentive leave, moral and exemplary damages, and attorney’s fees. Jumuad also sought the
reimbursement of the amount equivalent to her forty percent (40%) contribution to Hi-Flyer’s subsidized car loan
program.
While the LA found that Jumuad was not completely blameless for the anomalies discovered, she was of the view
that the employer’s prerogative to dismiss or layoff an employee "must be exercised without abuse of discretion" and
"should be tempered with compassion and understanding."20 Thus, the dismissal was too harsh considering the
circumstances. After finding that no serious cause for termination existed, the LA ruled that Jumuad was illegally
dismissed. The LA disposed:
WHEREFORE, VIEWED FROM THE FOREGOING PREMISES, judgment is hereby rendered declaring
complainant’s dismissal as ILLEGAL. Consequently, reinstatement not being feasible, respondents HI-FLYER FOOD,
INC. AND OR JESUS R. MONTEMAYOR are hereby ordered to pay, jointly and severally, complainant PAMELA
FLORENTINA P. JUMUAD, the total amount of THREE HUNDRED THIRTY-SIX THOUSAND FOUR HUNDRED
PESOS (₱ 336,400.00), Philippine currency, representing Separation Pay, within ten (10) days from receipt hereof,
through the Cashier of this Arbitration Branch.
Further, same respondents are ordered to reimburse complainant an amount equivalent to 40% of the value of her
car loaned pursuant to the car loan entitlement memorandum.
Other claims are DISMISSED for lack of merit.21
Both Jumuad and Hi-Flyer appealed to the NLRC. Jumuad faulted the LA for not awarding backwages and damages
despite its finding that she was illegally dismissed. Hi-Flyer and Montemayor, on the other hand, assailed the finding
that Jumuad was illegally dismissed and that they were solidarily liable therefor. They also questioned the orders of
the LA that they pay separation pay and reimburse the forty percent (40%) of the loan Jumuad paid pursuant to Hi-
Flyer’s car entitlement program.
Echoing the finding of the LA that the dismissal of Jumuad was too harsh, the NLRC affirmed in toto the LA decision
dated August 10, 2006. In addition, the NLRC noted that even before the Irregularities Report and Notice of Charges
were given to Jumuad on September 5, 2005, two (2) electronic mails (e-mails) between Montemayor and officers of
Hi-Flyer showed that Hi-Flyer was already determined to terminate Jumuad. The first e-mail22 read:
From: Jess R. Montemayor
Sent: Tuesday, August 16, 2005 5:59 PM
To: bebe chaves; Maria Judith N. Marcelo; Jennifer Coloma Ravela; Bernard Joseph A. Velasco
Cc: Odjie Belarmino; Jesse D. Cruz
Subject: RE: 049 KFC Cocomall – Food Safety Risk/Product Quality Violation
I agree if the sanctions are light we should change them. In the case of Pamela however, the fact that Cebu Colon
store had these violations is not the first time this incident has happened in her area. The Bohol case was also in her
area and maybe these two incidents is enough grounds already for her to be terminated or maybe asked to resign
instead of being terminated.
I know if any Ops person serves expired product this is ground for termination. I think serving off specs products such
as this lumpy gravy in the case of Coco Mall should be grounds for termination. How many customers have we lost
due to this lumpy clearly out of specs gravy? 20 customers maybe.
Jess.
The second e-mail,23 sent by one Bebe Chaves of Hi-Flyer to Montemayor and other officers of Hi-Flyer, reads:
From: bebe chaves
Sent: Sat 9/3/2005 3:45 AM
To: Maria Judith N. Marcelo
CC: Jennifer Coloma Ravela; Goodwin Belarmino; Jess R. Montemayor
Subject: RE: 049 KFC Cocomall – Food Safety Risk/Product Quality Violation
Jojo,
Just an update of our meeting yesterday with Jennifer. After having reviewed the case and all existing documents, we
have decided that there is enough ground to terminate her services. IR/Jennifer are working hand in hand to service
due notice and close the case.
According to the NLRC, these e-mails were proof that Jumuad was denied due process considering that no matter
how she would refute the charges hurled against her, the decision of Hi-Flyer to terminate her would not change.24
Sustaining the order of the LA to reimburse Jumuad the amount equivalent to 40% of the value of the car loan, the
NLRC explained that Jumuad enjoyed this benefit during her period of employment as Area Manager and could have
still enjoyed the same if not for her illegal dismissal.25
Finally, the NLRC held that the active participation of Montemayor in the illegal dismissal of Jumuad justified his
solidary liability with Hi-Flyer.
Both Jumuad and Hi-Flyer sought reconsideration of the NLRC Decision but their respective motions were denied on
November 29, 2007.26
Alleging grave abuse of discretion on the part of the NLRC, Hi-Flyer appealed the case before the CA in Cebu City.
On April 20, 2009, the CA rendered the subject decision reversing the decision of the labor tribunal. The appellate
court disposed:
WHEREFORE, in view of the foregoing, the Petition is GRANTED. The Decision of the National Labor Relations
Commission (4th Division) dated 28 September 2007 in NLRC Case No. V-000813-06 (RAB Case No. VII-10-2269-
05, as well as the Decision dated 10 August 2006 of the Honorable Labor Arbiter Julie C. Ronduque, and the 29
November 2006 Resolution of the NLRC denying petitioner’s Motion for Reconsideration dated 08 November 2007,
are hereby REVERSED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.27
Contrary to the findings of the LA and the NLRC, the CA was of the opinion that the requirements of substantive and
procedural due process were complied with affording Jumuad an opportunity to be heard first, when she submitted
her written explanation and then, when she was informed of the decision and the basis of her termination.28 As for the
e-mail exchanges between Montemayor and the officers of Hi-Flyer, the CA opined that they did not equate to a
predetermination of Jumuad’s termination. It was of the view that the e-mail exchanges were mere discussions
between Montemayor and other officers of Hi-Flyer on whether grounds for disciplinary action or termination existed.
To the mind of the CA, the e-mails just showed that Hi-Flyer extensively deliberated the nature and cause of the
charges against Jumuad.29
On the issue of loss of trust and confidence, the CA considered the deplorable sanitary conditions and the cash
shortages uncovered at three of the seven KFC branches supervised by Jumuad as enough bases for Hi-Flyer to
lose its trust and confidence in her.30
With regard to the reimbursement of the 40% of the car loan as awarded by the labor tribunal, the CA opined that the
terms of the car loan program did not provide for reimbursement in case an employee was terminated for just cause
and they, in fact, required that the employee should stay with the company for at least three (3) years from the date of
the loan to obtain the full 40% subsidy. The CA further stated that the rights and obligations of the parties should be
litigated in a separate civil action before the regular courts.31
The CA also exculpated Montemayor from any liability since it considered Jumuad’s dismissal with a just cause and it
found no evidence that he acted with malice and bad faith.32
Hence, this petition on the following
GROUNDS:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLD[ING] AS VALID THE TERMINATION
OF PETITIONER’S SERVICES BY RESPONDENTS.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION 4th DIVISION OF CEBU CITY WHICH AFFIRMED THE DECISION
OF LABOR ARBITER JULUE RENDOQUE.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION 4th DIVISION OF CEBU CITY WHEN IT RULED THAT
PETITIONER IS NOT ENTITLED TO REIMBURSEMENT OF FORTY PERCENT (40%) OF THE CAR VALUE
BENEFITS.
It is a hornbook rule that factual findings of administrative or quasi-judicial bodies, which are deemed to have
acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even
finality, and bind the Court when supported by substantial evidence. 33 While this rule is strictly adhered to in labor
cases, the same rule, however, admits exceptions. These include: (1) when there is grave abuse of discretion; (2)
when the findings are grounded on speculation; (3) when the inference made is manifestly mistaken; (4) when the
judgment of the Court of Appeals is based on a misapprehension of facts; (5) when the factual findings are conflicting;
(6) when the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of
the parties; (7) when the Court of Appeals overlooked undisputed facts which, if properly considered, would justify a
different conclusion; (8) when the facts set forth by the petitioner are not disputed by the respondent; and (9) when
the findings of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence
on record.34
In the case at bench, the factual findings of the CA differ from that of the LA and the NLRC. This divergence of
positions between the CA and the labor tribunal below constrains the Court to review and evaluate assiduously the
evidence on record.
The petition is without merit.
On whether Jumuad was illegally dismissed, Article 282 of the Labor Code provides:
Art. 282. Termination by Employer. — An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative
in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member
of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Jumuad was terminated for neglect of duty and breach of trust and confidence. Gross negligence connotes want or
absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Fraud and willful neglect of duties imply bad
faith of the employee in failing to perform his job, to the detriment of the employer and the latter’s business. Habitual
neglect, on the other hand, implies repeated failure to perform one's duties for a period of time, depending upon the
circumstances. It has been said that a single or an isolated act of negligence cannot constitute as a just cause for the
dismissal of an employee.35 To be a ground for removal, the neglect of duty must be both gross and habitual.36
On the other hand, breach of trust and confidence, as a just cause for termination of employment, is premised on the
fact that the employee concerned holds a position of trust and confidence, where greater trust is placed by
management and from whom greater fidelity to duty is correspondingly expected. The betrayal of this trust is the
essence of the offense for which an employee is penalized.37
It should be noted, however, that the finding of guilt or innocence in a charge of gross and habitual neglect of duty
does not preclude the finding of guilty or innocence in a charge of breach of trust and confidence. Each of the
charges must be treated separately, as the law itself has treated them separately. To repeat, to warrant removal from
service for gross and habitual neglect of duty, it must be shown that the negligence should not merely be gross, but
also habitual. In breach of trust and confidence, so long as it is shown there is some basis for management to lose its
trust and confidence and that the dismissal was not used as an occasion for abuse, as a subterfuge for causes which
are illegal, improper, and unjustified and is genuine, that is, not a mere afterthought intended to justify an earlier
action taken in bad faith, the free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.
After an assiduous review of the facts as contained in the records, the Court is convinced that Jumuad cannot be
dismissed on the ground of gross and habitual neglect of duty. The Court notes the apparent neglect of Jumuad of
her duty in ensuring that her subordinates were properly monitored and that she had dutifully done all that was
expected of her to ensure the safety of the consuming public who continue to patronize the KFC branches under her
jursidiction. Had Jumuad discharged her duties to be highly visible in the restaurants under her jurisdiction, monitor
and support the day to day operations of the branches and ensure that all the facilities and equipment at the
restaurant were properly maintained and serviced, the deplorable conditions and irregularities at the various KFC
branches under her jurisdiction would have been prevented.
Considering, however, that over a year had lapsed between the incidences at KFC-Gaisano and KFC-Bohol, and that
the nature of the anomalies uncovered were each of a different nature, the Court finds that her acts or lack of action
in the performance of her duties is not born of habit.1avvphi1
Despite saying this, it cannot be denied that Jumuad willfully breached her duties as to be unworthy of the trust and
confidence of Hi-Flyer. First, there is no denying that Jumuad was a managerial employee. As correctly noted by the
appellate court, Jumuad executed management policies and had the power to discipline the employees of KFC
branches in her area. She recommended actions on employees to the head office. Pertinent is Article 212 (m) of the
Labor Code defining a managerial employee as one who is vested with powers or prerogatives to lay down and
execute management policies and/or hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees.
Based on established facts, the mere existence of the grounds for the loss of trust and confidence justifies petitioner’s
dismissal. Pursuant to the Court’s ruling in Lima Land, Inc. v. Cuevas,38 as long as there is some basis for such loss
of confidence, such as when the employer has reasonable ground to believe that the employee concerned is
responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust
and confidence demanded of his position, a managerial employee may be dismissed.
In the present case, the CER’s reports of Hi-Flyer show that there were anomalies committed in the branches
managed by Jumuad. On the principle of respondeat superior or command responsibility alone, Jumuad may be held
liable for negligence in the performance of her managerial duties. She may not have been directly involved in causing
the cash shortages in KFC-Bohol, but her involvement in not performing her duty monitoring and supporting the day
to day operations of the branches and ensure that all the facilities and equipment at the restaurant were properly
maintained and serviced, could have truly prevented the whole debacle from ever occurring.
Moreover, it is observed that rather than taking proactive steps to prevent the anomalies at her branches, Jumuad
merely effected remedial measures. In the restaurant business where the health and well-being of the consuming
public is at stake, this does not suffice. Thus, there is reasonable basis for Hi-Flyer to withdraw its trust in her and
dismissing her from its service.
The disquisition of the appellate court on the matter is also worth mentioning:
In this case, there is ample evidence that private respondent indeed committed acts justifying loss of trust and
confidence of Hi-Flyer, and eventually, which resulted to her dismissal from service. Private respondent’s
mismanagement and negligence in supervising the effective operation of KFC branches in the span of less than a
year, resulting in the closure of KFC-Gaisano due to deplorable sanitary conditions, cash shortages in KFC-Bohol, in
which the said branch, at the time of discovery, was only several months into operation, and the poor sanitation at
KFC-Cocomall. The glaring fact that three (3) out of the seven (7) branches under her area were neglected cannot be
glossed over by private respondent’s explanation that there was no negligence on her part as the sanitation problem
was structural, that she had been usually busy conducting management team meetings in several branches of KFC in
her area or that she had no participation whatsoever in the alleged cash shortages.
xxx
It bears stressing that both the Labor Arbiter and the NLRC found that private respondent was indeed lax in her
duties. Thus, said the NLRC: "xxx [i]t is Our considered view that xxx complainant cannot totally claim that she was
not remiss in her duties xxx.39
As the employer, Hi-Flyer has the right to regulate, according to its discretion and best judgment, all aspects of
employment, including work assignment, working methods, processes to be followed, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Management has
the prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant to
company rules and regulations.401âwphi1
So long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid agreements, the employer’s
exercise of its management prerogative must be upheld.41
In this case, Hi-Flyer exercised in good faith its management prerogative as there is no dispute that it has lost trust
and confidence in her and her managerial abilities, to its damage and prejudice. Her dismissal, was therefore,
justified.
As for Jumuad’s claim for the reimbursement of the 40% of the value of the car loan subsidized by Hi-Flyer under its
car loan policy, the same must also be denied. The rights and obligations of the parties to a car loan agreement is not
a proper issue in a labor dispute but in a civil one. 42 It involves the relationship of debtor and creditor rather than
employee-employer relations.43 Jurisdiction, therefore, lies with the regular courts in a separate civil action.44
The law imposes many obligations on the employer such as providing just compensation to workers, observance of
the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct and loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to its interests.45
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 185567 October 20, 2010

ARSENIO Z. LOCSIN, Petitioner,

vs.

NISSAN LEASE PHILS. INC. and LUIS BANSON, Respondents.

DECISION

BRION, J.:

1
Through a petition for review on certiorari, petitioner Arsenio Z. Locsin (Locsin) seeks the reversal
2 3
of the Decision of the Court of Appeals (CA) dated August 28, 2008, in "Arsenio Z. Locsin v. Nissan
Car Lease Phils., Inc. and Luis Banson," docketed as CA-G.R. SP No. 103720 and the Resolution
4
dated December 9, 2008, denying Locsin’s Motion for Reconsideration. The assailed ruling of the
5
CA reversed and set aside the Decision of the Hon. Labor Arbiter Thelma Concepcion (Labor
Arbiter Concepcion) which denied Nissan Lease Phils. Inc.’s (NCLPI) and Luis T. Banson’s (Banson)
Motion to Dismiss.

THE FACTUAL ANTECEDENTS

On January 1, 1992, Locsin was elected Executive Vice President and Treasurer (EVP/Treasurer) of
NCLPI. As EVP/Treasurer, his duties and responsibilities included: (1) the management of the
finances of the company; (2) carrying out the directions of the President and/or the Board of
Directors regarding financial management; and (3) the preparation of financial reports to advise the
 6
officers and directors of the financial condition of NCLPI. Locsin held this position for 13 years,
having been re-elected every year since 1992, until January 21, 2005, when he was nominated and
7
elected Chairman of NCLPI’s Board of Directors.

On August 5, 2005, a little over seven (7) months after his election as Chairman of the Board, the
NCLPI Board held a special meeting at the Manila Polo Club. One of the items of the agenda was
the election of a new set of officers. Unfortunately, Locsin was neither re-elected Chairman nor
8
reinstated to his previous position as EVP/Treasurer.

Aggrieved, on June 19, 2007, Locsin filed a complaint for illegal dismissal with prayer for
reinstatement, payment of backwages, damages and attorney’s fees before the Labor Arbiter against
9
NCLPI and Banson, who was then President of NCLPI.

The Compulsory Arbitration Proceedings before the Labor Arbiter.

On July 11, 2007, instead of filing their position paper, NCLPI and Banson filed a Motion to
10
Dismiss, on the ground that the Labor Arbiter did not have jurisdiction over the case since the
issue of Locsin’s removal as EVP/Treasurer involves an intra-corporate dispute.

On August 16, 2007, Locsin submitted his opposition to the motion to dismiss, maintaining his
position that he is an employee of NCLPI.

On March 10, 2008, Labor Arbiter Concepcion issued an Order denying the Motion to Dismiss,
holding that her office acquired "jurisdiction to arbitrate and/or decide the instant complaint finding
11
extant in the case an employer-employee relationship."

NCLPI, on June 3, 2008, elevated the case to the CA through a Petition for Certiorari under Rule 65
12
of the Rules of Court. NCLPI raised the issue on whether the Labor Arbiter committed grave abuse
of discretion by denying the Motion to Dismiss and holding that her office had jurisdiction over the
dispute.

The CA Decision - Locsin was a corporate officer; the issue of his removal as EVP/Treasurer is an
intra-corporate dispute under the RTC’s jurisdiction.

13
On August 28, 2008, the CA reversed and set aside the Labor Arbiter’s Order denying the Motion
to Dismiss and ruled that Locsin was a corporate officer.

Citing PD 902-A, the CA defined "corporate officers as those officers of a corporation who are given
that character either by the Corporation Code or by the corporations’ by-laws." In this regard, the CA
held:

Scrutinizing the records, We hold that petitioners successfully discharged their onus of establishing
that private respondent was a corporate officer who held the position of Executive Vice-
President/Treasurer as provided in the by-laws of petitioner corporation and that he held such
position by virtue of election by the Board of Directors.

That private respondent is a corporate officer cannot be disputed. The position of Executive Vice-
President/Treasurer is specifically included in the roster of officers provided for by the (Amended)
By-Laws of petitioner corporation, his duties and responsibilities, as well as compensation as such
14
officer are likewise set forth therein.
Article 280 of the Labor Code, the receipt of salaries by Locsin, SSS deductions on that salary, and
the element of control in the performance of work duties – indicia used by the Labor Arbiter to
15
conclude that Locsin was a regular employee – were held inapplicable by the CA. The CA noted
the Labor Arbiter’s failure to address the fact that the position of EVP/Treasurer is specifically
16
enumerated as an "office" in the corporation’s by-laws.

Further, the CA pointed out Locsin’s failure to "state any circumstance by which NCLPI engaged his
services as a corporate officer that would make him an employee." The CA found, in this regard, that
Locsin’s assumption and retention as EVP/Treasurer was based on his election and subsequent re-
elections from 1992 until 2005. Further, he performed only those functions that were "specifically set
17
forth in the By-Laws or required of him by the Board of Directors. "

With respect to the suit Locsin filed with the Labor Arbiter, the CA held that:

Private respondent, in belatedly filing this suit before the Labor Arbiter, questioned the legality of his
"dismissal" but in essence, he raises the issue of whether or not the Board of Directors had the
authority to remove him from the corporate office to which he was elected pursuant to the By-Laws
of the petitioner corporation. Indeed, had private respondent been an ordinary employee, an election
conducted by the Board of Directors would not have been necessary to remove him as Executive
Vice-President/Treasurer. However, in an obvious attempt to preclude the application of settled
jurisprudence that corporate officers whose position is provided in the by-laws, their election,
removal or dismissal is subject to Section 5 of P.D. No. 902-A (now R.A. No. 8799), private
respondent would even claim in his Position Paper, that since his responsibilities were akin to that of
the company’s Executive Vice-President/Treasurer, he was "hired under the pretext that he was
18
being ‘elected’ into said post. [Emphasis supplied.]

As a consequence, the CA concluded that Locsin does not have any recourse with the Labor Arbiter
or the NLRC since the removal of a corporate officer, whether elected or appointed, is an intra-
19
corporate controversy over which the NLRC has no jurisdiction. Instead, according to the CA,
Locsin’s complaint for "illegal dismissal" should have been filed in the Regional Trial Court ( RTC),
20
pursuant to Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies.

Finally, the CA addressed Locsin’s invocation of Article 4 of the Labor Code. Dismissing the
application of the provision, the CA cited Dean Cesar Villanueva of the Ateneo School of Law, as
follows:

x x x the non-coverage of corporate officers from the security of tenure clause under the Constitution
is now well-established principle by numerous decisions upholding such doctrine under the aegis of
the 1987 Constitution in the face of contemporary decisions of the same Supreme Court likewise
confirming that security of tenure covers all employees or workers including managerial
21
employees.

THE PETITIONER’S ARGUMENTS

Failing to obtain a reconsideration of the CA’s decision, Locsin filed the present petition on January
28, 2009, raising the following procedural and substantive issues:

(1) Whether the CA has original jurisdiction to review decision of the Labor Arbiter under Rule 65?

(2) Whether he is a regular employee of NCLPI under the definition of Article 280 of the Labor Code?
and
(3) Whether Locsin’s position as Executive Vice-President/Treasurer makes him a corporate officer
thereby excluding him from the coverage of the Labor Code?

Procedurally, Locsin essentially submits that NCLPI wrongfully filed a petition for certiorari before the
CA, as the latter’s remedy is to proceed with the arbitration, and to appeal to the NLRC after the
Labor Arbiter shall have ruled on the merits of the case. Locsin cites, in this regard, Rule V, Section 6
of the Revised Rules of the National Labor Relations Commission (NLRC Rules), which provides
that a denial of a motion to dismiss by the Labor Arbiter is not subject to an appeal. Locsin also
argues that even if the Labor Arbiter committed grave abuse of discretion in denying the NCLPI
motion, a special civil action for certiorari, filed with the CA was not the appropriate remedy, since
this was a breach of the doctrine of exhaustion of administrative remedies.

Substantively, Locsin submits that he is a regular employee of NCLPI since - as he argued before
the Labor Arbiter and the CA - his relationship with the company meets the "four-fold test."

First, Locsin contends that NCLPI had the power to engage his services as EVP/Treasurer. Second,
he received regular wages from NCLPI, from which his SSS and Philhealth contributions, as well as
22
his withholding taxes were deducted. Third, NCLPI had the power to terminate his employment.
Lastly, Nissan had control over the manner of the performance of his functions as EVP/Treasurer, as
shown by the 13 years of faithful execution of his job, which he carried out in accordance with the
23
standards and expectations set by NCLPI. Further, Locsin maintains that even after his election as
Chairman, he essentially performed the functions of EVP/Treasurer – handling the financial and
24
administrative operations of the Corporation – thus making him a regular employee.

Under these claimed facts, Locsin concludes that the Labor Arbiter and the NLRC – not the RTC (as
NCLPI posits) – has jurisdiction to decide the controversy. Parenthetically, Locsin clarifies that he
does not dispute the validity of his election as Chairman of the Board on January 1, 2005. Instead,
he theorizes that he never lost his position as EVP/Treasurer having continuously performed the
25
functions appurtenant thereto. Thus, he questions his "unceremonious removal" as EVP/Treasurer
during the August 5, 2005 special Board meeting.

THE RESPONDENT’S ARGUMENTS

26
It its April 17, 2009 Comment, Nissan prays for the denial of the petition for lack of merit. Nissan
submits that the CA correctly ruled that the Labor Arbiter does not have jurisdiction over Locsin’s
complaint for illegal dismissal. In support, Nissan maintains that Locsin is a corporate officer and not
an employee. In addressing the procedural defect Locsin raised, Nissan brushes the issue aside,
stating that (1) this issue was belatedly raised in the Motion for Reconsideration, and that (2) in any
case, Rule VI, Section 2(1) of the NLRC does not apply since only appealable decisions, resolutions
and orders are covered under the rule.

THE COURT’S RULING

We resolve to deny the petition for lack of merit.

At the outset, we stress that there are two (2) important considerations in the final determination of
this case. On the one hand, Locsin raises a procedural issue that, if proven correct, will require the
Court to dismiss the instant petition for using an improper remedy. On the other hand, there is the
substantive issue that will be disregarded if a strict implementation of the rules of procedure is
upheld.

Prefatorily, we agree with Locsin’s submission that the NCLPI incorrectly elevated the Labor Arbiter’s
denial of the Motion to Dismiss to the CA. Locsin is correct in positing that the denial of a motion to
dismiss is unappealable. As a general rule, an aggrieved party’s proper recourse to the denial is to
file his position paper, interpose the grounds relied upon in the motion to dismiss before the labor
arbiter, and actively participate in the proceedings. Thereafter, the labor arbiter’s decision can be
appealed to the NLRC, not to the CA.

As a rule, we strictly adhere to the rules of procedure and do everything we can, to the point of
penalizing violators, to encourage respect for these rules. We take exception to this general rule,
however, when a strict implementation of these rules would cause substantial injustice to the parties.

We see it appropriate to apply the exception to this case for the reasons discussed below; hence, we
are compelled to go beyond procedure and rule on the merits of the case. In the context of this case,
we see sufficient justification to rule on the employer-employee relationship issue raised by NCLPI,
even though the Labor Arbiter’s interlocutory order was incorrectly brought to the CA under Rule 65.

The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not appealable
because the denial is merely an interlocutory order.

27
In Metro Drug v. Metro Drug Employees, we definitively stated that the denial of a motion to
28
dismiss by a labor arbiter is not immediately appealable.

29
We similarly ruled in Texon Manufacturing v. Millena, in Sime Darby Employees Association v.
30 31
National Labor Relations Commission and in Westmont Pharmaceuticals v. Samaniego. In
Texon, we specifically said:

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

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

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

In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of Court,
which specifically enumerates interlocutory orders as one of the court actions that cannot be
appealed. In the same rule, as amended by A.M. No. 07-7-12-SC, the aggrieved party is allowed to
file an appropriate special civil action under Rule 65. The latter rule, however, also contains
limitations for its application, clearly outlined in its Section 1 which provides:

Section 1. Petition for certiorari.

When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or
in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging
the facts with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice
may require.

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

ART. 223. APPEAL

Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained only on any of the following grounds:

(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; x x x
[Emphasis supplied.]

Pursuant to this Article, we held in Metro Drug (citing Air Services Cooperative, et al. v. Court of
35
Appeals ) that the NLRC is clothed with sufficient authority to correct any claimed "erroneous
assumption of jurisdiction" by labor arbiters:

In Air Services Cooperative, et al. v. The Court of Appeals, et al., a case where the jurisdiction of the
labor arbiter was put in issue and was assailed through a petition for certiorari, prohibition and
annulment of judgment before a regional trial court, this Court had the opportunity to expound on the
nature of appeal as embodied in Article 223 of the Labor Code, thus:

x x x Also, while the title of the Article 223 seems to provide only for the remedy of appeal as that
term is understood in procedural law and as distinguished from the office of certiorari, nonetheless, a
closer reading thereof reveals that it is not as limited as understood by the petitioners x x x.

Abuse of discretion is admittedly within the ambit of certiorari and its grant of review thereof to the
NLRC indicates the lawmakers’ intention to broaden the meaning of appeal as that term is used in
the Code. For this reason, petitioners cannot argue now that the NLRC is devoid of any corrective
power to rectify a supposed erroneous assumption of jurisdiction by the Labor Arbiter x x x. [ Air
Services Cooperative, et al. v. The Court of Appeals, et al. G.R. No. 118693, 23 July 1998, 293
SCRA 101]

Since the legislature had clothed the NLRC with the appellate authority to correct a claimed
"erroneous assumption of jurisdiction" on the part of the labor arbiter – a case of grave abuse of
discretion - the remedy availed of by petitioner in this case is patently erroneous as recourse in this
case is lodged, under the law, with the NLRC.

In Metro Drug, as in the present case, the defect imputed through the NLCPI Motion to Dismiss is
the labor arbiter’s lack of jurisdiction since Locsin is alleged to be a corporate officer, not an
employee. Parallelisms between the two cases is undeniable, as they are similar on the following
points: (1) in Metro Drug, as in this case, the Labor Arbiter issued an Order denying the Motion to
Dismiss by one of the parties; (2) the basis of the Motion to Dismiss is also the alleged lack of
jurisdiction by the Labor Arbiter to settle the dispute; and (3) dissatisfied with the Order of the Labor
Arbiter, the aggrieved party likewise elevated the case to the CA via Rule 65.
The similarities end there, however. Unlike in the present case, the CA denied the petition for
certiorari and the subsequent Motion for Reconsideration in Metro Drug; the CA correctly found that
the proper appellate mechanism was an appeal to the NLRC and not a petition for certiorari under
Rule 65. In the present case, the CA took a different position despite our clear ruling in Metro Drug,
and allowed, not only the use of Rule 65, but also ruled on the merits.

From this perspective, the CA clearly erred in the application of the procedural rules by disregarding
the relevant provisions of the NLRC Rules, as well as the requirements for a petition for certiorari
under the Rules of Court. To reiterate, the proper action of an aggrieved party faced with the labor
arbiter’s denial of his motion to dismiss is to submit his position paper and raise therein the
supposed lack of jurisdiction. The aggrieved party cannot immediately appeal the denial since it is an
interlocutory order; the appropriate remedial recourse is the procedure outlined in Article 223 of the
Labor Code, not a petition for certiorari under Rule 65.

A strict implementation of the NLRC Rules and the Rules of Court would cause injustice to the
parties because the Labor Arbiter clearly has no jurisdiction over the present intra-corporate dispute.

36
Our ruling in Mejillano v. Lucillo stands for the proposition that we should strictly apply the rules of
procedure. We said:

Time and again, we have ruled that procedural rules do not exist for the convenience of the litigants.
Rules of Procedure exist for a purpose, and to disregard such rules in the guise of liberal
construction would be to defeat such purpose. Procedural rules were established primarily to provide
order to and enhance the efficiency of our judicial system. [Emphasis supplied.]

37
An exception to this rule is our ruling in Lazaro v. Court of Appeals where we held that the strict
enforcement of the rules of procedure may be relaxed in exceptionally meritorious cases:

x x x Procedural rules are not to be belittled or dismissed simply because their non-observance may
have resulted in prejudice to a party's substantive rights. Like all rules, they are required to be
followed except only for the most persuasive of reasons when they may be relaxed to relieve a
litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying
with the procedure prescribed. The Court reiterates that rules of procedure, especially those
prescribing the time within which certain acts must be done, "have oft been held as absolutely
indispensable to the prevention of needless delays and to the orderly and speedy discharge of
business. x x x The reason for rules of this nature is because the dispatch of business by courts
would be impossible, and intolerable delays would result, without rules governing practice x x x.
Such rules are a necessary incident to the proper, efficient and orderly discharge of judicial
functions." Indeed, in no uncertain terms, the Court held that the said rules may be relaxed only in
exceptionally meritorious cases. [Emphasis supplied.]

Whether a case involves an exceptionally meritorious circumstance can be tested under the
38
guidelines we established in Sanchez v. Court of Appeals, as follows:

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

Under these standards, we hold that exceptional circumstances exist in the present case to merit the
relaxation of the applicable rules of procedure.

Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer and not
an employee of Nissan must take precedence over procedural considerations.

We arrived at the conclusion that we should go beyond the procedural rules and immediately take a
look at the intrinsic merits of the case based on several considerations.

First, the parties have sufficiently ventilated their positions on the disputed employer-employee
relationship and have, in fact, submitted the matter for the CA’s consideration.

Second, the CA correctly ruled that no employer-employee relationship exists between Locsin and
Nissan.

Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan
39
board pursuant to its By-laws. As such, he was a corporate officer, not an employee. The CA
reached this conclusion by relying on the submitted facts and on Presidential Decree 902-A, which
defines corporate officers as "those officers of a corporation who are given that character either by
the Corporation Code or by the corporation’s by-laws." Likewise, Section 25 of Batas Pambansa Blg.
69, or the Corporation Code of the Philippines (Corporation Code) provides that corporate officers
are the president, secretary, treasurer and such other officers as may be provided for in the by-laws.

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

because the position of Executive Vice-President/Treasurer is provided for in Nissan’s By-Laws.
Article IV, Section 4 of these By-Laws specifically provides for this position, as follows:

ARTICLE IV

Officers

Section 1. Election and Appointment – The Board of Directors at their first meeting, annually
thereafter, shall elect as officers of the Corporation a Chairman of the Board, a President, an
Executive Vice-President/Treasurer, a Vice-President/General Manager and a Corporate Secretary.
The other Senior Operating Officers of the Corporation shall be appointed by the Board upon the
recommendation of the President.

xxxx

Section 4. Executive Vice-President/Treasurer – The Executive Vice-President/Treasurer shall have

such powers and perform such duties as are prescribed by these By-Laws, and as may be required
of him by the Board of Directors. As the concurrent Treasurer of the Corporation, he shall have the
charge of the funds, securities, receipts, and disbursements of the Corporation. He shall deposit, or
cause to be deposited, the credit of the Corporation in such banks or trust companies, or with such
banks of other depositories, as the Board of Directors may from time to time designate. He shall
tender to the President or to the Board of Directors whenever required an account of the financial
condition of the corporation and of all his transactions as Treasurer. As soon as practicable after the
close of each fiscal year, he shall make and submit to the Board of Directors a like report of such
fiscal year. He shall keep correct books of account of all the business and transactions of the
Corporation.

40 41
In Okol v. Slimmers World International, citing Tabang v. National Labor Relations Commission,
we held that –
x x x an "office" is created by the charter of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such employee. [Emphasis
supplied.]

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

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

We fully agree with this factual determination which we find to be sufficiently supported by evidence.
We likewise rule, based on law and established jurisprudence, that Locsin, at the time of his
severance from NCLPI, was the latter’s corporate officer.

a. The Question of Jurisdiction

Given Locsin’s status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has
jurisdiction to hear the legality of the termination of his relationship with Nissan. As we also held in
Okol, a corporate officer’s dismissal from service is an intra-corporate dispute:

In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4 October
1996, 262 SCRA 709; Lozon v. National Labor Relations Commission, 310 Phil. 1 (1995); Espino v.
National Labor Relations Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National
Labor Relations Commission, G.R. No. 79762, 24 January 1991, 193 SCRA 258], we have held that
a corporate officer’s dismissal is always a corporate act, or an intra-corporate controversy which
43
arises between a stockholder and a corporation. [Emphasis supplied.]

so that the RTC should exercise jurisdiction based on the following legal reasoning:

Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that
intra-corporate disputes fall within the jurisdiction of the Securities and Exchange Commission
(SEC):

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

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

Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred
to regional trial courts the SEC’s jurisdiction over all cases listed in Section 5 of PD 902-A:

5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree
No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial
Court. [Emphasis supplied.]

b. Precedence of Substantive Merits;

Primacy of Element of Jurisdiction

Based on the above jurisdictional considerations, we would be forced to remand the case to the
Labor Arbiter for further proceedings if we were to dismiss the petition outright due to the wrongful
44
use of Rule 65. We cannot close our eyes, however, to the factual and legal reality, established by
evidence already on record, that Locsin is a corporate officer whose termination of relationship is
outside a labor arbiter’s jurisdiction to rule upon.

Under these circumstances, we have to give precedence to the merits of the case, and primacy to
the element of jurisdiction. Jurisdiction is the power to hear and rule on a case and is the threshold
element that must exist before any quasi-judicial officer can act. In the context of the present case,
the Labor Arbiter does not have jurisdiction over the termination dispute Locsin brought, and should
not be allowed to continue to act on the case after the absence of jurisdiction has become obvious,
based on the records and the law. In more practical terms, a contrary ruling will only cause
substantial delay and inconvenience as well as unnecessary expenses, to the point of injustice, to
the parties. This conclusion, of course, does not go into the merits of termination of relationship and
is without prejudice to the filing of an intra-corporate dispute on this point before the appropriate
RTC.

WHEREFORE, we DISMISS the petitioner’s petition for review on certiorari, and AFFIRM the
Decision of the Court of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28, 2008, as
well as its Resolution of December 9, 2008, which reversed and set aside the March 10, 2008 Order
of Labor Arbiter Concepcion in NLRC NCR Case No. 00-06-06165-07. This Decision is without
prejudice to petitioner Locsin’s available recourse for relief through the appropriate remedy in the
proper forum.

No pronouncement as to costs.

SO ORDERED.

OSCAR C. REYES, Petitioner, v. HON. REGIONAL TRIAL COURT OF MAKATI,

Branch 142, ZENITH INSURANCE CORPORATION, and RODRIGO C. REYES,
Respondents.

DECISION

BRION, J.:

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

BACKGROUND FACTS

Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are two of the four
children of the spouses Pedro and Anastacia Reyes. Pedro, Anastacia, Oscar, and
Rodrigo each owned shares of stock of Zenith Insurance Corporation (Zenith), a
domestic corporation established by their family. Pedro died in 1964, while
Anastacia died in 1993. Although Pedro's estate was judicially partitioned among his
heirs sometime in the 1970s, no similar settlement and partition appear to have
been made with Anastacia's estate, which included her shareholdings in Zenith. As
of June 30, 1990, Anastacia owned 136,598 shares of Zenith; Oscar and Rodrigo
owned 8,715,637 and 4,250 shares, respectively. 3

On May 9, 2000, Zenith and Rodrigo filed a complaint 4 with the Securities and
Exchange Commission (SEC) against Oscar, docketed as SEC Case No. 05-00-6615.
The complaint stated that it is "a derivative suit initiated and filed by the
complainant Rodrigo C. Reyes to obtain an accounting of the funds and assets
of ZENITH INSURANCE CORPORATION which are now or formerly in the
control, custody, and/or possession of respondent [herein petitioner Oscar] and to
determine the shares of stock of deceased spouses Pedro and Anastacia
Reyes that were arbitrarily and fraudulently appropriated [by Oscar] for himself
[and] which were not collated and taken into account in the partition, distribution,
and/or settlement of the estate of the deceased spouses, for which he should be
ordered to account for all the income from the time he took these shares of stock,
and should now deliver to his brothers and sisters their just and respective
shares."5 [Emphasis supplied.]

In his Answer with Counterclaim, 6 Oscar denied the charge that he illegally acquired
the shares of Anastacia Reyes. He asserted, as a defense, that he purchased the
subject shares with his own funds from the unissued stocks of Zenith, and that the
suit is not a bona fide derivative suit because the requisites therefor have not been
complied with. He thus questioned the SEC's jurisdiction to entertain the complaint
because it pertains to the settlement of the estate of Anastacia Reyes.

When Republic Act (R.A.) No. 87997 took effect, the SEC's exclusive and original
jurisdiction over cases enumerated in Section 5 of Presidential Decree (P.D.) No.
902-A was transferred to the RTC designated as a special commercial court. 8 The
records of Rodrigo's SEC case were thus turned over to the RTC, Branch 142,
Makati, and docketed as Civil Case No. 00-1553.

On October 22, 2002, Oscar filed a Motion to Declare Complaint as Nuisance or

Harassment Suit.9 He claimed that the complaint is a mere nuisance or harassment
suit and should, according to the Interim Rules of Procedure for Intra-Corporate
Controversies, be dismissed; and that it is not a bona fidederivative suit as it
partakes of the nature of a petition for the settlement of estate of the deceased
Anastacia that is outside the jurisdiction of a special commercial court. The RTC, in
its Order dated November 29, 2002 (RTC Order), denied the motion in part and
declared:

A close reading of the Complaint disclosed the presence of two (2)

causes of action, namely: a) a derivative suit for accounting of the funds
and assets of the corporation which are in the control, custody, and/or
possession of the respondent [herein petitioner Oscar] with prayer to
appoint a management committee; and b) an action for determination of
the shares of stock of deceased spouses Pedro and Anastacia Reyes
allegedly taken by respondent, its accounting and the corresponding
delivery of these shares to the parties' brothers and sisters. The latter is
not a derivative suit and should properly be threshed out in a petition for
settlement of estate.

Accordingly, the motion is denied. However, only the derivative suit

consisting of the first cause of action will be taken cognizance of by this
Court.10

Oscar thereupon went to the CA on a Petition for Certiorari, prohibition, and

mandamus11 and prayed that the RTC Order be annulled and set aside and that the
trial court be prohibited from continuing with the proceedings. The appellate court
affirmed the RTC Order and denied the petition in its Decision dated May 26, 2004.
It likewise denied Oscar's motion for reconsideration in a Resolution dated October
21, 2004.

Petitioner now comes before us on appeal through a Petition for Review on

Certiorariunder Rule 45 of the Rules of Court.

ASSIGNMENT OF ERRORS

Petitioner Oscar presents the following points as conclusions the CA should have
made:

1. that the complaint is a mere nuisance or harassment suit that should be

dismissed under the Interim Rules of Procedure of Intra-Corporate Controversies;
andcralawlibrary

2. that the complaint is not a bona fide derivative suit but is in fact in the nature of
a petition for settlement of estate; hence, it is outside the jurisdiction of the RTC
acting as a special commercial court.

Accordingly, he prays for the setting aside and annulment of the CA decision and
resolution, and the dismissal of Rodrigo's complaint before the RTC.

THE COURT'S RULING

We find the petition meritorious.

The core question for our determination is whether the trial court, sitting as a
special commercial court, has jurisdiction over the subject matter of Rodrigo's
complaint. To resolve it, we rely on the judicial principle that "jurisdiction over the
subject matter of a case is conferred by law and is determined by the allegations of
the complaint, irrespective of whether the plaintiff is entitled to all or some of the
claims asserted therein."12

JURISDICTION OF SPECIAL COMMERCIAL COURTS

P.D. No. 902-A enumerates the cases over which the SEC (now the RTC acting as a
special commercial court) exercises exclusive jurisdiction:

SECTION 5. In addition to the regulatory and adjudicative functions of

the Securities and Exchange Commission over corporations, partnership,
and other forms of associations registered with it as expressly granted
under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:

a) Devices or schemes employed by or any acts of the board

of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation which may be
detrimental to the interest of the public and/or of the
stockholders, partners, members of associations or
organizations registered with the Commission.

b) Controversies arising out of intra-corporate or partnership

relations, between and among stockholders, members, or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members, or associates, respectively; and between such
corporation, partnership or association and the State insofar
as it concerns their individual franchise or right to exist as
such entity; andcralawlibrary

c) Controversies in the election or appointment of directors,

trustees, officers, or managers of such corporations,
partnerships, or associations.

The allegations set forth in Rodrigo's complaint principally invoke Section 5,

paragraphs (a) and (b) above as basis for the exercise of the RTC's special court
jurisdiction. Our focus in examining the allegations of the complaint shall therefore
be on these two provisions.

Fraudulent Devices and Schemes

The rule is that a complaint must contain a plain, concise, and direct statement of
the ultimate facts constituting the plaintiff's cause of action and must specify the
relief sought.13 Section 5, Rule 8 of the Revised Rules of Court provides that in all
averments of fraud or mistake, the circumstances constituting fraud or
mistake must be stated with particularity.14 These rules find specific application
to Section 5(a) of P.D. No. 902-A which speaks of corporate devices or schemes
that amount to fraud or misrepresentation detrimental to the public and/or to the
stockholders.

In an attempt to hold Oscar responsible for corporate fraud, Rodrigo alleged in the
complaint the following:

3. This is a complaint to determine the shares of stock of the

deceased spouses Pedro and Anastacia Reyes that were
arbitrarily and fraudulently appropriated for himself [herein
petitioner Oscar] which were not collated and taken into account in the
partition, distribution, and/or settlement of the estate of the deceased
Spouses Pedro and Anastacia Reyes, for which he should be ordered to
account for all the income from the time he took these shares of stock,
and should now deliver to his brothers and sisters their just and
respective shares with the corresponding equivalent amount of
P7,099,934.82 plus interest thereon from 1978 representing his
obligations to the Associated Citizens' Bank that was paid for his account
by his late mother, Anastacia C. Reyes. This amount was not collated or
taken into account in the partition or distribution of the estate of their
late mother, Anastacia C. Reyes.

3.1. Respondent Oscar C. Reyes, through other schemes of fraud

including misrepresentation, unilaterally, and for his own benefit,
capriciously transferred and took possession and control of the
management of Zenith Insurance Corporationwhich is considered as
a family corporation, and other properties and businesses belonging to
Spouses Pedro and Anastacia Reyes.

x x x

4.1. During the increase of capitalization of Zenith Insurance

Corporation, sometime in 1968, the property covered by TCT No. 225324
was illegally and fraudulently used by respondent as a collateral.

x x x

5. The complainant Rodrigo C. Reyes discovered that by some

manipulative scheme, the shareholdings of their deceased
mother, Doña Anastacia C. Reyes, shares of stocks and [sic]
valued in the corporate books at P7,699,934.28, more or less,
excluding interest and/or dividends, had been transferred solely in
the name of respondent. By such fraudulent manipulations and
misrepresentation, the shareholdings of said respondent Oscar C. Reyes
abruptly increased to P8,715,637.00 [sic] and becomes [sic] the
majority stockholder of Zenith Insurance Corporation, which portion of
 said shares must be distributed equally amongst the brothers and sisters
of the respondent Oscar C. Reyes including the complainant herein.

x x x

9.1 The shareholdings of deceased Spouses Pedro Reyes and

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

x x x

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

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

x x x

11.1 By continuous refusal of the respondent to account of his [sic]

shareholding with Zenith Insurance Corporation[,] particularly the
number of shares of stocks illegally and fraudulently transferred to him
from their deceased parents Sps. Pedro and Anastacia Reyes[,] which
are all subject for collation and/or partition in equal shares among their
children. [Emphasis supplied.]

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

are largely conclusions of law that, without supporting statements of the facts to
which the allegations of fraud refer, do not sufficiently state an effective cause of
action.15 The late Justice Jose Feria, a noted authority in Remedial Law, declared
that fraud and mistake are required to be averred with particularity in order to
enable the opposing party to controvert the particular facts allegedly constituting
such fraud or mistake.16

Tested against these standards, we find that the charges of fraud against Oscar
were not properly supported by the required factual allegations. While the
complaint contained allegations of fraud purportedly committed by him, these
allegations are not particular enough to bring the controversy within the special
commercial court's jurisdiction; they are not statements of ultimate facts, but are
mere conclusions of law: how and why the alleged appropriation of shares can be
characterized as "illegal and fraudulent" were not explained nor elaborated on.

Not every allegation of fraud done in a corporate setting or perpetrated by

corporate officers will bring the case within the special commercial court's
jurisdiction. To fall within this jurisdiction, there must be sufficient nexus showing
that the corporation's nature, structure, or powers were used to facilitate the
fraudulent device or scheme. Contrary to this concept, the complaint presented a
reverse situation. No corporate power or office was alleged to have facilitated the
transfer of the shares; rather, Oscar, as an individual and without reference to his
corporate personality, was alleged to have transferred the shares of Anastacia to
his name, allowing him to become the majority and controlling stockholder of
Zenith, and eventually, the corporation's President. This is the essence of the
complaint read as a whole and is particularly demonstrated under the following
allegations:

5. The complainant Rodrigo C. Reyes discovered that by some

manipulative scheme, the shareholdings of their deceased mother, Doña
Anastacia C. Reyes, shares of stocks and [sic] valued in the corporate
books at P7,699,934.28, more or less, excluding interest and/or
dividends, had been transferred solely in the name of respondent. By
such fraudulent manipulations and misrepresentation, the
shareholdings of said respondent Oscar C. Reyes abruptly
increased to P8,715,637.00 [sic] and becomes [sic] the majority
stockholder of Zenith Insurance Corporation, which portion of said
shares must be distributed equally amongst the brothers and sisters of
the respondent Oscar C. Reyes including the complainant herein.

x x x

9.1 The shareholdings of deceased Spouses Pedro Reyes and

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

In ordinary cases, the failure to specifically allege the fraudulent acts does not
constitute a ground for dismissal since such defect can be cured by a bill of
particulars. In cases governed by the Interim Rules of Procedure on Intra-Corporate
Controversies, however, a bill of particulars is a prohibited pleading. 17 It is
essential, therefore, for the complaint to show on its face what are claimed to be
the fraudulent corporate acts if the complainant wishes to invoke the court's special
commercial jurisdiction.

We note that twice in the course of this case, Rodrigo had been given the
opportunity to study the propriety of amending or withdrawing the complaint, but
he consistently refused. The court's function in resolving issues of jurisdiction is
limited to the review of the allegations of the complaint and, on the basis of these
allegations, to the determination of whether they are of such nature and subject
that they fall within the terms of the law defining the court's jurisdiction.
Regretfully, we cannot read into the complaint any specifically alleged corporate
fraud that will call for the exercise of the court's special commercial jurisdiction.
Thus, we cannot affirm the RTC's assumption of jurisdiction over Rodrigo's
complaint on the basis of Section 5(a) of P.D. No. 902-A.18

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the Court's approach in

classifying what constitutes an intra-corporate controversy. Initially, the main
consideration in determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-corporate relationship
existing between or among the parties. 19 The types of relationships embraced under
Section 5(b), as declared in the case of Union Glass & Container Corp. v. SEC,20
were as follows:

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

b) between the corporation, partnership, or association and its

stockholders, partners, members, or officers;

c) between the corporation, partnership, or association and the State as

far as its franchise, permit or license to operate is concerned; and cralawlibrary

d) among the stockholders, partners, or associates themselves.

[Emphasis supplied.]

The existence of any of the above intra-corporate relations was sufficient to confer
jurisdiction to the SEC, regardless of the subject matter of the dispute. This came
to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve,
Inc.,21 the Court introduced the nature of the controversy test. We declared in
this case that it is not the mere existence of an intra-corporate relationship that
gives rise to an intra-corporate controversy; to rely on the relationship test alone
will divest the regular courts of their jurisdiction for the sole reason that the dispute
involves a corporation, its directors, officers, or stockholders. We saw that there is
no legal sense in disregarding or minimizing the value of the nature of the
transactions which gives rise to the dispute.

Under the nature of the controversy test, the incidents of that relationship must
also be considered for the purpose of ascertaining whether the controversy itself is
intra-corporate.22 The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the enforcement of the
parties' correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the relationship
and its incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate controversy
exists.

The Court then combined the two tests and declared that jurisdiction should be
determined by considering not only the status or relationship of the parties, but
also the nature of the question under controversy. 23 This two-tier test was adopted
in the recent case of Speed Distribution, Inc. v. Court of Appeals:24

To determine whether a case involves an intra-corporate controversy,

and is to be heard and decided by the branches of the RTC specifically
designated by the Court to try and decide such cases, two elements
must concur: (a) the status or relationship of the parties; and (2) the
nature of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-
corporate or partnership relations between any or all of the parties and
the corporation, partnership, or association of which they are
stockholders, members or associates; between any or all of them and
the corporation, partnership, or association of which they are
stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as it
concerns their individual franchises. The second element requires that
the dispute among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the controversy involves
matters that are purely civil in character, necessarily, the case does not
involve an intra-corporate controversy.

Given these standards, we now tackle the question posed for our determination
under the specific circumstances of this case:

Application of the Relationship Test

Is there an intra-corporate relationship between the parties that would characterize

the case as an intra-corporate dispute? cra lawlibrary

We point out at the outset that while Rodrigo holds shares of stock in Zenith, he
holds them in two capacities: in his own right with respect to the 4,250 shares
registered in his name, and as one of the heirs of Anastacia Reyes with respect to
the 136,598 shares registered in her name. What is material in resolving the issues
of this case under the allegations of the complaint is Rodrigo's interest as an
heirsince the subject matter of the present controversy centers on the shares of
stocks belonging to Anastacia, not on Rodrigo's personally-owned shares nor on his
personality as shareholder owning these shares. In this light, all reference to shares
of stocks in this case shall pertain to the shareholdings of the deceased Anastacia
and the parties' interest therein as her heirs.

Article 777 of the Civil Code declares that the successional rights are transmitted
from the moment of death of the decedent. Accordingly, upon Anastacia's death,
her children acquired legal title to her estate (which title includes her shareholdings
in Zenith), and they are, prior to the estate's partition, deemed co-owners
thereof.25 This status as co-owners, however, does not immediately and necessarily
make them stockholders of the corporation. Unless and until there is compliance
with Section 63 of the Corporation Code on the manner of transferring shares, the
heirs do not become registered stockholders of the corporation. Section 63
provides:

Section 63. Certificate of stock and transfer of shares. - The capital stock
of stock corporations shall be divided into shares for which certificates
signed by the president or vice-president, countersigned by the secretary
or assistant secretary, and sealed with the seal of the corporation shall
be issued in accordance with the by-laws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall
be valid, except as between the parties, until the transfer is
recorded in the books of the corporation so as to show the names
of the parties to the transaction, the date of the transfer, the
number of the certificate or certificates, and the number of
shares transferred. [Emphasis supplied.]

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

Simply stated, the transfer of title by means of succession, though effective and
valid between the parties involved (i.e., between the decedent's estate and her
heirs), does not bind the corporation and third parties. The transfer must be
registered in the books of the corporation to make the transferee-heir a stockholder
entitled to recognition as such both by the corporation and by third parties. 26

We note, in relation with the above statement, that in Abejo v. Dela Cruz27 and TCL
Sales Corporation v. Court of Appeals 28 we did not require the registration of the
transfer before considering the transferee a stockholder of the corporation (in effect
upholding the existence of an intra-corporate relation between the parties and
bringing the case within the jurisdiction of the SEC as an intra-corporate
controversy). A marked difference, however, exists between these cases and the
present one.

In Abejo and TCL Sales, the transferees held definite and uncontested titles to
a specific number of shares of the corporation; after the transferee had
established prima facie ownership over the shares of stocks in question, registration
became a mere formality in confirming their status as stockholders. In the present
case, each of Anastacia's heirs holds only an undivided interest in the shares. This
interest, at this point, is still inchoate and subject to the outcome of a settlement
proceeding; the right of the heirs to specific, distributive shares of inheritance will
not be determined until all the debts of the estate of the decedent are paid. In
short, the heirs are only entitled to what remains after payment of the decedent's
debts;29 whether there will be residue remains to be seen. Justice Jurado aptly puts
it as follows:

No succession shall be declared unless and until a liquidation of the

assets and debts left by the decedent shall have been made and all his
creditors are fully paid. Until a final liquidation is made and all the debts
 are paid, the right of the heirs to inherit remains inchoate. This is so
because under our rules of procedure, liquidation is necessary in
order to determine whether or not the decedent has left any
liquid assets which may be transmitted to his heirs.30 [Emphasis
supplied.]

Rodrigo must, therefore, hurdle two obstacles before he can be considered a

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

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

Application of the Nature of Controversy Test

The body rather than the title of the complaint determines the nature of an action. 31
Our examination of the complaint yields the conclusion that, more than anything
else, the complaint is about the protection and enforcement of successional rights.
The controversy it presents is purely civil rather than corporate, although it is
denominated as a "complaint for accounting of all corporate funds and assets."

Contrary to the findings of both the trial and appellate courts, we read only one
cause of action alleged in the complaint. The "derivative suit for accounting of the
funds and assets of the corporation which are in the control, custody, and/or
possession of the respondent [herein petitioner Oscar]" does not constitute a
separate cause of action but is, as correctly claimed by Oscar, only an incident to
the "action for determination of the shares of stock of deceased spouses Pedro and
Anastacia Reyes allegedly taken by respondent, its accounting and the
corresponding delivery of these shares to the parties' brothers and sisters." There
can be no mistake of the relationship between the "accounting" mentioned in the
complaint and the objective of partition and distribution when Rodrigo claimed in
paragraph 10.1 of the complaint that:

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

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

We particularly note that the complaint contained no sufficient allegation that

justified the need for an accounting other than to determine the extent of
Anastacia's shareholdings for purposes of distribution.

Another significant indicator that points us to the real nature of the complaint are
Rodrigo's repeated claims of illegal and fraudulent transfers of Anastacia's shares
by Oscar to the prejudice of the other heirs of the decedent; he cited these
allegedly fraudulent acts as basis for his demand for the collation and distribution of
Anastacia's shares to the heirs. These claims tell us unequivocally that the present
controversy arose from the parties' relationship as heirs of Anastacia and not as
shareholders of Zenith. Rodrigo, in filing the complaint, is enforcing his rights as a
co-heir and not as a stockholder of Zenith. The injury he seeks to remedy is one
suffered by an heir (for the impairment of his successional rights) and not by the
corporation nor by Rodrigo as a shareholder on record.

More than the matters of injury and redress, what Rodrigo clearly aims to
accomplish through his allegations of illegal acquisition by Oscar is the distribution
of Anastacia's shareholdings without a prior settlement of her estate - an objective
that, by law and established jurisprudence, cannot be done. The RTC of Makati,
acting as a special commercial court, has no jurisdiction to settle, partition, and
distribute the estate of a deceased. A relevant provision - Section 2 of Rule 90 of
the Revised Rules of Court - that contemplates properties of the decedent held by
one of the heirs declares:

Questions as to advancement made or alleged to have been made by

the deceased to any heir may be heard and determined by the court
having jurisdiction of the estate proceedings; and the final order of
the court thereon shall be binding on the person raising the questions
and on the heir. [Emphasis supplied.]

Worth noting are this Court's statements in the case of Natcher v. Court of
Appeals:32

Matters which involve settlement and distribution of the estate of

the decedent fall within the exclusive province of the probate
court in the exercise of its limited jurisdiction.

x x x

It is clear that trial courts trying an ordinary action cannot resolve

to perform acts pertaining to a special proceedingbecause it is
subject to specific prescribed rules. [Emphasis supplied.]
That an accounting of the funds and assets of Zenith to determine the extent and
value of Anastacia's shareholdings will be undertaken by a probate court and not by
a special commercial court is completely consistent with the probate court's limited
jurisdiction. It has the power to enforce an accounting as a necessary means to its
authority to determine the properties included in the inventory of the estate to be
administered, divided up, and distributed. Beyond this, the determination of title or
ownership over the subject shares (whether belonging to Anastacia or Oscar) may
be conclusively settled by the probate court as a question of collation or
advancement. We had occasion to recognize the court's authority to act on
questions of title or ownership in a collation or advancement situation in Coca v.
Pangilinan33 where we ruled:

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

by the Court of First Instance in the exercise of its general jurisdiction or
of its limited probate jurisdiction is in reality not a jurisdictional question.
In essence, it is a procedural question involving a mode of practice
"which may be waived."

As a general rule, the question as to title to property should not be

passed upon in the testate or intestate proceeding. That question should
be ventilated in a separate action. That general rule has qualifications or
exceptions justified by expediency and convenience.

Thus, the probate court may provisionally pass upon in an intestate or

testate proceeding the question of inclusion in, or exclusion from, the
inventory of a piece of property without prejudice to its final
determination in a separate action.

Although generally, a probate court may not decide a question of

title or ownership, yet if the interested parties are all heirs, or the
question is one of collation or advancement, or the parties consent
to the assumption of jurisdiction by the probate court and the rights of
third parties are not impaired, the probate court is competent to
decide the question of ownership. [Citations omitted. Emphasis
supplied.]

In sum, we hold that the nature of the present controversy is not one which may be
classified as an intra-corporate dispute and is beyond the jurisdiction of the special
commercial court to resolve. In short, Rodrigo's complaint also fails the nature of
the controversy test.

DERIVATIVE SUIT

Rodrigo's bare claim that the complaint is a derivative suit will not suffice to confer
jurisdiction on the RTC (as a special commercial court) if he cannot comply with the
requisites for the existence of a derivative suit. These requisites are:

A. the party bringing suit should be a shareholder during the time of the
act or transaction complained of, the number of shares not being
 material;

b. the party has tried to exhaust intra-corporate remedies, i.e., has

made a demand on the board of directors for the appropriate relief, but
the latter has failed or refused to heed his plea; and cralawlibrary

c. the cause of action actually devolves on the corporation; the

wrongdoing or harm having been or being caused to the corporation and
not to the particular stockholder bringing the suit.34

Based on these standards, we hold that the allegations of the present complaint do
not amount to a derivative suit.

First, as already discussed above, Rodrigo is not a shareholder with respect to the
shareholdings originally belonging to Anastacia; he only stands as a transferee-heir
whose rights to the share are inchoate and unrecorded. With respect to his own
individually-held shareholdings, Rodrigo has not alleged any individual cause or
basis as a shareholder on record to proceed against Oscar.

Second, in order that a stockholder may show a right to sue on behalf of the
corporation, he must allege with some particularity in his complaint that he has
exhausted his remedies within the corporation by making a sufficient demand upon
the directors or other officers for appropriate relief with the expressed intent to sue
if relief is denied.35 Paragraph 8 of the complaint hardly satisfies this requirement
since what the rule contemplates is the exhaustion of remedies within the corporate
setting:

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

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

Lastly, we find no injury, actual or threatened, alleged to have been done to the
corporation due to Oscar's acts. If indeed he illegally and fraudulently transferred
Anastacia's shares in his own name, then the damage is not to the corporation but
to his co-heirs; the wrongful transfer did not affect the capital stock or the assets of
Zenith. As already mentioned, neither has Rodrigo alleged any particular cause or
wrongdoing against the corporation that he can champion in his capacity as a
shareholder on record.36

In summary, whether as an individual or as a derivative suit, the RTC - sitting as

special commercial court - has no jurisdiction to hear Rodrigo's complaint since
what is involved is the determination and distribution of successional rights to the
shareholdings of Anastacia Reyes. Rodrigo's proper remedy, under the
circumstances, is to institute a special proceeding for the settlement of the estate of
the deceased Anastacia Reyes, a move that is not foreclosed by the dismissal of his
present complaint.

WHEREFORE, we hereby GRANT the petition and REVERSE the decision of the
Court of Appeals dated May 26, 2004 in CA-G.R. SP No. 74970. The complaint
before the Regional Trial Court, Branch 142, Makati, docketed as Civil Case No. 00-
1553, is ordered DISMISSED for lack of jurisdiction.

[G.R. NO. 160146 : December 11, 2009]

LESLIE OKOL, Petitioner, v. SLIMMERS WORLD INTERNATIONAL, BEHAVIOR

MODIFICATIONS, INC., and RONALD JOSEPH MOY,Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a Petition for Review on Certiorari 1 assailing the Decision2dated
18 October 2002 and Resolution dated 22 September 2003 of the Court of Appeals
in CA-G.R. SP No. 69893, which set aside the Resolutions dated 29 May 2001 and
21 December 2001 of the National Labor Relations Commission (NLRC).

The Facts

Respondent Slimmers World International operating under the name Behavior

Modifications, Inc. (Slimmers World) employed petitioner Leslie Okol (Okol) as a
management trainee on 15 June 1992. She rose up the ranks to become Head
Office Manager and then Director and Vice President from 1996 until her dismissal
on 22 September 1999.

On 28 July 1999, prior to Okol's dismissal, Slimmers World preventively suspended

Okol. The suspension arose from the seizure by the Bureau of Customs of seven
Precor elliptical machines and seven Precor treadmills belonging to or consigned to
Slimmers World. The shipment of the equipment was placed under the names of
Okol and two customs brokers for a value less than US$500. For being
undervalued, the equipment were seized.

On 2 September 1999, Okol received a memorandum that her suspension had been
extended from 2 September until 1 October 1999 pending the outcome of the
investigation on the Precor equipment importation.

On 17 September 1999, Okol received another memorandum from Slimmers World

requiring her to explain why no disciplinary action should be taken against her in
connection with the equipment seized by the Bureau of Customs.

On 19 September 1999, Okol filed her written explanation. However, Slimmers

World found Okol's explanation to be unsatisfactory. Through a letter dated 22
September 1999 signed by its president Ronald Joseph Moy (Moy), Slimmers World
terminated Okol's employment.

Okol filed a complaint3 with the Arbitration branch of the NLRC against Slimmers
World, Behavior Modifications, Inc. and Moy (collectively called respondents) for
illegal suspension, illegal dismissal, unpaid commissions, damages and attorney's
fees, with prayer for reinstatement and payment of backwages.

On 22 February 2000, respondents filed a Motion to Dismiss 4 the case with a

reservation of their right to file a Position Paper at the proper time. Respondents
asserted that the NLRC had no jurisdiction over the subject matter of the complaint.

In an Order,5 dated 20 March 2000, the labor arbiter granted the motion to dismiss.
The labor arbiter ruled that Okol was the vice-president of Slimmers World at the
time of her dismissal. Since it involved a corporate officer, the dispute was an intra-
corporate controversy falling outside the jurisdiction of the Arbitration branch.

Okol filed an appeal with the NLRC. In a Resolution 6 dated 29 May 2001, the NLRC
reversed and set aside the labor arbiter's order. The dispositive portion of the
resolution states:

WHEREFORE, the Order appealed from is SET ASIDE and REVERSED. A new one is
hereby ENTERED ordering respondent Behavior Modification, Inc./Slimmers World
International to reinstate complainant Leslie F. Okol to her former position with full
back wages which to date stood in the amount of P10,000,000.00 computed from
July 28, 1999 to November 28, 2000 until fully reinstated; and the further sum of
P1,250,000.00 as indemnity pay plus attorney's fee equivalent to ten (10%) of the
total monetary award. However, should reinstatement be not feasible separation
pay equivalent to one month pay per year of service is awarded, a fraction of at
least six months considered one whole year.

All other claims are dismissed for lack of factual or legal basis.

SO ORDERED.7

Respondents filed a Motion for Reconsideration with the NLRC. Respondents

contended that the relief prayed for was confined only to the question of
jurisdiction. However, the NLRC not only decided the case on the merits but did so
in the absence of position papers from both parties. In a Resolution 8 dated 21
December 2001, the NLRC denied the motion for lack of merit.

Respondents then filed an appeal with the Court of Appeals, docketed as CA-G.R.
SP No. 69893.

The Ruling of the Court of Appeals

In a Decision9 dated 18 October 2002, the appellate court set aside the NLRC's
Resolution dated 29 May 2001 and affirmed the labor arbiter's Order dated 20
March 2000. The Court of Appeals ruled that the case, being an intra-corporate
dispute, falls within the jurisdiction of the regular courts pursuant to Republic Act
No. 8799.10 The appellate court added that the NLRC had acted without jurisdiction
in giving due course to the complaint and deprived respondents of their right to due
process in deciding the case on the merits.
Okol filed a Motion for Reconsideration which was denied in a Resolution 11dated 22
September 2003.

Hence, the instant petition.

The Issue

The issue is whether or not the NLRC has jurisdiction over the illegal dismissal case
filed by petitioner.

The Court's Ruling

The petition lacks merit.

Petitioner insists that the Court of Appeals erred in ruling that she was a corporate
officer and that the case is an intra-corporate dispute falling within the jurisdiction
of the regular courts. Petitioner asserts that even as vice-president, the work that
she performed conforms to that of an employee rather than a corporate officer.
Mere title or designation in a corporation will not, by itself, determine the existence
of an employer-employee relationship. It is the "four-fold" test, namely (1) the
power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the
power to control, which must be applied.

Petitioner enumerated the instances that she was under the power and control of
Moy, Slimmers World's president: (1) petitioner received salary evidenced by pay
slips, (2) Moy deducted Medicare and SSS benefits from petitioner's salary, and (3)
petitioner was dismissed from employment not through a board resolution but by
virtue of a letter from Moy. Thus, having shown that an employer-employee
relationship exists, the jurisdiction to hear and decide the case is vested with the
labor arbiter and the NLRC.

Respondents, on the other hand, maintain that petitioner was a corporate officer at
the time of her dismissal from Slimmers World as supported by the General
Information Sheet and Director's Affidavit attesting that petitioner was an officer.
Also, the factors cited by petitioner that she was a mere employee do not prove
that she was not an officer of Slimmers World. Even the alleged absence of any
resolution of the Board of Directors approving petitioner's termination does not
constitute proof that petitioner was not an officer. Respondents assert that
petitioner was not only an officer but also a stockholder and director; which facts
provide further basis that petitioner's separation from Slimmers World does not
come under the NLRC's jurisdiction.

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

officer of Slimmers World. Section 25 of the Corporation Code enumerates
corporate officers as the president, secretary, treasurer and such other officers as
may be provided for in the by-laws. In Tabang v. NLRC, 12 we held that an "office" is
created by the charter of the corporation and the officer is elected by the directors
or stockholders. On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation to be
paid to such employee.

In the present case, the respondents, in their motion to dismiss filed before the
labor arbiter, questioned the jurisdiction of the NLRC in taking cognizance of
petitioner's complaint. In the motion, respondents attached the General Information
Sheet13 (GIS) dated 14 April 1998, Minutes14 of the meeting of the Board of
Directors dated 14 April 1997 and Secretary's Certificate, 15 and the Amended By-
Laws16 dated 1 August 1994 of Slimmers World as submitted to the SEC to show
that petitioner was a corporate officer whose rights do not fall within the NLRC's
jurisdiction. The GIS and minutes of the meeting of the board of directors indicated
that petitioner was a member of the board of directors, holding one subscribed
share of the capital stock, and an elected corporate officer.

The relevant portions of the Amended By-Laws of Slimmers World which enumerate
the power of the board of directors as well as the officers of the corporation state:

Article II

The Board of Directors

1. Qualifications and Election - The general management of the

corporation shall be vested in a board of five directors who shall be
stockholders and who shall be elected annually by the stockholders and
who shall serve until the election and qualification of their successors.

xxx

Article III

Officers

xxx

4. Vice-President - Like the Chairman of the Board and the President, the
Vice-President shall be elected by the Board of Directors from [its] own
members.

The Vice-President shall be vested with all the powers and authority and
is required to perform all the duties of the President during the absence
of the latter for any cause.

The Vice-President will perform such duties as the Board of Directors

may impose upon him from time to time.

xxx

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

and officer of Slimmers World. The charges of illegal suspension, illegal dismissal,
unpaid commissions, reinstatement and back wages imputed by petitioner against
respondents fall squarely within the ambit of intra-corporate disputes. In a number
of cases,17 we have held that a corporate officer's dismissal is always a corporate
act, or an intra-corporate controversy which arises between a stockholder and a
corporation. The question of remuneration involving a stockholder and officer, not a
mere employee, is not a simple labor problem but a matter that comes within the
area of corporate affairs and management and is a corporate controversy in
contemplation of the Corporation Code.18

Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A 19 (PD 902-A)
provided that intra-corporate disputes fall within the jurisdiction of the Securities
and Exchange Commission (SEC):

Sec. 5. In addition to the regulatory and adjudicative functions of the

Securities and Exchange Commission over corporations, partnerships
and other forms of associations registered with it as expressly granted
under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:

xxx

c) Controversies in the election or appointments of directors, trustees,

officers or managers of such corporations, partnerships or associations.

Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on
8 August 2000, transferred to regional trial courts the SEC's jurisdiction
over all cases listed in Section 5 of PD 902-A:

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

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

xxx

It is a settled rule that jurisdiction over the subject matter is conferred by law. 20
The determination of the rights of a director and corporate officer dismissed from
his employment as well as the corresponding liability of a corporation, if any, is an
intra-corporate dispute subject to the jurisdiction of the regular courts. Thus, the
appellate court correctly ruled that it is not the NLRC but the regular courts which
have jurisdiction over the present case.

WHEREFORE, we DENY the petition. We AFFIRM the 18 October 2002 Decision and
22 September 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 69893.
This Decision is without prejudice to petitioner Leslie Okol's taking recourse to and
seeking relief through the appropriate remedy in the proper forum.

SO ORDERED.
G.R. No. 164888 December 6, 2006

RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD STORAGE AND DEVELOPMENT
CORPORATION, CITIZENS DEVELOPMENT INCOPRORATED, CARIDAD B. GARCIA, SANDRA
G. ESCAT, LORNA GARCIA, and OLGA G. ESCAT, petitioners,

vs.

ANNALISA CORTES, respondent.

DECISION

CARPIO MORALES, J.:

In 1987, Virgilio Garcia, "founder" of petitioner corporations (the corporations), hired the then still
single Annalisa Cortes (respondent) as clerk of the Rural Bank of Coron (Manila Office).

After Virgilio died, his son Victor took over the management of the corporations.

Anita Cortes (Anita), the wife of Victor Garcia, was also involved in the management of the
corporations. Respondent later married Anita’s brother Eduardo Cortes.

Anita soon assumed the position of Vice President of petitioner Citizens Development Incorporated
(CDI) and practically controlled the financial operations of almost all of the other corporations in the
course of which she allowed some of her relatives and in-laws, including respondent, to hold several
key sensitive positions thereat.

Respondent later became the Financial Assistant, Personnel Officer and Corporate Secretary of The
Rural Bank of Coron, Personnel Officer of CDI, and also Personnel Officer and Disbursing Officer of
The Empire Cold Storage Development Corporation (ECSDC). She simultaneously received salaries
from these corporations.

On examination of the financial books of the corporations by petitioner Sandra Garcia Escat, a
daughter of Virgilio Garcia who was previously residing in Spain, she found out that respondent was
1
involved in several anomalies, drawing petitioners to terminate respondent’s services on November
2
23, 1998 in petitioner corporations.

3
By letter of November 25, 1998 addressed to individual petitioners Caridad B. Garcia (widow of
Virgilio Garcia), Sandra G. Escat, and Olga G. Escat (another daughter of Virgilio Garcia),
respondent’s counsel conveyed respondent’s willingness to abide by the decision to terminate her
but reminded them that she was entitled to separation pay equivalent to 11 months salary as well as
to the other benefits provided by law in her favor.

Respondent’s counsel thus demanded the payment of respondent’s unpaid salary for the months of
4 th
October and November 1998, separation pay equivalent to 12 months salary, 13 month pay and
other benefits.

5
As the demand remained unheeded, respondent filed a complaint for illegal dismissal and non-
payment of salaries and other benefits, docketed as NLRC-NCR Case No. 00-05-05738-99.

Petitioners moved for the dismissal of the complaint on the ground of lack of jurisdiction, contending
that the case was an intra-corporate controversy involving the removal of a corporate officer,
respondent being the Corporate Secretary of the Rural Bank of Coron, Inc., hence, cognizable by
6
the Securities and Exchange Commission (SEC) pursuant to Section 5 of PD 902-A.

In resolving the issue of jurisdiction, the Labor Arbiter noted as follows:

It is to be noted that complainant, aside from her being Corporate Secretary of Rural Bank of Coron,
complainant was likewise appointed as Financial Assistant & Personnel Officer of all
respondents herein, whose services w[ere] terminated on 23 November 1998, hence, the instant
complaint.

Verily, a Financial Assistant & Personnel Officer is not a Corporate Officer of the [petitioners’]
corporation, thus, pursuant to Article 217 of the Labor Code, as amended, the instant case falls
7
within the ambit of original and exclusive jurisdiction of this Office. (Emphasis and underscoring
supplied).

Eventually, the Labor Arbiter found for respondent, computing the monetary award due her as
follows:

Backwages P658,000.00

13th Month Pay for 1998, 1999 63,000.00

& 2000

P721,000.00

Separation Pay 315,000.00

Unpaid Salary 25,900.00

Attorney’s fees 106,190.00

P1,168,090.00

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

WHEREFORE, in view of all the foregoing, respondents are hereby ordered to jointly and severally
pay complainant the total amount of ONE MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND
8
NINETY (P1,168,090.00) PESOS as discussed above.

9
On August 13, 2001, the tenth or last day of the period of appeal, petitioners filed a Notice of
10 11
Appeal and Motion for Reduction of Bond to which they attached a Memorandum on Appeal. In
their Motion for Reduction of Bond, petitioners alleged that the corporations were under financial
distress and the Rural Bank of Coron was under receivership. They thus prayed that the amount of
12
bond be substantially reduced, preferably to one half thereof or even lower.

13
By Resolution of October 16, 2001 , the National Labor Relations Commission (NLRC), while
noting that petitioners timely filed the appeal, held that the same was not accompanied by an appeal
14
bond, a mandatory requirement under Article 223 of the Labor Code and Section 6, Rule VI of the
NLRC New Rules of Procedure. It also noted that the Motion for Reduction of Bond was "premised
on self-serving allegations." It accordingly dismissed the appeal.

15
Petitioners’ Motion for Reconsideration was denied by the NLRC by November 26, 2001
16 17
Resolution, hence, they filed a Petition for Certiorari before the Court of Appeals.

18
By Decision dated May 26, 2004 , the appellate court dismissed the petition for lack of merit.
19
Petitioners’ motion for reconsideration was also denied by Resolution of August 13, 2004.

20
Hence, this petition, petitioners faulting the appellate court for:

. . . FAIL[URE] TO RULE THAT THE NLRC’S RULE OF PROCEDURE WHICH PROVIDES FOR
THE POSTING OF A BOND AS A CONDITION PRECEDENT FOR PERFECTING AN APPEAL AS A
CONDITION PRECEDENT FOR PERFECTING AN APPEAL IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.

II

. . . DISMISS[ING] PETITIONERS[’] PETITION FOR [CERTIORARI] BASED ON TECHNICALITY

AND FAIL[URE] TO DECIDE THE SAME BASED ON ITS MERIT.

III

. . . DISMISSING PETITIONERS’ PETITION FOR CERTIORARI FROM THE DECISION OF THE

NLRC FOR NON-PERFECTION THEREOF.

IV

. . . DISMISSING PETITIONERS’ PETITION FOR [CERTIORARI] FROM THE DECISION OF THE

NLRC WITHOUT RESOLVING THE CASE BASED ON ITS MERITS.

. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL PETITIONERS ARE NOT SOLIDARY LIABLE TO

PAY THE RESPONDENT FOR HER MONETARY CLAIM IN VIEW OF THE ABSENCE OF ANY
EVIDENCE SHOWING THAT THEY WERE MOTIVATED BY ILL-WILL OR MALICE IN SEVERING
HER EMPLOYMENT.

VI

21
. . . FAIL[URE] TO RESOLVE THE ISSUE OF JURISDICTION.

While, indeed, respondent was the Corporate Secretary of the Rural Bank of Coron, she was also its
22
Financial Assistant and the Personnel Officer of the two other petitioner corporations.

23
Mainland Construction Co., Inc. v. Movilla instructs that a corporation can engage its corporate
24
officers to perform services under a circumstance which would make them employees.

The Labor Arbiter has thus jurisdiction over respondent’s complaint.

On the first three assigned errors which bear on whether petitioners’ appeal before the NLRC was
perfected:

As before the Court of Appeals, petitioners cite Cosico, Jr. v. NLRC[25] and Taberrah v. NLRC[26] in
support of their contention that their appeal before the NLRC was perfected. As correctly ruled by the
Court of Appeals, however, the cited cases are not in point.

… The appellant in Taberrah filed a motion to fix appeal bond instead of posting an appeal bond; and
the Supreme Court relaxed the requirement considering that the labor arbiter’s decision did not
contain a computation of the monetary award. In Cosico, the appeal bond posted was of insufficient
amount but the Supreme Court ruled that provisions of the Labor Code on requiring a bond on
appeal involving monetary awards must be given liberal interpretation in line with the desired
objective of resolving controversies on their merits. Herein, no appeal bond, whether sufficient or
27
not, was ever filed by the petitioners. (Italics in the original; emphasis and underscoring
supplied)

Petitioners additionally cite Star Angel Handicraft v. NLRC[28] to support their position that there is a
distinction between the filing of an appeal within the reglementary period and its perfection. In the
29
parallel case of Computer Innovations Center v. National Labor Relations Commission, this Court
hesitated to reiterate the doctrine in Star Angel in this wise:

Petitioners invoke the aforementioned holding in Star Angel that there is a distinction between the
filing of an appeal within the reglementary period and its perfection, and that the appeal may be
perfected after the said reglementary period. Indeed, Star Angel held that the filing of a motion for
reduction of appeal bond necessarily stays the reglementary period for appeal. However, in this
case, the motion for reduction of appeal bond, which was incorporated in the appeal memorandum,
was filed only on the tenth or final day of the reglementary period. Under such circumstance, the
motion for reduction of appeal bond can no longer be deemed to have stayed the appeal, and
the petitioner faces the risk, as had happened in this case, of summary dismissal of the
appeal for non-perfection.

Moreover, the reference in Star Angel to the distinction between the period to file the appeal and to
perfect the appeal has been pointedly made only once by this Court in Gensoli v. NLRC thus, it has
not acquired the sheen of venerability reserved for repeatedly-cited cases. The distinction, if any, is
not particularly evident or material in the Labor Code; hence, the reluctance of the Court to adopt
such doctrine. Moreover, the present provision in the NLRC Rules of Procedure, that "the filing of
a motion to reduce bond shall not stop the running of the period to perfect appeal" flatly contradicts
the notion expressed in Star Angel that there is a distinction between the filing an appeal and
perfecting an appeal.

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

The appellate court did not thus err in dismissing the petition before it. And contrary to petitioners’
assertion, the appellate court dismissed its petition not "on a mere technicality." For the non-posting
of an appeal bond within the reglementary period divests the NLRC of its jurisdiction to entertain the
appeal. Thus, in the same case of Computer Innovations Center, this Court held:

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

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

It bears emphasis that all that is required to perfect the appeal is the posting of a bond to ensure that
the award is eventually paid should the appeal be dismissed. Petitioners should thus have posted a
bond, even if it were only partial, but they did not. No relaxation of the Rule may thus be
32
considered.

In the case at bar, petitioner did not post a full or partial appeal bond within the prescribed period,
thus, no appeal was perfected from the decision of the Labor Arbiter. For this reason, the decision
sought to be appealed to the NLRC had become final and executory and therefore immutable.
Clearly then, the NLRC has no authority to entertain the appeal, much less to reverse the decision of
the Labor Arbiter. Any amendment or alteration made which substantially affects the final and
executory judgment is null and void for lack of jurisdiction, including the entire proceeding held for
33
that purpose. (Emphasis and underscoring supplied)

As the decision of the Labor Arbiter had become final and executory, a discussion of the fourth and
fifth assigned errors is no longer necessary.

WHEREFORE, the petition is DENIED.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Tinga, and Velasco, Jr., JJ., concur.
G.R. No. 172013 October 2, 2009

PATRICIA HALAGUEÑA, MA. ANGELITA L. PULIDO, MA. TERESITA P. SANTIAGO, MARIANNE

V. KATINDIG, BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARY CHRISTINE A.
VILLARETE, CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI R. CRESENCIO, and
other flight attendants of PHILIPPINE AIRLINES, Petitioners,

vs.

PHILIPPINE AIRLINES INCORPORATED, Respondent.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
1 2
annul and set aside the Decision and the Resolution of the Court of Appeals (CA) in CA-G.R. SP.
No. 86813.

Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL) on
different dates prior to November 22, 1996. They are members of the Flight Attendants and
Stewards Association of the Philippines (FASAP), a labor organization certified as the sole and
exclusive certified as the sole and exclusive bargaining representative of the flight attendants, flight
stewards and pursers of respondent.

3
On July 11, 2001, respondent and FASAP entered into a Collective Bargaining Agreement
incorporating the terms and conditions of their agreement for the years 2000 to 2005, hereinafter
referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:

xxxx

3. Compulsory Retirement

Subject to the grooming standards provisions of this Agreement, compulsory retirement shall be fifty-
five (55) for females and sixty (60) for males. x x x.

4
In a letter dated July 22, 2003, petitioners and several female cabin crews manifested that the
aforementioned CBA provision on compulsory retirement is discriminatory, and demanded for an
5
equal treatment with their male counterparts. This demand was reiterated in a letter by petitioners'
counsel addressed to respondent demanding the removal of gender discrimination provisions in the
coming re-negotiations of the PAL-FASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA
6
proposals and manifested their willingness to commence the collective bargaining negotiations
between the management and the association, at the soonest possible time.

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the
7
Issuance of Temporary Restraining Order and Writ of Preliminary Injunction with the Regional Trial
Court (RTC) of Makati City, Branch 147, docketed as Civil Case No. 04-886, against respondent for
the invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing on petitioners'
application for a TRO and, thereafter, required the parties to submit their respective memoranda.

8
On August 9, 2004, the RTC issued an Order upholding its jurisdiction over the present case. The
RTC reasoned that:

In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which is allegedly
discriminatory as it discriminates against female flight attendants, in violation of the Constitution, the
Labor Code, and the CEDAW. The allegations in the Petition do not make out a labor dispute arising
from employer-employee relationship as none is shown to exist. This case is not directed specifically
against respondent arising from any act of the latter, nor does it involve a claim against the
respondent. Rather, this case seeks a declaration of the nullity of the questioned provision of the
CBA, which is within the Court's competence, with the allegations in the Petition constituting the
bases for such relief sought.

9
The RTC issued a TRO on August 10, 2004, enjoining the respondent for implementing Section
144, Part A of the PAL-FASAP CBA.

10
The respondent filed an omnibus motion seeking reconsideration of the order overruling its
objection to the jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1) petitioners'
application for the issuance of a writ of preliminary injunction be denied; and (2) the petition be
dismissed or the proceedings in this case be suspended.

11
On September 27, 2004, the RTC issued an Order directing the issuance of a writ of preliminary
injunction enjoining the respondent or any of its agents and representatives from further
implementing Sec. 144, Part A of the PAL-FASAP CBA pending the resolution of the case.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with Prayer
12
for a Temporary Restraining Order and Writ of Preliminary Injunction with the Court of Appeals
(CA) praying that the order of the RTC, which denied its objection to its jurisdiction, be annuled and
set aside for having been issued without and/or with grave abuse of discretion amounting to lack of
jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled
that:

WHEREFORE, the respondent court is by us declared to have NO JURISDICTION OVER THE

CASE BELOW and, consequently, all the proceedings, orders and processes it has so far issued
therein are ANNULED and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No.
04-886.

SO ORDERED.

13
Petitioner filed a motion for reconsideration, which was denied by the CA in its Resolution dated
March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR DISPUTE
OR GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has jurisdiction over the petitioners' action
challenging the legality or constitutionality of the provisions on the compulsory retirement age
contained in the CBA between respondent PAL and FASAP.

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

Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the present
case, as the controversy partakes of a labor dispute. The dispute concerns the terms and conditions
of petitioners' employment in PAL, specifically their retirement age. The RTC has no jurisdiction over
the subject matter of petitioners' petition for declaratory relief because the Voluntary Arbitrator or
panel of Voluntary Arbitrators have original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or implementation of the CBA. Regular courts
have no power to set and fix the terms and conditions of employment. Finally, respondent alleged
that petitioners' prayer before this Court to resolve their petition for declaratory relief on the merits is
procedurally improper and baseless.

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the material allegations of the complaint and
14
the character of the relief prayed for irrespective of whether plaintiff is entitled to such relief.

In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners'
cause of action is the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent
portion of the petition recites:

CAUSE OF ACTION

24. Petitioners have the constitutional right to fundamental equality with men under Section 14,
Article II, 1987 of the Constitution and, within the specific context of this case, with the male cabin
attendants of Philippine Airlines.

26. Petitioners have the statutory right to equal work and employment opportunities with men under
Article 3, Presidential Decree No. 442, The Labor Code and, within the specific context of this case,
with the male cabin attendants of Philippine Airlines.

27. It is unlawful, even criminal, for an employer to discriminate against women employees with
respect to terms and conditions of employment solely on account of their sex under Article 135 of the
Labor Code as amended by Republic Act No. 6725 or the Act Strengthening Prohibition on
Discrimination Against Women.

28. This discrimination against Petitioners is likewise against the Convention on the Elimination of All
Forms of Discrimination Against Women (hereafter, "CEDAW"), a multilateral convention that the
Philippines ratified in 1981. The Government and its agents, including our courts, not only must
condemn all forms of discrimination against women, but must also implement measures towards its
elimination.
29. This case is a matter of public interest not only because of Philippine Airlines' violation of the
Constitution and existing laws, but also because it highlights the fact that twenty-three years after the
Philippine Senate ratified the CEDAW, discrimination against women continues.

31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory retirement from service
is invidiously discriminatory against and manifestly prejudicial to Petitioners because, they are
compelled to retire at a lower age (fifty-five (55) relative to their male counterparts (sixty (60).

33. There is no reasonable, much less lawful, basis for Philippine Airlines to distinguish, differentiate
or classify cabin attendants on the basis of sex and thereby arbitrarily set a lower compulsory
retirement age of 55 for Petitioners for the sole reason that they are women.

37. For being patently unconstitutional and unlawful, Section 114, Part A of the PAL-FASAP 2000-
2005 CBA must be declared invalid and stricken down to the extent that it discriminates against
petitioner.

38. Accordingly, consistent with the constitutional and statutory guarantee of equality between men
and women, Petitioners should be adjudged and declared entitled, like their male counterparts, to
work until they are sixty (60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the Honorable Court:

c. after trial on the merits:

(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULL and VOID to the
extent that it discriminates against Petitioners; x x x x

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

The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the
application of the Constitution, labor statutes, law on contracts and the Convention on the
16
Elimination of All Forms of Discrimination Against Women, and the power to apply and interpret the
constitution and CEDAW is within the jurisdiction of trial courts, a court of general jurisdiction. In
17
Georg Grotjahn GMBH & Co. v. Isnani, this Court held that not every dispute between an employer
and employee involves matters that only labor arbiters and the NLRC can resolve in the exercise of
their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC under
Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship
which can only be resolved by reference to the Labor Code, other labor statutes, or their collective
bargaining agreement.

Not every controversy or money claim by an employee against the employer or vice-versa is within
the exclusive jurisdiction of the labor arbiter. Actions between employees and employer where the
employer-employee relationship is merely incidental and the cause of action precedes from a
18
different source of obligation is within the exclusive jurisdiction of the regular court. Here, the
employer-employee relationship between the parties is merely incidental and the cause of action
ultimately arose from different sources of obligation, i.e., the Constitution and CEDAW.

Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other
labor relations statute or a collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to the labor arbiter and
the NLRC. In such situations, resolution of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to labor arbiters and the NLRC and the rationale for granting jurisdiction
19
over such claims to these agencies disappears.

If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall
determine the constitutionality or legality of the assailed CBA provision?

This Court holds that the grievance machinery and voluntary arbitrators do not have the power to
determine and settle the issues at hand. They have no jurisdiction and competence to decide
constitutional issues relative to the questioned compulsory retirement age. Their exercise of
jurisdiction is futile, as it is like vesting power to someone who cannot wield it.

20
In Gonzales v. Climax Mining Ltd., this Court affirmed the jurisdiction of courts over questions on
constitutionality of contracts, as the same involves the exercise of judicial power. The Court said:

Whether the case involves void or voidable contracts is still a judicial question. It may, in some
instances, involve questions of fact especially with regard to the determination of the circumstances
of the execution of the contracts. But the resolution of the validity or voidness of the contracts
remains a legal or judicial question as it requires the exercise of judicial function. It requires the
ascertainment of what laws are applicable to the dispute, the interpretation and application of those
laws, and the rendering of a judgment based thereon. Clearly, the dispute is not a mining conflict. It
is essentially judicial. The complaint was not merely for the determination of rights under the mining
contracts since the very validity of those contracts is put in issue.

21
In Saura v. Saura, Jr., this Court emphasized the primacy of the regular court's judicial power
enshrined in the Constitution that is true that the trend is towards vesting administrative bodies like
the SEC with the power to adjudicate matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to them. This would also relieve the regular
courts of a substantial number of cases that would otherwise swell their already clogged dockets.
But as expedient as this policy may be, it should not deprive the courts of justice of their
power to decide ordinary cases in accordance with the general laws that do not require any
particular expertise or training to interpret and apply. Otherwise, the creeping take-over by
the administrative agencies of the judicial power vested in the courts would render the
judiciary virtually impotent in the discharge of the duties assigned to it by the Constitution.

22
To be sure, in Rivera v. Espiritu, after Philippine Airlines (PAL) and PAL Employees Association
(PALEA) entered into an agreement, which includes the provision to suspend the PAL-PALEA CBA
for 10 years, several employees questioned its validity via a petition for certiorari directly to the
Supreme Court. They said that the suspension was unconstitutional and contrary to public policy.
Petitioners submit that the suspension was inordinately long, way beyond the maximum statutory life
of 5 years for a CBA provided for in Article 253-A of the Labor Code. By agreeing to a 10-year
suspension, PALEA, in effect, abdicated the workers' constitutional right to bargain for another CBA
at the mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to petitioners a
plain, speedy, and adequate remedy in the ordinary course of law. The Court said that while the
petition was denominated as one for certiorari and prohibition, its object was actually the nullification
of the PAL-PALEA agreement. As such, petitioners' proper remedy is an ordinary civil action for
annulment of contract, an action which properly falls under the jurisdiction of the regional trial courts.

The change in the terms and conditions of employment, should Section 144 of the CBA be held
invalid, is but a necessary and unavoidable consequence of the principal relief sought, i.e.,
nullification of the alleged discriminatory provision in the CBA. Thus, it does not necessarily follow
that a resolution of controversy that would bring about a change in the terms and conditions of
employment is a labor dispute, cognizable by labor tribunals. It is unfair to preclude petitioners from
invoking the trial court's jurisdiction merely because it may eventually result into a change of the
terms and conditions of employment. Along that line, the trial court is not asked to set and fix the
terms and conditions of employment, but is called upon to determine whether CBA is consistent with
the laws.

Although the CBA provides for a procedure for the adjustment of grievances, such referral to the
grievance machinery and thereafter to voluntary arbitration would be inappropriate to the petitioners,
because the union and the management have unanimously agreed to the terms of the CBA and their
interest is unified.

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

x x x Hence, only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.

In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. No grievance between them exists which could be
brought to a grievance machinery. The problem or dispute in the present case is between the union
and the company on the one hand and some union and non-union members who were dismissed,
on the other hand. The dispute has to be settled before an impartial body. The grievance machinery
with members designated by the union and the company cannot be expected to be impartial against
the dismissed employees. Due process demands that the dismissed workers’ grievances be
ventilated before an impartial body. x x x .

Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the
union and petitioner company because both have previously agreed upon the provision on
"compulsory retirement" as embodied in the CBA. Also, it was only private respondent on his own
who questioned the compulsory retirement. x x x.

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

Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under the
CBA would be futile because respondent already implemented Section 114, Part A of PAL-FASAP
CBA when several of its female flight attendants reached the compulsory retirement age of 55.

Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's
bargaining proposal for the remaining period of 2004-2005 of the PAL-FASAP CBA, which includes
the renegotiation of the subject Section 144. However, FASAP's attempt to change the questioned
provision was shallow and superficial, to say the least, because it exerted no further efforts to pursue
its proposal. When petitioners in their individual capacities questioned the legality of the compulsory
retirement in the CBA before the trial court, there was no showing that FASAP, as their
representative, endeavored to adjust, settle or negotiate with PAL for the removal of the difference in
compulsory age retirement between its female and male flight attendants, particularly those
employed before November 22, 1996. Without FASAP's active participation on behalf of its female
flight attendants, the utilization of the grievance machinery or voluntary arbitration would be
pointless.

The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA.
Interpretation, as defined in Black's Law Dictionary, is the art of or process of discovering and
24
ascertaining the meaning of a statute, will, contract, or other written document. The provision
regarding the compulsory retirement of flight attendants is not ambiguous and does not require
interpretation. Neither is there any question regarding the implementation of the subject CBA
provision, because the manner of implementing the same is clear in itself. The only controversy lies
in its intrinsic validity.

Although it is a rule that a contract freely entered between the parties should be respected, since a
contract is the law between the parties, said rule is not absolute.

25
In Pakistan International Airlines Corporation v. Ople, this Court held that:

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

Moreover, the relations between capital and labor are not merely contractual. They are so impressed
26
with public interest that labor contracts must yield to the common good.x x x The supremacy of
the law over contracts is explained by the fact that labor contracts are not ordinary contracts; these
27
are imbued with public interest and therefore are subject to the police power of the state. It should
not be taken to mean that retirement provisions agreed upon in the CBA are absolutely beyond the
ambit of judicial review and nullification. A CBA, as a labor contract, is not merely contractual in
nature but impressed with public interest. If the retirement provisions in the CBA run contrary to law,
28
public morals, or public policy, such provisions may very well be voided.

Finally, the issue in the petition for certiorari brought before the CA by the respondent was the
alleged exercise of grave abuse of discretion of the RTC in taking cognizance of the case for
declaratory relief. When the CA annuled and set aside the RTC's order, petitioners sought relief
before this Court through the instant petition for review under Rule 45. A perusal of the petition
before Us, petitioners pray for the declaration of the alleged discriminatory provision in the CBA
against its female flight attendants.

This Court is not persuaded. The rule is settled that pure questions of fact may not be the proper
subject of an appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode of appeal
is generally limited only to questions of law which must be distinctly set forth in the petition. The
29
Supreme Court is not a trier of facts.

The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or not
is a question of fact. This would require the presentation and reception of evidence by the parties in
order for the trial court to ascertain the facts of the case and whether said provision violates the
Constitution, statutes and treaties. A full-blown trial is necessary, which jurisdiction to hear the same
is properly lodged with the the RTC. Therefore, a remand of this case to the RTC for the proper
determination of the merits of the petition for declaratory relief is just and proper. 1avvphi1

WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of
Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813 are
REVERSED and SET ASIDE. The Regional Trial Court of Makati City, Branch 147 is DIRECTED to
continue the proceedings in Civil Case No. 04-886 with deliberate dispatch.

SO ORDERED.

[G.R. No. 142244. November 18, 2002.]

ATLAS FARMS, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, JAIME O. DELA
PEÑA and MARCIAL I. ABION, Respondents.

DECISION

QUISUMBING, J.:

Petitioner seeks the reversal of the decision 1 dated January 10, 2000 of the Court of Appeals in CA-G.R. SP
No. 52780, dismissing its petition for certiorari against the NLRC, as well as the resolution 2 dated February
24, 2000, denying its motion for reconsideration.

The antecedent facts of the case, as found by the Court of Appeals, 3 are as follows: chanrob1es virtual 1aw library

Private respondent Jaime O. dela Peña was employed as a veterinary aide by petitioner in December 1975.
He was among several employees terminated in July 1989. On July 8, 1989, he was re-hired by petitioner
and given the additional job of feedmill operator. He was instructed to train selected workers to operate the
feedmill.

On March 13, 1993, 4 Peña was allegedly caught urinating and defecating on company premises not
intended for the purpose. The farm manager of petitioner issued a formal notice directing him to explain
within 24 hours why disciplinary action should not be taken against him for violating company rules and
regulations. Peña refused, however, to receive the formal notice. He never bothered to explain, either
verbally or in writing, according to petitioner. Thus, on March 20, 1993, a notice of termination with
payment of his monetary benefits was sent to him. He duly acknowledged receipt of his separation pay of
P13,918.67. chanrob1es virtua1 1aw 1ibrary

From the start of his employment on July 8, 1989, until his termination on March 20, 1993, Peña had
worked for seven days a week, including holidays, without overtime, holiday, rest day pay and service
incentive leave. At the time of his dismissal from employment, he was receiving P180 pesos daily wage, or
an average monthly salary of P5,402.
Co-respondent Marcial I. Abion 5 was a carpenter/mason and a maintenance man whose employment by
petitioner commenced on October 8, 1990. Allegedly, he caused the clogging of the fishpond drainage
resulting in damages worth several hundred thousand pesos when he improperly disposed of the cut grass
and other waste materials into the pond’s drainage system. Petitioner sent a written notice to Abion,
requiring him to explain what happened, otherwise, disciplinary action would be taken against him. He
refused to receive the notice and give an explanation, according to petitioner. Consequently, the company
terminated his services on October 27, 1992. He acknowledged receipt of a written notice of dismissal, with
his separation pay.

Like Peña, Abion worked seven days a week, including holidays, without holiday pay, rest day pay, service
incentive leave pay and night shift differential pay. When terminated on October 27, 1992, Abion was
receiving a monthly salary of P4,500.

Peña and Abion filed separate complaints for illegal dismissal that were later consolidated. Both claimed that
their termination from service was due to petitioner’s suspicion that they were the leaders in a plan to form
a union to compete and replace the existing management-dominated union.

On November 9, 1993, the labor arbiter dismissed their complaints on the ground that the grievance
machinery in the collective bargaining agreement (CBA) had not yet been exhausted. Private respondents
availed of the grievance process, but later on refiled the case before the NLRC in Region IV. They alleged
"lack of sympathy" on petitioner’s part to engage in conciliation proceedings. chanrob1es virtua1 1aw 1ibrary

Their cases were consolidated in the NLRC. At the initial mandatory conference, petitioner filed a motion to
dismiss, on the ground of lack of jurisdiction, alleging private respondents themselves admitted that they
were members of the employees’ union with which petitioner had an existing CBA. This being the case,
according to petitioner, jurisdiction over the case belonged to the grievance machinery and thereafter the
voluntary arbitrator, as provided in the CBA.

In a decision dated January 30, 1996, the labor arbiter dismissed the complaint for lack of merit, finding
that the case was one of illegal dismissal and did not involve the interpretation or implementation of any
CBA provision. He stated that Article 217 (c) of the Labor Code 6 was inapplicable to the case. Further, the
labor arbiter found that although both complainants did not substantiate their claims of illegal dismissal,
there was proof that private respondents voluntarily accepted their separation pay and petitioner’s financial
assistance.

Thus, private respondents brought the case to the NLRC, which reversed the labor arbiter’s decision.
Dissatisfied with the NLRC ruling, petitioner went to the Court of Appeals by way of a petition for review on
certiorari under Rule 65, seeking reinstatement of the labor arbiter’s decision. The appellate court denied
the petition and affirmed the NLRC resolution with some modifications, thus: chanrob1es virtual 1aw library

WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520–96 is AFFIRMED with the
following modifications:chanrob1es virtual 1aw library

1) The private respondents can not be reinstated, due to their acceptance of the separation pay offered by
the petitioner;

2) The private respondents are entitled to their full back wages; and,

3) The amount of the separation pay received by private respondents from petitioner shall not be deducted
from their full back wages. chanrob1es virtua1 law library

Costs against petitioner.

SO ORDERED. 7
Petitioner forthwith filed its motion for reconsideration, which was denied in a resolution dated February 24,
2000, which reads: chanrob1es virtual 1aw library

Acting on the Motion for Reconsideration filed by petitioner[s] which drew an opposition from private
respondents, the Court resolved to DENY the aforesaid motion for reconsideration, as the issues raised
therein have been passed upon by the Court in its questioned decision and no substantial arguments were
presented to warrant its reversal, let alone modification.

SO ORDERED. 8

In this petition now before us, petitioner alleges that the appellate court erred in: chanrob1es virtual 1aw library

I. . . . DENYING THE PETITION FOR CERTIORARI AND IN EFFECT AFFIRMING THE RULINGS OF THE PUBLIC
RESPONDENT NLRC THAT THE PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED;

II. . . . RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY AND FULL
BACKWAGES;

III. . . . RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT. 9

Petitioner contends that the dismissal of private respondents was for a just and valid cause, pursuant to the
provisions of the company’s rules and regulations. It also alleges lack of jurisdiction on the part of the labor
arbiter, claiming that the cases should have been resolved through the grievance machinery, and eventually
referred to voluntary arbitration, as prescribed in the CBA.

For their part, private respondents contend that they were illegally dismissed from employment because
management discovered that they intended to form another union, and because they were vocal in
asserting, their rights. In any case, according to private respondents, the petition involves factual issues
that cannot be properly raised in a petition for review on certiorari under Rule 45 of the Revised Rules of
Court. 10

In fine, there are three issues to be resolved: 1) whether private respondents were legally and validly
dismissed; 2) whether the labor arbiter and the NLRC had jurisdiction to decide complaints for illegal
dismissal; and 3) whether petitioner is liable for costs of the suit.

The first issue primarily involves questions of fact, which can serve as basis for the conclusion that private
respondents were legally and validly dismissed. The burden of proving that the dismissal of private
respondents was legal and valid falls upon petitioner. The NLRC found that petitioner failed to substantiate
its claim that both private respondents committed certain acts that violated company rules and regulations,
11 hence we find no factual basis to say that private respondents’ dismissal was in order. We see no
compelling reason to deviate from the NLRC ruling that their dismissal was illegal, absent a showing that it
reached its conclusion arbitrarily. 12 Moreover, factual findings of agencies exercising quasi-judicial
functions are accorded not only respect but even finality, aside from the consideration here that this Court is
not a trier of facts. 13

Anent the second issue, Article 217 of the Labor Code provides that labor arbiters have original and
exclusive jurisdiction over termination disputes. A possible exception is provided in Article 261 of the Labor
Code, which provides that —

The Voluntary Arbitrator or panel of voluntary arbitrators shall have original and exclusive jurisdiction to
hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company personnel
policies referred to in the immediately preceding article. Accordingly, violations of a Collective Bargaining
Agreement, except those which are gross in character, shall no longer be treated as unfair labor practice
and shall be resolved as grievances under the Collective Bargaining Agreement. For purposes of this article,
gross violations of Collective Bargaining Agreement shall mean flagrant and or malicious refusal to comply
with the economic provisions of such agreement. chanrob1es virtua1 1aw 1ibrary

The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction
of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose and refer the
same to the grievance Machinery or Arbitration provided in the Collective Bargaining Agreement.

But as held in Vivero v. CA, 14 "petitioner cannot arrogate into the powers of Voluntary Arbitrators the
original and exclusive jurisdiction of Labor Arbiters over unfair labor practices, termination disputes, and
claims for damages, in the absence of an express agreement between the parties in order for Article 262 of
the Labor Code [Jurisdiction over other labor disputes] to apply in the case at bar." cralaw virtua1aw library

Moreover, per Justice Bellosillo: chanrob1es virtual 1aw library

It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993,
"Clarifying the Jurisdiction Between Voluntary Arbitrators and Labor Arbiters Over Termination Cases and
Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the NCMB," termination
cases arising in or resulting from the interpretation and implementation of collective bargaining agreements
and interpretation and enforcement of company personnel policies which were initially processed at the
various steps of the plant-level Grievance Procedures under the parties’ collective bargaining agreements fall
within the original and exclusive jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and Art. 261
of the Labor Code; and, if filed before the Labor Arbiter, these cases shall be dismissed by the Labor Arbiter
for lack of jurisdiction and referred to the concerned NCMB Regional Branch for appropriate action towards
and expeditious selection by the parties of a Voluntary Arbitrator or Panel of Arbitrators based on the
procedures agreed upon in the CBA.

As earlier stated, the instant case is a termination dispute falling under the original and exclusive jurisdiction
of the Labor Arbiter, and does not specifically involve the application, implementation or enforcement of
company personnel policies contemplated in Policy Instruction No. 56. Consequently, Policy Instruction No.
56 does not apply in the case at bar. 15 . . .

Records show, however, that private respondents sought without success to avail of the grievance procedure
in their CBA. 16 On this point, petitioner maintains that by so doing, private respondents recognized that
their cases still fell under the grievance machinery. According to petitioner, without having exhausted said
machinery, the private respondents filed their action before the NLRC, in a clear act of forum-shopping. 17
However, it is worth pointing out that private respondents went to the NLRC only after the labor arbiter
dismissed their original complaint for illegal dismissal. Under these circumstances private respondents had
to find another avenue for redress. We agree with the NLRC that it was petitioner who failed to show proof
that it took steps to convene the grievance machinery after the labor arbiter first dismissed the complaints
for illegal dismissal and directed the parties to avail of the grievance procedure under Article VII of the
existing CBA. They could not now be faulted for attempting to find an impartial forum, after petitioner failed
to listen to them and after the intercession of the labor arbiter proved futile. The NLRC had aptly concluded
in part that private respondents had already exhausted the remedies under the grievance procedure. 18 It
erred only in finding that their cause of action was ripe for arbitration.

In the case of Maneja v. NLRC, 19 we held that the dismissal case does not fall within the phrase
"grievances arising from the interpretation or implementation of the collective bargaining agreement and
those arising from the interpretation or enforcement of company personnel policies." In Maneja, the hotel
employee was dismissed without hearing. We ruled that her dismissal was unjustified, and her right to due
process was violated, absent the twin requirements of notice and hearing. We also held that the labor
arbiter had original and exclusive jurisdiction over the termination case, and that it was error to give the
voluntary arbitrator jurisdiction over the illegal dismissal case.

In Vivero v. CA, 20 private respondents attempted to justify the jurisdiction of the voluntary arbitrator over
a termination dispute alleging that the issue involved the interpretation and implementation of the grievance
procedure in the CBA. There, we held that since what was challenged was the legality of the employee’s
dismissal for lack of cause and lack of due process, the case was primarily a termination dispute. The issue
of whether there was proper interpretation and implementation of the CBA provisions came into play only
because the grievance procedure in the CBA was not observed, after he sought his union’s assistance. Since
the real issue then was whether there was a valid termination, there was no reason to invoke the need to
interpret nor question an implementation of any CBA, provision. chanrob1es virtua1 1aw 1ibrary

One significant fact in the present petition also needs stressing. Pursuant to Article 260 21 of the Labor
Code, the parties to a CBA shall name or designate their respective representatives to the grievance
machinery and if the grievance is unsettled in that level, it shall automatically be referred to the voluntary
arbitrators designated in advance by the parties to a CBA. Consequently only disputes involving the union
and the company shall be referred to the grievance machinery or voluntary arbitrators. In these termination
cases of private respondents, the union had no participation, it having failed to object to the dismissal of the
employees concerned by the petitioner. It is obvious that arbitration without the union’s active participation
on behalf of the dismissed employees would be pointless, or even prejudicial to their cause.

Coming to the merits of the petition, the NLRC found that petitioner did not comply with the requirements of
a valid dismissal. For a dismissal to be valid, the employer must show that: (1) the employee was accorded
due process, and (2) the dismissal must be for any of the valid causes provided for by law. 22 No evidence
was shown that private respondents refused, as alleged, to receive the notices requiring them to show cause
why no disciplinary action should be taken against them. Without proof of notice, private respondents who
were subsequently dismissed without hearing were also deprived of a chance to air their side at the level of
the grievance machinery. Given the fact of dismissal, it can be said that the cases were effectively removed
from the jurisdiction of the voluntary arbitrator, thus placing them within the jurisdiction of the labor arbiter.
Where the dispute is just in the interpretation, implementation or enforcement stage, it may be referred to
the grievance machinery set up in the CBA, or brought to voluntary arbitration. But, where there was
already actual termination, with alleged violation of the employee’s rights, it is already cognizable by the
labor arbiter. 23

In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction over the cases involving
private respondents’ dismissal, and no error was committed by the appellate court in upholding their
assumption of jurisdiction.

However, we find that a modification of the monetary awards is in order. As a consequence of their illegal
dismissal, private respondents are entitled to reinstatement to their former positions. But since
reinstatement is no longer feasible because petitioner had already closed its shop, separation pay in lieu of
reinstatement shall be awarded. 24 A terminated employee’s receipt of his separation pay and other
monetary benefits does not preclude reinstatement or full benefits under the law, should reinstatement be
no longer possible. 25 As held in Cariño v. ACCFA: 26

Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee,
obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must
have to get hold of the money. Because out of job, he had to face the harsh necessities of life. He thus
found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One
thing sure, however, is that petitioners did not relent their claim. They pressed it. They are deemed not to
have waived their rights. Renuntiato non praesumitur. chanrob1es virtua1 1aw 1ibrary

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

Having found private respondents’ dismissal to be illegal, and the labor arbiter and the NLRC duly vested
with jurisdiction to hear and decide their cases, we agree with the appellate court that petitioner should pay
the costs of suit.

WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. SP No.
52780 is AFFIRMED with the MODIFICATION that petitioner is ordered to pay private respondents (a)
separation pay, in lieu of their reinstatement, equivalent to one month’s salary for every year of service, (b)
full backwages from the date of their dismissal up to the date of the promulgation of this decision, together
with (c) the costs of suit.

SO ORDERED.

Bellosillo, Mendoza and Callejo, Sr., JJ., concur.

[G.R. No. 121948. October 8, 2001.]

PERPETUAL HELP CREDIT COOPERATIVE, INC., Petitioner, v. BENEDICTO FABURADA, SISINITA

VILLAR, IMELDA TAMAYO, HAROLD CATIPAY, and the NATIONAL LABOR RELATIONS
COMMISSION, Fourth Division, Cebu City, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and Harold Catipay, private
respondents, filed a complaint against the Perpetual Help Credit Cooperative, Inc. (PHCCI), Petitioner, with
the Arbitration Branch, Department of Labor and Employment (DOLE), Dumaguete City, for illegal dismissal,
premium pay on holidays and rest days, separation pay, wage differential, moral damages, and attorney’s
fees.

Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the ground that there is no employer-
employee relationship between them as private respondents are all members and co-owners of the
cooperative. Furthermore, private respondents have not exhausted the remedies provided in the cooperative
by-laws.chanrob1es virtua1 1aw 1ibrary

On September 3, 1990, petitioner filed a supplemental motion to dismiss alleging that Article 121 of R.A.
No. 6939, otherwise known as the Cooperative Development Authority Law which took effect on March 26,
1990, requires conciliation or mediation within the cooperative before a resort to judicial proceeding.

On the same date, the Labor Arbiter denied petitioner’s motion to dismiss, holding that the case is
impressed with employer-employee relationship and that the law on cooperatives is subservient to the Labor
Code.

On November 23, 1993, the Labor Arbiter rendered a decision, the dispositive portion of which reads: chanrob1es virtual 1aw library

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants illegally dismissed,
thus respondent is directed to pay Complainants backwages computed from the time they were illegally
dismissed up to the actual reinstatement but subject to the three year backwages rule, separation pay for
one month for every year of service since reinstatement is evidently not feasible anymore, to pay
complainants 13th month pay, wage differentials and Ten Percent (10%) attorney’s fees from the aggregate
monetary award. However, complainant Benedicto Faburada shall only be awarded what are due him in
proportion to the nine and a half months that he had served the respondent, he being a part-time employee.
All other claims are hereby dismissed for lack of merit.

The computation of the foregoing awards is hereto attached and forms an integral part of this decision." cralaw virtua1aw library

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

Hence, this petition by the PHCCI.

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

Petitioner PHCCI contends that private respondents are its members and are working for it as volunteers.
Not being regular employees, they cannot sue petitioner. chanrob1es virtua1 1aw 1ibrary

In determining the existence of an employer-employee relationship, the following elements are considered:
(1) the selection and engagement of the worker or the power to hire; (2) the power to dismiss; (3) the
payment of wages by whatever means; and (4) the power to control the worker’s conduct, with the latter
assuming primacy in the overall consideration. No particular form of proof is required to prove the existence
of an employer-employee relationship. Any competent and relevant evidence may show the relationship. 2

The above elements are present here. Petitioner PHCCI, through Mr. Edilberto Lantaca, Jr., its Manager,
hired private respondents to work for it. They worked regularly on regular working hours, were assigned
specific duties, were paid regular wages and made to accomplish daily time records just like any other
regular employee. They worked under the supervision of the cooperative manager. But unfortunately, they
were dismissed.

That an employer-employee exists between the parties is shown by the averments of private respondents in
their respective affidavits, carefully considered by respondent NLRC in affirming the Labor Arbiter’s decision,
thus:chanrob1es virtual 1aw library

Benedicto Faburada —Regular part-time Computer programmer/ operator. Worked with the Cooperative
since June 1, 1988 up to December 29, 1989. Work schedule: Tuesdays and Thursdays, from 1:00 p.m. to
5:30 p.m. and every Saturday from 8:00 to 11:30 a.m. and 1:00 to 4:00 p.m. and for at least three (3)
hours during Sundays. Monthly salary: P1,000.00 — from June to December 1988; P1,350.00 - from
January to June 1989; and P1,500.00 from July to December 1989. Duties: Among others, — Enter data
into the computer; compute interests on savings deposits, effect mortuary deductions and dividends on
fixed deposits; maintain the masterlist of the cooperative members; perform various forms for
mimeographing; and perform such other duties as may be assigned from time to time.

Sisinita Vilar — Clerk. Worked with the Cooperative since December 1, 1987 up to December 29, 1989.
Work schedule: Regular working hours. Monthly salary: P500.00 — from December 1, 1987 to December
31, 1988; P1,000.00 — from January 1, 1989 to June 30, 1989; and P1,150.00 — from July 1, 1989 to
December 31, 1989. Duties: Among others, Prepare summary of salary advances, journal vouchers, daily
summary of disbursements to respective classifications; schedule loans; prepare checks and cash vouchers
for regular and emergency loans; reconcile bank statements to the daily summary of disbursements; post
the monthly balance of fixed and savings deposits in preparation for the computation of interests, dividends,
mortuary and patronage funds; disburse checks during regular and emergency loans; and perform such
other bookkeeping and accounting duties as may be assigned to her from time to time.
Imelda C. Tamayo — Clerk. Worked with the Cooperative since October 19, 1987 up to December 29, 1989.
Work schedule: Monday to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday — 8:00 to
11:30 a.m and 1:00 to 4:00 p.m; and for one Sunday each month - for at least three (3) hours. Monthly
salary: P60.00 — from October to November 1987; P250.00 for December 1987; P500.00 — from January
to December 1988; P950 — from January to June 1989; and P1,000.00 from July to December 1989.
Duties: Among others, pick up balances for the computation of interests on savings deposit, mortuary,
dividends and patronage funds; prepare cash vouchers; check petty cash vouchers; take charge of the
preparation of new passbooks and ledgers for new applicants; fill up members logbook of regular depositors,
junior depositors and special accounts; take charge of loan releases every Monday morning; assist in the
posting and preparation of deposit slips; receive deposits from members; and perform such other
bookkeeping and accounting duties as may be assigned her from time to time.

Harold D. Catipay — Clerk. Worked with the Cooperative since March 3 to December 29, 1989. Work
schedule: — Monday to Friday — 8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday — 8:00 to 11:30
a.m. and 1:00 to 4:00 p.m.; and one Sunday each month — for at least three (3) hours. Monthly salary:
P900.00 — from March to June 1989; P1,050.00 - from July to December 1989. Duties: Among others,
Bookkeeping, accounting and collecting duties, such as, post daily collections from the two (2) collectors in
the market; reconcile passbooks and ledgers of members in the market; and assist the other clerks in their
duties.

All of them were given a memorandum of termination on January 2, 1990, effective December 29, 1989.

We are not prepared to disregard the findings of both the Labor Arbiter and respondent NLRC, the same
being supported by substantial evidence, that quantum of evidence required in quasi judicial proceedings,
like this one..

Necessarily, this leads us to the issue of whether or not private respondents are regular employees. Article
280 of the Labor Code provides for three kinds of employees: (1) regular employees or those who have
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of
the employer; (2) project employees or those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of the engagement of
the employee or where the work or service to be performed is seasonal in nature and the employment is for
the duration of the season; and (3) casual employees or those who are neither regular nor project
employees. 3 The employees who are deemed regular are: (a) those who have been engaged to perform
activities which are usually necessary or desirable in the usual trade or business of the employer; and (b)
those casual employees who have rendered at least one (1) year of service, whether such service is
continuous or broken, with respect to the activity in which they are employed. 4 Undeniably, private
respondents were rendering services necessary to the day-to-day operations of petitioner PHCCI. This fact
alone qualified them as regular employees. chanrob1es virtua1 1aw 1ibrary

All of them, except Harold D. Catipay, worked with petitioner for more than one (1) year: Benedicto
Faburada, for one and a half (1 1/2) years; Sisinita Vilar, for two (2) years; and Imelda C. Tamayo, for two
(2) years and two (2) months. That Benedicto Faburada worked only on a part-time basis, does not mean
that he is not a regular employee. One’s regularity of employment is not determined by the number of hours
one works but by the nature and by the length of time one has been in that particular job. 5 Petitioner’s
contention that private respondents are mere volunteer workers, not regular employees, must necessarily
fail. Its invocation of San Jose City Electric Cooperative v. Ministry of Labor and Employment (173 SCRA
697, 703 (1989) is misplaced. The issue in this case is whether or not the employees-members of a
cooperative can organize themselves for purposes of collective bargaining, not whether or not the members
can be employees. Petitioner missed the point

As regular employees or workers, private respondents are entitled to security of tenure. Thus, their services
may be terminated only for a valid cause, with observance of due process.
The valid causes are categorized into two groups: the just causes under Articles 282 of the Labor Code and
the authorized causes under Articles 283 and 284 of the same Code. The just causes are: (1) serious
misconduct or willful disobedience of lawful orders in connection with the employee’s work; (2) gross or
habitual neglect of duties; (3) fraud or willful breach of trust; (4) commission of a crime or an offense
against the person of the employer or his immediate family member or representative; and, analogous
cases. The authorized causes are: (1) the installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of operations of the establishment or
undertaking, unless the closing is for the purpose of circumventing the provisions of law. Article 284
provides that an employer would be authorized to terminate the services of an employee found to be
suffering from any disease if the employee’s continued employment is prohibited by law or is prejudicial to
his health or to the health of his fellow employees 6

Private respondents were dismissed not for any of the above causes. They were dismissed because
petitioner considered them to be mere voluntary workers, being its members, and as such work at its
pleasure. Petitioner thus vehemently insists that their dismissal is not against the law.

Procedural due process requires that the employer serve the employees to be dismissed two (2) written
notices before the termination of their employment is effected: (a) the first, to apprise them of the
particular acts or omissions for which their dismissal is sought and (b) the second, to inform them of the
decision of the employer that they are being dismissed. 7 In this case, only one notice was served upon
private respondents by petitioner. It was in the form of a Memorandum signed by the Manager of the
Cooperative dated January 2, 1990 terminating their services effective December 29, 1989. Clearly,
petitioner failed to comply with the twin requisites of a valid notice.

We hold that private respondents have been illegally dismissed.

Petitioner contends that the labor arbiter has no jurisdiction to take cognizance of the complaint of private
respondents considering that they failed to submit their dispute to the grievance machinery as required by
P.D. 175 (strengthening the Cooperative Movement) 8 and its implementing rules and regulations under LOI
23. Likewise, the Cooperative Development Authority did not issue a Certificate of Non-Resolution pursuant
to Section 8 of R.A. 6939 or the Cooperative Development Authority Law.

As aptly stated by the Solicitor General in his comment, P.D. 175 does not provide for a grievance
machinery where a dispute or claim may first be submitted. LOI 23 refers to instructions to the Secretary of
Public Works and Communications to implement immediately the recommendation of the Postmaster
General for the dismissal of some employees of the Bureau of Post. Obviously, this LOI has no relevance to
the instant case.

Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines) provides the procedure how
cooperative disputes are to be resolved, thus: chanrob1es virtual 1aw library

ART. 121. Settlement of Disputes. — Disputes among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in accordance with
the conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in applicable
laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent
jurisdiction." cralaw virtua1aw library

Complementing this Article is Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) which
reads:chanrob1es virtual 1aw library

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

The above provisions apply to members, officers and directors of the cooperative involved in disputes within
a cooperative or between cooperatives.

There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the
dispute is about payment of wages, overtime pay, rest day and termination of employment. Under Art. 217
of the Labor Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.

As illegally dismissed employees, private respondents are therefore entitled to reinstatement without loss of
seniority rights and other privileges and to full backwages, inclusive of allowances, plus other benefits or
their monetary equivalent computed from the time their compensation was withheld from them up to the
time of their actual reinstatement. 9 Since they were dismissed after March 21, 1989, the effectivity date of
R.A. 6715 10 they are granted full backwages, meaning, without deducting from their backwages the
earnings derived by them elsewhere during the period of their illegal dismissal. 11 If reinstatement is no
longer feasible, as when the relationship between petitioner and private respondents has become strained,
payment of their separation pay in lieu of reinstatement is in order. 12
chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the petition is hereby DENIED. The decision of respondent NLRC is AFFIRMED, with
modification in the sense that the backwages due private respondents shall be paid in full, computed from
the time they were illegally dismissed up to the time of the finality of this Decision. 13

SO ORDERED.

FIRST DIVISION

[G.R. No. 124382. August 16, 1999]

PASTOR DIONISIO V. AUSTRIA, Petitioner, v. HON. NATIONAL LABOR

RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL
PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY
ADVENTIST, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE,
OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON
BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PROFIRIO BALACY, DAVID
RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE,
MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO
LOBITANA, Respondents.

DECISION

KAPUNAN, J.:

Subject to the instant petition for certiorari under Rule 65 of the Rules of Court is
the Resolution1 of public respondent National Labor Relations Commission (the
NLRC), rendered on 23 January 1996, in NLRC Case No. V-0120-93, entitled Pastor
Dionisio V. Austria v. Central Philippine Union Mission Corporation of Seventh Day
Adventists, et. al., which dismissed the case for illegal dismissal filed by the
petitioner against private respondents for lack of jurisdiction.
Private Respondent Central Philippine Union Mission Corporation of the Seventh-
Day Adventists (hereinafter referred to as the SDA) is a religious corporation duly
organized and existing under Philippine law and is represented in this case by the
other private respondents, officers of the SDA. Petitioner, on the other hand, was a
Pastor of the SDA until 31 October 1991, when his services were terminated.

The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for
twenty eight (28) years from 1963 to 1991. 2 He began his work with the SDA on 15
July 1963 as a literature evangelist, selling literature of the SDA over the island of
Negros. From then on, petitioner worked his way up the ladder and got promoted
several times. In January, 1968, petitioner became the Assistant Publishing Director
in the West Visayan Mission of the SDA. In July, 1972, he was elevated to the
position of Pastor in the West Visayan Mission covering the island of Panay, and the
provinces of Romblon and Guimaras. Petitioner held the same position up to 1988.
Finally, in 1989, petitioner was promoted as District Pastor of the Negros Mission of
the SDA and was assigned at Sagay, Balintawak and Toboso, Negros Occidental,
with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was
transferred to Bacolod City. He held the position of district pastor until his services
were terminated on 31 October 1991.

On various occasions from August up to October, 1991, petitioner received several

communications3 from Mr. Eufronio Ibesate, the treasurer of the Negros Mission
asking him to admit accountability and responsibility for the church tithes and
offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted
to P15,078.10, and to remit the same to the Negros Mission.

In his written explanation dated 11 October 1991, 4 petitioner reasoned out that he
should not be made accountable for the unremitted collections since it was private
respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife
to collect the tithes and offerings since he was very sick to do the collecting at that
time.

Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office
of Pastor Buhat, the president of the Negros Mission. During said call, petitioner
tried to persuade Pastor Buhat to convene the Executive Committee for the purpose
of settling the dispute between him and the private respondent, Pastor David
Rodrigo. The dispute between Pastor Rodrigo and petitioner arose from an incident
in which petitioner assisted his friend, Danny Diamada, to collect from Pastor
Rodrigo the unpaid balance for the repair of the latters motor vehicle which he
failed to pay to Diamada.5 Due to the assistance of petitioner in collecting Pastor
Rodrigos debt, the latter harbored ill-feelings against petitioner. When news
reached petitioner that Pastor Rodrigo was about to file a complaint against him
with the Negros Mission, he immediately proceeded to the office of Pastor Buhat on
the date abovementioned and asked the latter to convene the Executive
Committee. Pastor Buhat denied the request of petitioner since some committee
members were out of town and there was no quorum. Thereafter, the two
exchanged heated arguments. Petitioner then left the office of Pastor Buhat. While
on his way out, petitioner overheard Pastor Buhat saying, Pastor daw inisog na ina
iya (Pastor you are talking tough).6 Irked by such remark, petitioner returned to the
office of Pastor Buhat, and tried to overturn the latters table, though
unsuccessfully, since it was heavy. Thereafter, petitioner banged the attache case
of Pastor Buhat on the table, scattered the books in his office, and threw the
phone.7 Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio
Montao were around and they pacified both Pastor Buhat and petitioner.

On 17 October 1991, petitioner received a letter 8 inviting him and his wife to attend
the Executive Committee meeting at the Negros Mission Conference Room on 21
October 1991, at nine in the morning. To be discussed in the meeting were the
non-remittance of church collection and the events that transpired on 16 October
1991. A fact-finding committee was created to investigate petitioner. For two (2)
days, from October 21 and 22, the fact-finding committee conducted an
investigation of petitioner. Sensing that the result of the investigation might be
one-sided, petitioner immediately wrote Pastor Rueben Moralde, president of the
SDA and chairman of the fact-finding committee, requesting that certain members
of the fact-finding committee be excluded in the investigation and resolution of the
case.9 Out of the six (6) members requested to inhibit themselves from the
investigation and decision-making, only two (2) were actually excluded, namely:
Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner
received a letter of dismissal 10 citing misappropriation of denominational funds,
willful breach of trust, serious misconduct, gross and habitual neglect of duties, and
commission of an offense against the person of employers duly authorized
representative, as grounds for the termination of his services.

Reacting against the adverse decision of the SDA, petitioner filed a complaint 11on
14 November 1991, before the Labor Arbiter for illegal dismissal against the SDA
and its officers and prayed for reinstatement with backwages and benefits, moral
and exemplary damages and other labor law benefits.

On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of

petitioner, the dispositive portion of which reads thus:

WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION

MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its
officers, respondents herein, are hereby ordered to immediately reinstate
complainant Pastor Dionisio Austria to his former position as Pastor of Brgy.
Taculing, Progreso and Banago, Bacolod City, without loss of seniority and other
rights and backwages in the amount of ONE HUNDRED FIFTEEN THOUSAND EIGHT
HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons.

Respondent CPUMCSDA is further ordered to pay complainant the following:

A. 13th month pay - P21,060.00

B. Allowance - P 4,770.83

C. Service Incentive
Leave Pay - P 3,461.85
D. Moral Damages - P50,000.00

E. Exemplary
Damages - P25,000.00

F. Attorneys Fee - P22,012.27

SO ORDERED.12

The SDA, through its officers, appealed the decision of the Labor Arbiter to the
National Labor Relations Commission, Fourth Division, Cebu City. In a decision,
dated 26 August 1994, the NLRC vacated the findings of the Labor Arbiter. The
decretal portion of the NLRC decision states:

WHEREFORE, the Decision appealed from is hereby VACATED and a new one
ENTERED dismissing this case for want of merit.

SO ORDERED.13

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

July 1995, the NLRC issued a Resolution reversing its original decision. The
dispositive portion of the resolution reads:

WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED
and the decision of the Labor Arbiter dated February 15, 1993 is REINSTATED.

SO ORDERED.14

In view of the reversal of the original decision of the NLRC, the SDA filed a motion
for reconsideration of the above resolution. Notable in the motion for
reconsideration filed by private respondents is their invocation, for the first time on
appeal, that the Labor Arbiter has no jurisdiction over the complaint filed by
petitioner due to the constitutional provision on the separation of church and state
since the case allegedly involved and ecclesiastical affair to which the State cannot
interfere.

The NLRC, without ruling on the merits of the case, reversed itself once again,
sustained the argument posed by private respondents and, accordingly, dismissed
the complaint of petitioner. The dispositive portion of the NLRC resolution dated 23
January 1996, subject of the present petition, is as follows:

WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is
hereby granted. Accordingly, this case is hereby DISMISSED for lack of jurisdiction.

SO ORDERED.15

Hence, the recourse to this Court by petitioner.

After the filing of the petition, the Court ordered the Office of the Solicitor General
(the OSG) to file its comment on behalf of public respondent NLRC. Interestingly,
the OSG filed a manifestation and motion in lieu of comment 16setting forth its stand
that it cannot sustain the resolution of the NLRC. In its manifestation, the OSG
submits that the termination of petitioner of his employment may be questioned
before the NLRC as the same is secular in nature, not ecclesiastical. After the
submission of memoranda of all the parties, the case was submitted for decision.

The issues to be resolved in this petition are:

1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the
complaint filed by petitioner against the SDA;

2) Whether or not the termination of the services of petitioner is an ecclesiastical

affair, and, as such, involves the separation of church and state; and

3) Whether or not such termination is valid.

The first two issues shall be resolved jointly, since they are related.

Private respondents contend that by virtue of the doctrine of separation of church

and state, the Labor Arbiter and the NLRC have no jurisdiction to entertain the
complaint filed by petitioner. Since the matter at bar allegedly involves the
discipline of a religious minister, it is to be considered a purely ecclesiastical affair
to which the State has no right to interfere.

The contention of private respondents deserves scant consideration. The principle of

separation of church and state finds no application in this case.

The rationale of the principle of the separation of church and state is summed up in
the familiar saying, Strong fences make good neighbors. 17 The idea advocated by
this principle is to delineate the boundaries between the two institutions and thus
avoid encroachments by one against the other because of a misunderstanding of
the limits of their respective exclusive jurisdictions. 18The demarcation line calls on
the entities to render therefore unto Ceasar the things that are Ceasars and unto
God the things that are Gods.19 While the State is prohibited from interfering in
purely ecclesiastical affairs, the Church is likewise barred from meddling in purely
secular matters.20cräläwvirtualibräry

The case at bar does not concern an ecclesiastical or purely religious affair as to bar
the State from taking cognizance of the same. An ecclesiastical affair is one that
concerns doctrine, creed, or form or worship of the church, or the adoption and
enforcement within a religious association of needful laws and regulations for the
government of the membership, and the power of excluding from such associations
those deemed unworthy of membership. 21 Based on this definition, an ecclesiastical
affair involves the relationship between the church and its members and relate to
matters of faith, religious doctrines, worship and governance of the congregation.
To be concrete, examples of this so-called ecclesiastical affairs to which the State
cannot meddle are proceedings for excommunication, ordinations of religious
ministers, administration of sacraments and other activities with which attached
religious significance. The case at bar does not even remotely concern any of the
abovecited examples. While the matter at hand relates to the church and its
religious minister it does not ipso facto give the case a religious significance. Simply
stated, what is involved here is the relationship of the church as an employer and
the minister as an employee. It is purely secular and has no relation whatsoever
with the practice of faith, worship or doctrines of the church. In this case, petitioner
was not excommunicated or expelled from the membership of the SDA but was
terminated from employment. Indeed, the matter of terminating an employee,
which is purely secular in nature, is different from the ecclesiastical act of expelling
a member from the religious congregation.

As pointed out by the OSG in its memorandum, the grounds invoked for petitioners
dismissal, namely: misappropriation of denominational funds, willful breach of trust,
serious misconduct, gross and habitual neglect of duties and commission of an
offense against the person of his employers duly authorize representative, are all
based on Article 282 of the Labor Code which enumerates the just causes for
termination of employment.22 By this alone, it is palpable that the reason for
petitioners dismissal from the service is not religious in nature. Coupled with this is
the act of the SDA in furnishing NLRC with a copy of petitioners letter of
termination. As aptly stated by the OSG, this again is an eloquent admission by
private respondents that NLRC has jurisdiction over the case. Aside from these,
SDA admitted in a certification23issued by its officer, Mr. Ibesate, that petitioner has
been its employee for twenty-eight (28) years. SDA even registered petitioner with
the Social Security System (SSS) as its employee. As a matter of fact, the workers
records of petitioner have been submitted by private respondents as part of their
exhibits. From all of these it is clear that when the SDA terminated the services of
petitioner, it was merely exercising its management prerogative to fire an employee
which it believes to be unfit for the job. As such, the State, through the Labor
Arbiter and the NLRC, has the right to take cognizance of the case and to determine
whether the SDA, as employer, rightfully exercised its management prerogative to
dismiss an employee. This is in consonance with the mandate of the Constitution to
afford full protection to labor.

Under the Labor Code, the provision which governs the dismissal of employees, is
comprehensive enough to include religious corporations, such as the SDA, in its
coverage. Article 278 of the Labor Code on post-employment states that the
provisions of this Title shall apply to all establishments or undertakings, whether for
profit or not. Obviously, the cited article does not make any exception in favor of a
religious corporation. This is made more evident by the fact that the Rules
Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the
Termination of Employment and Retirement, categorically includes religious
institutions in the coverage of the law, to wit:

Section 1. Coverage. This Rule shall apply to all establishments and undertakings,
whether operated for profit or not, including educational, medical, charitable and
religious institutions and organizations, in cases of regular employment with
the exception of the Government and its political subdivisions including
government-owned or controlled corporations.24
With this clear mandate, the SDA cannot hide behind the mantle of protection of
the doctrine of separation of church and state to avoid its responsibilities as an
employer under the Labor Code.

Finally, as correctly pointed out by petitioner, private respondents are estopped

from raising the issue of lack of jurisdiction for the first time on appeal. It is already
too late in the day for private respondents to question the jurisdiction of the NLRC
and the Labor Arbiter since the SDA had fully participated in the trials and hearings
of the case from start to finish. The Court has already ruled that the active
participation of a party against whom the action was brought, coupled with his
failure to object to the jurisdiction of the court or quasi-judicial body where the
action is pending, is tantamount to an invocation of that jurisdiction and a
willingness to abide by the resolution of the case and will bar said party from later
on impugning the court or bodys jurisdiction. 25Thus, the active participation of
private respondents in the proceedings before the Labor Arbiter and the NLRC
mooted the question on jurisdiction.

The jurisdictional question now settled, we shall now proceed to determine whether
the dismissal of petitioner was valid.

At the outset, we note that as a general rule, findings of fact of administrative

bodies like the NLRC are binding upon this Court. A review of such findings is
justified, however, in instances when the findings of the NLRC differ from those of
the labor arbiter, as in this case. 26 When the findings of NLRC do not agree with
those of the Labor Arbiter, this Court must of necessity review the records to
determine which findings should be preferred as more comformable to the
evidentiary facts.27
cräläwvirtualibräry

We turn now to the crux of the matter. In termination cases, the settled rule is that
the burden of proving that the termination was for a valid or authorized cause rests
on the employer.28 Thus, private respondents must not merely rely on the
weaknesses of petitioners evidence but must stand on the merits of their own
defense.

The issue being the legality of petitioners dismissal, the same must be measured
against the requisites for a valid dismissal, namely: (a) the employee must be
afforded due process, i.e., he must be given an opportunity to be heard and to
defend himself, and; (b) the dismissal must be for a valid cause as provided in
Article 282 of the Labor Code. 29 Without the concurrence of this twin requirements,
the termination would, in the eyes of the law, be illegal.30 cräläwvirtualibräry

Before the services of an employee can be validly terminated, Article 277 (b) of the
Labor Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor
Code further require the employer to furnish the employee with two (2) written
notices, to wit: (a) a written notice served on the employee specifying the ground
or grounds for termination, and giving to said employee reasonable opportunity
within which to explain his side; and, (b) a written notice of termination served on
the employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise
the employee of the particular acts or omissions for which his dismissal is sought. 31
The second notice on the other hand seeks to inform the employee of the
employers decision to dismiss him.32 This decision, however, must come only after
the employee is given a reasonable period from receipt of the first notice within
which to answer the charge and ample opportunity to be heard and defend himself
with the assistance of a representative, if he so desires. 33This is in consonance with
the express provision of the law on the protection to labor and the broader dictates
of procedural due process.34 Non-compliance therewith is fatal because these
requirements are conditions sine quo nonbefore dismissal may be validly
effected.35
cräläwvirtualibräry

Private respondent failed to substantially comply with the above requirements. With
regard to the first notice, the letter, 36 dated 17 October 1991, which notified
petitioner and his wife to attend the meeting on 21 October 1991, cannot be
construed as the written charge required by law. A perusal of the said letter reveals
that it never categorically stated the particular acts or omissions on which
petitioners impending termination was grounded. In fact, the letter never even
mentioned that petitioner would be subject to investigation. The letter merely
mentioned that petitioner and his wife were invited to a meeting wherein what
would be discussed were the alleged unremitted church tithes and the events that
transpired on 16 October 1991. Thus, petitioner was surprised to find out that the
alleged meeting turned out to be an investigation. From the tenor of the letter, it
cannot be presumed that petitioner was actually on the verge of dismissal. The
alleged grounds for the dismissal of petitioner from the service were only revealed
to him when the actual letter of dismissal was finally issued. For this reason, it
cannot be said that petitioner was given enough opportunity to properly prepare for
his defense. While admittedly, private respondents complied with the second
requirement, the notice of termination, this does not cure the initial defect of lack of
the proper written charge required by law.

In the letter of termination,37 dated 29 October 1991, private respondents

enumerated the following as grounds for the dismissal of petitioner, namely:
misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an offense
against the person of employers duly authorized representative. Breach of trust and
misappropriation of denominational funds refer to the alleged failure of petitioner to
remit to the treasurer of the Negros Mission tithes, collections and offerings
amounting to P15,078.10 which were collected by his wife, Mrs. Thelma Austria, in
the churches under his jurisdiction. On the other hand, serious misconduct and
commission of an offense against the person of the employers duly authorized
representative pertain to the 16 October 1991 incident wherein petitioner allegedly
committed an act of violence in the office of Pastor Gideon Buhat. The final ground
invoked by private respondents is gross and habitual neglect of duties allegedly
committed by petitioner.

We cannot sustain the validity of dismissal based on the ground of breach of trust.
Private respondents allege that they have lost their confidence in petitioner for his
failure, despite demands, to remit the tithes and offerings amounting to
P15,078.10, which were collected in his district. A careful study of the voluminous
records of the case reveals that there is simply no basis for the alleged loss of
confidence and breach of trust. Settled is the rule that under Article 282 (c) of the
Labor Code, the breach of trust must be willful. A breach is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently. 38 It must
rest on substantial grounds and not on the employers arbitrariness, whims, caprices
or suspicion; otherwise, the employee would eternally remain at the mercy of the
employer.39 It should be genuine and not simulated. 40 This ground has never been
intended to afford an occasion for abuse, because of its subjective nature. The
records show that there were only six (6) instances when petitioner personally
collected and received from the church treasurers the tithes, collections, and
donations for the church.41 The stenographic notes on the testimony of Naomi
Geniebla, the Negros Mission Church Auditor and a witness for private respondents,
show that Pastor Austria was able to remit all his collections to the treasurer of the
Negros Mission.42cräläwvirtualibräry

Though private respondents were able to establish that petitioner collected and
received tithes and donations several times, they were not able to establish that
petitioner failed to remit the same to the Negros Mission, and that he pocketed the
amount and used it for his personal purpose. In fact, as admitted by their own
witness, Naomi Geniebla, petitioner remitted the amounts which he collected to the
Negros Mission for which corresponding receipts were issued to him. Thus, the
allegations of private respondents that petitioner breached their trust have no leg
to stand on.

In a vain attempt to support their claim of breach of trust, private respondents try
to pin on petitioner the alleged non-remittance of the tithes collected by his wife.
This argument deserves little consideration. First of all, as proven by convincing and
substantial evidence consisting of the testimonies of the witnesses for private
respondents who are church treasurers, it was Mrs. Thelma Austria who actually
collected the tithes and donations from them, and, who failed to remit the same to
the treasurer of the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA.
Hence, in the absence of conspiracy and collusion, which private respondents failed
to demonstrate, between petitioner and his wife, petitioner cannot be made
accountable for the alleged infraction committed by his wife. After all, they still
have separate and distinct personalities. For this reason, the Labor Arbiter found it
difficult to see the basis for the alleged loss of confidence and breach of trust. The
Court does not find any cogent reason, therefore, to digress from the findings of
the Labor Arbiter which is fully supported by the evidence on record.

With respect to the grounds of serious misconduct and commission of an offense

against the person of the employers duly authorized representative, we find the
same unmeritorious and, as such, do not warrant petitioners dismissal from the
service.
Misconduct has been defined as improper or wrong conduct. It is the transgression
of some established and definite rule of action, a forbidden act, a dereliction of
duty, willful in character, and implies wrongful intent and not mere error in
judgment.43 For misconduct to be considered serious it must be of such grave and
aggravated character and not merely trivial or unimportant. 44 Based on this
standard, we believe that the act of petitioner in banging the attache case on the
table, throwing the telephone and scattering the books in the office of Pastor Buhat,
although improper, cannot be considered as grave enough to be considered as
serious misconduct. After all, as correctly observed by the Labor Arbiter, though
petitioner committed damage to property, he did not physically assault Pastor
Buhat or any other pastor present during the incident of 16 October 1991. In fact,
the alleged offense committed upon the person of the employers representatives
was never really established or proven by private respondents. Hence, there is no
basis for the allegation that petitioners act constituted serious misconduct or that
the same was an offense against the person of the employers duly authorized
representative. As such, the cited actuation of petitioner does not justify the
ultimate penalty of dismissal from employment. While the Constitution does not
condone wrongdoing by the employee, it nevertheless urges a moderation of the
sanctions that may be applied to him in light of the many disadvantages that weigh
heavily on him like an albatross on his neck. 45Where a penalty less punitive would
suffice, whatever missteps may have been committed by the worker ought not be
visited with a consequence so severe such as dismissal from employment. 46 For the
foregoing reasons, we believe that the minor infraction committed by petitioner
does not merit the ultimate penalty of dismissal.

The final ground alleged by private respondents in terminating petitioner, gross and
habitual neglect of duties, does not requires an exhaustive discussion. Suffice it to
say that all private respondents had were allegations but not proof. Aside from
merely citing the said ground, private respondents failed to prove culpability on the
part of petitioner. In fact, the evidence on record shows otherwise. Petitioners rise
from the ranks disclose that he was actually a hard-worker. Private respondents
evidence,47 which consisted of petitioners Workers Reports, revealed how petitioner
travelled to different churches to attend to the faithful under his care. Indeed, he
labored hard for the SDA, but, in return, he was rewarded with a dismissal from the
service for a non-existent cause.

In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner
was terminated from service without just or lawful cause. Having been illegally
dismissed, petitioner is entitled to reinstatement to his former position without loss
of seniority right48 and the payment of full backwages without any deduction
corresponding to the period from his illegal dismissal up to actual reinstatement. 49
cräläwvirtualibräry

WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of

public respondent National Labor Relations Commission, rendered on 23 January
1996, is NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15
February 1993, is reinstated and hereby AFFIRMED.

SO ORDERED.
G.R. No. 113191 September 18, 1996

DEPARTMENT OF FOREIGN AFFAIRS, petitioner,

vs.

NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER NIEVES V. DE CASTRO

and JOSE C. MAGNAYI, respondents.

VITUG, J.:

The questions raised in the petition for certiorari are a few coincidental matters relative to the
diplomatic immunity extended to the Asian Development Bank ("ADB").

On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-0690-93 for his
alleged illegal dismissal by ADB and the latter's violation of the "labor-only" contracting law. Two
summonses were served, one sent directly to the ADB and the other through the Department of
Foreign Affairs ("DFA"), both with a copy of the complaint. Forthwith, the ADB and the DFA notified
respondent Labor Arbiter that the ADB, as well as its President and Office, were covered by an
immunity from legal process except for borrowings, guaranties or the sale of securities pursuant to
Article 50(1) and Article 55 of the Agreement Establishing the Asian Development Bank (the
"Charter") in relation to Section 5 and Section 44 of the Agreement Between The Bank And The
Government Of The Philippines Regarding The Bank's Headquarters (the "Headquarters
Agreement").

The Labor Arbiter took cognizance of the complaint on the impression that the ADB had waived its
diplomatic immunity from suit. In time, the Labor Arbiter rendered his decision, dated 31 August
1993, that concluded:

WHEREFORE, above premises considered, judgment is hereby rendered declaring the complainant
as a regular employee of respondent ADB, and the termination of his services as illegal. Accordingly,
respondent Bank is hereby ordered:

1. To immediately reinstate the complainant to his former position effective September 16, 1993;

2. To pay complainant full backwages from December 1, 1992 to September 15, 1993 in the amount
of P42,750.00 (P4,500.00 x 9 months);

3. And to pay complainants other benefits and without loss of seniority rights and other privileges
and benefits due a regular employee of Asian Development Bank from the time he was terminated
on December 31, 1992;

1
4. To pay 10% attorney's fees of the total entitlements.

The ADB did not appeal the decision. Instead, on 03 November 1993, the DFA referred the matter to
the National Labor Relations Commission ("NLRC"); in its referral, the DFA sought a "formal vacation
of the void judgment." Replying to the letter, the NLRC Chairman. wrote:

The undersigned submits that the request for the "investigation" of Labor Arbiter Nieves de Castro,
by the National Labor Relations Commission, has been erroneously premised on Art. 218(c) of the
Labor Code, as cited in the letter of Secretary Padilla, considering that the provision deals with "a
question, matter or controversy within its (the Commission) jurisdiction" obviously referring to a labor
disputewithin the ambit of Art. 217 (on jurisdiction of Labor Arbiters and the Commission over labor
cases).

The procedure, in the adjudication of labor cases, including raising of defenses, is prescribed by law.
The defense of immunity could have been raised before the Labor Arbiter by a special appearance
which, naturally, may not be considered as a waiver of the very defense being raised. Any decision
thereafter is subject to legal remedies, including appeals to the appropriate division of the
Commission and/or a petition for certiorari with the Supreme Court, under Rule 65 of the Rules of
Court. Except where an appeal is seasonably and properly made, neither the Commission nor the
undersigned may review, or even question, the property of any decision by a Labor Arbiter.
Incidentally, the Commission sits en banc (all fifteen Commissioners) only to promulgate rules of
procedure, or to formulate policies (Art. 213, Labor Code).

On the other hand, while the undersigned exercises "administrative supervision over the
Commission and its regional branches and all its personnel, including the Executive Labor Arbiters
and Labor Arbiters" (penultimate paragraph, Art. 213, Labor Code), he does not have the
competence to investigate or review any decision of a Labor Arbiter. However, on the purely
administrative aspect of the decision-making process, he may cause that an misconduct,
malfeasance or misfeasance, upon complaint properly made.

If the Department of Foreign Affairs feels that the action of Labor Arbiter Nieves de Castro
constitutes misconduct, malfeasance or misfeasance, it is suggested that an appropriate complaint
be lodged with the Office of the Ombudsman.

2
Thank you for kind attention.

Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's resolution of 31 January
1994, respondents were required to comment. Petitioner was later constrained to make an
application for a restraining order and/or writ of preliminary injunction following the issuance, on 16
March 199, by the Labor Arbiter of a writ of execution. In a resolution, dated 07 April 1994, the Court
issued the temporary restraining order prayed for.

The Office of the Solicitor General ("OSG"), in its comment of 26 May 1994, initially assailed the
claim of immunity by the ADB. Subsequently, however, it submitted a Manifestation (dated 20 June
1994) stating, among other things, that "after a thorough review of the case and the records," it
became convinced that ADB, indeed, was correct in invoking its immunity from suit under the
Charter and the Headquarters Agreement.

The Court is of the same view.

Article 50(1) of the Charter provides:

The Bank shall enjoy immunity from every form of legal process, except in cases arising out of or in
connection with the exercise of its powers to borrow money, to guarantee obligations, or to buy and
3
sell or underwrite the sale of securities.

Under Article 55 thereof —

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

Like provisions are found in the Headquarters Agreement. Thus, its Section 5 reads:

The Bank shall enjoy immunity from every form of legal process, except in cases arising out of, or in
connection with, the exercise of its powers to borrow money, to guarantee obligations, or to buy and
5
sell or underwrite the sale of securities.

And, with respect to certain officials of the bank, Section 44 of the agreement states:

Governors, other representatives of Members, Directors, the president, Vice-President and executive
officers as may be agreed upon between the Government and the Bank shall enjoy, during their stay
in the Republic of the Philippines in connection with their official duties with the Bank:

xxx xxx xxx

(b) Immunity from legal process of every kind in respect of words spoken or written and all acts done
by them in their official

6
capacity.

The above stipulations of both the Charter and Headquarters Agreement should be able, may well
enough, to establish that, except in the specified cases of borrowing and guarantee operations, as
well as the purchase, sale and underwriting of securities, the ADB enjoys immunity from legal
process of every form. The Bank's officers, on their part, enjoy immunity in respect of all acts
performed by them in their official capacity. The Charter and the Headquarters Agreement granting
these immunities and privileges are treaty covenants and commitments voluntarily assumed by the
Philippines government which must be respected.

7
In World Health Organization vs. Aquino. we have declared:

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

8
jurisdiction."

9
To the same effect is the decision in International Catholic Migration Commission vs. Calleja,
which has similarly deemed the Memoranda of the Legal Adviser of the Department of Foreign
Affairs to be "a categorical recognition by the Executive Branch of Government that ICMC . . .
enjoy(s) immunities accorded to international organizations" and which determination must be held
"conclusive upon the Courts in order not to embarrass a political department of Government." In the
instant case, the filing of the petition by the DFA, in behalf of ADB, is itself an affirmance of the
government's own recognition of ADB's immunity.

Being an international organization that has been extended diplomatic status, the ADB is
10
independent of the municipal law. In Southeast Asian Fisheries Development Center vs. Acosta.
11 12
The Court has cited with approval the opinion of the Minister of justice; thus —

One of the basic immunities of an international organization is immunity from local jurisdiction, i.e.,
that it is immune from the legal writs and processes issued by the tribunals of the country where it is
found. (See Jenks, Id., pp. 37-44). The obvious reason for this is that the subjection of such an
organization to the authority of the local courts would afford a convenient medium thru which the
host government may interfere in their operations or even influence or control its policies and
decisions of the organization; besides, such subjection to local jurisdiction would impair the capacity
13
of such body to discharge its responsibilities impartially behalf of its member-states.

Contrary to private respondent's assertion, the claim of immunity is not here being raised for the first
time, it has been invoked before the forum of origin through communications sent by petitioner and
the ADB to the Labor Arbiter, as well as before the NLRC following the rendition of the questioned
judgment by the Labor Arbiter, but evidently to no avail.

In its communication of 27 May 1993, the DFA, through the Office of legal Affairs, has advised the
NLRC:

Respectfully returned to the Honorable Domingo B. Mabazza, Labor Arbitration Associate

Commission, National Labor Relations Commission, National Capital Judicial Region, Arbitration
Branch, Associated Bank Bldg., T.M. Kalaw St., Ermita, Manila, the attached Notice of Hearing
addressed to the Asian Development Bank, in connection with the aforestated case, for the reason
stated in the Department's 1st Indoresment dated 23 March 1993, copy attached, which is self-
explanatory.

In view of the fact that the Asian Development Bank (ADB) invokes its immunity which is sustained
by the Department of Foreign Affairs, a continuos hearing of this case erodes the credibility of the
Philippine government before the international community, let alone the negative implication of such
a suit on the official relationship of the Philippine government with the ADB.

For the Secretary of Foreign Affairs

(Sgd.) SIME D. HIDALGO

14
Assistant Secretary

The Office of the President, likewise, has issued on 18 May 1993 a letter to the Secretary of Labor,
viz

Dear Secretary Confesor,

I am writing to draw your attention to a case filed by a certain Jose C. Magnayi against the Asian
Development Bank and its President, Kimmasa Tarumizu, before the National Labor Relations
Commission, National Capital Region Arbitration Board (NLRC NCR Case No. 00-01690-93).
Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de Castro, addressed a Notice
of Resolution/Order to the Bank which brought it to the attention of the Department of Foreign Affairs
on the ground that the service of such notice was in violation of the RP-ADB Headquarters
Agreement which provided, inter alia, for the immunity of the Bank, its President and officers from
every form of legal process, except only, in cases of borrowings, guarantees or the sale of securities.

The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V. de Castro of this fact by
letter dated March 22, copied to you.

Despite this, the labor arbiter in question persited to send summons, the latest dated May 4,
herewith attached, regarding the Magnayi case.

The Supreme Court has long settled the matter of diplomatic immunities. In WHO vs. Aquino, SCRA
48, it ruled that courts should respect diplomatic immunities of foreign officials recognized by the
Supreme Court forms part of the law of the land.

Perhaps you should point out to Labor Arbiter Nieves V. de Castro that ignorance of the law is a
ground for dismissal.

Very truly yours,

(Sgd.) JOSE B. ALEJANDRINO

15
Chairman, PCC-ADB

Private respondent argues that, by centering into service contracts with different private companies,
ADB has descended to the level of an ordinary party to a commercial transaction giving rise to a
16
waiver of its immunity from suit. In the case of Holy See vs. Hon. Rosario, Jr., the Court has held:

There are two conflicting concept of sovereign immunity, each widely held and firmly established.
According to the classical or absolute theory, a sovereign cannot, without its consent, be made a
respondent in the Courts of another sovereign. According to the newer or restrictive theory, the
immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state,
but not with regard to private act or acts jure gestionis.

xxx xxx xxx

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the
foreign state is engaged in the activity in regular course of business. If the foreign state is not
engaged regularly in a business or trade, the particular act or transaction must then be tested by its
nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure
17
imperit, especially when it is not undertaken for gain or profit.

The service contracts referred to by private respondent have not been intended by the ADB for profit
or gain but are official acts over which a waiver of immunity would not attack.

With regard to the issue of whether or not the DFA has the legal standing to file the present petition,
and whether or not petitioner has regarded the basic rule that certiorari can be availed of only when
there is no appeal nor plain, speedy and adequate remedy in the ordinary course of law, we hold
both in the affirmative.
The DFA's function includes, among its other mandates, the determination of persons and
institutions covered by diplomatic immunities, a determination which, when challenge, entitles it to
seek relief from the court so ass not to seriously impair the conduct of the country's foreign relations.
The DFA must be allowed to plead its case whenever necessary or advisable to enable it to help
keep the credibility of the Philippine government before the international community. When
international agreements are concluded, the parties therto are deemed to have likewise accepted
the responsibility of seeing to it that their agreements are duly regarded. In our country, this task falls
principally of the DFA as being the highest executive department with the competence and authority
18 19
to so act in this aspect of the international arena. In Holy See vs. Hon. Rosario, Jr., this Court
has explained the matter in good datail; viz:

In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to
convey to the court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state
or the international organization sued in an American court requests the Secretary of State to make
a determination as to whether it is entitled to immunity. If the Secretary of State finds that the
defendant is immune from suit, he, in turn, asks the attorney General to submit to the court a
"suggestion" that the defendant is entitled to immunity. In England, a similar procedure is followed,
only the Foreign Office issues a certification to the effect instead of submitting a "suggestion"
(O'Connell, In International Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign
Instrumentalities and Obligations 50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization to first
secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic
Migration Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a
letter directly to the Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization
vs. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to
that effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign
Affairs to request the Solicitor General to make, in behalf of the Commander of the United States
Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General
embodied the "suggestion" in a manifestation and memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved
with this Court to be allowed to intervene on the side of petitioner. The Court allowed the said
Department to file its memorandum in support of petitioner's claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts by the
respondents through their private counsels (Raquiza vs. Bradford, 75 Phil. 50 [1945]; Miquiabas vs.
Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America vs. Guinto, 182 SCRA
644 [1990] and companion cases). In cases where the foreign states bypass the Foreign Office, the
courts can in quire into the facts and make their own determination as to the nature of the acts and
20
transactions involved.

Relative to the property of the extraordinary remedy of certiorari, the Court has, under special
circumstances, so allowed and entertained such a petition when (a) the questioned order or decision
21
is issued in excess of or without jurisdiction, or (b) where the order or decision is a patent nullity,
22
which, verily, are the circumstances that can be said to obtain in the present case. When an
adjudicator is devoid of jurisdiction on a matter before him, his action that assumes otherwise would
be a clear nullity.

WHEREFORE, the petition for certiorari is GRANTED, and the decision of the Labor Arbiter, dated
31 August 1993 is VACATED, for being NULL AND VOID. The temporary restraining order issued by
this Court on 07 April 1994 is hereby made permanent. No costs.

G.R. No. 157010 June 21, 2005

PHILIPPINE NATIONAL BANK, petitioner,

vs.

FLORENCE O. CABANSAG, respondent.

DECISION

PANGANIBAN, J.:

The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas,
enjoy the protective mantle of Philippine labor and social legislations. Our labor statutes may not be
rendered ineffective by laws or judgments promulgated, or stipulations agreed upon, in a foreign
country.

The Case

1
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to
2 3
reverse and set aside the July 16, 2002 Decision and the January 29, 2003 Resolution of the
Court of Appeals (CA) in CA-GR SP No. 68403. The assailed Decision dismissed the CA Petition
(filed by herein petitioner), which had sought to reverse the National Labor Relations Commission
4
(NLRC)’s June 29, 2001 Resolution, affirming Labor Arbiter Joel S. Lustria’s January 18, 2000
5
Decision.

The assailed CA Resolution denied herein petitioner’s Motion for Reconsideration.

The Facts

The facts are narrated by the Court of Appeals as follows:

"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied
for employment, with the Singapore Branch of the Philippine National Bank, a private banking
corporation organized and existing under the laws of the Philippines, with principal offices at the PNB
Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under the
helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of Vice-President of the Bank.
At the time, too, the Branch Office had two (2) types of employees: (a) expatriates or the regular
employees, hired in Manila and assigned abroad including Singapore, and (b) locally (direct) hired.
She applied for employment as Branch Credit Officer, at a total monthly package of $SG4,500.00,
effective upon assumption of duties after approval. Ruben C. Tobias found her eminently qualified
and wrote on October 26, 1998, a letter to the President of the Bank in Manila, recommending the
appointment of Florence O. Cabansag, for the position.
xxxxxxxxx

"The President of the Bank was impressed with the credentials of Florence O. Cabansag that he
approved the recommendation of Ruben C. Tobias. She then filed an ‘Application,’ with the Ministry
of Manpower of the Government of Singapore, for the issuance of an ‘Employment Pass’ as an
employee of the Singapore PNB Branch. Her application was approved for a period of two (2) years.

"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a
temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month
and, upon her successful completion of her probation to be determined solely, by the Bank, she may
be extended at the discretion of the Bank, a permanent appointment and that her temporary
appointment was subject to the following terms and conditions:

‘1. You will be on probation for a period of three (3) consecutive months from the date of your
assumption of duty.

‘2. You will observe the Bank’s rules and regulations and those that may be adopted from time to
time.

‘3. You will keep in strictest confidence all matters related to transactions between the Bank and its
clients.

‘4. You will devote your full time during business hours in promoting the business and interest of the
Bank.

‘5. You will not, without prior written consent of the Bank, be employed in anyway for any purpose
whatsoever outside business hours by any person, firm or company.

‘6. Termination of your employment with the Bank may be made by either party after notice of one (1)
day in writing during probation, one month notice upon confirmation or the equivalent of one (1)
day’s or month’s salary in lieu of notice.’

"Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine
Embassy in Singapore processed the employment contract of Florence O. Cabansag and, on March
8, 1999, she was issued by the Philippine Overseas Employment Administration, an ‘Overseas
Employment Certificate,’ certifying that she was a bona fide contract worker for Singapore.

xxxxxxxxx

"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9,
1999, her initial ‘Performance Report.’ Ruben C. Tobias was so impressed with the ‘Report’ that he
made a notation and, on said ‘Report’: ‘GOOD WORK.’ However, in the evening of April 14, 1999,
while Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the Assistant Vice-
President and Deputy General Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of
the said Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to tell
Florence O. Cabansag to resign from her job. Florence O. Cabansag was perplexed at the sudden
turn of events and the runabout way Ruben C. Tobias procured her resignation from the Bank. The
next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and
Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a ‘cost-cutting measure’ of
the Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch will
be sold or transformed into a remittance office and that, in either way, Florence O. Cabansag had to
resign from her employment. The more Florence O. Cabansag was perplexed. She then asked
Ruben C. Tobias that she be furnished with a ‘Formal Advice’ from the PNB Head Office in Manila.
However, Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit any letter of
resignation.

"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and
demanded that she submit her letter of resignation, with the pretext that he needed a Chinese-
speaking Credit Officer to penetrate the local market, with the information that a Chinese-speaking
Credit Officer had already been hired and will be reporting for work soon. She was warned that,
unless she submitted her letter of resignation, her employment record will be blemished with the
notation ‘DISMISSED’ spread thereon. Without giving any definitive answer, Florence O. Cabansag
asked Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. Tobias told
her that she should be ‘out’ of her employment by May 15, 1999.

"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and
adamantly ordered her to submit her letter of resignation. She refused. On April 20, 1999, she
received a letter from Ruben C. Tobias terminating her employment with the Bank.

xxxxxxxxx

"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against
the Respondents, the decretal portion of which reads as follows:

‘WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding

respondents guilty of Illegal dismissal and devoid of due process, and are hereby ordered:

1. To reinstate complainant to her former or substantially equivalent position without loss of seniority
rights, benefits and privileges;

2. Solidarily liable to pay complainant as follows:

a) To pay complainant her backwages from 16 April 1999 up to her actual reinstatement. Her
backwages as of the date of the promulgation of this decision amounted to SGD 40,500.00 or its
equivalent in Philippine Currency at the time of payment;

b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine Currency at the time
of payment;

c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in Philippine
Currency at the time of payment;

d) Monetary equivalent of leave credits earned on Sunday banking in the amount of SGD 1,557.67
or its equivalent in Philippine Currency at the time of payment;

e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60 or its
equivalent in Philippine Currency at the time of payment.

f) Monetary equivalent of unused vacation leave benefits in the amount of SGD 319.85 or its
equivalent in Philippine Currency at the time of payment.

g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine Currency at the time
of payment;

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

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

PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution dated June 29, 2001, the
Commission affirmed that Decision, but reduced the moral damages to ₱100,000 and the exemplary
damages to ₱50,000. In a subsequent Resolution, the NLRC denied PNB’s Motion for
Reconsideration.

Ruling of the Court of Appeals

In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in
evidence the Singaporean law supposedly governing the latter’s employment Contract with
respondent. The appellate court found that the Contract had actually been processed by the
Philippine Embassy in Singapore and approved by the Philippine Overseas Employment
Administration (POEA), which then used that Contract as a basis for issuing an Overseas
Employment Certificate in favor of respondent.

According to the CA, even though respondent secured an employment pass from the Singapore
Ministry of Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the
labor arbiter or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit
herself solely to the Ministry of Manpower of Singapore’s jurisdiction over disputes arising from her
employment. The appellate court further noted that a cursory reading of the Ministry’s letter will
readily show that no such waiver or submission is stated or implied.

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

7
Hence, this Petition.

Issues

Petitioner submits the following issues for our consideration:

"1. Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction
over the instant controversy;

"2. Whether or not the arbitration of the NLRC in the National Capital Region is the most convenient
venue or forum to hear and decide the instant controversy; and

"3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover moral
8
and exemplary damages and attorney’s fees."

9
In addition, respondent assails, in her Comment, the propriety of Rule 45 as the procedural mode
for seeking a review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant
consideration. Respondent miscomprehends the Court’s discourse in St. Martin Funeral Home v.
10
NLRC, which has indeed affirmed that the proper mode of review of NLRC decisions, resolutions
or orders is by a special civil action for certiorari under Rule 65 of the Rules of Court. The Supreme
Court and the Court of Appeals have concurrent original jurisdiction over such petitions for certiorari.
Thus, in observance of the doctrine on the hierarchy of courts, these petitions should be initially filed
11
with the CA.

Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for Certiorari. In
seeking a review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity of
12
employment termination -- petitioner is likewise correct in invoking Rule 45.

It is true, however, that in a petition for review on certiorari, the scope of the Supreme Court’s judicial
review of decisions of the Court of Appeals is generally confined only to errors of law. It does not
extend to questions of fact. This doctrine applies with greater force in labor cases. Factual questions
13
are for the labor tribunals to resolve. In the present case, the labor arbiter and the NLRC have
already determined the factual issues. Their findings, which are supported by substantial evidence,
were affirmed by the CA. Thus, they are entitled to great respect and are rendered conclusive upon
14
this Court, absent a clear showing of palpable error or arbitrary disregard of evidence.

The Court’s Ruling

The Petition has no merit.

First Issue:

Jurisdiction

The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as
follows:

"ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided
under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage,
rates of pay, hours of work and other terms and conditions of employment

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount of exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.

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

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

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

x x x x x x x x x"

Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination disputes involving all
15
workers, among whom are overseas Filipino workers (OFW).

We are not unmindful of the fact that respondent was directly hired, while on a tourist status in
Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner had to
obtain an employment pass for her from the Singapore Ministry of Manpower. Securing the pass was
16
a regulatory requirement pursuant to the immigration regulations of that country.

Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a
local work permit in order to be legally employed here. That permit, however, does not automatically
mean that the non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at
all imply a waiver of one’s national laws on labor. Absent any clear and convincing evidence to the
contrary, such permit simply means that its holder has a legal status as a worker in the issuing
country. 1avvphil.zw+

Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment
Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on
March 8, 1999, declared her a bona fide contract worker for Singapore. Under Philippine law, this
document authorized her working status in a foreign country and entitled her to all benefits and
processes under our statutes. Thus, even assuming arguendothat she was considered at the start of
her employment as a "direct hire" governed by and subject to the laws, common practices and
17
customs prevailing in Singapore she subsequently became a contract worker or an OFW who was
covered by Philippine labor laws and policies upon certification by the POEA. At the time her
employment was illegally terminated, she already possessed the POEA employment Certificate.

Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office
18
in Singapore. Significantly, respondent’s employment by the Singapore branch office had to be
19
approved by Benjamin P. Palma Gil, the president of the bank whose principal offices were in
Manila. This circumstance militates against petitioner’s contention that respondent was "locally
hired"; and totally "governed by and subject to the laws, common practices and customs" of
Singapore, not of the Philippines. Instead, with more reason does this fact reinforce the presumption
that respondent falls under the legal definition of migrant worker, in this case one deployed in
Singapore. Hence, petitioner cannot escape the application of Philippine laws or the jurisdiction of
the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown
20
Internationale v. NLRC:
"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers. For the State assures the basic rights of all
1awphi1.net

workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and
Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of
the Civil Code which states that laws ‘which have for their object public order, public policy and good
customs shall not be rendered ineffective by laws or judgments promulgated, or by determination or
conventions agreed upon in a foreign country.’"

Second Issue:

Proper Venue

Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

"Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear and decide may be
filed in the Regional Arbitration Branch having jurisdiction over the workplace of the
complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall be
filed before the Regional Arbitration Branch where the complainant resides or where the principal
office of the respondent/employer is situated, at the option of the complainant.

"For purposes of venue, workplace shall be understood as the place or locality where the employee
is regularly assigned when the cause of action arose. It shall include the place where the employee
is supposed to report back after a temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their workplace is where they are regularly
assigned, or where they are supposed to regularly receive their salaries/wages or work instructions
from, and report the results of their assignment to their employers."

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

As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal.
The law gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2)
at the RAB where the principal office of her employer is situated. Since her dismissal by petitioner,
respondent has returned to the Philippines -- specifically to her residence at Filinvest II, Quezon City.
Thus, in filing her Complaint before the RAB office in Quezon City, she has made a valid choice of
proper venue.

Third Issue:

Illegal Dismissal

The appellate court was correct in holding that respondent was already a regular employee at the
time of her dismissal, because her three-month probationary period of employment had already
ended. This ruling is in accordance with Article 281 of the Labor Code: "An employee who is allowed
to work after a probationary period shall be considered a regular employee." Indeed, petitioner
recognized respondent as such at the time it dismissed her, by giving her one month’s salary in lieu
of a one-month notice, consistent with provision No. 6 of her employment Contract.

Notice and Hearing Not Complied With

As a regular employee, respondent was entitled to all rights, benefits and privileges provided under
our labor laws. One of her fundamental rights is that she may not be dismissed without due process
of law. The twin requirements of notice and hearing constitute the essential elements of procedural
due process, and neither of these elements can be eliminated without running afoul of the
22
constitutional guarantee.

In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them
of the particular acts or omissions for which their dismissal is sought; and 2) the other to inform them
of the decision to dismiss them. As to the requirement of a hearing, its essence lies simply in the
23
opportunity to be heard.

The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission
for which her dismissal was being sought. Neither was she given any chance to be heard, as
required by law. At any rate, even if she were given the opportunity to be heard, she could not have
defended herself effectively, for she knew no cause to answer to.

All that petitioner tendered to respondent was a notice of her employment termination effective the
very same day, together with the equivalent of a one-month pay. This Court has already held that
nothing in the law gives an employer the option to substitute the required prior notice and opportunity
24
to be heard with the mere payment of 30 days’ salary.

Well-settled is the rule that the employer shall be sanctioned for noncompliance with the
requirements of, or for failure to observe, due process that must be observed in dismissing an
25
employee.

No Valid Cause for Dismissal

26 27 28
Moreover, Articles 282, 283 and 284 of the Labor Code provide the valid grounds or causes
for an employee’s dismissal. The employer has the burden of proving that it was done for any of
those just or authorized causes. The failure to discharge this burden means that the dismissal was
29
not justified, and that the employee is entitled to reinstatement and back wages.

Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for
terminating the employment of respondent. It merely insists that her dismissal was validly effected
pursuant to the provisions of her employment Contract, which she had voluntarily agreed to be
bound to.

Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However, petitioner overlooks
the qualification that those terms and conditions agreed upon must not be contrary to law, morals,
30
customs, public policy or public order. As explained earlier, the employment Contract between
petitioner and respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and
terms and conditions of the Contract must not contravene our labor law provisions.

Moreover, a contract of employment is imbued with public interest. The Court has time and time
again reminded parties that they "are not at liberty to insulate themselves and their relationships
31
from the impact of labor laws and regulations by simply contracting with each other." Also, while a
contract is the law between the parties, the provisions of positive law that regulate such contracts
32
are deemed included and shall limit and govern the relations between the parties.

Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal
33
cause for the termination of employment, the law considers the matter a case of illegal dismissal.

Awards for Damages Justified

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

In affirming the awards of moral and exemplary damages, we quote with approval the following
ratiocination of the labor arbiter:

"The records also show that [respondent’s] dismissal was effected by [petitioners’] capricious and
high-handed manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals,
good customs and public policy. Bad faith and fraud are shown in the acts committed by [petitioners]
before, during and after [respondent’s] dismissal in addition to the manner by which she was
dismissed. First, [respondent] was pressured to resign for two different and contradictory reasons,
namely, cost-cutting and the need for a Chinese[-]speaking credit officer, for which no written advice
was given despite complainant’s request. Such wavering stance or vacillating position indicates bad
faith and a dishonest purpose. Second, she was employed on account of her qualifications,
experience and readiness for the position of credit officer and pressured to resign a month after she
was commended for her good work. Third, the demand for [respondent’s] instant resignation on 19
April 1999 to give way to her replacement who was allegedly reporting soonest, is whimsical,
fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic] until 15 May
1999 within which to leave. Fourth, the pressures made on her to resign were highly oppressive,
anti-social and caused her absolute torture, as [petitioners] disregarded her situation as an overseas
worker away from home and family, with no prospect for another job. She was not even provided
with a return trip fare. Fifth, the notice of termination is an utter manifestation of bad faith and whim
as it totally disregards [respondent’s] right to security of tenure and due process. Such notice
together with the demands for [respondent’s] resignation contravenes the fundamental guarantee
and public policy of the Philippine government on security of tenure.

"[Respondent] likewise established that as a proximate result of her dismissal and prior demands for
resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock and social humiliation. Her standing in the social and
business community as well as prospects for employment with other entities have been adversely
affected by her dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the
Civil Code.

xxxxxxxxx

"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating

[respondent’s] employment and are therefore liable for exemplary damages. This should served [sic]
as protection to other employees of [petitioner] company, and by way of example or correction for the
public good so that persons similarly minded as [petitioners] would be deterred from committing the
36
same acts."

The Court also affirms the award of attorney’s fees. It is settled that when an action is instituted for
the recovery of wages, or when employees are forced to litigate and consequently incur expenses to
37
protect their rights and interests, the grant of attorney’s fees is legally justifiable.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs
against petitioner.

SO ORDERED.

G.R. No. 120077 October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,

vs.

NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND

MARCELO G. SANTOS, respondents.

PARDO, J.:

1
The case before the Court is a petition for certiorari to annul the following orders of the National
Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without or
2
with excess jurisdiction and with grave abuse of discretion:

3 4
(1) Order of May 31, 1993. Reversing and setting aside its earlier resolution of August 28, 1992.
The questioned order declared that the NLRC, not the Philippine Overseas Employment
Administration (hereinafter referred to as "POEA"), had jurisdiction over private respondent's
complaint;

5
(2) Decision of December 15, 1994. Directing petitioners to jointly and severally pay private
respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the
unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00) as extra four
months salary for the two (2) year period of his contract, three thousand six hundred dollars
(US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight hundred dollars
(US$19,800.00) or its peso equivalent and attorney's fees amounting to ten percent (10%) of the
total award; and

6
(3) Order of March 30, 1995. Denying the motion for reconsideration of the petitioners.

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an
overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's Republic of
China and later terminated due to retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel
International Company, Limited (hereinafter referred to as "MHICL").

When the case was filed in 1990, MHC was still a government-owned and controlled corporation
duly organized and existing under the laws of the Philippines.
 7
MHICL is a corporation duly organized and existing under the laws of Hong Kong. MHC is an
8
"incorporator" of MHICL, owning 50% of its capital stock.

9
By virtue of a "management agreement" with the Palace Hotel (Wang Fu Company Limited),
10
MHICL trained the personnel and staff of the Palace Hotel at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent
Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace
Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.

Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary
11
and increased benefits. The position was slated to open on October 1, 1988.

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment
contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was
acceptable, to return the same to Mr. Henk in Manila, together with his passport and two additional
pictures for his visa to China.

On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30,
1988, under the pretext that he was needed at home to help with the family's piggery and poultry
business.

On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter.
Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4,
1988) and notified them that he was going to arrive in Manila during the first week of July 1988.

The employment contract of June 4, 1988 stated that his employment would commence September
12
1, 1988 for a period of two years. It provided for a monthly salary of nine hundred dollars
13
(US$900.00) net of taxes, payable fourteen (14) times a year.

On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.

On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace
14
Hotel.

Subsequently, respondent Santos signed an amended "employment agreement" with the Palace
Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The
Vice President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the
employment agreement under the word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned
to China and reassumed his post on July 17, 1989.

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten
note that respondent Santos be given one (1) month notice of his release from employment.

On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt
that his employment at the Palace Hotel print shop would be terminated due to business reverses
15 16
brought about by the political upheaval in China. We quote the letter:

"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square
incidents), our business has been severely affected. To reduce expenses, we will not open/operate
printshop for the time being.

"We sincerely regret that a decision like this has to be made, but rest assured this does in no way
reflect your past performance which we found up to our expectations."

"Should a turnaround in the business happen, we will contact you directly and give you priority on
future assignment."

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

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

On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt,
demanding full compensation pursuant to the employment agreement.

17
On November 11, 1989, Mr. Shmidt replied, to wit:

His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-
month notice clause and Mr. Santos received all benefits due him.

"For your information the Print Shop at the Palace Hotel is still not operational and with a low
business outlook, retrenchment in various departments of the hotel is going on which is a normal
management practice to control costs.

"When going through the latest performance ratings, please also be advised that his performance
was below average and a Chinese National who is doing his job now shows a better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still
enjoyed free accommodation/laundry/meals up to the day of his departure."

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

The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the
18
proceedings before the Labor Arbiter.
 19
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:

"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant jointly and severally;

"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;

"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and

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

"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had
jurisdiction over the case.

20
On August 28, 1992, the NLRC promulgated a resolution, stating:

"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of
jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA.

"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted
resolution. He argued that the case was not cognizable by the POEA as he was not an "overseas
21
contract worker."

On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor
Arbiter Emerson Tumanon to hear the case on the question of whether private respondent was
22
retrenched or dismissed.

On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial
23
and documentary evidence presented to and heard by him.

Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region,
24
Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.

25
On November 25, 1994, Labor Arbiter de Vera submitted his report. He found that respondent
Santos was illegally dismissed from employment and recommended that he be paid actual damages
26
equivalent to his salaries for the unexpired portion of his contract.

27
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:

"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by
substantial evidence, judgment is hereby rendered, directing the respondents to jointly and severally
pay complainant the following computed contractual benefits: (1) US$12,600.00 as salaries for the
unexpired portion of the parties' contract; (2) US$3,600.00 as extra four (4) months salary for the two
(2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for the aforesaid
two (2) years contract stipulated by the parties or a total of US$19,800.00 or its peso equivalent, plus
(4) attorney's fees of 10% of complainant's total award.

"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de
28
Vera's recommendation had no basis in law and in fact.

29
On March 30, 1995, the NLRC denied the motion for reconsideration.

30
Hence, this petition.

On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary
restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of
31
judgment of the NLRC dated July 31, 1995.

On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents
32
to file their respective comments, without giving due course to the petition.

On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition
and its annexes, they can not defend and sustain the position taken by the NLRC in its assailed
decision and orders. The Solicitor General prayed that he be excused from filing a comment on
33
behalf of the NLRC

34
On April 30,1996, private respondent Santos filed his comment.

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the
35
NLRC to file its own comment to the petition.

On January 7, 1997, the NLRC filed its comment.

The petition is meritorious.

I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions and the case
involves purely foreign elements. The only link that the Philippines has with the case is that
respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all
cases involving our citizens can be tried here.

The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign
employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was
then employed. He was hired without the intervention of the POEA or any authorized recruitment
36
agency of the government.

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over
the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its
37
decision. The conditions are unavailing in the case at bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of
the case — from the time of recruitment, to employment to dismissal occurred outside the
Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace
Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the
Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the
Philippines.

No power to determine applicable law. — Neither can an intelligent decision be made as to the law
governing the employment contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place where the contract was
38
made).

The employment contract was not perfected in the Philippines. Respondent Santos signified his
acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the
Palace Hotel in the People's Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the
alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of China.
The NLRC was not in a position to determine whether the Tiannamen Square incident truly
adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision
could be reached by the NLRC, such would not have any binding effect against the employer, the
Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not
even served with summons. Jurisdiction over its person was not acquired.

This is not to say that Philippine courts and agencies have no power to solve controversies involving
foreign employers. Neither are we saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum,
39
specifically the POEA, not the NLRC, would protect him. He is not an "overseas contract worker"
40
a fact which he admits with conviction.

Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision
cannot be sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL
was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be
held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However,
this is not enough to pierce the veil of corporate fiction between MHICL and MHC.

Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction
is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done
only when a corporation is a mere alter ego or business conduit of a person or another corporation.

42
In Traders Royal Bank v. Court of Appeals, we held that "the mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of
itself a sufficient reason for disregarding the fiction of separate corporate personalities."

The tests in determining whether the corporate veil may be pierced are: First, the defendant must
have control or complete domination of the other corporation's finances, policy and business
practices with regard to the transaction attacked. There must be proof that the other corporation had
no separate mind, will or existence with respect the act complained of. Second, control must be used
by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the
proximate cause of the injury or loss complained of. The absence of any of the elements prevents
43
the piercing of the corporate veil.

It is basic that a corporation has a personality separate and distinct from those composing it as well
44
as from that of any other legal entity to which it may be related. Clear and convincing evidence is
45
needed to pierce the veil of corporate fiction. In this case, we find no evidence to show that
MHICL and MHC are one and the same entity.

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment
contract with the Palace Hotel. This fact fails to persuade us.

First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda
signed the employment contract as a mere witness. He merely signed under the word "noted".

46
When one "notes" a contract, one is not expressing his agreement or approval, as a party would.
47
In Sichangco v. Board of Commissioners of Immigration, the Court recognized that the term
"noted" means that the person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a decision on the matter.

Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the
document is that which, "in a deed or other formal instrument is that part which comes after the
48
recitals, or where there are no recitals, after the parties (emphasis ours)." As opposed to a party
to a contract, a witness is simply one who, "being present, personally sees or perceives a thing; a
49
beholder, a spectator, or eyewitness." One who "notes" something just makes a "brief written
50
statement" a memorandum or observation.
Second, and more importantly, there was no existing employer-employee relationship between
Santos and MHICL. In determining the existence of an employer-employee relationship, the
51
following elements are considered:

"(1) the selection and engagement of the employee;

"(2) the payment of wages;

"(3) the power to dismiss; and

"(4) the power to control employee's conduct."

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

52
Neither is there evidence to suggest that MHICL was a "labor-only contractor." There is no proof
that MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel.

Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same
entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to
pierce the corporate veil between MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering further that no employer-
employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina
J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-
90.

53
Labor Arbiters have exclusive and original jurisdiction only over the following:

"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;

"4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee
relations;

"5. Cases arising from any violation of Article 264 of this Code, including questions involving legality
of strikes and lockouts; and

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

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

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

"To determine which body has jurisdiction over the present controversy, we rely on the sound judicial
principle that jurisdiction over the subject matter is conferred by law and is determined by the
allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims
55
asserted therein."

The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His
56
failure to dismiss the case amounts to grave abuse of discretion.

V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and
resolutions of the National Labor Relations Commission dated May 31, 1993, December 15, 1994
and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90).

No costs.

SO ORDERED.

[G.R. No. 128024. May 9, 2000.]

BEBIANO M. BAÑEZ, Petitioner, v. HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC.,
Respondents.

DECISION

GONZAGA-REYES, J.:

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

Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993,
private respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal dismissal
with the National Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994,
Labor Arbiter Nicodemus G. Palangan found petitioner to have been illegally dismissed and ordered the
payment of separation pay in lieu of reinstatement, and of backwages and attorney’s fees. The decision was
appealed to the NLRC, which dismissed the same for having been filed out of time. 2 Elevated by petition for
certiorari before this Court, the case was dismissed on technical grounds 3; however, the Court also pointed
out that even if all the procedural requirements for the filing of the petition were met, it would still be
dismissed for failure to show grave abuse of discretion on the part of the NLRC.
chanrobles virtua| |aw |ibrary
On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial Court
("RTC") of Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the payment of the
following: chanrob1es virtual 1aw library

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

b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities, properties, space, etc. for three
years;

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

d. P25,000.00 as attorney’s fees. 4

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

Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which summarized
the basis for private respondent’s action for damages in this manner: chanrob1es virtual 1aw library

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

In declaring itself as having jurisdiction over the subject matter of the instant controversy, respondent court
stated:chanrob1es virtual 1aw library

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

While seemingly the cause of action arose from employer- employee relations, the employer’s claim for
damages is grounded on the nefarious activities of defendant causing damage and prejudice to plaintiff as
alleged in paragraph 7 of the complaint. The Court believes that there was a breach of a contractual
obligation, which is intrinsically a civil dispute. The averments in the complaint removed the controversy
from the coverage of the Labor Code of the Philippines and brought it within the purview of civil law.
(Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.) . . . 6
Petitioner’s motion for reconsideration of the above Order was denied for lack of merit on October 16, 1996.
Hence, this petition.

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

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

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

ARTICLE 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under
this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision without extension, even in
the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:
chanrob1es virtual 1aw library

x x x

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

x x x

The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No. 6715, which
took effect on March 21, 1989, and which put to rest the earlier confusion as to who between Labor Arbiters
and regular courts had jurisdiction over claims for damages as between employers and employees.

It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including
claims for damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the Labor
Code. 7 On May 1, 1979, however, Presidential Decree ("P.D.") No. 1367 amended said Article 217 to the
effect that "Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or
other forms of damages." 8 This limitation in jurisdiction, however, lasted only briefly since on May 1, 1980,
P.D. No. 1691 nullified P.D. No. 1367 and restored Article 217 of the Labor Code almost to its original form.
Presently, and as amended by R.A. 6715, the jurisdiction of Labor Arbiters and the NLRC in Article 217 is
comprehensive enough to include claims for all forms of damages "arising from the employer-employee
relations" .

Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims
for damages filed by employees, 9 we hold that by the designating clause "arising from the employer-
employee relations" Article 217 should apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the claim arises from or is necessarily
connected with the fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the Labor
Code), jurisprudence was settled that where the plaintiff’s cause of action for damages arose out of, or was
necessarily intertwined with, an alleged unfair labor practice committed by the union, the jurisdiction is
exclusively with the (now defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular
courts over the same is a nullity. 10 To allow otherwise would be "to sanction split jurisdiction, which is
prejudicial to the orderly administration of justice." 11 Thus, even after the enactment of the Labor Code,
where the damages separately claimed by the employer were allegedly incurred as a consequence of strike
or picketing of the union, such complaint for damages is deeply rooted from the labor dispute between the
parties, and should be dismissed by ordinary courts for lack of jurisdiction. As held by this Court in National
Federation of Labor v. Eisma, 127 SCRA 419: chanrob1es virtual 1aw library

Certainly, the present Labor Code is even more committed to the view that on policy grounds, and equally
so in the interest of greater promptness in the disposition of labor matters, a court is spared the often
onerous task of determining what essentially is a factual matter, namely, the damages that may be incurred
by either labor or management as a result of disputes or controversies arising from employer-employee
relations.

There is no mistaking the fact that in the case before us, private respondent’s claim against petitioner for
actual damages arose from a prior employer-employee relationship. In the first place, private respondent
would not have taken issue with petitioner’s "doing business of his own" had the latter not been concurrently
its employee. Thus, the damages alleged in the complaint below are: first, those amounting to lost profits
and earnings due to petitioner’s abandonment or neglect of his duties as sales manager, having been
otherwise preoccupied by his unauthorized installment sale scheme; and second, those equivalent to the
value of private respondent’s property and supplies which petitioner used in conducting his "business" .

Second, and more importantly, to allow respondent court to proceed with the instant action for damages
would be to open anew the factual issue of whether petitioner’s installment sale scheme resulted in business
losses and the dissipation of private respondent’s property. This issue has been duly raised and ruled upon
in the illegal dismissal case, where private respondent brought up as a defense the same allegations now
embodied in his complaint, and presented evidence in support thereof. The Labor Arbiter, however, found to
the contrary — that no business losses may be attributed to petitioner as in fact, it was by reason of
petitioner’s installment plan that the sales of the Iligan branch of private respondent (where petitioner was
employed) reached its highest record level to the extent that petitioner was awarded the 1989 Field Sales
Achievement Award in recognition of his exceptional sales performance, and that the installment scheme
was in fact with the knowledge of the management of the Iligan branch of private Respondent. 12 In other
words, the issue of actual damages has been settled in the labor case, which is now final and executory.

Still on the prospect of re-opening factual issues already resolved by the labor court, it may help to refer to
that period from 1979 to 1980 when jurisdiction over employment-predicated actions for damages vacillated
from labor tribunals to regular courts, and back to labor tribunals. In Ebon v. de Guzman, 113 SCRA 52, 13
this Court discussed: chanrob1es virtual 1aw library

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

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

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

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

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

Neither can we uphold the reasoning of respondent court that because the resolution of the issues presented
by the complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically
civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and
exclusive jurisdiction over claims for damages arising from employer-employee relations — in other words,
the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also damages
governed by the Civil Code. 18

Thus, it is obvious that private respondent’s remedy is not in the filing of this separate action for damages,
but in properly perfecting an appeal from the Labor Arbiter’s decision. Having lost the right to appeal on
grounds of untimeliness, the decision in the labor case stands as a final judgment on the merits, and the
instant action for damages cannot take the place of such lost appeal.

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

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

SO ORDERED. chanrobles.com : red

THIRD DIVISION

[G.R. NO. 166377 : November 28, 2008]

MA. ISABEL T. SANTOS, represented by ANTONIO P. SANTOS,Petitioner, v. SERVIER PHILIPPINES,

INC. and NATIONAL LABOR RELATIONS COMMISSION, Respondents.

DECISION

NACHURA, J.:

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

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

Petitioner Ma. Isabel T. Santos was the Human Resource Manager of respondent Servier Philippines, Inc.
since 1991 until her termination from service in 1999. On March 26 and 27, 1998, petitioner attended a
meeting3 of all human resource managers of respondent, held in Paris, France. Since the last day of the
meeting coincided with the graduation of petitioner's only child, she arranged for a European vacation with
her family right after the meeting. She, thus, filed a vacation leave effective March 30, 1998. 4

On March 29, 1998, petitioner, together with her husband Antonio P. Santos, her son, and some friends, had
dinner at Leon des Bruxelles, a Paris restaurant known for mussels 5 as their specialty. While having dinner,
petitioner complained of stomach pain, then vomited. Eventually, she was brought to the hospital known as
Centre Chirurgical de L Quest where she fell into coma for 21 days; and later stayed at the Intensive Care
Unit (ICU) for 52 days. The hospital found that the probable cause of her sudden attack was "alimentary
allergy," as she had recently ingested a meal of mussels which resulted in a concomitant uticarial eruption. 6

During the time that petitioner was confined at the hospital, her husband and son stayed with her in Paris.
Petitioner's hospitalization expenses, as well as those of her husband and son, were paid by respondent. 7

In June 1998, petitioner's attending physicians gave a prognosis of the former's condition; and, with the
consent of her family, allowed her to go back to the Philippines for the continuation of her medical
treatment. She was then confined at the St. Luke's Medical Center for rehabilitation. 8 During the period of
petitioner's rehabilitation, respondent continued to pay the former's salaries; and to assist her in paying her
hospital bills.

In a letter dated May 14, 1999, respondent informed the petitioner that the former had requested the
latter's physician to conduct a thorough physical and psychological evaluation of her condition, to determine
her fitness to resume her work at the company. Petitioner's physician concluded that the former had not
fully recovered mentally and physically. Hence, respondent was constrained to terminate petitioner's
services effective August 31, 1999.9

As a consequence of petitioner's termination from employment, respondent offered a retirement package

which consists of:

P
1,063,841
Retirement Plan Benefits: .76

Insurance Pension at
20,000.00/month for 60 P
months from company- 1,200,000
sponsored group life policy: .00

P
465,000.0
Educational assistance: 0

P
200,000.0
Medical and Health Care: 010

Of the promised retirement benefits amounting to P1,063,841.76, only P701,454.89 was released to
petitioner's husband, the balance 11 thereof was withheld allegedly for taxation purposes. Respondent also
failed to give the other benefits listed above.12

Petitioner, represented by her husband, instituted the instant case for unpaid salaries; unpaid separation
pay; unpaid balance of retirement package plus interest; insurance pension for permanent disability;
educational assistance for her son; medical assistance; reimbursement of medical and rehabilitation
expenses; moral, exemplary, and actual damages, plus attorney's fees. The case was docketed as NLRC-
NCR (SOUTH) Case No. 30-06-02520-01.

On September 28, 2001, Labor Arbiter Aliman D. Mangandog rendered a Decision 13 dismissing petitioner's
complaint. The Labor Arbiter stressed that respondent had been generous in giving financial assistance to
the petitioner.14 He likewise noted that there was a retirement plan for the benefit of the employees. In
denying petitioner's claim for separation pay, the Labor Arbiter ratiocinated that the same had already been
integrated in the retirement plan established by respondent. Thus, petitioner could no longer collect
separation pay over and above her retirement benefits.15 The arbiter refused to rule on the legality of the
deductions made by respondent from petitioner's total retirement benefits for taxation purposes, as the
issue was beyond the jurisdiction of the NLRC. 16 On the matter of educational assistance, the Labor Arbiter
found that the same may be granted only upon the submission of a certificate of enrollment. 17 Lastly, as to
petitioner's claim for damages and attorney's fees, the Labor Arbiter denied the same as the former's
dismissal was not tainted with bad faith.18

On appeal to the National Labor Relations Commission (NLRC), the tribunal set aside the Labor Arbiter's
decision, ruling that:

WHEREFORE, premises considered, Complainant's appeal is partly GRANTED. The Labor

Arbiter's decision in the above-entitled case is hereby SET ASIDE. Respondent is ordered to
pay Complainant's portion of her separation pay covering the following: 1) P200,000.00 for
medical and health care from September 1999 to April 2001; and 2) P35,000.00 per year for
her son's high school (second year to fourth year) education and P45,000.00 per semester for
the latter's four-year college education, upon presentation of any applicable certificate of
enrollment.

SO ORDERED.19

The NLRC emphasized that petitioner was not retired from the service pursuant to law, collective bargaining
agreement (CBA) or other employment contract; rather, she was dismissed from employment due to a
disease/disability under Article 28420 of the Labor Code.21 In view of her non-entitlement to retirement
benefits, the amounts received by petitioner should then be treated as her separation pay. 22Though not
legally obliged to give the other benefits, i.e., educational assistance, respondent volunteered to grant them,
for humanitarian consideration. The NLRC therefore ordered the payment of the other benefits promised by
the respondent.23 Lastly, it sustained the denial of petitioner's claim for damages for the latter's failure to
substantiate the same.24

Unsatisfied, petitioner elevated the matter to the Court of Appeals which affirmed the NLRC decision. 25

Hence, the instant petition.

At the outset, the Court notes that initially, petitioner raised the issue of whether she was entitled to
separation pay, retirement benefits, and damages. In support of her claim for separation pay, she cited
Article 284 of the Labor Code, as amended. However, in coming to this Court via a Petition for Review on
Certiorari, she abandoned her original position and alleged that she was, in fact, not dismissed from
employment based on the above provision. She argued that her situation could not be characterized as a
disease; rather, she became disabled. In short, in her petition before us, she now changes her theory by
saying that she is not entitled to separation pay but to retirement pay pursuant to Section 4, 26 Article V of
the Retirement Plan, on disability retirement. She, thus, prayed for the full payment of her retirement
benefits by giving back to her the amount deducted for taxation purposes.

In our Resolution27 dated November 23, 2005 requiring the parties to submit their respective memoranda,
we specifically stated:

No new issues may be raised by a party in the Memorandum and the issues raised in the
pleadings but not included in the Memorandum shall be deemed waived or abandoned.

Being summations of the parties' previous pleadings, the Court may consider the Memoranda
alone in deciding or resolving this petition.

Pursuant to the above resolution, any argument raised in her petition, but not raised in her Memorandum, 28
is deemed abandoned.29 Hence, the only issue proper for determination is the propriety of deducting
P362,386.87 from her total benefits, for taxation purposes. Nevertheless, in order to resolve the legality of
the deduction, it is imperative that we settle, once and for all, the ground relied upon by respondent in
terminating the services of the petitioner, as well as the nature of the benefits given to her after such
termination. Only then can we decide whether the amount deducted by the respondent should be paid to the
petitioner.

Respondent dismissed the petitioner from her employment based on Article 284 of the Labor Code, as
amended, which reads:

Art. 284. DISEASE AS GROUND FOR TERMINATION

An employer may terminate the services of an employee who has been found to be suffering
from any disease and whose continued employment is prohibited by law or is prejudicial to his
health as well as to the health of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of
 service, whichever is greater, a fraction of at least six (6) months being considered as one (1)
whole year.

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

Sec. 4. DISABILITY RETIREMENT

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

On the basis of the above-mentioned retirement plan, respondent offered the petitioner a retirement
package which consists of retirement plan benefits, insurance pension, and educational assistance. 31 The
amount of P1,063,841.76 represented the disability retirement benefit provided for in the plan; while the
insurance pension was to be paid by their insurer; and the educational assistance was voluntarily
undertaken by the respondent as a gesture of compassion to the petitioner. 32

We have declared in Aquino v. National Labor Relations Commission 33 that the receipt of retirement benefits
does not bar the retiree from receiving separation pay. Separation pay is a statutory right designed to
provide the employee with the wherewithal during the period that he/she is looking for another employment.
On the other hand, retirement benefits are intended to help the employee enjoy the remaining years of his
life, lessening the burden of worrying about his financial support, and are a form of reward for his loyalty
and service to the employer.34 Hence, they are not mutually exclusive. However, this is only true if there is
no specific prohibition against the payment of both benefits in the retirement plan and/or in the Collective
Bargaining Agreement (CBA).35

In the instant case, the Retirement Plan bars the petitioner from claiming additional benefits on top of that
provided for in the Plan. Section 2, Article XII of the Retirement Plan provides:

Section 2. NO DUPLICATION OF BENEFITS

No other benefits other than those provided under this Plan shall be payable from the Fund.
Further, in the event the Member receives benefits under the Plan, he shall be precluded from
receiving any other benefits under the Labor Code or under any present or future legislation
under any other contract or Collective Bargaining Agreement with the Company. 36

There being such a provision, as held in Cruz v. Philippine Global Communications, Inc.,37 petitioner is
entitled only to either the separation pay under the law or retirement benefits under the Plan, and not both.

Clearly, the benefits received by petitioner from the respondent represent her retirement benefits under the
Plan. The question that now confronts us is whether these benefits are taxable. If so, respondent correctly
made the deduction for tax purposes. Otherwise, the deduction was illegal and respondent is still liable for
the completion of petitioner's retirement benefits.

Respondent argues that the legality of the deduction from petitioner's total benefits cannot be taken
cognizance of by this Court since the issue was not raised during the early stage of the proceedings. 38

We do not agree.

Records reveal that as early as in petitioner's position paper filed with the Labor Arbiter, she already raised
the legality of said deduction, albeit designated as "unpaid balance of the retirement package." Petitioner
specifically averred that P362,386.87 was not given to her by respondent as it was allegedly a part of the
former's taxable income.39 This is likewise evident in the Labor Arbiter and the NLRC's decisions although
they ruled that the issue was beyond the tribunal's jurisdiction. They even suggested that petitioner's claim
for illegal deduction could be addressed by filing a tax refund with the Bureau of Internal Revenue. 40

Contrary to the Labor Arbiter and NLRC's conclusions, petitioner's claim for illegal deduction falls within the
tribunal's jurisdiction. It is noteworthy that petitioner demanded the completion of her retirement benefits,
including the amount withheld by respondent for taxation purposes. The issue of deduction for tax purposes
is intertwined with the main issue of whether or not petitioner's benefits have been fully given her. It is,
therefore, a money claim arising from the employer-employee relationship, which clearly falls within the
jurisdiction41 of the Labor Arbiter and the NLRC.
This is not the first time that the labor tribunal is faced with the issue of illegal deduction. In
Intercontinental Broasting Corporation (IBC) v. Amarilla,42 IBC withheld the salary differentials due its
retired employees to offset the tax due on their retirement benefits. The retirees thus lodged a complaint
with the NLRC questioning said withholding. They averred that their retirement benefits were exempt from
income tax; and IBC had no authority to withhold their salary differentials. The Labor Arbiter took
cognizance of the case, and this Court made a definitive ruling that retirement benefits are exempt from
income tax, provided that certain requirements are met.

Nothing, therefore, prevents us from deciding this main issue of whether the retirement benefits are
taxable.

We answer in the affirmative.

Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides for the exclusion of
retirement benefits from gross income, thus:

(6) Retirement Benefits, Pensions, Gratuities, etc.'

a) Retirement benefits received under Republic Act 7641 and those received by officials and
employees of private firms, whether individual or corporate, in accordance with a reasonable
private benefit plan maintained by the employer: Provided, That the retiring official or
employee has been in the service of the same employer for at least ten (10) years and is not
less than fifty (50) years of age at the time of his retirement: Providedfurther, That the
benefits granted under this subparagraph shall be availed of by an official or employee only
once. x x x.

Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to prove
the concurrence of the following elements: (1) a reasonable private benefit plan is maintained by the
employer; (2) the retiring official or employee has been in the service of the same employer for at least ten
(10) years; (3) the retiring official or employee is not less than fifty (50) years of age at the time of his
retirement; and (4) the benefit had been availed of only once. 43

As discussed above, petitioner was qualified for disability retirement. At the time of such retirement,
petitioner was only 41 years of age; and had been in the service for more or less eight (8) years. As such,
the above provision is not applicable for failure to comply with the age and length of service requirements.
Therefore, respondent cannot be faulted for deducting from petitioner's total retirement benefits the amount
of P362,386.87, for taxation purposes.

WHEREFORE, the petition is DENIED for lack of merit. The Court of Appeals Decision dated August 12,
2004 and its Resolution dated December 17, 2004, in CA-G.R. SP No. 75706 are AFFIRMED.

SO ORDERED.

G.R. No. 89621 September 24, 1991

PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General
Manager ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA,
petitioners,

vs.

HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO

CABAÑAS & FULGENCIO LEGO, respondents.

Aurelio D. Menzon for petitioners.

Mario P. Nicolasora co-counsel for petitioners.

Papiano L. Santo for private respondents.

CRUZ, J.:

The question now before us has been categorically resolved in earlier decisions of the Court that a
little more diligent research would have disclosed to the petitioners. On the basis of those cases and
the facts now before us, the petition must be denied.

The private respondents were employees of the petitioner who were suspected of complicity in the
irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal
complaint for theft against them but this was later withdrawn and substituted with a criminal
complaint for falsification of private documents. On November 26, 1987, after a preliminary
investigation conducted by the Municipal Trial Court of Tanauan, Leyte, the complaint was
dismissed. The dismissal was affirmed on April 8, 1988, by the Office of the Provincial Prosecutor.

Meantime, allegedly after an administrative investigation, the private respondents were dismissed by
the petitioner company on November 23, 1987. As a result, they lodged a complaint for illegal
dismissal with the Regional Arbitration Branch of the NLRC in Tacloban City on December 1, 1987,
and decisions manded reinstatement with damages. In addition, they instituted in the Regional Trial
Court of Leyte, on April 4, 1988, a separate civil complaint against the petitioners for damages
arising from what they claimed to be their malicious prosecution.

The petitioners moved to dismiss the civil complaint on the ground that the trial court had no
jurisdiction over the case because it involved employee-employer relations that were exclusively
cognizable by the labor arbiter. The motion was granted on February 6, 1989. On July 6, 1989,
however, the respondent judge, acting on the motion for reconsideration, reinstated the complaint,
saying it was "distinct from the labor case for damages now pending before the labor courts." The
petitioners then came to this Court for relief.

The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to
support their position that the private respondents civil complaint for damages falls under the
jurisdiction of the labor arbiter. They particularly cite the case of Getz Corporation v. Court of
1
Appeals, where it was held that a court of first instance had no jurisdiction over the complaint filed
by a dismissed employee "for unpaid salary and other employment benefits, termination pay and
moral and exemplary damages."

We hold at the outset that the case is not in point because what was involved there was a claim
arising from the alleged illegal dismissal of an employee, who chose to complain to the regular court
and not to the labor arbiter. Obviously, the claim arose from employee-employer relations and so
came under Article 217 of the Labor Code which then provided as follows:

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

1. Unfair labor practice cases;

2. Those that workers may file involving wages, hours of work and other terms and conditions of
employment;

3. All money claims of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate
agreement, except claims for employees' compensation, social security, medicare and maternity
benefits;
4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code, including questions involving the
legality of strikes and lockouts.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by labor
2
Arbiters.

It must be stressed that not every controversy involving workers and their employers can be
resolved only by the labor arbiters. This will be so only if there is a "reasonable causal connection"
between the claim asserted and employee-employer relations to put the case under the provisions of
Article 217. Absent such a link, the complaint will be cognizable by the regular courts of justice in the
exercise of their civil and criminal jurisdiction.

3
In Medina v. Castro-Bartolome, two employees filed in the Court of First Instance of Rizal a civil
complaint for damages against their employer for slanderous remarks made against them by the
company president. On the order dismissing the case because it came under the jurisdiction of the
labor arbiters, Justice Vicente Abad Santos said for the Court:

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

4
In Singapore Airlines Ltd. v. Paño, where the plaintiff was suing for damages for alleged violation by
the defendant of an "Agreement for a Course of Conversion Training at the Expense of Singapore
Airlines Limited," the jurisdiction of the Court of First Instance of Rizal over the case was questioned.
5
The Court, citing the earlier case of Quisaba v. Sta. Ines Melale Veneer and Plywood, Inc.,
declared through Justice Herrera:

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

6
In Molave Sales, Inc. v. Laron, the same Justice held for the Court that the claim of the plaintiff
against its sales manager for payment of certain accounts pertaining to his purchase of vehicles and
automotive parts, repairs of such vehicles, and cash advances from the corporation was properly
cognizable by the Regional Trial Court of Dagupan City and not the labor arbiter, because "although
a controversy is between an employer and an employee, the Labor Arbiters have nojurisdiction if the
Labor Code is not involved."

7
The latest ruling on this issue is found in San Miguel Corporation v. NLRC, where the above cases
are cited and the changes in Article 217 are recounted. That case involved a claim of an employee
for a P60,000.00 prize for a proposal made by him which he alleged had been accepted and
implemented by the defendant corporation in the processing of one of its beer products. The claim
was filed with the labor arbiter, who dismissed it for lack of jurisdiction but was reversed by the
NLRC on appeal. In setting aside the appealed decision and dismissing the complaint, the Court
observed through Justice Feliciano:

It is the character of the principal relief sought that appears essential, in this connection. Where such
principal relief is to be granted under labor legislation or a collective bargaining agreement, the case
should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for
damages might be asserted as an incident to such claim.

xxx xxx xxx

Where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or
other labor relations statute or a collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and
the NLRC. In such situations, resolution of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or
expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.

xxx xxx xxx

While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that
the entire universe of money claims that might be asserted by workers against their employers has
been absorbed into the original and exclusive jurisdiction of Labor Arbiters.

xxx xxx xxx

For it cannot be presumed that money claims of workers which do not arise out of or in connection
with their employer-employee relationship, and which would therefore fall within the general
jurisdiction of the regular courts of justice, were intended by the legislative authority to be taken
away from the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The
Court, therefore, believes and so holds that the 'money claims of workers" referred to in paragraph 3
of Article 217 embraces money claims which arise out of or in connection with the employer-
employee relationship, or some aspect or incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters
are those money claims which have some reasonable causal connection with the employer-
employee relationship (Ibid.).

The case now before the Court involves a complaint for damages for malicious prosecution which
was filed with the Regional Trial Court of Leyte by the employees of the defendant company. It does
not appear that there is a "reasonable causal connection" between the complaint and the relations of
the parties as employer and employees. The complaint did not arise from such relations and in fact
could have arisen independently of an employment relationship between the parties. No such
relationship or any unfair labor practice is asserted. What the employees are alleging is that the
petitioners acted with bad faith when they filed the criminal complaint which the Municipal Trial Court
said was intended "to harass the poor employees" and the dismissal of which was affirmed by the
Provincial Prosecutor "for lack of evidence to establish even a slightest probability that all the
respondents herein have committed the crime imputed against them." This is a matter which the
labor arbiter has no competence to resolve as the applicable law is not the Labor Code but the
Revised Penal Code.

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

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

SO ORDERED.

FIRST DIVISION

G.R. No. 182295, June 26, 2013

7K CORPORATION, Petitioner, v. EDDIE ALBARICO, Respondent.

DECISION

SERENO, C.J.:

This is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court, asking the Court
to determine whether a voluntary arbitrator in a labor dispute exceeded his jurisdiction in deciding issues
not specified in the submission agreement of the parties. It assails the Decision 1 dated 18 September 2007
and the Resolution2 dated 17 March 2008 of the Court of Appeals (CA).3

FACTS

When he was dismissed on 5 April 1993, respondent Eddie Albarico (Albarico) was a regular employee of
petitioner 7K Corporation, a company selling water purifiers. He started working for the company in 1990 as
a salesman.4 Because of his good performance, his employment was regularized. He was also promoted
several times: from salesman, he was promoted to senior sales representative and then to acting team field
supervisor. In 1992, he was awarded the President’s Trophy for being one of the company’s top water
purifier specialist distributors. In April of 1993, the chief operating officer of petitioner 7K Corporation
terminated Albarico’s employment allegedly for his poor sales performance. 5Respondent had to stop
reporting for work, and he subsequently submitted his money claims against petitioner for arbitration before
the National Conciliation and Mediation Board (NCMB). The issue for voluntary arbitration before the NCMB,
according to the parties’ Submission Agreement dated 19 April 1993, was whether respondent Albarico was
entitled to the payment of separation pay and the sales commission reserved for him by the corporation. 6

While the NCMB arbitration case was pending, respondent Albarico filed a Complaint against petitioner
corporation with the Arbitration Branch of the National Labor Relations Commission (NLRC) for illegal
dismissal with money claims for overtime pay, holiday compensation, commission, and food and travelling
allowances.7 The Complaint was decided by the labor arbiter in favor of respondent Albarico, who was
awarded separation pay in lieu of reinstatement, backwages and attorney’s fees. 8

On appeal by petitioner, the labor arbiter’s Decision was vacated by the NLRC for forum shopping on the
part of respondent Albarico, because the NCMB arbitration case was still pending. 9 The NLRC Decision, which
explicitly stated that the dismissal was without prejudice to the pending NCMB arbitration case, 10became
final after no appeal was taken.

On 17 September 1997, petitioner corporation filed its Position Paper in the NCMB arbitration case. 11 It
denied that respondent was terminated from work, much less illegally dismissed. The corporation claimed
that he had voluntarily stopped reporting for work after receiving a verbal reprimand for his sales
performance; hence, it was he who was guilty of abandonment of employment. Respondent made an oral
manifestation that he was adopting the position paper he submitted to the labor arbiter, a position paper in
which the former claimed that he had been illegally dismissed. 12

On 12 January 2005, almost 12 years after the filing of the NCMB case, both parties appeared in a hearing
before the NCMB.13 Respondent manifested that he was willing to settle the case amicably with petitioner
based on the decision of the labor arbiter ordering the payment of separation pay in lieu of reinstatement,
backwages and attorney’s fees. On its part, petitioner made a counter-manifestation that it was likewise
amenable to settling the dispute. However, it was willing to pay only the separation pay and the sales
commission according to the Submission Agreement dated 19 April 1993. 14

The factual findings of the voluntary arbitrator, as well as of the CA, are not clear on what happened
afterwards. Even the records are bereft of sufficient information.

On 18 November 2005, the NCMB voluntary arbitrator rendered a Decision finding petitioner corporation
liable for illegal dismissal.15 The termination of respondent Albarico, by reason of alleged poor performance,
was found invalid.16 The arbitrator explained that the promotions, increases in salary, and awards received
by respondent belied the claim that the latter was performing poorly. 17 It was also found that Albarico could
not have abandoned his job, as the abandonment should have been clearly shown. Mere absence was not
sufficient, according to the arbitrator, but must have been accompanied by overt acts pointing to the fact
that the employee did not want to work anymore. It was noted that, in the present case, the immediate
filing of a complaint for illegal dismissal against the employer, with a prayer for reinstatement, showed that
the employee was not abandoning his work. The voluntary arbitrator also found that Albarico was dismissed
from his work without due process.

However, it was found that reinstatement was no longer possible because of the strained relationship of the
parties.18 Thus, in lieu of reinstatement, the voluntary arbitrator ordered the corporation to pay separation
pay for two years at P4,456 for each year, or a total amount of P8,912.

Additionally, in view of the finding that Albarico had been illegally dismissed, the voluntary arbitrator also
ruled that the former was entitled to backwages in the amount of P90,804. 19 Finally, the arbitrator awarded
attorney’s fees in respondent’s favor, because he had been compelled to file an action for illegal dismissal. 20

Petitioner corporation subsequently appealed to the CA, imputing to the voluntary arbitrator grave abuse of
discretion amounting to lack or excess of jurisdiction for awarding backwages and attorney’s fees to
respondent Albarico based on the former’s finding of illegal dismissal. 21 The arbitrator contended that the
issue of the legality of dismissal was not explicitly included in the Submission Agreement dated 19 April
1993 filed for voluntary arbitration and resolution. It prayed that the said awards be set aside, and that only
separation pay of P8,912.00 and sales commission of P4,787.60 be awarded.

The CA affirmed the Decision of the voluntary arbitrator, but eliminated the award of attorney’s fees for
having been made without factual, legal or equitable justification. 22 Petitioner’s Motion for Partial
Reconsideration was denied as well.23

Hence, this Petition.

ISSUE

The issue before the Court is whether the CA committed reversible error in finding that the voluntary
arbitrator properly assumed jurisdiction to decide the issue of the legality of the dismissal of respondent as
well as the latter’s entitlement to backwages, even if neither the legality nor the entitlement was
expressedly claimed in the Submission Agreement of the parties.

The Petition is denied for being devoid of merit.

DISCUSSION

Preliminarily, we address petitioner’s claim that under Article 217 of the Labor Code, original and exclusive
jurisdiction over termination disputes, such as the present case, is lodged only with the labor arbiter of the
NLRC.24
Petitioner overlooks the proviso in the said article, thus:cralavvonlinelawlibrary

Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

a. Except as otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission
of the case by the parties for decision without extension, even in the absence of stenographic
notes, the following cases involving all workers, whether agricultural or non-agricultural: cralavvonlinelawlibrary

xxxx

2. Termination disputes;

xxxx

6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for reinstatement.
(Emphases supplied)
Thus, although the general rule under the Labor Code gives the labor arbiter exclusive and original
jurisdiction over termination disputes, it also recognizes exceptions. One of the exceptions is provided in
Article 262 of the Labor Code. In San Jose v. NLRC,25 we said: cralavvonlinelawlibrary

The phrase “Except as otherwise provided under this Code” refers to the following
exceptions:cralavvonlinelawlibrary

A. Art. 217. Jurisdiction of Labor Arbiters . . .

xxxx

(c) Cases arising from the interpretation or implementation of collective bargaining agreement
and those arising from the interpretation or enforcement of company procedure/policies shall
be disposed of by the Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitrator as may be provided in said agreement.

B. Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel
of Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide
all other labor disputes including unfair labor practices and bargaining deadlocks.
(Emphasis supplied)
We also said in the same case that “[t]he labor disputes referred to in the same Article 262 [of the Labor
Code] can include all those disputes mentioned in Article 217 over which the Labor Arbiter has original and
exclusive jurisdiction.”26

From the above discussion, it is clear that voluntary arbitrators may, by agreement of the parties, assume
jurisdiction over a termination dispute such as the present case, contrary to the assertion of petitioner that
they may not.

We now resolve the main issue. Petitioner argues that, assuming that the voluntary arbitrator has
jurisdiction over the present termination dispute, the latter should have limited his decision to the issue
contained in the Submission Agreement of the parties – the issue of whether respondent Albarico was
entitled to separation pay and to the sales commission the latter earned before being terminated. 27Petitioner
asserts that under Article 262 of the Labor Code, the jurisdiction of a voluntary arbitrator is strictly limited to
the issues that the parties agree to submit. Thus, it contends that the voluntary arbitrator exceeded his
jurisdiction when he resolved the issues of the legality of the dismissal of respondent and the latter’s
entitlement to backwages on the basis of a finding of illegal dismissal.

According to petitioner, the CA wrongly concluded that the issue of respondent’s entitlement to separation
pay was necessarily based on his allegation of illegal dismissal, thereby making the issue of the legality of
his dismissal implicitly submitted to the voluntary arbitrator for resolution. 28 Petitioner argues that this was
an erroneous conclusion, because separation pay may in fact be awarded even in circumstances in which
there is no illegal dismissal.

We rule that although petitioner correctly contends that separation pay may in fact be awarded for reasons
other than illegal dismissal, the circumstances of the instant case lead to no other conclusion than that the
claim of respondent Albarico for separation pay was premised on his allegation of illegal dismissal. Thus, the
voluntary arbitrator properly assumed jurisdiction over the issue of the legality of his dismissal.

True, under the Labor Code, separation pay may be given not only when there is illegal dismissal. In fact, it
is also given to employees who are terminated for authorized causes, such as redundancy, retrenchment or
installation of labor-saving devices under Article 283 29 of the Labor Code. Additionally, jurisprudence holds
that separation pay may also be awarded for considerations of social justice, even if an employee has been
terminated for a just cause other than serious misconduct or an act reflecting on moral character. 30 The
Court has also ruled that separation pay may be awarded if it has become an established practice of the
company to pay the said benefit to voluntarily resigning employees 31 or to those validly dismissed for non-
membership in a union as required in a closed-shop agreement. 32

The above circumstances, however, do not obtain in the present case. There is no claim that the issue of
entitlement to separation pay is being resolved in the context of any authorized cause of termination
undertaken by petitioner corporation. Neither is there any allegation that a consideration of social justice is
being resolved here. In fact, even in instances in which separation pay is awarded in consideration of social
justice, the issue of the validity of the dismissal still needs to be resolved first. Only when there is already a
finding of a valid dismissal for a just cause does the court then award separation pay for reason of social
justice. The other circumstances when separation pay may be awarded are not present in this case.

The foregoing findings indisputably prove that the issue of separation pay emanates solely from
respondent’s allegation of illegal dismissal. In fact, petitioner itself acknowledged the issue of illegal
dismissal in its position paper submitted to the NCMB.

Moreover, we note that even the NLRC was of the understanding that the NCMB arbitration case sought to
resolve the issue of the legality of the dismissal of the respondent. In fact, the identity of the issue of the
legality of his dismissal, which was previously submitted to the NCMB, and later submitted to the NLRC, was
the basis of the latter’s finding of forum shopping and the consequent dismissal of the case before it. In fact,
petitioner also implicitly acknowledged this when it filed before the NLRC its Motion to Dismiss respondent’s
Complaint on the ground of forum shopping. Thus, it is now estopped from claiming that the issue before
the NCMB does not include the issue of the legality of the dismissal of respondent. Besides, there has to be
a reason for deciding the issue of respondent’s entitlement to separation pay. To think otherwise would lead
to absurdity, because the voluntary arbitrator would then be deciding that issue in a vacuum. The arbitrator
would have no basis whatsoever for saying that Albarico was entitled to separation pay or not if the issue of
the legality of respondent’s dismissal was not resolve first.

Hence, the voluntary arbitrator correctly assumed that the core issue behind the issue of separation pay is
the legality of the dismissal of respondent. Moreover, we have ruled in Sime Darby Pilipinas, Inc. v. Deputy
Administrator Magsalin33 that a voluntary arbitrator has plenary jurisdiction and authority to interpret an
agreement to arbitrate and to determine the scope of his own authority when the said agreement is vague
— subject only, in a proper case, to the certiorari jurisdiction of this Court.

Having established that the issue of the legality of dismissal of Albarico was in fact necessarily – albeit not
explicitly – included in the Submission Agreement signed by the parties, this Court rules that the voluntary
arbitrator rightly assumed jurisdiction to decide the said issue.

Consequently, we also rule that the voluntary arbitrator may award backwages upon a finding of illegal
dismissal, even though the issue of entitlement thereto is not explicitly claimed in the Submission
Agreement. Backwages, in general, are awarded on the ground of equity as a form of relief that restores the
income lost by the terminated employee by reason of his illegal dismissal. 34

In Sime Darby we ruled that although the specific issue presented by the parties to the voluntary arbitrator
was only “the issue of performance bonus,” the latter had the authority to determine not only the issue of
whether or not a performance bonus was to be granted, but also the related question of the amount of the
bonus, were it to be granted. We explained that there was no indication at all that the parties to the
arbitration agreement had regarded “the issue of performance bonus” as a two-tiered issue, of which only
one aspect was being submitted to arbitration. Thus, we held that the failure of the parties to limit the
issues specifically to that which was stated allowed the arbitrator to assume jurisdiction over the related
issue.

Similarly, in the present case, there is no indication that the issue of illegal dismissal should be treated as a
two-tiered issue whereupon entitlement to backwages must be determined separately. Besides, “since
arbitration is a final resort for the adjudication of disputes,” the voluntary arbitrator in the present case can
assume that he has the necessary power to make a final settlement. 35 Thus, we rule that the voluntary
arbitrator correctly assumed jurisdiction over the issue of entitlement of respondent Albarico to backwages
on the basis of the former’s finding of illegal dismissal.

WHEREFORE, premises considered, the instant Petition is DENIED. The 18 September 2007 Decision and
17 March 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 92526, are hereby AFFIRMED.

SO ORDERED.

G.R. No. 163768 March 27, 2007

JULIUS KAWACHI and GAYLE KAWACHI, Petitioners,

vs.

DOMINIE DEL QUERO and HON. JUDGE MANUEL R. TARO, Metropolitan Trial Court, Branch
43, Quezon City, Respondents.

DECISION

TINGA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, assailing two
resolutions of the Regional Trial Court (RTC), Branch 226, Quezon City which affirmed the
jurisdiction of the Metropolitan Trial Court (MeTC), Branch 42, Quezon City over private respondent’s
action for damages against petitioner.

The following factual antecedents are matters of record. 1ªvvphi1.nét

In an Affidavit-Complaint dated 14 August 2002, private respondent Dominie Del Quero charged A/J
Raymundo Pawnshop, Inc., Virgilio Kawachi and petitioner Julius Kawachi with illegal dismissal,
non-execution of a contract of employment, violation of the minimum wage law, and non-payment of
1
overtime pay. The complaint was filed before the National Labor Relations Commission (NLRC).

The complaint essentially alleged that Virgilio Kawachi hired private respondent as a clerk of the
pawnshop and that on certain occasions, she worked beyond the regular working hours but was not
paid the corresponding overtime pay.

The complaint also narrated an incident on 10 August 2002, wherein petitioner Julius Kawachi
scolded private respondent in front of many people about the way she treated the customers of the
pawnshop and afterwards terminated private respondent’s employment without affording her due
process.

On 7 November 2002, private respondent Dominie Del Quero filed an action for damages against
2
petitioners Julius Kawachi and Gayle Kawachi before the MeTC of Quezon City. The complaint,
which was docketed as Civil Case No. 29522, alleged the following:

2. That the Plaintiff was employed as a clerk in the pawnshop business office of the Defendants
otherwise known as the A/J RAYMUNDO PAWNSHOP, INC. located (sic) and with principal office
address at Unit A Virka Bldg. Edsa Corner Roosevelt[,] Quezon City, from May 27, 2002 to August
10, 2002;

3. That on August 10, 2002 at or about 11:30 AM, the Plaintiff was admonished by the Defendants
Julius Kawachi and Gayle Kawachi who are acting as manager and assistant manager respectively
of the pawnshop business and alternately accused her of having committed an act which she had
not done and was scolded in a loud voice in front of many employees and customers in their offices;

4. That further for no apparent reason the Plaintiff was ordered to get out and leave the pawnshop
office and was told to wait for her salary outside the office when she tried to explain that she had no
fault in the complaint of the customer, (sic) [H]owever[,] her explanation fell on deaf ears;

5. That she was instantly dismissed from her job without due process;

6. That the incident happened in front of many people which caused the Plaintiff to suffer serious
embarrassment and shame so that she could not do anything but cry because of the shameless way
3
by which she was terminated from the service; x x x

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

Petitioners moved for the dismissal of the complaint on the grounds of lack of jurisdiction and forum-
shopping or splitting causes of action. At first, the MeTC granted petitioners’ motion and ordered the
4
dismissal of the complaint for lack of jurisdiction in an Order dated 2 January 2003. Upon private
respondent’s motion, the MeTC reconsidered and set aside the order of dismissal in an Order dated
5
3 March 2003. It ruled that no causal connection appeared between private respondent’s cause of
action and the employer-employee relations between the parties. The MeTC also rejected
6
petitioners’ motion for reconsideration in an Order dated 22 April 2003.

Thus, petitioners elevated the MeTC’s aforesaid two orders to the RTC, Branch 226 of Quezon City,
via a Petition for Certiorari (With Prayer for Temporary Restraining Order and/or Preliminary
Injunction). After due hearing, the RTC declined petitioners’ prayer for a temporary restraining order.
For her part, private respondent filed a Motion to Dismiss Petition.

On 20 October 2003, the RTC issued the assailed Resolution, upholding the jurisdiction of the MeTC
7
over private respondent’s complaint for damages.

The RTC held that private respondent’s action for damages was based on the alleged tortious acts
committed by her employers and did not seek any relief under the Labor Code. The RTC cited the
8
pronouncement in Medina, et al. v. Hon. Castro-Bartolome, etc., et al. where the Court held that the
employee’s action for damages based on the slanderous remarks uttered by the employer was
within the regular courts’ jurisdiction since the complaint did not allege any unfair labor practice on
the part of the employer.

9
On 29 March 2004, the RTC denied petitioners’ motion for reconsideration. Hence, the instant
petition for review on certiorari, raising the sole issue of jurisdiction over private respondent’s
complaint for damages.

Petitioners argue that the NLRC has jurisdiction over the action for damages because the alleged
injury is work-related. They also contend that private respondent should not be allowed to split her
causes of action by filing the action for damages separately from the labor case.

Private respondent maintains that there is no causal connection between her cause of action and the
employer-employee relations of the parties.

The petition is meritorious.

The jurisdictional controversy of the sort presented in this case has long been settled by this Court.

Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and
exclusive jurisdiction over claims for damages arising from employer-employee relations —in other
words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by labor laws, but also
10
damages governed by the Civil Code.

11
In the 1999 case of San Miguel Corporation v. Etcuban, the Court noted what was then the current
trend, and still is, to refer worker-employer controversies to labor courts, unless unmistakably
provided by the law to be otherwise. Because of the trend, the Court noted further, jurisprudence has
developed the "reasonable causal connection rule." Under this rule, if there is a reasonable causal
connection between the claim asserted and the employer-employee relations, then the case is within
the jurisdiction of our labor courts. In the absence of such nexus, it is the regular courts that have
12
jurisdiction.

13
In San Miguel Corporation, the Court upheld the labor arbiter’s jurisdiction over the employees’
separate action for damages, which also sought the nullification of the so-called "contract of
termination" and noted that the allegations in the complaint were so carefully formulated as to avoid
a semblance of employer-employee relations.

In said case, the employees of San Miguel Corporation (SMC) availed of the "Retrenchment to
Prevent Loss Program." After their inclusion in the retrenchment program, the employees were given
their termination letters and separation pay. In return, the employees executed "receipt and release"
documents in favor of the company. Subsequently, the employees learned that the company was
never in financial distress and was engaged in hiring new employees. Thus, they filed a complaint

before the NLRC for the declaration of nullity of the retrenchment program and prayed for
reinstatement, backwages and damages. After the labor arbiter dismissed the complaint, the
employees filed an action for damages before the RTC, alleging the deception employed upon them
by SMC which led to their separation from the company. They sought the declaration of nullity of
their so-called collective "contract of termination" and the recovery of actual and compensatory
damages, moral damages, exemplary damages, and attorney’s fees.
The Court held that the employees’ claim for damages was intertwined with their having been
separated from their employment without just cause and, consequently, had a reasonable causal
connection with their employer-employee relations with petitioner. The Court explained in this
manner:

x x x First, their claim for damages is grounded on their having been deceived into serving their
employment due to SMC’s concocted financial distress and fraudulent retrenchment program—a
clear case of illegal dismissal. Second, a comparison of respondents’ complaint for the declaration of
nullity of the retrenchment program before the labor arbiter and the complaint for the declaration of
nullity of their "contract of termination" before the RTC reveals that the allegations and prayer of the
former are almost identical with those of the latter except that the prayer for reinstatement was no
longer included and the claim for backwages and other benefits was replaced with a claim for actual
damages. These are telltale signs that respondents’ claim for damages is intertwined with their
having been separated from their employment without just cause and, consequently, has a
reasonable causal connection with their employer-employee relations with SMC. Accordingly, it
cannot be denied that respondents’ claim falls under the jurisdiction of the labor arbiter as provided
14
in paragraph 4 of Article 217.

The "reasonable causal connection rule" emerged in the 1987 case of Primero v. Intermediate
15
Appellate Court, where the Court recognized the jurisdiction of the labor arbiters over claims for
damages in connection with termination of employment, thus:

It is clear that the question of the legality of the act of dismissal is intimately related to the issue of
the legality of the manner by which that act of dismissal was performed. But while the Labor Code
treats of the nature of, and the remedy available as

regards the first – the employee’s separation from employment – it does not at all deal with the
second – the manner of that separation – which is governed exclusively by the Civil Code. In
addressing the first issue, the Labor Arbiter applies the Labor Code; in addressing the second, the
Civil Code. And this appears to be the plain and patent intendment of the law. For apart from the
reliefs expressly set out in the Labor Code flowing from illegal dismissal from employment, no other
damages may be awarded to an illegally dismissed employee other than those specified by the Civil
Code. Hence, the fact that the issue—of whether or not moral or other damages were suffered by an
employee and in the affirmative, the amount that should properly be awarded to him in the
circumstances—is determined under the provisions of the Civil Code and not the Labor Code,
obviously was not meant to create a cause of action independent of that for illegal dismissal and
16
thus place the matter beyond the Labor Arbiter’s jurisdiction.

In the instant case, the allegations in private respondent’s complaint for damages show that her
injury was the offshoot of petitioners’ immediate harsh reaction as her administrative superiors to the
supposedly sloppy manner by which she had discharged her duties.

Petitioners’ reaction culminated in private respondent’s dismissal from work in the very same
incident. The incident on 10 August 2002 alleged in the complaint for damages was similarly
narrated in private respondent’s Affidavit-Complaint supporting her action for illegal dismissal before
the NLRC. Clearly, the alleged injury is directly related to the employer-employee relations of the
parties.

Where the employer-employee relationship is merely incidental and the cause of action proceeds
from a different source of obligation, the Court has not hesitated to uphold the jurisdiction of the
regular

courts. Where the damages claimed for were based on tort, malicious prosecution, or breach of
contract, as when the claimant seeks to recover a debt from a former employee or seeks liquidated
17
damages in the enforcement of a prior employment contract, the jurisdiction of regular courts was
upheld. The scenario that obtains in this case is obviously different. The allegations in private
respondent’s complaint unmistakably relate to the manner of her alleged illegal dismissal.

For a single cause of action, the dismissed employee cannot be allowed to sue in two forums: one,
before the labor arbiter for reinstatement and recovery of back wages or for separation pay, upon the
theory that the dismissal was illegal; and two, before a court of justice for recovery of moral and
other damages, upon the theory that the

manner of dismissal was unduly injurious or tortious. Suing in the manner described is known as
"splitting a cause of action," a practice engendering multiplicity of actions. It is considered
18
procedurally unsound and obnoxious to the orderly administration of justice.

In the instant case, the NLRC has jurisdiction over private respondent’s complaint for illegal
dismissal and damages arising therefrom. She cannot be allowed to file a separate or independent
civil action for damages where the alleged injury has a reasonable connection to her termination
from employment. Consequently, the action for damages filed before the MeTC must be dismissed.

WHEREFORE, the petition for review on certiorari is GRANTED. The two Resolutions dated 20
October 2003 and 29 March 2004 of the Regional Trial Court, Branch 226, Quezon City are
REVERSED and SET ASIDE. Costs against private respondent.

SO ORDERED.

THIRD DIVISION

[G.R. No. 200476 : April 18, 2012]

GILDA G. LUNZAGA v. ALBAR SHIPPING AND TRADING CORP. AND/OR AKIRA

KATO, AND DARWIN, VENUS, ROMEO ULYSSES, MARIKIT ODESSA, ALL
SURNAMED LUNZAGA

Sirs/Mesdames:

Please take notice that the Court, Third Division, issued a Resolution dated 18 April
2012, which reads as follows:

G.R. No. 200476 (Gilda G. Lunzaga v. Albar Shipping and Trading Corp. and/or Akira
Kato, and Darwin, Venus, Romeo Ulysses, Marikit Odessa, all surnamed Lunzaga)

RESOLUTION

Before the Court is a Petition for Review on Certiorari under Rule 45, assailing the July
21, 2011 Decision[1]and February 2, 2012 Resolution[2] of the Court of Appeals (CA) in
CA-G.R. SP No. 116476. The CA Decision upheld the Decision dated April 30, 2010 [3] of
the National Labor Relations Commission (NLRC), which dismissed the appeal of
petitioner for having been filed out of time. The CA Decision, in effect, affirmed the
Order dated August 28, 2009[4] of the Labor Arbiter, which ruled that jurisdiction over
the instant controversy is with the regular courts and not with the NLRC, the dispositive
portion of which reads:

WHEREFORE PREMISES CONSIDERED the parties are directed to ventilate

their conflict before the regular court to determine who the rightful heirs to
receive the disability benefits.

For the meantime instant case is temporarily dismissed.

SO ORDERED.

The facts of the case are as follows:

Romeo Lunzaga (Romeo) was a seaman working for respondent Albar Shipping and
Trading Corp. (Albar). On June 11, 2008, Romeo was assigned as Chief Engineer on
board Albar's Philippine vessel MV Lake Aru by virtue of a Philippine Overseas
Employment Administration-approved employment contract. One month later, Romeo
suffered a heart attack and was repatriated to the Philippines only to die on September
5, 2008.

Sometime in early 2009, Gilda G. Lunzaga (Gilda), claiming to be the surviving spouse
of Romeo, filed with the NLRC a complaint against Albar for payment of death benefits,
damages and attorney's fees. It should be noted that Gilda was the designated heir in
Romeo's Overseas Filipino Worker Verification Sheet and PhilHealth Information Sheet.
Darwin Lunzaga, Venus Lunzaga, Romeo Ulysses Lunzaga, and Marikit Odessa Lunzaga
(Lunzaga siblings), the children of Romeo from his first marriage that was judicially
declared null and void, opposed the complaint through a complaint-in-intervention. The
Lunzaga siblings claimed that Gilda is not entitled to the death benefits of Romeo, as
she had a subsisting marriage when she married him. They claim that her marriage
with Romeo was, therefore, bigamous. During the mandatory conferences of the parties
before the Labor Arbiter, Albar signified its willingness to pay Romeo's death benefits in
the amount of USD 55,547.44. However, Gilda and the Lunzaga siblings could not agree
as to the sharing of the benefits.

Thus, on August 28, 2009, the Labor Arbiter issued an Order temporarily dismissing the
complaint and directing the parties to file their case with the regular courts. Gilda
received a copy of the August 28, 2009 Order of the Labor Arbiter on September 28,
2009. Gilda's appeal to the NLRC was, however, filed only on October 9, 2009, one day
past the 10-day period for filing an appeal from the decision of the Labor Arbiter. Thus,
the NLRC rendered a Decision dated April 30, 2010, dismissing the appeal for having
been filed beyond the reglementary period.

On appeal, the CA rendered the July 21, 2011 Decision, ruling that the petition is
devoid of merit. The CA ruled that despite the fact that the appeal to the NLRC was filed
only one day beyond the reglementary period, Gilda failed to present any reason for the
liberal application of the rule on filing of appeals. The CA wrote, "Indeed, the matter of
the parties' entitlement is inherently intertwined with their status as legal heirs of
Romeo Lunzaga. Clearly, this is a matter not within the competence of the Labor Arbiter
to decide."[5]

Gilda's motion for reconsideration of the Decision of the CA was denied in its February
2, 2012 Resolution. Hence, We have this petition.
We agree with the pronouncement of the Labor Arbiter and the CA that the issue of who
is the proper beneficiary of Romeo is properly within the jurisdiction of the regular
courts. However, this is not the only issue in the instant petition.

A review of the records of the case reveals that the main issue in the complaint before
the Labor Arbiter was whether the heirs of Romeo are entitled to receive his death
benefits from Albar. Clearly, the Labor Arbiter has jurisdiction over this issue and the
case itself, involving as it does a claim arising from an employer-employee relationship.
And while the Labor Arbiter has no jurisdiction to determine who among the alleged
heirs is entitled to receive Romeo's death benefits, it should have made a ruling holding
Albar liable for the claim.

In this light, substantial justice and fair play dictate that the Court reconsider the
August 28, 2009 Order of the Labor Arbiter, the April 30, 2010 Decision of the NLRC,
and the July 21, 2011 Decision and February 2, 2012 Resolution of the CA.

With regard to the dismissal of the appeal by the NLRC on the ground that it was filed
one (1) day past the reglementary period, We rule that the ends of justice would be
best served with the admission of the appeal for the complete ventilation of the issues
in the case. Considering that Albar admitted its liability to the heirs of Romeo for his
death benefits, the NLRC should have given due course to the meritorious appeal. Thus,
this Court ruled in Chronicle Securities Corporation v. National Labor Relations
Commission:[6]

In not a few instances, we relaxed the rigid application of the rules of

procedure to afford the parties the opportunity to fully ventilate their cases
on the merits. This is in line with the time honored principle that cases
should be decided only after giving all parties the chance to argue their
causes and defenses. Technicality and procedural imperfections should thus
not serve as bases of decisions. In that way, the ends of justice would be
better served. For indeed, the general objective of procedure is to facilitate
the application of justice to the rival claims of contending parties, bearing
always in mind that procedure is not to hinder but to promote the
administration of justice.

In Philippine National Bank, et al. v. Court of Appeals, we allowed, in the

higher interest of justice, an appeal filed three days late.

In Republic v. Court of Appeals, we ordered the Court of Appeals to

entertain an appeal filed six days after the expiration of the [reglementary]
period; while in Siguenza v. Court of Appeals, we accepted an appeal filed
thirteen days late. Likewise, in Olacao v. NLRC, we affirmed the respondent
Commission's order giving due course to a tardy appeal "to forestall the
grant of separation pay twice" since the issue of separation pay had been
judicially settled with finality in another case. All of the aforequoted rulings
were reiterated in our 2001 decision in the case of Equitable PCI Bank v. Ku.

Notably, in Philippine National Bank v. Court of Appeals,[7] the Court cited the following
cases, applicable to the instant controversy:

It has been said this time and again that the perfection of an appeal within
 the period fixed by the rules is mandatory and jurisdictional. But, it is
always in the power of this Court to suspend its own rules, or to except a
particular case from its operation, whenever the purposes of justice require
it. Strong compelling reasons such as serving the ends of justice and
preventing a grave miscarriage thereof warrant the suspension of the rules.

xxxx

In Siguenza vs. Court of Appeals, the appeal which was perfected

thirteen days late was permitted, "since on its face the appeal
appeared to be impressed with merit." x x x

xxxx

In Cortes vs. Court of Appeals, the counsel of record of a party failed to

withdraw his appearance as such when he was appointed as Judge of the
RTC of Dumaguete City. Thus, the copy of the adverse decision was still
served at his address of record in Cebu City on 28 February 1983. He was at
the time in Dumaguete City and learned of the decision only on 8 March
1983 when he came home to Cebu City. He right away informed his client
through a telegram, which reached the latter's office in Zamboanga City at a
time when he was out on official business and which came to his knowledge
only a few days later. It was only on 22 March 1983 that a notice of appeal
was filed by his new lawyer. This Court held that the seven-day delay is
excusable, and that the appeal, being ostensibly meritorious,
deserves to be given due course. (Emphasis supplied.)

Evidently, the NLRC and the CA erred in not giving due course to the appeal due to a
one (l)-day delay of its filing, considering the apparent merit of the appeal as shown by
the admission of Albar.

Verily, Albar is liable to the heirs of Romeo for the amount of USD 55,547.44. Albar
hereby is ordered to deposit this amount in an escrow account under the control of the
NLRC in order to protect the interests of Romeo's heirs. The parties claiming to be the
beneficiaries of Romeo are directed to file the appropriate action with a trial court to
determine the true and legal heirs of Romeo entitled to receive the disability benefits.
The amount in the escrow account will only be released to the legal heirs per the
decision of a trial court.

WHEREFORE, the instant petition is GRANTED. The July 21, 2011 Decision and
February 2, 2012 Resolution of the CA in CA-G.R. SP No. 116476, the Decision dated
April 30, 2010 of the NLRC, and the Order dated August 28, 2009 of the Labor Arbiter
dismissing the complaint of petitioner Gilda G. Lunzaga are hereby REVERSED and SET
ASIDE.

Further, respondent Albar Shipping and Trading Corp. is hereby ORDERED to pay the
heirs of Romeo Lunzaga the amount of USD 55,547.44 and to deposit in escrow the
said amount with the NLRC in a bank account in trust for the heirs of Romeo Lunzaga.
The said amount shall only be released to the legal beneficiaries of Romeo adjudged as
such by a trial court in the appropriate action to determine his legal heirs.

SO ORDERED.
 THIRD DIVISION

G.R. Nos. 178382-83, September 23, 2015

CONTINENTAL MICRONESIA, INC., Petitioner, v. JOSEPH BASSO, Respondent.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the levised Rules of Court assailing the Decision 2
dated May 23, 2006 and Resolution 3 dated June 19, 2007 of the Court of Appeals in the consolidated cases
CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281. These assailed Decision and Resolution set aside the
Decision4 dated November 28, 2003 of the National Labor Relations Commission (NLRC) declaring Joseph
Basso's (Basso) dismissal illegal, and ordering the payment of separation pay as alternative to reinstatement
and full backwages until the date of the Decision.

The Facts

Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and existing under the laws
of and domiciled in the United States of America (US). It is licensed to do business in the Philippines. 5 Basso,
a US citizen, resided in the Philippines prior to his death.6

During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing Director-Asia of Continental
Airlines, Inc. (Continental), offered Basso the position of General Manager of the Philippine Branch of
Continental. Basso accepted the offer.7

It was not until much later that Mr. Braden, who had since returned to the US, sent Basso the employment
contract8 dated February 1, 1991, which Mr. Braden had already signed. Basso then signed the employment
contract and returned it to Mr. Braden as instructed.

On November 7, 1992, CMI took over the Philippine operations of Continental, with Basso retaining his
position as General Manager.9

On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz), who was then CMI's
Vice President of Marketing and Sales, informing Basso that he has agreed to work in CMI as a consultant on
an "as needed basis" effective February 1, 1996 to July 31, 1996. The letter also informed Basso that: (1)
he will not receive any monetary compensation but will continue being covered by the insurance provided by
CMI; (2) he will enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the payment of
housing lease for 12 months.10

On January 11, 1996, Basso wrote a counter-proposal 11 to Mr. Schulz regarding his employment status in
CMI. On March 14, 1996, Basso wrote another letter addressed to Ms. Marty Woodward (Ms. Woodward) of
CMI's Human Resources Department inquiring about the status of his employment. 12 On the same day, Ms.
Woodward responded that pursuant to the employment contract dated February 1, 1991, Basso could be
terminated at will upon a thirty-day notice. This notice was allegedly the letter Basso received from Mr.
Schulz on December 20, 1995. Ms. Woodward also reminded Basso of the telephone conversation between
him, Mr. Schulz and Ms. Woodward on December 19, 1995, where they informed him of the company's
decision to relieve him as General Manager. Basso, instead, was offered the position of consultant to CMI.
Ms. Woodward also informed Basso that CMI rejected his counter-proposal and, thus, terminated his
employment effective January 31, 1996. CMI offered Basso a severance pay, in consideration of the
Php1,140,000.00 housing advance that CMI promised him.13

Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary Damages against CMI on December
19, 1996.14 Alleging the presence of foreign elements, CMI filed a Motion to Dismiss 15 dated February 10,
1997 on the ground of lack of jurisdiction over the person of CMI and the subject matter of the controversy.
In an Order16 dated August 27, 1997, the Labor Arbiter granted the Motion to Dismiss. Applying the doctrine
of lex loci contractus, the Labor Arbiter held that the terms and provisions of the employment contract show
that the parties did not intend to apply our Labor Code (Presidential Decree No. 442). The Labor Arbiter also
held that no employer-employee relationship existed between Basso and the branch office of CMI in the
Philippines, but between Basso and the foreign corporation itself.

On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of certain facts to settle
the issue on jurisdiction. NLRC ruled that the issue on whether the principle of lex loci contractus or lex loci
celebrationis should apply has to be further threshed out. 17

Labor Arbiter's Ruling

Labor Arbiter Madjayran H. Ajan in his Decision 18 dated September 24, 1999 dismissed the case for lack of
merit and jurisdiction.

The Labor Arbiter agreed with CMI that the employment contract was xecuted in the US "since the letter-
offer was under the Texas letterhead and the acceptance of Complainant was returned there." 19 Thus,
applying the doctrine of lex loci celebrationis, US laws apply. Also, applying lex loci contractus, the Labor
Arbiter ruled that the parties did not intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that Philippine laws
were not written into it. More specifically, the Philippine law on taxes and the Labor Code were
not intended by the parties to apply, otherwise Par. 7 on the payment by Complainant U.S.
Federal and Home State income taxes, and Pars. 22/23 on termination by 30-day prior notice,
will not be there. The contract was prepared in contemplation of Texas or U.S. laws where Par.
7 is required and Pars. 22/23 is allowed.20
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the allegations of CMI
that Basso committed a series of acts that constitute breach of trust and loss of confidence. 21

The Labor Arbiter, however, found CMI to have voluntarily submitted to his office's jurisdiction. CMI
participated in the proceedings, submitted evidence on the merits of the case, and sought affirmative relief
through a motion to dismiss.22

NLRC's Ruling

On appeal, the NLRC Third Division promulgated its Decision 23 dated November 28, 2003, the decretal
portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE. Respondent
CMI is ordered to pay complainant the amount of US$5,416.00 for failure to comply with the
due notice requirement. The other claims are dismissed.

SO ORDERED.24
The NLRC did not agree with the pronouncement of the Labor Arbiter that his office has no jurisdiction over
the controversy. It ruled that the Labor Arbiter acquired jurisdiction over the case when CMI voluntarily
submitted to his office's jurisdiction by presenting evidence, advancing arguments in support of the legality
of its acts, and praying for reliefs on the merits of the case.25
cralawred

On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for just and valid causes on
the ground of breach of trust and loss of confidence. The NLRC ruled that under the applicable rules on loss
of trust and confidence of a managerial employee, such as Basso, mere existence of a basis for believing
that such employee has breached the trust of his employer suffices. However, the NLRC found that CMI
denied Basso the required due process notice in his dismissal. 26

Both CMI and Basso filed their respective Motions for Reconsideration dated January 15, 2004 27 and January
8, 2004.28 Both motions were dismissed in separate Resolutions dated March 15, 2004 29 and February 27,
2004,30 respectively.

Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals docketed as CA-G.R. SP
No. 83938.31 Basso imputed grave abuse of discretion on the part of the NLRC in ruling that he was validiy
dismissed. CMI filed its own Petition for Certiorari dated May 13, 2004 docketed as CA-G.R. SP No. 84281, 32
alleging that the NLRC gravely abused its discretion when it assumed jurisdiction over the person of CMI and
the subject matter of the case.

In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two cases 33 and ordered the
parties to file their respective Memoranda.

The Court of Appeal's Decision

The Court of Appeals promulgated the now assailed Decision 34 dated May 23, 2006, the relevant dispositive
portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is DENIED DUE
COURSE and DISMISSED.

On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN DUE
COURSE and GRANTED, and accordingly, the assailed Decision dated November 28, 2003
and Resolution dated February 27, 2004 of the NLRC are SET ASIDE and VACATED. Instead
judgment is rendered hereby declaring the dismissal of Basso illegal and ordering Continental
to pay him separation pay equivalent to one (1) month pay for every year of service as an
alternative to reinstatement. Further, ordering Continental to pay Basso his full backwages
from the date of his said illegal dismissal until date of this decision. The claim for moral and
exemplary damages as well as attorney's fees are dismissed. 35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over the subject matter of
the case and over the parties. The Court of Appeals explained that jurisdiction over the subject matter of the
action is determined by the allegations of the complaint and the law. Since the case filed by Basso is a
termination dispute that is "undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC
had jurisdiction to rule on the merits of the case. On the issue of jurisdiction over he person of the parties,
who are foreigners, the Court of Appeals ruled that jurisdiction over the person of Basso was acquired when
he filed the complaint for illegal dismissal, while jurisdiction over the person of CMI was acquired through
coercive process of service of summons to its agent in the Philippines. The Court of Appeals also agreed that
the active participation of CMI in the case rendered moot the issue on jurisdiction.

On the merits of the case, the Court of Appeals declared that CMI illegally dismissed Basso. The Court of
Appeals found that CMI's allegations of loss of trust and confidence were not established. CMI "failed to
prove its claim of the incidents which were its alleged bases for loss of trust or confidence." 36 While
managerial employees can be dismissed for loss of trust and confidence, there must be a basis for such loss,
beyond mere whim or caprice.

After the parties filed their Motions for Reconsideration, 37 the Court of Appeals promulgated
Resolution38dated June 19, 2007 denying CMI's motion, while partially granting Basso's as to the
computation of backwages.

Hence, this petition, which raises the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE FACTUAL FINDINGS
OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO WHETHER OR NOT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION.

II.
 WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE LABOR ARBITER
AND THE NLRC HAD JURISDICTION TO HEAR AND TRY THE ILLEGAL DISMISSAL CASE.

III.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT BASSO WAS NOT
VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in the illegal dismissal
case. The first and third issues will be discussed jointly.

The labor tribunals had jurisdiction over the parties and the subject matter of the case.

CMI maintains that there is a conflict-of-laws issue that must be settled to determine proper jurisdiction
over the parties and the subject matter of the case. It also alleges that the existence of foreign elements
calls or the application of US laws and the doctrines of lex loci celebrationis (the law of the place of the
ceremony), lex loci contractus (law of the place where a contract is executed), and lex loci intentionis(the
intention of the parties as to the law that should govern their agreement). CMI also invokes the application
of the rule of forum non conveniens to determine the propriety of the assumption of jurisdiction by the labor
tribunals.

We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first. Where the facts
establish the existence of foreign elements, he case presents a conflict-of-laws issue. 39 The foreign element
in a case nay appear in different forms, such as in this case, where one of the parties s an alien and the
other is domiciled in another state.

In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-of-laws problems, three
consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of judgments.
In resolving the conflicts problem, courts should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this case?

2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?

3. "If the answer is yes, what is the conflicts rule for this particular problem?

4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and proved
by the one invoking it?

5. "If so, is the application or enforcement of the foreign law in the forum one of the basic
exceptions to the application of foreign law? In short, is there any strong policy or vital
interest of the forum that is at stake in this case and which should preclude the application of
foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and decide cases. Jurisdiction
over the subject matter is conferred by the Constitution or by law and by the material allegations in the
complaint, regardless of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs
sought therein.42 It cannot be acquired through a waiver or enlarged by the omission of the parties or
conferred by the acquiescence of the court. 43 That the employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US, do not automatically preclude
our labor tribunals from exercising jurisdiction to hear and try this case.

This case stemmed from an illegal dismissal complaint. The Labor Code, under Article 217, clearly vests
original and exclusive jurisdiction to hear and decide cases involving termination disputes to the Labor
Arbiter. Hence, the Labor Arbiter and the NLRC have jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the Labor Arbiter acquired
jurisdiction over the person of Basso, notwithstanding his citizenship, when he filed his complaint against
CMI. On the other hand, jurisdiction over the person of CMI was acquired through the coercive process of
service of summons. We note that CMI never denied that it was served with summons. CMI has, in fact,
voluntarily appeared and participated in the proceedings before the courts. Though a foreign corporation,
CMI is licensed to do business in the Philippines and has a local business address here. The purpose of the
law in requiring that foreign corporations doing business in the country be licensed to do so, is to subject the
foreign corporations to the jurisdiction of our courts.44

Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and the subject matter of
this case, these tribunals may proceed to try the case even if the rules of conflict-of-laws or the convenience
of the parties point to a foreign forum, this being an exercise of sovereign prerogative of the country where
the case is filed.45

The next question is whether the local forum is the convenient forum in light of the facts of the case. CMI
contends that a Philippine court is an inconvenient forum.

We disagree.

Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws case may assume
jurisdiction if it chooses to do so, provided, that the following requisites are met: (1) that the Philippine
Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is likely to
have power to enforce its decision.46 All these requisites are present here.

Basso may conveniently resort to our labor tribunals as he and CMI lad physical presence in the Philippines
during the duration of the trial. CMI has a Philippine branch, while Basso, before his death, was residing
here. Thus, it could be reasonably expected that no extraordinary measures were needed for the parties to
make arrangements in advocating their respective cases.

The labor tribunals can make an intelligent decision as to the law and facts. The incident subject of this case
(i.e. dismissal of Basso) happened in the Philippines, the surrounding circumstances of which can be
ascertained without having to leave the Philippines. The acts that allegedly led to loss of trust and
confidence and Basso's eventual dismissal were committed in the Philippines. As to the law, we hold that
Philippine law is the proper law of he forum, as we shall discuss shortly. Also, the labor tribunals have the
power to enforce their judgments because they acquired jurisdiction over the persons of both parties.

Our labor tribunals being the convenient fora, the next question is what law should apply in resolving this
case.

The choice-of-law issue in a conflict-of-laws case seeks to answer the following important questions: (1)
What legal system should control a given situation where some of the significant facts occurred in two or
more states; and (2) to what extent should the chosen legal system regulate the situation. 47 These
questions are entirely different from the question of jurisdiction that only seeks to answer whether the
courts of a state where the case is initiated have jurisdiction to enter a judgment. 48 As such, the power to
exercise jurisdiction does not automatically give a state constitutional authority to apply forum law. 49

CMI insists that US law is the applicable choice-of-law under the principles of lex loci celebrationis and lex
loci contractus. It argues that the contract of employment originated from and was returned to the US after
Basso signed it, and hence, was perfected there. CMI further claims that the references to US law in the
employment contract show the parties' intention to apply US law and not ours. These references are:

1. Foreign station allowance of forty percent (40%) using the "U.S. State Department Index, the base
being Washington, D.C."
 2. Tax equalization that made Basso responsible for "federal and any home state income taxes."

3. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S. Department of State
Indexes of living costs abroad."

4. The employment arrangement is "one at will, terminable by either party without any further liability
on thirty days prior written notice."50

CMI asserts that the US law on labor relations particularly, the US Railway Labor Act sanctions termination-
at-will provisions in an employment contract. Thus, CMI concludes that if such laws were applied, there
would have been no illegal dismissal to speak of because the termination-at-will provision in Basso's
employment contract would have been perfectly valid.

We disagree.

In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an essential element of conflict rules is
the indication of a "test" or "connecting factor" or "point of contact". Choice-of-law rules invariably consist of
a factual relationship (such as property right, contract claim) and a connecting fact or point of contact, such
as the situs of the res, the place of celebration, the place of performance, or the place of wrongdoing.
Pursuant to Saudi Arabian Airlines, we hold that the "test factors," "points of contact" or "connecting factors"
in this case are the following: chanRoblesvirt ualLawlibrary

(1) The nationality, domicile or residence of Basso; ChanRoblesVirtualawlibrary

(2) The seat of CMI; ChanRoblesVirtualawlibrary

(3) The place where the employment contract has been made, the locus actus; ChanRoblesVirtualawlibrary

(4) The place where the act is intended to come into effect, e.g., the place of performance of contractual
duties; ChanRoblesVirtualawlibrary

(5) The intention of the contracting parties as to the law that should govern their agreement, the lex loci
intentionis; and

(6) The place where judicial or administrative proceedings are instituted or done. 52

Applying the foregoing in this case, we conclude that Philippine law the applicable law. Basso, though a US
citizen, was a resident here from he time he was hired by CMI until his death during the pendency of the
case. CMI, while a foreign corporation, has a license to do business in the Philippines and maintains a branch
here, where Basso was hired to work. The contract of employment was negotiated in the Philippines. A
purely consensual contract, it was also perfected in the Philippines when Basso accepted the terms and
conditions of his employment as offered by CMI. The place of performance relative to Biasso's contractual
duties was in the Philippines. The alleged prohibited acts of Basso that warranted his dismissal were
committed in the Philippines.

Clearly, the Philippines is the state with the most significant relationship to the problem. Thus, we hold that
CMI and Basso intended Philippine law to govern, notwithstanding some references made to US laws and the
fact that this intention was not expressly stated in the contract. We explained in Philippine Export and
Foreign Loan Guarantee Corporation v. V. P. Eusebio Construction, Inc. 53 that the law selected may be
implied from such factors as substantial connection with the transaction, or the nationality or domicile of the
parties.54 We cautioned, however, that while Philippine courts would do well to adopt the first and most basic
rule in most legal systems, namely, to allow the parties to select the law applicable to their contract, the
selection is subject to the limitation that it is not against the law, morals, or public policy of the forum. 55
Similarly, in Bank of America, NT&SA v. American Realty Corporation,56 we ruled that a foreign law,
judgment or contract contrary to a sound and established public policy of the forum shall not be applied.
Thus:
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection espoused by our laws and
Constitution, which dictates that no worker shall be dismissed except for just and authorized causes
provided by law and after due process having been complied with. 58 Hence, the US Railway Labor Act, which
sanctions termination-at-will, should not be applied in this case.

Additionally, the rule is that there is no judicial notice of any foreign law. As any other fact, it must be
alleged and proved.59 If the foreign law is not properly pleaded or proved, the presumption of identity or
similarity of the foreign law to our own laws, otherwise known as processual presumption, applies. Here, US
law may have been properly pleaded but it was not proved in the labor tribunals.

Having disposed of the issue on jurisdiction, we now rule on the first and third issues.

The Court of Appeals may review the factual findings of the NLRC in a Rule 65 petition.

CMI submits that the Court of Appeals overstepped the boundaries of the limited scope of its
certiorarijurisdiction when instead of ruling on the existence of grave abuse of discretion, it proceeded to
pass upon the legality and propriety of Basso's dismissal. Moreover, CMI asserts that it was error on the part
of the Court of Appeals to re-evaluate the evidence and circumstances surrounding the dismissal of Basso.

We disagree.

The power of the Court of Appeals to review NLRC decisions via a Petition for Certiorari under Rule 65 of the
Revised Rules of Court was settled in our decision in St. Martin Funeral Home v. NLRC.60 The general rule is
that certiorari does not lie to review errors of judgment of the trial court, as well as that of a quasi-judicial
tribunal. In certiorari proceedings, judicial review does not go as far as to examine and assess the evidence
of the parties and to weigh their probative value. 61 However, this rule admits of exceptions. In Globe
Telecom, Inc. v. Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave abuse of discretion on the part of the labor
tribunal. Hence, the Court refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court
is constrained to delve into factual matters where, as in the instant case, the findings of the
NLRC contradict those of the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction may look into the records of
the case and re-examine the questioned findings. As a corollary, this Court is clothed with
ample authority to review matters, even if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of Appeals in its
expanded jurisdiction over labor cases elevated through a petition for certiorari; thus, we see
no error on its part when it made anew a factual determination of the matters and on that
basis reversed the ruling of the NLRC. 63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual hidings complained of are not supported
by the evidence on record; when its necessary to prevent a substantial wrong or to do substantial justice;
when the findings of the NLRC contradict those of the Labor Arbiter; and when necessary to arrive at a just
decision of the case.64 To make these findings, the Court of Appeals necessarily has to look at the evidence
and make its own factual determination.65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the Court of Appeals
correctly exercised its power to review the evidence and the records of the illegal dismissal case.

Basso was illegally dismissed.

It is of no moment that Basso was a managerial employee of CMI Managerial employees enjoy security of
tenure and the right of the management to dismiss must be balanced against the managerial employee's
right to security of tenure, which is not one of the guaranties he gives up. 66

In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to validly dismiss an employee on
the ground of loss of trust and confidence under Article 282 (c) of the Labor Code, the employer must
observe the following guidelines: 1) loss of confidence should not be simulated; 2) it should not be used as
subterfuge for causes which are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the
face of overwhelming evidence to the contrary; and 4) it must be genuine, not a mere afterthought to justify
earlier action taken in bad faith. More importantly, it must be based on a willful breach of trust and founded
on clearly established facts.

We agree with the Court of Appeals that the dismissal of Basso was not founded on clearly established facts
and evidence sufficient to warrant dismissal from employment. While proof beyond reasonable doubt is not
required to establish loss of trust and confidence, substantial evidence is required and on the employer rests
the burden to establish it.68 There must be some basis for the loss of trust, or that the employer has
reasonable ground to believe that the employee is responsible for misconduct, which renders him unworthy
of the trust and confidence demanded by his position. 69

CMI alleges that Basso committed the following: chanRoblesvirtualLawlibrary

(1) Basso delegated too much responsibility to the General Sales Agent and relied heavily on its
judgments.70

(2) Basso excessively issued promotional tickets to his friends who had no direct business with CMI. 71

(3) The advertising agency that CMI contracted had to deal directly with Guam because Basso was
hardly available.72 Mr. Schulz discovered that Basso exceeded the advertising budget by
$76,000.00 in 1994 and by $20,000.00 in 1995.73

(4) Basso spent more time and attention to his personal businesses and was reputed to own
nightclubs in the Philippines.74
(5) Basso used free tickets and advertising money to promote his personal business, 75 such as a
brochure that jointly advertised one of Basso's nightclubs with CMI.

We find that CMI failed to discharge its burden to prove the above acts. CMI merely submitted affidavits of
its officers, without any other corroborating evidence. Basso, on the other hand, had adequately explained
his side. On the advertising agency and budget issues raised by CMI, he explained that these were blatant
lies as the advertising needs of CMI were centralized in its Guam office and the Philippine office was not
authorized to deal with CMI's advertising agency, except on minor issues. 76 Basso further stated that under
CMI's existing policy, ninety percent (90%) of the advertising decisions were delegated to the advertising
firm of McCann-Ericsson in Japan and only ten percent (10%) were left to the Philippine office. 77 Basso also
denied the allegations of owning nightclubs and promoting his personal businesses and explained that it was
illegal for foreigners in the Philippines to engage in retail trade in the first place.

Apart from these accusations, CMI likewise presented the findings of the audit team headed by Mr. Stephen
D. Goepfert, showing that "for the period of 1995 and 1996, personal passes for Continental and other
airline employees were noted (sic) to be issued for which no service charge was collected." 78 The audit cited
the trip pass log of a total of 10 months. The trip log does not show, however, that Basso caused all the
ticket issuances. More, half of the trips in the log occurred from March to July of 1996, 79 a period beyond the
tenure of Basso. Basso was terminated effectively on January 31, 1996 as indicated in the letter of Ms.
Woodward.80

CMI also accused Basso of making "questionable overseas phone calls". Basso, however, adequately
explained in his Reply81 that the phone calls to Italy and Portland, USA were made for the purpose of looking
for a technical maintenance personnel with US Federal Aviation Authority qualifications, which CMI needed
at that time. The calls to the US were also made in connection with his functions as General Manager, such
as inquiries on his tax returns filed in Nevada. Biasso also explained that the phone lines 82were open direct
lines that all personnel were free to use to make direct long distance calls. 83

Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover the transfer fee of the
Manila Polo Club share from Mr. Kenneth Glover, the previous General Manager, to him. CMI claimed that
"nowhere in the said contract was it likewise indicated that the Manila Polo Club share was part of the
compensation package given by CMI to Basso."84 CMI's claims are not credible. Basso explained that the
Manila Polo Club share was offered to him as a bonus to entice him to leave his then employer, United
Airlines. A letter from Mr. Paul J. Casey, former president of Continental, supports Basso. 85 In the letter, Mr.
Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was given
the Manila Polo Club share and authorized to have the share re-issued in his name. In addition
to giving Mr. Basso the Manila Polo Club share, Continental agreed to pay the dues for a
period of three years and this was embodied in his contract with Continental. This was all
clone with my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a club in
Manila that your immediate supervisor and I agree is of at least that value to Continental
through you in your role as our General Manager for the Philippines. 87
Taken together, the above pieces of evidence suggest that the Manila Polo Club share was part of Basso's
compensation package and thus he validly used company funds to pay for the transfer fees. If doubts exist
between the evidence presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter.88

Finally, CMI violated procedural due process in terminating Basso. In King of Kings Transport, Inc. v.
Mamac89 we detailed the procedural due process steps in termination of employment:
 To clarify, the following should be considered in terminating the services of employees: chanRoblesvirtualLawlibrary

(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management must
accord to the employees to enable them to prepare adequately for their defense. This should
be construed as a period of at least five (5) calendar days from receipt of the notice to give
the employees an opportunity to study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing or
conference, the employees are given the chance to defend themselves personally, with the
assistance of a representative or counsel of their choice. Moreover, this conference or hearing
could be used by the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment. (Emphasis in original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December 19, 1995 and March 14, 1996, respectively,
are not one of the valid twin notices. Neither identified the alleged acts that CMI now claims as bases for
Basso's termination. Ms. Woodward's letter even stressed that the original plan was to remove Basso as
General Manager but with an offer to make him consultant. It was inconsistent of CMI to declare Basso as
unworthy of its trust and confidence and, in the same breath, offer him the position of consultant. As the
Court of Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground for his dismissal was the
exercise of the termination at will clause in the employment contract. The alleged loss of trust
and confidence claimed by Continental appears to be a mere afterthought belatedly trotted out
to save the day.90

Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of eniority rights and other privileges, and to his full backwages ,
inclusive of allowances and to his other benefits or their monetary equivalent omputed from the time his
compensation was withheld up to the time of actual reinstatement.

Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for
every year of service should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.91 In the case of Basso, reinstatement is no longer possible since he has already
passed away. Thus, Basso's separation pay with full backwages shall be paid to his heirs.
As to the computation of backwages, we agree with CMI that Basso was entitled to backwages only up to
the time he reached 65 years old, the compulsory retirement age under the law. 92 This is our consistent
ruling.93 When Basso was illegally dismissed on January 31, 1996, he was already 58 years old. 94 He turned
65 years old on October 2, 2002. Since backwages are granted on grounds of equity for earnings lost by an
employee due to his illegal dismissal,95 Basso was entitled to backwages only for the period he could have
worked had he not been illegally dismissed, i.e. from January 31, 1996 to October 2, 2002.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated May 23, 2006 and
Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281
are AFFIRMED, with MODIFICATION as to the award of backwages. Petitioner Continental Micronesia,
Inc. is hereby ordered to pay Respondent Joseph Basso's heirs: 1) separation pay equivalent to one (1)
month pay for every year of service, and 2) full backwages from January 31, 1996, the date of his illegal
dismissal, to October 2, 2002, the date of his compulsory retirement age.

SO ORDERED. chanroblesvirtuallawlibrary

FIRST DIVISION

G.R. No. 211588, September 09, 2015

WORLD'S BEST GAS, INC., Petitioner, v. HENRY VITAL, JOINED BY HIS WIFE FLOSERFINA VITAL,
Respondents.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 filed by petitioner World's Best Gas, Inc. (WBGI)
assailing the Decision2 dated September 30, 2013 and the Resolution 3 dated March 4, 2014 of the Court of
Appeals (CA) in CA-G.R. SP No. 123497, which affirmed the Decision 4 dated December 12, 2011 of the
Regional Trial Court of Bataan, Branch 2 (RTC) in Civil Case No. 8694 finding WBGI liable to respondent
Henry Vital (Vital) for his unpaid salaries and separation pay.

The Facts

Vital was one of the incorporators of WBGI, holding P500,000.00 worth of shares of stocks therein. 5 As a
separate business venture, Vital and his wife, respondent Floserfina Vital (respondents), sourced Liquefied
Petroleum Gas (LPG) from WBGI and distributed the same through ERJ Enterprises owned by them. 6 As of
respondents' last statement of account, their outstanding balance with WBGI for unpaid LPG
amounted to P923,843.59.7

On January 6, 1999, Vital was appointed as Internal Auditor and Personnel Manager by WBGI's
President/CEO and continued to serve as such until his mandatory retirement on September 25, 2003. 8Upon
his retirement, WBGI's Board of Directors computed Vital's retirement benefits at P82,500.00 by multiplying
his P15,000.00 monthly pay by 5.5 years, which was the number of years he served as Internal Auditor and
Personnel Manager. WBGI also agreed to acquire Vital's P500,000.00 shares of stocks at par value. 9

After offsetting the P500,000.00 due from WBGI's acquisition of his shares of stocks against ERJ Enterprises'
P923,843.59 outstanding balance to WBGI, Vital claimed that the unpaid salaries and separation pay
due him amounted to P845,000.00 and P250,000.00, respectively, leaving a net amount of
P671,156.41 payable to him. WBGI rejected Vital's claim and contended that after offsetting, Vital actually
owed it P369,156.19.10

On January 4, 2006, Vital filed a complaint before the National Labor Relations Commission (NLRC) —
Regional Arbitration Branch III (RAB), docketed as NLRC Case No. RAB-III-01-9671-06, for non-payment
of separation and retirement benefits, underpayment of salaries/wages and 13 thmonth pay,
illegal reduction of salary and benefits, and damages.11

For its part, WBGI averred that the Labor Arbiter (LA) had no jurisdiction over the complaint because Vital is
not an employee, but a mere incorporator and stockholder of WBGI, hence, no employer-employee
relationship exists between them.12

The LA Ruling

In a Decision13 dated May 3, 2006, the LA found that the issues between Vital and WBGI are intra-corporate
in nature as they arose between the relations of a stockholder and the corporation, and not from an
employee and employer relationship. 14 Thus, the LA dismissed the case for lack of jurisdiction, 15prompting
Vital to file his complaint16 for payment of unpaid salaries, separation and retirement benefits, and damages
on July 19, 2007 before the RTC, docketed as Civil Case No. 8694. 17

The RTC Ruling

In a Decision18 dated December 12, 2011, the RTC, acting as a special commercial court, oppositely found
that Vital was an employee of WBGI and thereby, upheld his claim of P845,000.00 and P250,000.00 in
unpaid salaries and separation pay. However, the RTC offset these amounts, including the P500,000.00 due
from WBGFs acquisition of Vital's shares of stocks, against the P923,843.59 payable to WBGI from ERJ
Enterprises, thus, awarding Vital the net amount of P671,156.41, with legal interest from date of demand
until full payment, P50,000.00 as attorney's fees and costs of suit plus litigation expenses. 19

The RTC ratiocinated that since the positions of Internal Auditor and Personnel Manager were not provided
for in WBGI's By-Laws, Vital was not a corporate officer but an employee entitled to employment benefits. It
also maintained that it had jurisdiction to rule on the main intra-corporate controversy, together with the
question of damages and employment benefits.20

Aggrieved, WBGI elevated the case to the CA on appeal.21

The CA Ruling

In a Decision22 dated September 30, 2013, the CA dismissed the appeal, agreeing with the RTC's finding that
Vital was an employee of WGBI. While the CA observed that the RTC's award of employment benefits to
Vital was improper, as the same was under the exclusive jurisdiction of the labor arbiters, it still ruled on
said claim, reasoning that it has the eventual authority to review the labor courts' decision on the matter. 23

WBGI filed a motion for reconsideration24 which was, however, denied in a Resolution25 dated March 4, 2014;
hence, the present petition.

The Issue Before the Court

The main issue to be resolved is whether or not the CA erred in ruling upon Vital's claim of P845,000.00 and
P250,000.00 in unpaid salaries and separation pay.

The Court's Ruling

The petition is partly meritorious.

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

However, the RTC's adjudication of the first cause of action was improper since the same is one which arose
from Vital and WBGI's employer-employee relations, involving an amount exceeding P5,000.00, hence,
belonging to the jurisdiction of the labor arbiters pursuant to Article 217 of the Labor Code:
Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

(a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission
of the case by the parties for decision without extension, even in the absence of stenographic
notes, the following cases involving all workers, whether agricultural or non-agricultural: chanRoblesvirtualLawlibrary

1. Unfair labor practice cases; ChanRoblesVirtualawlibrary

2. Termination disputes; ChanRoblesVirtualawlibrary

3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment; ChanRoblesVirtualawlibrary

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving
the legality of strikes and lockouts; and

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

xxxx
Having no subject matter jurisdiction to resolve claims arising from employer-employee relations, the RTC's
ruling on Vital's claim of P845,000.00 and P250,000.00 in unpaid salaries and separation pay is, thus, null
and void, and therefore, cannot perpetuate even if affirmed on appeal, 26 rendering the CA's ratiocination
that it "has the eventual authority to review the labor courts' decision on the matter" 27direly infirm. As a
result, WBGI's petition is meritorious on this score. However, since the dismissal is grounded on lack of
jurisdiction, then the same should be considered as a dismissal without prejudice. 28As such, Vital may re-
file29the same claim, including those related thereto ( e.g., moral and exemplary damages, and
attorney's fees) before the proper labor tribunal.

Contrary to its lack of jurisdiction over claims arising from employer-employee relations, the RTC has: (a)
general jurisdiction to adjudicate on the P923,843.59 in arrearages payable to WBGI from ERJ
Enterprises, which was admitted by Vital but not claimed by WBGI;30 and (b) special jurisdiction, as
a special commercial court, to adjudicate on Vital's claim of P500,000.00 from WBGI's acquisition of
his shares of stocks.31 Indeed, even acting as a special commercial court, the RTC's general jurisdiction to
adjudicate on the first-mentioned claim is retained.

With the RTC's jurisdiction established over the above-mentioned causes of action, Vital's claim of
P500,000.00 due from WBGI's acquisition of his shares of stocks should therefore be offset against the
P923,843.59 in arrearages payable to WBGI by ERJ Enterprises owned by respondents, as prayed for by
him. Hence, no amount can be adjudicated in Vital's favor, since it is the respondents who, after due
computation, would be left liable to WBGI in the net amount of P423,843.59. This notwithstanding, WBGI
cannot recover this latter amount in this case since it never interposed a permissive counterclaim therefor
in its answer.32 It is well-settled that courts cannot grant a relief not prayed for in the pleadings or in excess
of what is being sought by the party. 33WBGI may, however, opt to file a separate collection suit,
including those related thereto (e.g., moral and exemplary damages, and attorney's fees), to
recover such sum.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated September 30, 2013 and the
Resolution dated March 4, 2014 of the Court of Appeals in CA-G.R. SP No. 123497 are hereby SET ASIDE. A
new one is entered: chanRoblesvirt ualLawlibrary

(a) DISMISSING respondent Henry Vital's (Vital) labor claims of P845,000.00 and P250,000.00 in unpaid
salaries and separation pay against petitioner World's Best Gas, Inc.'s (WBGI), WITHOUT PREJUDICE as
stated in this Decision; and

(b) RECOGNIZING WBGI's liability to Vital in the amount of P500,000.00 due from the acquisition of his
shares of stocks. This amount is, however, OFFSET against the P923,843.59 in arrearages payable to WBGI
by ERJ Enterprises owned by Vital and his wife, respondent Floserfma Vital, leaving a net amount of
P423,843.59, which WBGI may claim in a separate case as stated in this Decision.

SO ORDERED. chanroblesvirtuallawlibrary

SECOND DIVISION

G.R. No. 201595, January 25, 2016

ALLAN M. MENDOZA, Petitioner, v. OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU),

NAMELY, EDUARDO B. BORELA, BUENAVENTURA QUEBRAL, ELIZABETH COMETA, ALEJANDRO
TORRES, AMORSOLO TIERRA, SOLEDAD YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA
BOLO, ROGELIO BARBERO, JOSE CASAÑAS, ALFREDO MAGA, EMILIO FERNANDEZ, ROSITA
BUENAVENTURA, ALMENIO CANCINO, ADELA IMANA, MARIO MANCENIDO, WILFREDO
MANDILAG, ROLANDO MANLAPAZ, EFREN MONTEMAYOR, NELSON PAGULAYAN, CARLOS VILLA,
RIC BRIONES,AND CHITO BERNARDO, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the April 24, 2012 Decision 2 of the Court of Appeals (CA) which
dismissed the Petition for Certiorari3 in CA-G.R.SP No. 115639.

Factual Antecedents

Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of Labor and
Employment (DOLE)-registered labor organization consisting of rank-and-file employees within Manila Water
Company (MWC). The respondents herein named - Eduardo B. Borela (Borela), Buenaventura Quebral
(Quebral), Elizabeth Cometa (Cometa), Alejandro Torres (Torres), Amorsolo Tierra (Tierra), Soledad Yeban
(Yeban), Luis Rendon (Rendon), Virginia Apilado (Apilado), Teresita Bob (Bolo), Rogelio Barbero (Barbero),
Jose Casanas (Casanas), Alfredo Maga (Maga), Emiiio Fernandez (Fernandez), Rosita Buenaventura
(Buenaventura), Almenio Cancino (Cancino), Adela Imana, Mario Mancenido (Mancenido), Wilfredo Mandilag
(Mandilag), Rolando Manlapaz (Manlapaz), Efren Montemayor (Montemayor), Nelson Pagulayan, Carlos Villa,
Ric Briones, and Chito Bernardo - were MWEU officers during the period material to this Petition, with Borela
as President and Chairman of the MWEU Executive Board, Quebral as First Vice-President and Treasurer, and
Cometa as Secretary.4

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

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled hearing. On June
6, 2007, the MWEU grievance committee recommended that petitioner be suspended for 30 days.

In a June 20, 2007 letter, 8 Borela informed petitioner and his corespondents of the MWEU Executive Board's
"unanimous approval"9 of the grievance committee's recommendation and imposition upon them of a
penalty of 30 days suspension, effective June 25,2007.

In a June 26, 2007 letter 10 to Borela, petitioner and Ms co-respondents took exception to the imposition and
indicated their intention to appeal the same to the General Membership Assembly in accordance with Section
2(g), Article V of the union's Constitution and By-Laws, 11 which grants them the right to appeal any arbitrary
resolution, policy and rule promulgated by the Executive Board to the General Membership Assembly. In a
June 28, 2007 reply,12 Borela denied petitioner's appeal, stating that the prescribed period for appeal had
expired.

Petitioner and his co-respondents sent another letter 13 on July 4, 2007, reiterating their arguments and
demanding that the General Membership Assembly be convened in order that their appeal could be taken
up. The letter was not acted upon.

Petitioner was once more charged with non-payment of union dues, and was required to attend an August 3,
2007 hearing.14 Thereafter, petitioner was again penalized with a 30-day suspension through an August 21,
2007 letter15 by Borela informing petitioner of the Executive Board's "unanimous approval" 16 of the grievance
committee recommendation to suspend him effective August 24, 2007, to which he submitted a written
reply,17 invoking his right to appeal through the convening of the General Membership Assembly. However,
the respondents did not act on petitioner's plea.

Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner filed his certificate of
candidacy for Vice-President, but he was disqualified for not being a member in good standing on account of
his suspension.

On October 2, 2007, petitioner was charged with non-payment of union dues for the third time. He did not
attend the scheduled hearing. This time, he was meted the penalty of expulsion from the union, per
"unanimous approval"18 of the members of the Executive Board. His pleas for an appeal to the General
Membership Assembly were once more unheeded.19

In 2008, during the freedom period and negotiations for a new collective bargaining agreement (CBA) with
MWC, petitioner joined another union, the Workers Association for Transparency, Empowerment and
Reform, All-Filipino Workers Confederation (WATER-AFWC). He was elected union President. Other MWEU
members were inclined to join WATER-AFWC, but MWEU director Torres threatened that they would not get
benefits from the new CBA.20

The MWEU leadership submitted a proposed CBA which contained provisions to the effect that in the event
of retrenchment, non-MWEU members shall be removed first, and that upon the signing of the CBA, only
MWEU members shall receive a signing bonus.21
Ruling of the Labor Arbiter

On October 13,2008, petitioner filed a Complaint 22 against respondents for unfair labor practices, damages,
and attorney's fees before the National Labor Relations Commission (NLRC), Quezon City, docketed as NLRC
Case No. NCR-10-14255-08. In his Position Paper and other written submissions, 23petitioner accused the
respondents of illegal termination from MWEU in connection with the events relative to his non-payment of
union dues; unlawful interference, coercion, and violation of the rights of MWC employees to self-
organization - in connection with the proposed CBA submitted by MWEU leadership, which petitioner claims
contained provisions that discriminated against non-MWEU members. Petitioner prayed in his Supplemental
Position Paper that respondents be held guilty of unfair labor practices and ordered to indemnify him moral
damages in the amount of P100,000.00, exemplary damages amounting to P50,000.00, and 10% attorney's
fees.

In their joint Position Paper and other pleadings, 24 respondents claimed that the Labor Arbiter had no
jurisdiction over the dispute, which is intra-union in nature; that the Bureau of Labor Relations (BLR) was
the proper venue, in accordance with Article 226 of the Labor Code 25 and Section 1, Rule XI of Department
Order 40-03, series of 2003, of the DOLE; 26 and that they were not guilty of unfair labor practices,
discrimination, coercion or restraint.

On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision 27 which decreed as follows:

Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation
Procedures and Appeal Process of the Union Constitution and By-Laws provides that:
Section 5. Any dismissed and/or expelled member shall have the rights to
appeal to the Executive Board within seven (7) days from the date of notice of
the said dismissal and/or expulsion, which in [turn] shall be referred to the
General Membership Assembly. In case of an appeal, a simple majority of the
decision of the Executive Board is imperative. The same shall be
approved/disapproved by a majority vote of the general membership assembly
in a meeting duly called for the purpose.
On the basis of the foregoing, the parties shall exhaust first all the administrative remedies
before resorting to compulsory arbitration. Thus, instant case is referred back to the Union for
the General Assembly to act or deliberate complainant's appeal on the decision of the
Executive Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the; Union level for the
General Assembly to act on complainant's appeal.

SO ORDERED.28 ChanRoblesVirtualawlibrary

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No. 07-001913-09. On
March 15, 2010, the NLRC issued its Decision,29 declaring as follows:
Complainant30 imputes serious error to the Labor Arbiter when she decided as follows:

1. Referring back the subject case to the Union level for the General
Assembly to act on bis appeal.

2. Not ruling that respondents are guilty of ULP as charged.

3. Not granting to complainant moral and exemplary damages and

attorney's fees.
 Complainant, in support of his charges, claims that respondents restrained or coerced him in
the exercise of his right as a union member in violation of paragraph "a", Article 249 of the
Labor Code,31 particularly, in denying him the explanation as to whether there was observance
of the proper procedure in the increase of the membership dues from P100.00 to P200.00 per
month. Further, complainant avers that he was denied the right to appeal his suspension and
expulsion in accordance with the provisions of the Union's Constitution and By-Laws. In
addition, complainant claims that respondents attempted to cause the management to
discriminate against the members of WATER-AFWC thru the proposed CBA.

Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred back
to the Union level for the General Assembly to act on complainant's appeal. Hence, these
appeals.

After a careful look at all the documents submitted and a meticulous review of the facts, We
find that this Commission lacks the jurisdictional competence to act on this case.

Article 217 of the Labor Code,32 as amended, specifically enumerates the cases over which the
Labor Arbiters and the Commission have original and exclusive jurisdiction. A perusal of the
record reveals that the causes of action invoked by complainant do not fall under any of the
enumerations therein. Clearly, We have no jurisdiction over the same.

Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-03 in
particular, Item A, paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively, provide:
"A. Inter-Intra-Union disputes shall include:

"(h) violation of or disagreements over any provision of the Constitution and By-
Laws of a Union or workers' association.

"(j) violation of the rights and conditions of membership in a Union or workers'

association.

"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the
Labor Code, shall include -

"3. a labor union and an individual who is not a member of said union."
Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the Bureau of
Labor Relations, as these are inter/intra-union disputes.

WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby declared
NULL and VOID for being rendered without jurisdiction and the instant complaint is
DISMISSED.

SO ORDERED.33 ChanRoblesVirtualawlibrary

Petitioner moved for reconsideration, 34 but in a June 16, 2010 Resolution, 35 the motion was denied and the
NLRC sustained its Decision.

Ruling of the Court of Appeals

In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No. 115639, petitioner sought to
reverse the NLRC Decision and be awarded his claim for damages and attorney's fees on account of
respondents' unfair labor practices, arguing among others that his charge of unfair labor practices is
cognizable by the Labor Arbiter; that the fact that the dispute is inter- or intra-union in nature cannot erase
the fact that respondents were guilty of unfair labor practices in interfering and restraining him in the
exercise of his right to self-organization as member of both MWEU and WATER-AFWC, and in discriminating
against him and other members through the provisions of the proposed 2008 CBA which they drafted; that
his failure to pay the increased union dues was proper since the approval of said increase was arrived at
without observing the prescribed voting procedure laid down in the Labor Code; that he is entitled to an
award of damages and attorney's fees as a result of respondents' illegal acts in discriminating against him;
and that in ruling the way it did, the NLRC committed grave abuse of discretion.

On April 24, 2012, the CA issued the assailed Decision containing the following pronouncement:
The petition lacks merit.

Petitioner's causes of action against MWEU are inter/intra-union disputes cognizable by the
BLR whose functions and jurisdiction are largely confined to union matters, collective
bargaining registry, and labor education. Section 1, Rule XI of Department Order (D.O.) No.
40-03, Series of 2003, of the Department of Labor and Employment enumerates instances of
inter/intra-union disputes, viz:
Section 1. Coverage. - Inter/intra-union disputes shall include:
chanRoblesvirt ualLawlibrary

xxxx

(b) conduct of election of union and workers' association officers/nullification of

election of union and workers' association officers;

(c) audit/accounts examination of union or workers' association funds;

xxxx

(g) validity/invalidity of impeachment/ expulsion of union and workers'

association officers and members;

xxxx

(j) violations of or disagreements over any provision in a union or workers'

association constitution and by-laws;

xxxx

(l) violations of the rights and conditions of union or workers' association

membership;

xxxx

(n) such other disputes or conflicts involving the rights to self-organization,

union membership and collective bargaining -

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers' association.

In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor
unions involving representation questions for purposes of collective bargaining or to any other
 conflict or dispute between legitimate labor unions. "Intra-Union Dispute" refers to any conflict
between and among union members, including grievances arising from any violation of the
rights and conditions of membership, violation of or disagreement over any provision of the
union's constitution and by-laws, or disputes arising from chartering or affiliation of union. On
the other hand, the circumstances of unfair labor practices (ULP) of a labor organization are
stated in Article 249 of the Labor Code, to wit:
Article 249. Unfair labor practices of labor organizations. It shall be unlawful for
labor organization, its officers, agents, or representatives to commit any of the
following unfair labor practices:
chanRoblesvirt ualLawlibrary

(a) To restrain or coerce employees in the exercise of their right to

self-organization; Provided, That the labor organization shall have
the right to prescribe its own rules with respect to the acquisition
or retention of membership;

(b) To cause or attempt to cause an employer to discriminate against

an employee, including discrimination against an employee with
respect to whom membership in such organization has been
denied or terminated on any ground other than the usual terms
and conditions under which membership or continuation of
membership is made available to other members;

xxxx
Applying the aforementioned rules, We find that the issues arising from petitioner's right to
information on the increased membership dues, right to appeal his suspension and expulsion
according to CBL provisions, and right to vote and be voted on are essentially intra-union
disputes; these involve violations of rights ;and conditions of union membership. But his claim
that a director of MWEU warned that non-MWEU members would not receive CBA benefits is
an inter-union dispute. It is more of an "interference" by a rival union to ensure the loyalty of
its members and to persuade non-members to join their union. This is not an actionable wrong
because interfering in the exercise of the right to organize is itself a function of self-
organizing.37 As long as it does not amount to restraint or coercion, a labor organization may
interfere in the employees' right to self-organization. 38 Consequently, a determination of
validity or illegality of the alleged acts necessarily touches on union matters, not ULPs, and are
outside the scope of the labor arbiter's jurisdiction.

As regards petitioner's other accusations, i.e., discrimination in terms of meting out the
penalty of expulsion against him alone, and attempt to cause the employer, MWC, to
discriminate against non-MWEU members in terms of retrenchment or reduction of personnel,
and signing bonus, while We may consider them as falling within the concept of ULP under
Article 249(a) and (b), still, petitioner's complaint cannot prosper for lack of substantial
evidence. Other than his bare allegation, petitioner offered no proof that MWEU did not
penalize some union members who failed to pay the increased dues. On the proposed
 discriminatory CBA provisions, petitioner merely attached the pages containing the questioned
provisions without bothering to reveal the MWEU representatives responsible for the said
proposal. Article 249 mandates that "x x x only the officers, members of the governing
boards, representatives or agents or members of labor associations or organizations who have
actually participated in, authorized or ratified unfair labor practices shall be held criminally
liable." Plain accusations against all MWEU officers, without specifying their actual
participation, do not suffice. Thus, the ULP charges must necessarily fail.

In administrative and quasi-judicial proceedings, only substantial evidence is necessary to

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

FOR THESE REASONS, the petition is DISMISSED.

SO ORDERED.39 ChanRoblesVirtualawlibrary

Thus, the instant Petition.

Issue

In an August 28, 2013 Resolution,40 this Court resolved to give due course to the Petition, which claims that
the CA erred:

1. IN DECLARING THAT THE PRESENCE OF INTER/INTRA- UNION CONFLICTS NEGATES

THE COMPLAINT FOR UNFAIR LABOR PRACTICES AGAINST A LABOR ORGANIZATION
AND ITS OFFICERS, AND IN AFFIRMING THAT THE NLRC PROPERLY DISMISSED THE
CASE FOR ALLEGED LACK OF JURISDICTION.

2. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR PRACTICES

UNDER ARTICLE 249(a) AND (b) OF THE LABOR CODE.

3. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER AGAINST MEMBERS

OF A RIVAL UNION IS (sic) MERELY AN "INTERFERENCE" AND DO NOT AMOUNT TO
"RESTRAINT' OR "COERCION".

4. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL EVIDENCE IN

PROVING RESPONDENTS' SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.

5. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO PETITIONER FOR

MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY'S FEES. 41

Petitioner's Arguments

Praying that the assailed CA dispositions be set aside and that respondents be declared guilty of unfair labor
practices under Article 249(a) and (b) and adjudged liable for damages and attorney's fees as prayed for in
bis complaint, petitioner maintains in his Petition and Reply 42 that respondents are guilty of unfair labor
practices which he clearly enumerated and laid out in his pleadings below; that these unfair labor practices
committed by respondents fall within the jurisdiction of the Labor Arbiter; that the Labor Arbiter, the NLRC,
and the CA failed to rule on his accusation of unfair labor practices and simply dismissed his complaint on
the ground that his causes of action are intra- or inter-union in nature; that admittedly, some of his causes
of action involved intra- or inter-union disputes, but other acts of respondents constitute unfair labor
practices; that he presented substantial evidence to prove that respondents are guilty of unfair labor
practices by failing to observe the proper procedure in the imposition of the increased monthly union dues,
and in unduly imposing the penalties of suspension and expulsion against him; that under the union's
constitution and by-laws, he is given the right to appeal his suspension and expulsion to the general
membership assembly; that in denying him his rights as a union member and expelling him, respondents
are guilty of malice and evident bad faith; that respondents are equally guilty for violating and curtailing his
rights to vote and be voted to a position within the union, and for discriminating against non-MWEU
members; and that the totality of respondents' conduct shows that they are guilty of unfair labor practices.

Respondent's Arguments

In their joint Comment,43 respondents maintain that petitioner raises issues of fact which are beyond the
purview of a petition for review on certiorari; that the findings of fact of the CA are final and conclusive; that
the Labor Arbiter, NLRC, and CA are one in declaring that there is no unfair labor practices committed
against petitioner; that petitioner's other allegations fall within the jurisdiction of the BLR, as they refer to
intra- or inter-union disputes between the parties; that the issues arising from petitioner's right to
information on the increased dues, right to appeal his suspension and expulsion, and right to vote and be
voted upon are essentially intra-union in nature; that his allegations regarding supposed coercion and
restraint relative to benefits in the proposed CBA do not constitute an actionable wrong; that all of the acts
questioned by petitioner are covered by Section 1, Rule XI of Department Order 40-03, series of 2003 as
intra-/inter-union disputes which do not fall within the jurisdiction of the Labor Arbiter; that in not paying his
union dues, petitioner is guilty of insubordination and deserved the penalty of expulsion; that petitioner
failed to petition to convene the general assembly through the required signature of 30% of the union
membership in good standing pursuant to Article VI, Section 2(a) of MWEU's Constitution and By-Laws or by
a petition of the majority of the general membership in good standing under Article VI, Section 3; and that
for his failure to resort to said remedies, petitioner can no longer question his suspension or expulsion and
avail of his right to appeal.

Our Ruling

The Court partly grants the Petition.

In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this Court is not a trier of
facts. However, when the conclusion arrived at by them is erroneous in certain respects, and would result in
injustice as to the parties, this Court must intervene to correct the error. While the Labor Arbiter, NLRC, and
CA are one in their conclusion in this case, they erred in failing to resolve petitioner's charge of unfair labor
practices against respondents.

It is true that some of petitioner's causes of action constitute intra-union cases cognizable by the BLR under
Article 226 of the Labor Code.
An intra-union dispute refers to any conflict between and among union members, including
grievances arising from any violation of the rights and conditions of membership, violation of
or disagreement over any provision of the union's constitution and by-laws, or disputes arising
from chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order
No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as inter/intra-
union disputes x x x.44
ChanRoblesVirtualawlibrary

However, petitioner's charge of unfair labor practices falls within the original and exclusive jurisdiction of the
Labor Arbiters, pursuant to Article 217 of the Labor Code. In addition, Article 247 of the same Code provides
that "the civil aspects of all cases involving unfair labor practices, which may include claims for actual,
moral, exemplary and other forms of damages, attorney's fees and other affirmative relief, shall be under
the jurisdiction of the Labor Arbiters."

Unfair labor practices may be committed both by the employer under Article 248 and by labor organizations
under Article 249 of the Labor Code,45 which provides as follows:
ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for a
labor organization, its officers, agents or representatives:chanRoblesvirt ualLawlibrary

(a) To restrain or coerce employees in the exercise of their right to self- organization.
 However, a labor organization shall have the right to prescribe its own rules with respect to
the acquisition or retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including

discrimination against an employee with respect to whom membership in such organization
has been denied or to terminate an employee on any ground other than the usual terms and
conditions under which membership or continuation of membership is made available to other
members;

(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the
representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any
money or other things of value, in the nature of an exaction, for services which are not
performed or not to be performed, including the demand for fee for union negotiations;

(e) To ask for or accept negotiation or attorney's fees from employers as part of the
settlement of any issue in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of
governing boards, representatives or agents or members of labor associations or organizations
who have actually participated in, authorized or ratified unfair labor practices shall be held
criminally liable. (As amended by Batas Pambansa Bilang 130, August 21, 1981).
Petitioner contends that respondents committed acts constituting unfair labor practices - which charge was
particularly laid out in his pleadings, but that the Labor Arbiter, the NLRC, and the CA ignored it and simply
dismissed his complaint on the ground that his causes of action were intra- or inter-union in nature.
Specifically, petitioner claims that he was suspended and expelled from MWEU illegally as a result of the
denial of his right to appeal his case to the general membership assembly in accordance with the union's
constitution and bylaws. On the other hand, respondents counter that such charge is intra-union in nature,
and that petitioner lost his right to appeal when he failed to petition to convene the general assembly
through the required signature of 30% of the union membership in good standing pursuant to Article VI,
Section 2(a) of MWEU's Constitution and By-Laws or by a petition of the majority of the general membership
in good standing under Article VI, Section 3.

Under Article VI, Section 2(a) of MWEU's Constitution and By-Laws, the general membership assembly has
the power to "review revise modify affirm repeal [sic] resolution and decision of the Executive Board and/or
committees upon petition of thirty percent (30%) of the Union in good standing," 46 and under Section 2(d),
to "revise, modify, affirm or reverse all expulsion cases."47 Under Section 3 of the same Article, "[t]he
decision of the Executive Board may be appealed to the General Membership which by a simple majority
vote reverse the decision of said body. If the general Assembly is not in session the decision of the
Executive Board may be reversed by a petition of the majority of the general membership in good
standing."48 And, in Article X, Section 5, "[a]ny dismissed and/or expelled member shall have the right to
appeal to the Executive Board within seven days from notice of said dismissal and/or expulsion which, in
[turn] shall be referred to the General membership assembly. In case of an appeal, a simple majority of the
decision of the Executive Board is imperative. The same shall be approved/disapproved by a majority vote of
the general membership assembly in a meeting duly called for the purpose." 49

In regard to suspension of a union member, MWEU's Constitution and By-Laws provides under Article X,
Section 4 thereof that "[a]ny suspended member shall have the right to appeal within three (3) working
days from the date of notice of said suspension. In case of an appeal a simple majority of vote of the
Executive Board shall be necessary to nullify the suspension."
Thus, when an MWEU member is suspended, he is given the right to appeal such suspension within three
working days from the date of notice of said suspension, which appeal the MWEU Executive Board is
obligated to act upon by a simple majority vote. When the penalty imposed is expulsion, the expelled
member is given seven days from notice of said dismissal and/or expulsion to appeal to the Executive
Board, which is required to act by a simple majority vote of its members. The Board's decision shall then be
approved/ disapproved by a majority vote of the general membership assembly in a meeting duly called for
the purpose.

The documentary evidence is clear that when petitioner received Borela's August 21, 2007 letter informing
him of the Executive Board's unanimous approval of the grievance committee recommendation to suspend
him for the second time effective August 24, 2007, he immediately and timely filed a written appeal.
However, the Executive Board - then consisting of respondents Borela, Tierra, Bolo, Casafias, Fernandez,
Rendon, Montemayor, Torres, Quebral, Pagulayan, Cancino, Maga, Cometa, Mancenido, and two others who
are not respondents herein - did not act thereon. Then again, when petitioner was charged for the third time
and meted the penalty of expulsion from MWEU by the unanimous vote of the Executive Board, his timely
appeal was again not acted upon by said board - this time consisting of respondents Borela, Quebral, Tierra,
Imana, Rendon, Yeban, Cancino, Torres, Montemayor, Mancenido, Mandilag, Fernandez, Buenaventura,
Apilado, Maga, Barbero, Cometa, Bolo, and Manlapaz.

Thus, contrary to respondents' argument that petitioner lost his right to appeal when he failed to petition to
convene the general assembly through the required signature of 30% of the union membership in good
standing pursuant to Article VI, Section 2(a) of MWEU's Constitution and By-Laws or by a petition of the
majority of the general membership in good standing under Article VI, Section 3, this Court finds that
petitioner was illegally suspended for the second time and thereafter unlawfully expelled from MWEU due to
respondents' failure to act on his written appeals. The required petition to convene the general assembly
through the required signature of 30% (under Article VI, Section 2[a]) or majority (under Article VI, Section
3) of the union membership does not apply in petitioner's case; the Executive Board must first act on his
two appeals before the matter could properly be referred to the general membership. Because respondents
did not act on his two appeals, petitioner was unceremoniously suspended, disqualified and deprived of his
right to run for the position of MWEU Vice-President in the September 14, 2007 election of officers, expelled
from MWEU, and forced to join another union, WATER-AFWC. For these, respondents are guilty of unfair
labor practices under Article 249 (a) and (b) - that is, violation of petitioner's right to self-organization,
unlawful discrimination, and illegal termination of his union membership - which case falls within the original
and exclusive jurisdiction of the Labor Arbiters, in accordance with Article 217 of the Labor Code.

The primary concept of unfair labor practices is stated in Article 247 of the Labor Code, which states:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. — Unfair
labor practices violate the constitutional right of workers and employees to self-organization,
are inimical to the legitimate interests of both labor and management, including their right to
bargain collectively and otherwise deal with each other in an atmosphere of freedom and
mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-
management relations.
"In essence, [unfair labor practice] relates to the commission' of acts that transgress the workers' right to
organize."50 "[A]ll the prohibited acts constituting unfair labor practice in essence relate to the workers' right
to self-organization."51 "[T]he term unfair labor practice refers to that gamut of offenses defined in the Labor
Code which, at their core, violates the constitutional right of workers and employees to self-organization." 52
Guaranteed to all employees or workers is the 'right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective bargaining.' This is
made plain by no less than three provisions of the Labor Code of the Philippines. Article 243 of
the Code provides as follows:
ART. 243. Coverage and employees' right to self-organization. — All persons
employed in commercial, industrial and agricultural enterprises and in religious,
charitable, medical, or educational institutions whether operating for profit or
not, shall have the right to serf-organisation and to form, join, or assist labor
 organizations of their own choosing for purposes or collective bargaining.
Ambulant, intermittent and itinerant workers, self-employed people, ratal
workers and those without any definite employers may form labor organizations
for their , mutual aid and protection.
Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
'interfere with, restrain or coerce employees in the exercise of their right to self-organization.'
Similarly, Article 249 (a) makes it an unfair labor practice for a labor organization to 'restrain
or coerce employees in the exercise of their rights to self-organization...'

xxxx

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

As members of the governing board of MWEU, respondents are presumed to know, observe, and apply the
union's constitution and by-laws. ' Thus, their repeated violations, thereof and their disregard of petitioner's
rights as a union member - their inaction on his two appeals which resulted in his suspension,
disqualification from running as MWEU officer, and subsequent expulsion without being accorded the foil
benefits of due process - connote willfulness and bad faith, a gross disregard of his rights thus causing
untold suffering, oppression and, ultimately., ostracism from MWEU. "Bad faith implies breach of faith and
willful failure to respond to plain and well understood obligation." 54 This warrants an award of moral
damages in the amount of P100,000.00. Moreover, the Civil Code provides:
Art. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights
and liberties of another person shall be liable to the latter for damages: chanRoblesvirt ualLawlibrary

xxxx

(12) The right to become a member of associations or societies for purposes not contrary to
law;
In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:
Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. They may be
recovered if they are the proximate result of the defendant's wrongful act or omission. The
instances when moral damages may be recovered are, inter alia, 'acts and actions referred to
in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,' which, in turn, are found in
the Chapter on Human Relations of the Preliminary Title of the Civil Code. x x x
Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as prayed for, is
likewise proper. "Exemplary damages are designed to permit the courts to mould behavior that has socially
deleterious consequences, and their imposition is required by public policy to suppress the wanton acts of
the offender."56 This should prevent respondents from repeating their mistakes, which proved costly for
petitioner.
Under Article 2229 of the Civil Code, '[e]xemplary or corrective damages are imposed, by way
of example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.' As this court has stated in the past: 'Exemplary damages are
designed by our civil law to permit the courts to reshape behaviour that is socially deleterious
in its consequence by creating negative incentives or deterrents against such behaviour.' 57 ChanRoblesVirtualawlibrary

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

SO ORDERED. chanroblesvirtuallawlibrary

G.R. No. 208986, January 13, 2016

HIJO RESOURCES CORPORATION, Petitioner, v. EPIFANIO P. MEJARES, REMEGIO C. BALURAN, JR.,

DANTE SAYCON, AND CECILIO CUCHARO, REPRESENTED BY NAMABDJERA-HRC, Respondents.

DECISION

CARPIO, J.:

The Case

This petition for review1 assails the 29 August 2012 Decision2 and the 13 August 2013 Resolution 3 of the
Court of Appeals in CA-G.R. SP No. 04058-MIN. The Court of Appeals reversed and set aside the Resolutions
dated 29 June 2009 and 16 December 2009 of the National Labor Relations Commission (NLRC) in NLRC No.
MIC-03-000229-08 (RAB XI-09-00774-2007), and remanded the case to the Regional Arbitration Branch,
Region XI, Davao City for further proceedings.

The Facts

Respondents Epifanio P. Mejares, Remegio C. Baluran, Jr., Dante Saycon, and Cecilio Cucharo (respondents)
were among the complainants, represented by their labor union named "Nagkahiusang Mamumuo ng Bit,
Djevon, at Raquilla Farms sa Hijo Resources Corporation" (NAMABDJERA-HRC), who filed with the NLRC an
illegal dismissal case against petitioner Hijo Resources Corporation (HRC).

Complainants (which include the respondents herein) alleged that petitioner HRC, formerly known as Hijo
Plantation Incorporated (HPI), is the owner of agricultural lands in Madum, Tagum, Davao del Norte, which
were planted primarily with Cavendish bananas. In 2000, HPI was renamed as HRC. In December 2003,
HRC's application for the conversion of its agricultural lands into agri-industrial use was approved. The
machineries and equipment formerly used by HPI continued to be utilized by HRC.

Complainants claimed that they were employed by HPI as farm workers in HPI's plantations occupying
various positions as area harvesters, packing house workers, loaders, or labelers. In 2001, complainants
were absorbed by HRC, but they were working under the contractor-growers: Buenaventura Tano (Bit
Farm); Djerame Pausa (Djevon Farm); and Ramon Q. Laurente (Raquilla Farm). Complainants asserted that
these contractor-growers received compensation from HRC and were under the control of HRC. They further
alleged that the contractor-growers did not have their own capitalization, farm machineries, and equipment.

On 1 July 2007, complainants formed their union NAMABDJERA-HRC, which was later registered with the
Department of Labor and Employment (DOLE). On 24 August 2007, NAMABDJERA-HRC filed a petition for
certification election before the DOLE.

When HRC learned that complainants formed a union, the three contractor-growers filed with the DOLE a
notice of cessation of business operations. In September 2007, complainants were terminated from their
employment on the ground of cessation of business operations by the contractor-growers of HRC. On 19
September 2007, complainants, represented by NAMABDJERA-HRC, filed a case for unfair labor practices,
illegal dismissal, and illegal deductions with prayer for moral and exemplary damages and attorney's fees
before the NLRC.
On 19 November 2007, DOLE Med-Arbiter Lito A. Jasa issued an Order, 4 dismissing NAMABDJERA-HRC's
petition for certification election on the ground that there was no employer-employee relationship between
complainants (members of NAMABDJERA-HRC) and HRC. Complainants did not appeal the Order of Med-
Arbiter Jasa but pursued the illegal dismissal case they filed.

On 4 January 2008, HRC filed a motion to inhibit Labor Arbiter Maria Christina S. Sagmit and moved to
dismiss the complaint for illegal dismissal. The motion to dismiss was anchored on the following arguments:
(1) Lack of jurisdiction under the principle of res judicata; and (2) The Order of the Med-Arbiter finding that
complainants were not employees of HRC, which complainants did not appeal, had become final and
executory.

The Labor Arbiter's Ruling

On 5 February 2008, Labor Arbiter Sagmit denied the motion to inhibit. Labor Arbiter Sagmit likewise denied
the motion to dismiss in an Order dated 12 February 2008. Labor Arbiter Sagmit held that res judicata does
not apply. Citing the cases of Manila Golf & Country Club, Inc. v. IAC5 and Sandoval Shipyards, Inc. v.
Pepito,6 the Labor Arbiter ruled that the decision of the Med-Arbiter in a certification election case, by the
nature of that proceedings, does not foreclose further dispute between the parties as to the existence or
non-existence of employer-employee relationship between them. Thus, the finding of Med-Arbiter Jasa that
no employment relationship exists between HRC and complainants does not bar the Labor Arbiter from
making his own independent finding on the same issue. The non-litigious nature of the proceedings before
the Med-Arbiter does not prevent the Labor Arbiter from hearing and deciding the case. Thus, Labor Arbiter
Sagmit denied the motion to dismiss and ordered the parties to file their position papers.

HRC filed with the NLRC a petition for certiorari with a prayer for temporary restraining order, seeking to
nullify the 5 February 2008 and 12 February 2008 Orders of Labor Arbiter Sagmit.

The Ruling of the NLRC

The NLRC granted the petition, holding that Labor Arbiter Sagmit gravely abused her discretion in denying
HRC's motion to dismiss. The NLRC held that the Med-Arbiter Order dated 19 November 2007 dismissing the
certification election case on the ground of lack of employer-employee relationship between HRC and
complainants (members of NAMABDJERA-HRC) constitutes res judicata under the concept of conclusiveness
of judgment, and thus, warrants the dismissal of the case. The NLRC ruled that the Med-Arbiter exercises
quasi-judicial power and the Med-Arbiter's decisions and orders have, upon their finality, the force and effect
of a final judgment within the purview of the doctrine of res judicata.

On the issue of inhibition, the NLRC found it moot and academic in view of Labor Arbiter Sagmit's voluntary
inhibition from the case as per Order dated 11 March 2009.

The Ruling of the Court of Appeals

The Court of Appeals found the ruling in the Sandoval case more applicable in this case. The Court of
Appeals noted that the Sandoval case, which also involved a petition for certification election and an illegal
dismissal case filed by the union members against the alleged employer, is on all fours with this case. The
issue in Sandoval on the effect of the Med-Arbiter's findings as to the existence of employer-employee
relationship is the very same issue raised in this case. On the other hand, the case of Chris Garments Corp.
v. Hon. Sto. Tomas7 cited by the NLRC, which involved three petitions for certification election filed by the
same union, is of a different factual milieu.

The Court of Appeals held that the certification proceedings before the Med-Arbiter are non-adversarial and
merely investigative. On the other hand, under Article 217 of the Labor Code, the Labor Arbiter has original
and exclusive jurisdiction over illegal dismissal cases. Although the proceedings before the Labor Arbiter are
also described as non-litigious, the Court of Appeals noted that the Labor Arbiter is given wide latitude in
ascertaining the existence of employment relationship. Thus, unlike the Med-Artbiter, the Labor Arbiter may
conduct clarificatory hearings and even avail of ocular inspection to ascertain facts speedily.

Hence, the Court of Appeals concluded that the decision in a certification election case does not foreclose
further dispute as to the existence or non-existence of an employer-employee relationship between HRC and
the complainants.

On 29 August 2012, the Court of Appeals promulgated its Decision, the dispositive portion of which
reads:chanRoblesvirtualLawlibrary

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

SO ORDERED.8 ChanRoblesVirtualawlibrary

cralawlawlibrary

The Issue

Whether the Court of Appeals erred in setting aside the NLRC ruling and remanding the case to the Labor
Arbiter for further proceedings.

The Ruling of the Court

We find the petition without merit.

There is no question that the Med-Arbiter has the authority to determine the existence of an employer-
employee relationship between the parties in a petition for certification election. As held in M. Y. San
Biscuits, Inc. v. Acting Sec. Laguesma:9 chanroblesvirtuallawlibrary

Under Article 226 of the Labor Code, as amended, the Bureau of Labor Relations (BLR), of
which the med-arbiter is an officer, has the following jurisdiction -
"ART. 226. Bureau of Labor Relations. - The Bureau of Labor Relations and the
Labor Relations Divisionfs] in the regional offices of the Department of Labor
shall have original and exclusive authority to act, at their own initiative or upon
request of either or both parties, on all inter-union and intra-union conflicts, and
all disputes, grievances or problems arising from or affecting labor-management
relations in all workplaces whether agricultural or non-agricultural, except those
arising from the implementation or interpretation of collective bargaining
agreements which shall be the subject of grievance procedure and/or voluntary
arbitration.

The Bureau shall have fifteen (15) working days to act on labor cases before it,
subject to extension by agreement of the parties." (Italics supplied)
From the foregoing, the BLR has the original and exclusive jurisdiction to inter alia, decide all
disputes, grievances or problems arising from or affecting labor-management relations in all
workplaces whether agricultural or non-agricultural. Necessarily, in the exercise of this
jurisdiction over labor-management relations, the med-arbiter has the authority, original and
exclusive, to determine the existence of an employer-employee relationship between the
parties.

Apropos to the present case, once there is a determination as to the existence of such a
relationship, the med-arbiter can then decide the certification election case. As the authority
to determine the employer-employee relationship is necessary and indispensable in the
 exercise of jurisdiction by the med-arbiter, his finding thereon may only be reviewed and
reversed by the Secretary of Labor who exercises appellate jurisdiction under Article 259 of
the Labor Code, as amended, which provides -
"ART. 259. Appeal from certification election orders. - Any party to an election
may appeal the order or results of the election as determined by the Med-Arbiter
directly to the Secretary of Labor and Employment on the ground that the rules
and regulations or parts thereof established by the Secretary of Labor and
Employment for the conduct of the election have been violated. Such appeal
shall be decided within fifteen (15) calendar days."10
cralawlawlibrary

In this case, the Med-Arbiter issued an Order dated 19 November 2007, dismissing the certification election
case because of lack of employer-employee relationship between HRC and the members of the respondent
union. The order dismissing the petition was issued after the members of the respondent union were
terminated from their employment in September 2007, which led to the filing of the illegal dismissal case
before the NLRC on 19 September 2007. Considering their termination from work, it would have been futile
for the members of the respondent union to appeal the Med-Arbiter' s order in the certification election case
to the DOLE Secretary. Instead, they pursued the illegal dismissal case filed before the NLRC.

The Court is tasked to resolve the issue of whether the Labor Arbiter, in the illegal dismissal case, is bound
by the ruling of the Med-Arbiter regarding the existence or non-existence of employer-employee relationship
between the parties in the certification election case.

The Court rules in the negative. As found by the Court of Appeals, the facts in this case are very similar to
those in the Sandoval case, which also involved the issue of whether the ruling in a certification election
case on the existence or non-existence of an employer-employee relationship operates as res judicata in the
illegal dismissal case filed before the NLRC. In Sandoval, the DOLE Undersecretary reversed the finding of
the Med-Arbiter in a certification election case and ruled that there was no employer-employee relationship
between the members of the petitioner union and Sandoval Shipyards, Inc. (SSI), since the former were
employees of the subcontractors. Subsequently, several illegal dismissal cases were filed by some members
of the petitioner union against SSI. Both the Labor Arbiter and the NLRC ruled that there was no employer-
employee relationship between the parties, citing the resolution of the DOLE Undersecretary in the
certification election case. The Court of Appeals reversed the NLRC ruling and held that the members of the
petitioner union were employees of SSI. On appeal, this Court affirmed the appellate court's decision and
ruled that the Labor Arbiter and the NLRC erred in relying on the pronouncement of the DOLE
Undersecretary that there was no employer-employee relationship between the parties. The Court cited the
ruling in the Manila Golf11 case that the decision in a certification election case, by the very nature of that
proceeding, does not foreclose all further dispute between the parties as to the existence or non-existence
of an employer-employee relationship between them.

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

SO ORDERED. chanroblesvirtuallawlibrary

G.R. No. 202961, February 04, 2015

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO

MATUNDAN, NORA MENDOZA, ET AL., Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION,
SOLID MILLS, INC., AND/OR PHILIP ANG, Respondents.

DECISION

LEONEN, J.:

An employer is allowed to withhold terminal pay and benefits pending the employee’s return of its
properties.

Petitioners are respondent Solid Mills, Inc.’s (Solid Mills) employees. 1 They are represented by the National
Federation of Labor Unions (NAFLU), their collective bargaining agent. 2 chanroblesvirtuallawlibrary

As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a property
owned by Solid Mills.3 According to Solid Mills, this was “[o]ut of liberality and for the convenience of its
employees . . . [and] on the condition that the employees . . . would vacate the premises anytime the
Company deems fit.”4 chanroblesvirtuallawlibrary

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease its
operations due to serious business losses. 5 NAFLU recognized Solid Mills’ closure due to serious business
losses in the memorandum of agreement dated September 1, 2003. 6 The memorandum of agreement
provided for Solid Mills’ grant of separation pay less accountabilities, accrued sick leave benefits, vacation
leave benefits, and 13th month pay to the employees. 7 Pertinent portions of the agreement provide: chanRoblesvirt ualLawlibrary

WHEREAS, the COMPANY has incurred substantial financial losses and is currently experiencing
further severe financial losses; chanrobleslaw

WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its
operations on October 10, 2003; chanrobleslaw

WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be
dismissed from employment effective October 10, 2003; chanrobleslaw

In view thereof, the parties agree as follows: chanRoblesvirt ualLawlibrary

1. That UNION acknowledges that the COMPANY is experiencing severe financial losses
and as a consequence of which, management is constrained to cease the company’s
operations.

2. The UNION acknowledges that under Article 283 of the Labor Code, separation pay is
granted to employees who are dismissed due to closures or cessation of operations
NOT DUE to serious business losses.

3. The UNION acknowledges that in view of the serious business losses the Company
has been experiencing as seen in their audited financial statements, employees ARE
NOT granted separation benefits under the law.

4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant
financial assistance less accountabilities to members of the Union based on
 length of service to be computed as follows: (Italics in this paragraph supplied)

Number of days - 12.625 for every year of service

5. In view of the above, the members of the UNION will receive such financial assistance
on an equal monthly installments basis based on the following schedule: chanRoblesvirt ualLawlibrary

First Check due on January 5, 2004 and every 5th of the month thereafter
until December 5, 2004.

6. The COMPANY commits to pay any accrued benefits the Union members are entitled
to, specifically those arising from sick and vacation leave benefits and 13th month
pay, less accountabilities based on the following schedule: chanRoblesvirtualLawlibrary

One Time Cash Payment to be distributed anywhere from. . . .

....

7. The foregoing agreement is entered into with full knowledge by the parties of their
rights under the law and they hereby bind themselves not to conduct any concerted
action of whatsoever kind, otherwise the grant of financial assistance as discussed
above will be withheld.8 (Emphasis in the original)

Solid Mills filed its Department of Labor and Employment termination report on September 2, 2003. 9 chanroblesvirtuallawlibrary

Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI Village. 10 chanroblesvirtuallawlibrary

Petitioners were no longer allowed to report for work by October 10, 2003. 11 They were required to sign a
memorandum of agreement with release and quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released. 12 Employees who signed the memorandum of agreement
were considered to have agreed to vacate SMI Village, and to the demolition of the constructed houses
inside as condition for the release of their termination benefits and separation pay. 13 Petitioners refused to
sign the documents and demanded to be paid their benefits and separation pay. 14 chanroblesvirtuallawlibrary

Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of separation pay,
accrued sick and vacation leaves, and 13th month pay. 15 They argued that their accrued benefits and
separation pay should not be withheld because their payment is based on company policy and practice. 16
Moreover, the 13th month pay is based on law, specifically, Presidential Decree No. 851. 17 Their possession
of Solid Mills property is not an accountability that is subject to clearance procedures. 18 They had already
turned over to Solid Mills their uniforms and equipment when Solid Mills ceased operations. 19 chanroblesvirtuallawlibrary

On the other hand, Solid Mills argued that petitioners’ complaint was premature because they had not
vacated its property.20 chanroblesvirtuallawlibrary

The Labor Arbiter ruled in favor of petitioners. 21 According to the Labor Arbiter, Solid Mills illegally withheld
petitioners’ benefits and separation pay. 22 Petitioners’ right to the payment of their benefits and separation
pay was vested by law and contract.23 The memorandum of agreement dated September 1, 2003 stated no
condition to the effect that petitioners must vacate Solid Mills’ property before their benefits could be given
to them.24 Petitioners’ possession should not be construed as petitioners’ “accountabilities” that must be
cleared first before the release of benefits. 25 Their possession “is not by virtue of any employer-employee
relationship.”26 It is a civil issue, which is outside the jurisdiction of the Labor Arbiter. 27 chanroblesvirtuallawlibrary

The dispositive portion of the Labor Arbiter’s decision reads: chanRoblesvirt ualLawlibrary

WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID

MILLS, INC. and/or PHILIP ANG (President), in solido to pay the remaining 21
complainants: chanRoblesvirtualLawlibrary
 1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO
DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS,
RENATO ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO
MENDOZA, ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA MAHILOM,
MARILOU LINGA, RENATO LINGA their separation pay of 12.625 days’ pay per year of service,
pro-rated 13th month pay for 2003 and accrued vacation and sick leaves, plus 12% interest
p.a. from date of filing of the lead case/judicial demand on 12/08/03 until actual payment
and/or finality; chanrobleslaw

2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received on

12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total amount of P15,435.16,
likewise, complainant Jerry L. Sesma as he already received his accrued 13th month pay for
2003, SL/VL in the total amount of P10,974.97, shall be paid only their separation pay of
12.625 days’ pay per year of service but also with 12% interest p.a. from date of filing of the
lead case/judicial demand on 12/08/03 until actual payment and/or finality, which
computation as of date, amount to as shown in the attached computation sheet.

3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie
Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and
Purificacion Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement,
whereas, that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA
PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for lack of interest
and/or failure to prosecute.

The Computation and Examination unit is directed to cause the computation of the award in Pars. 2 and 3
above.28 (Emphasis in the original)

Solid Mills appealed to the National Labor Relations Commission. 29 It prayed for, among others, the
dismissal of the complaints against it and the reversal of the Labor Arbiter’s decision. 30 chanroblesvirtuallawlibrary

The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s dispositive portion, but
reversed paragraphs 1 and 2. Thus: chanRoblesvirtualLawlibrary

WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is

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

The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga, Ismael Mata,
and Carlito Damian were already paid their respective separation pays and benefits. 32 Meanwhile, Teodora
Mahilom already retired long before Solid Mills’ closure. 33 She was already given her retirement
benefits.34
chanroblesvirtuallawlibrary

The National Labor Relations Commission ruled that because of petitioners’ failure to vacate Solid Mills’
property, Solid Mills was justified in withholding their benefits and separation pay. 35 Solid Mills granted the
petitioners the privilege to occupy its property on account of petitioners’ employment. 36 It had the
prerogative to terminate such privilege. 37 The termination of Solid Mills and petitioners’ employer-employee
relationship made it incumbent upon petitioners to turn over the property to Solid Mills. 38 chanroblesvirtuallawlibrary

Petitioners filed a motion for partial reconsideration on October 18, 2010, 39 but this was denied in the
November 30, 2010 resolution.40 chanroblesvirtuallawlibrary

Petitioners, thus, filed a petition for certiorari 41 before the Court of Appeals to assail the National Labor
Relations Commission decision of August 31, 2010 and resolution of November 30, 2010. 42 chanroblesvirtuallawlibrary

On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’ petition, 43 thus: chanRoblesvirtualLawlibrary

WHEREFORE, the petition is hereby ordered DISMISSED.44

The Court of Appeals ruled that Solid Mills’ act of allowing its employees to make temporary dwellings in its
property was a liberality on its part. It may be revoked any time at its discretion. 45 As a consequence of
Solid Mills’ closure and the resulting termination of petitioners, the employer-employee relationship between
them ceased to exist. There was no more reason for them to stay in Solid Mills’ property. 46 Moreover, the
memorandum of agreement between Solid Mills and the union representing petitioners provided that Solid
Mills’ payment of employees’ benefits should be “less accountabilities.” 47 chanroblesvirtuallawlibrary

On petitioners’ claim that there was no evidence that Teodora Mahilom already received her retirement pay,
the Court of Appeals ruled that her complaint filed before the Labor Arbiter did not include a claim for
retirement pay. The issue was also raised for the first time on appeal, which is not allowed. 48 In any case,
she already retired before Solid Mills ceased its operations.49 chanroblesvirtuallawlibrary

The Court of Appeals agreed with the National Labor Relations Commission’s deletion of interest since it
found that Solid Mills’ act of withholding payment of benefits and separation pay was proper. Petitioners’
terminal benefits and pay were withheld because of petitioners’ failure to vacate Solid Mills’ property. 50 chanroblesvirtuallawlibrary

Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and benefits. 51
Hence, he should no longer be awarded these claims. 52 chanroblesvirtuallawlibrary

In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’ motion for
reconsideration.53chanroblesvirtuallawlibrary

Petitioners raise in this petition the following errors: chanRoblesvirtualLawlibrary

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

WHEN IT RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE
HELD IN ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

WHEN IT UPHELD THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM
IMPOSED BY THE HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNT DUE FROM THE
DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL
ACTUAL PAYMENT AND/OR FINALITY.

III
 WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT UPHELD THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM
FOR PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.

IV

WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY BENEFITS

FROM RESPONDENT SOLID MILLS.54

Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of agreement has no provision
stating that benefits shall be paid only upon return of the possession of respondent Solid Mills’ property. 55 It
only provides that the benefits shall be “less accountabilities,” which should not be interpreted to include
such possession.56 The fact that majority of NAFLU’s members were not occupants of respondent Solid Mills’
property is evidence that possession of the property was not contemplated in the agreement. 57
“Accountabilities” should be interpreted to refer only to accountabilities that were incurred by petitioners
while they were performing their duties as employees at the worksite. 58 Moreover, applicable laws,
company practice, or policies do not provide that 13th month pay, and sick and vacation leave pay benefits,
may be withheld pending satisfaction of liabilities by the employee. 59 chanroblesvirtuallawlibrary

Petitioners also point out that the National Labor Relations Commission and the Court of Appeals have no
jurisdiction to declare that petitioners’ act of withholding possession of respondent Solid Mills’ property is
illegal.60 The regular courts have jurisdiction over this issue. 61 It is independent from the issue of payment
of petitioners’ monetary benefits.62 chanroblesvirtuallawlibrary

For these reasons, and because, according to petitioners, the amount of monetary award is no longer in
question, petitioners are entitled to 12% interest per annum. 63 chanroblesvirtuallawlibrary

Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims. They insist that
Teodora Mahilom did not receive her retirement benefits and that Carlito Damian did not receive his
separation benefits.64 chanroblesvirtuallawlibrary

Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners’ failure to turn over
respondent Solid Mills’ property “constituted an unsatisfied accountability” for which reason “petitioners’
benefits could rightfully be withheld.”65 The term “accountability” should be given its natural and ordinary
meaning.66 Thus, it should be interpreted as “a state of being liable or responsible,” or “obligation.” 67
Petitioners’ differentiation between accountabilities incurred while performing jobs at the worksite and
accountabilities incurred outside the worksite is baseless because the agreement with NAFLU merely stated
“accountabilities,” without qualification.68 chanroblesvirtuallawlibrary

On the removal of the award of 12% interest per annum, respondents argue that such removal was proper
since respondent Solid Mills was justified in withholding the monetary claims. 69 chanroblesvirtuallawlibrary

Respondents argue that Teodora Mahilom had no more cause of action for retirement benefits claim. 70 She
had already retired more than a decade before Solid Mills’ closure. She also already received her retirement
benefits in 1991.71 Teodora Mahilom’s claim was also not included in the complaint filed before the Labor
Arbiter. It was improper to raise this claim for the first time on appeal. In any case, Teodora Mahilom’s
claim was asserted long after the three-year prescriptive period provided in Article 291 of the Labor
Code.72chanroblesvirtuallawlibrary

Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to receive monetary
benefits again, which he, admittedly, already received from Solid Mills. 73 chanroblesvirtuallawlibrary

I
The National Labor Relations
Commission may preliminarily
determine issues related to rights
arising from an employer-employee
relationship

The National Labor Relations Commission has jurisdiction to determine, preliminarily, the parties’ rights over
a property, when it is necessary to determine an issue related to rights or claims arising from an employer-
employee relationship.

Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National Labor
Relations Commission, in its appellate jurisdiction, may determine issues involving claims arising from
employer-employee relations. Thus: chanRoblesvirtualLawlibrary

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic notes,
the following cases involving workers, whether agricultural or non-agricultural: chanRoblesvirtualLawlibrary

1. Unfair labor practice cases;

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

(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters. (Emphasis supplied)

Petitioners’ claim that they have the right to the immediate release of their benefits as employees separated
from respondent Solid Mills is a question arising from the employer-employee relationship between the
parties.

Claims arising from an employer-employee relationship are not limited to claims by an employee.
Employers may also have claims against the employee, which arise from the same relationship.

In Bañez v. Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to employers’ claim
for damages, which arises from or is connected with the labor issue. Thus: chanRoblesvirt ualLawlibrary

Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article
217 to claims for damages filed by employees, we hold that by the designating clause “arising
from the employer-employee relations” Article 217 should apply with equal force to the claim
of an employer for actual damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the fact of termination, and should be
entered as a counterclaim in the illegal dismissal case.75
Bañez was cited in Domondon v. National Labor Relations Commission. 76 One of the issues in Domondon is
whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of ownership of a vehicle
assigned to the employee. It was argued that only regular courts have jurisdiction to decide the issue. 77 chanroblesvirtuallawlibrary

This court ruled that since the transfer of ownership of the vehicle to the employee was connected to his
separation from the employer and arose from the employer-employee relationship of the parties, the
employer’s claim fell within the Labor Arbiter’s jurisdiction.78 chanroblesvirtuallawlibrary

As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raised and
must arise from an employer-employee relationship for the labor tribunals to have jurisdiction.

In this case, respondent Solid Mills claims that its properties are in petitioners’ possession by virtue of their
status as its employees. Respondent Solid Mills allowed petitioners to use its property as an act of liberality.
Put in other words, it would not have allowed petitioners to use its property had they not been its
employees. The return of its properties in petitioners’ possession by virtue of their status as employees is
an issue that must be resolved to determine whether benefits can be released immediately. The issue
raised by the employer is, therefore, connected to petitioners’ claim for benefits and is sufficiently
intertwined with the parties’ employer-employee relationship. Thus, it is properly within the labor tribunals’
jurisdiction.

II

Institution of clearance procedures

has legal bases

Requiring clearance before the release of last payments to the employee is a standard procedure among
employers, whether public or private. Clearance procedures are instituted to ensure that the properties,
real or personal, belonging to the employer but are in the possession of the separated employee, are
returned to the employer before the employee’s departure.

As a general rule, employers are prohibited from withholding wages from employees. The Labor Code
provides:chanRoblesvirtualLawlibrary

Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any
person, directly or indirectly, to withhold any amount from the wages of a worker or induce
him to give up any part of his wages by force, stealth, intimidation, threat or by any other
means whatsoever without the worker’s consent.

The Labor Code also prohibits the elimination or diminution of benefits. Thus: chanRoblesvirt ualLawlibrary

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

However, our law supports the employers’ institution of clearance procedures before the release of wages.
As an exception to the general rule that wages may not be withheld and benefits may not be diminished, the
Labor Code provides: chanRoblesvirt ualLawlibrary

Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except: chanRoblesvirtualLawlibrary

1. In cases where the worker is insured with his consent by the employer, and the deduction is
to recompense the employer for the amount paid by him as premium on the insurance; chanrobleslaw
 2. For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and

3. In cases where the employer is authorized by law or regulations issued by the Secretary of
Labor and Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts due: chanRoblesvirt ualLawlibrary

Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer. cralawred

“Debt” in this case refers to any obligation due from the employee to the employer. It includes any
accountability that the employee may have to the employer. There is no reason to limit its scope to
uniforms and equipment, as petitioners would argue.

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the
release of petitioners’ benefits shall be “less accountabilities.”

“Accountability,” in its ordinary sense, means obligation or debt. The ordinary meaning of the term
“accountability” does not limit the definition of accountability to those incurred in the worksite. As long as
the debt or obligation was incurred by virtue of the employer-employee relationship, generally, it shall be
included in the employee’s accountabilities that are subject to clearance procedures.

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

Accountabilities of employees are personal. They need not be uniform among all employees in order to be
included in accountabilities incurred by virtue of an employer-employee relationship.

Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and they do not
claim superior right to it. What can be gathered from the findings of the Labor Arbiter, National Labor
Relations Commission, and the Court of Appeals is that respondent Solid Mills allowed the use of its property
for the benefit of petitioners as its employees. Petitioners were merely allowed to possess and use it out of
respondent Solid Mills’ liberality. The employer may, therefore, demand the property at will. 79 chanroblesvirtuallawlibrary

The return of the property’s possession became an obligation or liability on the part of the employees when
the employer-employee relationship ceased. Thus, respondent Solid Mills has the right to withhold
petitioners’ wages and benefits because of this existing debt or liability. In Solas v. Power and Telephone
Supply Phils., Inc., et al., this court recognized this right of the employer when it ruled that the employee in
that case was not constructively dismissed.80 Thus: chanRoblesvirtualLawlibrary

There was valid reason for respondents’ withholding of petitioner’s salary for the month of
February 2000. Petitioner does not deny that he is indebted to his employer in the amount of
around P95,000.00. Respondents explained that petitioner’s salary for the period of February
1-15, 2000 was applied as partial payment for his debt and for withholding taxes on his
income; while for the period of February 15-28, 2000, petitioner was already on absence
without leave, hence, was not entitled to any pay. 81

The law does not sanction a situation where employees who do not even assert any claim over the
employer’s property are allowed to take all the benefits out of their employment while they simultaneously
withhold possession of their employer’s property for no rightful reason.
Withholding of payment by the employer does not mean that the employer may renege on its obligation to
pay employees their wages, termination payments, and due benefits. The employees’ benefits are also not
being reduced. It is only subjected to the condition that the employees return properties properly belonging
to the employer. This is only consistent with the equitable principle that “no one shall be unjustly enriched
or benefited at the expense of another.”82 chanroblesvirtuallawlibrary

For these reasons, we cannot hold that petitioners are entitled to interest of their withheld separation
benefits. These benefits were properly withheld by respondent Solid Mills because of their refusal to return
its property.

III

Mahilom and Damian are not

entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals found that Teodora Mahilom already
retired long before respondent Solid Mills’ closure. They found that she already received her retirement
benefits. We have no reason to disturb this finding. This court is not a trier of facts. Findings of the
National Labor Relations Commission, especially when affirmed by the Court of Appeals, are binding upon
this court.83
chanroblesvirtuallawlibrary

Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her complaint filed before the
Labor Arbiter. Hence, it may not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito Damian
already received his terminal benefits. Hence, he may no longer claim terminal benefits.

The fact that respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI Village is not
evidence that he did not receive his benefits. Both the National Labor Relations Commission and the Court
of Appeals found that he executed an affidavit stating that he already received the benefits.

Absent any showing that the National Labor Relations Commission and the Court of Appeals misconstrued
these facts, we will not reverse these findings.

Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical power of those
with capital when they are left to negotiate with their workers without the standards and protection of law.
In cases such as these, the collective bargaining unit of workers are able to get more benefits and in
exchange, the owners are able to continue with the program of cutting their losses or wind down their
operations due to serious business losses. The company in this case did all that was required by law.

The preferential treatment given by our law to labor, however, is not a license for abuse. 84 It is not a signal
to commit acts of unfairness that will unreasonably infringe on the property rights of the company. Both
labor and employer have social utility, and the law is not so biased that it does not find a middle ground to
give each their due.

Clearly, in this case, it is for the workers to return their housing in exchange for the release of their benefits.
This is what they agreed upon. It is what is fair in the premises.

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

G.R. No. 198587, January 14, 2015

 SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA. JOPETTE M.
REBESENCIO, MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S.
SCHNEIDER-CRUZ, Respondents.

DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a temporary restraining order
and/or writ of preliminary injunction under Rule 45 of the 1997 Rules of Civil Procedure praying that
judgment be rendered reversing and setting aside the June 16, 2011 Decision 1 and September 13, 2011
Resolution2 of the Court of Appeals in CA-G.R. SP. No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and existing under the laws of
Jeddah, Kingdom of Saudi Arabia. It has a Philippine office located at 4/F, Metro House Building, Sen. Gil J.
Puyat Avenue, Makati City.3 In its Petition filed with this court, Saudia identified itself as follows:
chanroblesvirtuallawlibrary

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal Decree
No. M/24 of 18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its
Philippine Office is located at 4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati City
(Philippine Office). It may be served with orders of this Honorable Court through undersigned
counsel at 4th and 6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas, Makati City. 4
(Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by Saudia as Temporary
Flight Attendants with the accreditation and approval of the Philippine Overseas Employment
Administration.5 After undergoing seminars required by the Philippine Overseas Employment Administration
for deployment overseas, as well as training modules offered by Saudia (e.g., initial flight attendant/training
course and transition training), and after working as Temporary Flight Attendants, respondents became
Permanent Flight Attendants. They then entered into Cabin Attendant contracts with Saudia: Ma. Jopette M.
Rebesencio (Ma. Jopette) on May 16, 1990; 6 Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A.
Cristobal (Rouen Ruth) on May 22, 1993;7 and Loraine Schneider-Cruz (Loraine) on August 27, 1995.8

Respondents continued their employment with Saudia until they were separated from service on various
dates in 2006.9

Respondents contended that the termination of their employment was illegal. They alleged that the
termination was made solely because they were pregnant.10

As respondents alleged, they had informed Saudia of their respective pregnancies and had gone through the
necessary procedures to process their maternity leaves. Initially, Saudia had given its approval but later on
informed respondents that its management in Jeddah, Saudi Arabia had disapproved their maternity leaves.
In addition, it required respondents to file their resignation letters. 11

Respondents were told that if they did not resign, Saudia would terminate them all the same. The threat of
termination entailed the loss of benefits, such as separation pay and ticket discount entitlements. 12

Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base Manager, Abdulmalik
Saddik (Abdulmalik).13 Montassah was informed personally by Abdulmalik and a certain Faisal Hussein on
October 20, 2006 after being required to report to the office one (1) month into her maternity leave. 14Rouen
Ruth was also personally informed by Abdulmalik on October 17, 2006 after being required to report to the
office by her Group Supervisor. 15 Loraine received a call on October 12, 2006 from her Group Supervisor,
Dakila Salvador.16
Saudia anchored its disapproval of respondents' maternity leaves and demand for their resignation on its
"Unified Employment Contract for Female Cabin Attendants" (Unified Contract). 17 Under the Unified Contract,
the employment of a Flight Attendant who becomes pregnant is rendered void. It provides: chanroblesvirtuallawlibrary

(H) Due to the essential nature of the Air Hostess functions to be physically fit on board to
provide various services required in normal or emergency cases on both
domestic/international flights beside her role in maintaining continuous safety and security of
passengers, and since she will not be able to maintain the required medical fitness while at
work in case of pregnancy, accordingly, if the Air Hostess becomes pregnant at any time
during the term of this contract, this shall render her employment contract as void
and she will be terminated due to lack of medical fitness.18 (Emphasis supplied)
In their Comment on the present Petition, 19 respondents emphasized that the Unified Contract took effect on
September 23, 2006 (the first day of Ramadan), 20 well after they had filed and had their maternity leaves
approved. Ma. Jopette filed her maternity leave application on September 5, 2006. 21 Montassah filed her
maternity leave application on August 29, 2006, and its approval was already indicated in Saudia's computer
system by August 30, 2006. 22 Rouen Ruth filed her maternity leave application on September 13, 2006, 23
and Loraine filed her maternity leave application on August 22, 2006. 24

Rather than comply and tender resignation letters, respondents filed separate appeal letters that were all
rejected.25

Despite these initial rejections, respondents each received calls on the morning of November 6, 2006 from
Saudia's office secretary informing them that their maternity leaves had been approved. Saudia, however,
was quick to renege on its approval. On the evening of November 6, 2006, respondents again received calls
informing them that it had received notification from Jeddah, Saudi Arabia that their maternity leaves had
been disapproved.26

Faced with the dilemma of resigning or totally losing their benefits, respondents executed handwritten
resignation letters. In Montassah's and Rouen Ruth's cases, their resignations were executed on Saudia's
blank letterheads that Saudia had provided. These letterheads already had the word "RESIGNATION" typed
on the subject portions of their headings when these were handed to respondents. 27

On November 8, 2007, respondents filed a Complaint against Saudia and its officers for illegal dismissal and
for underpayment of salary, overtime pay, premium pay for holiday, rest day, premium, service incentive
leave pay, 13th month pay, separation pay, night shift differentials, medical expense reimbursements,
retirement benefits, illegal deduction, lay-over expense and allowances, moral and exemplary damages, and
attorney's fees.28 The case was initially assigned to Labor Arbiter Hermino V. Suelo and docketed as NLRC
NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter. 29 It claimed that all the determining points of contact
referred to foreign law and insisted that the Complaint ought to be dismissed on the ground of forum non
conveniens.30 It added that respondents had no cause of action as they resigned voluntarily. 31

On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the Decision 32dismissing
respondents' Complaint. The dispositive portion of this Decision reads:chanroblesvirtuallawlibrary

WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the instant

complaint for lack of jurisdiction/merit.33
cralawlawlibrary

On respondents' appeal, the National Labor Relations Commission's Sixth Division reversed the ruling of
Executive Labor Arbiter Jambaro-Franco. It explained that "[considering that complainants-appellants are
OFWs, the Labor Arbiters and the NLRC has [sic] jurisdiction to hear and decide their complaint for illegal
termination."34 On the matter of forum non conveniens, it noted that there were no special circumstances
that warranted its abstention from exercising jurisdiction.35 On the issue of whether respondents were validly
dismissed, it held that there was nothing on record to support Saudia's claim that respondents resigned
voluntarily.
The dispositive portion of the November 19, 2009 National Labor Relations Commission Decision 36reads: chanroblesvirtuallawlibrary

WHEREFORE, premises considered, judgment is hereby rendered finding the appeal

impressed with merit. The respondents-appellees are hereby directed to pay complainants-
appellants the aggregate amount of SR614,001.24 corresponding to their backwages and
separation pay plus ten (10%) percent thereof as attorney's fees. The decision of the Labor
Arbiter dated December 12, 2008 is hereby VACATED and SET ASIDE. Attached is the
computation prepared by this Commission and made an integral part of this Decision. 37 cralawlawlibrary

In the Resolution dated February 11, 2010, 38 the National Labor Relations Commission denied petitioners'
Motion for Reconsideration.

In the June 16, 2011 Decision,39 the Court of Appeals denied petitioners' Rule 65 Petition and modified the
Decision of the National Labor Relations Commission with respect to the award of separation pay and
backwages.

The dispositive portion of the Court of Appeals Decision reads:chanroblesvirtuallawlibrary

WHEREFORE, the instant petition is hereby DENIED. The Decision dated November 19, 2009
issued by public respondent, Sixth Division of the National Labor Relations Commission -
National Capital Region is MODIFIED only insofar as the computation of the award of
separation pay and backwages. For greater clarity, petitioners are ordered to pay private
respondents separation pay which shall be computed from private respondents' first day of
employment up to the finality of this decision, at the rate of one month per year of service and
backwages which shall be computed from the date the private respondents were illegally
terminated until finality of this decision. Consequently, the ten percent (10%) attorney's fees
shall be based on the total amount of the award. The assailed Decision is affirmed in all other
respects.

The labor arbiter is hereby DIRECTED to make a recomputation based on the foregoing.40 cralawlawlibrary

In the Resolution dated September 13, 2011, 41 the Court of Appeals denied petitioners' Motion for
Reconsideration.

Hence, this Appeal was filed.

The issues for resolution are the following:

First, whether the Labor Arbiter and the National Labor Relations Commission may exercise jurisdiction over
Saudi Arabian Airlines and apply Philippine law in adjudicating the present dispute;

Second, whether respondents' voluntarily resigned or were illegally terminated; and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian Airlines. chanRoblesvirt ualLawlibrary

Summons were validly served on Saudia and jurisdiction over it validly acquired.

There is no doubt that the pleadings and summons were served on Saudia through its counsel. 42 Saudia,
however, claims that the Labor Arbiter and the National Labor Relations Commission had no jurisdiction over
it because summons were never served on it but on "Saudia Manila." 43 Referring to itself as "Saudia
Jeddah," it claims that "Saudia Jeddah" and not "Saudia Manila" was the employer of respondents because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into by respondents;

Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries and benefits; and
Lastly, it was with "Saudia Jeddah" that respondents filed their resignations. 44

Saudia posits that respondents' Complaint was brought against the wrong party because "Saudia Manila,"
upon which summons was served, was never the employer of respondents. 45

Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare allegation, there is
no basis for concluding that "Saudia Jeddah" is distinct from "Saudia Manila."

What is clear is Saudia's statement in its own Petition that what it has is a "Philippine Office . . . located at
4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati City." 46 Even in the position paper that Saudia
submitted to the Labor Arbiter,47 what Saudia now refers to as "Saudia Jeddah" was then only referred to as
"Saudia Head Office at Jeddah, KSA,"48 while what Saudia now refers to as "Saudia Manila" was then only
referred to as "Saudia's office in Manila."49

By its own admission, Saudia, while a foreign corporation, has a Philippine office.

Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments Act of 1991, provides
the following:chanroblesvirtuallawlibrary

The phrase "doing business" shall include . . . opening offices, whether called
"liaison" offices or branches; . . . and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of commercial gain or of the purpose and object of the business organization.
(Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other conclusion than that
Saudia is a foreign corporation doing business in the Philippines. As such, Saudia may be sued in the
Philippines and is subject to the jurisdiction of Philippine tribunals.

Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia Manila" — the latter being
nothing more than Saudia's local office — service of summons to Saudia's office in Manila sufficed to vest
jurisdiction over Saudia's person in Philippine tribunals. chanRoblesvirtualLawlibrary

II

Saudia asserts that Philippine courts and/or tribunals are not in a position to make an intelligent decision as
to the law and the facts. This is because respondents' Cabin Attendant contracts require the application of
the laws of Saudi Arabia, rather than those of the Philippines. 50 It claims that the difficulty of ascertaining
foreign law calls into operation the principle of forum non conveniens, thereby rendering improper the
exercise of jurisdiction by Philippine tribunals. 51

A choice of law governing the validity of contracts or the interpretation of its provisions dees not necessarily
imply forum non conveniens. Choice of law and forum non conveniens are entirely different matters.

Choice of law provisions are an offshoot of the fundamental principle of autonomy of contracts. Article 1306
of the Civil Code firmly ensconces this: chanroblesvirtuallawlibrary

Article 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It is designed to
frustrate illicit means for securing advantages and vexing litigants that would otherwise be possible if the
venue of litigation (or dispute resolution) were left entirely to the whim of either party.

Contractual choice of law provisions factor into transnational litigation and dispute resolution in one of or in
a combination of four ways: (1) procedures for settling disputes, e.g., arbitration; (2) forum, i.e., venue; (3)
governing law; and (4) basis for interpretation. Forum non conveniens relates to, but is not subsumed by,
the second of these.

Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the laws of a given
jurisdiction as the governing law of a contract does not preclude the exercise of jurisdiction by tribunals
elsewhere. The reverse is equally true: The assumption of jurisdiction by tribunals does not ipso factomean
that it cannot apply and rule on the basis of the parties' stipulation. In Hasegawa v. Kitamura:52 ChanRoblesVirtualawlibrary

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

As various dealings, commercial or otherwise, are facilitated by the progressive ease of communication and
travel, persons from various jurisdictions find themselves transacting with each other. Contracts involving
foreign elements are, however, nothing new. Conflict of laws situations precipitated by disputes and
litigation anchored on these contracts are not totally novel.

Transnational transactions entail differing laws on the requirements Q for the validity of the formalities and
substantive provisions of contracts and their interpretation. These transactions inevitably lend themselves to
the possibility of various fora for litigation and dispute resolution. As observed by an eminent expert on
transnational law: chanroblesvirtuallawlibrary

The more jurisdictions having an interest in, or merely even a point of contact with, a
transaction or relationship, the greater the number of potential fora for the resolution of
disputes arising out of or related to that transaction or relationship. In a world of increased
mobility, where business and personal transactions transcend national boundaries, the
jurisdiction of a number of different fora may easily be invoked in a single or a set of related
disputes.54
cralawlawlibrary

Philippine law is definite as to what governs the formal or extrinsic validity of contracts. The first paragraph
of Article 17 of the Civil Code provides that "[t]he forms and solemnities of contracts . . . shall be governed
by the laws of the country in which they are executed" 55 (i.e., lex loci celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws situations on matters
pertaining to substantive content of contracts. It has been noted that three (3) modes have emerged: (1)
lex loci contractus or the law of the place of the making; (2) lex loci solutionis or the law of the place of
performance; and (3) lex loci intentionis or the law intended by the parties.56

Given Saudia's assertions, of particular relevance to resolving the present dispute is lex loci intentionis.

An author observed that Spanish jurists and commentators "favor lex loci intentionis."57 These jurists and
commentators proceed from the Civil Code of Spain, which, like our Civil Code, is silent on what governs the
intrinsic validity of contracts, and the same civil law traditions from which we draw ours.

In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P. Eusebio Construction,
Inc.,58 manifested preference for allowing the parties to select the law applicable to their contract": chanroblesvirtuallawlibrary

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The
rule followed by most legal systems, however, is that the intrinsic validity of a contract must
be governed by the lex contractus or "proper law of the contract." This is the law voluntarily
agreed upon by the parties (the lex loci voluntatis) or the law intended by them either
expressly or implicitly (the lex loci intentionis). The law selected may be implied from such
factors as substantial connection with the transaction, or the nationality or domicile of the
 parties. Philippine courts would do well to adopt the first and most basic rule in most legal
systems, namely, to allow the parties to select the law applicable to their contract, subject to
the limitation that it is not against the law, morals, or public policy of the forum and that the
chosen law must bear a substantive relationship to the transaction.59 (Emphasis in the
original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the application of the laws of
Saudi Arabia. It insists that the need to comply with these stipulations calls into operation the doctrine of
forum non conveniens and, in turn, makes it necessary for Philippine tribunals to refrain from exercising
jurisdiction.

As mentioned, contractual choice of laws factors into transnational litigation in any or a combination of four
(4) ways. Moreover, forum non conveniens relates to one of these: choosing between multiple possible fora.

Nevertheless, the possibility of parallel litigation in multiple fora — along with the host of difficulties it poses
— is not unique to transnational litigation. It is a difficulty that similarly arises in disputes well within the
bounds of a singe jurisdiction.

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

Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata, is a means of
addressing the problem of parallel litigation. While the rules of forum shopping, litis pendentia, and res
judicata are designed to address the problem of parallel litigation within a single jurisdiction, forum non
conveniens is a means devised to address parallel litigation arising in multiple jurisdictions.

Forum non conveniens literally translates to "the forum is inconvenient." 62 It is a concept in private
international law and was devised to combat the "less than honorable" reasons and excuses that litigants
use to secure procedural advantages, annoy and harass defendants, avoid overcrowded dockets, and select
a "friendlier" venue.63 Thus, the doctrine of forum non conveniens addresses the same rationale that the rule
against forum shopping does, albeit on a multijurisdictional scale.

Forum non conveniens, like res judicata,64 is a concept originating in common law. 65 However, unlike the rule
on res judicata, as well as those on litis pendentia and forum shopping, forum non conveniens finds no
textual anchor, whether in statute or in procedural rules, in our civil law system. Nevertheless, jurisprudence
has applied forum non conveniens as basis for a court to decline its exercise of jurisdiction.66

Forum non conveniens is soundly applied not only to address parallel litigation and undermine a litigant's
capacity to vex and secure undue advantages by engaging in forum shopping on an international scale. It is
also grounded on principles of comity and judicial efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on account of forum
non conveniens is a deferential gesture to the tribunals of another sovereign. It is a measure that prevents
the former's having to interfere in affairs which are better and more competently addressed by the latter.
Further, forum non conveniens entails a recognition not only that tribunals elsewhere are better suited to
rule on and resolve a controversy, but also, that these tribunals are better positioned to enforce judgments
and, ultimately, to dispense justice. Forum non conveniens prevents the embarrassment of an awkward
situation where a tribunal is rendered incompetent in the face of the greater capability — both analytical and
practical — of a tribunal in another jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of efficiency and
economy as it is a matter of international courtesy. A court would effectively be neutering itself if it insists
on adjudicating a controversy when it knows full well that it is in no position to enforce its judgment. Doing
so is not only an exercise in futility; it is an act of frivolity. It clogs the dockets of a.tribunal and leaves it to
waste its efforts on affairs, which, given transnational exigencies, will be reduced to mere academic, if not
trivial, exercises.

Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most 'convenient' or available forum and the parties are not
precluded from seeking remedies elsewhere."67 In Puyat v. Zabarte,68 this court recognized the following
situations as among those that may warrant a court's desistance from exercising jurisdiction: chanroblesvirtuallawlibrary

1) The belief that the matter can be better tried and decided elsewhere, either because
the main aspects of the case transpired in a foreign jurisdiction or the material
witnesses have their residence there;

2) The belief that the non-resident plaintiff sought the forum[,] a practice known as
forum shopping[,] merely to secure procedural advantages or to convey or harass
the defendant;

3) The unwillingness to extend local judicial facilities to non residents or aliens when
the docket may already be overcrowded;

4) The inadequacy of the local judicial machinery for effectuating the right sought to be
maintained; and

5) The difficulty of ascertaining foreign law.69

In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,70 this court underscored
that a Philippine court may properly assume jurisdiction over a case if it chooses to do so to the extent: "(1)
that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court
is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine Court
has or is likely to have power to enforce its decision."71

The use of the word "may" (i.e., "may refuse impositions on its jurisdiction" 72) in the decisions shows that
the matter of jurisdiction rests on the sound discretion of a court. Neither the mere invocation of forum non
conveniens nor the averment of foreign elements operates to automatically divest a court of jurisdiction.
Rather, a court should renounce jurisdiction only "after 'vital facts are established, to determine whether
special circumstances' require the court's desistance." 73 As the propriety of applying forum non conveniens is
contingent on a factual determination, it is, therefore, a matter of defense. 74

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

On the matter of pleading forum non conveniens, we state the rule, thus: Forum non conveniens must not
only be clearly pleaded as a ground for dismissal; it must be pleaded as such at the earliest possible
opportunity. Otherwise, it shall be deemed waived.

This court notes that in Hasegawa,76 this court stated that forum non conveniens is not a ground for a
motion to dismiss. The factual ambience of this case however does not squarely raise the viability of this
doctrine. Until the opportunity comes to review the use of motions to dismiss for parallel litigation,
Hasegawa remains existing doctrine.

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative that it proceed
from & factually established basis. It would be improper to dismiss an action pursuant to forum non
conveniens based merely on a perceived, likely, or hypothetical multiplicity of fora. Thus, a defendant must
also plead and show that a prior suit has, in fact, been brought in another jurisdiction.

The existence of a prior suit makes real the vexation engendered by duplicitous litigation, the
embarrassment of intruding into the affairs of another sovereign, and the squandering of judicial efforts in
resolving a dispute already lodged and better resolved elsewhere. As has been noted: chanroblesvirtuallawlibrary

A case will not be stayed o dismissed on [forum] non conveniens grounds unless the plaintiff is
shown to have an available alternative forum elsewhere. On this, the moving party bears the
burden of proof.

A number of factors affect the assessment of an alternative forum's adequacy. The statute of
limitations abroad may have run, of the foreign court may lack either subject matter or
personal jurisdiction over the defendant. . . . Occasionally, doubts will be raised as to the
integrity or impartiality of the foreign court (based, for example, on suspicions of corruption or
bias in favor of local nationals), as to the fairness of its judicial procedures, or as to is
operational efficiency (due, for example, to lack of resources, congestion and delay, or
interfering circumstances such as a civil unrest). In one noted case, [it was found] that delays
of 'up to a quarter of a century' rendered the foreign forum... inadequate for these
purposes.77cralawlawlibrary

We deem it more appropriate and in the greater interest of prudence that a defendant not only allege
supposed dangerous tendencies in litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has commenced in another jurisdiction and
that a foreign tribunal has chosen to exercise jurisdiction.

III

Forum non conveniens finds no application and does not operate to divest Philippine tribunals of jurisdiction
and to require the application of foreign law.

Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the Cabin Attendant
contracts that require the application of the laws of Saudi Arabia.

Forum non conveniens relates to forum, not to the choice of governing law. Thai forum non conveniensmay
ultimately result in the application of foreign law is merely an incident of its application. In this strict sense,
forum non conveniens is not applicable. It is not the primarily pivotal consideration in this case.

In any case, even a further consideration of the applicability of forum non conveniens on the incidental
matter of the law governing respondents' relation with Saudia leads to the conclusion that it is improper for
Philippine tribunals to divest themselves of jurisdiction.

Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents must grapple with
two (2) considerations: first, the availability and adequacy of recourse to a foreign tribunal; and second, the
question of where, as between the forum court and a foreign court, the balance of interests inhering in a
dispute weighs more heavily.

The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign tribunal and can
be resolved by juxtaposing the competencies and practical circumstances of the tribunals in alternative fora.
Exigencies, like the statute of limitations, capacity to enforce orders and judgments, access to records,
requirements for the acquisition of jurisdiction, and even questions relating to the integrity of foreign courts,
may render undesirable or even totally unfeasible recourse to a foreign court. As mentioned, we consider it
in the greater interest of prudence that a defendant show, in pleading forum non conveniens, that litigation
has commenced in another jurisdiction and that a foieign tribunal has, in fact, chosen to exercise
jurisdiction.

Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a dispute: first, the
vinculum which the parties and their relation have to a given jurisdiction; and second, the public interest
that must animate a tribunal, in its capacity as an agent of the sovereign, in choosing to assume or decline
jurisdiction. The first is more concerned with the parties, their personal circumstances, and private interests;
the second concerns itself with the state and the greater social order.

In considering the vinculum, a court must look into the preponderance of linkages which the parties and
their transaction may have to either jurisdiction. In this respect, factors, such as the parties' respective
nationalities and places of negotiation, execution, performance, engagement or deployment, come into play.

In considering public interest, a court proceeds with a consciousness that it is an organ of the state. It must,
thus, determine if the interests of the sovereign (which acts through it) are outweighed by those of the
alternative jurisdiction. In this respect, the court delves into a consideration of public policy. Should it find
that public interest weighs more heavily in favor of its assumption of jurisdiction, it should proceed in
adjudicating the dispute, any doubt or .contrary view arising from the preponderance of linkages
notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law provisions. Where such provisions
exist, Philippine tribunals, acting as the forum court, generally defer to the parties' articulated choice.

This is consistent with the fundamental principle of autonomy of contracts. Article 1306 of the Civ:l Code
expressly provides that "[t]he contracting parties may establish 'such stipulations, clauses, terms and
conditions as they may deem convenient." 78 Nevertheless, while a Philippine tribunal (acting as the forum
court) is called upon to respect the parties' choice of governing law, such respect must not be so permissive
as to lose sight of considerations of law, morals, good customs, public order, or public policy that underlie
the contract central to the controversy.

Specifically with respect to public policy, in Pakistan International Airlines Corporation v. Ople,79 this court
explained that:chanroblesvirtuallawlibrary

counter-balancing the principle of autonomy of contracting parties is the equally general rule
that provisions of applicable law, especially provisions relating to matters affected with public
policy, are deemed written inta the contract. Put a little differently, the governing principle is
that parties may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. 80(Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure the fundamental
equality before the law of women and men." Contrasted with Article II, Section 1 of the 1987 Constitution's
statement that "[n]o person shall ... be denied the equal protection of the laws," Article II, Section 14
exhorts the State to "ensure." This does not only mean that the Philippines shall not countenance nor lend
legal recognition and approbation to measures that discriminate on the basis of one's being male or female.
It imposes an obligation to actively engage in securing the fundamental equality of men and women.

The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW), signed and
ratified by the Philippines on July 15, 1980, and on August 5, 1981, respectively, 81 is part of the law of the
land. In view of the widespread signing and ratification of, as well as adherence (in practice) to it by states,
it may even be said that many provisions of the CEDAW may have become customary international law. The
CEDAW gives effect to the Constitution's policy statement in Article II, Section 14. Article I of the CEDAW
defines "discrimination against women" as: chanroblesvirtuallawlibrary

any distinction, exclusion or restriction made on the basis of sex which has the effect or
purpose of impairing or nullifying the recognition, enjoyment or exercise by women,
irrespective of their marital status, on a basis of equality of men and women, of human rights
and fundamental freedoms in the political, economic, social, cultural, civil or any other
field.82
cralawlawlibrary

The constitutional exhortation to ensure fundamental equality, as illumined by its enabling law, the CEDAW,
must inform and animate all the actions of all personalities acting on behalf of the State. It is, therefore, the
bounden duty of this court, in rendering judgment on the disputes brought before it, to ensure that no
discrimination is heaped upon women on the mere basis of their being women. This is a point so basic and
central that all our discussions and pronouncements — regardless of whatever averments there may be of
foreign law — must proceed from this premise.

So informed and animated, we emphasize the glaringly discriminatory nature of Saudia's policy. As argued
by respondents, Saudia's policy entails the termination of employment of flight attendants who become
pregnant. At the risk of stating the obvious, pregnancy is an occurrence that pertains specifically to women.
Saudia's policy excludes from and restricts employment on the basis of no other consideration but sex.

We do not lose sight of the reality that pregnancy does present physical limitations that may render difficult
the performance of functions associated with being a flight attendant. Nevertheless, it would be the height
of iniquity to view pregnancy as a disability so permanent and immutable that, it must entail the termination
of one's employment. It is clear to us that any individual, regardless of gender, may be subject to exigencies
that limit the performance of functions. However, we fail to appreciate how pregnancy could be such an
impairing occurrence that it leaves no other recourse but the complete termination of the means through
which a woman earns a living.

Apart from the constitutional policy on the fundamental equality before the law of men and women, it is
settled that contracts relating to labor and employment are impressed with public interest. Article 1700 of
the Civil Code provides that "[t]he relation between capital and labor are not merely contractual. They are
so impressed with public interest that labor contracts must yield to the common good."

Consistent with this, this court's pronouncements in Pakistan International Airlines Corporation83 are clear
and unmistakable: chanroblesvirtuallawlibrary

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement, and, secondly,
lays the venue for settlement of any dispute arising out of or in connection with the agreement
"only [in] courts of Karachi, Pakistan". The first clause of paragraph 10 cannot be invoked to
prevent the application of Philippine labor laws and'regulations to the subject matter of this
case, i.e., the employer-employee relationship between petitioner PIA and private
respondents. We have already pointed out that the relationship is much affected with public
interest and that the otherwise applicable Philippine laws and regulations cannot be rendered
illusory by the parties agreeing upon some other law to govern their relationship. . . . Under
these circumstances, paragraph 10 of the employment agreement cannot be given effect so as
to oust Philippine agencies and courts of the jurisdiction vested upon them by Philippine law. 84
(Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal termination of respondents'
employment, this case is immutably a matter of public interest and public policy. Consistent with clear
pronouncements in law and jurisprudence, Philippine laws properly find application in and govern this case.
'Moreover, as this premise for Saudia's insistence on the application forum non conveniens has been
shattered, it follows that Philippine tribunals may properly assume jurisdiction over the present controversy.
Philippine jurisprudence provides ample illustrations of when a court's renunciation of jurisdiction on account
of forum non conveniens is proper or improper.'

In Philsec Investment Corporation v. Court of Appeals,85 this court noted that the trial court failed to
consider that one of the plaintiffs was a domestic corporation, that one of the defendants was a Filipino, and
that it was the extinguishment of the latter's debt that was the object of the transaction subject of the
litigation. Thus, this court held, among others, that the trial court's refusal to assume jurisdiction was not
justified by forum non conveniens and remanded the case to the trial court.

In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial court's assumption of
jurisdiction considering that the trial court could properly enforce judgment on the petitioner which was a
foreign corporation licensed to do business in the Philippines.

In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to disturb the trial court's
assumption of jurisdiction over a case in which, as noted by the trial court, "it is more convenient to hear
and decide the case in the Philippines because Todaro [the plaintiff] resides in the Philippines and the
contract allegedly breached involve[d] employment in the Philippines." 88

In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held that the fact that the
complainant in an illegal dismissal case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor Code does not include forum non
conveniens as a ground for the dismissal of a complaint for illegal dismissal; (2) the propriety of dismissing
a case based on forum non conveniens requires a factual determination; and (3) the requisites for
assumption of jurisdiction as laid out in Bank of America, NT&SA90 were all satisfied.

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations Commission 91 that the
National Labor Relations Q Commission was a seriously inconvenient forum. In that case, private respondent
Marcelo G. Santos was working in the Sultanate of Oman when he received a letter from Palace Hotel
recruiting him for employment in Beijing, China. Santos accepted the offer. Subsequently, however, he was
released from employment supposedly due to business reverses arising from political upheavals in China
(i.e., the Tiananmen Square incidents of 1989). Santos later filed a Complaint for illegal dismissal
impleading Palace Hotel's General Manager, Mr. Gerhard Schmidt, the Manila Hotel International Company
Ltd. (which was, responsible for training Palace Hotel's personnel and staff), and the Manila Hotel
Corporation (which owned 50% of Manila Hotel International Company Ltd.'s capital stock).

In ruling against the National Labor Relations Commission's exercise of jurisdiction, this court noted that the
main aspects of the case transpired in two (2) foreign jurisdictions, Oman and China, and that the case
involved purely foreign elements. Specifically, Santos was directly hired by a foreign employer through
correspondence sent to Oman. Also, the proper defendants were neither Philippine nationals nor engaged in
business in the Philippines, while the main witnesses were not residents of the Philippines. Likewise, this
court noted that the National Labor Relations Commission was in no position to conduct the following: first,
determine the law governing the employment contract, as it was entered into in foreign soil; second,
determine the facts, as Santos' employment was terminated in Beijing; and third, enforce its judgment,
since Santos' employer, Palace Hotel, was incorporated under the laws of China and was not even served
with summons.

Contrary to Manila Hotel, the case now before us does not entail a preponderance of linkages that favor a
foreign jurisdiction.
Here, the circumstances of the parties and their relation do not approximate the circumstances enumerated
in Puyat,92 which this court recognized as possibly justifying the desistance of Philippine tribunals from
exercising jurisdiction.

First, there is no basis for concluding that the case can be more conveniently tried elsewhere. As established
earlier, Saudia is doing business in the Philippines. For their part, all four (4) respondents are Filipino
citizens maintaining residence in the Philippines and, apart from their previous employment with Saudia,
have no other connection to the Kingdom of Saudi Arabia. It would even be to respondents' inconvenience if
this case were to be tried elsewhere.

Second, the records are bereft of any indication that respondents filed their Complaint in an effort to engage
in forum shopping or to vex and inconvenience Saudia.

Third, there is no indication of "unwillingness to extend local judicial facilities to non-residents or aliens." 93
That Saudia has managed to bring the present controversy all the way to this court proves this.

Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating the right sought to
be maintained. Summons was properly served on Saudia and jurisdiction over its person was validly
acquired.

Lastly, there is not even room for considering foreign law. Philippine law properly governs the present
dispute.

As the question of applicable law has been settled, the supposed difficulty of ascertaining foreign law (which
requires the application of forum non conveniens) provides no insurmountable inconvenience or special
circumstance that will justify depriving Philippine tribunals of jurisdiction.

Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia which should apply,
it does not follow that Philippine tribunals should refrain from exercising jurisdiction. To. recall our
pronouncements in Puyat,94 as well as in Bank of America, NT&SA,95 it is not so much the mere applicability
of foreign law which calls into operation forum non conveniens. Rather, what justifies a court's desistance
from exercising jurisdiction is "[t]he difficulty of ascertaining foreign law"96 or the inability of a "Philippine
Court to make an intelligent decision as to the law[.]"97

Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to make an
intelligent decision"98), Philippine tribunals may apply the foreign law selected by the parties. In fact, (albeit
without meaning to make a pronouncement on the accuracy and reliability of respondents' citation) in this
case, respondents themselves have made averments as to the laws of Saudi Arabia. In their Comment,
respondents write: chanroblesvirtuallawlibrary

Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to
terminate the employment of any woman by virtue of pregnancy. The law in Saudi Arabia is
even more harsh and strict [sic] in that no employer can terminate the employment of a
female worker or give her a warning of the same while on Maternity Leave, the specific
provision of Saudi Labor Laws on the matter is hereto quoted as follows: chanroblesvirtuallawlibrary

"An employer may not terminate the employment of a female worker or give her
a warning of the same while on maternity leave." (Article 155, Labor Law of the
Kingdom of Saudi Arabia, Royal Decree No. M/51.)99 cralawlawlibrary

All told, the considerations for assumption of jurisdiction by Philippine tribunals as outlined in Bank of
America, NT&SA100 have been satisfied. First, all the parties are based in the Philippines and all the material
incidents transpired in this jurisdiction. Thus, the parties may conveniently seek relief from Philippine
tribunals. Second, Philippine tribunals are in a position to make an intelligent decision as to the law and the
facts. Third, Philippine tribunals are in a position to enforce their decisions. There is no compelling basis for
ceding jurisdiction to a foreign tribunal. Quite the contrary, the immense public policy considerations
attendant to this case behoove Philippine tribunals to not shy away from their duty to rule on the case. chanRoblesvirt ualLawlibrary
IV

Respondents were illegally terminated.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation as "the voluntary act of an
employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the
exigency of the service, and one has no other choice but to dissociate oneself from employment. It is a
formal pronouncement or relinquishment of an office, with the intention of relinquishing the office
accompanied by the act of relinquishment." 102 Thus, essential to the act of resignation is voluntariness. It
must be the result of an employee's exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an employee resigned
voluntarily:
chanroblesvirtuallawlibrary

As the intent to relinquish must concur with the overt act of relinquishment, the acts of the
employee before and after the alleged resignation must be considered in determining whether
he or she, in fact, intended, to sever his or her employment.103 (Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work because 'continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a
diminution in pay' and other benefits."104

In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive dismissal has been described as
tantamount to "involuntarily [sic] resignation due to the harsh, hostile, and unfavorable conditions set by
the employer."106 In the same case, it was noted that "[t]he gauge for constructive dismissal is whether a
reasonable person in the employee's position would feel compelled to give up his employment under the
prevailing circumstances."107

Applying the cited standards on resignation and constructive dismissal, it is clear that respondents were
constructively dismissed. Hence, their termination was illegal.

The termination of respondents' employment happened when they were pregnant and expecting to incur
costs on account of child delivery and infant rearing. As noted by the Court of Appeals, pregnancy is a time
when they need employment to sustain their families. 108 Indeed, it goes against normal and reasonable
human behavior to abandon one's livelihood in a time of great financial need.

It is clear that respondents intended to remain employed with Saudia. All they did was avail of their
maternity leaves. Evidently, the very nature of a maternity leave means that a pregnant employee will not
report for work only temporarily and that she will resume the performance of her duties as soon as the leave
allowance expires.

It is also clear that respondents exerted all efforts to' remain employed with Saudia. Each of them
repeatedly filed appeal letters (as much as five [5] letters in the case of Rebesencio 109) asking Saudia to
reconsider the ultimatum that they resign or be terminated along with the forfeiture of their benefits. Some
of them even went to Saudia's office to personally seek reconsideration. 110

Respondents also adduced a copy of the "Unified Employment Contract for Female Cabin Attendants." 111This
contract deemed void the employment of a flight attendant who becomes pregnant and threatened
termination due to lack of medical fitness. 112 The threat of termination (and the forfeiture of benefits that it
entailed) is enough to compel a reasonable person in respondents' position to give up his or her
employment.

Saudia draws attention to how respondents' resignation letters were supposedly made in their own
handwriting. This minutia fails to surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of how any supposed resignation did not
arise from respondents' own initiative. As earlier pointed out, respondents' resignations were executed on
Saudia's blank letterheads that Saudia had provided. These letterheads already had the word
"RESIGNATION" typed on the subject portion of their respective headings when these were handed to
respondents.113ChanRoblesVirtualawlibrary

"In termination cases, the burden of proving just or valid cause for dismissing an employee rests on the
employer."114 In this case, Saudia makes much of how respondents supposedly completed their exit
interviews, executed quitclaims, received their separation pay, and took more than a year to file their
Complaint.115 If at all, however, these circumstances prove only the fact of their occurrence, nothing more.
The voluntariness of respondents' departure from Saudia is non sequitur.

Mere compliance with standard procedures or processes, such as the completion of their exit interviews,
neither negates compulsion nor indicates voluntariness.

As with respondent's resignation letters, their exit interview forms even support their claim of illegal
dismissal and militates against Saudia's arguments. These exit interview forms, as reproduced by Saudia in
its own Petition, confirms the unfavorable conditions as regards respondents' maternity leaves. Ma. Jopette's
and Loraine's exit interview forms are particularly telling:
chanroblesvirtuallawlibrary

a. From Ma. Jopette's exit interview form:

3. In what respects has the job met or failed to meet your expectations?

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE. 116

b. From Loraine's exit interview form:

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

xxx xxx xxx

Others

CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY) 117

As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio,118 this court noted
that "[i]f (a) there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or (b)
the terms of the settlement are unconscionable, and on their face invalid, such quitclaims must be struck
down as invalid or illegal." 119 Respondents executed their quitclaims after having been unfairly given an
ultimatum to resign or be terminated (and forfeit their benefits). chanRoblesvirtualLawlibrary

Having been illegally and unjustly dismissed, respondents are entitled to full backwages and benefits from
the time of their termination until the finality of this Decision. They are likewise entitled to separation pay in
the amount of one (1) month's salary for every year of service until the fmality of this Decision, with a
fraction of a year of at least six (6) months being counted as one (1) whole year.

Moreover, "[m]oral damages are awarded in termination cases where the employee's dismissal was
attended by bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it was
done in a manner contrary to morals, good customs or public policy." 120 In this case, Saudia terminated
respondents' employment in a manner that is patently discriminatory and running afoul of the public interest
that underlies employer-employee relationships. As such, respondents are entitled to moral damages.

To provide an "example or correction for the public good"121 as against such discriminatory and callous
schemes, respondents are likewise entitled to exemplary damages.
In a long line of cases, this court awarded exemplary damages to illegally dismissed employees whose
"dismissal[s were] effected in a wanton, oppressive or malevolent manner." 122 This court has awarded
exemplary damages to employees who were terminated on such frivolous, arbitrary, and unjust grounds as
membership in or involvement with labor unions, 123 injuries sustained in the course of
employment,124development of a medical condition due to the employer's own violation of the employment
contract,125and lodging of a Complaint against the employer. 126 Exemplary damages were also awarded to
employees who were deemed illegally dismissed by an employer in an attempt to evade compliance with
statutorily established employee benefits.127 Likewise, employees dismissed for supposedly just causes, but
in violation of due process requirements, were awarded exemplary damages. 128

These examples pale in comparison to the present controversy. Stripped of all unnecessary complexities,
respondents were dismissed for no other reason than simply that they were pregnant. This is as wanton,
oppressive, and tainted with bad faith as any reason for termination of employment can be. This is no
ordinary case of illegal dismissal. This is a case of manifest gender discrimination. It is an affront not only to
our statutes and policies on employees' security of tenure, but more so, to the Constitution's dictum of
fundamental equality between men and women. 129

The award of exemplary damages is, therefore, warranted, not only to remind employers of the need to
adhere to the requirements of procedural and substantive due process in termination of employment, but
more importantly, to demonstrate that gender discrimination should in no case be countenanced.

Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal, respondents are
likewise entitled to attorney's fees in the amount of 10% of the total monetary award. 130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the persons composing it. Thus, as a
rule, corporate directors and officers are not liable for the illegal termination of a corporation's employees. It
is only when they acted in bad faith or with malice that they become solidarity liable with the corporation. 131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical,132 this court
clarified that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest purpose or
some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive
or interest or ill will; it partakes of the nature of fraud." 133

Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or with malice as
regards their termination. Thus, she may not be held solidarity liable with Saudia. cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not solidarity liable with
petitioner Saudi Arabian Airlines, and second, that petitioner Saudi Arabian Airlines is liable for moral and
exemplary damages. The June 16, 2011 Decision and the September 13, 2011 Resolution of the Court of
Appeals in CA-G.R. SP. No. 113006 are hereby AFFIRMED in all other respects. Accordingly, petitioner
Saudi Arabian Airlines is ordered to pay respondents:

(1) Full backwages and all other benefits computed from the respective dates in which each of the
respondents were illegally terminated until the finality of this Decision;
(2) Separation pay computed from the respective dates in which each of the respondents commenced
employment until the finality of this Decision at the rate of one (1) month's salary for every year
of service, with a fraction of a year of at least six (6) months being counted as one (1) whole
year;

(3) Moral damages in the amount of P100,000.00 per respondent;

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

(5) Attorney's fees equivalent to 10% of the total award.

Interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of this
Decision until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to
respondents which petitioner Saudi Arabian Airlines should pay without delay.

SO ORDERED. chanroblesvirtuallawlibrary

G.R. No.178055 July 2, 2014

AMECOS INNOVATIONS, INC. and ANTONIO F. MATEO, Petitioners,

vs.

ELIZA R. LOPEZ, Respondent.

DECISION

DEL CASTILLO, J.:

1 2
Assailed in this Petition for Review on Certiorari are the March 22, 2007 Resolution of the Court of
3
Appeals (CA) in CA-G.R. SP No. 96959 which affirmed the June 30, 2006 Decision of the Regional
4
Trial Court (RTC) of Caloocan City, Branch 121, dismissing the Complaint for lack of jurisdiction,
5 6
and its May 23, 2007 Resolution denying petitioners' Motion for Reconsideration.

Factual Antecedents

Petitioner Amecos Innovations, Inc. (Amecos) is a corporation duly incorporated under Philippine
laws engaged in the business of selling assorted products created by its President and herein co-
7
petitioner, Antonio F. Mateo (Mateo). On May 30, 2003, Amecos received a Subpoena from the
Office of the City Prosecutor of Quezon City in connection with a complaint filed by the Social
Security System (SSS) for alleged delinquency in the remittance of SSS contributions and penalty
liabilities in violation of Section 22(a) and 22(d) in relation to Section 28(e) of the SSS law, as
amended.

By way of explanation, Amecos attributed its failure to remit the SSS contributions to herein
respondent Eliza R. Lopez (respondent). Amecos claimed that it hired respondent on January 15,
2001 as Marketing Assistant to promote its products; that upon hiring, respondent refused to provide
Amecos with her SSS Number and to be deducted her contributions; that on the basis of the
foregoing, Amecos no longer enrolled respondent with the SSS and did not deduct her
corresponding contributions up to the time of her termination in February 2002.

Amecos eventually settled its obligations with the SSS; consequently, SSS filed a Motion to
8 9
Withdraw Complaint which was approved by the Office of the City Prosecutor.

10
Thereafter, petitioners sent a demand letter to respondent for ₱27,791.65 representing her share
in the SSS contributions and expenses for processing, but to no avail. Thus, petitioners filed the
instant Complaint for sum of money and damages against respondent docketed as Civil Case No.
04-27802 and raffled to Branch 51 of the Metropolitan Trial Court (MeTC) of Caloocan City.
Petitioners claimed that because of respondent’s misrepresentation, they suffered actual damages in
the amount of ₱27,791.65 allegedly incurred by Amecos by way of settlement and payment of its
11
obligations with the SSS. Mateo also allegedly suffered extreme embarrassment and besmirched
reputation as a result of the filing of the complaint by the SSS. Hence they prayed for ₱50,000.00 as
moral damages, ₱50,000.00 as exemplary damages, ₱50,000.00 as attorney’s fees, and costs of
the suit.

12
Respondent filed her Answer with Motion to Dismiss claiming that she was formerly an employee
of Amecos until her illegal dismissal in February 2002; that Amecos deliberately failed to deduct and
remit her SSS contributions; and that petitioners filed the instant Complaint in retaliation to her filing
of an illegal dismissal case. Respondent also averred that the regular courts do not have jurisdiction
over the instant case as it arose out of their employer-employee relationship.

13
The parties then submitted their respective Position Papers.

Ruling of the Metropolitan Trial Court

14
On March 24, 2006, the MeTC issued its Decision, which decreed as follows:

All viewed from the foregoing, the court hereby dismisses the complaint for lack of jurisdiction.

15
SO ORDERED.

Ruling of the Regional Trial Court

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

17
SO ORDERED.

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

19 20
Petitioners filed a Motion for Reconsideration which the RTC denied.

Ruling of the Court of Appeals

21
Petitioners thus instituted a Petition for Review with the CA claiming that the RTC seriously erred
in sustaining the dismissal of the Complaint by the MeTC on the ground of lack of jurisdiction. On
March 22, 2007, the CA rendered the assailed Resolution, viz:

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

22
SO ORDERED.

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

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

24
Petitioners moved to reconsider, but in the second assailed Resolution dated May 23, 2007, the
25
CA denied petitioners’ Motion for Reconsideration. Hence, the instant Petition.

Issues

The issues raised in this Petition are:

WHETHER THE REGULAR CIVIL COURT AND NOT THE LABOR ARBITER OR X X X
THE NATIONAL LABOR RELATIONS COMMISSION HAS JURISDICTION OVER
CLAIM[S] FOR REIMBURSEMENT ARISING FROM EMPLOYER-EMPLOYEE
RELATIONS.

WHETHER THE REGULAR CIVIL COURT AND NOT THE LABOR ARBITER OR X X X
THE NATIONAL LABOR RELATIONS COMMISSION HAS JURISDICTION OVER
CLAIM[S] FOR DAMAGES FOR MISREPRESENTATION ARISING FROM
 26
EMPLOYER-EMPLOYEE RELATIONS.

Petitioners’ Arguments

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

Petitioners cite the pronouncements of the Court to the effect that where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of
obligation, such as tort, malicious prosecution or breach of contract, the regular courts have
30
jurisdiction; that when the cause of action is based on Articles 19 and 21 of the Civil Code, the
31
case is not cognizable by the labor tribunals; that money claims of workers which fall within the
original and exclusive jurisdiction of Labor Arbiters are those money claims which have some
32
reasonable causal connection with the employer-employee relationship; and that when a person
unjustly retains a benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good conscience, a case of solutio
33
indebiti arises.

Respondent’s Arguments

Respondent, on the other hand, maintains that jurisdiction over petitioners’ case lies with the Labor
Arbiter, as their cause of action remains necessarily connected to and arose from their employer-
employee relationship. At any rate, respondent insists that petitioners, as employers, have the legal
duty to enroll her with the SSS as their employee and to pay or remit the necessary contributions.

Our Ruling

The Court denies the Petition.

This Court holds that as between the parties, Article 217(a)(4) of the Labor Code is applicable. Said
provision bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for damages
arising from employer-employee relations. The observation that the matter of SSS contributions
necessarily flowed from the employer-employee relationship between the parties – shared by the
lower courts and the CA – is correct; thus, petitioners’ claims should have been referred to the labor
tribunals. In this connection, it is noteworthy to state that "the Labor Arbiter has jurisdiction to award
34
not only the reliefs provided by labor laws, but also damages governed by the Civil Code."

At the same time, it cannot be assumed that since the dispute concerns the payment of SSS
premiums, petitioners’ claim should be referred to the Social Security Commission (SSC) pursuant to
35
Republic Act No. 1161, as amended by Republic Act No. 8282. As far as SSS is concerned, there
is no longer a dispute with respect to petitioners’ accountability to the System; petitioners already
settled their pecuniary obligations to it. Since there is no longer any dispute regarding coverage,
benefits, contributions and penalties to speak of, the SSC need not be unnecessarily dragged into
36
the picture. Besides, it cannot be made to act as a collecting agency for petitioners’ claims against
the respondent; the Social Security Law should not be so interpreted, lest the SSC be swamped with
cases of this sort.

At any rate, it appears that petitioners do not have a cause of action against respondent. The
Complaint in Civil Case No. 04-27802 reads in part:

STATEMENT OF FACTS AND CAUSES OF ACTION

4. On or about 15 January 2001, [petitioners] hired [respondent] as a Marketing Assistant to promote

the products of [petitioners].

5. Immediately, [respondent] represented that she had other gainful work and that she was also self-
employed for which reason, she refused to divulge her [SSS] Number and refused to be deducted
her share in the [SSS] contributions. In her bio-data submitted to [petitioners], she did not even
indicate her SSS [N]umber. x x x [These] representations were later found out to be untrue and
[respondent]knew that.

6. Misled by such misrepresentation, [petitioners’] employees no longer deducted her corresponding

SSS contributions up to the time of her termination from employment on or about 18 February 2002.

7. On or about 30 May 2003, to the unpleasant surprise and consternation of [petitioner] Mateo, he
received a Subpoena x x x pursuant to a criminal complaint against [petitioner] Dr. Antonio Mateo for
alleged un-remitted SSS Contributions including that corresponding to the [respondent]. Upon
subsequent clarification with the Social Security System, only that portion corresponding to the
[respondent’s] supposed unremitted contribution remained as the demandable amount. The total
amount demanded was ₱18,149.95. x x x

8. On or about 24 July 2003, [petitioner] Mateo had to explain to the Social Security System the
circumstances as to why no contributions reflected for [respondent]. x x x

9. On or about 31 July 2003, [petitioners] had to pay the Social Security System the amount of
₱18,149.95 including the share which should have been deducted from [respondent] in the amount
of ₱12,291.62. x x x

10. With this development, some of [petitioners’] employees felt troubled and started to doubt x x x
whether or not their SSS contributions were being remitted or paid by the [petitioners]. [Petitioner]
Mateo had to explain to them why there was an alleged deficiency in SSS contributions and had to
assure them that their contributions were properly remitted.

11. As a result of these events, [petitioner] Mateo, for days, felt deep worry and fear leading to
sleepless nights that the Social Security System might prosecute him for a possible criminal offense.

12. [Petitioner] Mateo also felt extreme embarrassment and besmirched reputation as he, being a
recognized inventor, a dean of a reputable university and a dedicated teacher, was made the butt of
ridicule and viewed as a shrewd businessman capitalizing on even the SSS contributions of his
employees. x x x
13. On or about 15 January 2004, in order to [recover] what is due [petitioners], they sent a demand
letter to [respondent] for her to pay the amount of ₱27,791.65 as her share in the SSS contributions
and other expenses for processing. x x x

14. This demand, however, fell on deaf ears as [respondent] did not pay and has not paid to date the
amount of her share in the SSS contributions and other amounts demanded.

15. For such malicious acts and the suffering befalling [petitioner] Mateo, [respondent] is liable for
moral damages in the amount of FIFTY THOUSAND PESOS (₱50,000.00).

16. For having made gross misrepresentation, she is liable for exemplary damages in the amount of
FIFTY THOUSAND PESOS (₱50,000.00) to serve as a warning for the public not to follow her evil
example.

17. As [petitioners] were compelled to file the instant suit to protect and vindicate [their] right and
reputation, [respondent] should also be held liable for attorney’s fees in the amount of FIFTY
THOUSAND PESOS (₱50,000.00) in addition to the costs of this suit.

PRAYER

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

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

NINETY ONE AND 65/100 (₱27,791.65) representing her share in the SSS
contributions and processing costs, with interest, at legal rate, from the time of the filing
of this Complaint;

2. To pay FIFTY THOUSAND PESOS (₱50,000.00) for moral damages;

3. To pay FIFTY THOUSAND PESOS (₱50,000.00) for exemplary damages;

4. To pay FIFTY THOUSAND PESOS (₱50,000.00) as attorney’s fees;

5. To pay the costs of this suit.

37
[Petitioners] further [pray] for such other relief as are just and equitable under the circumstances.

In fine, petitioners alleged that respondent misrepresented that she was simultaneously employed by
another company; consequently, they did not enroll her with the SSS or pay her SSS contributions.
Likewise, when petitioners eventually paid respondent’s SSS contributions as a result of the filing of
a complaint by the SSS, respondent was unjustly enriched because the amount was not deducted
from her wages in Amecos.

The evidence, however, indicates that while respondent was employed, Amecos did not remit
premium contributions – both employer and employees’ shares – to the SSS; the SSS demand
38
letter sent to it covers non-payment of SSS premium contributions from January 2001 up to April
39 40
2002, amounting to ₱85,687.84. The Amecos payroll covering the period from January 30 to
November 29, 2001 likewise shows that no deductions for SSS contributions were being made from
respondent’s salaries. This can only mean that during the period, Amecos was not remitting SSS
contributions – whether the employer or employees’ shares – pertaining to respondent. As such,
during her employment with Amecos, respondent was never covered under the System as SSS did
not know in the first instance that petitioners employed her, since the petitioners were not remitting
her contributions. Petitioners were forced to remit monthly SSS contributions only when SSS filed
I.S. No. 03-6068 with the Quezon City Prosecutor’s Office. By that time, however, respondent was
no longer with Amecos, as her employment was terminated sometime in mid-February of 2002.

Given the above facts, it is thus clear that petitioners have no cause of action against the respondent
in Civil Case No. 04-27802. Since Amecos did not remit respondent’s full SSS contributions, the
1âwphi1

latter was never covered by and protected under the System. If she was never covered by the
System, certainly there is no sense in making her answerable for the required contributions during
the period of her employment. And it follows as a matter of consequence that claims for other
damages founded on the foregoing non-existent cause of action should likewise fail.

WHEREFORE, premises considered, the Petition is DENIED. The assailed March 22, 2007 and the
May 23, 2007 Resolutions of the Court of Appeals in CA-G.R. SP No. 96959 are AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 202974, February 07, 2018

NORMA D. CACHO AND NORTH STAR INTERNATIONAL TRAVEL, INC., Petitioners, v. VIRGINIA D.
BALAGTAS, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended,
seeking to reverse and set aside the Decision1 dated November 9, 2011 and Resolution2 dated August 6,
2012 of the Court of Appeals in CA-G.R. SP No. 111637, which affirmed the Labor Arbiter's Decision 3dated
March 28, 2005.

This case stemmed from a Complaint 4 for constructive dismissal filed by respondent Virginia D. Balagtas
(Balagtas) against petitioners North Star International Travel, Inc. (North Star) and its President Norma D.
Cacho (Cacho) before the Labor Arbiter docketed as NLRC-NCR Case No. 04-04736-04.

The facts as narrated by the Court of Appeals are as follows:

In her Position Paper submitted before the Labor Arbiter, petitioner [Balagtas] alleged that she
was a former employee of respondent TQ3 Travel Solutions/North Star International Travel,
Inc., a corporation duly registered with the Securities and Exchange Commission (SEC) on
February 12, 1990. She also alleged that she was one of the original incorporators-directors of
the said corporation and, when it started its operations in 1990, she was the General Manager
and later became the Executive Vice President/Chief Executive Officer.

On March 19, 2004 or after 14 years of service in the said corporation, petitioner was placed
under 30 days preventive suspension pursuant to a Board Resolution passed by the Board of
Directors of the respondent Corporation due to her alleged questionable transactions. On
March 20, 2004, she was notified by private respondent Norma Cacho of her suspension and
ordered to explain in writing to the Board of Directors her alleged fraudulent transactions
within 5 days from said notice. Petitioner promptly heeded the order on March 29, 2004.

On April 5, 2004, while under preventive suspension, petitioner wrote a letter to private
 respondent Norma Cacho informing the latter that she was assuming her position as Executive
Vice-President/Chief Executive Officer effective on that date; however, she was prevented
from re-assuming her position. Petitioner also wrote a letter dated April 12, 2004 to the Audit
Manager inquiring about the status of the examination of the financial statement of
respondent corporation for the year 2003, which request was, however, ignored.
Consequently, petitioner filed a complaint claiming that she was constructively and illegally
dismissed effective on April 12, 2004.

In their defense, respondents averred that, on March 19, 2004, the majority of the Board of
Directors of respondent corporation decided to suspend petitioner for 30 days due to the
questionable documents and transactions she entered into without authority. The preventive
suspension was meant to prevent petitioner from influencing potential witnesses and to
protect the respondent corporation's property. Subsequently, the Board of Directors
constituted an investigation committee tasked with the duty to impartially assess the charges
against petitioner.

Respondents alleged that petitioner violated her suspension when, on several occasions, she
went to the respondent corporation's office and insisted on working despite respondent Norma
Cacho's protestation. Respondents also alleged that the complaint for constructive dismissal
was groundless. They asserted that petitioner was not illegally dismissed but was merely
placed under preventive suspension.5
The Decision of the Labor Arbiter

In his Decision dated March 28, 2005, the Labor Arbiter found that respondent Balagtas was illegally
dismissed from North Star, viz.:
WHEREFORE, judgment is hereby made finding the complainant to have been illegally
dismissed from employment on July 15, 2004 and concomitantly ordering the respondent
North Star International Travel, Inc., to pay her a separation pay computed at thirty (30) days
pay for every year of service with backwages, plus commissions and such other benefits which
she should have received had she not been dismissed at all.

The respondent North Star International Travel, Inc. is further ordered to pay complainant
three (3) million pesos as moral damages and two (2) million pesos as exemplary damages
plus ten (10%) percent attorney's fees.6
Subsequently, petitioners appealed the case to the National Labor Relations Commission (NLRC). In their
Notice of Appeal,7 they prayed that Balagtas's Complaint be dismissed for lack of jurisdiction. While they
maintained that Balagtas was never dismissed, they also alleged that she was a corporate officer,
incorporator, and member of the North Star's Board of Directors (The Board). Thus, the NLRC cannot take
cognizance of her illegal dismissal case, the same being an intra-corporate controversy, which properly falls
within the original and exclusive jurisdiction of the ordinary courts.

The Ruling of the NLRC

In its Resolution8 dated September 30, 2008, the NLRC ruled in favor of petitioners, viz.:
WHEREFORE, the questioned Decision of the Labor Arbiter is REVERSED and SET ASIDE and
the complaint is DISMISSED for lack of jurisdiction.9
The NLRC's findings are as follows: First, through a Board resolution passed on March 31, 2003, Balagtas
was elected as North Star's Executive Vice President and Chief Executive Officer, as evidenced by a
Secretary's Certificate dated April 22, 2003. Second, in her Counter Affidavit executed sometime in 2004 in
relation to the criminal charges against her, respondent Balagtas had in fact admitted occupying these
positions, apart from being one of North Star's incorporators. And, third, the position of "Vice President" is
a corporate office provided in North Star's by-laws. 10

Based on these findings, the NLRC ruled that respondent Balagtas was a corporate officer of North
Star at the time of her dismissal and not a mere employee. A corporate officer's dismissal is always an
intra-corporate controversy,11 a subject matter falling within the Regional Trial Court's (RTC) jurisdiction. 12
Thus, the Labor Arbiter and the NLRC do not have jurisdiction over Balagtas's Complaint.

The NLRC also held that petitioners North Star and Cacho were not estopped from raising the issue
of lack of jurisdiction. Citing Dy v. National Labor Relations Commission,13 the NLRC explained that the
Labor Arbiter heard and decided the case upon the theory that he had jurisdiction over the Complaint. Thus,
the Labor Arbiter's jurisdiction may be raised as an issue on appeal.

Aggrieved, respondent Balagtas moved for reconsideration but was denied. Thus, she elevated the case to
the Court of Appeals via a petition for certiorari.

The Ruling of the Court of Appeals

In its assailed Decision, the Court of Appeals found merit in Balagtas's petition, viz.:
WHEREFORE, the petition is hereby GRANTED. The assailed Resolution, dated September 30,
2008 of the National Labor Relations Commission dismissing the petitioner's complaint for lack
of jurisdiction, is hereby REVERSED and SET ASIDE. The Decision, dated March 28, 2005 of
the Labor Arbiter is AFFIRMED and this case is ordered REMANDED to the NLRC for the re-
computation of petitioner's backwages and attorney's fees in accordance with this Decision. 14
In ruling that the present case does not involve an intra-corporate controversy, the Court of Appeals applied
a two-tier test, viz.: (a) the relationship test, and (b) the nature of controversy test.

Applying the relationship test, the Court of Appeals explained that no intra-corporate relationship existed
between respondent Balagtas and North Star. While respondent Balagtas was North Star's Chief Executive
Officer and Executive Vice President, petitioners North Star and Cacho failed to establish that occupying
these positions made her a corporate officer. First, respondent Balagtas held the Chief Executive Officer
position as a mere corporate title for the purpose of enlarging North Star's corporate image. According to
North Star's by-laws, the company President shall assume the position of Chief Executive Officer. Thus,
respondent Balagtas was not empowered to exercise the functions of a corporate officer, which was lawfully
delegated to North Star's President, petitioner Cacho. 15 And, second, petitioner North Star's By-laws only
enumerate the position of Vice President as one of its corporate officers. The NLRC should not have assumed
that the Vice President position is the same as the Executive Vice President position that respondent
Balagtas admittedly occupied. Following Matling Industrial and Commercial Corporation v. Coros,16 the
appellate court reminded that "a position must be expressly mentioned in the by-laws in order to be
considered a corporate office."17

On the other hand, the Court of Appeals elucidated that based on the allegations in herein respondent
Balagtas's complaint filed before the Labor Arbiter, the present case involved labor issues. Thus, even
using the nature of controversy test, it cannot be regarded as an intra-corporate dispute.18

The subsequent motions for reconsideration were denied.19 Hence, the present petition.

The Issues

Petitioners North Star and Cacho come before this Court raising the following issues:
A.

WHETHER RESPONDENT BALAGTAS IS A CORPORATE OFFICER AS DEFINED BY THE

CORPORATION CODE, CASE LAW, AND NORTH STAR'S BY-LAWS

B.

WHETHER THE APPELLATE COURT'S DECISION REVERSING THE NLRC'S FINDING THAT
 BALAGTAS WAS A CORPORATE OFFICER FOR WHICH HER ACTION FOR ILLEGAL DISMISSAL
WAS INAPPROPRIATE FOR IT TO RESOLVE, WAS CORRECT ESPECIALLY BECAUSE NO
DISCUSSION OF THAT CONCLUSION WAS MADE BY THE APPELLATE COURT IN ITS DECISION

C.

WHETHER THE AWARD BY THE APPELLATE COURT OF SEPARATION PAY, BACKWAGES,

DAMAGES, AND LAWYER'S FEES TO BALAGTAS WAS APPROPRIATE 20
Petitioners Cacho and North Star insist that the present case's subject matter is an intra-corporate
controversy. They maintain that respondent Balagtas, as petitioner North Star's Executive Vice Presidentand
Chief Executive Officer, was its corporate officer. Particularly, they argue that: first, under petitioner North
Star's by-laws, vice-presidents are listed as corporate officers. Thus, the NLRC erred when it differentiated
between: (a) "vice president" as a corporate office provided in petitioner North Star's by-laws, and (b)
"Executive Vice President," the position occupied by respondent Balagtas. Its interpretation unduly
supplanted the Board's wisdom and authority in handling its corporate affairs. Her appointment as one of
petitioner North Star's vice presidents is evidenced by the Secretary's Certificate dated April 22, 2003. As
held in Mailing, if the position or office is created by the by-laws and the appointing authority is the
board of directors, then it is a corporate office. Second, she had already been a corporate officer of
petitioner North Star for quite some time, having been appointed as General Managerthrough a Board
Resolution in 1997 and, subsequently, as Executive Vice President and General Manager in 2001, as
evidenced by the Secretary's Certificate dated March 23, 2001. And third, respondent Balagtas has openly
admitted her appointments to these positions. She even acknowledged being a member of the Board and at
the same time petitioner North Star's Executive Vice President and General Manager.21

Considering all these in applying the relationship test, petitioners Cacho and North Star assert that
respondent Balagtas is not petitioner North Star's mere employee but a corporate officer thereof whose
dismissal is categorized as an intra-corporate matter.22

Petitioners Cacho and North Star further cite Espino v. National Labor Relations Commission 23 where the
Court held that a corporate officer's dismissal is always a corporate act. It cannot be considered as a simple
labor case. Thus, under the nature of the controversy test, the present case is an intra-corporate dispute
because the primary subject matter herein is the dismissal of a corporate officer.

In refuting petitioners Cacho and North Star's allegations, respondent Balagtas avers that: first, she was not
a corporate officer of petitioner North Star. The Board Resolution and Secretary's Certificates that
purportedly support petitioners Cacho and North Star's claims were falsified, forged, and invalid. Petitioners
Cacho and North Star failed to show that the Executive Vice President position she had occupied was a
corporate office. Said position was a mere nomenclature as she was never empowered to exercise the
functions of a corporate officer. In fact, in the 2003 General Information Sheet (GIS) of petitioner North
Star, the field "corporate position" opposite respondent Balagtas's name was filled out as "not applicable."
Second, she was no longer a stockholder and director of petitioner North Star. Third, she was merely an
employee. Petitioner Cacho was the one who hired her, determined her compensation, directed and
controlled the manner she performed her work, and ultimately, dismissed her from employment. Fourth, the
issue of whether or not she was a corporate officer is irrelevant because her claim for back wages,
commissions, and other monies is clearly categorized as a labor dispute, not an intra-corporate
controversy.24 And fifth, petitioners Cacho and North Star are already estopped from questioning the
jurisdiction of the Labor Arbiter. They actively participated in the proceedings before the Labor Arbiter and
cannot assail the validity of such proceedings only after obtaining an unfavorable judgment. 25

The Ruling of the Court

The petition is meritorious.

The sole issue before the Court is whether or not the present case is an intra-corporate controversy within
the jurisdiction of the regular courts or an ordinary labor dispute that the Labor Arbiter may properly take
cognizance of.

Respondent Balagtas's dismissal is an intra-corporate controversy

At the onset, We agree with the appellate court's ruling that a two-tier test must be employed to
determine whether an intra-corporate controversy exists in the present case, viz.: (a) the relationship
test, and (b) the nature of the controversy test. This is consistent with the Court's rulings in Reyes v.
Regional Trial Court of Makati, Branch 142,26Speed Distributing Corporation v. Court of Appeals,27 and Real
v. Sangu Philippines, Inc.28

A. Relationship Test

A dispute is considered an intra-corporate controversy under the relationship test when the relationship
between or among the disagreeing parties is any one of the following: (a) between the corporation,
partnership, or association and the public; (b) between the corporation, partnership, or association and its
stockholders, partners, members, or officers; (c) between the corporation, partnership, or association
and the State as far as its franchise, permit or license to operate is concerned; and (d) among the
stockholders, partners, or associates themselves.29

In the present case, petitioners Cacho and North Star allege that respondent Balagtas, as petitioner North
Star's Executive Vice President, was its corporate officer. On the other hand, while respondent Balagtas
admits to have occupied said position, she argues she was Executive Vice President merely by name and she
did not discharge any of the responsibilities lodged in a corporate officer.

Given the parties' conflicting views, We must now determine whether or not the Executive Vice
President position is a corporate office so as to establish the intra-corporate relationship between the
parties.

In Easy call Communications Phils., Inc. v. King,30 the Court ruled that a corporate office is created by the
charter of the corporation and the officer is elected thereto by the directors or stockholders. In other words,
one shall be considered a corporate officer only if two conditions are met, viz.: (1) the position occupied was
created by charter/by-laws, and (2) the officer was elected (or appointed) by the corporation's
board of directors to occupy said position.

1. The Executive Vice President position is one of the corporate offices provided in petitioner North Star's
By-laws

The rule is that corporate officers are those officers of a corporation who are given that character either by
the Corporation Code or by the corporation's by-laws.31

Section 25 of the Corporation Code 32 explicitly provides for the election of the corporation's president,
treasurer, secretary, and such other officers as may be provided for in the by-laws. In interpreting
this provision, the Court has ruled that if the position is other than the corporate president, treasurer, or
secretary, it must be expressly mentioned in the bylaws in order to be considered as a corporate
office.33

In this regard, petitioner North Star's by-laws 34 provides the following:

ARTICLE IV

OFFICERS

Section 1. Election/Appointment - Immediately after their election, the Board of Directors shall
formally organize by electing the Chairman, the President, one or more Vice-President
 (sic), the Treasurer, and the Secretary, at said meeting.

The Board may, from time to time, appoint such other officers as it may determine to be
necessary or proper.

Any two (2) or more positions may be held concurrently by the same person, except that no
one shall act as President and Treasurer or Secretary at the same time.
Clearly, there may be one or more vice president positions in petitioner North Star and, by virtue of its
by-laws, all such positions shall be corporate offices.

Consequently, the next question that begs to be asked is whether or not the phrase "one or more vice
president" in the above-cited provision of the by-laws includes the Executive Vice President
position held by respondent Balagtas.

In ruling that respondent Balagtas was not a corporate officer of petitioner North Star, the Court of Appeals
pointed out that the NLRC should not have assumed that the "Vice President" position is the same as the
"Executive Vice President" position that Balagtas admittedly occupied. In other words, that the exact and
complete name of the position must appear in the by-laws, otherwise it is an ordinary office whose
occupant shall be regarded as a regular employee rather than a corporate officer.

The appellate court's interpretation of the phrase "one or more vice president" unduly restricts one of
petitioner North Star's inherent corporate powers, viz.: to adopt its own by-laws, provided that it is not
contrary to law, morals, or public policy 35 for its internal affairs, to regulate the conduct and prescribe the
rights and duties of its members towards itself and among themselves in reference to the management of its
affairs.36

The use of the phrase "one or more" in relation to the establishment of vice president positions without
particular exception indicates an intention to give petitioner North Star's Board ample freedom to make
several vice-president positions available as it may deem fit and in consonance with sound business
practice.

To require that particular designation/variation of each vice-president (i.e., executive vice president) be
specified and enumerated is to invalidate the by-laws' true intention and to encroach upon petitioner North
Star's inherent right and authority to adopt its own set of rules and regulations to govern its internal affairs.
Whether the creation of several vice-president positions in a company is reasonable is a question of policy
that courts of law should not interfere with. Where the reasonableness of a by-law is a mere matter of
judgment, and one upon which reasonable minds must necessarily differ, a court would not be warranted in
substituting its judgment instead of the judgment of those who are authorized to make bylaws and who
have exercised their authority.37

Thus, by name, the Executive Vice President position is embraced by the phrase "one or more vice
president" in North Star's by-laws.

2. Respondent Balagtas was appointed by the Board as petitioner North Star's Executive Vice President

While a corporate office is created by an express provision either in the Corporation Code or the By-laws,
what makes one a corporate officer is his election or appointment thereto by the board of directors. Thus,
there must be documentary evidence to prove that the person alleged to be a corporate officer was
appointed by action or with approval of the board.38

In the present case, petitioners Cacho and North Star assert that respondent Balagtas was elected as
Executive Vice President by the Board as evidenced by the Secretary's Certificate dated April 22, 2003,
which provides:
I, MOLINA A. CABA, of legal age, Filipino citizen, x x x after being duly sworn to in accordance
 with law, depose and state: That —

1. I am the duly appointed Corporate Secretary of North Star International Travel, Inc. x
x x.

2. As such Corporate Secretary of the Corporation, I hereby certify that at the Regular/Special meeting
of the Board of Directors and Stockholders of the Corporation which was held on March 31, 2003
during which meeting a quorum was present and majority of the stockholders were in attendance,
the following resolutions were unanimously passed and adopted:

"RESOLVED, AS IT IS HEREBY RESOLVED, that during a meeting of the Board of Directors held
last March 31, 2003, the following members of the Board were elected to the corporate
position opposite their names:"
POSITION
NAME

NORMA D. CACHO Chairman

VIRGINIA D. BALAGTAS Executive Vice President39

(Emphasis supplied)

On the other hand, respondent Balagtas assails the validity of the above-cited Secretary's Certificate for
being forged and fabricated. However, aside from these bare allegations, the NLRC observed that she did
not present other competent proof to support her claim. To the contrary, respondent Balagtas even admitted
that she was elected by the Board as petitioner North Star's Executive Vice President and argued that she
could not be removed as such without another valid board resolution to that effect. To support this claim,
respondent Balagtas submitted the very same Secretary's Certificate as an attachment to her Position Paper
before the Labor Arbiter.40 That she is now casting doubt over a document she herself has previously relied
on belies her own claim that the Secretary's Certificate is a fake.

Thus, the above-cited Secretary's Certificate overcomes respondent Balagtas's contention that she was
merely the Executive Vice President by name and was never empowered to exercise the functions of a
corporate officer. Notably, she did not offer any proof to show that her duties, functions, and compensation
were all determined by petitioner Cacho as petitioner North Star's President.

In any case, that the Executive Vice President's duties and responsibilities are determined by the President
instead of the Board is irrelevant. In determining whether a position is a corporate office, the board of
directors' appointment or election thereto is controlling. Article IV, Section 4 of North Star's By-laws
provides:
Section 4. The Vice-President(s) - If one or more Vice-Presidents are appointed, he/they shall
have such powers and shall perform such duties as may from time to time be assigned to
him/them by the Board of Directors or by the President. [Emphasis supplied.]
When Article IV, Section 4 is read together with Section 1 thereof, it is clear that while petitioner North Star
may have one or more vice presidents and the President is authorized to determine each one's scope of
work, their appointment or election still devolves upon the Board.

At this point, it is best to emphasize that the manner of creation (i.e., under the express provisions of the
Corporation Code or by-laws) and the manner by which it is filled (i.e., by election or appointment of the
board of directors) are sufficient in vesting a position the character of a corporate office.

Respondent Balagtas also denies her status as one of petitioner North Star's corporate officers because she
was not listed as such in petitioner North Star's 2003 General Information Sheet (GIS).

This is of no moment.

The GIS neither governs nor establishes whether or not a position is an ordinary or corporate
office. At best, if one is listed in the GIS as an officer of a corporation, his/her position as indicated therein
could only be deemed a regular office, and not a corporate office as it is defined under the Corporation
Code.41

Based on the above discussion, as Executive Vice President, respondent Balagtas was one of petitioner North
Star's corporate officers. Thus, there is an intra-corporate relationship existing between the parties.

B. Nature of the Controversy Test

The existence of an intra-corporate controversy does not wholly rely on the relationship of the parties. The
incidents of their relationship must also be considered. Thus, under the nature of the controversy test, the
disagreement must not only be rooted in the existence of an intra-corporate relationship, but must as well
pertain to the enforcement of the parties' correlative rights and obligations under the Corporation Code and
the internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are
merely incidental to the controversy or if there will still be conflict even if the relationship does not exist,
then no intra-corporate controversy exists.42

Verily, in a long line of cases,43 the Court consistently ruled that a corporate officer's dismissal is alwaysa
corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation.
However, a closer look at these cases will reveal that the intra-corporate nature of the disputes therein did
not hinge solely on the fact that the subject of the dismissal was a corporate officer.

In Philippine School of Business Administration v. Leano,44 the complainant questioned the validity of his
dismissal after his position was declared vacant and he was not re-elected thereto. The cases of Fortune
Cement Corporation v. National Labor Relations Commission 45 and Locsin v. Nissan Lease Phils. Inc.46also
share similar factual milieu.

On the other hand, the complainant in Espino v. National Labor Relations Commission 47 also contested the
failure of the board of directors to re-elect him as a corporate officer. The Court found that the board of
directors deferred his re-election in light of previous administrative charges filed against the complainant.
Later on, the board of directors deemed him resigned from service and his position was subsequently
abolished.

Finally, in Pearson and George, (S.E. Asia), Inc. v. National Labor Relations Commission,48 the complainant
lost his corporate office primarily because he was not re-elected as a member of the corporation's board of
directors. The Court found that the corporate office in question required the occupant to be at the same time
a director. Thus, he should lose his position as a corporate officer because he ceased to be a director for any
reason (e.g., he was not re-elected as such), such loss is not dismissal but failure to qualify or to maintain a
prerequisite for that position.

The dismissals in these cases were all considered intra-corporate controversies not only because the
complainants were corporate officers, but also, and more importantly, because they were not re-elected to
their respective corporate offices and, thus, terminated from the corporation. "The matter of whom to elect
is a prerogative that belongs to the Board, and involves the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship of a person to a corporation, whether as officer
or as agent or employee, is not determined by the nature of the services performed, but by the incidents of
the relationship as they actually exist."49

In other words, the dismissal must relate to any of the circumstances and incidents surrounding the parties'
intra-corporate relationship. To be considered an intra-corporate controversy, the dismissal of a corporate
officer must have something to do with the duties and responsibilities attached to his/her corporate office or
performed in his/her official capacity.50

In respondent Balagtas's Position Paper filed before the Labor Arbiter she alleged as follows: (a) petitioner
Cacho informed her, through a letter, that she had been preventively suspended by the Board; (b) she
opposed the suspension, was unduly prevented from re-assuming her position as Executive Vice President,51
and thereafter constructively dismissed; (c) the Board did not authorize either her suspension and
removal from office; and (d) as a result of her illegal dismissal, she is entitled to separation pay in
lieu of her reinstatement to her previous positions, plus back wages, allowances, and other benefits. 52

The foregoing allegations mainly relate to incidents involving her capacity as Executive Vice President, a
position above-declared as a corporate office, viz.: first, respondent Balagtas's claim of dismissal without
prior authority from the Board reveals her understanding that the appointment and removal of a corporate
officer like the Executive Vice President could only be had through an official act by the Board. And, second,
she sought separation pay in lieu of reinstatement to her former positions, one of which was as Executive
Vice President. Even her prayer for full back wages, allowances, commissions, and other monetary benefits
all relate to her corporate office.53

On the other hand, petitioners Cacho and North Star terminated respondent Balagtas for the following
reasons: (a) for allegedly appropriating company funds for her personal gain; (b) for abandonment of work;
(c) violation of a lawful order of the corporation; and (d) loss of trust and confidence. 54 In their Position
Paper, petitioners Cacho and North Star described in detail the latter's fund disbursement process, 55
emphasizing respondent Balagtas's role as the one who approves payment vouchers and the signatory on
issued checks—responsibilities specifically devolved upon her as the vice president. And as the
vice president, respondent Balagtas actively participated in the whole process, if not controlled it
altogether. As a result, petitioners Cacho and North Star accused respondent Balagtas of gravely abusing
the confidence the Board has reposed in her as vice president and misappropriating company funds for
her own personal gain.

From these, it is clear that the termination complained of is intimately and inevitably linked to respondent
Balagtas's role as petitioner North Star's Executive Vice President: first, the alleged misappropriations were
committed by respondent Balagtas in her capacity as vice president, one of the officers responsible for
approving the disbursements and signing the checks. And, second, these alleged misappropriations
breached petitioners Cacho's and North Star's trust and confidence specifically reposed in respondent
Balagtas as vice president.

That all these incidents are adjuncts of her corporate office lead the Court to conclude that respondent
Balagtas's dismissal is an intra-corporate controversy, not a mere labor dispute.

Petitioners Cacho and North Star not estopped from questioning jurisdiction

Respondent Balagtas insists that petitioners belatedly raised the issue of the Labor Arbiter's lack of
jurisdiction before the NLRC. Relying on Tijam v. Sibonghanoy,56 she avers that petitioners, after actively
participating in the proceedings before the Labor Arbiter and obtaining an unfavorable judgment, are barred
by laches from attacking the latter's jurisdiction.

We disagree with respondent Balagtas.

The Court has already held that the ruling in Tijam v. Sibonghanoy remains only as an exception to the
general rule. Estoppel by laches will only bar a litigant from raising the issue of lack of jurisdiction in
exceptional cases similar to the factual milieu of Tijam v. Sibonghanoy. To recall, the Court in Tijam v.
Sibonghanoy ruled that the plea of lack of jurisdiction may no longer be raised for being barred by laches
because it was raised for the first time in a motion to dismiss filed almost 15 years after the questioned
ruling had been rendered.57

These exceptional circumstances are not present in this case. Thus, the general rule must apply: that the
issue of jurisdiction may be raised at any stage of the proceedings, even on appeal, and is not
lost by waiver or by estoppel. In Espino v. National Labor Relations Commission,58 We ruled:
The principle of estoppel cannot be invoked to prevent this Court from taking up the question,
which has been apparent on the face of the pleadings since the start of the litigation before
the Labor Arbiter. In the case of Dy v. NLRC, supra, the Court, citing the case of Calimlim v.
Ramirez, reiterated that the decision of a tribunal not vested with appropriate jurisdiction is
null and void. Again, the Court in Southeast Asian Fisheries Development Center-Aquaculture
Department v. NLRC restated the rule that the invocation of estoppel with respect to
the issue of jurisdiction is unavailing because estoppel does not apply to confer
jurisdiction upon a tribunal that has none over the cause of action. The instant case
does not provide an exception to the said rule.59 (Emphasis supplied.)
All told, the issue in the present case is an intra-corporate controversy, a matter outside the Labor Arbiter's
jurisdiction.

WHEREFORE, the petition is hereby GRANTED. The Decision dated November 9, 2011 and Resolution
dated August 6, 2012 of the Court of Appeals in CA-G.R. SP No. 111637 are SET ASIDE. NLRC-NCR Case
No. 04-04736-04 is dismissed for lack of jurisdiction, without prejudice to the filing of an appropriate case
before the proper tribunal.

SO ORDERED.

G.R. No. 143686 January 15, 2002

PHILIPPINE AIRLINES, INC., petitioner,

vs.

AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES, respondent.

YNARES-SANTIAGO, J.:

1
This is a petition for review on certiorari seeking to annul and set aside the March 2, 2000 Decision
2 3
and the June 19, 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 54403 which
4 5
affirmed the Order dated June 13, 1998 and Resolution dated June 1, 1991 of the Secretary of
Labor and Employment in NCMB-NCR-N.S. 12-514-97.

The instant labor dispute between petitioner Philippine Airlines, Inc. (PAL) and respondent Airline
Pilots Association of the Philippines (ALPAP), the exclusive bargaining representative of all
commercial airline pilots of petitioner, stemmed from petitioner's act of unilaterally retiring airline pilot
Captain Albino Collantes under Section 2, Article VII, of the 1967 PAL-ALPAP Retirement Plan.
Contending, inter alia, that the retirement of Captain Collantes constituted illegal dismissal and union
busting, ALPAP filed a Notice of Strike with the Department of Labor and Employment (DOLE).
Pursuant of Article 263 (g) of the Labor Code, the Secretary of the DOLE (hereafter referred to as
Secretary) assumed jurisdiction over the labor dispute.

On June 13, 1998, the Secretary issued the assailed order upholding PAL's action of unilaterally
retiring Captain Collantes and recognizing the same as a valid exercise of its option under Section 2,
Article VII, of the 1967 PAL-ALPAP Retirement Plan. The Secretary further ordered that the basis of
the computation of Captain Collantes' retirement benefits should be Article 287 of the Labor Code
(as amended by Republic Act No. 7641) and not Section 2, Article VII, of the PAL-ALPAP Retirement
Plan. The Secretary added that in the exercise of its option to retire pilots, PAL should first consult
the pilot concerned before implementing his retirement. The dispositive portion of the said order
reads:

WHEREFORE, premises considered, this Office hereby issues the following resolutions:

(1) PAL's action on Captain Albino Collantes is hereby recognized as a valid exercise of its option
under Sections 1 and 2, Article VII of the 1976 Retirement Plan. However, the retirement benefits
provided under Section 2 shall be adjusted to comply with Section 5, of Republic Act No. 7641.

(2) Said 1967 Retirement Plan which was incorporated as Article XXVII of the PAL-ALPAP Collective
Bargaining Agreement, is hereby sustained. In the interest of justice, however, this Office holds that
whenever PAL exercises its option under Section 2, it shall consult the pilot involved before the
retirement is implemented.

(3) PAL is not guilty of gross violation of the CBA insofar as the Wet Lease Agreement is concerned;
and

(4) The coverage of Section 6, Article 1 of the PAL-ALPAP Collective Bargaining Agreement is limited
only to union dues and other fees and assessments which are rightfully remitted to and are due
ALPAP.

The above dispositions shall be without prejudice to the parties' arriving at a voluntary settlement of
the dispute, especially in connection with employer-employee relations in PAL. Accordingly, the
National Conciliation and Mediation Board (NCMB) is hereby directed to continue assisting the
parties in arriving at such a settlement.

The department takes notice of the Ex-parte Manifestation filed by PAL on June 10, 1998.

6
SO ORDERED.

A motion for reconsideration of the foregoing order was denied by the Secretary on June 1, 1991.

On September 24, 1999, PAL filed with the Court of Appeals a petition for certiorari with prayer for
injunction and temporary restraining order. On March 2, 2000, and June 19, 2000, however, the
Court of Appeals denied the petition and the motion for reconsideration of petitioner, respectively.
Hence, PAL appealed to this Court, contending that:

THE QUESTION OF WHETHER OR NOT THE AMOUNT OF RETIREMENT PAY TO BE PAID

UNDER SECTION 2, ARTICLE VII OF THE PAL-ALPAP RETIREMENT PLAN OF 1967 SHOULD
BE INCREASED WAS NOT IN NCMB-NCR CASE NO. 12514-97.

II

A JUDGMENT THAT GOES BEYOND THE ISSUES AND PURPORTS TO ADJUDICATE

SOMETHING UPON WHICH THE PARTIES WERE NOT HEARD IS IRREGULAR AND INVALID
SINCE IT AMOUNTS TO A DENIAL OF DUE PROCESS.
 III

THE LAW GRANTS TO THE CONTRACTING PARTIES THE EXCLUSIVE RIGHT TO DETERMINE
FOR THEMSELVES THE PROVISIONS OF A COLLECTIVE BARGAINING AGREEMENT.

IV

THE SECRETARY OF LABOR AND EMPLOYMENT CANNOT AMEND THE CBA AND THE PAL-
ALPAP RETIREMENT PLAN OF 1967 WITHOUT VIOLATING THE PROSCRIPTION AGAINST THE
IMPAIRMENT OF CONTRACTS.

ON THE ASSUMPTION THAT THE SECRETARY OF LABOR AND EMPLOYMENT MAY AMEND
THE CBA AND THE PAL-ALPAP RETIREMENT PLAN OF 1967, IT IS LEGALLY INCORRECT AND
INIQUITOUS TO COMPEL PETITIONER TO PAY RETIREMENT PAY IN ACCORDANCE WITH
ARTICLE 287 OF THE LABOR CODE.

VI

ON THE ASSUMPTION THAT THE SECRETARY OF LABOR AND EMPLOYMENT MAY AMEND
THE CBA AND THE PAL-ALPAP RETIREMENT PLAN OF 1967, IT IS LEGALLY INCORRECT TO
COMPEL PETITIONER TO CONSULT THE PILOT CONCERNED BEFORE RETIREMENT IS
7
IMPLEMENTED.

The Court of Appeals, applying the second paragraph of Article 287 of the Labor Code, held that an
employee's retirement benefits under any collective bargaining and other agreement shall not be
8
less than those provided in the Labor Code. Hence, Article 287 of the Labor Code and not the 1967
PAL-ALPAP Retirement Plan, should govern the computation of the benefits to be awarded to
Captain Collantes.

The pertinent provision of the 1967 PAL-ALPAP Retirement Plan states:

SECTION 1. Normal Retirement. (a) Any member who completed twenty (20) years of service as a
pilot for PAL or has flown 20,000 hours for PAL shall be eligible for normal retirement. The normal
retirement date is the date on which he completes twenty (20) years of service, or on which he logs
his 20,000 hours as a pilot for PAL. The member who retires on his normal retirement shall be
entitled to either (a) a lump sum payment of P100,000.00 or (b) to such termination pay benefits to
which he may be entitled to under existing laws, whichever is the greater amount.

SECTION 2. Late Retirement. Any member who remains in the service of the Company after his
normal retirement date may retire either at his option or at the option of the Company and when so
retired he shall be entitled either (a) to a lump sum payment of P5,000.00 for each completed year of
service rendered as a pilot, or (b) to such termination pay benefits to which he may be entitled under
9
existing laws, whichever is the greater amount.

A pilot who retires after twenty years of service or after flying 20,000 hours would still be in the prime
of his life and at the peak of his career, compared to one who retires at the age of 60 years old.
Based on this peculiar circumstance that PAL pilots are in, the parties provided for a special scheme
of retirement different from that contemplated in the Labor Code. Conversely, the provisions of Article
287 of the Labor Code could not have contemplated the situation of PAL's pilots. Rather, it was
intended for those who have no more plans of employment after retirement, and are thus in need of
financial assistance and reward for the years that they have rendered service.

In any event, petitioner contends that its pilots who retire below the retirement age of 60 years not
only receive the benefits under the 1967 PAL-ALPAP Retirement Plan but also an equity of the
10
retirement fund under the PAL Pilots' Retirement Benefit Plan, entered into between petitioner and
respondent on May 30, 1972.

11
The PAL Pilots' Retirement Benefit Plan is a retirement fund raised from contributions exclusively
from petitioner of amounts equivalent to 20% of each pilot's gross monthly pay. Upon retirement,
each pilot stands to receive the full amount of the contribution. In sum, therefore, the pilot gets an
amount equivalent to 240% of his gross monthly income for every year of service he rendered to
petitioner. This is in addition to the amount of not less than P100,000.00 that he shall receive under
the 1967 Retirement Plan.

On the other hand, Article 287 of the Labor Code:

Art. 287. Retirement. - Any employee may be retired upon reaching the retirement age established
in the collective bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may
have earned under existing laws and any collective bargaining agreement and other agreements:
provided, however, That an employee's retirement benefits under any collective bargaining and other
agreements shall not be less than those provided herein. 1âwphi1.nêt

In the absence of a retirement plan or agreement plant providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but
not beyond sixty-five (65) years which is hereby declared as the compulsory retirement age, who
has served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction
of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term 'one-half (1/2) month salary' shall mean
th
fifteen (15) days plus one-twelfth (1/12) of the 13 month pay and the cash equivalent of not more
than five (5) days of service incentive leaves. xxx xxx xxx.

In short, the retirement benefits that a pilot would get under the provisions of the above-quoted
Article 287 of the Labor Code are less than those that he would get under the applicable retirement
plans of petitioner.

Finally, on the issue of whether petitioner should consult the pilot concerned before exercising its
option to retire pilots, we rule that this added requirement, in effect, amended the terms of Article VII,
Section 2 of the 1976 PAL-ALPAP Retirement Plan. The option of an employer to retire its
12 13
employees is recognized as valid. In the earlier case of Bulletin Publishing Corp. v. Sanchez,
this Court held:

The aforestated sections explicitly declare, in no uncertain terms, that retirement of an employee
may be done upon initiative and option of the management. And where there are cases of voluntary
retirement, the same is effective only upon the approval of management. The fact that there are
some supervisory employees who have not yet been retired after 25 years with the company or have
reached the age of sixty merely confirms that it is the singular prerogative of management, at its
option, to retire supervisors or rank-and-file members when it deems fit. There should be no unfair
labor practice committed by management if the retirement of private respondents were made in
accord with the agreed option. That there were numerous instances wherein management exercised
its option to retire employees pursuant to the aforementioned provisions, appears to be a fact which
private respondents have not controverted. It seems only now when the question of the legality of a
supervisors union has arisen that private respondents attempt to inject the dubious theory that the
private respondents are entitled to form a union or go on strike because there is allegedly no
retirement policy provided for their benefit. As above noted, this assertion does not appear to have
14
any factual basis.

Surely, the requirement to consult the pilots prior to their retirement defeats the exercise by
management of its option to retire the said employees. It gives the pilot concerned an undue
prerogative to assail the decision of management. Due process only requires that notice be given to
the pilot of petitioner's decision to retire him. Hence, the Secretary of Labor overstepped the
boundaries of reason and fairness when he imposed on petitioner the additional requirement of
consulting each pilot prior to retiring him.

Furthermore, when the Secretary of Labor and Employment imposed the added requirement that
petitioner should consult its pilots prior to retirement, he resolved a question which was outside of
15
the issues raised, thereby depriving petitioner an opportunity to be heard on this point.

WHEREFORE, in view of all the foregoing, the petition is GRANTED. The March 2, 2000 Decision
and the June 19, 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 54403 are REVERSED
and SET ASIDE. The Order of the Secretary of Labor in NCMB-NCR-N.S. 12-514-97, dated June
13, 1998, is MODIFIED as follows: The retirement benefits to be awarded to Captain Albino
Collantes shall be based on the 1967 PAL-ALPAP Retirement Plan and the PAL Pilots' Retirement
Benefit Plan. The directive contained in subparagraph (2) of the dispositive portion thereof, which
required petitioner to consult the pilot involved before exercising its option to retire him, is
DELETED. The said Order is AFFIRMED in all other respects.

SO ORDERED. 1âwphi1.nêt

G.R. No. 188047, November 28, 2016

LIGHT RAIL TRANSIT AUTHORITY, Petitioner, v. BIENVENIDO R. ALVAREZ, CARLOS S. VELASCO,

ASCENCION A. GARGALICANO, MARLON E. AGUINALDO, PETRONILO T. LEGASPI, BONIFACIO A.
ESTOPIA, ANDRE A. DELA MERCED, JOSE NOVIER D. BAYOT, ROLANDO AMAZONA AND MARLINO
HERRERA, Respondents.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 assailing the Decision2 and Resolution3 of the Court of Appeals
(CA) in CA-G.R. SP No. 103278 dated February 20, 2009 and May 22, 2009, respectively. The Decision and
Resolution dismissed the Petition for Certiorari4 filed by the Light Rail Transit Authority (LRTA), which sought
to annul and reverse the Resolution5 of the National Labor Relations Commission (NLRC) in NLRC CA Case
No. 046112-05 dated November 5, 2007. chanroblesvirtuallawlibrary

The Facts

LRTA is a government-owned and controlled corporation created by virtue of Executive Order No. 603, 6for
the purpose of the construction, operation, maintenance, and/or lease of light rail transit system in the
Philippines.7 Private respondents Bienvenido R. Alvarez, Carlos S. Velasco, Ascencion A. Gargalicano, Marlon
E. Aguinaldo, Petronilo T. Legaspi, Bonifacio A. Estopia, Andre A. Dela Merced, Jose Novier D. Bayot,
Rolando C. Amazona and Marlino G. Herrera (private respondents) are former employees of Meralco Transit
Organization, Inc. (METRO).8

On June 8, 1984, METRO and LRTA entered into an agreement called "Agreement for the Management and
Operation of the Light Rail Transit System" (AMO-LRTS) for the operation and management of the light rail
transit system.9 LRTA shouldered and provided for all the operating expenses of METRO. 10 Also, METRO
signed a Collective Bargaining Agreement (CBA) with its employees wherein provisions on wage increases
and benefits were approved by LRTA's Board of Directors.11

However, on April 7, 1989, the Commission on Audit (COA) nullified and voided the AMO-LRTS. 12 To resolve
the issue, LRTA decided to acquire METRO by purchasing all of its shares of stocks on June 8, 1989. METRO,
thus, became a wholly-owned subsidiary of LRTA. Since then, METRO has been renamed to Metro Transit
Organization, Inc.13 Also, by virtue of the acquisition, LRTA appointed the new set of officers, from chairman
to members of the board, and top management of METRO. 14 LRTA and METRO declared and continued the
implementation of the AMO-LRTS and the non-interruption of employment relations of the employees of
METRO. They likewise continued the establishment and funding of the Metro, Inc. Employees Retirement
Plan which covers the past services of all METRO regular employees from the date of their employment.
They confirmed that all CBAs remained in force and effect. LRTA then sanctioned the CBA's of the union of
rank and file employees and the union of supervisory employees. 15

On November 17, 1997, the METRO general manager (who was appointed by LRTA) announced in a
memorandum that its board of directors approved the severance/resignation benefit of METRO employees at
one and a half (1 1/2) months salaries for every year of service. 16

On July 25, 2000, the union of rank and file employees of METRO declared a strike over a retirement fund
dispute.17 By virtue of its ownership of METRO, LRTA assumed the obligation to update the Metro, Inc.
Employees Retirement Fund with the Bureau of Treasury. 18

A few months later, or on September 30, 2000, LRTA stopped the operation of METRO. 19 On April 5, 2001,
METRO's Board of Directors approved the release and payment of the first fifty percent (50%) of the
severance pay to the displaced METRO employees, including private respondents, who were issued
certifications of eligibility for severance pay along with the memoranda to receive the same. 20

Upon the request of the COA corporate auditor assigned at LRTA, COA issued an Advisory Opinion through
its Legal Department, and an Advise (sic) from Chairman Guillermo N. Carague, that LRTA is liable, as
owner of its wholly-owned subsidiary METRO, to pay the severance pay of the latter's employees. 21

LRTA earmarked an amount of P271,000,000.00 for the severance pay of METRO employees in its approved
corporate budget for the year 2002.22 However, METRO only paid the first fifty percent (50%) of the
severance pay of private respondents, thus, the following balance: chanRoblesvirtualLawlibrary

NAME MAN NO. 50% (Php)

1. Marlon E. Aguinaldo 0303 243,482.55

2. Bie[n]venido R. Alvarez 0304 193,952.82

 3. Bonifacio A. Estopia 0313 242,456.29

4. Petronilo J. Legaspi 0323 245,566.24

5. Andre A. [Dela] Merced 0328 322,187.70

6. Marlino G. Herrera 0400 239,055.57

7. Rolando C. Amazona 0485 231,432.00

8. Jose Novier D. Bayot 1201 231,494.17

9. Ascencion A. Gargalicano 1212 175,733.82

10. Carlos S. Velasco 1863 103,330.08

2,228,691.2423

Private respondents repeatedly and formally asked LRTA, being the principal owner of METRO, to pay the
balance of their severance pay, but to no avail. 24 Thus, they filed a complaint before the Arbitration Branch
of the NLRC, docketed as NLRC NCR Case No. 00-08-09472-04, praying for the payment of 13 thmonth pay,
separation pay, and refund of salary deductions, against LRTA and METRO. 25 cralawre d

In a Decision26 dated July 22, 2005, Labor Arbiter (LA) Elias H. Salinas ruled in favor of private respondents.
In arriving at his Decision, the LA adopted the ruling in Light Rail Transit Authority v. National Labor
Relations Commission, Ricardo B. Malanao, et al.27 (Malanao), which at that time was affirmed by the CA
(Twelfth Division). The LA adopted the ruling in Malanao because it involved the same claims, facts, and
issues as in this case.28Malanao ordered respondents LRTA and METRO to jointly and severally pay the
balance of the severance pay of the complainants therein. Thus, the dispositive portion 29 of the LA Decision
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents Light

Rail Transit Authority and Metro Transit Organization, Inc. to pay complainants the balance of
their severance pay as follows: cralawlawlibrary

NAME 50% Balance of Severance Pay

 1. Marlon E. Aguinaldo P 243,482.55

2. Bie[n]venido R. Alvarez P 193,952.82

3. Bonifacio A. Estopia P 242,456.29

4. Petronilo J. Legaspi P 245,566.24

5. Andre A. [Dela] Merced P 322,187.70

6. Marlino G. Herrera P 239,055.57

7. Rolando C. Amazona P 231,432.00

8. Jose Novier D. Bayot P 231,494.17

9. Ascencion A. Gargalicano P 175,733.82

10. Carlos S. Velasco P 103,330.08

P 2,228,691.24

Respondents are further ordered to pay the sum equivalent to ten per cent of the foregoing
amount as and by way of attorney's fees.

All other claims are ordered dismissed for lack of merit.

SO ORDERED.30
On September 29, 2005, LRTA and METRO separately appealed the LA's Decision before the NLRC, docketed
as NLRC CA Case No. 046112-05.31

In its Resolution dated November 5, 2007, the NLRC dismissed METRO's appeal for failure to file the
required appeal bond:Therefore, the NLRC ruled that the appealed Decision of the LA (as regards METRO) is
declared final and executory.32 In the same Resolution, the NLRC sustained the Decision of the LA in toto,
and therefore dismissed LRTA's appeal for lack of merit. The dispositive portion reads: chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the Metro, Inc[.]'s Appeal is DISMISSED for failure to get
perfected. LRTA's Appeal is likewise DISMISSED for lack of merit. Accordingly, the Decision
appealed from is SUSTAINED in toto.33
LRTA's motion for reconsideration of the Resolution was denied. 34 Thus, LRTA filed a Petition for Certiorari35
with the CA.chanroblesvirtuallawlibrary

CA Decision

The CA denied LRTA's petition. First, the CA ruled that since LRTA failed to comply with the mandatory
appeal bond, it lost its right to appeal. 36 Consequently, the LA's ruling already became final and executory. 37
On the merits of the case, the CA noted that the monetary claims emanated from the CBA; hence, the
controversy must be settled in light of the CBA. As the CBA controls, it is clear that LRTA has to pay the
remaining fifty percent (50%) of the retirement benefits due to the private respondents. The CA held that
whether the NLRC has jurisdiction to hear the case, the result would be the same: that LRTA has financial
obligations to private respondents.38

Finally, on the issue of jurisdiction, the CA found that METRO, even if it is a subsidiary of LRTA, remains a
private corporation. This being the case, the money claim brought against it falls under the original and
exclusive jurisdiction of the LA. Also, the CA agreed with the NLRC that the principle of stare decisisapplies
to this case. The NLRC applied the CA's Decision in Malanao, ruling that LRTA is liable for the fifty percent
(50%) balance of the separation pay of the private respondents therein. 39

LRTA filed a Motion for Reconsideration 40 arguing that contrary to what the CA declared, it filed the
mandatory appeal bond.41 It also claimed that the NLRC had no jurisdiction over LRTA, and that the NLRC
erred in applying stare decisis.42 The CA, however, denied LRTA's motion for lack of merit. 43

Hence, this petition.

Pending resolution of the case by this Court, private respondents filed with the NLRC a Motion for Issuance
of a Writ of Execution44 dated September 4, 2009.

On August 5, 2010, private respondents filed an Urgent Manifestation 45 with this Court, informing us that a
Writ of Execution46 has been issued on July 9, 2010 by the LA, since no Temporary Restraining Order was
issued by the CA or this Court. There being no response from LRTA after service of the writ, and upon
motion of private respondents, the LA ordered 47 the release of the cash bond deposited by LRTA, and which
was subsequently released to the private respondents. Thus, they prayed that the case be dismissed for
having been moot and academic. 48 In a Reply (To Respondents' Urgent Manifestation), 49LRTA argued that
the case has not become moot and academic. chanroblesvirtuallawlibrary

The Petition

LRTA now appeals the CA Decision and argues50 that the CA erred in: cralawlawlibrary

1) Ruling that the LA and NLRC have jurisdiction over LRTA;

2) Holding LRTA jointly and severally liable for private respondents' money claims;
and

3) Wrongly applying the doctrine of stare decisis.

The Court's Ruling

We deny the petition.

The same factual setting, (save for the identity of private respondents) and issues raised in this case also
obtained in Light Rail Transit Authority v. Mendoza 51 (Mendoza). In that case, this Court ruled that LRTA is
solidarily liable for the remaining fifty percent (50%) of the respondents' separation pay. The doctrine of
stare decisis, therefore, warrants the dismissal of this petition. The rule of stare decisis is a bar to any
attempt to re-litigate the same issue where the same questions relating to the same event have been put
forward by parties similarly situated as in a previous case litigated and decided by a competent court. 52Thus,
the Court's ruling in Mendoza regarding LRTA's solidary liability for respondents' monetary claims arising
from the very same AMO-LRTS which private respondents sought to enforce in the proceedings a quo
applies to the present case. Consequently, LRTA's appeal must be dismissed.

The LA and the NLRC have jurisdiction over private respondents' money claims.

LRTA argues that the LA and NLRC do not have jurisdiction over the case. LRTA cites Light Rail Transit
Authority v. Venus, Jr.53 (Venus) to support its claim.

We disagree. LRTA's reliance on Venus is misplaced. Venus involves the illegal dismissal of the
complainants. The proceedings a quo is not for an illegal dismissal case, but for the monetary claims of
respondents against METRO and LRTA. Thus, unlike in Venus, this case does not involve the issue of
respondents' employment with METRO or LRTA. In fact, in Mendoza, this Court held, "[a]s we see it, the
jurisdictional issue should not have been brought up in the first place because the respondents' claim does
not involve their employment with LRTA. There is no dispute on this aspect of the case. The respondents
were hired by METRO and, were, therefore its employees." 54

The only issue, therefore, as in Mendoza, is whether LRTA can be made liable by the labor tribunals for
private respondents' money claim despite the absence of an employer-employee relationship, and though
LRTA is a government-owned and controlled corporation.

We rule in the affirmative. In Mendoza, this Court upheld the jurisdiction of the labor tribunals over LRTA,
citing Philippine National Bank v. Pabalan:55
chanroblesvirtuallawlibrary

x x x By engaging in a particular business thru the instrumentality of a corporation, the

government divests itself pro hac vice of its sovereign character, so as to render the
corporation subject to the rules of law governing private corporations. 56
This Court further ruled that LRTA must submit itself to the provisions governing private corporations,
including the Labor Code, for having conducted business through a private corporation, in this case,
METRO.57

In this case, the NLRC accordingly declared, "[LRTA's] contractual commitments with [METRO] and its
employees arose out of its business relations with [METRO] which is private in nature. Such private relation
was not changed notwithstanding the subsequent acquisition by [LRTA] of full ownership of [METRO] and
take-over of its business operations at LRT."58

In view of the foregoing, we rule that the CA did not err when it upheld the jurisdiction of the labor tribunals
over private respondents' money claims against LRTA.59

LRTA is solidarily liable with METRO for the payment of private respondents' separation pay.

LRTA claims that it is not the real or actual or indirect employer of private respondents. 60 It argues that
there being no employer-employee relationship, it is legally inconceivable how LRTA can be held solidarity
liable with METRO for the payment of private respondents' separation differentials. 61

Again, we disagree. LRTA IS liable for the balance of private respondents' separation pay.

First, LRTA is contractually obligated to pay the retirement or severance/resignation pay of METRO
employees. Citing evidence on record, the LA found that: chanRoblesvirt ualLawlibrary

x x x On November 17, 1997, the Metro, Inc. general manager appointed by LRTA announced
in a memorandum that its Board of Directors approved the severance/resignation benefit of
Metro, Inc. employees at one and a half (1.5) months salaries for every year of service. x x x
By virtue of its ownership of Metro, Inc. LRTA officially and formally assumed by authority of
its board the obligation to update the Metro, Inc. Employees Retirement Fund with the Bureau
of Treasury, to ensure that the fund fully covers all retirement benefits payable to Metro,
 Inc[.] employees x x x. [T]he LRTA's appointed Board of Directors for Metro, Inc. approved
the release and payment of the first fifty (50%) per cent of the severance pay to the displaced
Metro. Inc. employees x x x and complainants were issued the certifications of eligibility for
severance pay/benefit and the memoranda to receive the same x x x. 62
On this same issue, we again quote this Court's ruling in Mendoza: chanRoblesvirt ualLawlibrary

First. LRTA obligated itself to fund METRO's retirement fund to answer for the retirement or
severance/resignation of METRO employees as part of METRO's "operating expenses." Under
Article 4.05.1 of the O & M agreement between LRTA and Metro, "The Authority shall
reimburse METRO for x x x "OPERATING EXPENSES x x x." In the letter to LRTA dated July 12,
2001, the Acting Chairman of the METRO Board of Directors at the time, Wilfredo Trinidad,
reminded LRTA that funding provisions for the retirement fund have always been considered
operating expenses of Metro. The coverage of operating expenses to include provisions for the
retirement fund has never been denied by LRTA.

In the same letter, Trinidad stressed that as a consequence of the nonrenewal of the O & M
agreement by LRTA, METRO was compelled to close its business operations effective
September 30, 2000. This created, Trinidad added, a legal obligation to pay the qualified
employees separation benefits under existing company policy and collective bargaining
agreements. The METRO Board of Directors approved the payment of 50% of the employees'
separation pay because that was only what the Employees' Retirement Fund could
accommodate.

The evidence supports Trinidad's position. We refer principally to Resolution No. 00-44 issued
by the LRTA Board of Directors on July 28, 2000, in anticipation of and in preparation for the
expiration of the O & M agreement with METRO on July 31, 2000.

Specifically, the LRTA anticipated and prepared for the (1) non-renewal (at its own behest) of
the agreement, (2) the eventual cessation of METRO operations, and (3) the involuntary loss
of jobs of the METRO employees; thus, (1) the extension of a two-month bridging fund for
METRO from August 1, 2000, to coincide with the agreement's expiration on July 31, 2000;
(2) METRO's cessation of operations - it closed on September 30, 2000, the last day of the
bridging fund - and most significantly to the employees adversely affected; (3) the updating of
the "Metro, Inc., Employee Retirement Fund with the Bureau of Treasury to ensure that the
fund fully covers all retirement benefits payable to the employees of Metro, Inc."

The clear language of Resolution No. 00-44, to our mind, established the LRTA's obligation for
the 50% unpaid balance of the respondents' separation pay. Without doubt, it bound itself to
provide the necessary funding to METRO's Employee Retirement Fund to fully compensate the
employees who had been involuntary retired by the cessation of operations of METRO. This is
not at all surprising considering that METRO was a wholly owned subsidiary of the LRTA. 63
Second, assuming arguendo that LRTA is not contractually liable to pay the separation benefits, it is
solidarily liable as an indirect employer of private respondents.

Articles 107 and 109 of the Labor Code provide: chanRoblesvirtualLawlibrary

Art. 107. Indirect employer. - The provisions of the immediately preceding article shall
likewise apply to any person, partnership, association or corporation which, not being an
employer, contracts with an independent contractor for the performance of any work, task, job
or project.
chanroblesvirtuallawlibrary

xxx

Art. 109. Solidary liability. - The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For purposes of determining the
 extent of their civil liability under this Chapter, they shall be considered as direct employers.
Based on the foregoing provisions, LRTA qualifies as an indirect employer by contracting METRO to manage
and operate the Metro Manila light rail transit. Being an indirect employer, LRTA is solidarily liable with
METRO in accordance with Article 109 of the Labor Code. The fact that there is no actual and direct
employer-employee relationship between LRTA and private respondents does not absolve the former from
liability for the latter's monetary claims.64 The owner of the project is not the direct employer but merely an
indirect employer, by operation of law, of his contractor's employees. 65

More, this Court has already ruled on this issue in Mendoza: chanRoblesvirtualLawlibrary

Second. Even on the assumption that the LRTA did not obligate itself to fully cover the
separation benefits of the respondents and others similarly situated, it still cannot avoid
liability for the respondents' claim. It is solidari[l]y liable as an indirect employer under the law
for the respondents' separation pay. This liability arises from the O & M agreement it had with
METRO, which created a principal-job contractor relationship between them, an arrangement it
admitted when it argued before the CA that METRO was an independent job contractor who, it
insinuated, should be solely responsible for the respondents' claim.

Under Article 107 of the Labor Code, an indirect employer is "any person, partnership,
association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project."

On the other hand, Article 109 on solidary liability, mandates that x x x "every employer or
indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provisions of this Code. For purposes of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers."

Department Order No. 18-02, S. 2002, the rules implementing Articles 106 to 109 of the
Labor Code, provides in its Section 19 that "the principal shall also be solidarity liable in case
the contract between the principal is preterminated for reasons not attributable to the
contractor or subcontractor."

Although the cessation of METRO's operations was due to a nonrenewal of the O & M
agreement and not a pretermination of the contract, the cause of the nonrenewal and the
effect on the employees are the same as in the contract pretermination contemplated in the
rules. The agreement was not renewed through no fault of METRO, as it was solely at the
behest of LRTA. The fact is, under the circumstances, METRO really had no choice on the
matter, considering that it was a mere subsidiary of LRTA.

Nevertheless, whether it is a pretermination or a nonrenewal of the contract, the same

adverse effect befalls the workers affected, like the respondents in this case - the involuntary
loss of their employment, one of the contingencies addressed and sought to be rectified by the
rules.66
In view of the foregoing, we affirm the CA in sustaining the decisions of the LA and the NLRC ordering LRTA
to pay the balance of private respondents' separation pay.

WHEREFORE, the Petition is DENIED. The Decision dated February 20, 2009 of the Court of Appeals in CA-
G.R. SP No. 103278 is AFFIRMED.

SO ORDERED. ChanRoblesVirtualawlibrary