G.R. No.
202974, February 07, 2018 The Decision of the Labor Arbiter
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 Decision3 dated
March 28, 2005.
This case stemmed from a Complaint4 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
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 APPROPRIATE20
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
President and 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 Manager through 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 Commission23 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 Code32 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-laws34 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 policy35 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:"
NAME POSITION
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 always a
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 Commission45 and Locsin v. Nissan Lease Phils.
Inc.46 also share similar factual milieu.
On the other hand, the complainant in Espino v. National Labor Relations Commission47 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. 209166, July 09, 2018
DEMETRIO ELLAO Y DELA VEGA, Petitioner, v. BATANGAS I ELECTRIC COOPERATIVE, INC. (BATELEC I), RAQUEL
ROWENA RODRIGUEZ BOARD PRESIDENT, Respondents.
DECISION
TIJAM, J.:
Through this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioner Demetrio V.
Ellao (Ellao) seeks to annul the Decision2 dated April 26, 2013 and Resolution3 dated August 28, 2013 of the
Court of Appeals (CA) in CA-G.R. SP No. 127281 which reversed the decisions of both the National Labor
Relations Commission and the Labor Arbiter on the ground of lack of jurisdiction. The CA ruled that Ellao, as
General Manager of respondent Batangas I Electric Cooperative, Inc., (BATELEC I), is a corporate officer
and his dismissal is regarded as an intra-corporate controversy, the jurisdiction over which belongs to the
Securities and Exchange Commission (SEC), now with the regional trial courts, and not the labor tribunals.
The Antecedents
BATELEC I is an electric cooperative organized and existing under Presidential Decree No. 269 (P.D. 269)
and is engaged in the business of distributing electric power or energy in the province of Batangas,
specifically in Nasugbu, Tuy, Calaca, Balayan, Lemery, San Nicolas, Sta. Teresita, San Luis, Calatagan, Lian
and Agoncillo. At the time material to this petition, respondent Raquel Rowena Rodriguez is the President
of BATELEC I's Board of Directors.4 Ellao was employed by BATELEC I initially as Office Supplies and
Equipment Control Officer on January 4, 1982 until he was appointed as General Manager on June 1,
2006.5
On February 12, 2009, a complaint was filed by Nestor de Sagun and Conrado Cornejo against Ellao,
charging him of committing irregularities6 in the discharge of his functions as General Manager.7 A fact-
finding body was created to investigate these charges and in the meantime, Ellao was placed under
preventive suspension.8
Ellao submitted his explanation refuting the charges against him, after which the matter was set for
hearing. However, the scheduled hearing was postponed at Ellao's instance. The re-scheduled hearing did
not push through, and instead, the fact-finding body issued a report recommending Ellao's termination. On
March 13, 2009, the Board of Directors adopted and issued Board Resolution No. 24-09 terminating Ellao as
General Manager on the grounds of gross and habitual neglect of duties and responsibilities and willful
disobedience or insubordination resulting to loss of trust and confidence.9 On October 2, 2009, Ellao was
formally informed of his dismissal from employment made effective on October 1, 2009.10 On December 9,
2009, the National Electrification Administration (NEA) confirmed BATELEC I's Board Resolution No. 24-09
and approved Ellao's termination.11
On February 23, 2011, Ellao filed a Complaint for illegal dismissal and money claims before the Labor
Arbiter against BATELEC I and/or its President Rowena A. Rodriguez. Alleging illegal dismissal, Ellao
complained that the charges against him were unsubstantiated and that there was no compliance with
procedural due process as he was not afforded the opportunity to explain and there was no written notice
of termination specifying the grounds of his termination.12
BATELEC I, on the other hand, moved to dismiss Ellao's complaint on the ground that it is the NEA and not
the NLRC which has jurisdiction over the complaint. Assuming the NLRC enjoys jurisdiction, BATELEC I
nevertheless asserts that Ellao was validly dismissed.13
The Labor Arbiter rendered his Decision14 affirming jurisdiction over the complaint. He held that while
Presidential Decree No. 279 (P.D. 279), the law creating the NEA, as amended by Presidential Decree No.
1645 (P.D. 1645), granted NEA the power to suspend or dismiss any employee of electric cooperatives, the
same does not authorize NEA to hear and decide a labor termination case which power is exclusively
vested by Presidential Decree No. 442 or the Labor Code, to Labor Arbiters.15 Thus, assuming jurisdiction
over the Complaint, the Labor Arbiter held that Ellao was illegally dismissed as the grounds for his dismissal
were unsubstantiated.16
In disposal, the Labor Arbiter held:
WHEREFORE, judgment is hereby made finding the complainant to have been illegally dismissed from
employment by the respondents. Concomitantly, the respondents are hereby ordered to reinstate him to
his prior position as General manager, without loss of seniority rights and with full backwages which, on
date of this Decision is computed at P1,499,106.00 (his monthly salary of P62,462.75 multiplied by twenty
four (24) months). If the complainant should reject reinstatement, the respondents are ordered to pay him,
in addition to full backwages, a separation pay computed at a full month's pay for every year of service or
the amount of P1,686,494.25 (P62,462.75 multiplied by his 27 years of service).
The respondents are further ordered to pay complainant one million pesos in moral damages plus ten
percent of the total financial award as attorney's fees.
Other claims are dismissed for lack of merit.
SO ORDERED.17
BATELEC I interposed its appeal18 before the NLRC while Ellao filed a partial appeal.19 BATELEC I maintains
that it is the NEA which has jurisdiction over Ellao's complaint and that in any case, Ellao was validly
dismissed. In its supplemental appeal,20 BATELEC I argued that jurisdiction over the subject matter belongs
to the regional trial court pursuant to Presidential Decree No. 902-A as amended by Republic Act No. 8799
and Administrative Matter No. 00-11-03-SC which provides that jurisdiction over intra-corporate disputes
are with the regional trial courts.
The NLRC held that BATELEC I is not a corporation registered with the SEC, but that it was formed and
organized pursuant to P.D. 269 and that Ellao is not an officer but a mere employee.21 Accordingly, the
NLRC, in its Decision22 dated May 21, 2012 denied BATELEC I's appeal and partly granted that of Ellao's,
disposing as follows:
WHEREFORE, premises considered, the appeal of respondents is denied for lack of merit. The partial appeal
of complainant is Partly Granted in that the cost of living allowance must be included in the computation
of his backwages and separation pay and that he must be paid his proportionate 13th month pay for the
year 2009 and the moral and exemplary damages awarded in his favor is reduced to P100,000.00.
All other dispositions not affected by the modification stands.
SO ORDERED.23
BATELEC I's motion for reconsideration met similar denial from the NLRC in its Resolution24 dated September
28, 2012. Undaunted, BATELEC I interposed its certiorari petition25 before the CA reiterating its argument
that the Labor Arbiter and the NLRC lacked jurisdiction over Ellao's complaint, the latter being a corporate
officer.
The Ruling of the Court of Appeals
The CA found merit in BATELEC I's certiorari petition and found that Ellao, as BATELEC I's General Manager,
is a corporate officer. The CA found that under BATELEC I's By-laws, its Board of Directors is authorized to
appoint such officers as it may deem necessary. It noted that Ellao was appointed as General Manager by
virtue of a board resolution and that Ellao's appointment was duly approved by the NEA
Administrator.26 The CA also found that the position of General Manager is specifically provided for under
BATELEC I's By-laws. As such, the CA concluded that Ellao's dismissal is considered an intra-corporate
controversy which falls under the jurisdiction of the SEC, now the RTC's, and not with the NLRC.
In disposal, the CA pronounced:
WHEREFORE, in view of the foregoing premises, the instant petition for certiorari is hereby GRANTED and the
assailed May 21, 2012 Decision and September 28, 2012 Resolution of the National Labor Relations
Commission, Sixth Division in NLRC LAC No. 01-000260-12 (NLRC RABIV Case No. 02-00265-11-B) as well as
the October 28, 2011 Decision of the Labor Arbiter are hereby declared as NULL and VOID and
consequently, SET ASIDE. The illegal dismissal complaint of Demetrio Ellao is hereby dismissed without
prejudice to his seeking recourse in the appropriate forum.
SO ORDERED.27
Ellao's motion for reconsideration met similar rebuke from the CA. Hence, resort to the present petition.
The Issue
Ellao presently imputes error on the part of the CA when the latter held that the RTC enjoys jurisdiction
based on the CA's alleged erroneous findings that Ellao is a corporate officer and that the controversy
involves an intra-corporate dispute. Simply, the issue to be resolved by the Court is whether or not
jurisdiction over Ellao's complaint for illegal dismissal belong to the labor tribunals.
The Ruling of the Court
We deny the petition.
Complaints for illegal dismissal filed by a cooperative officer constitute an intra-cooperative controversy,
jurisdiction over which belongs to the regional trial courts.
Ellao's main resistance to the regional trial court's exercise of jurisdiction over his complaint for illegal
dismissal rests on his theory that BATELEC I, as a cooperative, is not a corporation registered with the SEC.
Registration with the SEC, however, is not the operative factor in determining whether or not the latter
enjoys jurisdiction over a certain dispute or controversy.
To lend proper context, It is well to recall that a cooperative, as defined under P.D. 26928, refers to a
"corporation organized under Republic Act No. 603829 or [under P.D. 269] a cooperative supplying or
empowered to supply service which has heretofore been organized under the Philippine Non-Agricultural
Cooperative Act, whether covered under this Decree or not."30 P.D. 269 further provides that
"[c]ooperative non-stock, non-profit membership corporations may be organized, and electric
cooperative corporations heretofore formed or registered under the Philippine non Agricultural
Cooperative Act may as hereinafter provided be converted, under this Decree for the purpose of
supplying, and of promoting and encouraging the fullest use of, service on an area coverage basis at the
lowest cost consistent with sound economy and the prudent management of the business of such
corporations."31 Likewise, by express provision of PD 269, an electric cooperative is hereby vested with all
powers necessary or convenient for the accomplishment of its corporate purpose.32 Consistently, an
electric cooperative is defined under Republic Act No. 913633 (R.A. 9136) as a "distribution utility organized
pursuant to [P.D. 269], as amended, xxx."34
Thus, organization under P.D. 269 sufficiently vests upon electric cooperatives' juridical personality enjoying
corporate powers. Registration with the SEC becomes relevant only when a non-stock, non-profit electric
cooperative decides to convert into and register as a stock corporation.35 As such, and even without
choosing to convert and register as a stock corporation, electric cooperatives already enjoy powers and
corporate existence akin to a corporation.
By jurisprudence, termination disputes involving corporate officers are treated differently from illegal
dismissal cases lodged by ordinary employees. Oft-cited is the case of Tabang v. NLRC36 distinguishing
between "officers" and "employees" as follows:
xxx 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.37
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable
by the labor arbiter pursuant to Article 217 (a)238 of the Labor Code, as amended.
By way of exception, where the complaint for illegal dismissal involves a corporate officer, the controversy
falls under the jurisdiction of the SEC, because the controversy arises out of intra-corporate or partnership
relations between and among stockholders, members, or associates, or 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 the
controversy concerns their individual franchise or right to exist as such entity; or because the controversy
involves the election or appointment of a director, trustee, officer, or manager of such corporation,
partnership, or association.39 With the advent of Republic Act No. 879940 (R.A. 8799) or The Securities
Regulation Code, the SEC's jurisdiction over all intra-corporate disputes was transferred to the regional trial
courts.41 Since Ellao filed his Complaint for illegal dismissal on February 23, 2011, after the passage and
approval of R.A. 8799, his complaint may either fall under the jurisdiction of the labor arbiter or the regional
trial courts, depending on his position. If Ellao is determined to be a corporate officer then jurisdiction over
his complaint for illegal dismissal is to be treated as an intra-corporate dispute, hence jurisdiction belongs
to the regional trial courts.
In Matling Industrial and Commercial Corporation, et al., v. Ricardo Coros,42 the Court held that in
conformity with Section 2543 of the Corporation Code, "a position must be expressly mentioned in the By-
Laws in order to be considered as a corporate office. Thus, the creation of an office pursuant to or under a
By-Law enabling provision is not enough to make a position a corporate office." Citing Guerrea v. Lezama,
et al.,44 Matling held that the only officers of a corporation were those given that character either by the
Corporation Code or by the By-Laws so much so that the rest of the corporate officers could be
considered only as employees or subordinate officials.
Here, the position of General Manager is expressly provided for under Article VI, Section 10 of BATELEC I's
By-laws, enumerating the cooperative offices as follows:
ARTICLE VI- OFFICERS
xxxx
SECTION 10. General Manager
a. The management of the Cooperative shall be vested in a General Manager who shall be appointed by
the Board and who shall be responsible to the Board for performance of his duties as set forth in a position
description adopted by the Board, in conformance with guidelines established by the National
Electrification Administration. It is incumbent upon the Manager to keep the Board fully informed of all
aspects of the operations and activities of the Cooperative. The appointment and dismissal of the General
Manager shall require approval of NEA.
b. No member of the board may hold or apply for the position of General Manager while serving as a
Director or within twelve months following his resignation or the termination of his tenure.45
Evidently, the functions of the office of the General Manager, i.e., management of the Cooperative and
to keep the Board fully informed of all aspects of the operations and activities of the Cooperative are
specifically laid down under BATELEC I's By-laws itself. It is therefore beyond cavil that Ellao's position as
General Manager is a cooperative office. Accordingly, his complaint for illegal dismissal partakes of the
nature of an intra-cooperative controversy; it involves a dispute between a cooperative officer on one
hand, and the Board of Directors, on the other.
On this score, the Court's pronouncement in Celso F. Pascual, Sr. and Serafin Terencio v. Caniogan Credit
and Development Cooperative,46 finds suitable application:
Petitioners clarify that they do not take issue on the power of the Board of Directors to remove them.
Rather, they dispute the "manner, cause[,] and legality" of their removal from their respective offices as
General Manager and Collection Manager. Even so, we hold that an officer's dismissal is a matter that
comes with the conduct and management of the affairs of a cooperative and/or an intra-cooperative
controversy, and that nature is not altered by reason or wisdom that the Board of Directors may have in
taking such action. Accordingly, the case a quo is not a labor dispute requiring the expertise of the Labor
Arbiter or of the National Labor Relations Commission. It is an intra-cooperative dispute that is within the
jurisdiction of the Regional Trial Court xxx.47
As such, the CA committed no reversible error when it ordered the dismissal of Ellao's Complaint for illegal
dismissal without prejudice to the latter's filing of his complaint at the proper forum. Considering that the
Labor Arbiter and the NLRC were without ample jurisdiction to take cognizance of Ellao's Complaint, the
labor tribunals' rulings therein made are resultantly void. There is therefore no need to discuss the issue on
illegal dismissal and monetary claims at this point.
WHEREFORE, the petition is DENIED. The Decision dated April 26, 2013 and Resolution dated August 28, 2013
of the Court of Appeals in CA-G.R. SP No. 127281 are AFFIRMED.
SO ORDERED.
 FIRST DIVISION
G.R. No. 219774, July 23, 2018
MANILA HOTEL CORPORATION, Petitioner, v. ROSITA DE LEON, Respondent.
DECISION
TIJAM, J.:
This is a petition for review on
certiorari1 under Rule 45 of the Rules of Court over the Decision2
dated March
19, 2015 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 132576, which set aside the
Decision3 dated June 10, 2013 and Resolution4 dated September 4, 2013 of the National Labor Relations
Commission (NLRC) in NLRC-LAC No. 01-000432-13 reversing the Decision5 dated December 10, 2012 of the
Labor Arbiter (LA) in NLRC-NCR Case No. 08-12795-11, dismissing Rosita De Leon's (respondent) complaint
for illegal dismissal and the CA Resolution6 dated July 31, 2015 which denied Manila Hotel Corporation's
(petitioner) Motion for Partial Reconsideration.7
The Facts
Respondent began working for petitioner on September 1, 1976 as a Restaurant and Bar Cashier. She was
promoted to Front Office Cashier in October 1977, as Front Office Cashier's Shift Leader in August 1986,
and as Head Cashier in January 1988. In March 1989, she assumed the post of Income Auditor. Seven years
later, she accepted the position of Assistant Credit and Collection Manager. In March 2000, petitioner
turned over to her the functions of the General Cashier who had resigned.8
On June 7, 2011, respondent received petitioner's June 6, 2011 letter, captioned as a Notice of Compulsory
Retirement (Notice),9 which read:
Re: Notice of Compulsory Retirement
Dear Ms. De Leon:
Following your verbal conversation with the Vice President of Human Resources and Security, P/SSupt
Felipe H. Buena Jr. (Ret), the undersigned would like to formally inform you of the intention of the
Management to exercise its prerogative to compulsorily retire you having been rendered 35 years in
service from the Hotel [sic] effective at the close of office hours of June 10, 2011. You shall, however, be
paid your retirement pay accordingly.
We thank you and wish you good luck in your future endeavors. (Emphasis in the original)
At the time she received said Notice, respondent was 57 years old10 and held the position of Assistant
Credit and Collection Manager/Acting General Cashier.11 She had by then rendered 34 years of service to
petitioner.12
Respondent subsequently filed against petitioner and its Chairman, President, Vice President for Finance
and Human Resources Assistant Director (officers),13 a Complaint for illegal dismissal, underpayment of
salaries and 13th month pay, non-payment of service charges, transportation allowance and other related
benefits, and illegal deductions, with prayer for reinstatement without loss of seniority rights, backwages,
actual, moral and exemplary damages and attorney's fees.14
Respondent claimed that she had been forced to retire without due process. She averred that petitioner
gave no rational basis for her retirement or dismissal and merely relied on management prerogative which,
she stressed, could not be utilized to circumvent the law and the public policy on labor and social justice.15
Petitioner countered that there was no dismissal because respondent voluntarily accepted its offer to avail
the compulsory retirement program under the Collective Bargaining Agreement (CBA) between petitioner
and its rank-and-file employees.16 Under the CBA, an employee's retirement is compulsory when he or she
reaches the age of 60 or has rendered 20 years of service, whichever comes first.17
Petitioner averred that when respondent received the Notice, she went directly to the Human Resources
Director to inquire about her retirement pay, and upon learning that the same would amount to P1.5
Million, she graciously accepted the retirement offer and even personally and eagerly processed her
Personnel Clearance. However, when notified that the release of her retirement pay at P1,510,757.92 had
been approved, respondent refused to get her check and instead maliciously sued petitioner for illegal
dismissal.18
Petitioner pointed out that respondent already rendered 14 years in excess of the 20-year cut-off period for
compulsory retirement, thus, it allegedly had all the right to terminate her services. According to petitioner,
that respondent was only 57 years of age and still willing to serve, or that her services had been extended
for 14 years, would not bar its exercise of the management prerogative to terminate her employment,
stressing that labor law discourages interference with an employer's judgment in conducting its business.19
Petitioner explained that it was implementing a cost-cutting program to avoid heavy losses caused by the
worldwide economic crisis, and the exigencies for the continuation of respondent's employment, which it
alone could determine, no longer existed.20
In any case, petitioner argued, respondent could be compulsorily retired under the CBA, being a rank-
and-file employee. It averred that respondent's work, the most crucial aspect of which was merely to
count and keep petitioner's money, was routinary and did not involve the exercise of any discretion.
Petitioner added that respondent was not a supervisory employee as she had no staff to supervise.
Furthermore, respondent had supposedly been receiving benefits under the CBA.21
Petitioner, in addition, denied liability for respondent's money claims.22
Respondent, however, decried petitioner's claim that she graciously accepted its retirement offer,
asserting that she questioned her dismissal from the beginning, and that her signing of the Personnel
Clearance only indicated an intention to clear all her accountabilities.23
Respondent also contended that petitioner's CBA with the rank-and-file employees did not apply to her
because she held a managerial or supervisory position as shown no less by her job title. To further prove
that she was a managerial or supervisory employee, she averred that: the Performance Appraisal Sheet for
Supervisory Positions was used to rate her; she was awarded Model Supervisor in 1992; as early as 1994, she
was entitled to the Officer's Check Privilege which was exclusively enjoyed by employees holding
managerial and supervisory positions; and the 50% discount she enjoyed in all outlets/restaurants was a
privilege given only to petitioner's officers or managers.24
Respondent also submitted office memorandums purportedly negating petitioner's claim that she did not
exercise discretion or independent judgment in discharging her functions. Pointing to documents
submitted by petitioner itself as proof that she was not a rank-and-file employee, she argued that: the
Regular Payroll Journal showed her as a confidential employee from 1996, when she assumed the position
of Assistant Credit and Collection Manager, until June 10, 2011; the Payroll Register included her name
under "CONFI-MANA" which stood for Confidential-Manager; and the Travelling Allowance and
Certification Report applied only to managers.25
Ruling of the LA
Ruling in respondent's favor, the LA held that respondent was a managerial employee, as evinced by the
Personnel Status Form and Appraisal Sheets she submitted and based on her responsibilities and duties and
the benefits and privileges that came with her post. The LA, thus, concluded that the CBA did not apply to
respondent and her compulsory retirement resultantly constituted constructive dismissal.26
The LA found merit in respondent's claims for attorney's fees and illegal deductions but denied her claims
for salary differentials and damages.27 Ruling of the NLRC

The dispositive portion of the LA Decision28 dated December 10, 2012 reads:
WHEREFORE, a Decision is hereby rendered declaring that [respondent] was illegally dismissed. Corollarily,
[petitioner] are hereby ordered to reinstate [respondent] to her former position without loss of seniority
rights and other privileges and to pay her backwages from the time of dismissal up to actual
reinstatement, which is only up to the retirable age of 60, for which a retirement pay is hereby also ordered
to be paid by the [petitioner].
In addition, [petitioner] are hereby ordered to return the amount illegally deducted from the [respondent].
An [sic] attorney's fees equivalent to ten (10%) of the total award is hereby granted. Computation is as
follows:
a) BACKWAGES
6/10/11- 12[/]10/12 - 16.06 mos.
P24,749.00 x 16.06 = 397,468.94
On June 10, 2013, the NLRC, in its Decision30 granted the appeal interposed by petitioner and its officers,
disposing as follows:
WHEREFORE, premises considered, the appealed decision dated December 10, 2012 is reversed and set
aside. Accordingly, the complaint for illegal constructive dismissal is dismissed for lack of merit.
However, [petitioner] is ordered to pay [respondent] the amount of P72,616.77 representing its illegal
deductions as previously granted and the amount of P7,261.67 which is equivalent to 10% of the monetary
award for and by way of attorney's fees.
Likewise, [petitioner] is ordered to immediately pay [respondent] her retirement pay and benefits based on
law and the [CBA].
SO ORDERED.31
According to the NLRC, while managerial employees are ordinarily outside the scope of CBA, nothing
prevents employers from granting them benefits equal to or higher than those given to union members. It
held that in extending the retirement benefits under the CBA to respondent, petitioner was merely
exercising a management prerogative, and by immediately processing her retirement requirements,
including the Personnel Clearance, respondent accepted petitioner's offer of retirement. The NLRC noted
that respondent, as a managerial employee, was presumed to be well-educated and to have understood
the import of the Personnel Clearance when she signed it.32

13th MONTH PAY The NLRC thus concluded that petitioner's offer of retirement and respondent's acceptance thereof
constituted a bilateral agreement the "applicable employment contract" on retirement sanctioned under
Article 28733 of the Labor Code, the existence of which rendered unimportant the issue of whether
respondent was a managerial employee or not. The NLRC held that having assented to her compulsory
retirement, respondent was already estopped from contesting the same.34
P397,468.94/12 = 33,122.41
The NLRC approved petitioner's computation of respondent's retirement pay. It also sustained the award of
attorney's fees since respondent was compelled to litigate. Because petitioners did not challenge the
award for illegal deductions, the NLRC retained the same but held that all adjudged liabilities shall be
SERVICE INCENTIVE LEAVE PAY borne by petitioner alone.35

P24,749/26 x 5/12 x 16.06
b) ILLEGAL DEDUCTION (given)
10% Attorney's fees
Both parties moved for reconsideration, petitioner insofar only as the NLRC sustained the award for illegal
deductions and attorney's fees.36
6,369.00 430,961.04
Respondent, for her part, maintained that she never assented to sever her employment with petitioner and
that she had in fact questioned the basis for her compulsory retirement. Respondent, in particular, denied
that she personally processed her Personnel Clearance, alleging that it was the staff from petitioner's
72,616.77 Human Resources Division who went to the different departments and to her own office to have the
clearance signed.
509,577.81
On September 4, 2013, the NLRC, in its Resolution37 denied both parties' motions for reconsideration.
50,957.78 Ruling of the CA

Total P560,535.59 Granting respondent's petition for certiorari, the CA rendered its Decision38 dated March 19, 2015, the
dispositive portion of which reads:
WHEREFORE, premises considered, the PETITION is GRANTED. The assailed 10 June 2013 Decision of the
SO ORDERED.29
NLRC, and its assailed Resolution promulgated on 4 September 2013, in so far as these hold that
[respondent] had been validly compulsorily retired and dismissing [respondent's] complaint for illegal
dismissal, are hereby ANNULLED and SET ASIDE.
[Petitioner] is hereby ORDERED to pay [respondent] her backwages from the termination of her
employment on 10 June 2011, her last day at work, until the date when [respondent] has turned sixty (60)
years of age, and thereupon, to immediately pay her retirement benefits in accordance with law.
[Petitioner] is likewise ORDERED to pay [respondent] the amount of Php72,616.77, representing illegal
deductions, as held by the NLRC and uncontested by [petitioner], as well as Php7,261.67, representing
attorney's fees of 10% of the amount unlawfully withheld.
SO ORDERED.39
In its Motion for Partial Reconsideration,40 petitioner asked that the NLRC's ruling be affirmed. However, it
was denied in the Resolution41 dated July 31, 2015.
Hence, this petition seeking the annulment of the CA's decision and the reinstatement of the NLRC 's
resolution.
Petitioner insists that respondent was not illegally dismissed because she voluntarily accepted her inclusion
in its compulsory retirement program, and that by such acceptance, she made the CBA provision on
retirement applicable to her.42
Ruling of the Court
The petition lacks merit.
The CA held that respondent is a managerial employee, as found by the LA and the NLRC - a finding
"which (petitioner) never bothered to contest."43 There is, thus, no issue as to the managerial position held
by respondent in petitioner's hotel.
Because respondent is a managerial employee, petitioner's CBA with its rank-and-file employees does not
apply to her. Furthermore, as the CA held, there is nothing in petitioner's submissions showing that
respondent had assented to be covered by the CBA's retirement provisions.
In United Pepsi-Cola Supervisory Union v. Judge Laguesma,44 this Court ruled:
Nor is the guarantee of organizational right in Art. III, §8 infringed by a ban against managerial employees
forming a union. The right guaranteed in Art. III, §8 is subject to the condition that its exercise should be for
purposes "not contrary to law." In the case of Art. 245, there is a rational basis for prohibiting managerial
employees from forming or joining labor organizations. As Justice Davide, Jr., himself a constitutional
commissioner, said in his ponencia in Philips Industrial Development, Inc. v. NLRC:
In the first place, all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-FFW; the
five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential employees. By
the very nature of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of labor relations. As such,
the rationale behind the ineligibility of managerial employees to form, assist or join a labor union equally
applies to them.
In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus:
"... The rationale for this inhibition has been stated to be, because if these managerial employees would
belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of
evident conflict of interests. The Union can also become company-dominated with the presence of
managerial employees in Union membership."
To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to organize.
But the same reason for denying them the right to organize justifies even more the ban on managerial
employees from forming unions. After all, those who qualify as top or middle managers are executives who
receive from their employers information that not only is confidential but also is not generally available to
the public, or to their competitors, or to other employees. It is hardly necessary to point out that to say that
the first sentence of Art. 245 is unconstitutional would be to contradict the decision in that case.45 (Citations
omitted and emphasis ours)
Thus, in the absence of an agreement to the contrary, managerial employees cannot be allowed to share
in the concessions obtained by the labor union through collective negotiation. Otherwise, they would be
exposed to the temptation of colluding with the union during the negotiations to the detriment of the
employer.46
Accordingly, the fact that respondent had rendered more than 20 years of service to petitioner will not
justify the latter's act of compulsorily retiring her at age 57, absent proof that she agreed to be covered by
the CBA's retirement clause.
As amended by Republic Act No. 7641,47 Article 287 of the Labor Code, in pertinent part, provides:
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 agreement and other
agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement 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 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 fifteen
(15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5)
days of service incentive leaves.
xxxx
"Undoubtedly, under this provision, the retirement age is primarily determined by the existing agreement or
employment contract."48 "By its express language, the Labor Code permits employers and employees to fix
the applicable retirement age at below 60 years."49 Absent such an agreement, the retirement age shall
be that fixed by law, and the above-cited law mandates that the compulsory retirement age is 65 years,
while the minimum age for optional retirement is set at 60 years.50
Petitioner maintains that it had an implied agreement with respondent for the latter's compulsory
retirement, which constitutes a retirement contract sanctioned under Article 287 of the Labor
Code.51 According to petitioner, this agreement was perfected when respondent verbally accepted its
retirement offer as provided in its June 6, 2011 letter, and when she personally and voluntarily processed
her Personnel Clearance.52
The Court is not persuaded.
A cursory reading of petitioner's June 6, 2011 letter will readily reveal that it was not an offer for compulsory
retirement. The letter, to begin with, was a Notice, which indicates that it merely served to notify
respondent of a decision to retire her services. It was clearly not a notice to avail of the retirement
provisions under the CBA. As said caption suggests, the retirement was compulsory and not optional as to
give respondent the choice to decline.
The body of the letter, too, signifies that retirement was no longer a choice or a decision to be made by
respondent, as the termination of her services was already fait accompli - an accomplished or
consummated act. First, the Notice specified the effectivity date of respondent's retirement, i.e., at "close
of office hours of June 10, 2011," or barely three days from the time she received the Notice. Second, it also
stated that the management was exercising its prerogative to compulsorily retire respondent. Thus,
petitioner was invoking its exclusive judgment and discretion in terminating respondent's employment
through compulsory retirement. Third, petitioner thanked respondent for her services and wished her luck in
her future endeavors, which indicates that from petitioner's perspective, cessation of employment was
certain and final, and respondent's future was no longer as its employee.
Indeed, the Notice gave respondent no opportunity to explore a mere possibility or option of retirement. In
fact, there is nothing in the Notice asking respondent to express her conformity to any retirement plan or
offer or suggesting that management was willing to discuss her retirement. Thus, contrary to petitioner's
claim, the Notice was not a proposal, but a management decision, to retire respondent who then had not
yet reached the age of compulsory retirement under Article 287 of the Labor Code.
By all indications, therefore, petitioner's June 6, 2011 letter was a notice of severance or termination of
employment through compulsory retirement. It was not, as petitioner would have this Court believe, an
offer which respondent was free to accept or decline. Petitioner had unilaterally made a decision to retire
respondent and by its Notice, imposed such decision on her.
The conversations between respondent and petitioner's Vice President of Human Resources and Security,
P/SSupt Felipe H. Buena Jr. (Ret) (Buena), also show that respondent had no intention to quit her job or to
retire, and that she questioned petitioner's decision to compulsorily retire her. In her Position
Paper,53 respondent narrated:
18. On June 3, 2011, P/SSupt. Felipe H. Buena, Jr., V.P.-HRD & Security required [respondent] to come to his
office. During the middle of the conversation, he suddenly commented "You know Rose I resigned
effective June 5, 2011 because I am not happy with my boss anymore; so same thing with you. Why don't
you just resign? With conviction he uttered, "Rose, you have to resign.
19. [Respondent] stated in response, "I am not yet planning to resign nor retire since I am the sole
breadwinner of the family and my son will continue his studies in college for two (2) more years, which
mainly [sic] my primary reasons why I am maintaining love, concern, good working relationship, being
hardworking employee [sic], above all my honesty and integrity for almost 35 years of continues [sic]
dedication to the company."
20. On June 4, 2011, P/SSupt. Felipe H. Buena asked [respondent] to see him in his office. Right away he
informed [respondent] that management decided to compulsory [sic] retire her. The same was manifested
by respondent Aurora Caday, Asst. Director to HR-Legal.
21. [Respondent] asked him what was the reason and why? He said that management opted to apply
what is stated in the CBA of the employees-"20 years of service or 50 years old whichever comes first" and
he added that this applied to all". [Respondent] simply commented that if its [sic] true that it applies to all,
how come that there are lots of rank & file employees, supervisors and managers/officers who are older
than her and working for more than 35 years of service, are [sic] still with the company? 54 (Emphasis in the
original)
These conversations were never denied by petitioner.55 It bears noting, too, that petitioner itself
acknowledged in its June 6, 2011 letter that Buena had discussed with respondent her compulsory
retirement, lending credence to the above-cited exchanges. As the CA found, the June 4, 2011 exchange
between respondent and Buena establish that "the information regarding respondent's retirement was not
an offer at all, but an order, and that respondent had questioned her coverage in the CBA."56
Petitioner has not likewise denied that after receiving the Notice, respondent approached its President
asking for an explanation and possibly a better package, but the latter simply answered: "Ok na yon
pahinga ka na and besides that was the decision of the management."57 This clearly belies petitioner's
claim that there was a "meeting of the minds"58 between its management and respondent as regards her
early retirement. In this regard, it bears to reiterate that "company retirement plans must not only comply
with the standards set by existing labor laws, but they should also be accepted by the employees to be
commensurate to their faithful service to the employer within the requisite period."59
The Court cannot subscribe to petitioner's argument that respondent's act of signing and processing her
Personnel Clearance amounts to indubitable proof that she accepted its retirement offer. To reiterate,
there was no such offer that respondent was at liberty to consider, accept or reject; petitioner already
resolved to compulsorily retire respondent when Buena informed her of such decision and when it formally
served upon her its Notice. Furthermore, faced with unemployment, respondent would naturally want to
have her last pay released and this requires the accomplishment of the Personnel Clearance. As the CA
aptly explained:
It is a familiar axiom that employer and employee do not stand on equal footing, a situation which often
causes an employee to act out of need instead of any genuine acquiescence to the employer. It cannot
be ignored that [respondent] has only six days before she. is deemed "compulsorily retired." She has
appealed the decision of [petitioner] but its representatives remained adamant. Therefore, it is unsurprising
that [respondent] would process her clearances; after all, without such clearance, her retirement pay
would not be released, and she would still be out of work. Hence, it was not out of eagerness, excitement,
and acceptance that she attended to her retirement requirements, but only out of sheer necessity and to
assure the release of her retirement pay.60
Furthermore, the CA correctly observed that respondent's refusal to accept her retirement pay and her
objections to being retired early, as well as the filing of her complaint for illegal dismissal, confirm that she
did not consent to her compulsory retirement.61 Apropos is the following pronouncement in Universal
Robina Sugar Milling Corp. (URSUMCO) and/or Cabatt v. Caballeda, et al.:62
Furthermore, the fact that respondents filed a complaint for illegal dismissal against petitioners completely
negates their claim that respondents voluntarily retired. To note, respondents vigorously pursued this case
against petitioners, all the way up to this Court. Without doubt, this is a manifestation that respondents had
no intention of relinquishing their employment, wholly incompatible to petitioners' assertion that
respondents voluntarily retired.63
Contrary to petitioner's assertion, the exercise of management prerogative cannot justify its compulsory
retirement of respondent's services. There can be no debate that the exercise of management
prerogatives cannot trounce the requirements of the law which, in this case, demand the employee's
unequivocal agreement to an early retirement. The Court has held:
It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad
discretion includes the implementation of company rules and regulations and the imposition of disciplinary
measures on its employees. But the exercise of a management prerogative like this is not limitless, but
hemmed in by good faith and a due consideration of the rights of the worker. In this light, the management
prerogative will be upheld for as long as it is not wielded as an implement to circumvent the laws and
oppress labor.64 (Citations omitted and emphasis ours)
All told, an employee in the private sector who did not expressly agree to an early retirement cannot be
retired from the service before he reaches the age of 65 years.65 "Acceptance by the employee of an
early retirement age option must be explicit, voluntary, free and uncompelled." 66 "The law demanded
more than a passive acquiescence on the part of the employee, considering that his early retirement age
option involved conceding the constitutional right to security of tenure."67 Thus, We held that "[r]etirement is
the result of a bilateral act of the parties, a voluntary agreement between the employer and the
employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the
former."68
In the instant case, respondent's early retirement arose not from a bilateral act but a unilateral decision on
the part of petitioner. Respondent's consent was neither sought nor procured by petitioner in deciding to
prematurely retire her services. For this reason, respondent's compulsory retirement, as imposed by
petitioner in its June 6, 2011 letter, constitutes illegal dismissal. As this Court recently held in Alfredo F. Laya,
Jr. v. Philippine veterans Bank and Ricardo A. Balbido, Jr.:69
Although the employer could be free to impose a retirement age lower than 65 years for as long its
employees consented, the retirement of the employee whose intent to retire was not clearly established, or
whose retirement was involuntary is to be treated as a discharge.70 (Citations omitted and emphasis ours)
Having been unjustly dismissed, respondent is entitled to the reliefs under Article 279 of the Labor Code
which provides:
Article 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.71
In ICT Marketing Services, Inc. v. Sales,72 the Court held that:
The normal consequences of respondents' illegal dismissal, then, are reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up to the date 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 ofbackwages.73
The CA held that reinstatement was no longer feasible as it would not work to the best interest of the
parties. It found that petitioner had consistently objected to respondent's return to work and concluded
that reintroducing her into the workplace may initiate conflicts which would ultimately hamper the efficient
management of petitioner's hotel and foster ill feelings and enmity between respondent and her former
superiors.74 In this light, We hold that separation pay in lieu of actual reinstatement should be awarded.
Indeed, "[t]he accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement
is no longer practical or in the best interest of the parties."75

Accordingly, respondent is entitled to backwages and all other benefits from June 10, 2011, when her
employment was terminated,76 until the finality of this Decision, with interest at twelve percent (12%) per
annum from June 10, 2011 to June 30, 2013 and at six percent (6%) per annum from July 1, 2013 until their
full satisfaction.77 Respondent shall also receive separation pay, in lieu of reinstatement, equivalent to one
(1) month salary for every year of service,78 which shall earn interest at six percent (6%) per annum from the
finality of this Decision until full payment.79 Both the separation pay and backwages shall be computed up
to the finality of the Decision as it is at that point that the employment relationship is effectively ended.80

WHEREFORE, the Petition is DENIED. The Decision dated March 19, 2015 and Resolution dated July 31, 2015
of the Court of Appeals in CAG.R. SP No. 132576 are AFFIRMED with MODIFICATIONS in that petitioner
Manila Hotel Corporation is ordered to pay respondent Rosita De Leon:
(a) backwages and all other benefits due from June 10, 2011 until the finality of this Decision, plus interest
at twelve percent (12%) per annum from June 10, 2011 to June 30, 2013, and at six percent (6%) per
annum from July l, 2013 until their full satisfaction; and

(b) separation pay, in lieu of reinstatement, from September 1, 1976 until the finality of this Decision,
equivalent to one (1) month pay for every year of service, plus interest at six percent (6%) per annum from
the finality of this Decision until full payment.
SO ORDERED.
G.R. No. 181416 November 11, 2013
MEDICAL PLAZA MAKATI CONDOMINIUM CORPORATION, Petitioner,
vs.
ROBERT H. CULLEN, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals
(CA) Decision1 dated July 10, 2007 and Resolution2 dated January 25, 2008 in CA-G.R. CV No. 86614. The
assailed decision reversed and set aside the September 9, 2005 Order3 of the Regional Trial Court (RTC) of
Makati, Branch 58 in Civil Case No. 03-1018; while the assailed resolution denied the separate motions for
reconsideration filed by petitioner Medical Plaza Makati Condominium Corporation (MPMCC) and
Meridien Land Holding, Inc. (MLHI).
The factual and procedural antecedents are as follows:
Respondent Robert H. Cullen purchased from MLHI condominium Unit No. 1201 of the Medical Plaza
Makati covered by Condominium Certificate of Title No. 45808 of the Register of Deeds of Makati. Said title
was later cancelled and Condominium Certificate of Title No. 64218 was issued in the name of respondent.
On September 19, 2002, petitioner, through its corporate secretary, Dr. Jose Giovanni E. Dimayuga,
demanded from respondent payment for alleged unpaid association dues and assessments amounting to
₱145,567.42. Respondent disputed this demand claiming that he had been religiously paying his dues
shown by the fact that he was previously elected president and director of petitioner.4 Petitioner, on the
other hand, claimed that respondent’s obligation was a carry-over of that of MLHI.5 Consequently,
respondent was prevented from exercising his right to vote and be voted for during the 2002 election of
petitioner’s Board of Directors.6 Respondent thus clarified from MLHI the veracity of petitioner’s claim, but
MLHI allegedly claimed that the same had already been settled.7 This prompted respondent to demand
from petitioner an explanation why he was considered a delinquent payer despite the settlement of the
obligation. Petitioner failed to make such explanation. Hence, the Complaint for Damages8 filed by
respondent against petitioner and MLHI, the pertinent portions of which read:
xxxx
6. Thereafter, plaintiff occupied the said condominium unit no. 1201 and religiously paid all the
corresponding monthly contributions/association dues and other assessments imposed on the
same. For the years 2000 and 2001, plaintiff served as President and Director of the Medical Plaza
Makati Condominium Corporation;
7. Nonetheless, on September 19, 2002, plaintiff was shocked/surprised to receive a letter from the
incumbent Corporate Secretary of the defendant Medical Plaza Makati, demanding payment of
alleged unpaid association dues and assessments arising from plaintiff’s condominium unit no.
1201. The said letter further stressed that plaintiff is considered a delinquent member of the
defendant Medical Plaza Makati.
x x x;
8. As a consequence, plaintiff was not allowed to file his certificate of candidacy as director.
Being considered a delinquent, plaintiff was also barred from exercising his right to vote in the
election of new members of the Board of Directors x x x;
9. x x x Again, prior to the said election date, x x x counsel for the defendant [MPMCC] sent a
demand letter to plaintiff, anent the said delinquency, explaining that the said unpaid amount is
a carry-over from the obligation of defendant Meridien. x x x;
10. Verification with the defendant [MPMCC] resulted to the issuance of a certification stating
that Condominium Unit 1201 has an outstanding unpaid obligation in the total amount of
₱145,567.42 as of November 30, 2002, which again, was attributed by defendant [MPMCC] to
defendant Meridien. x x x;
11. Due to the seriousness of the matter, and the feeling that defendant Meridien made false
representations considering that it fully warranted to plaintiff that condominium unit 1201 is free
and clear from all liens and encumbrances, the matter was referred to counsel, who accordingly
sent a letter to defendant Meridien, to demand for the payment of said unpaid association dues
and other assessments imposed on the condominium unit and being claimed by defendant
[MPMCC]. x x x;
12. x x x defendant Meridien claimed however, that the obligation does not exist considering that
the matter was already settled and paid by defendant Meridien to defendant [MPMCC]. x x x;
13. Plaintiff thus caused to be sent a letter to defendant [MPMCC] x x x. The said letter x x x sought
an explanation on the fact that, as per the letter of defendant Meridien, the delinquency of unit
1201 was already fully paid and settled, contrary to the claim of defendant [MPMCC]. x x x;
14. Despite receipt of said letter on April 24, 2003, and to date however, no explanation was
given by defendant [MPMCC], to the damage and prejudice of plaintiff who is again obviously
being barred from voting/participating in the election of members of the board of directors for
the year 2003;
15. Clearly, defendant [MPMCC] acted maliciously by insisting that plaintiff is a delinquent
member when in fact, defendant Meridien had already paid the said delinquency, if any. The
branding of plaintiff as delinquent member was willfully and deceitfully employed so as to
prevent plaintiff from exercising his right to vote or be voted as director of the condominium
corporation; 16. Defendant [MPMCC]’s ominous silence when confronted with claim of payment
made by defendant Meridien is tantamount to admission that indeed, plaintiff is not really a
delinquent member;
17. Accordingly, as a direct and proximate result of the said acts of defendant [MPMCC], plaintiff
experienced/suffered from mental anguish, moral shock, and serious anxiety. Plaintiff, being a
doctor of medicine and respected in the community further suffered from social humiliation and
besmirched reputation thereby warranting the grant of moral damages in the amount of
₱500,000.00 and for which defendant [MPMCC] should be held liable;
18. By way of example or correction for the public good, and as a stern warning to all similarly
situated, defendant [MPMCC] should be ordered to pay plaintiff exemplary damages in the
amount of ₱200,000.00;
19. As a consequence, and so as to protect his rights and interests, plaintiff was constrained to
hire the services of counsel, for an acceptance fee of ₱100,000.00 plus ₱2,500.00 per every court
hearing attended by counsel;
20. In the event that the claim of defendant [MPMCC] turned out to be true, however, the herein
defendant Meridien should be held liable instead, by ordering the same to pay the said
delinquency of condominium unit 1201 in the amount of ₱145,567.42 as of November 30, 2002 as
well as the above damages, considering that the non-payment thereof would be the proximate
cause of the damages suffered by plaintiff;9
Petitioner and MLHI filed their separate motions to dismiss the complaint on the ground of lack of
jurisdiction.10 MLHI claims that it is the Housing and Land Use Regulatory Board (HLURB) which is vested with
the exclusive jurisdiction to hear and decide the case. Petitioner, on the other hand, raises the following
specific grounds for the dismissal of the complaint: (1) estoppel as respondent himself approved the
assessment when he was the president; (2) lack of jurisdiction as the case involves an intra-corporate
controversy; (3) prematurity for failure of respondent to exhaust all intra-corporate remedies; and (4) the
case is already moot and academic, the obligation having been settled between petitioner and MLHI.11
On September 9, 2005, the RTC rendered a Decision granting petitioner’s and MLHI’s motions to dismiss
and, consequently, dismissing respondent’s complaint.
The trial court agreed with MLHI that the action for specific performance filed by respondent clearly falls
within the exclusive jurisdiction of the HLURB.12 As to petitioner, the court held that the complaint states no
cause of action, considering that respondent’s obligation had already been settled by MLHI. It, likewise,
ruled that the issues raised are intra-corporate between the corporation and member.13
On appeal, the CA reversed and set aside the trial court’s decision and remanded the case to the RTC for
further proceedings. Contrary to the RTC conclusion, the CA held that the controversy is an ordinary civil
action for damages which falls within the jurisdiction of regular courts.14 It explained that the case hinged
on petitioner’s refusal to confirm MLHI’s claim that the subject obligation had already been settled as early
as 1998 causing damage to respondent.15 Petitioner’s and MLHI’s motions for reconsideration had also
been denied.16
Aggrieved, petitioner comes before the Court based on the following grounds:
I.
THE COURT A QUO HAS DECIDED A QUESTION OF SUBSTANCE, NOT THERETOFORE DETERMINED BY THE
SUPREME COURT, OR HAS DECIDED IT IN A WAY NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT WHEN IT DECLARED THE INSTANT CASE AN ORDINARY ACTION FOR
DAMAGES INSTEAD OF AN INTRA-CORPORATE CONTROVERSY COGNIZABLE BY A SPECIAL COMMERCIAL
COURT.
II.
THE COURT A QUO HAS DECIDED THE INSTANT CASE IN A WAY NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT TOOK COGNIZANCE OF THE APPEAL WHILE
RAISING ONLY PURE QUESTIONS OF LAW.17
The petition is meritorious.
It is a settled rule that jurisdiction over the subject matter is determined by the allegations in the complaint.
It is not affected by the pleas or the theories set up by the defendant in an answer or a motion to dismiss.
Otherwise, jurisdiction would become dependent almost entirely upon the whims of the defendant.18 Also
illuminating is the Court’s pronouncement in Go v. Distinction Properties Development and Construction,
Inc.:19
Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and
determined by the allegations in the complaint which comprise a concise statement of the ultimate facts
constituting the plaintiff’s cause of action. The nature of an action, as well as which court or body has
jurisdiction over it, is determined based on the allegations contained in the complaint of the plaintiff,
irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein. The averments in the complaint and the character of the relief sought are the ones to be
consulted. Once vested by the allegations in the complaint, jurisdiction also remains vested irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. x x x20
Based on the allegations made by respondent in his complaint, does the controversy involve intra-
corporate issues as would fall within the jurisdiction of the RTC sitting as a special commercial court or an
ordinary action for damages within the jurisdiction of regular courts?
In determining whether a dispute constitutes an intra-corporate controversy, the Court uses two tests,
namely, the relationship test and the nature of the controversy test.21
An intra-corporate controversy is one which pertains to any of the following relationships: (1) between the
corporation, partnership or association and the public; (2) between the corporation, partnership or
association and the State insofar as its franchise, permit or license to operate is concerned; (3) between
the corporation, partnership or association and its stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates themselves.22 Thus, under the relationship test, the
existence of any of the above intra-corporate relations makes the case intra-corporate.23
Under the nature of the controversy test, "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."24 In other words, jurisdiction should be determined by considering both the relationship of the
parties as well as the nature of the question involved.25
Applying the two tests, we find and so hold that the case involves intra-corporate controversy. It obviously
arose from the intra-corporate relations between the parties, and the questions involved pertain to their
rights and obligations under the Corporation Code and matters relating to the regulation of the
corporation.26
Admittedly, petitioner is a condominium corporation duly organized and existing under Philippine laws,
charged with the management of the Medical Plaza Makati. Respondent, on the other hand, is the
registered owner of Unit No. 1201 and is thus a stockholder/member of the condominium corporation.
Clearly, there is an intra-corporate relationship between the corporation and a stockholder/member.
The nature of the action is determined by the body rather than the title of the complaint.1âwphi1 Though
denominated as an action for damages, an examination of the allegations made by respondent in his
complaint shows that the case principally dwells on the propriety of the assessment made by petitioner
against respondent as well as the validity of petitioner’s act in preventing respondent from participating in
the election of the corporation’s Board of Directors. Respondent contested the alleged unpaid dues and
assessments demanded by petitioner.
The issue is not novel. The nature of an action involving any dispute as to the validity of the assessment of
association dues has been settled by the Court in Chateau de Baie Condominium Corporation v.
Moreno.27 In that case, respondents therein filed a complaint for intra-corporate dispute against the
petitioner therein to question how it calculated the dues assessed against them, and to ask an accounting
of association dues. Petitioner, however, moved for the dismissal of the case on the ground of lack of
jurisdiction alleging that since the complaint was against the owner/developer of a condominium whose
condominium project was registered with and licensed by the HLURB, the latter has the exclusive
jurisdiction. In sustaining the denial of the motion to dismiss, the Court held that the dispute as to the
validity of the assessments is purely an intra-corporate matter between petitioner and respondent and is
thus within the exclusive jurisdiction of the RTC sitting as a special commercial court. More so in this case as
respondent repeatedly questioned his characterization as a delinquent member and, consequently,
petitioner’s decision to bar him from exercising his rights to vote and be voted for. These issues are clearly
corporate and the demand for damages is just incidental. Being corporate in nature, the issues should be
threshed out before the RTC sitting as a special commercial court. The issues on damages can still be
resolved in the same special commercial court just like a regular RTC which is still competent to tackle civil
law issues incidental to intra-corporate disputes filed before it.28
Moreover, Presidential Decree No. 902-A enumerates the cases over which the Securities and Exchange
Commission (SEC) exercises exclusive jurisdiction:
xxxx
b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members, or associates, respectively;
and between such corporation, partnership or association and the State insofar as it concerns
their individual franchise or right to exist as such entity; and
c) Controversies in the election or appointment of directors, trustees, officers, or managers of
such corporations, partnerships, or associations.29
To be sure, this action partakes of the nature of an intra-corporate controversy, the jurisdiction over which
pertains to the SEC. Pursuant to Section 5.2 of Republic Act No. 8799, otherwise known as the Securities
Regulation Code, the jurisdiction of the SEC over all cases enumerated under Section 5 of Presidential
Decree No. 902-A has been transferred to RTCs designated by this Court as Special Commercial
Courts.30 While the CA may be correct that the RTC has jurisdiction, the case should have been filed not
with the regular court but with the branch of the RTC designated as a special commercial court.
Considering that the RTC of Makati City, Branch 58 was not designated as a special commercial court, it
was not vested with jurisdiction over cases previously cognizable by the SEC.31 The CA, therefore, gravely
erred in remanding the case to the RTC for further proceedings.
Indeed, Republic Act (RA) No. 9904, or the Magna Carta for Homeowners and Homeowners’ Associations,
approved on January 7, 2010 and became effective on July 10, 2010, empowers the HLURB to hear and
decide inter-association and/or intra-association controversies or conflicts concerning homeowners’
associations. However, we cannot apply the same in the present case as it involves a controversy between
a condominium unit owner and a condominium corporation. While the term association as defined in the
law covers homeowners’ associations of other residential real property which is broad enough to cover a
condominium corporation, it does not seem to be the legislative intent. A thorough review of the
deliberations of the bicameral conference committee would show that the lawmakers did not intend to
extend the coverage of the law to such kind of association. We quote hereunder the pertinent portion of
the Bicameral Conference Committee’s deliberation, to wit:
THE CHAIRMAN (SEN. ZUBIRI). Let’s go back, Mr. Chair, very quickly on homeowners.
THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin lang, I think our views are similar, Your Honor, Senator
Zubiri, the entry of the condominium units might just complicate the whole matters. So we’d like to put it on
record that we’re very much concerned about the plight of the Condominium Unit Homeowners’
Association. But this could very well be addressed on a separate bill that I’m willing to co-sponsor with the
distinguished Senator Zubiri, to address in the Condominium Act of the Philippines, rather than address it
here because it might just create a red herring into the entire thing and it will just complicate matters, hindi
ba?
THE CHAIRMAN (SEN. ZUBIRI). I also agree with you although I sympathize with them---although we
sympathize with them and we feel that many times their rights have been also violated by abusive
condominium corporations. However, there are certain things that we have to reconcile. There are certain
issues that we have to reconcile with this version.
In the Condominium Code, for example, they just raised a very peculiar situation under the Condominium
Code --- Condominium Corporation Act. It’s five years the proxy, whereas here, it’s three years. So there
would already be violation or there will be already a problem with their version and our version. Sino ang
matutupad doon? Will it be our version or their version?
So I agree that has to be studied further. And because they have a law pertaining to the condominium
housing units, I personally feel that it would complicate matters if we include them. Although I agree that
they should be looked after and their problems be looked into.
Probably we can ask our staff, Your Honor, to come up already with the bill although we have no more
time. Hopefully we can tackle this again on the 15th Congress. But I agree with the sentiments and the
inputs of the Honorable Chair of the House panel.
May we ask our resource persons to also probably give comments?
Atty. Dayrit.
MR. DAYRIT.
Yes I agree with you. There are many, I think, practices in their provisions in the Condominium Law that may
be conflicting with this version of ours.
For instance, in the case of, let’s say, the condominium, the so-called common areas and/or maybe so
called open spaces that they may have, especially common areas, they are usually owned by the
condominium corporation. Unlike a subdivision where the open spaces and/or the common areas are not
necessarily owned by the association. Because sometimes --- generally these are donated to the
municipality or to the city. And it is only when the city or municipality gives the approval or the conformity
that this is donated to the homeowners’ association. But generally, under PD [Presidential Decree] 957, it’s
donated. In the Condominium Corporation, hindi. Lahat ng mga open spaces and common areas like
corridors, the function rooms and everything, are owned by the corporation. So that’s one main issue that
can be conflicting.
THE CHAIRMAN (SEN. ZUBIRI). I’ll just ask for a one-minute suspension so we can talk.
THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you want to put a catchall phrase like what we did in the
Senior Citizen’s Act. Something like, to the extent --- paano ba iyon? To the extent that it is practicable and
applicable, the rights and benefits of the homeowners, are hereby extended to the --- mayroon kaming
ginamit na phrase eh...to the extent that it be practicable and applicable to the unit homeoweners, is
hereby extended, something like that. It’s a catchall phrase. But then again, it might create a...
MR. JALANDONI. It will become complicated. There will be a lot of conflict of laws between the two laws.
THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At saka, I don’t know. I think the --- mayroon naman
silang protection sa ano eh, di ba? Buyers decree doon sa Condominium Act. I’m sure there are provisions
there eh. Huwag na lang, huwag na lang.
MR. JALANDONI. Mr. Chairman, I think it would be best if your previous comments that you’d be supporting
an amendment.1âwphi1 I think that would be --- Well, that would be the best course of action with all due
respect.
THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay. Thank you. So iyon na lang final proposal naming
‘yung catchall phrase, "With respect to the..."32
xxxx
THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their final decision on the definition of homeowners?
THE ACTING CHAIRMAN (REP. ZIALCITA).
We stick to the original, Mr. Chairman. We’ll just open up a whole can of worms and a whole new ball
game will come into play. Besides, I am not authorized, neither are you, by our counterparts to include the
condominium owners.
THE CHAIRMAN (SEN. ZUBIRI).
Basically that is correct. We are not authorized by the Senate nor – because we have discussed this
lengthily on the floor, actually, several months on the floor. And we don’t have the authority as well for
other Bicam members to add a provision to include a separate entity that has already their legal or their
established Republic Act tackling on that particular issue. But we just like to put on record, we sympathize
with the plight of our friends in the condominium associations and we will just guarantee them that we will
work on an amendment to the Condominium Corporation Code. So with that – we skipped, that is correct,
we have to go back to homeowners’ association definition, Your Honor, because we had skipped it
altogether. So just quickly going back to Page 7 because there are amendments to the definition of
homeowners. If it is alright with the House Panel, adopt the opening phrase of Subsection 7 of the Senate
version as opening phrase of Subsection 10 of the reconciled version.
x x x x33
To be sure, RA 4726 or the Condominium Act was enacted to specifically govern a condominium. Said law
sanctions the creation of the condominium corporation which is especially formed for the purpose of
holding title to the common area, in which the holders of separate interests shall automatically be
members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their
respective units.34 The rights and obligations of the condominium unit owners and the condominium
corporation are set forth in the above Act.
Clearly, condominium corporations are not covered by the amendment. Thus, the intra-corporate dispute
between petitioner and respondent is still within the jurisdiction of the RTC sitting as a special commercial
court and not the HLURB. The doctrine laid down by the Court in Chateau de Baie Condominium
Corporation v. Moreno35 which in turn cited Wack Wack Condominium Corporation, et al v. CA36 is still a
good law.
WHEREFORE, we hereby GRANT the petition and REVERSE the Court of Appeals Decision dated July 10,
2007 and Resolution dated January 25, 2008 in CA-G.R. CV No. 86614. The Complaint before the Regional
Trial Court of Makati City, Branch 58, which is not a special commercial court, docketed as Civil Case No.
03-1018 is ordered DISMISSED for lack of jurisdiction. Let the case be REMANDED to the Executive Judge of
the Regional Trial Court of Makati City for re-raffle purposes among the designated special commercial
courts.
SO ORDERED.
G.R. No. 215281
ROLANDO DE ROCA, Petitioner
vs.
EDUARDO C. DABUY AN, JENNIFER A. BRANZUELA, JENNYL YN A. RI CARTE, and HERMINIGILDO F. SABANATE,
Respondents
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 seeks to set aside the June 19, 2014 Decision2 and October 28, 2014
Resolution3 of the Court of Appeals (CA) dismissing the Petition for Certiorari4 in CA-G.R. SP No. 127974 and
denying herein petitioner's Motion for Reconsideration,5 respectively.
Factual Antecedents
As found by the CA, the facts are as follows:
In 2012, private respondents filed a complaint6 for illegal dismissal against "RAF Mansion Hotel Old
Management and New Management and Victoriano Ewayan." Later, private respondents amended the
complaint and included petitioner Rolando De Roca as [co]-respondent. Summons was sent through
registered mail to petitioner but it was returned.
Thereafter, a conference was set but only complainants attended. Thus, another summons was issued and
personally served to petitioner by the bailiff of the NLRC as evidenced by the latter’s return dated 14
March 2012. Despite service of summons, petitioner did not attend the subsequent hearings prompting the
labor arbiter to direct private respondents to submit their position paper.
On 18 April 2012, private respondents submitted their position paper. On the same day, petitioner filed his
motion to dismiss7 on the ground of lack of jurisdiction. He alleged that[,] while he [was] the owner of RA.F
Mru1sion Hotel building, the same [was being] leased by Victoriano Ewayan., the owner of Oceanics Travel
and Tour Agency. Petitioner claims that Ewayan was the employer of private respondents, Consequently,
he asserted that there was no employer-employee relationship between him and private respondents and
the labor arbiter had no jurisdiction.
On 29 June 2012. the labor arbiter rendered a decision directing petitioner, among others, to pay
backwages and other monetary award to private respondents. In said decision, the labor arbiter also
denied the motion to dismiss for having been filed beyond the reglementary period. Petitioner received a
copy of the decision on 3 August 2012.
On 4 September 2012, petitioner filed a petition8 for annulment of judgment on the ground of lack of
jurisdiction before the NLRC. However, the petition was dismissed because it was also filed beyond the
period allowed by the 2011 NLRC Rules of Procedure. Petitioner sought reconsideration but the same was
also denied.9
Ruling of the Labor Arbiter
In the above-mentioned June 29, 2012 Decision10 in NLRC-NCR-Case No. 02-02490-12, Labor Arbiter J.
Potenciano F. Napenas, Jr. held, among others, that -
x x x [R]espondent Rolando De Roca surprisingly filed a "Motion to Dismiss" on the ground of lack of
jurisdiction. In substance, the motion is anchored on the alleged lack of employer-employee relationship
between the parties thereto. In support thereof: respondent De Roca further alleged that it was rather the
Oceanic Travel and Tour Agency and respondent Ewayan in whose favor respondent De Roca leased the
subject Hotel, rule the true employers of the complainants as evidenced by the Contract of Lease of
Buildings (Annex "1" respondent’s Motion to Dismiss).
Subsequent thereof [sic], complainants filed an Opposition with Motion to Implead (to Respondent’s
Motion to Dismiss), seeking, among others, that the corporation "Oceanic Travel and Tour Agency" be
impleaded as additional respondent.
xxxx
Anent the Motion to Dismiss, Rule V, Sections 6 and 7 of the Revised 2011 NLRC Rules of Procedure explicitly
provide:
‘SECTION 6. MOTION TO DISMISS. - Before the date set for the mandatory conciliation and mediation
conference, the respondent may file a motion to dismiss on grounds provided under Section 5, paragraph
(a) hereof Such motion shall be immediately resolve[ d] by the Labor Arbiter through a written order. An
order denying the motion to dismiss, or suspending its resolution until the final determination of the case, is
not appealable.
SECTION 7. EFFECT OF FAILURE TO FILE. - No motion to dismiss shall be allowed or entertained after the lapse
of the period provided in Section 6 hereof.’
Clearly, respondent De Roca’s Motion to Dismiss, having been filed long after the date set for the
mandatory conference, should be dismissed on such ground being a prohibited pleading.
Coming now on [sic] the meat of the controversy, since respondents obviously failed to controvert the
allegations by the complainants in their Position Papers accompanied with supporting evidence, We have
no recourse but to accord them credence for being uncontradicted.
xxxx
Obviously, respondents had failed to discharge such burden.
WHEREFORE, premises considered, judgement is hereby rendered finding all the respondents liable for
illegal dismissal.
Accordingly, all of them are hereby ordered to pay complainants their full backwages and other
monetary claims computed from date of their dismissal up to the promulgation of this decision plus 10% of
the total monetary award as attorney’s fees.
xxxx
Lastly, the Motion to Dismiss is denied for being filed beyond the period allowed by the rules, thus, a
prohibited pleading. Also, the Motion to implead Oceanic Travel and Tours Agency as additional
respondent is denied for the same reason.
SO ORDERED.11
Ruling of the National Labor Relations Commission
Instead of filing an appeal before the National Labor Relations Commission (NLRC), petitioner instituted the
petition for annulment of judgment referred to above, which the NLRC dismissed in its September 28, 2012
Resolution12 for being tardy, as it was filed beyond the 10-day reglementary period prescribed under
Section 3, Rule XII of the 2011 NLRC Rules of Procedure.
Ruling of the Court of Appeals
Petitioner filed a Petition for Certiorari before the CA, where he argued, among others, that he was never
an employer of the respondents, as he was merely the owner of the premises which were leased out to
and occupied by respondents' true employer, Victoriano Ewayan (Ewayan), who owned Oceanic Travel
and Tours Agency which operated the RAF Mansion Hotel where respondents were employed as cook,
waitress, and housekeeper; and that his inclusion in the labor case was borne of malice which is shown by
the fact that when the labor complaint was filed, he was not originally impleaded as a respondent, and
was made so only after respondents discovered that their employer had already absconded - in which
case he was impleaded under the pretext that he constituted the "new management of RAF Mansion
Hotel".
On June 19, 2014, the CA rendered the assailed Decision dismissing the petition, decreeing thus:
At the outset, We note that the issue raised by petitioner is imprecise because the NLRC did not rule on the
propriety of finding petitioner liable to private respondents. It is obvious from the assailed resolution that the
petition for annulment of judgment was denied because it was filed after the lapse of the period
prescribed under the 2011 NLRC Rules of Procedure and this is the issue that this Court will resolve.
xxxx
Record shows that petitioner received the decision of the labor arbiter on 3 August 2012 but he filed his
petition on 4 September 2012 or thirty-one days after such receipt. In this regard, the NLRC did not commit
any error in denying the petition much more grave abuse of discretion. The rule is clear and the NLRC may
not ‘arbitrarily disregard specific provisions of the Rules which are precisely intended to assist the parties in
obtaining just, expeditious and inexpensive settlement of labor disputes.’
Similarly, the labor arbiter did not commit any grave abuse of discretion because he just observed the
NLRC rules when he denied petitioner's motion to dismiss. x x x
In addition, We also cannot attribute grave abuse of discretion in the labor arbiter’s resolution of the
motion to dismiss in the decision itself: While this may seem peculiar, it must be emphasized that the motion
to dismiss was filed at about the period when the case was about to be submitted for decision. x xx
In the case at bar, the inclusion of the denial of the motion to dismiss in the decision is not without
justification. Petitioner not only failed to submit the motion to dismiss on time but also forfeited the right to
submit his position paper because he did not attend the conference and subsequent hearings. Even if the
labor arbiter denied the motion to dismiss in a separate order, petitioner would still be precluded from
submitting a position paper where he can buttress his claim of lack of jurisdiction. The labor arbiter,
therefore, could not be said to have committed grave abuse of discretion in denying the motion to dismiss
and in incorporating its order in the decision.
xxxx
As regards the claim of petitioner on the merits of his ground, We cannot consider his arguments and
assume that his allegation of lack of employer-employment [sic] relationship between him and private
respondents is true. First, he did not present any evidence to support his claim because he lost the
opportunity to submit a position paper. Thus, his allegations will remain mere allegations.
Second, it would transgress fairness if his allegations in this petition should be given any attention because
the private respondents never had the [opportunity to] present evidence to meet his claims. Private
respondents' arguments were correctly centered on the provisions of the 2011 NLRC Rules of Procedure
because they were the bases for the denial of petitioner's motion to dismiss and petition for annulment of
judgment.
Furthermore, petitioner did not submit the position paper of private respondents where We can find their
averments on the employment relationship between them and petitioner or lack thereof. This omission not
only rendered useless the evaluation of the asseverations in the petition but also gave Us another reason to
dismiss this petition under Section 3, Rule 46 of the Rules of Court. Petitioner is well-aware that this pleading
is material to the resolution of his petition and in neglecting to attach the same to his petition, the same
would warrant the dismissal of this petition.
Lastly, the ultimate aim of petitioner is for Us to review the findings of the labor arbiter on the employment
relationship between him and the private respondents. 'The basic issue of whether or not the NLRC has
jurisdiction over the case resolves itself into the question of whether an employer-employee relationship
existed' between them. 111us, it is an issue which necessitates presentation of evidence on the part of
petitioner and evaluation of the pieces of evidence of each party. Again, this is not proper in a petition
for certiorari.
WHEREEFORE, the petition is DISMISSED.
SO ORDERED.13
Petitioner filed a motion for reconsideration, but the CA denied the same via its October 28, 2014
Resolution. Hence, the instant Petition, which includes a prayer for injunctive relief against execution of the
judgment pending appeal.
On December 10, 2014 and January 12, 2015, the Court issued Resolutions14 respectively granting
temporary injunctive relief and issuing in favor of petitioner a Temporary Restraining Order15 upon filing of a
cash or surety bond.
In a November 9, 2015 Resolution,16 the Court resolved to give due course to the Petition.
Issue
Petitioner frames the issue in this Petition thus -
Petitioner submits before this Honorable Court that the Court of Appeals erred in affirming the findings of
both the labor arbiter and the NLRC and in concluding that they did not abuse their discretion and acted
beyond their jurisdiction when they asserted their authorities and found petitioner DE ROCA solidarily liable
with EWAYAN/ OCEANIC TRAVEL AND TOUR AGENCY to private respondents, despite the patent lack of
employer-employee relationship between the petitioner and private respondents.17
Petitioner’s Arguments
In his Petition and Reply18 seeking reversal of the assailed CA dispositions as well as the nullification of the
decisions of the labor tribunals, petitioner argues that the Labor Arbiter's decision is null and void as there
was no determination of facts and evidence relative to his supposed liability to respondents; that he was
not at any time the respondents' employer, but merely the owner-lessor of the premises where Ewayan and
his Oceanic Travel and Tours Agency operated the RAF Mansion Hotel where respondents were employed
as hotel staff; that the labor tribunals did not acquire jurisdiction over him since the element of employer-
employee relationship was lacking; that he was impleaded in the case only because respondents could
no longer trace the whereabouts of their true employer, Ewayan, who appears to have absconded - for
which reason respondents aim to unduly recover their claims from him; that the labor tribunals and the CA
strictly applied the labor procedural laws and rules, when the rule in labor cases is that technical rules of
procedure are not binding and must yield to the merits of the case and the interests of justice and due
process; and that since the labor tribunals did not have jurisdiction over him as he was not at any given
period the respondents' employer, their decisions are a nullity.
Respondents’ Arguments
In their Comment19 to the Petition, respondents argue that the Petition should be denied for lack of merit;
that the CA's dispositions are just and correct; that the issue in this case does not involve the merits of the
labor arbiter's decision, but merely the propriety of the NLRC’s dismissal of petitioner's petition for
annulment of judgment; that nonetheless, they have satisfactorily proved below that petitioner is their
employer, by the evidence they submitted - consisting of identification cards (IDs) issued to them and
signed by Ewayan, and pay envelopes and advise slips showing their salaries as the basis for their claims;
that since petitioner owned the building which was a hotel, it follows that he is their employer; that since he
is their employer, the labor arbiter acquired jurisdiction over him; and that since the decision of the labor
arbiter on the merits became final and executory for petitioner's failure to appeal the same, the same may
no longer be impugned.
Our Ruling
The Court grants the Petition.
All throughout the proceedings, petitioner has insisted that he was not the employer of respondents; that
he did not hire the respondents, nor pay their salaries, nor exercise supervision or control over them, nor did
he have the power to terminate their services. In support of his claim, he attached copies of a lease
agreement - a Contract of Lease of a Building20 - executed by him and Oceanic Tours and Travel Agency
(Oceanic) represented by Ewayan through his attorney-in- fact Marilou Buenafe. The agreement would
show that petitioner was the owner of a building called the RAF Mansion Hotel in Roxas Boulevard,
Baclaran, Parañaque City; that on September 25, 2007, Oceanic agreed to lease the entire premises of
RAF Mansion Hotel, including the elevator, water pump, airconditioning units, and existing furnishings and
all items found in the hotel and included in the inventory list attached to the lease agreement, except for
certain portions of the building where petitioner conducted his personal business and which were leased
out to other occupants, including a bank; that the lease would be for a period of five years, or from
October 15, 2007 up to October 15, 2012; that the monthly rental would be ₱450,000.00; and that all
expenses, utilities, maintenance, and taxes - except real property truces - incurred and due on the leased
building would be for the lessee's account.
Petitioner likewise attached to the instant Petition copies of: 1) a January 23, 2012 letter21 of demand to
pay and vacate sent to Ewayan, directing the latter's attention to previous demand letters sent to him and
making a final demand to pay rentals in arrears; and 2) a written waiver and acknowledgment22 executed
by respondents - except respondent Herminigildo Sabanate - and other Oceanic employees to the effect
that petitioner should not be held liable as owner of the premises for the "problems" caused by Ewayan.
Thus, it would appear from the fact on record and the evidence that petitioner's building was an existing
hotel called the "RAF Mansion Hotel", which Oceanic agreed to continue to operate under the same
name. There is no connection between petitioner and Oceanic other than through the lease agreement
executed by them; they are not partners in the operation of RAF Mansion Hotel. It just so happens that without regard to technicalities of law or procedure.27 Petitioner's motion to dismiss, though belated, should
Oceanic decided to continue operating the hotel using the original name – "RAF Mansion Hotel". have been given due attention.
The only claim respondents have in resorting to implead petitioner as a corespondent in the labor case is In arriving at the foregoing conclusions, the Court is guided by the allegations and arguments of the parties
the fact that he is the owner of the entire building called "RAF Mansion Hotel" which happens to be the on the existence of an employment relation between them, which may be found in their pleadings - even
very same name of the hotel which Ewayan and Oceanic continued to adopt, for reasons not evident in at this stage. In particular, respondents squarely addressed the issue in their Comment to the herein
the pleadings. It must be noted as well that when they originally filed the labor case, respondents did not Petition. On the other hand, petitioner has consistently raised the issue and argued against it all
include petitioner as respondent therein. It was only later on that they moved to amend their complaint, throughout. Since the issue was raised in the Petition and adequately met by the respondents in their
impleading petitioner and thus amending the title of the case to "x xx, Complainants, versus RAF Comment thereto, the Court is not precluded from ruling thereon. There is thus no need to remand the
Mansion Hotel Old Management and New Management/Victoriano Ewayan and Rolando De Roca, case to the Labor Arbiter for further proceedings. Finally, this resolves respondents' claim that the issue here
Respondents." involves only the propriety of the NLRC's dismissal of petitioner’s petition for annulment of judgment; having
As correctly observed by petitioner, such belated attempt to implead him in the labor case must be seen argued against petitioner's claim of absence of an employment relation between them - and having
as an afte1thought. Moreover, the fact that respondents recognize petitioner as embodying the "new presented documentary evidence below to prove their case against petitioner - the issue relative to
management" of RAF Mansion Hotel betrays an admission on their part that he had no hand in the "old existence or non-existence of an employment relation is ripe for adjudication before this Court.
management" of the hotel under Ewayan, during which they were hired and maintained as hotel With the view taken of the case, it necessarily follows that the decision of the Labor Arbiter must be set
employees - meaning that petitioner was never considered as Ewayan's partner and co-employer; aside for being grossly erroneous and unjust.1âwphi1 At worst, it is null and void, and, as petitioner correctly
respondents merely viewing petitioner as the subsequent manager taking over from Ewayan, which put it, it is a "lawless thing, which can be treated act an outlaw and slain at sight, or ignored wherever it
bolsters petitioner’s allegation that Ewayan had absconded and left respondents without recourse other exhibits its head."28 Being of such nature, it could not have acquired finality, contrary to what respondents
than to implead him as the "new management" upon whom the obligation to settle the claims believe - as it "creates no rights and imposes no duties. Any act performed pursuant to it and any claim
abandoned by Ewayan now fell. emanating from it have no legal effect."29
"Contracts take effect only between the parties, their assigns and heirs, except in case where the lights WHEREFORE, the Petition is GRANTED. The June 19, 2014 Decision and October 28, 2014 Resolution of the
and obligations arising from the contract are not transmissible by their nature, or by stipulation or by Court of Appeals in CA-G.R. SP No. 127974 are REVERSED and SETASIDE. NLRC-NCR-Case No. 02-02490-12 is
provision of law."23 The contract of employment between respondents, on the one hand, and Oceanic ordered DISMISSED, but only as against petitioner Rolando De Roca.
and Ewayan on the other, is effective only between them; it does not extend to petitioner, who is not a SO ORDERED.
party thereto. His only role is as lessor of the premises which Oceanic leased to operate as a hotel; he
cannot be deemed as respondent's employer - not even under the pretext that he took over as the "new
management" of the hotel operated by Oceanic. There simply is no truth to such claim.
Thus, to allow respondents to recover their monetary claims from petitioner would necessarily result in their
unjust enrichment.
There is unjust enrichment ‘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.’ The principle of unjust enrichment requires two conditions: (1) that a person is benefited
without a valid ba5is or justification, and (2) that such benefit is derived at the expense of another.
The main objective of the principle against unjust enrichment is to prevent one from enriching himself at
the expense of another without just cause or consideration. x x x24
"In rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm
that on the balance, technicalities take a backseat against substantive rights, and not the other way
around."25 In short, substantive law outweighs procedural technicalities as in this case.
Indeed, where as here, there is a strong showing that grave miscarriage of justice would result from the
strict application of the [r]ules, we will not hesitate to relax the same in the interest of substantial justice. It
bears stressing that the rules of procedure are merely tools designed to facilitate the attainment of justice.
They were conceived and promulgated to effectively aid the court in the dispensation of justice. Courts
are not slaves to or robots of technical rules, shorn to be, conscientiously guided by the norm that on the
balance, technicalities take a backseat against substantive rights, and not the other way around. Thus, if
the application of the rules would tend to frustrate rather than promote justice. it is always within our power
to suspend the rules, or except a particular case from its operation.26
Taking this to mind, the labor tribunals and the CA should have considered petitioner’s repeated pleas to
scrutinize the facts and particularly the lease agreement executed by him and Oceanic, which would
naturally exculpate him from liability as this would prove the absence of an employment relation between
him and respondents. Instead, the case was determined on pure technicality which in labor disputes, is not
necessarily sanctioned –given that proceedings before the Labor Arbiter and the NLRC are non-litigious in
nature where they are encouraged to avail of all reasonable means to ascertain the facts of the case
 G.R. No. 226002, June 25, 2018
LINO A. FERNANDEZ, JR., Petitioner, v. MANILA ELECTRIC COMPANY (MERALCO), Respondent.
DECISION
PERALTA, J.:
This resolves the petition for review on certiorari assailing the December 11, 2015 Decision1 and July 25, 2016
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 138212, which affirmed the Resolutions dated
August 29, 20143 and October 20, 20144 of the National Labor Relations Commission (NLRC) denying the
Verified Petition filed by petitioner Lino A. Fernandez, Jr. (Fernandez) under Rule XII (Extraordinary
Remedies) of the 2011 NLRC Rules of Procedure, as amended (NLRC Rules).
Petitioner Fernandez was an employee of respondent Manila Electric Company (MERALCO) from October
3, 1978 until his termination on September 14, 2000 for allegedly participating in an illegal strike.5 As a result,
he filed a case for illegal dismissal. Contrary to the conclusion reached by the Labor Arbiter (LA) and the
NLRC, the CA, in CA-G.R. SP No. 95923, declared that Fernandez was illegally dismissed. The dispositive
portion of its January 30, 2007 Decision6 reads:
WHEREFORE, premises considered, the assailed Decision and Resolution of the National Labor Relations
Commission are, hereby, REVERSED and SET ASIDE for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction and a new one entered finding petitioner Lino A. Fernandez to
have been illegally dismissed.
Petitioner Lino Fernandez is found to have been illegally dismissed. Private respondent Meralco is, hereby,
ordered to REINSTATE Lino Fernandez to his former position, without loss of seniority rights and other
privileges appurtenant thereto, with full backwages from the time of his dismissal until he is actually
reinstated, or to pay him separation pay if reinstatement is no longer feasible pursuant to existing
jurisprudence on the matter. No costs.
SO ORDERED.7
The CA ruling was sustained in Our Resolution8 dated January 16, 2008. With the denial of the motion for
reconsideration, the judgment became final and executory on May 26, 2008.9
During the execution proceedings, both parties filed several motions regarding the inclusions to, and
computation of, the monetary awards due to Fernandez. On the bases of which, LA Marie Josephine C.
Suarez summarized the issues for resolution as follows:
1. Whether [Fernandez] is entitled to additional backwages despite receipt of
P3,307,362.05 monetary award covering the period from September 14, 2000 up to June
26, 2008;
2. Whether [Fernandez] is entitled to [P1,950,525.53] additional backwages consisting,
among others, of CBA salary increases, covering the period from September 14, 2000 to
June 26, 2008, and whether said computation by Felix Dalisay of the Computation Unit
and adopted by LA Borbolla is correct;
3. Whether [Fernandez] is entitled to additional backwages starting January 31, 2009 when
[MERALCO] [in its Motion to Declare Full Satisfaction of Fernandez's Monetary Awards
Granted by the Court of Appeals and Supreme Court dated January 13, 2009]
manifested that it was exercising its option to pay [Fernandez's] separation pay instead
of reinstatement; and
4. Whether [Fernandez] should be reinstated.10
In the Order11 dated June 27, 2014, LA Suarez disposed the motions. Thus:
[MERALCO's] Motion to Declare Full Satisfaction of [Fernandez's] Monetary Awards Granted in the.
Decision. of the Court of Appeals and the Supreme Court dated January 13, 2009 is DENIED for lack of
merit.
[Fernandez's]: [1] Urgent Motion to Require [MERALCO] to Reinstate [Fernandez] dated December 16,
2008, [2] Motion for Recomputation of Backwages from September 14, 2000 to June 26, 2008 and
Computation of 14th & 15th Month Pay and Attorney's Fees dated October 17, 2012, and [3] Manifestation
and Urgent Motion dated October 17, 2012 praying that he be allowed to collect only P490,104;10 out of
the P2,123,277.80 garnished money per January 25, 2011 Alias Writ of Execution are DENIED for lack of
merit.
As to [Fernandez's] Urgent Motion to Release the Money to [Fernandez] dated April 4, 2011 in the sum of
P2,125,277.00 representing P1,614,626.40 separation pay from October 3, 1978 to January 31, 2009,
P490,104.10 accrued salaries and benefits from June 27, 2008 to January 31, 2009 and P20,547.30 execution
fee, BANCO DE ORO is ordered to release the garnished P2,125,277.00 to the NLRC Cashier, thru Sheriff
Manolito Manuel.
[Fernandez] is declared legally separated from employment effective January 31, 2009.
[MERALCO] is further ordered to pay [Fernandez] the sum of PESOS: ONE MILLION NINE HUNDRED FIFTY
THOUSAND FIVE HUNDRED TWENTY-FIVE & 53/100 [P1,950,525.53] representing additional backwages and
benefits pursuant to the CBA covering the period from September 14, 2000 to June 26, 2008, as computed
by the Computation Unit.
All other claims of the parties are DENIED for lack of merit.
SO ORDERED.12
On July 4, 2014, Fernandez received a copy of the June 27, 2014 Order.13 Prior to the expiration of the 10-
day reglementary period, he filed a Notice of Appeal and Memorandum on Appeal14 on July 11, 2014. The
appeal was limited to the following:
2.3.a. Findings of the Labor Arbiter that [Fernandez] was deemed separated from employment effective
[January 31, 2009] when [MERALCO] manifested in its "Motion to Declare Full Satisfaction of [Fernandez's]
Monetary Awards Granted in the Decision of the Court of Appeals and Supreme Court" dated January 13,
2009 that they were exercising their option to pay [Fernandez] separation pay in lieu of reinstatement.
2.3.b. Findings of the Labor Arbiter that [Fernandez] was not entitled to any retirement pay/benefits.
2.3.c. Findings of the Labor Arbiter that [Fernandez] was not entitled to 14th month pay, 15th month pay, rice
and clothing allowance pursuant to the CBA and attorney's fee.15
Realizing the procedural defect, Fernandez filed, on July 23, 2014, a Motion to Treat Remedy Previously
Filed As Verified Petition With Motion To Admit Original Copy Of The Assailed Order As Part
Thereof,16 alleging among others:
3. However, he entitled and treated the same as an Appeal (i.e., Notice of Appeal and Memorandum of
Appeal) instead of a Verified Petition.
4. Notably, his remedy was properly verified and certified (against non-forum shopping) and the only
technical issue/discrepancy therein is that it was entitled/treated as "Notice of Appeal and Memorandum
of Appeal" instead of a "Verified Petition."17
Despite his submissions, the appeal and motion were merely "NOTED WITHOUT ACTION" in the July 30, 2014
Order of LA Suarez, who opined that these are prohibited pleadings under Section 5 (i) and (j), Rule V of
the NLRC Rules.18 After Fernandez received a copy of the Order on August 14, 2014, he filed a Verified
Petition19 on August 26, 2014.
On August 29, 2014, the NLRC Fifth Division resolved to deny Fernandez's Verified Petition.20 His motion for
reconsideration was denied on October 20, 2014.21
Meantime, MERALCO also filed a Verified Petition22 to assail the June 27, 2014 Order. On July 31, 2014, it
was dismissed by the NLRC Fifth Division for insufficiency in form and substance.23 A motion for
reconsideration was filed.24 On October 31, 2014, the Verified Petition was reinstated, but was denied for
lack of merit.25
Fernandez elevated the case to the CA via a petition for certiorari,26 which was denied for lack of merit. His
motion for reconsideration27 suffered the same fate; hence, this petition.
We grant.
The sole issue in Velasco v. Matsushita Electric Philippines Corp.28 was whether the NLRC, in noting without
action petitioner's Notice of Appeal from the Order issued by the LA during the execution proceedings,
committed grave abuse of discretion amounting to lack or excess of jurisdiction. There, Velasco filed a
Notice of Appeal before the NLRC after the LA denied her Manifestation and Motion claiming that
Matsushita had not complied with the judgment in her favor. In ruling for Velasco, this Court held:
Petitioner is correct in asserting that she is not bereft of reliefs from adverse orders issued by the Labor
Arbiter in connection with the execution of the judgment in her favor. However, she failed to avail of the
correct remedy.
Rule 5, Section 5 of the 2011 Rules of Procedure of the National Labor Relations Commission explicitly
provides that an appeal from an order issued by a Labor Arbiter in the course of execution proceedings is
a prohibited pleading.
SECTION 5. PROHIBITED PLEADINGS AND MOTIONS. - The following pleadings and motions shall not be
allowed and acted upon nor elevated to the Commission:
xxx xxx xxx
i) Appeal from orders issued by the Labor Arbiter in the course of execution proceedings.
This is affirmed by Rule XII, Section 15 of the same Rules:
SECTION 15. NO APPEAL FROM THE ORDER OR RESOLUTION OF THE LABOR ARBITER ARISING FROM
EXECUTION PROCEEDINGS OR OTHER INCIDENTS. - Except by way of a petition filed in accordance with this
Rule, no appeal from the order or resolution issued by the Labor Arbiter during the execution proceedings
or in relation to incidents other than a decision or disposition of the case on the merits, shall be allowed or
acted upon by the Commission.
Rule 12, Section 1 provides that, instead of an appeal, the proper remedy is a verified petition to annul or
modify the assailed order or resolution:
SECTION 1. VERIFIED PETITION. - A party aggrieved by any order or resolution of the Labor Arbiter including
those issued during execution proceedings may file a verified petition to annul or modify such order or
resolution. The petition may be accompanied by an application for the issuance of a temporary
restraining order and/or writ of preliminary or permanent injunction to enjoin the Labor Arbiter, or any
person acting under his/her authority, to desist from enforcing said resolution or order.29
Nevertheless, while it was an error for petitioner to seek relief from the National Labor Relations Commission
through an appeal, it is in the better interest of justice that petitioner be afforded the opportunity to avail
herself of the reliefs that this Court itself, in its November 23, 2009 ruling, found to be due to her.
It is a basic principle thatthe National Labor Relations Commission is "not bound by strict rules of evidence
and of procedure." Between two modes of action - first, one that entails a liberal application of rules but
affords full relief to an illegally dismissed employee; and second, one that entails the strict application of
procedural rules but the possible loss of reliefs properly due to an illegally dismissed employee - the second
must be preferred. Thus, it is more appropriate for the National Labor Relations Commission to have instead
considered the appeal filed before it as a petition to modify or annul.
Similarly, in the present case, the NLRC Rules of Procedure must be liberally applied so as to prevent
injustice and grave or irreparable damage or injury to an illegally dismissed employee. The matter should
be remanded to the NLRC for detennination of the inclusions to, and the computation of, the monetary
awards due to Fernandez.
Without prejudice to the factual findings of the NLRC and the power of review of the CA, We take note of
the following for guidance:
Under the law and prevailing jurisprudence, an illegally dismissed employee is entitled to reinstatement as
a matter of right.30 The award of separation pay is a mere exception to the rule.31 It is made an alternative
relief in lieu of reinstatement in certain circumstances, like: (a) when reinstatement can no longer be
effected in view of the passage of a long period of time or because of the realities of the situation; (b)
reinstatement is inimical to the employer's interest; (c) reinstatement is no longer feasible; (d) reinstatement
does not serve the best interests of the parties involved; (e) the employer is prejudiced by the workers'
continued employment; (f) facts that make execution unjust or inequitable have supervened; or (g)
strained relations between the employer and employee.32
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand, such
payment liberates the employee from what could be a highly oppressive work environment. On the other
hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ a
worker it could no longer trust.33
Nonetheless, the doctrine of strained relations shcmld not be used recklessly or applied loosely nor be
based on impression alone.34 It cannot be applied indiscriminately since every labor dispute almost
invariably results in "strained relations;" otherwise, reinstatement can never be possible simply because
some hostility is engendered between the parties as a result of their disagreement.35 Strained relations must
be demonstrated as a fact.36 It must be adequately supported by substantial evidence showing that the
relationship between the employer and the employee is indeed strained as a necessary consequence of
the judicial controversy.37
As we have held, "[s]trained relations must be demonstrated as a fact. The doctrine of strained relations
should not be used recklessly or applied loosely nor be based on impression alone" so as to deprive an
illegally dismissed employee of his means of livelihood and deny him reinstatement. Since the application
of this doctrine will result in the deprivation of employment despite the absence of just cause, the
implementation of the doctrine of strained relationship must be supplemented by the rule that the
existence of a strained relationship is for the employer to clearly establish and prove in the manner it is
called upon to prove the existence of a just cause; the degree of hostility attendantto a litigation is not, by
itself, sufficient proof of the existence of strained relations that would rule out the possibility of
reinstatement.38
Reinstatement cannot be barred especially when the employee has not indicated an aversion to returning
to work, or does not occupy a position of trust and confidence in, or has no say in the operation of the
employer's business.39
Here, Fernandez's intent and willingness to be reinstated to his former position is evident as early as July 10,
2008 when he filed his Comment with Motion for Re-computation of Monetary Award.40 He reiterated this
on December 17, 2008 in his Urgent Motion41 to require MERALCO to reinstate him and on January 21, 2009
in his Comment/Opposition42 to MERALCO's motion to declare full satisfaction of his monetary awards.
On January 13, 2009, or about three months before Fernandez reached the retirement age of 60 years old
in April 2009, MERALCO filed a Motion to Declare Full Satisfaction of Complainant's.Monetary Awards
Granted in the Decision of the Court of Appeals and the Supreme Court,43 stating:
xxx [The] decision of the Court of Appeals as affirmed by the Supreme Court gave [MERALCO] the options
to reinstate [Fernandez] or pay his separation pay if reinstatement is no longer feasible. Reinstatement of
[Fernandez] to his former position is not therefore mandatory.
 Finally, as to Fernandez's alleged entitlement to longevity pay, 14th month and 15th month pay, and other
This being the case, [MERALCO] [manifests] that [it is] exercising [its] option to compensate [Fernandez] his benefits and allowances, the same are subject to evidentiary support that must be ascertained and
separation pay instead of reinstating him to his fanner position. The filing of the above-entitled case, which confirmed based on the applicable CBA/s, employment contract, and company policies and practice.
dragged for long period of time severed the employee-employer relationship between [Fernandez] and
[MERALCO]. Reinstatement therefore is no longer feasible.44 WHEREFORE, the petition is GRANTED. The December 11, 2015 Decision and July 25, 2016 Resolution of the
MERALCO conveniently claimed that the filing of the case, which had dragged for a long period of time, Court of Appeals in CA-G.R. SP No. 138212, which affirmed the Resolutions dated August 29, 2014 and
severed the employee-employer relationship; hence, Fernandez's reinstatement was no longer feasible. October 20, 2014 of the National Labor Relations Commission, are REVERSED AND SET ASIDE. The appeal
Later, it echoed the reasoning of LA Suarez by contending that his alleged participation in the illegal strike filed by petitioner Lino A. Fernandez, Jr. before the NLRC is considered as a Verified Petition assailing the
definitely tainted the relations of the parties.45 June 27, 2014 Order of Labor Arbiter Marie Josephine C. Suarez. The case is REMANDED to the NLRC for it to
resolve the petition with reasonable dispatch.
The bare allegations of MERALCO, which later on became the basis of a mere presumption on the part of
LA Suarez, appear to be without any factual basis. To stress, strained relationship may be invoked only SO ORDERED.
against employees whose positions demand trust and confidence, or whose differences with their
employer are of such nature or degree as to preclude reinstatement.46 Here, the confidential relationship
between Fernandez, as a supervisory employee, and MERALCO has not been established. For lack of
evidence on record, it appears that his designation as a Leadman47 was not a sensitive position as would
require complete trust and confidence, and where personal ill will would foreclose his reinstatement.

Backwages shall include the whole amount of salaries, plus all other benefits and bonuses, and general
increases, to which Fernandez would have been normally entitled had he not been illegally
dismissed.48 Unless there is/are valid ground/s for the payment of separation pay in lieu of reinstatement,
Fernandez's backwages should be computed from the date when he was illegally dismissed on September
14, 2000, until his retirement in April 2009.49 It shall be subject to legal interest of 12% per annum from
September 14, 2000 until June 30, 2013, and then to legal interest of 6% interest per annum from July 1, 2013
until full satisfaction.50

In addition, subject to proof of entitlement,51 Fernandez must receive the retirement benefits he should
have received if he was not illegally dismissed.52 Even if he receives a separation pay in lieu of
reinstatement, he is not precluded to obtain retirement benefits because both are not mutually exclusive:53
Retirement benefits are a form of reward for an employee's loyalty and service to an employer and are
earned under existing laws, CBAs, employment contracts and company policies. On the other hand,
separation pay is that amount which an employee receives at the time of his severance from
employment, designed to provide the employee with the wherewithal during the period that he is looking
for another employment and is recoverable only in instances enumerated under Articles 283 and 284 [now
298 and 299] of the Labor Code or in illegal dismissal cases when reinstatement is not feasible.54
On the issue of attorney's fees, We agree with LA Suarez that Fernandez is not entitled thereto. It is an
elementary principle of procedure that the resolution of the court in a given issue, as embodied in the
dispositive part of a decision or order, is the controlling factor as to settlement of rights of the parties.55 The
dispositive portion or the fallo is the decisive resolution and is the subject of execution.56 Therefore, the writ
of execution must conform to the judgment to be executed, particularly with that which is ordained or
decreed in the dispositive portion of the decision, and adhere strictly to the very essential particulars.57

In this case, the January 30, 2007 Decision of the CA, which does not grant attorney's fees to Fernandez,
already became final and executory on May 26, 2008. As such, it is immutable and
unalterable.58 Generally, it may no longer be modified in any respect, even if the modification is meant to
correct what is perceived to be an erroneous conclusion of law or fact.59 In opting not to file a petition
before the Supreme Court assailing the CA Decision, Fernandez is deemed to have acquiesced to the
entirety of the ruling. It cannot be convincingly argued that the petition filed by MERALCO also inured to
his benefit, for not only are their interests separate and distinct, but they are completely in conflict with
each other. Considering that the judgment on the issue of attorney's fees is already final and executory
against Fernandez who did not appeal, then MERALCO already acquired a vested right by virtue thereof.
Indeed, just as the losing party has the privilege to file an appeal (or petition) within the prescribed period,
so does the winner also have the correlative right to enjoy the finality of the decision.60
 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.14 Rouen Ruth was also personally informed by Abdulmalik on October 17, 2006 after being required
to report to the office by her Group Supervisor.15 Loraine received a call on October 12, 2006 from her
Group Supervisor, Dakila Salvador.16
Saudia anchored its disapproval of respondents' maternity leaves and demand for their resignation on its
"Unified Employment Contract for Female Cabin Attendants" (Unified Contract).17 Under the Unified
Contract, the employment of a Flight Attendant who becomes pregnant is rendered void. It
provides: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 Decision32 dismissing
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.33cralawlawlibrary
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
Decision36 reads: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.37cralawlawlibrary
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.40cralawlawlibrary
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.chanRoblesvirtualLawlibrary
I A choice of law governing the validity of contracts or the interpretation of its provisions dees not
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
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 facto mean
that it cannot apply and rule on the basis of the parties' stipulation. In Hasegawa v.
Kitamura:52ChanRoblesVirtualawlibrary
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.53cralawlawlibrary
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.54cralawlawlibrary
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
conveniens may ultimately result in the application of foreign law is merely an incident of its application. In
this strict sense, forum non conveniens is not applicable. It is not the primarily pivotal consideration in this
case.
In any case, even a further consideration of the applicability of forum non conveniens on the incidental
matter of the law governing respondents' relation with Saudia leads to the conclusion that it is improper for
Philippine tribunals to divest themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents must grapple
with two (2) considerations: first, the availability and adequacy of recourse to a foreign tribunal; and
second, the question of where, as between the forum court and a foreign court, the balance of interests
inhering in a dispute weighs more heavily.
The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign tribunal and can
be resolved by juxtaposing the competencies and practical circumstances of the tribunals in alternative
fora. Exigencies, like the statute of limitations, capacity to enforce orders and judgments, access to
records, requirements for the acquisition of jurisdiction, and even questions relating to the integrity of
foreign courts, may render undesirable or even totally unfeasible recourse to a foreign court. As
mentioned, we consider it in the greater interest of prudence that a defendant show, in pleading forum
non conveniens, that litigation has commenced in another jurisdiction and that a 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.82cralawlawlibrary
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 Commission91 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.)99cralawlawlibrary
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.chanRoblesvirtualLawlibrary
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."111 This contract deemed void the employment of a flight attendant who becomes pregnant
and threatened termination due to lack of medical fitness.112 The threat of termination (and the forfeiture
of benefits that it entailed) is enough to compel a reasonable person in respondents' position to give up his
or her employment.
Saudia draws attention to how respondents' resignation letters were supposedly made in their own
handwriting. This minutia fails to surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of how any supposed resignation did
not arise from respondents' own initiative. As earlier pointed out, respondents' resignations were executed
on Saudia's blank letterheads that Saudia had provided. These letterheads already had the word
"RESIGNATION" typed on the subject portion of their respective headings when these were handed to
respondents.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
V
Having been illegally and unjustly dismissed, respondents are entitled to full backwages and benefits from
the time of their termination until the finality of this Decision. They are likewise entitled to separation pay in
the amount of one (1) month's salary for every year of service until the 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. (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
To provide an "example or correction for the public good"121
as against such discriminatory and callous service, with a fraction of a year of at least six (6) months being counted as one (1) whole year;
schemes, respondents are likewise entitled to exemplary damages.

In a long line of cases, this court awarded exemplary damages to illegally dismissed employees whose (3) Moral damages in the amount of P100,000.00 per respondent;
"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
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
membership in or involvement with labor unions,123 injuries sustained in the course of
employment,124 development of a medical condition due to the employer's own violation of the
employment contract,125 and lodging of a Complaint against the employer.126 Exemplary damages were (5) Attorney's fees equivalent to 10% of the total award.
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
Interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of this
just causes, but in violation of due process requirements, were awarded exemplary damages.128
Decision until full satisfaction thereof.
These examples pale in comparison to the present controversy. Stripped of all unnecessary complexities,
This case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to
respondents were dismissed for no other reason than simply that they were pregnant. This is as wanton,
respondents which petitioner Saudi Arabian Airlines should pay without delay.
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
SO ORDERED.
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;
G.R. NOS. 178382-83
CONTINENTAL MICRONESIA, INC., Petitioner,
vs.
JOSEPH BASSO, Respondent.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court assailing the
Decision2 dated May 23, 2006 and Resolution3 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 e:xisting 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-proposal11 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 him13 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 Dismiss15 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 Decision18 dated September 24, 1999 dismissed the case for lack of
merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was executed in the US "since the letter-
offer was under the Texas letterhead and the acceptance of Complainant was returned there."19 Thus,
applying the doctrine of lex loci celebrationis, US laws apply. Also, applying lex loci contractus, the Labor
Arbiter ruled that the parties did not intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that Philippine laws were not
written into it. More specifically, the Philippine law on taxes and the Labor Code were not intended by the
parties to apply, otherwise Par. 7 on the payment by Complainant U.S. Federal and Home State income
taxes, and Pars. 22/23 on termination by 30-day prior notice, will not be there. The contract was prepared
in contemplation of Texas or U.S. laws where Par. 7 is required and Pars. 22/23 is allowed.20
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the allegations of CMI
that Basso committed a series of acts that constitute breach of trust and loss of confidence.21
The Labor Arbiter, however, found CMI to have voluntarily submitted to his office’s jurisdiction. CMI
participated in the proceedings, submitted evidence on the merits of the case, and sought affirmative
relief through a motion to dismiss.22
NLRC’s Ruling
On appeal, the NLRC Third Division promulgated its Decision23 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
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, 200427 and
January 8, 2004.28 Both motions were dismissed in separate Resolutions dated March 15, 200429 and
February 27, 2004,30 respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals docketed as CA-G.R. SP
No. 83938.31 Basso imputed grave abuse of discretion on the part of the NLRC in ruling that he was validly
dismissed. CMI filed its own Petition for Certiorari dated May 13, 2004 docketed as CA-G.R. SP No.
84281,32 alleging that the NLRC gravely abused its discretion when it assumed jurisdiction over the person of
CMI and the subject matter of the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two cases 33 and ordered
the parties to file their respective Memoranda.
The Court of Appeal’s Decision
The Court of Appeals promulgated the now assailed Decision34 dated May 23, 2006, the relevant
dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is DENIED DUE COURSE and
DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN DUE COURSE and
GRANTED, and accordingly, the assailed Decision dated November 28, 2003 and Resolution dated
February 27, 2004 of the NLRC are SET ASIDE and VACATED. Instead judgment is rendered hereby declaring
the dismissal of Basso illegal and ordering Continental to pay him separation pay equivalent to one (1)
month pay for every year of service as an alternative to reinstatement. Further, ordering Continental to pay
Basso his full backwages from the date of his said illegal dismissal until date of this decision. The claim for
moral and exemplary damages as well as attorney’s fees are dismissed.35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over the subject matter of
the case and over the parties. The Court of Appeals explained that jurisdiction over the subject matter of
the action is determined by the allegations of the complaint and the law. Since the case filed by Basso is a
termination dispute that is "undoubtedly cognizable by the labor tribunals", the Labor Arbiter and the NLRC
had jurisdiction to rule on the merits of the case. On the issue of jurisdiction over the person of the parties,
who are foreigners, the Court of Appeals ruled that jurisdiction over the person of Basso was acquired
when he filed the complaint for illegal dismissal, while jurisdiction over the person of CMI was acquired
through coercive process of service of summons to its agent in the Philippines. The Court of Appeals also
agreed that the active participation of CMI in the case rendered moot the issue on jurisdiction.
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
Resolution38 dated June 19, 2007 denying CMI’s motion, while partially granting Basso’s as to the
computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE FACTUAL FINDINGS OF THE NLRC
INSTEAD OF LIMITING ITS INQUIRY INTO WHETHER OR NOT THE NLRC COMMITTED GRAVE ABUSE OF
DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE LABOR ARBITER AND THE NLRC HAD
JURISDICTION TO HEAR AND TRY THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT BASSO WAS NOT VALIDLY DISMISSED ON
THE GROUND OF LOSS OF TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC in the illegal dismissal
case. The first and third issues will be discussed jointly.
The labor tribunals had jurisdiction
over the parties and the subject
matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to determine proper jurisdiction over
the parties and the subject matter of the case. It also alleges that the existence of foreign elements calls
for the application of US laws and the doctrines of lex loci celebrationis (the law of the place of the
ceremony), lex loci contractus (law of the place where a contract is executed), and lex loci intentionis (the
intention of the parties as to the law that should govern their agreement). CMI also invokes the application
of the rule of forum non conveniens to determine the propriety of the assumption of jurisdiction by the
labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first. Where the facts
establish the existence of foreign elements, the case presents a conflict-of-laws issue.39 The foreign element
in a case may appear in different forms, such as in this case, where one of the parties is an alien and the
other is domiciled in another state.
In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of conflict-of-laws problems, three
consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of
judgments. In resolving the conflicts problem, courts should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and proved by
the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one of the basic
exceptions to the application of foreign law? In short, is there any strong policy or vital interest of
the forum that is at stake in this case and which should preclude the application of foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and decide cases. Jurisdiction
over the subject matter is conferred by the Constitution or by law and by the material allegations in the
complaint, regardless of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs
sought therein.42 It cannot be acquired through a waiver or enlarged by the omission of the parties or
conferred by the acquiescence of the court.43 That the employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US, do not automatically
preclude our labor tribunals from exercising jurisdiction to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code, under Article 217, clearly vests
original and exclusive jurisdiction to hear and decide cases involving termination disputes to the Labor
Arbiter.
Hence, the Labor Arbiter and the NLRC have jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the Labor Arbiter acquired
jurisdiction over the person of Basso, notwithstanding his citizenship, when he filed his complaint against
CMI. On the other hand, jurisdiction over the person of CMI was acquired through the coercive process of
service of summons. We note that CMI never denied that it was served with summons. CMI has, in fact,
voluntarily appeared and participated in the proceedings before the courts. Though a foreign
corporation, CMI is licensed to do business in the Philippines and has a local business address here. The
purpose of the law in requiring that foreign corporations doing business in the country be licensed to do so,
is to subject the foreign corporations to the jurisdiction of our courts.44
Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties and the subject matter
of this case, these tribunals may proceed to try the case even if the rules of conflict-of-laws or the
convenience of the parties point to a foreign forum, this being an exercise of sovereign prerogative of the
country where the case is filed.45
The next question is whether the local forum is the convenient forum in light of the facts of the case. CMI
contends that a Philippine court is an inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-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 had physical presence in the Philippines
during the duration of the trial. CMI has a Philippine branch, while Basso, before his death, was residing
here.
Thus, it could be reasonably expected that no extraordinary measures were needed for the parties to
make arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts. The incident subject of this
case (i.e. dismissal of Basso) happened in the Philippines, the surrounding circumstances of which can be
ascertained without having to leave the Philippines. The acts that allegedly led to loss of trust and
confidence and Basso’s eventual dismissal were committed in the Philippines. As to the law, we hold that
Philippine law is the proper law of the forum, as we shall discuss shortly. Also, the labor tribunals have the
power to enforce their judgments because they acquired jurisdiction over the persons of both parties.
Our labor tribunals being the convenient fora, the next question is what law should apply in resolving this
case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the following important questions: (1)
What legal system should control a given situation where some of the significant facts occurred in two or
more states; and (2) to what extent should the chosen legal system regulate the situation.47 These questions
are entirely different from the question of jurisdiction that only seeks to answer whether the courts of a state
where the case is initiated have jurisdiction to enter a judgment.48 As such, the power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law.49
CMI insists that US law is the applicable choice-of-law under the principles of lex loci celebrationis and lex
loci contractus. It argues that the contract of employment originated from and was returned to the US
after Basso signed it, and hence, was perfected there. CMI further claims that the references to US law in
the employment contract show the parties’ intention to apply US law and not ours. These references are:
a. Foreign station allowance of forty percent (40%) using the "U.S. State Department Index, the
base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any home state income taxes."
c. Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S. Department of
State Indexes of living costs abroad."
d. The employment arrangement is "one at will, terminable by either party without any further
liability on thirty days prior written notice."50
CMI asserts that the US law on labor relations particularly, the US Railway Labor Act sanctions termination-
at-will provisions in an employment contract. Thus, CMI concludes that if such laws were applied, there
would have been no illegal dismissal to speak of because the termination-at-will provision in Basso’s
employment contract would have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an essential element of conflict rules is
the indication of a "test" or "connecting factor" or "point of contact". Choice-of-law rules invariably consist
of a factual relationship (such as property right, contract claim) and a connecting fact or point of contact,
such as the situs of the res, the place of celebration, the place of performance, or the place of
wrongdoing. Pursuant to Saudi Arabian Airlines, we hold that the "test factors," "points of contact" or
"connecting factors" in this case are the following:
(1) The nationality, domicile or residence of Basso;
(2) The seat of CMI;
(3) The place where the employment contract has been made, the locus actus;
(4) The place where the act is intended to come into effect, e.g., the place of performance of
contractual duties;
(5) The intention of the contracting parties as to the law that should govern their agreement, the
lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or done.52
Applying the foregoing in this case, we conclude that Philippine law is the applicable law. Basso, though a
US citizen, was a resident here from the time he was hired by CMI until his death during the pendency of
the case. CMI, while a foreign corporation, has a license to do business in the Philippines and maintains a
branch here, where Basso was hired to work. The contract of employment was negotiated in the
Philippines. A purely consensual contract, it was also perfected in the Philippines when Basso accepted the
terms and conditions of his employment as offered by CMI. The place of performance relative to Basso’s
contractual duties was in the Philippines. The alleged prohibited acts of Basso that warranted his dismissal
were committed in the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the problem. Thus, we hold that
CMI and Basso intended Philippine law to govern, notwithstanding some references made to US laws and
the fact that this intention was not expressly stated in the contract. We explained in Philippine Export and
Foreign Loan Guarantee Corporation v. V. P. Eusebio Construction, Inc.53 that the law selected may be
implied from such factors as substantial connection with the transaction, or the nationality or domicile of
the parties.54 We cautioned, however, that while Philippine courts would do well to adopt the first and most
basic rule in most legal systems, namely, to allow the parties to select the law applicable to their contract,
the selection is subject to the limitation that it is not against the law, morals, or public policy of the forum.55
Similarly, in Bank of America, NT & SA v. American Realty Corporation,56 we ruled that a foreign law,
judgment or contract contrary to a sound and established public policy of the forum shall not be applied.
Thus:
Moreover, foreign law should not be applied when its application would work undeniable injustice to the
citizens or residents of the forum. To give justice is the most important function of law; hence, a law, or
judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection espoused by our laws and
Constitution, which dictates that no worker shall be dismissed except for just and authorized causes
provided by law and after due process having been complied with.58 Hence, the US Railway Labor Act,
which sanctions termination-at-will, should not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As any other fact, it must be
alleged and proved.59 If the foreign law is not properly pleaded or proved, the presumption of identity or
similarity of the foreign law to our own laws, otherwise known as processual presumption, applies. Here, US
law may have been properly pleaded but it was not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third issues.
The Court of Appeals may review the
factual findings of the NLRC in a
Rule 65 petition.
CMI submits that the Court of Appeals overstepped the boundaries of the limited scope of its certiorari
jurisdiction when instead of ruling on the existence of grave abuse of discretion, it proceeded to pass upon
the legality and propriety of Basso’s dismissal. Moreover, CMI asserts that it was error on the part of the
Court of Appeals to re-evaluate the evidence and circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition for Certiorari under Rule 65 of
the Revised Rules of Court was settled in our decision in St. Martin Funeral Home v. NLRC.60 The general rule
is that certiorari does not lie to review errors of judgment of the trial court, as well as that of a quasi-judicial
tribunal. In certiorari proceedings, judicial review does not go as far as to examine and assess the
evidence of the parties and to weigh their probative value.61 However, this rule admits of exceptions. In
Globe Telecom, Inc. v. Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action for certiorari, resolution is confined only to
issues of jurisdiction and grave abuse of discretion on the part of the labor tribunal. Hence, the Court
refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative functions,
such as the NLRC.
Occasionally, however, the Court is constrained to delve into factual matters where, as in the instant case,
the findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the case and
reexamine the questioned findings. As a corollary, this Court is clothed with ample authority to review
matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary
to arrive at a just decision of the case. The same principles are now necessarily adhered to and are
applied by the Court of Appeals in its expanded jurisdiction over labor cases elevated through a petition
for certiorari; thus, we see no error on its part when it made anew a factual determination of the matters
and on that basis reversed the ruling of the NLRC.63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual findings complained of are not
supported by the evidence on record; when it is necessary to prevent a substantial wrong or to do
substantial justice; when the findings of the NLRC contradict those of the Labor Arbiter; and when
necessary to arrive at a just decision of the case.64 To make these findings, the Court of Appeals necessarily
has to look at the evidence and make its own factual determination.65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the Court of Appeals
correctly exercised its power to review the evidence and the records of the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI. Managerial employees enjoy security of
tenure and the right of the management to dismiss must be balanced against the managerial employee’s
right to security of tenure, which is not one of the guaranties he gives up.66
In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to validly dismiss an employee on
the ground of loss of trust and confidence under Article 282 (c) of the Labor Code, the employer must
observe the following guidelines: 1) loss of confidence should not be simulated; 2) it should not be used as
subterfuge for causes which are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the
face of overwhelming evidence to the contrary; and 4) it must be genuine, not a mere afterthought to
justify earlier action taken in bad faith. More importantly, it must be based on a willful breach of trust and
founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not founded on clearly established
facts and evidence sufficient to warrant dismissal from employment. While proof beyond reasonable
doubt is not required to establish loss of trust and confidence, substantial evidence is required and on the
employer rests the burden to establish it.68 There must be some basis for the loss of trust, or that the
employer has reasonable ground to believe that the employee is responsible for misconduct, which
renders him unworthy of the trust and confidence demanded by his position.69
CMI alleges that Basso committed the following:
(1) Basso delegated too much responsibility to the General Sales Agent and relied heavily on its
judgments.70
(2) Basso excessively issued promotional tickets to his friends who had no direct business with
CMI.71
(3) The advertising agency that CMI contracted had to deal directly with Guam because Basso
was hardly available.72 Mr. Schulz discovered that Basso exceeded the advertising budget by
$76,000.00 in 1994 and by $20,000.00 in 1995.73
(4) Basso spent more time and attention to his personal businesses and was reputed to own
nightclubs in the Philippines.74
(5) Basso used free tickets and advertising money to promote his personal business,75 such as a
brochure that jointly advertised one of Basso’s nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI merely submitted affidavits of
its officers, without any other corroborating evidence. Basso, on the other hand, had adequately
explained his side. On the advertising agency and budget issues raised by CMI, he explained that these
were blatant lies as the advertising needs of CMI were centralized in its Guam office and the Philippine
office was not authorized to deal with CMI’s advertising agency, except on minor issues.76 Basso further
stated that under CMI’s existing policy, ninety percent (90%) of the advertising decisions were delegated
to the advertising firm of 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. Basso also explained that the phone
lines82 were open direct lines that all personnel were free to use to make direct long distance calls.83
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover the transfer fee of the
Manila Polo Club share from Mr. Kenneth Glover, the previous General Manager, to him. CMI claimed that
"nowhere in the said contract was it likewise indicated that the Manila Polo Club share was part of the
compensation package given by CMI to Basso."84 CMI’s claims are not credible. Basso explained that the
Manila Polo Club share was offered to him as a bonus to entice him to leave his then employer, United
Airlines. A letter from Mr. Paul J. Casey, former president of Continental, supports Basso.85 In the letter, Mr.
Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he was given the Manila
Polo Club share and authorized to have the share re-issued in his name. In addition to giving Mr. Basso the
Manila Polo Club share, Continental agreed to pay the dues for a period of three years and this was
embodied in his contract with Continental. This was all done with my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a club in Manila that your
immediate supervisor and I agree is of at least that value to Continental through you in your role as our
General Manager for the Philippines.87
Taken together, the above pieces of evidence suggest that the Manila Polo Club share was part of Basso’s
compensation package and thus he validly used company funds to pay for the transfer fees. If doubts
exist between the evidence presented by the employer and the employee, the scales of justice must be
tilted in favor of the latter.88
Finally, CMI violated procedural due process in terminating Basso. In King of Kings Transport, Inc. v.
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:
(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 seniority rights and other privileges, and to his full backwages, inclusive of
allowances and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld up to the time of actual reinstatement.
Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary
for every year of service should be awarded as an alternative.1âwphi1 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.
 G.R. No. 205703, March 07, 2016
INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS), SNC LAVALIN ENGINEERS &
CONTRACTORS, INC. AND ANGELITO C. HERNANDEZ, Petitioners, v. JOSE G. DE VERA AND ALBERTO B.
ARRIOLA, Respondents.
DECISION
MENDOZA, J.:
When can a foreign law govern an overseas employment contract? This is the fervent question that the
Court shall resolve, once and for all.
This petition for review on certiorari seeks to reverse and set aside the January 24, 2013 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 118869, which modified the November 30, 2010 Decision2 of the
National Labor Relations Commission (NLRC) and its February 2, 2011 Resolution,3 in NLRC LAC Case No. 08-
000572-10/NLRC Case No. NCR 09-13563-09, a case for illegal termination of an Overseas Filipino Worker
(OFW).
The Facts
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement agency duly
organized and existing under Philippine laws, with petitioner Angelito C. Hernandez as its president and
managing director. Petitioner SNC Lavalin Engineers & Contractors, Inc. (SNC-Lavalin) is the principal of
IPAMS, a Canadian company with business interests in several countries. On the other hand, respondent
Alberto Arriola (Arriola) is a licensed general surgeon in the Philippines.4
Employee's Position
Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position of Safety Officer in its
Ambatovy Project site in Madagascar. The position offered had a rate of CA$32.00 per hour for forty (40)
hours a week with overtime pay in excess of forty (40) hours. It was for a period of nineteen (19) months
starting from June 9, 2008 to December 31, 2009.
Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his overseas
employment contract was processed with the Philippine Overseas Employment Agency (POEA)6 In a letter
of understanding,7 dated June 5, 2008, SNC-Lavalin confirmed Arriola's assignment in the Ambatovy
Project. According to Arriola, he signed the contract of employment in the Philippines.8 On June 9, 2008,
Arriola started working in Madagascar.
After three months, Arriola received a notice of pre-termination of employment,9 dated September 9,
2009, from SNC-Lavalin. It stated that his employment would be pre-terminated effective September 11,
2009 due to diminishing workload in the area of his expertise and the unavailability of alternative
assignments. Consequently, on September 15, 2009, Arriola was repatriated. SNC-Lavalin deposited in
Arriola's bank account his pay amounting to Two Thousand Six Hundred Thirty Six Dollars and Eight
Centavos (CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-payment of
overtime pay, vacation leave and sick leave pay before the Labor Arbiter (LA). He claimed that SNC-
Lavalin still owed him unpaid salaries equivalent to the three-month unexpired portion of his contract,
amounting to, more or less, One Million Sixty-Two Thousand Nine Hundred Thirty-Six Pesos (P1,062,936.00). He
asserted that SNC-Lavalin never offered any valid reason for his early termination and that he was not
given sufficient notice regarding the same. Arriola also insisted that the petitioners must prove the
applicability of Canadian law before the same could be applied to his employment contract.
Employer's Position
The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-Lavalin was
greatly affected by the global financial crises during the latter part of 2008. The economy of Madagascar,
where SNC-Lavalin had business sites, also slowed down. As proof of its looming financial standing, SNC-
Lavalin presented a copy of a news item in the Financial Post,10 dated March 5, 2009, showing the decline
of the value of its stocks. Thus, it had no choice but to minimize its expenditures and operational expenses.
It re-organized its Health and Safety Department at the Ambatovy Project site and Arriola was one of those
affected.11
The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-Staffbuilders), pointing out
that particular labor laws of a foreign country incorporated in a contract freely entered into between an
OFW and a foreign employer through the latter's agent was valid. In the present case, as all of Arriola's
employment documents were processed in Canada, not to mention that SNC-Lavalin's office was in
Ontario, the principle of lex loci celebrationis was applicable. Thus, the petitioners insisted that Canadian
laws governed the contract.
The petitioners continued that the pre-termination of Arriola's contract was valid for being consistent with
the provisions of both the Expatriate Policy and laws of Canada. The said foreign law did not require any
ground for early termination of employment, and the only requirement was the written notice of
termination. Even assuming that Philippine laws should apply, Arriola would still be validly dismissed
because domestic law recognized retrenchment and redundancy as legal grounds for termination.
In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act (ESA) of Ontario,
which was duly authenticated by the Canadian authorities and certified by the Philippine Embassy.
The LA Ruling
In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of merit. The LA ruled that
the rights and obligations among and between the OFW, the local recruiter/agent, and the foreign
employer/principal were governed by the employment contract pursuant to the EDI-Staffbuilders case.
Thus, the provisions on termination of employment found in the ESA, a foreign law which governed Arriola's
employment contract, were applied. Given that SNC-Lavalin was able to produce the duly authenticated
ESA, the LA opined that there was no other conclusion but to uphold the validity of Arriola's dismissal based
on Canadian law. The fallo of the LA decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered dismissing the
complaint for lack of merit.
SO ORDERED.15ChanRoblesVirtualawlibrary
Aggrieved, Arriola elevated the LA decision before the NLRC.
The NLRC Ruling
In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled that Arriola was
illegally dismissed by the petitioners. Citing PNB v. Cabansag,16 the NLRC stated that whether employed
locally or overseas, all Filipino workers enjoyed the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. Thus, the Labor Code of the Philippines
and Republic Act (R.A.) No. 8042, or the Migrant Workers Act, as amended, should be applied. Moreover,
the NLRC added that the overseas employment contract of Arriola was processed in the POEA.
Applying the Philippine laws, the NLRC found that there was no substantial evidence presented by the
petitioners to show any just or authorized cause to terminate Arriola. The ground of financial losses by SNC-
Lavalin was not supported by sufficient and credible evidence. The NLRC concluded that, for being
illegally dismissed, Arriola should be awarded CA$81,920.00 representing sixteen (16) months of Arriola's
purported unpaid salary, pursuant to the Serrano v. Gallant17 doctrine. The decretal portion of the NLRC
decision states:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding complainant-appellant to have
been illegally dismissed. Respondents-appellees are hereby ordered to pay complainant-appellant the
amount of CA$81,920.00, or its Philippine Peso equivalent prevailing at the time of payment. Accordingly,
the decision of the Labor Arbiter dated May 31, 2010 is hereby VACATED and SET ASIDE.
SO ORDERED.18ChanRoblesVirtualawlibrary
The petitioners moved for reconsideration, but their motion was denied by the NLRC in its resolution, dated
February 2, 2011.
Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it should be the ESA, or
the Ontario labor law, that should be applied in Arriola's employment contract. No temporary restraining
order, however, was issued by the CA.
The Execution Proceedings
In the meantime, execution proceedings were commenced before the LA by Arriola. The LA granted the
motion for execution in the Order,19 dated August 8, 2011.
The petitioners appealed the execution order to the NLRC. In its Decision,20 dated May 31, 2012, the NLRC
corrected the decretal portion of its November 30, 2010 decision. It decreased the award of backpay in
the amount of CA$26,880.00 or equivalent only to three (3) months and three (3) weeks pay based on 70-
hours per week workload. The NLRC found that when Arriola was dismissed on September 9, 2009, he only
had three (3) months and three (3) weeks or until December 31, 2009 remaining under his employment
contract.
Still not satisfied with the decreased award, IPAMS filed a separate petition for certiorari before the CA. In
its decision, dated July 25, 2013, the CA affirmed the decrease in Arriola's backpay because the unpaid
period in his contract was just three (3) months and three (3) weeks.
Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No. 212031. The
appeal, however, was dismissed outright by the Court in its resolution, dated August 8, 2014, because it
was belatedly filed and it did not comply with Sections 4 and 5 of Rule 7 of the Rules of Court. Hence, it
was settled in the execution proceedings that the award of backpay to Arriola should only amount to
three (3) months and three (3) weeks of his pay.
The CA Ruling
Returning to the principal case of illegal dismissal, in its assailed January 24, 2013 decision, the CA affirmed
that Arriola was illegally dismissed by the petitioners. The CA explained that even though an authenticated
copy of the ESA was submitted, it did not mean that the said foreign law automatically applied in this
case. Although parties were free to establish stipulations in their contracts, the same must remain consistent
with law, morals, good custom, public order or public policy. The appellate court wrote that the ESA
allowed an employer to disregard the required notice of termination by simply giving the employee a
severance pay. The ESA could not be made to apply in this case for being contrary to our Constitution,
specifically on the right of due process. Thus, the CA opined that our labor laws should find application.
As the petitioners neither complied with the twin notice-rule nor offered any just or authorized cause for his
termination under the Labor Code, the CA held that Arriola's dismissal was illegal. Accordingly, it
pronounced that Arriola was entitled to his salary for the unexpired portion of his contract which is three (3)
months and three (3) weeks salary. It, however, decreased the award of backpay to Arriola because the
NLRC made a wrong calculation. Based on his employment contract, the backpay of Arriola should only
be computed on a 40-hour per week workload, or in the amount of CA$19,200.00. The CA disposed the
case in this wise:
chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY GRANTED. The assailed Order of
the National Labor Relations Commission in NLRC LAC No. 08-000572-10/NLRC Case No. NCR 09-13563-09 is
MODIFIED in that private respondent is only entitled to a monetary judgment equivalent to his unpaid
salaries in the amount of CA$19,200.00 or its Philippine Peso equivalent.
SO ORDERED.21ChanRoblesVirtualawlibrary
Hence, this petition, anchored on the following
ISSUES
I
WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED PURSUANT TO THE EMPLOYMENT
CONTRACT.
II
GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT BAR, WHETHER OR NOT THE SIX-WEEK ON,
TWO-WEEK OFF SCHEDULE SHOULD BE USED IN THE COMPUTATION OF ANY MONETARY AWARD.
III
GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT THE AMOUNT BEING CLAIMED BY
RESPONDENTS HAD ALREADY BEEN SATISFIED, OR AT THE VERY LEAST, WHETHER OR NOT THE AMOUNT OF
CA$2,636.80 SHOULD BE DEDUCTED FROM THE MONETARY AWARD.22ChanRoblesVirtualawlibrary
The petitioners argue that the rights and obligations of the OFW, the local recruiter, and the foreign
employer are governed by the employment contract, citing EDI-Staffbuilders; that the terms and
conditions of Arriola's employment are embodied in the Expatriate Policy, Ambatovy Project - Site, Long
Term, hence, the laws of Canada must be applied; that the ESA, or the Ontario labor law, does not require
any ground for the early termination of employment and it permits the termination without any notice
provided that a severance pay is given; that the ESA was duly authenticated by the Canadian authorities
and certified by the Philippine Embassy; that the NLRC Sixth Division exhibited bias and bad faith when it
made a wrong computation on the award of backpay; and that, assuming there was illegal dismissal, the
CA$2,636.80, earlier paid to Arriola, and his home leaves should be deducted from the award of backpay.
In his Comment,23 Arriola countered that foreign laws could not apply to employment contracts if they
were contrary to law, morals, good customs, public order or public policy, invoking Pakistan International
Airlines Corporation v. Ople (Pakistan International);24 that the ESA was not applicable because it was
contrary to his constitutional right to due process; that the petitioners failed to substantiate an authorized
cause to justify his dismissal under Philippine labor law; and that the petitioners could not anymore claim a
deduction of CA$2,636.80 from the award of backpay because it was raised for the first time on appeal.
In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability of foreign laws on
labor contracts; that the Pakistan International case was superseded by EDI-Staffbuilders and other
subsequent cases; and that SNC-Lavalin suffering financial losses was an authorized cause to terminate
Arriola's employment.
In his Memorandum,26 Arriola asserted that his employment contract was executed in the Philippines and
that the alleged authorized cause of financial losses by the petitioners was not substantiated by evidence.
In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was applicable in the present
case and that recent jurisprudence recognized that the parties could agree on the applicability of foreign
laws in their labor contracts.
 The Court's Ruling
The petition lacks merit.
Application of foreign laws with labor contracts
At present, Filipino laborers, whether skilled or professional, are enticed to depart from the motherland in
search of greener pastures. There is a distressing reality that the offers of employment abroad are more
lucrative than those found in our own soils. To reap the promises of the foreign dream, our unsung heroes
must endure homesickness, solitude, discrimination, mental and emotional struggle, at times, physical
turmoil, and, worse, death. On the other side of the table is the growing number of foreign employers
attracted in hiring Filipino workers because of their reasonable compensations and globally-competitive
skills and qualifications. Between the dominant foreign employers and the vulnerable and desperate
OFWs, however, there is an inescapable truth that the latter are in need of greater safeguard and
protection.
In order to afford the full protection of labor to our OFWs, the State has vigorously enacted laws, adopted
regulations and policies, and established agencies to ensure that their needs are satisfied and that they
continue to work in a humane living environment outside of the country. Despite these efforts, there are still
issues left unsolved in the realm of overseas employment. One existing question is posed before the Court -
when should an overseas labor contract be governed by a foreign law? To answer this burning query, a
review of the relevant laws and jurisprudence is warranted.
R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on overseas employment
and to establish a higher standard of protection and promotion of the welfare of migrant workers.28 It
emphasized that while recognizing the significant contribution of Filipino migrant workers to the national
economy through their foreign exchange remittances, the State does not promote overseas employment
as a means to sustain economic growth and achieve national development.29 Although it acknowledged
claims arising out of law or contract involving Filipino workers,30 it does not categorically provide that
foreign laws are absolutely and automatically applicable in overseas employment contracts.
The issue of applying foreign laws to labor contracts was initially raised before the Court in Pakistan
International. It was stated in the labor contract therein (1) that it would be governed by the laws of
Pakistan, (2) that the employer have the right to terminate the employee at any time, and (3) that the
one-month advance notice in terminating the employment could be dispensed with by paying the
employee an equivalent one-month salary. Therein, the Court elaborated on the parties' right to stipulate
in labor contracts, to wit:
chanRoblesvirtualLawlibrary
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law
between the parties. 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, counterbalancing 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. x x x31
[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the foreign employer 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." 32 Thus, the
Court applied the Philippine laws, instead of the Pakistan laws. It was also held that the provision in the
employment contract, where the employer could terminate the employee at any time for any ground and
it could even disregard the notice of termination, violates the employee's right to security of tenure under
Articles 280 and 281 of the Labor Code.
In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that, "[i]n formulating the
contract, the 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."33 In that case, the overseas contract specifically stated that Saudi Labor Laws would govern
matters not provided for in the contract. The employer, however, failed to prove the said foreign law,
hence, the doctrine of processual presumption came into play and the Philippine labor laws were applied.
Consequently, the Court did not discuss any longer whether the Saudi labor laws were contrary to
Philippine labor laws.
The case of Becmen Service Exporter and Promotion, Inc. v. Spouses Cuaresma,34 though not an illegal
termination case, elucidated on the effect of foreign laws on employment. It involved a complaint for
insurance benefits and damages arising from the death of a Filipina nurse from Saudi Arabia. It was initially
found therein that there was no law in Saudi Arabia that provided for insurance arising from labor
accidents. Nevertheless, the Court concluded that the employer and the recruiter in that case
abandoned their legal, moral and social obligation to assist the victim's family in obtaining justice for her
death, and so her family was awarded P5,000,000.00 for moral and exemplary damages.
In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment agency invoked the
defense that the foreign employer was immune from suit and that it did not sign any document agreeing
to be held jointly and solidarily liable. Such defense, however, was rejected because R.A. No. 8042
precisely afforded the OFWs with a recourse against the local agency and the foreign employer to assure
them of an immediate and sufficient payment of what was due. Similar to EDI-Staffbuilders, the local
agency therein failed to prove the Kuwaiti law specified in the labor contract, pursuant to Sections 24 and
25 of Rule 132 of the Revised Rules of Court.
Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles36 (Sameer Overseas), it
was declared that the security of tenure for labor was guaranteed by our Constitution and employees
were not stripped of the same when they moved to work in other jurisdictions. Citing PCL Shipping Phils.,
Inc. v. NLRC37 (PCL Shipping), the Court held that the principle of lex loci contractus (the law of the place
where the contract is made) governed in this jurisdiction. As it was established therein that the overseas
labor contract was executed in the Philippines, the Labor Code and the fundamental procedural rights
were observed. It must be noted that no foreign law was specified in the employment contracts in both
cases.
Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted the doctrine of
forum non conveniens because the overseas employment contracts required the application of the laws
of Saudi Arabia, and so, the Philippine courts were not in a position to hear the case. In striking down such
argument, the Court held that while a Philippine tribunal was 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. As the
dispute in that case related to the illegal termination of the employees due to their pregnancy, then it
involved a matter of public interest and public policy. Thus, it was ruled that Philippine laws properly found
application and that Philippine tribunals could assume jurisdiction.
Based on the foregoing, the general rule is that Philippine laws apply even to overseas employment
contracts. This rule is rooted in the constitutional provision of Section 3, Article XIII that the State shall afford
full protection to labor, whether local or overseas. Hence, even if the OFW has his employment abroad, it
does not strip him of his rights to security of tenure, humane conditions of work and a living wage under our
Constitution.39
As an exception, the parties may agree that a foreign law shall govern the employment contract. A
synthesis of the existing laws and jurisprudence reveals that this exception is subject to the following
requisites:
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1. That it is expressly stipulated in the overseas employment contract that a specific foreign law shall
govern;
2. That the foreign law invoked must be proven before the courts pursuant to the Philippine rules on
evidence;
3. That the foreign law stipulated in the overseas employment contract must not be contrary to law,
morals, good customs, public order, or public policy of the Philippines; and
4. That the overseas employment contract must be processed through the POEA.
The Court is of the view that these four (4) requisites must be complied with before the employer could
invoke the applicability of a foreign law to an overseas employment contract. With these requisites, the
State would be able to abide by its constitutional obligation to ensure that the rights and well-being of our
OFWs are fully protected. These conditions would also invigorate the policy under R.A. No. 8042 that the
State shall, at all times, uphold the dignity of its citizens whether in country or overseas, in general, and the
Filipino migrant workers, in particular.40 Further, these strict terms are pursuant to the jurisprudential doctrine
that "parties may not contract away applicable provisions of law especially peremptory provisions dealing
with matters heavily impressed with public interest,"41 such as laws relating to labor. At the same time,
foreign employers are not at all helpless to apply their own laws to overseas employment contracts
provided that they faithfully comply with these requisites.
If the first requisite is absent, or that no foreign law was expressly stipulated in the employment contract
which was executed in the Philippines, then the domestic labor laws shall apply in accordance with the
principle of lex loci contractus. This is based on the cases of Sameer Overseas and PCL Shipping.
If the second requisite is lacking, or that the foreign law was not proven pursuant to Sections 24 and 25 of
Rule 132 of the Revised Rules of Court, then the international law doctrine of processual presumption
operates. The said doctrine declares that "[w]here a foreign law is not pleaded or, even if pleaded, is not
proved, the presumption is that foreign law is the same as ours."42 This was observed in the cases of EDI-
Staffbuilders and ATCI Overseas.
If the third requisite is not met, or that the foreign law stipulated is contrary to law, morals, good customs,
public order or public policy, then Philippine laws govern. This finds legal bases in the Civil Code,
specifically: (1) Article 17, which provides that laws which have, for their object, public order, public policy
and good customs shall not be rendered ineffective by laws of a foreign country; and (2) Article 1306,
which states that the stipulations, clauses, terms and conditions in a contract must not be contrary to law,
morals, good customs, public order, or public policy. The said doctrine was applied in the case of Pakistan
International.
Finally, if the fourth requisite is missing, or that the overseas employment contract was not processed
through the POEA, then Article 18 of the Labor Code is violated. Article 18 provides that no employer may
hire a Filipino worker for overseas employment except through the boards and entities authorized by the
Secretary of Labor. In relation thereto, Section 4 of R.A. No. 8042, as amended, declares that the State shall
only allow the deployment of overseas Filipino workers in countries where the rights of Filipino migrant
workers are protected. Thus, the POEA, through the assistance of the Department of Foreign Affairs, reviews
and checks whether the countries have existing labor and social laws protecting the rights of workers,
including migrant workers.43 Unless processed through the POEA, the State has no effective means of
assessing the suitability of the foreign laws to our migrant workers. Thus, an overseas employment contract
that was not scrutinized by the POEA definitely cannot be invoked as it is an unexamined foreign law.
In other words, lacking any one of the four requisites would invalidate the application of the foreign law,
and the Philippine law shall govern the overseas employment contract.
As the requisites of the applicability of foreign laws in overseas labor contract have been settled, the Court
can now discuss the merits of the case at bench.
A judicious scrutiny of the records of the case demonstrates that the petitioners were able to observe the
second requisite, or that the foreign law must be proven before the court pursuant to the Philippine rules
on evidence. The petitioners were able to present the ESA, duly authenticated by the Canadian authorities
and certified by the Philippine Embassy, before the LA. The fourth requisite was also followed because
Arriola's employment contract was processed through the POEA.44
Unfortunately for the petitioners, those were the only requisites that they complied with. As correctly held
by the CA, even though an authenticated copy of the ESA was submitted, it did not mean that said
foreign law could be automatically applied to this case. The petitioners miserably failed to adhere to the
two other requisites, which shall be discussed in seratim.
The foreign law was not expressly specified in the employment contract
The petitioners failed to comply with the first requisite because no foreign law was expressly stipulated in
the overseas employment contract with Arriola. In its pleadings, the petitioners did not directly cite any
specific provision or stipulation in the said labor contract which indicated the applicability of the Canadian
labor laws or the ESA. They failed to show on the face of the contract that a foreign law was agreed upon
by the parties. Rather, they simply asserted that the terms and conditions of Arriola's employment were
embodied in the Expatriate Policy, Ambatovy Project - Site, Long Term.45 Then, they emphasized provision
8.20 therein, regarding interpretation of the contract, which provides that said policy would be governed
and construed with the laws of the country where the applicable SNC-Lavalin, Inc. office was
located.46 Because of this provision, the petitioners insisted that the laws of Canada, not of Madagascar or
the Philippines, should apply. Then, they finally referred to the ESA.
It is apparent that the petitioners were simply attempting to stretch the overseas employment contract of
Arriola, by implication, in order that the alleged foreign law would apply. To sustain such argument would
allow any foreign employer to improperly invoke a foreign law even if it is not anymore reasonably
contemplated by the parties to control the overseas employment. The OFW, who is susceptible by his
desire and desperation to work abroad, would blindly sign the labor contract even though it is not clearly
established on its face which state law shall apply. Thus, a better rule would be to obligate the foreign
employer to expressly declare at the onset of the labor contract that a foreign law shall govern it. In that
manner, the OFW would be informed of the applicable law before signing the contract.
Further, it was shown that the overseas labor contract was executed by Arriola at his residence in Batangas
and it was processed at the POEA on May 26, 2008.47 Considering that no foreign law was specified in the
contract and the same was executed in the Philippines, the doctrine of lex loci celebrationis applies and
the Philippine laws shall govern the overseas employment of Arriola.
The foreign law invoked is contrary to the Constitution and the Labor Code
Granting arguendo that the labor contract expressly stipulated the applicability of Canadian law, still,
Arriola's employment cannot be governed by such foreign law because the third requisite is not satisfied. A
perusal of the ESA will show that some of its provisions are contrary to the Constitution and the labor laws of
the Philippines.
First, the ESA does not require any ground for the early termination of employment.48 Article 54 thereof only
provides that no employer should terminate the employment of an employee unless a written notice had
been given in advance.49 Necessarily, the employer can dismiss any employee for any ground it so discharge the same would mean that the dismissal is not justified and, therefore, illegal.60
desired. At its own pleasure, the foreign employer is endowed with the absolute power to end the
employment of an employee even on the most whimsical grounds. As to the amount of backpay awarded, the Court finds that the computation of the CA was valid and
proper based on the employment contract of Arriola. Also, the issue of whether the petitioners had made
Second, the ESA allows the employer to dispense with the prior notice of termination to an employee. partial payments on the backpay is a matter best addressed during the execution process.chanrobleslaw
Article 65(4) thereof indicated that the employer could terminate the employment without notice by
simply paying the employee a severance pay computed on the basis of the period within which the WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of Appeals in CA-G.R. SP No.
notice should have been given.50 The employee under the ESA could be immediately dismissed without 118869 is AFFIRMED in toto.
giving him the opportunity to explain and defend himself.
SO ORDERED.
The provisions of the ESA are patently inconsistent with the right to security of tenure. Both the
Constitution51 and the Labor Code52 provide that this right is available to any employee. In a host of cases,
the Court has upheld the employee's right to security of tenure in the face of oppressive management
behavior and management prerogative. Security of tenure is a right which cannot be denied on mere
speculation of any unclear and nebulous basis.53

Not only do these provisions collide with the right to security of tenure, but they also deprive the employee
of his constitutional right to due process by denying him of any notice of termination and the opportunity
to be heard.54 Glaringly, these disadvantageous provisions under the ESA produce the same evils which
the Court vigorously sought to prevent in the cases of Pakistan International and Sameer Overseas. Thus,
the Court concurs with the CA that the ESA is not applicable in this case as it is against our fundamental
and statutory laws.

In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a foreign law, then
the Philippine labor laws must govern the overseas employment contract of Arriola.

No authorized cause for dismissal was proven

Article 279 of our Labor Code has construed security of tenure to mean that the employer shall not
terminate the services of an employee except for a just cause or when authorized by law.55 Concomitant
to the employer's right to freely select and engage an employee is the employer's right to discharge the
employee for just and/or authorized causes. To validly effect terminations of employment, the discharge
must be for a valid cause in the manner required by law. The purpose of these two-pronged qualifications
is to protect the working class from the employer's arbitrary and unreasonable exercise of its right to
dismiss.56

Some of the authorized causes to terminate employment under the Labor Code would be installation of
labor-saving devices, redundancy, retrenchment to prevent losses and the closing or cessation of
operation of the establishment or undertaking.57 Each authorized cause has specific requisites that must be
proven by the employer with substantial evidence before a dismissal may be considered valid.

Here, the petitioners assert that the economy of Madagascar weakened due to the global financial crisis.
Consequently, SNC-Lavalin's business also slowed down. To prove its sagging financial standing, SNC-
Lavalin presented a copy of a news item in the Financial Post, dated March 5, 2009. They insist that SNC-
Lavalin had no choice but to minimize its expenditures and operational expenses.58 In addition, the
petitioners argued that the government of Madagascar prioritized the employment of its citizens, and not
foreigners. Thus, Arriola was terminated because there was no more job available for him.59

The Court finds that Arriola was not validly dismissed. The petitioners simply argued that they were suffering
from financial losses and Arriola had to be dismissed. It was not even clear what specific authorized cause,
whether retrenchment or redundancy, was used to justify Arriola's dismissal. Worse, the petitioners did not
even present a single credible evidence to support their claim of financial loss. They simply offered an
unreliable news article which deserves scant consideration as it is undoubtedly hearsay. Time and again
the Court has ruled that in illegal dismissal cases like the present one, the onus of proving that the
employee was dismissed and that the dismissal was not illegal rests on the employer, and failure to
 G.R. No. 200088, February 26, 2018
PHILIPPINE AIRLINES, INC., Petitioner, v. AIRLINE PILOTS ASSOCIATION OF THE PHILIPPINES, SOTICO T. LLOREN,
RONALDO V. CUNANAN, LEONCIO H. MANARANG, JR., VICTOR N. AGUILAR, RODOLFO M. MEDINA, RENATO
A. FLESTADO, ROMEO L. LORENZO, WESLEY V. TATE, SALVADOR S. ARCEO, JR., MARIANO V. NAVARETTE, JR.,
WILLIAM Z. CENZON, LIBERATE D. GUTIZA, MANUEL F. FORONDA, ISMAEL C. LAPUS, JR., RAQUELITO L.
CAMACHO, JOHN JOSEPH V. DE GUZMAN, EFREN L. PATTUGALAN, JIMMY JESUS D. ARRANZA, PAUL DE LEON,
ANTONIO A. CAYABA, DIOSDADO S. JUAN, JR., ORLANDO A. DEL CASTILLO, DEOGRACIAS C. CABALLERO,
JR., AND FLORENDO R. UMALI, Respondents.
DECISION
MARTIRES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the 26
August 2011 Decision1 and 05 January 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
113985, which affirmed with modification the 27 April 20093and 26 February 20104 Resolutions of the
National Labor Relations Commission (NLRC) in NLRC LAC No. 036558-03 (RA-10-08), which likewise affirmed
with modification the 22 April 2008 Decision5 of the Labor Arbiter (LA) in NLRC NCR No. 04-04906-03.
THE FACTS
The present case arose from a labor dispute between petitioner Philippine Airlines, Inc. (PAL) and
respondent Airline Pilots' Association of the Philippines (ALPAP), a duly registered labor organization and
the exclusive bargaining agent of all commercial pilots of PAL. On 9 December 1997, ALPAP filed with the
Department of Labor and Employment (DOLE) a notice of strike alleging that PAL committed unfair labor
practice. On 23 December 1997, the Secretary of DOLE (SOLE) assumed jurisdiction over the dispute and
thereafter prohibited ALPAP from staging a strike and committing any act that could exacerbate the
dispute.6
Despite the prohibition by the SOLE, ALPAP staged a strike on 5 June 1998. A return-to-work order7 was
issued by the SOLE on 7 June 1998, but ALPAP defied the same and went on with their strike. Consequently,
on 1 June 1999, the SOLE issued a resolution[8 which declared the illegality of the strike staged by ALPAP
and the loss of employment status of the officers who participated in the strike.
The SOLE's resolution was upheld by the CA in CA-G.R. SP No. 54880.9 The matter was eventually elevated
to this Court in G.R. No. 152306. In a Resolution,10 dated 10 April 2002, the Court dismissed ALPAP's petition
for failure to show that the CA committed grave abuse of discretion or a reversible error. The resolution
attained finality on 29 August 2002.11
On 22 April 2003, or almost eight (8) months :from the finality of the Court's 10 April 2002 Resolution, PAL filed
before the LA a complaint12 for damages against ALPAP, as well as some of its officers and members.
PAL alleged, among others, that on 6 June 1998, the second day of the illegal strike conducted by ALPAP,
its striking pilots abandoned three (3) PAL aircraft, as follows: (i) PR 730 bound for Paris, France, at Bangkok,
Thailand; (ii) PR 741 bound for Manila, at Bangkok, Thailand; and (iii) PR 104 bound for Manila, at San
Francisco, California, U.S.A. Because of the deliberate and malicious abandonment of the said flights, its
passengers were stranded, and rendered PAL liable for violation of its contract of carriage. Thus, PAL was
compelled to incur expenses by way of hotel accommodations, meals for the stranded passengers, airport
parking fees, and other operational expenses. PAL further alleged that its operation was crippled by the
illegal strike resulting in several losses from ticket refunds, extraordinary expenses to cope with the shutdown
situation, and lost income from the cancelled domestic and international flights. PAL claimed that, as a
result of the illegal strike, it suffered actual damages in the amount of P731,078,988.59. PAL further prayed
that it be awarded P300,000,000.00 and P3,000,000.00 as exemplary damages and attorney's fees,
respectively.
The LA Ruling
In its decision, dated 22 April 2008, the LA dismissed PAL's complaint. It ruled that it had no jurisdiction to
resolve the issue on damages. It noted that the SOLE did not certify the controversy for compulsory
arbitration to the NLRC nor in any occasion did the parties agree to refer the same to voluntary arbitration
under Article 263(h) of the Labor Code. Hence, jurisdiction to resolve all issues arising from the labor
dispute, including the claim for damages arising from the illegal strike, was left with the SOLE to the
exclusion of all other fora.
The LA further ruled that PAL's cause of action had already been barred by prescription. It opined that
since the complaint was premised on the illegality of the strike held by the respondents, the accrual of
PAL's cause of action should be reckoned either on 5 June 1998, the first day of the strike, or on 7 June
1998, when the respondents defied the SOLE's return-to-work order. Hence, PAL's 22 April 2003 complaint
was filed beyond the 3-year prescriptive period set forth in Article 291 of the Labor Code. The LA
suggested, however, that PAL's cause of action may be treated as an independent civil action in another
forum. The dispositive portion reads:
WHEREFORE, the complaint is DISMISSED for lack of merit.
SO ORDERED.13
Aggrieved, PAL elevated an appeal to the NLRC.
The NLRC Ruling
In its resolution, dated 27 April 2009, the NLRC affirmed with modification the LA's 22 April 2008 decision. It
ruled that labor tribunals have no jurisdiction over the claims interposed by PAL. It opined that the reliefs
prayed for by PAL should have been ventilated before the regular courts considering that they are based
on the tortuous acts allegedly committed by the respondents. It explained that the airline pilots' refusal to
fly their assigned aircrafts constitutes breach of contractual obligation which is intrinsically a civil dispute.
The dispositive portion of the resolution states:
WHEREFORE, except for the MODIFICATION that the phrase "for lack of merit" in the dispositive portion is
deleted therefrom, the appealed Decision is hereby AFFIRMED.
SO ORDERED.14
PAL moved for reconsideration, but the same was denied by the NLRC in its resolution, dated 26 February
2010.
Unconvinced, PAL filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.
The CA Ruling
In its assailed Decision, dated 26 August 2011, the CA partially granted PAL's petition. It ruled that while the
NLRC correctly sustained the LA's dismissal of the complaint for lack of jurisdiction, it declared that the
NLRC gravely abused its discretion when it affirmed the LA's pronouncement that PAL's cause of action
had already prescribed.
The appellate court concurred with the NLRC's opinion that exclusive jurisdiction over PAL's claim for
damages lies with the regular courts and not with the SOLE. It ratiocinated that while Article 263(g) of the
Labor Code vests in the SOLE the authority to resolve all questions and controversies arising from a labor
dispute over which it assumed jurisdiction, said authority must be interpreted to cover only those causes of
action which are based on labor laws. Stated differently, causes of action based on an obligation or duty
not provided under the labor laws are beyond the SOLE's jurisdiction. It continued that only those issues
that arise from the assumed labor dispute, which has a direct causal connection to the employer-
employee relationship between the parties, will fall under the jurisdiction of the SOLE. It pointed out that
the damages caused by the wilful acts of the striking pilots in abandoning their aircraft are recoverable
under civil law and are thus within the jurisdiction of the regular courts.
Further, the appellate court held that PAL's cause of action accrued only on 29 August 2002, the date
when this Court's resolution sustaining the finding of the strike's illegality had attained finality. The dispositive
portion of the assailed decision reads:
WHEREFORE, premises considered, the Petition for Certiorari is PARTIALLY GRANTED. The April 27, 2009 and
February 26, 2010 NLRC Resolutions are MODIFIED as follows:
1) The complaint for damages arising from the illegal strike claimed by the petitioner lies not within the
jurisdiction of the DOLE Secretary or the Labor Arbiter but with the regular courts; and
2) Petitioner's cause of action for damages has not yet prescribed.
No costs.
SO ORDERED.15
PAL moved for partial reconsideration but the same was denied by the CA in its assailed Resolution, dated
5 January 2012.
Hence, this petition.
THE ISSUE
WHETHER THE NLRC AND THE LABOR ARBITER HAVE JURISDICTION OVER PAL'S CLAIMS AGAINST THE
RESPONDENTS FOR DAMAGES INCURRED AS A CONSEQUENCE OF THE LATTER'S ACTIONS DURING THE ILLEGAL
STRIKE.
THE COURT'S RULING
The petition is partially meritorious.
Labor tribunals have jurisdiction
over actions for damages arising
from a labor strike.
Under Article 217 [now Article 224] of the Labor Code, as amended by Section 9 of R.A. No. 6715, the LA
and the NLRC have jurisdiction to resolve cases involving claims for damages arising from employer-
employee relationship, to wit:
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
nonagricultural:
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
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.
[emphases supplied]
It is settled, however, that not every controversy or money claim by an employee against the employer or
vice-versa falls within the jurisdiction of the labor arbiter.16 Intrinsically, civil disputes, although involving the
claim of an employer against its employees, are cognizable by regular courts.17
To determine whether a claim for damages under paragraph 4 of Article 217 is properly cognizable by the
labor arbiter, jurisprudence has evolved the "reasonable connection rule" which essentially states that the
claim for damages must have reasonable causal connection with any of the claims provided for in that
article. A money claim by a worker against the employer or vice-versa is within the exclusive jurisdiction of
the labor arbiter only if there is a "reasonable causal connection" between the claim asserted and
employee-employer relations. Only if there is such a connection with the other claims can the claim for
damages be considered as arising from employer-employee relations.18 Absent such a link, the complaint
will be cognizable by the regular courts.
The appellate court was of the opinion that, applying the reasonable connection rule, PAL's claims for
damages have no relevant connection whatsoever to the employer-employee relationship between the
parties. Thus, the claim is within the exclusive jurisdiction of the regular courts. It explained that Article 217 of
the Labor Code does not include a claim for damages wherein the employer-employee relation is merely
incidental, and where the claim is largely civil in character.
The appellate court is mistaken.
The Court agrees with PAL that its claim for damages has reasonable connection with its employer-
employee relationship with the respondents. Contrary to the pronouncements made by the appellate
court, PAL's cause of action is not grounded on mere acts of quasi-delict. The claimed damages arose
from the illegal strike and acts committed during the same which were in tum closely related and
intertwined with the respondents' allegations of unfair labor practices against PAL. This could not even be
disputed as even the appellate court recognized this fact. In its 26 August 2011 Decision, the CA made the
following statements:
The damages caused by the willful act of the striking pilots in abandoning their aircrafts, together with the
passengers and cargo, which resulted in injury to petitioner's business is recoverable under civil
law.19 [emphasis supplied]
xxx
1) The complaint for damages arising from the illegal strike claimed by petitioner lies not within the
jurisdiction of the DOLE Secretary or the Labor Arbiter but with the regular courts; xxx[20 [emphasis supplied]
Since the loss and injury from which PAL seeks compensation have reasonable causal connection with the
alleged acts of unfair labor practice, a claim provided for in Article 217 of the Labor Code, the question of
damages becomes a labor controversy and is therefore an employment relationship dispute.
This issue is not novel. It has been previously decided by the Court in several cases.
In Goodrich Employees Association v. Hon. Flores, 21
the Court stressed the rule that cases involving unfair
labor practices are within the jurisdiction of the Court of Industrial Relations (CIR), the labor tribunal at that
time. The Court further emphasized that where the subject matter is within the exclusive jurisdiction of the
CIR, it must be deemed to have jurisdiction over all incidental matters connected to the main issue.
Thus, in Holganza v. Hon. Apostol,22 the Court reaffirmed the exclusive jurisdiction of the labor tribunal over
actions for damages arising from labor controversies. In the said case, the Social Security System (SSS) filed
with the then Court of First Instance (CFI) of Rizal a complaint for damages with writ of preliminary
attachment against several of its employees. It alleged that it sustained damages as a consequence of
the picketing carried on by its striking employees during a strike held against it. The striking employees
moved for the dismissal of the complaint on the ground of lack of jurisdiction, but the trial court denied the
same. Eventually, the issue reached this Court which opined that the trial court is devoid of any jurisdiction
to entertain the said complaint for damages. In so ruling, the Court declared that exclusive jurisdiction over
disputes of this character belonged to the then CIR. To hold otherwise would be to sanction split jurisdiction
which is obnoxious to the orderly administration of justice.
A similar controversy arose in Philippine Long Distance Telephone Company v. Free Telephone Workers
Union.23 The Court reiterated the rule that regular courts are devoid of any jurisdiction over claims for
damages arising from a labor strike, thus:
It is clear from the records that the subject complaint for damages is intertwined with or deeply rooted
from the 1964 certified labor dispute between appellant and appellees. As can be gleaned from the
aforesaid complaint, appellant is claiming against appellees damages it allegedly sustained as a
consequence of the strikes declared by the appellees. It is therefore obvious in the light of the established
jurisprudence as aforestated that the lower court, Court of First Instance of Manila, Branch XII, did not have
jurisdiction over the aforesaid complaint for damages; hence, all the proceedings taken therein are void
for lack of jurisdiction.24
The rule stands even if the strike is illegal. In Antipolo Highway Lines Employees Union v. Hon.
Aquino.25 Francisco De Jesus, the owner of Antipolo Highway Lines (AHL), instituted a complaint for
damages with injunction against AHL Employees Union (AHLEU) and its officers before the CFI of Rizal. De
Jesus alleged that AHLEU staged a strike and posted picket lines along AHL's compound, thereby
preventing its employees from performing their work and causing it to suffer losses and damages from the
non-operation of its buses. The Court ruled that the trial court lacked jurisdiction over the complaints for
damages and injunction because the illegal strike and picket which allegedly caused damages to De
Jesus were mere incidents of the labor dispute between the parties, to wit:
Although it was artfully made to appear that the suit was one for damages that did not divest the Court of
Industrial Relations of its jurisdiction. The Complaint itself, in paragraph 5, adverted to an "illegal strike" and
"picket lines," which are but mere incidents or consequences of the unfair labor practice complained
against by petitioner Union. In other words, it is clear that the cause of action for damages "arose out of or
was necessarily intertwined with" an alleged unfair labor practice committed by DE JESUS in refusing to sit
at the bargaining table. It is still the labor court: therefore, that has jurisdiction, particularly under the
principle that split jurisdiction is not to be countenanced for being "obnoxious to the orderly administration
of justice."26
Indeed, the aforecited cases were decided by this Court under R.A. No. 875 or the Industrial Peace Act.
The Court is also not unmindful of the fact that R.A. No. 875 had been completely superseded in 1974 by
Presidential Decree (P.D.) No. 442 or the Labor Code of the Philippines. Nevertheless, it could not be
denied that the underlying rationale for the rule finds application even with the effectivity of the Labor
Code. As in the Industrial Peace Act, splitting of jurisdiction is abhorred under the Labor Code.27
A case in point is National Federation of Labor v. Hon. Eisma, 28 decided by the Court under the provisions
of the Labor Code. In case, as in those cited, the employer, Zamboanga Wood Products, Inc., filed, before
the CFI of Zamboanga City, a complaint for damages against the officers and members of the labor
union. The employer alleged that it incurred damages because the union officers and members
blockaded the road leading to its manufacturing division, thus preventing customers and suppliers free
ingress to or egress from their premises. The labor union, however, contended that jurisdiction over the
controversy belongs to the labor arbiter because the acts complained of were incidents of picketing by
the defendants who were then on strike against the employer.
The Court ruled in favor of the labor union and nullified the proceedings before the trial court. The Court
opined that the complaint for damages is deeply rooted in the labor dispute between the parties and thus
should be dismissed by the regular court for lack of jurisdiction. The Court stressed that the wordings of
Article 217 of the Labor Code is explicit and clear enough to mean that exclusive jurisdiction over suits for
damages arising from a strike belongs to the labor arbiter, thus:
Article 217 is to be applied the way it is worded. The exclusive original jurisdiction of a labor arbiter is therein
provided for explicitly. It means, it can only mean, that a court of first instance judge then, a regional trial
court judge now, certainly acts beyond the scope of the authority conferred on him by law when he
entertained the suit for damages, arising from picketing that accompanied a strike. That was squarely
within the express terms of the law. Any deviation cannot therefore be tolerated. So it has been the
constant ruling of this Court even prior to Lizarraga Hermanos v. Yap Tico, a 1913 decision. The ringing
words of the ponencia of Justice Moreland still call for obedience. Thus, "The first and fundamental duty of
courts, in our judgment, is to apply the law. Construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate without them." It is so even after the lapse of
sixty years.29 [Citations omitted]
Jurisprudence dictates that where the plaintiffs cause of action for damages arose out of or was
necessarily intertwined with an alleged unfair labor practice, the jurisdiction is exclusively with the labor
tribunal. Likewise, 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 in the labor
dispute between the parties and within the exclusive jurisdiction of the labor arbiter. Consequently, the
same should be dismissed by ordinary courts for lack of jurisdiction.30
From the foregoing, it is clear that the regular courts do not have jurisdiction over PAL's claim of damages,
the same being intertwined with its labor dispute with the respondents over which the SOLE had assumed
jurisdiction. It is erroneous, therefore, for the CA to even suggest that PAL's complaint should have been
ventilated before the trial court.

A separate complaint for damages
runs counter to the rule against
split jurisdiction.
While there is merit in the contention that regular courts do not have jurisdiction over claims for damages
arising from a labor controversy, the Court opines that PAL could no longer recover the alleged damages.
It must be recalled that the SOLE assumed jurisdiction over the labor dispute between PAL and the
respondents on 23 December 1997. In this regard, it is settled that the authority of the SOLE to assume
jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to
national interest includes and extends to all questions and controversies arising therefrom.31 It has also
been opined that when the very reason for the SOLE's assumption of jurisdiction is the declaration of strike,
any issue regarding the strike is not merely incidental to but is essentially involved in the labor dispute
itself. 32
It bears emphasis, even at the risk of being repetitious, that it is beyond question that the issue on damages
is a controversy which arose from the labor dispute between the parties herein. Consequently, when the
SOLE assumed jurisdiction over the labor dispute, the claim for damages was deemed included therein.
Thus, the issue on damages was also deemed resolved when the SOLE decided the main controversy in its
1 June 1999 resolution declaring the illegality of the strike and the loss of employment status of the striking
officers of ALPAP, as well as when the case was finally settled by this Court in its 10 April 2002 Resolution in
G.R. No. 152306. This is true even if the respective resolutions of the SOLE, CA, and this Court were silent with
respect to the damages.
To insist that PAL may recover the alleged damages through its complaint before the LA would be to
sanction a relitigation of the issue of damages separately from the main issue of the legality of the strike
from which it is intertwined. This runs counter to the proscription against split jurisdiction – the very principle
invoked by PAL.
Likewise, PAL's claim for damages is barred under the doctrine of immutability of final judgment. Under the
said doctrine, a decision that has acquired finality becomes immutable and unalterable, and may no
longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of
fact and law, and whether it is made by the court that rendered it or by the Highest Court of the land. Any
act which violates this principle must immediately be struck down.33
Whether the damages claimed by PAL are recoverable and to what extent would depend on the
evidence in the illegal strike case which had long attained finality.34 PAL's recovery, therefore, would entail
a relitigation of the illegal strike case. The subject claim for damages would ultimately require the
modification of a final judgment. This cannot be done. The dismissal of the present petition as well as the
complaint for damages is therefore in order.
In any event, PAL only has itself to blame for this blunder. It was already aware that it had sustained
damages even before the SOLE issued its resolution. It must be remembered that the damages allegedly
sustained by PAL were incurred as a consequence of the acts committed by the respondents on the
second day of the strike on 6 June 1998, or almost a year prior to the issuance of the SOLE's resolution.
However, PAL did not assert its claim during the proceedings before the SOLE and, instead, acted on it
only after the decision on the main case attained finality. This is a grave error on the part of PAL.
The proper recourse for PAL should have been to assert its claim for damages before the SOLE and, as
aptly stated by the LA, to elevate the case to the CA when the SOLE failed to rule on the matter of
damages. The 22 April 2008 LA decision, therefore, deserves reinstatement insofar as it dismissed PAL's 22
April 2003 complaint for lack of jurisdiction for the reason that the SOLE has exclusive jurisdiction over the
same. Thus, the Court quotes with approval the following pronouncements by the LA:
The respondents maintain that the complainant simply slept on its rights when it failed to elevate the
matter of damages to the Court of Appeals. In this regard, we find the argument of the respondents
availing considering that upon the assumption of jurisdiction of the Secretary of Labor over the labor
disputes at PAL, all other issues had been subsumed therein including the claim for damages arising from
the strike. This is clear from the language of Article 263(g) of the Labor Code granting the Secretary to
order the "dismissal or loss of employment status or payment by the locking-out employer of back wages,
damages and other affirmative relief even criminal prosecution against either or both."
xxx
There is no quarrel regarding the jurisdiction of labor arbiters to rule on the legality of strikes and lock-outs
under Article 217(a)(4) but this refers to strikes or lock-outs in establishments that are not indispensable to
national interest. However, if in his opinion the dispute affects industries imbued with national interest, the
Secretary of Labor who has the authority, may assume jurisdiction over the dispute and may opt to hear
the same until its final disposition as is obtaining at bar, or to certify the same for compulsory arbitration to
the NLRC, where it is the Commission that will hear and dispose of the certified cases under Rule VIII of the
Revised Rules of the NLRC. Even in voluntary arbitration, should the disputants agree to submit the dispute
to voluntary arbitration, the Voluntary Arbitrator is not precluded from awarding damages.
As the issue on the illegality of the strikes of June 5, 1998 has already been passed upon by the Secretary of
Labor when he assumed jurisdiction to the exclusion of all others, all incidents arising from the main issue of
the legality of the strike are presumed to have been ruled upon because they are deemed subsumed by
the assumption by the Secretary of Labor.35
In sum, the Court finds meritorious PAL's claim that the CA erred in its decision. Indeed, the CA erred when
it ruled that regular courts have jurisdiction to entertain claims for damages arising from strike as the same
violates the proscription against splitting of jurisdiction. The Court, however, also finds that the LA was
already divested of its jurisdiction to entertain PAL's claim for damages as such issue was deemed included
in the issue of legality of strike of which the SOLE had assumed jurisdiction, pursuant to the rule against
splitting of jurisdiction. Unfortunately, for PAL's failure to raise the claim during the pendency of the illegal
strike case before the SOLE, the same is deemed waived.
WHEREFORE, the 26 August 2011 Decision and 5 January 2012 Resolution of the Court of Appeals (CA) in
CA-G.R. SP No. 113985 are SET ASIDE. The 22 April 2008 Decision of the Labor Arbiter is REINSTATED insofar as
it dismissed the 22 April 2003 Complaint filed by Philippine Airlines, Inc. in NLRC NCR No. 04-04906-03 for lack
of jurisdiction.
SO ORDERED.
 G.R. No. 200114, August 24, 2015
SOCIAL SECURITY SYSTEM, Petitioner, v. DEBBIE UBAÑA, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the July 29, 2011 Decision2 of the Court of Appeals (CA)
denying the Petition for Certiorari in CA-G.R. SP No. 110006 and affirming the March 6, 2007 Order3 of the
Regional Trial Court (RTC) of Daet, Camarines Norte, Branch 39 in Civil Case No. 7304; and 2) the CA's
January 10, 2012 Resolution4 denying petitioner's Motion for Reconsideration of the herein assailed
Decision.
Factual Antecedents
On December 26, 2002, respondent Debbie Ubana filed a civil case for damages against the DBP Service
Corporation, petitioner Social Security System (SSS), and the SSS Retirees Association5 before the RTC of
Daet, Camarines Norte. The case was docketed as Civil Case No. 7304 and assigned to RTC Branch 39.
In her Complaint,6 respondent alleged that in July 1995, she applied for employment with the petitioner.
However, after passing the examinations and accomplishing all the requirements for employment, she was
instead referred to DBP Service Corporation for "transitory employment." She took the pre-employment
examination given by DBP Service Corporation and passed the same. On May 20, 1996, she was told to
report for training to SSS, Naga City branch, for immediate deployment to SSS Daet branch. On May 28,
1996, she was made to sign a six-month Service Contract Agreement7 by DBP Service Corporation,
appointing her as clerk for assignment with SSS Daet branch effective May 27, 1996, with a daily wage of
only P171.00. She was assigned as "Frontliner" of the SSS Members Assistance Section until December 15,
1999. From December 16, 1999 to May 15, 2001, she was assigned to the Membership Section as Data
Encoder. On December 16, 2001, she was transferred to the SSS Retirees Association as Processor at the
Membership Section until her resignation on August 26, 2002. As Processor, she was paid only P229.00 daily
or P5,038.00 monthly, while a regular SSS Processor receives a monthly salary of P18,622.00 or P846.45 daily
wage. Her May 28, 1996 Service Contract Agreement with DBP Service Corporation was never renewed,
but she was required to work for SSS continuously under different assignments with a maximum daily salary
of only P229.00; at the same time, she was constantly assured of being absorbed into the SSS plantilla.
Respondent claimed she was qualified for her position as Processor, having completed required training
and passed the SSS qualifying examination for Computer Operations Course given by the National
Computer Institute, U.P. Diliman from May 16 to June 10, 2001, yet she was not given the proper salary.
Because of the oppressive and prejudicial treatment by SSS, she was forced to resign on August 26, 2002 as
she could no longer stand being exploited, the agony of dissatisfaction, anxiety, demoralization, and
injustice. She asserted that she dedicated six years of her precious time faithfully serving SSS, foregoing
more satisfying employment elsewhere, yet she was merely exploited and given empty and false promises;
that defendants conspired to exploit her and violate civil service laws and regulations and Civil Code
provisions on Human Relations, particularly Articles 19, 20, and 21.8 As a result, she suffered actual losses by
way of unrealized income, moral and exemplary damages, attorney's fees and litigation expenses.
Respondent prayed for an award of P572,682.67 actual damages representing the difference between
the legal and proper salary she should have received and the actual salary she received during her six-
year stint with petitioner; P300,000.00 moral damages; exemplary damages at the discretion of the court;
P20,000.00 attorney's fees and P1,000.00 appearance fees; and other just and equitable relief.
Petitioner and its co-defendants SSS Retirees Association and DBP Service Corporation filed their respective
motions to dismiss, arguing that the subject matter of the case and respondent's claims arose out of
employer-employee relations, which are beyond the RTC's jurisdiction and properly cognizable by the
National Labor Relations Commission (NLRC).
Respondent opposed the motions to dismiss, arguing that pursuant to civil service rules and regulations,
service contracts such as her Service Contract Agreement with DBP Service Corporation should cover only
a) lump sum work or services such as janitorial, security or consultancy services, and b) piece work or
intermittent jobs of short duration not exceeding six months on a daily basis.9 She posited that her service
contract involved the performance of sensitive work, and not merely janitorial, security, consultancy
services, or work of intermittent or short duration. In fact, she was made to work continuously even after the
lapse of her 6-month service contract. Citing Civil Service Commission Memorandum Circular No. 40,
respondent contended that the performance of functions outside of the nature provided in the
appointment and receiving salary way below that received by regular SSS employees amount to an abuse
of rights; and that her cause of action is anchored on the provisions of the Civil Code on Human Relations.
Ruling of the Regional Trial Court
On October 1, 2003, the RTC issued an Order10 dismissing respondent's complaint for lack of jurisdiction,
stating that her claim for damages "has a reasonable causal connection with her employer-employee
relations with the defendants"11 and "is grounded on the alleged fraudulent and malevolent manner by
which the defendants conspired with each other in exploiting [her], which is a clear case of unfair labor
practice,"12 falling under the jurisdiction of the Labor Arbiter of the NLRC. Thus, it decreed:cralawlawlibrary
WHEREFORE, premises considered, the aforementioned Motion to Dismiss the complaint of the herein
plaintiff for lack of jurisdiction is hereby GRANTED. The above-entitled complaint is hereby DISMISSED.
SO ORDERED.13
Respondent moved for reconsideration. On March 6, 2007, the RTC issued another Order14 granting
respondent's motion for reconsideration. The trial court held:cralawlawlibrary
Section 2(1), Art. K-B, 1987 Constitution, expressly provides that "the civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the government, including government-owned or
controlled corporation[s] with original charters." Corporations with original charters are those which have
been created by special law[s] and not through the general corporation law. In contrast, labor law claims
against government-owned and controlled corporations without original charters fall within the jurisdiction
of the Department of Labor and Employment and not the Civil Service Commission. (Light Rail Transit
Authority vs. Perfecto Venus, March 24, 2006.)
Having been created under an original charter, RA No. 1161 as amended by R.A. 8282, otherwise known
as the Social Security Act of 1997, the SSS is governed by the provision[s] of the Civil Service Commission.
However, since the SSS denied the existence of an employer-employee relationship, and the case is one
for Damages, it is not the Civil Service Commission that has jurisdiction to try the case, but the regular
courts.
A perusal of the Complaint filed by the plaintiff against the defendant SSS clearly shows that the case is
one for Damages.
Paragraph 15 of her complaint states, thus:ChanRoblesvirtualLawlibrary
xxx. Likewise, they are contrary to the Civil Code provisions on human relations which [state], among
others, that Every person, must in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due and observe honesty and good faith (Article 19) and that Every person who,
contrary to law, willfully or negligently [causes] damages to another, shall indemnify the latter for the same.
(Art. 20)
"Article 19 provides a rule of conduct that is consistent with an orderly and harmonious relationship
between and among men and women It codifies the concept of what is justice and fair play so that
abuse of right by a person will be prevented. Art. 20 speaks of general sanction for all other provisions of
law which do not especially provide their own sanction. Thus, anyone, who, whether willfully or negligently,
in the exercise of his legal right or duty, causes damage to another, shall indemnify his or her victim for
injuries suffered thereby." (Persons and Family Relations, Sta. Maria, Melencio, Jr. (2004) pp. 31-32.)

Wherefore, all premises considered, the Motion for Reconsideration is hereby GRANTED. The case against
defendant Social Security System represented by its President is hereby reinstated in the docket of active
civil cases of this court.
SO ORDERED.15 [Italics in the original]
Petitioner moved for reconsideration, but the RTC stood its ground in its June 24, 2009 Order16cralawrednad
Ruling of the Court of Appeals
In a Petition for Certiorari17 filed with the CA and docketed as CA-G.R. SP No. 110006, petitioner sought a
reversal of the RTC's June 24, 2009 and March 6, 2007 Orders and the reinstatement of its original October
1, 2003 Order dismissing Civil Case No. 7304, insisting that the trial court did not have jurisdiction over
respondent's claims for "unrealized salary income" and other damages, which constitute a labor dispute
cognizable only by the labor tribunals. Moreover, it claimed that the assailed Orders of the trial court were
issued with grave abuse of discretion. It argued that the trial court gravely erred in dismissing the case only
as against its co-defendants DBP Service Corporation and SSS Retirees Association and maintaining the
charge against it, considering that its grounds for seeking dismissal are similar to those raised by the two. It
maintained that DBP Service Corporation and SSS Retirees Association are legitimate independent job
contractors engaged by it to provide manpower services since 2001, which thus makes respondent an
employee of these two entities and not of SSS; and that since it is not the respondent's employer, then
there is no cause of action against it.
On July 29, 2011, the CA issued the assailed Decision containing the following
pronouncement:cralawlawlibrary
Hence, petitioner seeks recourse before this Court via this Petition for Certiorari challenging the RTC Orders.
For the resolution of this Court is the sole issue of:cralawlawlibrary
WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 7304.
The petition is devoid of merits.
The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency
of the government has jurisdiction over the same, are determined by the material allegations of the
complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for relief is not part of the
petition of the cause of action; nor does it enlarge the cause of action stated or change the legal effect
of what is alleged. In determining which body has jurisdiction over a case, the better policy is to consider
not only the status or relationship of the parties but also the nature of the action that is the subject of their
controversy.
A careful perusal of Ubana's Complaint in Civil Case No. 7304 unveils that Ubana's claim is rooted on the
principle of abuse of right laid in the New Civil Code. She was claiming damages based on the alleged
exploitation [perpetrated] by the defendants depriving her of her rightful income. In asserting that she is
entitled to the damages claimed, [she] invoked not the provisions of the Labor Code or any other labor
laws but the provisions on human relations under the New Civil Code. Evidently, the determination of the
respective rights of the parties herein, and the ascertainment whether there were abuses of such rights, do
not call for the application of the labor laws but of the New Civil Code. Apropos thereto, the resolution of
the issues raised in the instant complaint does not require the expertise acquired by labor officials. It is the
courts of general jurisdiction, which is the RTC in this case, which has the authority to hear and decide Civil
Case No. 7304.
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. 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.
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.
The pivotal question is whether the Labor Code has any relevance to the principal relief sought in the
complaint. As pointed out earlier, Ubana did not seek refuge from the Labor Code in asking for the award
of damages. It was the transgression of Article[s] 19 and 20 of the New Civil Code that she was insisting in
wagering this case. The primary relief sought herein is for moral and exemplary damages for the abuse of
rights. The claims for actual damages for unrealized income are the natural consequence for abuse of
such rights.
While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by labor
laws, but also damages governed by the Civil Code, these reliefs must still be based on an action that has
a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining
agreements. Claims for damages under paragraph 4 of Article 217 must have a reasonable causal
connection with any of the claims provided for in the article in order to be cognizable by the labor arbiter.
Only if there is such a connection with the other claims can the claim for damages be considered as
arising from employer-employee relations. In the present case, Ubana's claim for damages is not related to
any other claim under Article 217, other labor statutes, or collective bargaining agreements.
All told, it is ineluctable that it is the regular courts that has [sic] jurisdiction to hear and decide Civil Case
No. 7304. In Tolosa v. NLRC,18 the Supreme Court held that, "[i]t is not the NLRC but the regular courts that
have jurisdiction over action for damages, in which the employer-employee relations is merely incidental,
and in which the cause of action proceeds from a different source of obligation such as tort. Since
petitioner's claim for damages is predicated on a quasi-delict or tort that has no reasonable causal
connection with any of the claims provided for in Article 217, other labor statutes or collective bargaining
agreements, jurisdiction over the action lies with the regular courts not with the NLRC or the labor arbiters."
The same rule applies in this case.
WHEREFORE, premises considered, the instant petition is DENIED and the Order dated March 6, 2007 of the
Regional Trial Court, Branch 39 of Daet, Camarines Norte in Civil Case No. 7304 is hereby AFFIRMED.
SO ORDERED.19
Petitioner filed a Motion for Reconsideration,20 but the CA denied the same in its January 10, 2012
Resolution.21 Hence, the present Petition.
Issue
Petitioner simply submits that the assailed CA dispositions are contrary to law and jurisprudence.
Petitioner's Arguments
Praying that the assailed CA dispositions be set aside and that the RTC's October 1, 2003 Order dismissing
Civil Case No. 7304 be reinstated, petitioner essentially maintains in its Petition and Reply22 that
respondent's claims arose from and are in fact centered on her previous employment. It maintains that
there is a direct causal connection between respondent's claims and her employment, which brings the
subject matter within the jurisdiction of the NLRC. Petitioner contends that respondent's other claims are
intimately intertwined with her claim of actual damages which are cognizable by the NLRC. Moreover,
petitioner alleges that its existing manpower services agreements with DBP Service Corporation and SSS
Retirees Association are legitimate; and that some of respondent's claims may not be entertained since
these pertain to benefits enjoyed by government employees, not by employees contracted via legitimate
manpower service providers. Finally, petitioner avers that the nature and character of the reliefs prayed for
by the respondent are directly within the jurisdiction not of the courts, but of the labor tribunals.
Respondent's Arguments
In her Comment,23 respondent maintains that her case is predicated not on labor laws but on Articles 19
and 20 of the Civil Code for petitioner's act of exploiting her and enriching itself at her expense by not
paying her the correct salary commensurate to the position she held within SSS. Also, since there is no
employer-employee relationship between her and petitioner, as the latter itself admits, then her case is not
cognizable by the Civil Service Commission (CSC) either; that since the NLRC and the CSC have no
jurisdiction over her case, then it is only the regular courts which can have jurisdiction over her claims. She
argues that the CA is correct in ruling that her case is rooted in the principle of abuse of rights under the
Civil Code; and that the Petition did not properly raise issues of law.
Our Ruling
The Court denies the Petition.
In Home Development Mutual Fund v. Commission on Audit,24 it was held that while they performed the
work of regular government employees, DBP Service Corporation personnel are not government
personnel, but employees of DBP Service Corporation acting as an independent contractor. Applying the
foregoing pronouncement to the present case, it can be said that during respondent's stint with petitioner,
she never became an SSS employee, as she remained an employee of DBP Service Corporation and SSS
Retirees Association - the two being independent contractors with legitimate service contracts with SSS.
Indeed, "[i]n legitimate job contracting, no employer-employee relation exists between the principal and
the job contractor's employees. The principal is responsible to the job contractor's employees only for the
proper payment of wages."25cralawredcralawrednad
In her Complaint, respondent acknowledges that she is not petitioner's employee, but that precisely she
was promised that she would be absorbed into the SSS plantilla after all her years of service with SSS; and
that as SSS Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a regular SSS Processor
receives a monthly salary of P18,622.00, or P846.45 daily wage. In its pleadings, petitioner denied the
existence of an employer-employee relationship between it and respondent; in fact, it insists on the validity
of its service agreements with DBP Service Corporation and SSS Retirees Association - meaning that the
latter, and not SSS, are respondent's true employers. Since both parties admit that there is no employment
relation between them, then there is no dispute cognizable by the NLRC. Thus, respondent's case is
premised on the claim that in paying her only P229.00 daily - or P5,038.00 monthly - as against a monthly
salary of P18,622.00, or P846.45 daily wage, paid to a regular SSS Processor at the time, petitioner exploited
her, treated her unfairly, and unjustly enriched itself at her expense.
For Article 217 of the Labor Code to apply, and in order for the Labor Arbiter to acquire jurisdiction over a
dispute, there must be an employer-employee relation between the parties thereto.chanrobleslaw
x x x It is well settled in law and jurisprudence that where no employer-employee relationship exists
between the parties and no issue is involved which may be resolved by reference to the Labor Code,
other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has
jurisdiction, x x x The action is within the realm of civil law hence jurisdiction over the case belongs to the
regular courts. While the resolution of the issue involves the application of labor laws, reference to the labor
code was only for the determination of the solidary liability of the petitioner to the respondent where no
employer-employee relation exists. Article 217 of the Labor Code as amended vests upon the labor
arbiters exclusive original jurisdiction only over the following:ChanRoblesvirtualLawlibrary
1. Unfair labor practices;
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 requisite x x x.26
Since there is no employer-employee relationship between the parties herein, then there is no labor
dispute cognizable by the Labor Arbiters or the NLRC.
There being no employer-employee relation or any other definite or direct contract between respondent
and petitioner, the latter being responsible to the former only for the proper payment of wages,
respondent is thus justified in filing a case against petitioner, based on Articles 19 and 20 of the Civil Code,
to recover the proper salary due her as SSS Processor. At first glance, it is indeed unfair and unjust that as,
Processor who has worked with petitioner for six long years, she was paid only P5,038.00 monthly, or P229.00
daily, while a regular SSS employee with the same designation and who performs identical functions is paid
a monthly salary of P18,622.00, or P846.45 daily wage. Petitioner may not hide under its service contracts to
deprive respondent of what is justly due her. As a vital government entity charged with ensuring social
security, it should lead in setting the example by treating everyone with justice and fairness. If it cannot
guarantee the security of those who work for it, it is doubtful that it can even discharge its directive to
promote the social security of its members in line with the fundamental mandate to promote social justice
and to insure the well-being and economic security of the Filipino people.
In this jurisdiction, the "long honored legal truism of 'equal pay for equal work'" has been "impregnably
institutionalized;" "[p]ersons who work with substantially equal qualifications, skill, effort and responsibility,
under similar conditions, should be paid similar salaries."27 "That public policy abhors inequality and
discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The
Constitution in the Article on Social Justice and Human Rights exhorts Congress to 'give highest priority to
the enactment of measures that protect and enhance the right of all people to human dignity, reduce
social, economic, and political inequalities.' The very broad Article 19 of the Civil Code requires every
person, 'in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone
his due, and observe honesty and good faith'."28cralawrednad
WHEREFORE, the Petition is DENIED. The assailed July 29, 2011 Decision and January 10, 2012 Resolution of
the Court of Appeals in CA-G.R. SP No. 110006 are AFFIRMED. The case is ordered remanded with dispatch
to the Regional Trial Court of Daet, Camarines Norte, Branch 39, for continuation of proceedings.
SO ORDERED.
G.R. No. 202961 February 4, 2015
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN, NORA
MENDOZA, et al., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ·SOLID MILLS, INC., and/or PHILIP ANG, Respondents.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employee's return of its
properties.
Petitioners are respondent Solid Mills, Inc.' s (Solid Mills) employees.1 They are represented by the National
Federation of Labor Unions (NAFLU), their collective bargaining agent.2
As Solid Mills’ employees, petitionersand their families were allowed to occupy SMI Village, a property
owned by Solid Mills.3 According to Solid Mills, this was "[o]ut of liberality and for the convenience of its
employees . . . [and] on the condition that the employees . . . would vacate the premises anytime the
Company deems fit."4
In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease its
operations due to serious business losses.5 NAFLU recognized Solid Mills’ closure due to serious business
losses in the memorandum of agreement dated September 1, 2003.6 The memorandum of agreement
provided for Solid Mills’ grant of separation pay less accountabilities, accrued sick leave benefits, vacation
leave benefits, and 13th month pay to the employees.7 Pertinent portions of the agreement provide:
WHEREAS, the COMPANYhas incurred substantial financial losses and is currently experiencing further
severe financial losses;
WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations on October
10, 2003;
WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will bedismissed from
employment effective October 10, 2003;
In view thereof, the parties agree as follows:
1. That UNION acknowledges that the COMPANY is experiencing severe financial losses
and as a consequence of which, management is constrained to cease the company’s
operations.
2. The UNION acknowledges that under Article 283 of the Labor Code, separation pay is
granted to employees who are dismissed due to closures or cessation of operations NOT
DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses the Company has
been experiencing as seen in their audited financial statements, employees ARE NOT
granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant
financial assistance less accountabilities to members of the Union based on length of
service to be computed as follows: (Italics in this paragraph supplied)
Number of days - 12.625 for every year of service
5. In view of the above, the members of the UNION will receive such financial assistance
on an equal monthly installments basis based on the following schedule:
First Check due on January 5, 2004 and every 5th of the month thereafter until
December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union members are entitled
to, specifically those arising from sick and vacation leave benefits and 13th month pay,
less accountabilities based on the following schedule:
One Time Cash Payment to bedistributed anywhere from. . . .
....
8. The foregoing agreement is entered into with full knowledge by the parties of their
rights under the law and they hereby bind themselves not to conduct any concerted
action of whatsoever kind, otherwise the grant of financial assistance as discussed
above will be withheld.8 (Emphasis in the original)
Solid Mills filed its Department of Labor and Employment termination report on September 2, 2003.9
Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI Village.10
Petitioners were no longer allowed to report for work by October 10, 2003.11 They were required to sign a
memorandum of agreement with release and quitclaim before their vacation and sick leave benefits, 13th
month pay, and separation pay would be released.12 Employees who signed the memorandum of
agreement were considered to have agreed to vacate SMI Village, and to the demolition of the
constructed houses inside as condition for the release of their termination benefits and separation
pay.13 Petitioners refused to sign the documents and demanded to be paid their benefits and separation
pay.14
Hence, petitioners filed complaintsbefore 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 becausetheir 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 SolidMills their uniforms and equipment when Solid Mills ceased operations.19
On the other hand, Solid Mills argued that petitioners’ complaint was premature because they had not
vacated its property.20
The Labor Arbiter ruled in favor of petitioners.21 According to the Labor Arbiter, Solid Mills illegallywithheld
petitioners’ benefits and separation pay.22 Petitioners’ right to the payment of their benefits and separation
pay was vestedby law and contract.23 The memorandum of agreement dated September 1, 2003 stated
no condition to the effect that petitioners must vacate SolidMills’ 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 isoutside the jurisdiction of the Labor Arbiter.27
The dispositive portion of the Labor Arbiter’s decision reads:
WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID MILLS, INC. and/or
PHILIP ANG (President), in solido to pay the remaining 21 complainants:
1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO DAVID,
BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS, RENATO
ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA, ROBERTO
IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA MAHILOM, MARILOU LINGA, RENATO LINGA
their separation pay of 12.625 days’ pay per year of service, pro-rated 13th month pay for 2003
and accrued vacation and sick leaves, plus 12% interest p.a. from date of filing of the
leadcase/judicial demand on 12/08/03 until actual payment and/or finality;
2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received on
12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total amount of ₱15,435.16,
likewise, complainant Jerry L. Sesma as he already received his accrued 13th month pay for 2003,
SL/VL in the total amount of ₱10,974.97, 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 complaintsviz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie
Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and
Purificacion Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement, whereas,
that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA PASCO], [OLIMPIO
A. PASCO] are DISMISSED WITHOUT PREJUDICE, for lack of interest and/or failure to prosecute.
The Computation and Examination unit is directed to cause the computation of the award in Pars. 2 and 3
above.28 (Emphasis in the original)
Solid Mills appealed to the National Labor Relations Commission.29 It prayed for, among others, the
dismissal of the complaints against it and the reversal of the Labor Arbiter’s decision.30
The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s dispositive portion,
but reversed paragraphs 1 and 2. Thus:
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is AFFIRMED in so far as
par. 3 thereof is concerned but modified in that paragraphs 1 and 2 thereof are REVERSED and SET ASIDE.
Accordingly, the following complainants, namely: Emir Milan, Ramon Masangkay, Alfredo Javier, Ronaldo
David, Bonifacio Matundan, Nora Mendoza, Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S.
Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and
Jerry L. Sesma’s monetary claims in the form of separation pay, accrued 13th month pay for 2003, accrued
vacation and sick leave pays are held in abeyance pending compliance of their accountabilities to
respondent company by turning over the subject lots they respectively occupy at SMI Village Sucat
Muntinlupa City, Metro Manila to herein respondent company.31
The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga,
IsmaelMata, and Carlito Damian were already paid their respective separation pays and
benefits.32 Meanwhile, Teodora Mahilom already retired longbefore Solid Mills’ closure.33 She was already
given her retirement benefits.34
The National Labor Relations Commission ruled that because of petitioners’ failure to vacate Solid Mills’
property, Solid Mills was justified in withholding their benefits and separation pay.35 Solid Mills granted the
petitioners the privilege to occupy its property on accountof petitioners’ employment.36 It had the
prerogative toterminate such privilege.37 The termination of Solid Mills and petitioners’ employer-employee
relationship made it incumbent upon petitioners to turn over the property to Solid Mills.38
Petitioners filed a motion for partial reconsideration on October 18, 2010,39 but this was denied in the
November 30, 2010 resolution.40
Petitioners, thus, filed a petition for certiorari41 before the Court of Appeals to assail the National
LaborRelations Commission decision of August 31, 2010 and resolution of November 30, 2010.42
On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’ petition,43 thus:
WHEREFORE, the petition is hereby ordered DISMISSED.44
The Court of Appeals ruled thatSolid Mills’ act of allowing its employees to make temporary dwellingsin its
property was a liberality on its part. It may be revoked any time at its discretion.45 As a consequence of
Solid Mills’ closure and the resulting termination of petitioners, the employer-employee relationship
between them ceased to exist. There was no more reason for them to stay in Solid Mills’
property.46 Moreover, the memorandum of agreement between Solid Mills and the union representing
petitioners provided that Solid Mills’ payment of employees’ benefits should be "less accountabilities." 47
On petitioners’ claim that there was no evidence that Teodora Mahilom already received her retirement
pay, the Court of Appeals ruled that her complaint filed before the Labor Arbiter did not include a claim
for retirement pay. The issue was also raised for the first time on appeal, which is not allowed.48 In any case,
she already retired before Solid Mills ceased its operations.49
The Court of Appeals agreed with the National Labor Relations Commission’s deletion of interest since it
found that Solid Mills’ act of withholding payment of benefits and separation pay was proper. Petitioners’
terminal benefits and pay were withheld because of petitioners’ failure to vacate Solid Mills’ property.50
Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and
benefits.51 Hence, he should no longer be awarded these claims.52
In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’ motion for
reconsideration.53
Petitioners raise in this petition the following errors:
I monetary benefits again, which he, admittedly, already received from Solid Mills.73
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 AMOUNTDUE 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 wereincurred by
petitioners while they were performing their duties asemployees at the worksite.58 Moreover, applicable
laws, company practice, or policies do not provide that 13th month pay, and sick and vacation leave pay
benefits, may be withheld pending satisfaction of liabilities by the employee.59
Petitioners also point out thatthe National Labor Relations Commission and the Court of Appeals have no
jurisdiction to declare that petitioners’ act of withholding possession of respondent Solid Mills’ property is
illegal.60 The regular courts have jurisdiction over this issue.61 It is independent from the issue of payment of
petitioners’ monetary benefits.62
For these reasons, and because, according to petitioners, the amount of monetary award is no longer in
question, petitioners are entitled to 12% interest per annum.63
Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims. They insistthat
Teodora Mahilom did not receive her retirement benefits and that Carlito Damian did not receive his
separation benefits.64
Respondents Solid Mills and Philip Ang,in their joint comment, argue that petitioners’ failure to turn over
respondentSolid 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
NAFLUmerely stated "accountabilities," without qualification.68
On the removal of the award of 12% interest per annum, respondents argue that such removal was proper
since respondent Solid Mills was justified in withholding the monetary claims.69 Respondents argue that
Teodora Mahilom had no more cause of action for retirement benefits claim.70 She had already retired
more than a decade before Solid Mills’ closure. She also already received her retirement benefits in
1991.71 Teodora Mahilom’s claim was also not included in the complaint filed before the Labor Arbiter.It
was improper to raise this claim for the first time on appeal. In any case, Teodora Mahilom’s claim was
asserted long after the three-year prescriptive period provided in Article 291 of the Labor Code.72
Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to receive
 I In this case, respondent Solid Mills claims that its properties are in petitioners’ possession by virtue of their
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
employeremployee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within
thirty (30) calendar days after the submission of the case by the parties for decision without extension, even
in the absence of stenographic notes, the following cases involving workers, whether agricultural or non-
agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
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 (₱5,000.00), 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: 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 factof 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 Domondonis
whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of ownership of a vehicle
assigned to the employee. It was argued that only regular courts have jurisdiction to decide the issue.77
This court ruled that since the transfer of ownership of the vehicle to the employee was connected to his
separation from the employer and arose from the employer-employee relationship of the parties, the
employer’s claim fell within the LaborArbiter’s jurisdiction.78
As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raisedand
must arise from an employeremployee relationship for the labortribunals to have jurisdiction.
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’ employeremployee 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 tothe employer before the employee’s departure.
As a general rule, employers are prohibited from withholding wages from employees. The Labor Code
provides:
Art. 116. Withholding of wages and kickbacks prohibited.It shall be unlawful for any person, directly or
indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his
wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker’s
consent.
The Labor Code also prohibits the elimination or diminution of benefits. Thus:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of
promulgation of this Code.
However, our law supports the employers’ institution of clearance procedures before the release of wages.
As an exception to the general rule that wages may not be withheld and benefits may not be diminished,
the Labor Code provides:
Art. 113. Wage deduction.No employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except:
1. In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to 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:
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.
"Debt" in this case refers to any obligation due from the employee to the employer. It includes any
accountability that the employee may have to the employer. There is no reason to limit its scope to
uniforms and equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the
release of petitioners’ benefits shall be "less accountabilities."
"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning of the term
"accountability" does not limit the definition of accountability to those incurred in the worksite. As long as
the debt or obligation was incurred by virtue of the employer-employee relationship, generally, it shall be
included in the employee’s accountabilities that are subject to clearance procedures.
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 The preferential treatment given by our law to labor, however, is not a license for abuse.84 It is not a signal
included in accountabilities incurred by virtue of an employer-employee relationship. Petitioners do not to commit acts of unfairness that will unreasonably infringe on the property rights of the company. Both
categorically deny respondent Solid Mills’ ownership of the property, and they do not claim superior right labor and employer have social utility, and the law is not so biased that it does not find a middle ground to
to it. What can be gathered from the findings ofthe Labor Arbiter, National Labor Relations Commission, give each their due.
and the Court ofAppeals is that respondent Solid Mills allowed the use of its property for the benefit of Clearly, in this case, it is for the workers to return their housing in exchange for the release of their
petitioners as its employees. Petitioners were merely allowed to possess and use it out of respondent Solid benefits.1âwphi1 This is what they agreed upon. It is what is fair in the premises.
Mills’ liberality. The employer may, therefore, demand the property at will.79
WHEREFORE, the petition is DENIED. The Court of Appeals' decision is AFFIRMED.
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 benefitsbecause of this existing debt or liability. In Solas v. Power and Telephone
Supply Phils., Inc., et al., this court recognized this right of the employer when it ruled that the employee in
that case was not constructively dismissed.80 Thus:
There was valid reason for respondents’ withholding of petitioner’s salary for the month of February 2000.
Petitioner does not deny that he is indebted to his employer in the amount of around 95,000.00.
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
subjectedto the condition that the employees return properties properly belonging to the employer. This is
only consistent with the equitable principle that "no one shall be unjustly enriched or benefited at the
expense of another."82
For these reasons, we cannot hold that petitioners are entitled to interest of their withheldseparation
benefits. These benefits were properly withheld by respondent Solid Mills because of their refusal to return
its property.
III
Mahilom and Damian are not entitled to the benefits claimed
Teodora Mahilom is not entitled to separation benefits.
Both the National Labor Relations Commission and the Court of Appeals found that Teodora Mahilom
already retired long before respondent Solid Mills’ closure. They found that she already received her
retirement benefits. We have no reason to disturb this finding. This court is not a trier of facts. Findings of the
National Labor Relations Commission, especially when affirmed by the Court of Appeals, are binding upon
this court.83
Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her complaint filed before
the Labor Arbiter. Hence, it may not be raised in the appeal.
Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito Damian
already received his terminal benefits. Hence, he may no longer claim terminal benefits. The fact that
respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI Village is not evidence that he
did not receive his benefits. Both the National Labor Relations Commission and the Court of Appeals found
that he executed an affidavit stating that he already received the benefits.
A bsent 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.
G.R. No. 168612 December 10, 2014
First Month ----- 350.00
PHILIPPINE ELECTRIC CORPORATION (PHILEC), Petitioner,
vs.
Second month ----- 815.00
COURT OF APPEALS, NATIONAL CONCILIATION AND MEDIATION BOARD (NCMB), Department of Labor and
Employment, RAMON T. JIMENEZ, in his capacity as Voluntary Arbitrator, PHILEC WORKERS' UNION (PWU),
ELEODORO V. LIPIO, and EMERLITO C. IGNACIO, Respondents. Third month ----- 815.00
DECISION
Fourth month ----- 815.00
LEONEN, J.:
An appeal to reverse or modify a Voluntary Arbitrator's award or decision must be filed before the Court of Please be guided accordingly.10
Appeals within 10 calendar days from receipt of the award or decision. Ignacio, Sr., then DT-Assembler with Pay Grade VII,11 was likewise selected for training for the position of
This is a
petition1 for review on certiorari of the Court of Appeals’
decision2 dated May 25, 2004, dismissing Foreman I.12 On August 21, 1997, PHILEC served Ignacio, Sr. a memorandum,13 instructing him to undergo
the Philippine Electric Corporation’s petition for certiorari for lack of merit. Philippine Electric Corporation training with the following schedule of allowance:
(PHILEC) is a domestic corporation "engaged in the manufacture and repairs of high voltage This will confirm your selection and that you will undergo training for the position of Foreman I (PG B) of the
transformers."3 Among its rank-and-file employees were Eleodoro V. Lipio (Lipio) and Emerlito C. Ignacio, Sr. Assembly Section, Distribution Transformer Manufacturing and Repair effective
(Ignacio, Sr.), former members of the PHILEC Workers’ Union (PWU).4 PWU is a legitimate labor organization
August 25, 1997.
and the exclusive bargaining representative of PHILEC’s rank-and-file employees.5
You will be trained as a Foreman I,and shall receive the following training allowance until you have
From June 1, 1989 to May 31, 1997, PHILEC and its rank-and-file employees were governed by collective
completed the training/observation period which shall not exceed four (4) months.
bargaining agreements providing for the following step increases in an employee’s basic salary in case of
promotion:6 First Month ----- 255.00
Rank-and-File (PWU)
Pay Second month ----- 605.00
Grade June 1, 1989 to June 1, 1992 to June 1, 1994 to
May 31, 1992 May 31, 1994 May 31, 1997 Third month ----- 1,070.00

I – II 50 60 65 Fourth month ----- 1,070.00

II – III 60 70 78 Please be guided accordingly.14

On September 17, 1997, PHILEC and PWU entered into a new collective bargaining agreement, effective
III – IV 70 80 95 retroactively on June 1, 1997 and expiring on May 31, 1999.15 Under Article X, Section 4 of the June 1, 1997
collective bargaining agreement, a rank-and-file employee promoted shall be entitled to the following
IV – V 80 110 120 step increases in his or her basic salary:16
Section 4. STEP INCREASES. [Philippine Electric Corporation] shall adopt the following step increases on the
V- VI 100 140 150 basic salary in case of promotion effective June 1, 1997. Such increases shall be based on the scale below
or upon the minimum of the new pay grade to which the employee is promoted, whichever is higher:
VI – VII 120 170 195
Pay Grade Step Increase
VII – VIII 170 230 255 I - II ₱80.00

VIII – IX 220 290 340 II - III ₱105.00

III - IV ₱136.00
IX – X 260 350 455
IV - V ₱175.00
On August 18, 1997 and with the previous collective bargaining agreements already expired, PHILEC
selected Lipio for promotion from Machinist under Pay Grade VIII 7 to Foreman I under Pay Grade B.8 PHILEC V - VI ₱224.00
served Lipio a memorandum,9 instructing him to undergo training for the position of Foreman I beginning
VI - VII ₱285.00
on August 25, 1997. PHILEC undertook to pay Lipio training allowance as provided in the memorandum:
This will confirm your selection and that you will undergo training for the position of Foreman I (PG B) of the VII - VIII ₱361.00
Tank Finishing Section, Distribution Transformer Manufacturing and Repair effective August 25, 1997.
VIII - IX ₱456.00
You will be trained as a Foreman I,and shall receive the following training allowance until you have
completed the training/observation period which shall not exceed four (4) months. IX - X ₱575.00
To be promoted, a rank-and-file employee shall undergo training or observation and shall receive training For the second month, he should be paid an allowance equal to the step increase under pay grade
allowance as provided in Article IX, Section 1(f) of the June 1, 1997 collective bargaining agreement:17 bracket VIIVIII plus the step increase under pay grade bracket VIII-IX. For the third and fourth months,
Section 1. JOB POSTING AND BIDDING: Ignacio, Sr. should receive an allowance equal to the amount he received for the second month plus the
amount equal to the step increase under pay grade bracket IX-X, thus:26
....
(f) Allowance for employees under Training or Observation shall be on a graduated basis as follows: First Month ----- ₱361.00
For the first month of training, the allowance should be equivalent to one step increase of the next higher
grade. Every month thereafter the corresponding increase shall be equivalent to the next higher grade Second month ----- ₱817.00
until the allowance for the grade applied for is attained.
As an example, if a Grade I employee qualifies for a Grade III position, he will receive the training Third month ----- ₱1,392.00
allowance for Grade I to Grade II for the first month. On the second month, he will receive the training
allowance for Grade I to Grade II plus the allowance for Grade II to Grade III. He will then continue to Fourth month ----- ₱1,392.00.
receive this amount until he finishes his training or observation period.18
For PHILEC’s failure to apply the schedule of step increases under Article X of the June 1, 1997 collective
Claiming that the schedule of training allowance stated in the memoranda served on Lipio and Ignacio,Sr.
bargaining agreement, PWU argued that PHILEC committed an unfair labor practice under Article 24827 of
did not conform to Article X, Section 4 of the June 1, 1997 collective bargaining agreement, PWU
the Labor Code.28
submitted the grievance to the grievance machinery.19
In its position paper,29 PHILEC emphasized that it promoted Lipio and Ignacio, Sr. while it was still
PWU and PHILEC failed to amicably settle their grievance. Thus, on December 21, 1998, the parties filed a
negotiating a new collective bargaining agreement with PWU. Since PHILEC and PWU had not yet
submission agreement20 with the National Conciliation and Mediation Board, submitting the following issues
negotiated a new collective bargaining agreement when PHILEC selected Lipio and Ignacio, Sr. for
to voluntary arbitration:
training, PHILEC applied the "Modified SGV" pay grade scale in computing Lipio’s and Ignacio, Sr.’s training
I allowance.30
WHETHER OR NOT PHILEC VIOLATED SECTION 4 (Step Increases) ARTICLE X (Wage and Position This "Modified SGV" pay grade scale, which PHILEC and PWU allegedly agreed to implement beginning on
Standardization) OF THE EXISTING COLLECTIVE BARGAINING AGREEMENT (CBA) IN IMPLEMENTING THE STEP May 9, 1997, covered both rank-and-file and supervisory employees.31 According to PHILEC, its past
INCREASES RELATIVE TO THE PROMOTION OF INDIVIDUAL COMPLAINANTS. collective bargaining agreements withthe rank-and-file and supervisory unions resulted in an overlap of
II union membership in Pay Grade IX of the rank-and-file employees and Pay Grade A of the supervisory
WHETHER OR NOT PHILEC’s MANNER OF IMPLEMENTING THE STEP INCREASES IN CONNECTION WITH THE employees.32 Worse, past collective bargaining agreements resulted in rank-and-file employees under Pay
PROMOTION OF INDIVIDUAL COMPLAINANTS IN RELATION TO THE PROVISIONS OF SECTION 4, ARTICLE X OF Grades IX and X enjoying higher step increases than supervisory employees under Pay Grades A and B:33
THE CBA CONSTITUTES UNFAIR LABOR PRACTICE.21 Pay Grade
Pay Grade Scale
In their submission agreement, PWU and PHILEC designated Hon. Ramon T. Jimenez as Voluntary Arbitrator Scale under the
Step Increase under the Step Increase
(Voluntary Arbitrator Jimenez).22 Rank-and-File
Supervisory CBA
Voluntary Arbitrator Jimenez, in the order23 dated January 4, 1999, directed the parties to file their CBA
respective position papers.
VIII-IX ₱340.00 A ₱290.00
In its position paper,24 PWU maintained that PHILEC failed to follow the schedule of step increases under
Article X, Section 4 of the June 1, 1997 collective bargaining agreement. Machinist I, Lipio’s position before
IX-X ₱455.00 A-B ₱350.00
he underwent training for Foreman I, fell under Pay Grade VIII, while Foreman I fell under Pay Grade X.
Following the schedule under Article X, Section 4 of the June 1, 1997 collective bargaining agreement and To preserve the hierarchical wage structure within PHILEC’s enterprise, PHILEC and PWU allegedly agreed
the formula under Article IX, Section 1(f), Lipio should be paid training allowance equal to the step to implement the uniform pay grade scale under the "Modified SGV" pay grade system, thus:34
increase for pay grade bracket VIII-IX for the first month of training. For the succeeding months, Lipio should
be paid an allowance equal to the step increase for pay grade bracket VIII-IX plus the step increase for Pay Grade
pay grade bracket IX-X, thus:25 Step Increase
Rank-and-File Supervisory
First Month ----- ₱456.00

I – II ₱65.00
Second month ----- ₱1,031.00

II-III ₱78.00
Third month ----- ₱1,031.00

III-IV ₱95.00
Fourth month ----- ₱1,031.00.

With respect to Ignacio, Sr., he was holding the position of DTAs sembler under Pay Grade VII when hewas IV-V ₱120.00
selected to train for the position of Foreman I under Pay Grade X. Thus, for his first month of training,
Ignacio, Sr. should be paid training allowance equal to the step increase under pay grade bracket VII-VIII.

V-VI ₱150.00
VI-VII ₱195.00
VII-VIII ₱255.00
VIII-IX A ₱350.00
IX-X A-B ₱465.00
X-XI B-C ₱570.00
XI-XII C-D ₱710.00
D-E ₱870.00
E-F ₱1,055.00
Pay grade bracket I–IX covered rank-and-file employees, while pay grade bracket A–F covered
supervisory employees.35
Under the "Modified SGV" pay grade scale, the position of Foreman I fell under Pay Grade B. PHILEC then
computed Lipio’s and Ignacio, Sr.’s training allowance accordingly.36
PHILEC disputed PWU’s claim of unfair labor practice. According to PHILEC, it did not violate its collective
bargaining agreement with PWU when it implemented the "Modified SGV" scale. Even assuming that it
violated the collective bargaining agreement, PHILEC argued that its violation was not "gross" or a "flagrant
and/or malicious refusal to comply with the economic provisions of [the collective bargaining
agreement]."37 PHILEC, therefore, was not guilty of unfair labor practice.38
Voluntary Arbitrator Jimenez held in the decision39 dated August 13, 1999, that PHILEC violated its collective
bargaining agreement with PWU.40 According to Voluntary Arbitrator Jimenez, the June 1, 1997 collective
bargaining agreement governed when PHILEC selected Lipio and Ignacio, Sr. for promotion on August 18
and 21, 1997.41 The provisions of the collective bargaining agreement being the law between the parties,
PHILEC should have computed Lipio’s and Ignacio, Sr.’s training allowance based on Article X, Section 4 of
the June 1, 1997 collective bargaining agreement.42
As to PHILEC’s claim that applying Article X, Section 4 would result in salary distortion within PHILEC’s
enterprise, Voluntary Arbitrator Jimenez ruled that this was "a concern that PHILEC could have anticipated
and could have taken corrective action"43 before signing the collective bargaining agreement.
Voluntary Arbitrator Jimenez dismissed PWU’s claim of unfair labor practice.44 According to him, PHILEC’s
acts "cannot be considered a gross violation of the [collective bargaining agreement] nor . . . [a] flagrant
and/or malicious refusal to comply withthe economic provisions of the [agreement]."45
Thus, Voluntary Arbitrator Jimenez ordered PHILEC to pay Lipio and Ignacio, Sr. training allowance based
on Article X, Section 4 and Article IX, Section 1 of the June 1, 1997 collective bargaining agreement.46
PHILEC received a copy of Voluntary Arbitrator Jimenez’s decision on August 16, 1999.47 On August 26,
1999, PHILEC filed a motion for partial reconsideration48 of Voluntary Arbitrator Jimenez’s decision.
In the resolution49 dated July 7, 2000, Voluntary Arbitrator Jimenez denied PHILEC’s motion for partial
reconsideration for lack of merit. PHILEC received a copy of the July 7, 2000 resolution on August 11, 2000.50
On August 29, 2000, PHILEC filed a petition51 for certiorari before the Court of Appeals, alleging that
Voluntary Arbitrator Jimenez gravely abused his discretion in rendering his decision.52 PHILEC maintained
that it did not violate the June 1, 1997 collective bargaining agreement.53 It applied the "Modified SGV"
pay grade rates toavoid salary distortion within its enterprise.54
In addition, PHILEC argued that Article X, Section 4 of the collective bargaining agreement did not apply
to Lipio and Ignacio, Sr. Considering that Lipio and Ignacio, Sr. were promoted to a supervisory position,
their training allowance should be computed based on the provisions of PHILEC’s collective bargaining
agreement with ASSET, the exclusive bargaining representative of PHILEC’s supervisory employees.55
The Court of Appeals affirmed Voluntary Arbitrator Jimenez’s decision.56 It agreed that PHILEC was bound
to apply Article X, Section 4 of its June 1, 1997 collective bargaining agreement with PWU in computing
Lipio’s and Ignacio, Sr.’s training allowance.57 In its decision, the Court of Appeals denied due course and
dismissed PHILEC’s petition for certiorari for lack of merit.58
PHILEC filed a motion for reconsideration, which the Court of Appeals denied in the resolution 59 dated June
23, 2005.
On August 3, 2005, PHILEC filed its petition for review on certiorari before this court,60 insisting that it did not
violate its collective bargaining agreement with PWU.61 PHILEC maintains that Lipio and Ignacio, Sr. were
promoted to a position covered by the pay grade scale for supervisory employees.62 Consequently, the
provisions of PHILEC’s collective bargaining agreement with its supervisory employees should apply, not its
collective bargaining agreement with PWU.63 To insist on applying the pay grade scale in Article X, Section
4, PHILEC argues, would result in a salary distortion within PHILEC.64
In the resolution65 dated September 21, 2005,this court ordered PWU to comment on PHILEC’s petition for
review on certiorari.
In its comment,66 PWU argues that Voluntary Arbitrator Jimenez did not gravely abuse his discretion in
rendering his decision. He correctly applied the provisions of the PWU collective bargaining agreement,
the law between PHILEC and its rank-and-file employees, in computing Lipio’s and Ignacio, Sr.’s training
allowance.67
On September 27, 2006, PHILEC filed its reply,68 reiterating its arguments in its petition for review on
certiorari.
The issue for our resolution is whether Voluntary Arbitrator Jimenez gravely abused his discretion in directing
PHILEC to pay Lipio’s and Ignacio, Sr.’s training allowance based on Article X, Section 4 of the June 1, 1997
rank-and-file collective bargaining agreement.
This petition should be denied.
I
The Voluntary Arbitrator’s decision
dated August 13, 1999 is already final and
executory
We note that PHILEC filed before the Court of Appeals a petition for certiorari under Rule 65 of the Rules
ofCourt against Voluntary Arbitrator Jimenez’s decision.69
This was not the proper remedy.
Instead, the proper remedy to reverse or modify a Voluntary Arbitrator’s or a panel of Voluntary Arbitrators’
decision or award is to appeal the award or decision before the Court of Appeals. Rule 43, Sections 1 and
3 of the Rules of Court provide:
Section 1. Scope.
This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from
awards, judgments, final orders or resolutions of orauthorized by any quasi-judicial agency in the exercise
of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of
Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration
Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657,
Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions
Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction
Industry Arbitration Commission, and voluntary arbitrators authorized by law.
....
Sec. 3. Where to appeal.
An appeal under this Rule may be taken to the Court of Appeals within the period and in the manner
herein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and law.
(Emphasis supplied)
A Voluntary Arbitrator or a panel of Voluntary Arbitrators has the exclusive original jurisdiction over
grievances arising from the interpretation or implementation of collective bargaining agreements. Should
the parties agree, a Voluntary Arbitrator or a panel of Voluntary Arbitrators shall also resolve the parties’
other labor disputes, including unfair labor practices and bargaining deadlocks. Articles 261 and 262 of the
Labor Code provide:
ART. 261. JURISDICTION OF VOLUNTARY ARBITRATORS OR PANEL OF VOLUNTARY ARBITRATORS.
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to
hear and decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies referred to in the immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair
labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For
purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances, or matters under the exclusive and original jurisdiction
of the Voluntary Arbitrator orpanel of Voluntary Arbitrators and shall immediately dispose and refer the
same to the Grievance Machinery or Voluntary Arbitration provided in the Collective Bargaining
Agreement.
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.
In Luzon Development Bank v. Association of Luzon Development Bank Employees,70 this court ruled that
the proper remedy against the award or decision of the Voluntary Arbitratoris an appeal before the Court
of Appeals. This court first characterized the office ofa Voluntary Arbitrator or a panel of Voluntary
Arbitrators as a quasi-judicial agency, citing Volkschel Labor Union, et al. v. NLRC71 and Oceanic Bic
Division (FFW) v. Romero:72
In Volkschel Labor Union, et al. v. NLRC, et al.,on the settled premise that the judgments of courts and
awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the
awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal
effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., this Court ruled that "a
voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity." Under these rulings, it
follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a
quasijudicial agency but independent of, and apart from, the NLRC since his decisions are not appealable
to the latter.73 (Citations omitted)
This court then stated that the office of a Voluntary Arbitrator or a panel of Voluntary Arbitrators, even
assuming that the office is not strictly a quasi-judicial agency, may be considered an instrumentality, thus:
Assuming arguendo that the voluntaryarbitrator or the panel of voluntary arbitrators may not strictly be
considered as a quasi-judicial agency, board or commission, still both he and the panel are
comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to
meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as
the subsequent arbitrator/arbitral tribunal operating under the Construction Industry Arbitration
Commission, that the broader term "instrumentalities" was purposely included in the above-quoted
provision.
An "instrumentality" is anything used as a means or agency. Thus, the terms governmental "agency" or
"instrumentality" are synonymous in the sense that either of them is a means by which a government acts,
or by which a certain government act or function is performed. The word "instrumentality," with respect to
a state, contemplates an authority to which the state delegates governmental power for the performance
of a state function. An individual person, like an administrator or executor, is a judicial instrumentality in the
settling of an estate, in the same manner that a sub-agent appointed by a bankruptcy court is an
instrumentality of the court, and a trustee in bankruptcy of a defunct corporation is an instrumentality of
the state.
The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to
him under the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the
term "instrumentality" in the aforequoted Sec. 9 of B.P. 129.74 (Citations omitted)
Since the office of a Voluntary Arbitrator or a panel of Voluntary Arbitrators is considered a quasi-judicial
agency, this court concluded that a decision or award rendered by a Voluntary Arbitrator is appealable
before the Court of Appeals. Under Section 9 of the Judiciary Reorganization Act of 1980, the Court of
Appeals has the exclusive original jurisdiction over decisions or awards of quasi-judicial agencies and
instrumentalities:
Section 9. Jurisdiction. The Court of Appeals shall exercise:
....
3. Exclusive appellate jurisdiction over all final judgements, resolutions, orders or awardsof Regional Trial
Courts and quasijudicial agencies, instrumentalities, boards or commission, including the Securities and
Exchange Commission, the Social Security Commission, the Employees Compensation Commission and the
Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph 4
of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis supplied)
Luzon Development Bankwas decided in 1995 but remains "good law."75 In the 2002 case of Alcantara, Jr.
v. Court of Appeals,76 this court rejected petitioner Santiago Alcantara, Jr.’s argument that the Rules of
Court, specifically Rule 43, Section 2, superseded the Luzon Development Bank ruling:
Petitioner argues, however, that Luzon Development Bank is no longer good law because of Section 2,
Rule 43 of the Rules of Court, a new provision introduced by the 1997 revision. The provision reads:
SEC. 2. Cases not covered. -This Rule shall not apply to judgments or final orders issued under the Labor
Code of the Philippines.
The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rule 42 of the
1997 Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the exception to the
exclusive appellate jurisdiction of the Court of Appeals, as provided for in Section 9, Batas Pambansa Blg.
129,7 as amended by Republic Act No. 7902:8
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the
Securities and Exchange Commission, the Employees’ Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with
the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to the Labor Codedo not come within its ambit:
x x x. The fact that [the voluntary arbitrator’s] functions and powers are provided for in the Labor Code
does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as
contemplated therein. It will be noted that, although the Employees’ Compensation Commission is also
provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised
Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court
of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in
amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be
appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular
No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated
therein.77 (Emphases in the original)
This court has since reiterated the Luzon Development Bankruling in its decisions.78
Article 262-A of the Labor Code provides that the award or decision of the Voluntary Arbitrator "shall
befinal and executory after ten (10) calendar days from receipt of the copy of the award or decision by
the parties":
Art. 262-A. PROCEDURES. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have the power to
hold hearings, receive evidences and take whatever action isnecessary to resolve the issue or issues
subject of the dispute, including efforts to effect a voluntary settlement between parties.
All parties to the dispute shall beentitled to attend the arbitration proceedings. The attendance of any
third party or the exclusion of any witness from the proceedings shall be determined by the Voluntary
Arbitrator or panel of Voluntary Arbitrators. Hearing may be adjourned for cause or upon agreement by
the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary Arbitrator or panel of Voluntary
Arbitrators to render an award or decision within twenty (20) calendar days from the date of submission of
the dispute to voluntary arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators shall contain the facts
and the law on which it is based. It shall be final and executory after ten (10) calendar days from receipt of
the copy of the award or decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary Arbitrators or the Labor
Arbiter in the region where the movant resides, in case of the absence or incapacity of the Voluntary
Arbitrator or panel of Voluntary Arbitrators, for any reason, may issue a writ of execution requiring either the
sheriff of the Commission or regular courts or any public official whomthe parties may designate in the
submission agreement to execute the final decision, order or award. (Emphasis supplied)
Thus, in Coca-Cola Bottlers Philippines, Inc. Sales Force UnionPTGWO-BALAIS v. Coca Cola-Bottlers
Philippines, Inc.,79 this court declared that the decision of the Voluntary Arbitrator had become final and
executory because it was appealed beyond the 10-day reglementary period under Article 262-A of the
Labor Code.
It is true that Rule 43, Section 4 of the Rules of Court provides for a 15-day reglementary period for filing an
appeal:
Section 4. Period of appeal. — The appeal shall be taken within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of its last publication, if publication is required by law
for its effectivity, or of the denial of petitioner's motion for new trial or reconsideration duly filed in
accordance with the governing law of the court or agency a quo. Only one (1) motion for reconsideration
shall be allowed. Upon proper motion and the payment of the full amount of the docket fee before the
expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15)
days only within which to file the petition for review. No further extension shall be granted except for the
most compelling reason and in no case to exceed fifteen (15) days. (Emphasis supplied)
The 15-day reglementary period has been upheld by this court in a long line of cases.80 In AMA Computer
College-Santiago City, Inc. v. Nacino,81 Nippon Paint Employees Union-OLALIA v. Court of
Appeals,82 Manila Midtown Hotel v. Borromeo,83 and Sevilla Trading Company v. Semana,84 this court
denied petitioners’ petitions for review on certiorari since petitioners failed to appeal the Voluntary
Arbitrator’s decision within the 15-day reglementary period under Rule43. In these cases, the Court of
Appeals had no jurisdiction to entertain the appeal assailing the Voluntary Arbitrator’s decision.
Despite Rule 43 providing for a 15-day period to appeal, we rule that the Voluntary Arbitrator’s decision
mustbe appealed before the Court of Appeals within 10 calendar days from receipt of the decision as
provided in the Labor Code.
Appeal is a "statutory privilege,"85 which may be exercised "only in the manner and in accordance withthe
provisions of the law."86 "Perfection of an appeal within the reglementary period is not only mandatory but
also jurisdictional so that failure to doso rendered the decision final and executory, and deprives the
appellate court of jurisdiction to alter the final judgment much less to entertain the appeal." 87
We ruled that Article 262-A of the Labor Code allows the appeal of decisions rendered by Voluntary
Arbitrators.88 Statute provides that the Voluntary Arbitrator’s decision "shall befinal and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties." Being provided in the
statute,this 10-day period must be complied with; otherwise, no appellate court willhave jurisdiction over
the appeal. This absurd situation occurs whenthe decision is appealed on the 11th to 15th day from
receipt as allowed under the Rules, but which decision, under the law, has already become final and
executory.
Furthermore, under Article VIII, Section 5(5) of the Constitution, this court "shall not diminish, increase, or
modify substantive rights" in promulgating rules of procedure in courts.89 The 10-day period to appeal under
the Labor Code being a substantive right, this period cannot be
diminished, increased, or modified through the Rules of Court.90
In Shioji v. Harvey,91 this court held that the "rules of court, promulgated by authority of law, have the force
and effect of law, if not in conflict with positive law."92 Rules of Court are "subordinate to the statute."93 In
case of conflict between the law and the Rules of Court, "the statute will prevail."94
The rule, therefore, is that a Voluntary Arbitrator’s award or decision shall be appealed before the Court of
Appeals within 10 days from receipt of the award or decision. Should the aggrieved party choose to file a
motion for reconsideration with the Voluntary Arbitrator,95 the motion must be filed within the same 10-day
period since a motion for reconsideration is filed "within the period for taking an appeal." 96
A petition for certiorari is a special civil action "adopted to correct errors of jurisdiction committed by the
lower court or quasi-judicial agency, or when there is grave abuse of discretion on the part of such court or
agency amounting to lack or excess of jurisdiction."97 An extraordinary remedy,98 a petition for certiorari
may be filed only if appeal is not available.99 If appeal is available, an appeal must be taken even if the
ground relied upon is grave abuse of discretion.100
As an exception to the rule, this court has allowed petitions for certiorari to be filed in lieu of an appeal "(a)
when the public welfare and the advancement of public policy dictate; (b) when the broader interests of
justice so require; (c) when the writs issued are null; and (d) when the questioned order amounts to an
oppressive exercise of judicial authority."101
In Unicraft Industries International Corporation, et al. v. The Hon. Court of Appeals,102 petitioners filed a
petition for certiorari against the Voluntary Arbitrator’s decision. Finding that the Voluntary Arbitrator
rendered an award without giving petitioners an opportunity to present evidence, this court allowed
petitioners’ petition for certiorari despite being the wrong remedy. The Voluntary Arbitrator’s award,
thiscourt said, was null and void for violation of petitioners’ right to due process. This court decided the
case on the merits.
In Leyte IV Electric Cooperative, Inc. v. LEYECO IV Employees Union-ALU,103 petitioner likewise filed a
petition for certiorari against the Voluntary Arbitrator’s decision, alleging that the decision lacked basis in
fact and in law. Ruling that the petition for certiorari was filed within the reglementary period for filing an
appeal, this court allowed petitioner’s petition for certiorari in "the broader interests of justice." 104
In Mora v. Avesco Marketing Corporation,105 this court held that petitioner Noel E. Mora erred in filing a
petition for certiorari against the Voluntary Arbitrator’s decision. Nevertheless, this court decided the case
on the merits "in the interest of substantial justice to arrive at the proper conclusion that is conformable to
the evidentiary facts."106
None of the circumstances similar to Unicraft, Leyte IV Electric Cooperative, and Moraare present in this
case. PHILEC received Voluntary Arbitrator Jimenez’s resolution denying its motion for partial
reconsideration on August 11, 2000.107 PHILEC filed its petition for certiorari before the Court ofAppeals on
August 29, 2000,108 which was 18 days after its receipt of Voluntary Arbitrator Jimenez’s resolution. The
petition for certiorari was filed beyond the 10-day reglementary period for filing an appeal. We cannot
consider PHILEC’s petition for certiorari as an appeal.
There being no appeal seasonably filed in this case, Voluntary Arbitrator Jimenez’s decision became final
and executory after 10 calendar days from PHILEC’s receipt of the resolution denying its motion for partial
reconsideration.109 Voluntary Arbitrator Jimenez’s decision is already "beyond the purview of this Court to
act upon."110
 II
PHILEC must pay training allowance
based on the step increases provided in
the June 1, 1997 collective bargaining
agreement
The insurmountable procedural issue notwithstanding, the case will also fail on its merits. Voluntary
Arbitrator Jimenez correctly awarded both Lipio and Ignacio, Sr. training allowances based on the
amounts and formula provided in the June 1, 1997 collective bargaining agreement.
A collective bargaining agreement is "a contract executed upon the request of either the employer or the
exclusive bargaining representative of the employees incorporating the agreement reached after
negotiations with respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under such agreement." 111 A collective
bargaining agreement being a contract, its provisions "constitute the law between the parties"112 and must
be complied with in good faith.113
. . . since the signing of the current CBA took place on September 27, 1997, PHILEC, by oversight, may have overlooked
the possibility of a wage distortion occurring among ASSET-occupied positions. It is surmised that this matter could have
been negotiated and settled with PWU before the actual signing of the CBA on September 27. Instead, PHILEC, again,
allowed the provisions of Art. X, Sec. 4 of the CBA to remain the way it is and is now suffering the consequences of its
laches.123 (Emphasis in the original)
We note that PHILEC did not dispute PWU’s contention that it selected several rank-and-file employees for training and
paid them training allowance based on the schedule provided in the collective bargaining agreement effective at the
time of the trainees’ selection.124 PHILEC cannot choose when and to whom to apply the provisions of its collective
bargaining agreement. The provisions of a collective bargaining agreement must be applied uniformly and complied with
in good faith.
Given the foregoing, Lipio’s and Ignacio, Sr.’s training allowance should be computed based on Article X, Section 4 in
relation to Article IX, Section 1(f) of the June 1, 1997 rank-and-file collective bargaining agreement. Lipio, who held the
position of Machinist before selection for training as Foreman I, should receive training allowance based on the following
schedule:
First Month ----- ₱456.00

PHILEC, as employer, and PWU, as the exclusive bargaining representative of PHILEC’s rank-and-file Second month ----- ₱1,031.00
employees, entered into a collective bargaining agreement, which the parties agreed to make effective
from June 1, 1997 to May 31, 1999. Being the law between the parties, the June 1, 1997 collective Third month ----- ₱1,031.00
bargaining agreement must govern PHILEC and its rank-and-file employees within the agreed period.
Fourth month ----- ₱1,031.00
Lipio and Ignacio, Sr. were rank-and-file employees when PHILEC selected them for training for the position
of Foreman I beginning August 25, 1997. Lipio and Ignacio, Sr. were selected for training during the Ignacio, Sr., who held the position of DT-Assembler before selection for training as Foreman I, should receive training
effectivity of the June 1, 1997 rank-and-file collective bargaining agreement. Therefore, Lipio’s and allowance based on the following schedule:
Ignacio, Sr.’s training allowance must be computed based on Article X, Section 4 and ArticleIX, Section 1(f)
First Month ----- ₱361.00
of the June 1, 1997 collective bargaining agreement.
Contrary to PHILEC’s claim, Lipio and Ignacio, Sr. were not transferred out of the bargaining unit when they Second month ----- ₱817.00
were selected for training. Lipio and Ignacio, Sr. remained rank-and-file employees while they trained for
the position of Foreman I. Under Article IX, Section 1(e) of the June 1, 1997 collective bargaining Third month ----- ₱1,392.00
agreement,114 a trainee who is "unable to demonstrate his ability to perform the work . . . shall be reverted
Fourth month ----- ₱1,392.00
to his previous assignment. . . ."115 According to the same provision, the trainee "shall hold that job on a trial
or observation basis and . . . subject to prior approval of the authorized management official, be Considering that Voluntary Arbitrator Jimenez’s decision awarded sums of money, Lipio and Ignacio, Sr. are entitled to
appointed to the position in a regular capacity."116 legal interest on their training allowances. Voluntary Arbitrator Jimenez’s decision having become final and executory on
August 22, 2000, PHILEC is liable for legal interest equal to 12% per annum from finality of the decision until full payment as
Thus, training is a condition precedent for promotion. Selection for training does not mean automatic this court ruled in Eastern Shipping Lines, Inc. v. Court of Appeals: 125
transfer out of the bargaining unit of rankand-file employees.
When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest. . . shall
Moreover, the June 1, 1997 collective bargaining agreement states that the training allowance of a rank- be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then as equivalent to
and-file employee "whose application for a posted job is accepted shall [be computed] in accordance a forbearance of credit.126
with Section (f) of [Article IX]."117 Since Lipio and Ignacio, Sr. were rank-and-file employees when they The 6% legal interest under CircularNo. 799, Series of 2013, of the Bangko Sentral ng Pilipinas Monetary Board shall not
applied for training for the position of Foreman I, Lipio’s and Ignacio, Sr.’s training allowance must be apply, Voluntary Arbitrator Jimenez’s decision having become final and executory prior to the effectivity of the circular on
computed based on Article IX, Section 1(f) of the June 1, 1997 rank-and-file collective bargaining July 1, 2013.1avvphi1 In Nacar v. Gallery Frames,127 we held that:
agreement. . . . with regard to those judgments that have become final and executory prior to July 1, 2013, said judgments shall not be
PHILEC allegedly applied the "Modified SGV" pay grade scale to prevent any salary distortion within PHILEC’s enterprise. disturbed and shall continue to be implemented applying the rate of interest fixed therein. 128
This, however, does not justify PHILEC’s non-compliance with the June 1, 1997 collective bargaining agreement. This pay WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals' decision dated May 25, 2004 is AFFIRMED.
grade scale is not provided in the collective bargaining agreement. In Samahang Manggagawa sa Top Form Petitioner Philippine Electric Corporation is ORDERED to PAY respondent Eleodoro V. Lipio a total of ₱3,549.00 for a four (4)-
Manufacturing United Workers of the Philippines (SMTFM-UWP) v. NLRC,118 this court ruled that "only provisions embodied in month training for the position of Foreman I with legal interest of 12% per annum from August 22, 2000 until the amount's
the [collective bargaining agreement] should be so interpreted and complied with. Where a proposal raised by a full satisfaction.
contracting party does not find print in the [collective bargaining agreement], it is not part thereof and the proponent has
no claim whatsoever to its implementation."119 For respondent Emerlito C. Ignacio, Sr., Philippine Electric Corporation is ORDERED to PAY a total of ₱3,962.00 for a four (4)-
month training for the position of Foreman I with legal interest of 12% per annum from August 22, 2000 until the amount's
Had PHILEC wanted the "Modified SGV" pay grade scale applied within its enterprise, "it could have requested or full satisfaction.
demanded that [the ‘Modified SGV’ scale] be incorporated in the [collective bargaining agreement]."120 PHILEC had "the
means under the law to compel [PWU] to incorporate this specific economic proposal in the [collective bargaining SO ORDERED.
agreement]."121 It "could have invoked Article 252 of the Labor Code"122 to incorporate the "Modified SGV" pay grade
scale in its collective bargaining agreement with PWU. But it did not. Since this "Modified SGV" pay grade scale does not
appear in PHILEC’s collective bargaining agreement with PWU, PHILEC cannot insist on the "Modified SGV" pay grade
scale’s application. We reiterate Voluntary Arbitrator Jimenez’s decision dated August 13, 1999 where he said that:
G.R. No. 190389
MANGGAGAWA NG KOMUNIKASYON SA PILIPINAS, Petitioner
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY INCORPORATED, Respondent
x-----------------------x
G.R. No. 190390
MANGAGAWA NG KOMUNIKASYON SA PILIPINAS, Petitioner,
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY INCORPORATED, Respondent.
DECISION
LEONEN, J.:
An employer's declaration of redundancy becomes a valid and authorized cause for dismissal when the
employer proves by substantial evidence that the services of an employee are more than what is
reasonably demanded by the requirements of the business enterprise. 1
This resolves the Petition for Review on Certiorari2 filed by Manggagawa ng Komunikasyon sa Pilipinas
assailing the Court of Appeals' Decision3 dated August 28, 2008 and Resolution4 dated November 24, 2009
in CA-G.R. SP No. 94365 and CA-G.R. SP No. 98975. CA-G.R. SP No. 94365 upheld the October 28, 20055 and
January 31, 20066 Resolutions of the National Labor Relations Commission in NLRC Certified Case No.
000232-03 (NLRC NCR NS 11-405-02 & 11-412-02). In turn, CA-G.R. SP No. 98975 upheld the Secretary of
Labor and Employment's August 11, 2006 Resolution7 and March 16, 2007 Order.8
On June 27, 2002, the labor organization Manggagawa ng Komunikasyon sa Pilipinas, which represented
the employees of Philippine Long Distance Telephone Company, filed a notice of strike with the National
Conciliation and Mediation Board. 9 Manggagawa ng Komunikasyon sa Pilipinas charged Philippine Long
Distance Telephone Company with unfair labor practice "for transferring several employees of its
Provisioning Support Division to Bicutan, Taguig." 10
The first notice of strike was amended twice by Manggagawa ng Komunikasyon sa Pilipinas. 11 On its
second amendment dated November 4, 2002, docketed as NCMB-NCR-NS No. 11-405-
02, 12 Manggagawa ng Komunikasyon sa Pilipinas accused Philippine Long Distance Telephone Company
of the following unfair labor practices:
UNFAIR LABOR PRACTICES, to wit:
1. PLDT's abolition of the Provisioning Support Division. Such action, together with the consequent
redundancy of PSD employees and the farming out of the jobs to casuals and contractuals,
violates the duty to bargain collectively with MKP in good faith.
2. PLDT's unreasonable refusal to honor its commitment before this Honorable Office that it will
provide MKP its comprehensive plan/s with respect to personnel downsizing/ reorganization and
closure of exchanges. Such refusal violates its duty to bargain collectively with MKP in good faith.
3. PLDT's continued hiring of "contractual," "temporary," "project," and "casual" employees for
regular jobs performed by union members, resulting in the decimation of the union membership
and in the denial of the right to self-organization to the concerned employees. 13
On November 11, 2002, while the first notice of strike was pending, Manggagawa ng Komunikasyon sa
Pilipinas filed another notice of strike, 14 docketed as NCMB-NCR-NS No. 11-412-02, and accused Philippine
Long Distance Telephone Company of:
UNFAIR LABOR PRACTICES, to wit:
1. PLDT's alleged restructuring of its [Greater Metropolitan Manila] Operation Services December 31, 2002
and its closure of traffic operations at the Batangas, Calamba, Davao, Iloilo, Lucena, Malolos and Tarlac
Regional Operator Services effective December 31, 2002. These twin moves unjustly imperil the job security
of 503 of MKP's members and will substantially decimate the parties' bargaining unit. And in the light of
PLDT' s previous commitment before this Honorable Office that it will provide MKP its comprehensive plan/s
with respect to personnel downsizing/reorganization and closure of exchanges and of its more recent
declaration that the Davao operator services will not be closed, these moves are treacherous and are thus
violative of PLDT's duty to bargain collectively with MKP in good faith. That these moves were effected with
PLOT paying only lip service to its duties under Art. III, Section 8 of the parties' CBA do [sic] signifies PLDT's
gross violation of said CBA. 15
On December 23, 2002, Manggagawa ng Komunikasyon sa Pilipinas went on strike. 16
On December 31, 2002, Philippine Long Distance Telephone Company declared only 323 employees as
redundant as it was able to redeploy 180 of the 503 affected employees to other positions. 17
On January 2, 2003, the Secretary of Labor and Employment certified the labor dispute for compulsory
arbitration. 18 The dispositive portion of the Secretary of Labor and Employment's Order read as follows:
WHEREFORE, FOREGOING PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute at the
Philippine Long Distance Telephone Company to the National Labor Relations Commission (NLRC) for
compulsory arbitration pursuant to Article 263 (g) of the Labor Code, as amended.
Accordingly, the strike staged by the Union is hereby enjoined. All striking workers are hereby directed to
return to work within twenty four (24) hours from receipt of this Order, except those who were terminated
due to redundancy. The employer is hereby enjoined to accept the striking workers under the same terms
and conditions prevailing prior to the strike. The parties are likewise directed to cease and desist from
committing any act that might worsen the situation.
Let the entire records of the case be forwarded to the NLRC for its immediate and appropriate action.
SO ORDERED. 19
Manggagawa ng Komunikasyon sa Pilipinas filed a Petition for Certiorari before the Court of Appeals,
challenging the Secretary of Labor and Employment's Order insofar as it created a distinction among the
striking workers in the return-to-work order. The petition was docketed as CA-G.R. SP No. 76262.20
On November 25, 2003, the Court of Appeals granted the Petition for Certiorari, setting aside and nullifying
the Secretary of Labor and Employment's assailed Order.21
The Philippine Long Distance Telephone Company appealed the Court of Appeals' Decision to this Court.
The appeal was docketed as G.R. No. 162783.22
On July 14, 2005,23 this Court upheld the Court of Appeals' Decision, and directed Philippine Long Distance
Telephone Company to readmit all striking workers under the same terms and conditions prevailing before
the strike. This Court held:
As Article 263(g) is clear and unequivocal in stating that ALL striking or locked out employees shall
immediately return to work and the employer shall immediately resume operations and readmit ALL
workers under the same terms and conditions prevailing before the strike or lockout, then the unmistakable
mandate must be followed by the Secretary.24
On October 28, 2005, the National Labor Relations Commission dismissed Manggagawa ng Komunikasyon
sa Pilipinas' charges of unfair labor practices against Philippine Long Distance Telephone Company.25
The National Labor Relations Commission held that Philippine Long Distance Telephone Company's
redundancy program in 2002 was valid and did not constitute unfair legal practice. 26 The redundancy
program was due to the decline of subscribers for long distance calls and to fixed line services produced
by technological advances in the communications industry.27 The National Labor Relations Commission
ruled that the termination of employment of Philippine Long Distance Telephone Company's employees
due to redundancy was legal.28 The dispositive portion of the National Labor Relations Commission's
Resolution read:
WHEREFORE, premises considered, the Union[']s charge of unfair labor practice against PLDT is ordered
DISMISSED for lack of merit.
SO ORDERED.29
On January 31, 2006, the National Labor Relations Commission denied Manggagawa ng Komunikasyon sa
Pilipinas' motion for reconsideration. 30
On May 8, 2006, Manggagawa ng Komunikasyon sa Pilipinas filed a Petition for Certiorari31 with the Court
of Appeals. The petition was docketed as CA-G.R. SP No. 94365, and it assailed the National Labor
Relations Commission's resolutions, which upheld the validity of Philippine Long Distance Telephone
Company's redundancy program. 32
On August 11, 2006, the Secretary of Labor and Employment dismissed Manggagawa ng Komunikasyon sa
Pilipinas' Motion for Execution33 of this Court's July 14, 2005 Decision.34
On March 16, 2007, the Secretary of Labor and Employment denied35 Manggagawa ng Komunikasyon sa
Pilipinas' motion for reconsideration.36
On May 21, 2007, Manggagawa ng Komunikasyon sa Pilipinas filed a Petition for Certiorari37 before the
Court of Appeals, assailing the August 11, 2006 Resolution and March 16, 2007 Order of the Secretary of
Labor and Employment. The petition was docketed as CA-G.R. SP No. 98975.
The Court of Appeals consolidated CA-G.R. SP No. 94365 with CAG.R. SP No. 98975, and dismissed
Manggagawa ng Komunikasyon sa Pilipinas' appeals on August 28, 2008.38
For CA-G.R. SP No. 94365, the Court of Appeals ruled that the National Labor Relations Commission did not
commit grave abuse of discretion when it found that Philippine Long Distance Telephone Company's
declaration of redundancy was justified and valid, as the redundancy program was based on substantial
evidence.39
The Court of Appeals also found that Philippine Long Distance Telephone Company's 2002 declaration of
redundancy "was not attended by [unfair labor practice] . . . [because it was] transparent and forthright in
its implementation of the redundancy program."40 Philippine Long Distance Telephone Company also
successfully redeployed 180 of the 503 affected employees to other positions.41
As for CA-G.R. SP No. 98975, the Court of Appeals confirmed that its assailed order of reinstatement
indicated that all employees, even those declared separated effective December 31, 2002, should be
reinstated pendentelite.42 However, the Court of Appeals stated that the order of reinstatement became
moot due to the National Labor Relations Commission's October 28, 2005 Decision, which upheld the
validity of the dismissal of the employees affected by the redundancy program.43
The Court of Appeals also denied Manggagawa ng Komunikasyon sa Pilipinas' prayer that:
[T]he affected employees should at least be paid their salaries during the period from January 3, 2003 (the
working day immediately following the effectivity of their separation) to April 29, 2006 (the date when the
October 28, 2005 decision of the NLRC (declaring the employees' dismissal as valid) became final and
executory).44
The Court of Appeals compared the case to an illegal dismissal case where the Labor Arbiter found for the
employee and ordered the payroll reinstatement of the employee; however, the finding of illegality was
later reversed on appeal. 45
The dispositive portion of the Court of Appeals' Decision read:
WHEREFORE, the PETITIONS FOR CERTIORARI IN CA-G.R. SP Nos. 94365 and 98975 are DISMISSED for lack of
merit.
SO ORDERED.46 (Emphasis in the original)
On November 24, 2009, the Court of Appeals denied Manggagawa ng Komunikasyon sa Pilipinas' motion
for reconsideration.47
In its Petition for Review on Certiorari, Manggagawa ng Komunikasyon sa Pilipinas states that employees in
the Provisioning Support Division and in the Operator Services Section had their positions declared
redundant in 2002.48 Manggagawa ng Komunikasyon sa Pilipinas asserts that the total number of rank-and-
file positions actually declared redundant was 538, or 35 positions in the Provisioning Support Division and
503 positions in the Operator Services Section.49
Manggagawa ng Komunikasyon sa Pilipinas maintains that Philippine Long Distance Telephone Company
failed to submit evidence in support of its declaration of redundancy of the 35 rank-and-file employees in
the Provisioning Support Division.50 It claimed that "[Philippine Long Distance Telephone Company] only
notified [the Department of Labor and Employment] of the 'closure of traffic operations at Regional
Operator Services affecting three hundred ninety-two (392) employees and the restructuring of [Greater
Metropolitan Manila] Operator Services affecting one hundred eleven (111) employees."'51 Manggagawa
ng Komunikasyon sa Pilipinas asserts that there was no notice given regarding the closure of Philippine
Long Distance Telephone Company's Provisioning Support Division, and the termination of employment
due to redundancy of the affected rank-and-file employees. 52 It points out that the justifications for the
redundancy put forth by Philippine Long Distance Telephone Company "only pertained to the affected
operator services positions and not the affected [Provisioning Support Division] positions." 53
Manggagawa ng Komunikasyon sa Pilipinas also maintains that the National Labor Relations Commission
committed grave abuse of discretion when it disallowed the written interrogatories that Manggagawa ng
Komunikasyon sa Pilipinas submitted.54
As for the issue of reinstatement pendente lite, Manggagawa ng Komunikasyon sa Pilipinas cites Garcia v.
Philippine Airlines, Inc. 55 to bolster its stand. It holds that an employee is entitled to reinstatement or
backwages pending appeal if the Labor Arbiter's finding of illegal dismissal is later on reversed by the
National Labor Relations Commission. 56
For its part, Philippine Long Distance Telephone Company claims that the validity of redundancy of the
affected Provisioning Support Division employees was only raised by Manggagawa ng Komunikasyon sa
Pilipinas for the first time on appeal. 57 Philippine Long Distance Telephone Company asserts that the real
issue in that case was whether Philippine Long Distance Telephone Company was obligated to transfer the
affected Provisioning Support Division employees, and not whether their redundancies were
valid.58 Philippine Long Distance Telephone Company maintains that the affected Provisioning Support
Division personnel were given the opportunity to apply for another division, yet they chose not to. 59
Philippine Long Distance Telephone Company avers that Manggagawa ng Komunikasyon sa Pilipinas'
resort to interrogatories has been denied with finality by the Court of Appeals. 60 It also claims that the
National Labor Relations Commission's Rules of Procedure do not allow the use of discovery proceedings;
thus, Manggagawa ng Komunikasyon sa Pilipinas cannot assert that their resort to interrogatories is a
matter of procedural right. 61
Philippine Long Distance Telephone Company states that neither the Court of Appeals nor the Supreme
Court ordered the reinstatement of Manggagawa ng Komunikasyon sa Pilipinas' members, since their
decisions set aside Secretary of Labor and Employment's January 2, 2003 Order.62 The order enjoined the
striking workers to return to work, except those who were terminated due to redundancy. 63 Philippine Long
Distance Telephone Company asserts that "what controls execution is the dispositive or decretal statement
of the [d]ecision sought to be executed."64 Furthermore, Philippine Long Distance Telephone Company
maintains that the Court of Appeals correctly ruled that the reinstatement of the excluded employees was
rendered moot when the National Labor Relations Commission upheld its redundancy program.65
Finally, Philippine Long Distance Telephone Company holds that Garcia is not applicable because the
case at bar does not involve a reinstatement award by a Labor Arbiter.66
We resolve the following issues:
First, whether the Court of Appeals committed grave abuse of discretion in upholding the validity of
Philippine Long Distance Telephone Company's 2002 redundancy program; and
Second, whether the return-to-work order of the Secretary of Labor and Employment was rendered moot
when the National Labor Relations Commission upheld the validity of the redundancy program.
The Petition is partly meritorious.
I
A petition for review on certiorari under Rule 45 is a mode of appeal where the issue is limited only to
questions of law. 67 In labor cases, a Rule 45 petition "can prosper only if the Court of Appeals ... fails to
correctly determine whether the National Labor Relations Commission committed grave abuse of
discretion."68
A court or tribunal is said to have acted with grave abuse of discretion when it capriciously acts or
whimsically exercises judgment to be "equivalent to lack of jurisdiction."69 Furthermore, the abuse of
discretion must be so flagrant to amount to a refusal to perform a duty or to act as provided by law. 70
Career Philippines Shipmanagement, Inc. v. Serna,71 citing Montoyav. Transmed, 72 provides the
parameters of judicial review for a labor case under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the particular To establish good faith, the company must provide substantial proof that the services of the employees are
parameters of a Rule 45 appeal from the CA's Rule 65 decision on a labor case, as follows: in excess of what is required of the company, and that fair and reasonable criteria were used to determine
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for the redundant positions. 83
jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions In order to prove the validity of its redundancy program, Philippine Long Distance Telephone Company
of law raised against the assailed CA decision. In ruling for legal correctness, we have to view the CA has presented data on the decreasing volume of the received calls by the Operator Services Center for
decision in the same context that the petition for certiorari it ruled upon was presented to it; we have to the years 1996 to 2002:84
examine the CA decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision on RECEIVED CALLS
the merits of the case was correct. In other words, we have to be keenly aware that the CA undertook a
Rule 65 review, not a review on appeal, of the NLRC decision challenged before it. 73 (Emphasis in the YEAR 108 109 TOTAL
original)
Justice Arturo D. Brion's dissent in AbbotLaboratories, Philippinesv. Alcaraz74 thereafter laid down the 1996 33,641,751 430,125,633 463,767,384
guidelines to be followed in reviewing a petition for review under Rule 45:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave 1997 34,834,800 318,942,573 353,777,373
abuse of discretion exists and the CA should so declare and, accordingly, dismiss the petition. If grave
abuse of discretion exists, then the CA must grant the petition and nullify the NLRC ruling, entering at the 1998 28,651,703 209,458,041 238,109,744
same time the ruling that is justified under the evidence and the governing law, rules and jurisprudence. In
our Rule 45 review, this Court must deny the petition if it finds that the CA correctly acted. 75 (Emphasis in 1999 24,797,870 212,363,846 237,161,716
the original)
We shall adopt these parameters in resolving the substantive issues in the Petition. 2000 21,697,367 218,380,277 240,077,644
II
Redundancy is one of the authorized causes for the termination of employment provided for in Article 2001 15,773,988 158,310,276 174,084,264
298 76 of the Labor Code, as amended:
Article 298. Closure of Establishment and Reduction of Personnel. - The employer may also terminate the 2002 14,363,918 114,430,469 128,794,387
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the Philippine Long Distance Telephone Company has stated that "from f 1996 to 2002, the [t]otal [d]emand of
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the [c]alls dropped by 334,972,997 or a 72% reduction."85 It has attributed the reduction of demand for
workers and the Ministry of Labor and Employment at least one (1) month before the intended date operator-assisted 108/109 calls to "migration calls to direct distance dialing," and to "more
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker usage/substitution of text message over voice."86 It has added that "migration of calls from landline to cell,"
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at competitors' eating into the Philippine Long Distance Telephone Company's market, and "compliance with
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent the regulatory requirement of local integration per province" likewise d aggravated the situation.87
losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious Philippine Long Distance Telephone Company claims that the pattern of decline with operator-assisted
business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least calls has been consistent through the years, 88 and it has summarized the challenges facing its long
one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months distance services as follows:
shall be considered one (1) whole year. (a) international long distance revenues in 2001 stood at ₱11.4 billion; in 2002, this declined to
Wiltshire File Co. Inc. v. National Labor Relations Commission77 has explained that redundancy exists when ₱10.6 billion (pg. 33, PLDT's Financial Statement and Annual Report; Annex "4-A") - a decrease of
"the services of an employee are in excess of what is reasonably demanded by the actual requirements of ₱813 million. More drastically, this figure stood at ₱18.2 billion in 1997, indicating that international
the enterprise."78 long distance call revenue has declined to the tune of P8 billion in five years!
While a declaration of redundancy is ultimately a management decision in exercising its business (b) national long distance revenues in 2001 were ₱8 .3 88 billion in 2001; in 2002, this declined to
judgment, and the employer is not obligated to keep in its payroll more employees than are needed for its ₱7.6 billion (pg. 35, PLDT's Financial Statement and Annual Report; Annex ''4-B") - a decrease of
day to-day operations, 79 management must not violate the law nor declare redundancy without sufficient ₱719 million. As with international calls, there is a pattern on decline: PLDT earned ₱10.6 billion
basis. 80 from this service in 2000, so it is accurate to say that the company has seen revenue from national
Asian Alcohol Corporation v. National Labor Relations Commission81 listed down the elements for the valid long distance decline by more than a billion pesos a year. 89
implementation of a redundancy program: The National Labor Relations Commission has found that Philippine Long Distance Telephone Company
For the implementation of a redundancy program to be valid, the employer must comply with the was able to discharge its burden of proving that its redundancy measures had substantial basis:
following requisites: (1) written notice served on both the employees and the Department of Labor and Guided by the foregoing jurisprudence, it is evident that PLDT discharged the burden of proving that the
Employment at least one month prior to the intended date of retrenchment; (2) payment of separation declaration or implementation of redundancy measures have basis. For one, PLDT experienced a decline
pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is of subscribers, long distance calls, operated both local and abroad, has declined, landline or fixed line
higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in services also declined. This decrease of the need of PLDT services resulted from the advent of wireless
ascertaining what positions are to be declared redundant and accordingly abolished. 82 (Citations telephone, of texting as means of communication, the use of direct dialing including prepaid telesulit and
omitted)
teletipid measures introduced in the communication services. For another, PLDT has a debt burden of ₱70
billion pesos and it cannot subsidize the salaries of employees whose positions are redundant.90
The Court of Appeals echoed the findings of the National Labor Relations Commission regarding the
validity of Philippine Long Distance Telephone Company's redundancy measures:
We find that MKP demonstrated no such patent and gross evasion of a positive duty on the part of the
NLRC. On the contrary, the NLRC's finding that the 2002 redundancy declaration of PLDT was justified and
valid rested on substantial evidence, for the NLRC ostensibly based its finding on established facts showing
the decline of subscribers, the decline in long distance local and international calls, and the decline in
landline or fixed line services, constraining PLDT to declare certain positions redundant. There could be no
question that such factual circumstances were traceable to "the advent of wireless telephone, of texting
as a means of communication, the use of direct dialing including prepaid telesulit and teletipid measures
introduced in the communication services."
As such, the NLRC did not commit any grave abuse of discretion when it regarded the technological
advancements resulting in less work for the redundated employees as justifying PLDT's declaration of
redundancy. 91
This Court sees no reason to depart from the findings of the Court of Appeals and of the National Labor
Relations Commission.
Philippine Long Distance Telephone Company's declaration of redundancy was backed by substantial
evidence showing a consistent decline for operator-assisted calls for both local and international calls
because of cheaper alternatives like direct dialing services, and the growth of wireless communication.
Thus, the National Labor Relations Commission did not commit grave abuse of discretion when it upheld
the validity of PLDT's redundancy program. Redundancy is ultimately a management prerogative, and the
wisdom or soundness of such business judgment is not subject to discretionary review by labor tribunals or
even this Court, as long as the law was followed and malicious or arbitrary action was not shown.92
III
Nonetheless, there is a need to review the redundancy package awarded to the employees terminated
due to redundancy. For either redundancy or retrenchment, the law requires that the employer give
separation pay equivalent to at least one (1) month pay of the affected employee, or at least one (1)
month pay for every year of service, whichever is higher. The employer must also serve a written notice on
both the employees and the Department of Labor and Employment at least one (1) month before the
effective date of termination due to redundancy or retrenchment. 93
While we agree that Philippine Long Distance Telephone Company complied with the notice requirement,
the same cannot be said as regards the separation pay received by some of the affected workers.
Philippine Long Distance Telephone Company claims that most employees who were declared redundant
received a very generous separation package or "as much as 2.75 months [worth of salary] for every year
of service, with the average separation package at [₱]586,580.27."94 However, the records belie its claims
as shown by the notice of termination of employment received by the workers affected by the
redundancy program:
November 25, 2002
MYRNA C. CASTRO
OPERATOR SERVICES-NORTH
Dear Ms. Castro:
After a thorough review of operations, Management has determined that there is a need to reduce its
manpower requirements considering technological, organization, and process developments. This
reduction is inevitable to ensure the company's survival in the long term.
Your position is one of those affected by such changes and developments. Thus, with much regret, your
service to the company will be considered completed by December 30, 2002.
In recognition of your loyalty and dedicated service, the company is granting a generous separation pay
package that will assist you in making the necessary adjustments to your new situation.
This separation package consists of your regular retirement benefits plus 75% of basic monthly pay for every
year of service, or a minimum of 175% of basic monthly pay for every year of service for employees with
less than 15 years of service.
Counseling service on financial options in the future will be available to assist you during your period of
adjustment.
We would like to take this opportunity to thank you for your service to the Company and wish you well in all
your future undertakings.
Very truly yours,
PHILIPPINE LONG DISTANCE TELEPHONE CO., INC
(signed)
ERLINDA S. KABIGTING95
(Emphasis supplied)
The notices of termination of employment96 signed by Erlinda S. Kabigting, Philippine Long Distance
Telephone Company Vice-President for Operator Services Section,97 provided two (2) types of separation
packages for the terminated workers. These were: (1) regular retirement benefits plus 75% basic monthly
pay for every year of service for employees who had been with Philippine Long Distance Telephone
Company for more than 15 years; and (2) 175% of basic monthly pay for every year of service for
employees who had been with PLDT for less than 15 years.
When an employer declares redundancy, Article 298 of the Labor Code requires that the employer
provides a separation pay equivalent to at least one (1) month pay of the affected employee, or at least
one (1) month pay for every year of service, whichever is higher.98 In this case, Philippine Long Distance
Telephone Company claims that the terminated workers received a generous separation package of
about 2.75 months' worth of salary for every year of service. But it seems that the retirement benefits of the
terminated workers were added to the separation pay due them, hence the large payout. This should not
be the case.
Aquino v. National Labor Relations Commission99 differentiated between separation pay and retirement
benefits:
Separation pay is required in the cases enumerated in Articles 283 and 284 of the Labor Code, which
include retrenchment, and is computed at at least one month salary or at the rate of one-half month
salary for every month of service, whichever is higher. We have held that it is a statutory right designed to
provide the employee with the wherewithal during the period that he is looking for another employment.
Retirement benefits, where not mandated by law, may be granted by agreement of the employees and
their employer or as a voluntary act on the part of the employer. Retirement benefits are intended to help
the employee enjoy the remaining years of his life, lessening the burden of worrying for his financial
support, and are a form of reward for his loyalty and service to the employer. 100 (Citation omitted)
Separation pay brought about by redundancy is a statutory right, and it is irrelevant that the retirement
benefits together with the separation pay given to the terminated workers resulted in a total amount that
appeared to be more than what is required by the law. The facts show that instead of the legally required
one (1) month salary for every year of service rendered, the terminated workers who were with Philippine
Long Distance Telephone Company for more than 15 years received a separation pay of only 75% of their
basic pay for every year of service, despite the clear wording of the law.
The workers, who were terminated from employment as a result of redundancy, are entitled to the
separation pay due them under the law.
IV
Department of Labor and Employment Secretary Patricia A. Sto. Tomas (Secretary Sto. Tomas) assumed
jurisdiction over the labor dispute between Manggagawa ng Komunikasyon sa Pilipinas and Philippine
Long Distance Telephone Company pursuant to Article. 278(g)101 of the Labor Code. She certified 102 the
case to the National Labor Relations Commission for compulsory arbitration. This return-to-work order from
the Secretary of Labor and Employment aims to preserve the status quoante103 while the validity of the
redundancy program is being threshed out in the proper forum.
In Telefunken Semiconductors Employees Union-FFW v. Secretary of Labor, 104 pending resolution of the Return-to-work and reinstatement orders are both immediately executory; however, a return-to-work order
legality of the· strike, the Secretary of Labor and Employment directed the employer to accept all the is interlocutory in nature, and is merely meant to maintain status quo while the main issue is being threshed
striking workers except the Union Officers, shop stewards, and those with pending criminal charges. 105 This out in the proper forum. In contrast, an order of reinstatement is a judgment on the merits handed down
Court struck down the Secretary of Labor and Employment's order for being issued with grave abuse of by the Labor Arbiter pursuant to the original and exclusive jurisdiction provided for under Article 224(a)118 of
discretion, 106 and directed the employer to accept all the striking workers without l qualifications.107 the Labor Code. Clearly, Garcia is not applicable in the case at bar, and there is no basis to reinstate the
The ruling in Telefunken cannot be applied to the case at bar. employees who were terminated as a result of redundancy.
In Philippine Long Distance Telephone Co. Inc. v. Manggagawa ng Komunikasyon sa Pilipinas, 108 which WHEREFORE, premises considered, the Petition is PARTIALLY GRANTED. The Court of Appeals' August 28, 2008
was promulgated on July 14, 2005, this Court struck down the return-to-work order dated January 2, 2003 Decision and November 24, 2009 Resolution in CA-G.R. SP No. 94365 and CA-G.R. SP No. 98975
issued by Secretary Sto. Tomas for being tainted with grave abuse of discretion. We ruled that the return-to- are AFFIRMED with MODIFICATION. Private respondent Philippine Long Distance Telephone Company, Inc.
work order should have included all striking workers, and should not have excluded the workers affected is DIRECTED to pay the workers affected by its 2002 redundancy program and who had been employed for
by the redundancy program. 109 However, barely three (3) months after Philippine Long Distance more than fifteen (15) years prior to their dismissal, the balance of the separation pay due them or a sum
Telephone Co. Inc. 's promulgation, the National Labor Relations Commission in its October 28, 2005 equivalent to twenty-five percent (25%) of their basic monthly pay for every year of service with Philippine
Resolution 110 upheld the validity of Philippine Long Distance Telephone Company's redundancy program. Long Distance Telephone Company, Inc.
This resolution also dismissed the charges of unfair labor practice, and illegal dismissal against Philippine A legal interest of 6% per annum shall be imposed on the total judgment award from the finality of this
Long Distance Telephone Company. 111 Decision until its full satisfaction.
When petitioner filed its Motion for Execution112 on January 17, 2006 pursuant to this Court's ruling SO ORDERED.
in Philippine Long Distance Telephone Co. Inc., there was no longer any existing basis for the return-to-work
order. This was because the Secretary of Labor and Employment's return-to-work order had been
superseded by the National Labor Relations Commission's Resolution. Hence, the Secretary of Labor and
Employment did not err in dismissing the motion for execution on the ground of mootness.
Petitioner cites Garcia v. Philippine Airlines113 to support its claim that the affected and striking workers are
entitled to reinstatement and backwages from January 2, 2003, when Secretary Sto. Tomas directed the
striking workers to return to work, up to April 29, 2006, when the National Labor Relations Commission's
Resolution upholding Philippine Long Distance Telephone Company's redundancy program became final
and executory. 114
Petitioner is mistaken.
Garcia upholds the prevailing doctrine that even if a Labor Arbiter's order of reinstatement is reversed on
appeal, the employer is obligated "to reinstate and pay the wages of the dismissed employee during the
period of appeal until reversal by the higher court." 115
There is no order of reinstatement from a Labor Arbiter in the case at bar, instead, what is at issue is the
return-to-work order from the Secretary of Labor and Employment. An order of reinstatement is different
from a return-to-work order.
The award of reinstatement, including backwages, is awarded by a Labor Arbiter to an illegally dismissed
employee pursuant to Article 294116 of the Labor Code:
Article 294. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement. (Emphasis supplied)
If actual reinstatement is no longer possible, the employee becomes entitled to separation pay in lieu of
reinstatement. 117
On the other hand, a return-to-work order is issued by the Secretary of Labor and Employment when he or
she assumes jurisdiction over a labor dispute in an industry that is considered indispensable to the national
interest. Article 278(g) of the Labor Code provides that the assumption and certification of the Secretary of
Labor and Employment shall automatically enjoin the intended or impending strike. When a strike has
already taken place at the time the Secretary of Labor and Employment assumes jurisdiction over the
labor dispute, all striking employees shall immediately return to work. Moreover, the employer shall
immediately resume operations, and readmit all workers under the same terms and conditions prevailing
before the strike.
G.R. No. 180962 February 26, 2014
PIDLTRANCO SERVICE ENTERPRISES, INC., represented by its Vice-President for Administration, M/GEN.
NEMESIO M. SIGAYA, Petitioner,
vs.
PHILTRANCO WORKERS UNION-ASSOCIATION OF GENUINE LABOR ORGANIZATIONS (PWU-AGLO),
represented by JOSE JESSIE OLIVAR, Respondent.
DECISION
DEL CASTILLO, J.:
While a government office1 may prohibit altogether the filing of a motion for reconsideration with respect
to its decisions or orders, the fact remains that certiorari inherently requires the filing of a motion for
reconsideration, which is the tangible representation of the opportunity given to the office to correct itself.
Unless it is filed, there could be no occasion to rectify. Worse, the remedy of certiorari would be unavailing.
Simply put, regardless of the proscription against the filing of a motion for reconsideration, the same may
be filed on the assumption that rectification of the decision or order must be obtained, and before a
petition for certiorari may be instituted.
This Petition for Review on Certiorari 2 seeks a review and setting aside of the September 20, 2007
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100324,4 as well as its December 14, 2007
Resolution5 denying petitioner’s Motion for Reconsideration.
Factual Antecedents
On the ground that it was suffering business losses, petitioner Philtranco Service Enterprises, Inc., a local
land transportation company engaged in the business of carrying passengers and freight, retrenched 21 of
its employees. Consequently, the company union, herein private respondent Philtranco Workers Union-
Association of Genuine Labor Organizations (PWU-AGLU), filed a Notice of Strike with the Department of
Labor and Employment (DOLE), claiming that petitioner engaged in unfair labor practices. The case was
docketed as NCMB-NCR CASE No. NS-02-028-07.
Unable to settle their differences at the scheduled February 21, 2007 preliminary conference held before
Conciliator-Mediator Amorsolo Aglibut (Aglibut) of the National Conciliation and Mediation Board (NCMB),
the case was thereafter referred to the Office of the Secretary of the DOLE (Secretary of Labor), where the
case was docketed as Case No. OS-VA-2007-008.
After considering the parties’ respective position papers and other submissions, Acting DOLE Secretary
Danilo P. Cruz issued a Decision6 dated June 13, 2007, the dispositive portion of which reads, as follows:
WHEREFORE, premises considered, we hereby ORDER Philtranco to:
1. REINSTATE to their former positions, without loss of seniority rights, the ILLEGALLY TERMINATED 17
"union officers", x x x, and PAY them BACKWAGES from the time of termination until their actual or
payroll reinstatement, provided in the computation of backwages among the seventeen (17)
who had received their separation pay should deduct the payments made to them from the
backwages due them.
2. MAINTAIN the status quo and continue in full force and effect the terms and conditions of the
existing CBA – specifically, Article VI on Salaries and Wages (commissions) and Article XI, on
Medical and Hospitalization – until a new agreement is reached by the parties; and
3. REMIT the withheld union dues to PWU-AGLU without unnecessary delay.
The PARTIES are enjoined to strictly and fully comply with the provisions of the existing CBA and the other
dispositions of this Decision.
SO ORDERED.7
Petitioner received a copy of the above Decision on June 14, 2007. It filed a Motion for Reconsideration on
June 25, 2007, a Monday. Private respondent, on the other hand, submitted a "Partial Appeal."
In an August 15, 2007 Order8 which petitioner received on August 17, 2007, the Secretary of Labor declined
to rule on petitioner’s Motion for Reconsideration and private respondent’s "Partial Appeal", citing a DOLE
Regulation9 which provided that voluntary arbitrators’ decisions, orders, resolutions or awards shall not be
the subject of motions for reconsideration. The Secretary of Labor held:
WHEREFORE, the complainant’s and the respondent’s respective pleadings are hereby NOTED as
pleadings that need not be acted upon for lack of legal basis.
SO ORDERED.10
The Assailed Court of Appeals Resolutions
On August 29, 2007, petitioner filed before the CA an original Petition for Certiorari and Prohibition, and
sought injunctive relief, which case was docketed as CA-G.R. SP No. 100324.
On September 20, 2007, the CA issued the assailed Resolution which decreed as follows:
WHEREFORE, premises considered, the instant Petition for Certiorari and Prohibition with Prayer for
Temporary Restraining Order and Preliminary Injunction is hereby DISMISSED. Philtranco’s pleading entitled
"Reiterating Motion for The Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order" is
NOTED.
SO ORDERED.11
The CA held that, in assailing the Decision of the DOLE voluntary arbitrator, petitioner erred in filing a
petition for certiorari under Rule 65 of the 1997 Rules, when it should have filed a petition for review under
Rule 43 thereof, which properly covers decisions of voluntary labor arbitrators.12 For this reason, the petition
is dismissible pursuant to Supreme Court Circular No. 2-90.13 The CA added that since the assailed Decision
was not timely appealed within the reglementary 15-day period under Rule 43, the same became final
and executory. Finally, the appellate court ruled that even assuming for the sake of argument that
certiorari was indeed the correct remedy, still the petition should be dismissed for being filed out of time.
Petitioner’s unauthorized Motion for Reconsideration filed with the Secretary of Labor did not toll the
running of the reglementary 60-day period within which to avail of certiorari; thus, from the time of its
receipt of Acting Labor Secretary Cruz’s June 13, 2007 Decision on June 14 or the following day, petitioner
had until August 13 to file the petition – yet it filed the same only on August 29.
Petitioner filed a Motion for Reconsideration, which was denied by the CA through the second assailed
December 14, 2007 Resolution. In denying the motion, the CA held that the fact that the Acting Secretary
of Labor rendered the decision on the voluntary arbitration case did not remove the same from the
jurisdiction of the NCMB, which thus places the case within the coverage of Rule 43.
Issues
In this Petition,14 the following errors are assigned:
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER AVAILED OF THE ERRONEOUS
REMEDY IN FILING A PETITION FOR CERTIORARI UNDER RULE 65 INSTEAD OF UNDER RULE 43 OF THE RULES OF
COURT.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PETITION FOR CERTIORARI WAS FILED
OUT OF TIME.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION OUTRIGHT ON THE BASIS OF
PURE TECHNICALITY.15
Petitioner’s Arguments
In its Petition and Reply,16 petitioner argues that a petition for certiorari under Rule 65 – and not a petition
for review under Rule 43 – is the proper remedy to assail the June 13, 2007 Decision of the DOLE Acting
Secretary, pointing to the Court’s pronouncement in National Federation of Labor v. Hon. Laguesma 17 that
the remedy of an aggrieved party against the decisions and discretionary acts of the NLRC as well as the
Secretary of Labor is to timely file a motion for reconsideration, and then seasonably file a special civil
action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Petitioner adds that, contrary to the CA’s ruling, NCMB-NCR CASE No. NS-02-028-07 is not a simple
voluntary arbitration case. The character of the case, which involves an impending strike by petitioner’s
employees; the nature of petitioner’s business as a public transportation company, which is imbued with
public interest; the merits of its case; and the assumption of jurisdiction by the Secretary of Labor – all these
circumstances removed the case from the coverage of Article 262,18 and instead placed it under Article
263,19 of the Labor Code. Besides, Rule 43 does not apply to judgments or final orders issued under the
Labor Code.20
On the procedural issue, petitioner insists that it timely filed the Petition for Certiorari with the CA, arguing
that Rule 65 fixes the 60-day period within which to file the petition from notice of the denial of a timely
filed motion for reconsideration, whether such motion is required or not. It cites the Court’s pronouncement
in ABS-CBN Union Members v. ABS-CBN Corporation21 that "before a petition for certiorari under Rule 65 of
the Rules of Court may be availed of, the filing of a motion for reconsideration is a condition sine qua non
to afford an opportunity for the correction of the error or mistake complained of" and since "a decision of
the Secretary of Labor is subject to judicial review only through a special civil action of certiorari x x x [it]
cannot be resorted to without the aggrieved party having exhausted administrative remedies through a
motion for reconsideration".
Respondent’s Arguments
In its Comment,22 respondent argues that the Secretary of Labor decided Case No. OS-VA-2007-008 in his
capacity as voluntary arbitrator; thus, his decision, being that of a voluntary arbitrator, is only assailable via
a petition for review under Rule 43. It further echoes the CA’s ruling that even granting that certiorari was
the proper remedy, the same was filed out of time as the filing of a motion for reconsideration, which was
an unauthorized pleading, did not toll the running of the 60-day period. Finally, it argues that on the merits,
petitioner’s case could not hold water as it failed to abide by the requirements of law in effecting a
retrenchment on the ground of business losses.
Our Ruling
The Court grants the Petition.
It cannot be said that in taking cognizance of NCMB-NCR CASE No. NS-02-028-07, the Secretary of Labor
did so in a limited capacity, i.e., as a voluntary arbitrator. The fact is undeniable that by referring the case
to the Secretary of Labor, Conciliator-Mediator Aglibut conceded that the case fell within the coverage of
Article 263 of the Labor Code; the impending strike in Philtranco, a public transportation company whose
business is imbued with public interest, required that the Secretary of Labor assume jurisdiction over the
case, which he in fact did. By assuming jurisdiction over the case, the provisions of Article 263 became
applicable, any representation to the contrary or that he is deciding the case in his capacity as a
voluntary arbitrator notwithstanding.
It has long been settled that the remedy of an aggrieved party in a decision or resolution of the Secretary
of Labor is to timely file a motion for reconsideration as a precondition for any further or subsequent
remedy, and then seasonably file a special civil action for certiorari under Rule 65 of the 1997 Rules on Civil
Procedure.23 There is no distinction: when the Secretary of Labor assumes jurisdiction over a labor case in
an industry indispensable to national interest, "he exercises great breadth of discretion" in finding a solution
to the parties’ dispute.24 "[T]he authority of the Secretary of Labor to assume jurisdiction over a labor
dispute causing or likely to cause a strike or lockout in an industry indispensable to national interest includes
and extends to all questions and controversies arising therefrom. The power is plenary and discretionary in
nature to enable him to effectively and efficiently dispose of the primary dispute." 25 This wide latitude of
discretion given to the Secretary of Labor may not be the subject of appeal.
Accordingly, the Secretary of Labor’s Decision in Case No. OS-VA-2007-008 is a proper subject of certiorari,
pursuant to the Court’s pronouncement in National Federation of Labor v. Laguesma,26 thus:
Though appeals from the NLRC to the Secretary of Labor were eliminated, presently there are several
instances in the Labor Code and its implementing and related rules where an appeal can be filed with the
Office of the Secretary of Labor or the Secretary of Labor issues a ruling, to wit:
xxxx
(6) Art. 263 provides that the Secretary of Labor shall decide or resolve the labor dispute [over] which he
assumed jurisdiction within thirty (30) days from the date of the assumption of jurisdiction. His decision shall
be final and executory ten (10) calendar days after receipt thereof by the parties.
From the foregoing we see that the Labor Code and its implementing and related rules generally do not
provide for any mode for reviewing the decision of the Secretary of Labor. It is further generally provided
that the decision of the Secretary of Labor shall be final and executory after ten (10) days from notice. Yet,
like decisions of the NLRC which under Art. 223 of the Labor Code become final after ten (10) days,
decisions of the Secretary of Labor come to this Court by way of a petition for certiorari even beyond the
ten-day period provided in the Labor Code and the implementing rules but within the reglementary period
set for Rule 65 petitions under the 1997 Rules of Civil Procedure. x x x
xxxx
In fine, we find that it is procedurally feasible as well as practicable that petitions for certiorari under Rule 65 against the
decisions of the Secretary of Labor rendered under the Labor Code and its implementing and related rules be filed initially
in the Court of Appeals. Paramount consideration is strict observance of the doctrine on the hierarchy of the courts,
emphasized in St. Martin Funeral Homes v. NLRC, on "the judicial policy that this Court will not entertain direct resort to it
unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction." 27
On the question of whether the Petition for Certiorari was timely filed, the Court agrees with petitioner’s submission. Rule 65
states that where a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the
petition shall be filed not later than 60 days counted from the notice of the denial of the motion. 28 This can only mean that
even though a motion for reconsideration is not required or even prohibited by the concerned government office, and
the petitioner files the motion just the same, the 60-day period shall nonetheless be counted from notice of the denial of
the motion. The very nature of certiorari – which is an extraordinary remedy resorted to only in the absence of plain,
available, speedy and adequate remedies in the course of law – requires that the office issuing the decision or order be
given the opportunity to correct itself. Quite evidently, this opportunity for rectification does not arise if no motion for
reconsideration has been filed. This is precisely what the Court said in the ABS-CBN Union Members case, whose essence
continues to this day. Thus:
Section 8, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code, provides:
"The Secretary shall have fifteen (15) calendar days within which to decide the appeal from receipt of the records of the
case. The decision of the Secretary shall be final and inappealable." x x x
The aforecited provision cannot be construed to mean that the Decision of the public respondent cannot be
reconsidered since the same is reviewable by writ of certiorari under Rule 65 of the Rules of Court. As a rule, the law
requires a motion for reconsideration to enable the public respondent to correct his mistakes, if any. In Pearl S. Buck
Foundation, Inc., vs. NLRC, this Court held:
"Hence, the only way by which a labor case may reach the Supreme Court is through a petition for certiorari under Rule
65 of the Rules of Court alleging lack or excess of jurisdiction or grave abuse of discretion. Such petition may be filed within
a reasonable time from receipt of the resolution denying the motion for reconsideration of the NLRC decision." x x x
Clearly, before a petition for certiorari under Rule 65 of the Rules of Court may be availed of, the filing of a motion for
reconsideration is a condition sine qua non to afford an opportunity for the correction of the error or mistake complained
of.
So also, considering that a decision of the Secretary of Labor is subject to judicial review only through a special civil action
of certiorari and, as a rule, cannot be resorted to without the aggrieved party having exhausted administrative remedies
through a motion for reconsideration, the aggrieved party, must be allowed to move for a reconsideration of the same so
that he can bring a special civil action for certiorari before the Supreme Court. 29
Indeed, what needs to be realized is that while a government office may prohibit altogether the filing of a motion for
reconsideration with respect to its decisions or orders, the fact remains that certiorari inherently requires the filing of a
motion for reconsideration, which is the tangible representation of the opportunity given to the office to correct itself.
Unless it is filed, there could be no occasion to rectify. Worse, the remedy of certiorari would be unavailing. Simply put,
regardless of the proscription against the filing of a motion for reconsideration, the same may be filed on the assumption
that rectification of the decision or order must be obtained, and before a petition for certiorari may be instituted.
Petitioner received a copy of the Acting Secretary of Labor’s Decision on June 14, 2007.1âwphi1 It timely filed a Motion for
Reconsideration on June 25, which was a Monday, or the first working day following the last day (Sunday, June 24) for
filing the motion. But for lack of procedural basis, the same was effectively denied by the Secretary of Labor via his August
15, 2007 Order which petitioner received on August 17. It then filed the Petition for Certiorari on August 29, or well within
the fresh 60-day period allowed by the Rules from August 17. Given these facts, the Court finds that the Petition was timely
filed.
Going by the foregoing pronouncements, the CA doubly erred in dismissing CA-G.R. SP No. 100324.
WHEREFORE, the Petition is GRANTED. The assailed September 20, 2007 and December 14, 2007 Resolutions of the Court of
Appeals are REVERSED and SET ASIDE. The Petition in CA-G.R. SP No. 100324 is ordered REINSTATED and the Court of
Appeals is DIRECTED to RESOLVE the same with DELIBERATE DISPATCH.
SO ORDERED.MARIANO C. DEL CASTILLO
Associate Justice
 G.R. No. 210500, April 02, 2019
KILUSANG MAYO UNO, REPRESENTED BY ITS SECRETARY GENERAL ROGELIO SOLUTA; REP. FERNANDO HICAP
FOR HIMSELF AND AS REPRESENTATIVE OF THE ANAKPAWIS PARTY-LIST; CENTER FOR TRADE UNION AND
HUMAN RIGHTS, REPRESENTED BY ITS EXECUTIVE DIRECTOR DAISY ARAGO; JOSELITO USTAREZ AND SALVADOR
CARRANZA, FOR THEMSELVES AND IN REPRESENTATION OF THE NATIONAL FEDERATION OF LABOR UNIONS-
KMU; NENITA GONZAGA, PRESCILA A. MANIQUIZ, REDEN ALCANTARA, PETITIONERS, v. HON. BENIGNO
SIMEON C. AQUINO III, HON. PAQUITO N. OCHOA, JR., SOCIAL SECURITY COMMISSION, SOCIAL SECURITY
SYSTEM, AND EMILIO S. DE QUIROS, JR., RESPONDENTS.
DECISION
LEONEN, J.:
This Court is called to determine the validity of the Social Security System premium hike, which took effect
in January 2014. The case also involves the application of doctrines on judicial review, valid delegation of
powers, and the exercise of police power.
This resolves a Petition for Certiorari and Prohibition,1 praying that a temporary restraining order and/or writ
of preliminary injunction be issued to annul the Social Security System premium hike embodied in the
following issuances: (1) Resolution No. 262-s. 2013 dated April 19, 2013;2 (2) Resolution No. 711-s. 2013 dated
September 20, 2013;3 and (3) Circular No. 2013-0104 dated October 2, 2013 (collectively, the assailed
issuances). Kilusang Mayo Uno, together with representatives from recognized labor centers, labor
federations, party-list groups, and Social Security System members (collectively, Kilusang Mayo Uno, et al.),
filed the case against government officials and agencies involved in issuing the assailed issuances.
On April 19, 2013, the Social Security Commission issued Resolution No. 262-s. 2013,5 which provided an
increase in: (1) the Social Security System members' contribution rate from 10.4% to 11%; and (2) the
maximum monthly salary credit from P15,000.00 to P16,000.00. The increase was made subject to the
approval of the President of the Philippines.6
In a September 6, 2013 Memorandum, the President approved the increase.7
On September 20, 2013, the Social Security Commission issued Resolution No. 711-s. 2013,8 which approved,
among others, the increase in contribution rate and maximum monthly salary credit.
On October 2, 2013, the Social Security System, through President and Chief Executive Officer Emilio S. De
Quiros, Jr., issued Circular No. 2013-010,9 which provided the revised schedule of contributions that would
be in effect in January 2014. Per the circular, the employer and the employee shall equally shoulder the
0.6% increase in contributions. Thus, the employer would pay a contribution rate of 7.37% (from 7.07%); the
employee, 3.63% (from 3.33%).
On January 10, 2014, Kilusang Mayo Uno, et al. filed this Petition for Certiorari and Prohibition,10 questioning
the validity of the assailed issuances.
Maintaining that a majority of them are Social Security System members directly affected by the premium
hike, petitioners assert having the requisite locus standi to file the Petition.11 Citing David v. Macapagal-
Arroyo,12 they further argue that the other petitioners' legal personality arises from the transcendental
importance of the Petition's issues.13
Petitioners claim that the assailed issuances were issued per an unlawful delegation of power to
respondent Social Security Commission based on Republic Act No. 8282, or the Social Security Act. In
particular, Section 1814 allegedly offers vague and unclear standards, and are incomplete in its terms and
conditions. This provision, they claim, has allowed respondent Social Security Commission to fix contribution
rates from time to time, subject to the President's approval. Petitioners claim that the delegation of the
power had no adequate legal guidelines to map out the boundaries of the delegate's authority.15
In addition, petitioners claim that the increase in contribution rate violates Section 4(b)(2) of the Social
Security Act,16 which states that the "increases in benefits shall not require any increase in the rate of
contribution[.]" They argue that this proviso prohibits the increase in contributions if there was no
corresponding increase in benefits.17
Petitioners then argue that the increase in contributions is an invalid exercise of police power for not being
reasonably necessary for the attainment of the purpose sought, as well as for being unduly oppressive on
the labor sector.18 According to them, the Social Security System can extend actuarial life and decrease its
unfunded liability without increasing the premiums they pay.19
Petitioners further insist that the revised ratio of contributions between employers and employees, per the
assailed issuances, is grossly unjust to the working class and is beyond respondents' powers. They claim that
for the purposes of justice and consistency, respondents should have maintained the 70%-30% ratio in the
premium increase. Changing it, they add, is grossly unfair and detrimental to employees.20
Petitioners further emphasize that the State is required to protect the rights of workers and promote their
welfare under the Constitution.21
Lastly, petitioners pray that a temporary restraining order and/or writ of preliminary injunction be issued to
stop the implementation of the increase in contributions. They aver that stopping it is necessary to protect
their substantive rights and interests. They point out that their earnings for food and other basic needs
would be reduced and allocated instead to defraying the amount needed for contributions.22
The issues for this Court's resolution are:
First, whether or not this Court can exercise its power of judicial review;
Second, whether or not there is an actual case or controversy;
Third, whether or not the doctrine of exhaustion of administrative remedies applies;
Fourth, whether or not petitioners have legal standing to file the Petition; and
Finally, whether or not the assailed issuances were issued in violation of laws and with grave abuse of
discretion.
In connection with the fifth issue, this Court further resolves:
First, whether or not the assailed issuances are void for having been issued under vague and unclear
standards contained in the Social Security Act;
Second, whether or not the increase in Social Security System contributions is reasonably necessary for the
attainment of the purpose sought and is unduly oppressive upon the labor sector; and
Finally, whether or not the revised ratio of contributions between employers and employees is grossly unjust
to the working class and beyond respondent Social Security Commission's power to enact.
This Court denies the Petition for lack of merit.
I
Procedural infirmities attend the filing of this Petition. To begin with, former President Benigno Simeon C.
Aquino III, as President of the Philippines, is improperly impleaded here.
The president is the head of the executive branch,23 a co-equal of the judiciary under the Constitution. His
or her prerogative is entitled to respect from other branches of government.24 Inter-branch courtesy25 is but
a consequence of the doctrine of separation of powers.26
As such, the president cannot be charged with any suit, civil or criminal in nature, during his or her
incumbency in office. This is in line with the doctrine of the president's immunity from suit.27
In David,28 this Court explained why it is improper to implead the incumbent President of the Philippines.
The doctrine has both policy and practical considerations:
Settled is the doctrine that the President, during his tenure of office or actual incumbency, may not be
sued in any civil or criminal case, and there is no need to provide for it in the Constitution or law. It will
degrade the dignity of the high office of the President, the Head of State, if he can be dragged into court
litigations while serving as such. Furthermore, it is important that he be freed from any form of harassment,
hindrance or distraction to enable him to fully attend to the performance of his official duties and
functions. Unlike the legislative and judicial branch, only one constitutes the executive branch and
anything which impairs his usefulness in the discharge of the many great and important duties imposed
upon him by the Constitution necessarily impairs the operation of the Government. However, this does not
mean that the President is not accountable to anyone. Like any other official, he remains accountable to
the people but he may be removed from office only in the mode provided by law and that is by
impeachment.29 (Emphasis in the original, citations omitted)
As to the propriety of seeking redress from this Court, it is best to be guided by the power of judicial review
as provided in Article VIII, Section 1 of the 1987 Constitution:
ARTICLE VIII
Judicial Department
SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality
of the Government. (Emphasis supplied)
This Court has discussed in several cases how the 1987 Constitution has expanded the scope of judicial
power from its traditional understanding. As such, courts are not only expected to "settle actual
controversies involving rights which are legally demandable and enforceable[,]"30 but are also
empowered to determine if any government branch or instrumentality has acted beyond the scope of its
powers, such that there is grave abuse of discretion.31
This development of the courts' judicial power arose from the use and abuse of the political question
doctrine during the martial law era under former President Ferdinand Marcos. In Association of Medical
Clinics for Overseas Workers, Inc. v. GCC Approved Medical Centers Association, Inc.,32 this Court held:
In Francisco v. The House of Representatives, we recognized that this expanded jurisdiction was meant "to
ensure the potency of the power of judicial review to curb grave abuse of discretion by 'any branch or
instrumentalities of government.'" Thus, the second paragraph of Article VIII, Section 1 engraves, for the first
time in its history, into black letter law the "expanded certiorari jurisdiction" of this Court, whose nature and
purpose had been provided in the sponsorship speech of its proponent, former Chief Justice Constitutional
Commissioner Roberto Concepcion[:]
....
The first section starts with a sentence copied from former Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in such lower courts as may be established
by law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it first and explain.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality
of the government.
Fellow Members of this Commission, this is actually a product of our experience during martial law. As a
matter of fact, it has some antecedents in the past, but the role of the judiciary during the deposed regime
was marred considerably by the circumstance that in a number of cases against the government, which
then had no legal defense at all, the solicitor general set up the defense of political question and got
away with it. As a consequence, certain principles concerning particularly the writ of habeas corpus, that
is, the authority of courts to order the release of political detainees, and other matters related to the
operation and effect of martial law failed because the government set up the defense of political
question. And the Supreme Court said: "Well, since it is political, we have no authority to pass upon it." The
Committee on the Judiciary feels that this was not a proper solution of the questions involved. It did not
merely request an encroachment upon the rights of the people, but it, in effect, encouraged further
violations thereof during the martial law regime.
....
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the government
as well as those of its officers. In other words, the judiciary is the final arbiter on the question whether or not
a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction or lack of jurisdiction.
This is not only a judicial power but a duty to pass judgment on matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter evade
the duty to settle matters of this nature, by claiming that such matters constitute a political
question.33 (Emphasis in the original, citations omitted)
Rule 65, Sections 1 and 2 of the Rules of Court provides remedies to address grave abuse of discretion by
any government branch or instrumentality, particularly through petitions for certiorari and prohibition:
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.
The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject
thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification
of non-forum shopping as provided in the paragraph of Section 3, Rule 46.
SECTION 2. Petition for Prohibition. — When the proceedings of any tribunal, corporation, board, officer or
person, whether exercising judicial, quasi-judicial or ministerial functions, are 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 other 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 commanding the respondent to desist from further proceedings in the
action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may
require.
The petition shall likewise be accompanied by a certified true copy of the judgment, order or resolution
subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn
certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46.
While these provisions pertain to a tribunal's, board's, or an officer's exercise of discretion in judicial, quasi-
judicial, or ministerial functions, Rule 65 still applies to invoke the expanded scope of judicial power.
In Araullo v. Aquino III,34 this Court differentiated certiorari from prohibition, and clarified that Rule 65 is the
remedy to "set right, undo[,] and restrain any act of grave abuse of discretion amounting to lack or excess
of jurisdiction by any branch or instrumentality of the Government, even if the latter does not exercise
judicial, quasi-judicial[J or ministerial functions."35
This Court further explained:
The present Rules of Court uses two special civil actions for determining and correcting grave abuse of
discretion amounting to lack or excess of jurisdiction. These are the special civil actions for certiorari and
prohibition, and both are governed by Rule 65. . . .
The ordinary nature and function of the writ of certiorari in our present system are aptly explained in Delos
Santos v. Metropolitan Bank and Trust Company:
....
The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the
commission of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of
discretion is not enough to warrant the issuance of the writ. The abuse of discretion must be grave, which
means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive
duty, or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such
judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical
manner as to be equivalent to lack of jurisdiction.
Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is to be
distinguished from prohibition by the fact that it is a corrective remedy used for the re-examination of some
action of an inferior tribunal, and is directed to the cause or proceeding in the lower court and not to the
court itself, while prohibition is a preventative remedy issuing to restrain future action, and is directed to the
court itself. The Court expounded on the nature and function of the writ of prohibition in Holy Spirit
Homeowners Association, Inc. v. Defensor:
A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasi-
legislative function. Prohibition is an extraordinary writ directed against any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering said entity or
person to desist from further proceedings when said proceedings are without or in excess of said entity's or
person's jurisdiction, or are accompanied with grave abuse of discretion, and there is no appeal or any
other plain, speedy and adequate remedy in the ordinary course of law. Prohibition lies against judicial or
ministerial functions, but not against legislative or quasi-legislative functions. Generally, the purpose of a
writ of prohibition is to keep a lower court within the limits of its jurisdiction in order to maintain the
administration of justice in orderly channels. Prohibition is the proper remedy to afford relief against
usurpation of jurisdiction or power by an inferior court, or when, in the exercise of jurisdiction in handling
matters clearly within its cognizance the inferior court transgresses the bounds prescribed to it by the law,
or where there is no adequate remedy available in the ordinary course of law by which such relief can be
obtained. Where the principal relief sought is to invalidate an IRR, petitioners' remedy is an ordinary action
for its nullification, an action which properly falls under the jurisdiction of the Regional Trial Court. In any
case, petitioners' allegation that "respondents are performing or threatening to perform functions without
or in excess of their jurisdiction" may appropriately be enjoined by the trial court through a writ of injunction
or a temporary restraining order.
With respect to the Court, however, the remedies of certiorari and prohibition are necessarily broader in
scope and reach, and the writ of certiorari or prohibition may be issued to correct errors of jurisdiction
committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-judicial or
ministerial functions but also to set right, undo and restrain any act of grave abuse of discretion amounting
to lack or excess of jurisdiction by any branch or instrumentality of the Government, even if the latter does
not exercise judicial, quasi-judicial or ministerial functions. This application is expressly authorized by the text
of the second paragraph of Section 1, . . . .
Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues and to
review and/or prohibit or nullify the acts of legislative and executive officials.36 (Emphasis in the original,
citations omitted)
Here, petitioners filed a Petition for both certiorari and prohibition to determine whether respondents Social
Security System and Social Security Commission committed grave abuse of discretion in releasing the
assailed issuances. According to them, these issuances violated the provisions of the Constitution on the
protection of workers, promotion of social justice, and respect for human rights.37 They further claim that
the assailed issuances are void for having been issued based on vague and unclear standards. They also
argue that the increase in contributions is an invalid exercise of police power as it is not reasonably
necessary and, thus, unduly oppressive to the labor sector. Lastly, they insist that the revised ratio in
contributions is grossly unjust to the working class.38
Petitioners must, thus, comply with the requisites for the exercise of the power of judicial review: (1) there
must be an actual case or justiciable controversy before this Court; (2) the question before this Court must
be ripe for adjudication; (3) the person challenging the act must be a proper party; and (4) the issue of
constitutionality must be raised at the earliest opportunity and must be the very litis mota of the case.39
I (A)
Most important in this list of requisites is the existence of an actual case or controversy.40 In every exercise of
judicial power, whether in the traditional or expanded sense, this is an absolute necessity.
There is an actual case or controversy if there is a "conflict of legal right, an opposite legal claims
susceptible of judicial resolution."41 A petitioner bringing a case before this Court must establish that there is
a legally demandable and enforceable right under the Constitution. There must be a real and substantial
controversy, with definite and concrete issues involving the legal relations of the parties, and admitting of
specific relief that courts can grant.42
This requirement goes into the nature of the judiciary as a co-equal branch of government. It is bound by
the doctrine of separation of powers, and will not rule on any matter or cause the invalidation of any act,
law, or regulation, if there is no actual or sufficiently imminent breach of or injury to a right. The courts
interpret laws, but the ambiguities may only be clarified in the existence of an actual situation.
In Lozano v. Nograles,43 the petitions assailing House Resolution No. 1109 were dismissed due to the
absence of an actual case or controversy. This Court held that the "determination of the nature, scope[,]
and extent of the powers of government is the exclusive province of the judiciary, such that any mediation
on the part of the latter for the allocation of constitutional boundaries would amount, not to its supremacy,
but to its mere fulfillment of its 'solemn and sacred obligation' under the Constitution."44 The judiciary's
awesome power of review is limited in application.45
Jurisprudence lays down guidelines in determining an actual case or controversy. In Information
Technology Foundation of the Philippines v. Commission on Elections,46 this Court required that "the
pleadings must show an active antagonistic assertion of a legal right, on the one hand, and a denial
thereof on the other; that is, it must concern a real and not a merely theoretical question or issue." 47 Further,
there must be "an actual and substantial controversy admitting of specific relief through a decree
conclusive in nature, as distinguished from an opinion advising what the law would be upon a hypothetical
state of facts."48
Courts, thus, cannot decide on theoretical circumstances. They are neither advisory bodies, nor are they
tasked with taking measures to prevent imagined possibilities of abuse.
Hence, in Southern Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council,49 this Court ruled:
Without any justiciable controversy, the petitions have become pleas for declaratory relief, over which the
Court has no original jurisdiction. Then again, declaratory actions characterized by "double contingency,"
where both the activity the petitioners intend to undertake and the anticipated reaction to it of a public
official are merely theorized, lie beyond judicial review for lack of ripeness.
The possibility of abuse in the implementation of RA 9372 does not avail to take the present petitions out of
the realm of the surreal and merely imagined, . . . Allegations of abuse must be anchored on real events
before courts may step in to settle actual controversies involving rights which are legally demandable and
enforceable.50 (Emphasis supplied, citations omitted)
In Republic v. Roque,51 this Court further qualified the meaning of a justiciable controversy. In dismissing the
Petition for declaratory relief before the Regional Trial Court, which assailed several provisions of the
Human Security Act, we explained that justiciable controversy or ripening seeds refer to:
. . . an existing case or controversy that is appropriate or ripe for judicial determination, not one that is
conjectural or merely anticipatory. Corollary thereto, by "ripening seeds" it is meant, not that sufficient
accrued facts may be dispensed with, but that a dispute may be tried at its inception before it has
accumulated the asperity, distemper, animosity, passion, and violence of a full blown battle that looms
ahead. The concept describes a state of facts indicating imminent and inevitable litigation provided that
the issue is not settled and stabilized by tranquilizing declaration.52 (Emphasis supplied, citations omitted)
The existence of an actual case or controversy depends on the allegations pleaded.53
Here, petitioners allege that the premium hike, through the assailed issuances, violates their rights as
workers whose welfare is mandated to be protected under the Constitution.54 They further allege that the
issuances are grossly unjust to the working class and were issued beyond the scope of constitutional
powers.55
Thus, petitioners' allegations present violations of rights provided for under the Constitution on the
protection of workers, and promotion of social justice.56 They likewise assert that respondents Social Security
Commission and Social Security System acted beyond the scope of their powers.
This Court, however, notes that petitioners failed to prove how the assailed issuances violated workers'
constitutional rights such that it would warrant a judicial review. Petitioners cannot merely cite and rely on
the Constitution without specifying how these rights translate to being legally entitled to a fixed amount
and proportion of Social Security System contributions.
Moreover, an actual case or controversy requires that the right must be enforceable and legally
demandable. A complaining party's right is, thus, affected by the rest of the requirements for the exercise
of judicial power: (1) the issue's ripeness and prematurity; (2) the moot and academic principle; and (3)
the party's standing.57
 I (B)
A case is ripe for adjudication when the challenged governmental act is a completed action such that
there is a direct, concrete, and adverse effect on the petitioner.58 It is, thus, required that something had
been performed by the government branch or instrumentality before the court may step in, and the
petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
challenged action.59
In connection with acts of administrative agencies, ripeness is ensured under the doctrine of exhaustion of
administrative remedies. Courts may only take cognizance of a case or controversy if the petitioner has
exhausted all remedies available to it under the law. The doctrine ensures that the administrative agency
exercised its power to its full extent, including its authority to correct or reconsider its actions. It would, thus,
be premature for courts to take cognizance of the case prior to the exhaustion of remedies, not to
mention it would violate the principle of separation of powers. Thus, in Rule 65 petitions, it is required that
no other plain, speedy, or adequate remedy is available to the party. In Association of Medical Clinics for
Overseas Workers, Inc.:
The doctrine of exhaustion of administrative remedies applies to a petition for certiorari, regardless of the
act of the administrative agency concerned, i.e., whether the act concerns a quasi-judicial, or quasi-
legislative function, or is purely regulatory.
Consider in this regard that once an administrative agency has been empowered by Congress to
undertake a sovereign function, the agency should be allowed to perform its function to the full extent
that the law grants. This full extent covers the authority of superior officers in the administrative agencies to
correct the actions of subordinates, or for collegial bodies to reconsider their own decisions on a motion for
reconsideration. Premature judicial intervention would interfere with this administrative mandate, leaving
administrative action incomplete; if allowed, such premature judicial action through a writ of certiorari,
would be a usurpation that violates the separation of powers principle that underlies our Constitution.
In every case, remedies within the agency's administrative process must be exhausted before external
remedies can be applied. Thus, even if a governmental entity may have committed a grave abuse of
discretion, litigants should, as a rule, first ask reconsideration from the body itself, or a review thereof before
the agency concerned. This step ensures that by the time the grave abuse of discretion issue reaches the
court, the administrative agency concerned would have fully exercised its jurisdiction and the court can
focus its attention on the questions of law presented before it.
Additionally, the failure to exhaust administrative remedies affects the ripeness to adjudicate the
constitutionality of a governmental act, which in turn affects the existence of the need for an actual case
or controversy for the courts to exercise their power of judicial review. The need for ripeness — an aspect
of the timing of a case or controversy — does not change regardless of whether the issue of
constitutionality reaches the Court through the traditional means, or through the Court's expanded
jurisdiction. In fact, separately from ripeness, one other concept pertaining to judicial review is intrinsically
connected to it: the concept of a case being moot and academic.
Both these concepts relate to the timing of the presentation of a controversy before the Court — ripeness
relates to its prematurity, while mootness relates to a belated or unnecessary judgment on the issues. The
Court cannot preempt the actions of the parties, and neither should it (as a rule) render judgment after the
issue has already been resolved by or through external developments.
The importance of timing in the exercise of judicial review highlights and reinforces the need for an actual
case or controversy — an act that may violate a party's right. Without any completed action or a concrete
threat of injury to the petitioning party, the act is not yet ripe for adjudication. It is merely a hypothetical
problem. The challenged act must have been accomplished or performed by either branch or
instrumentality of government before a court may come into the picture, and the petitioner must allege
the existence of an immediate or threatened injury to itself as a result of the challenged action.
In these lights, a constitutional challenge, whether presented through the traditional route or through the
Court's expanded jurisdiction, requires compliance with the ripeness requirement. In the case of
administrative acts, ripeness manifests itself through compliance with the doctrine of exhaustion of
administrative remedies.60 (Emphasis in the original, citations omitted)
Here, it is clear that petitioners failed to exhaust their administrative remedies.
Petitioners allege that they "have no appeal nor any plain, speedy[,] and adequate remedy under the
ordinary course of law except through the instant Petition."61
However, Sections 4 and 5 of the Social Security Act are clear that the Social Security Commission has
jurisdiction over any dispute arising from the law regarding coverage, benefits, contributions, and
penalties. The law further provides that the aggrieved party must first exhaust all administrative remedies
available before seeking review from the courts:
SECTION 4. Powers and Duties of the Commission and SSS. — (a) The Commission. — For the attainment of
its main objectives as set forth in Section 2 hereof, the Commission shall have the following powers and
duties:
(1) To adopt, amend and rescind, subject to the approval of the President of the Philippines, such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act;
....
SECTION 5. Settlement of Disputes. — (a) Any dispute arising under this Act with respect to coverage,
benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by
the Commission, and any case filed with respect thereto shall be heard by the Commission, or any of its
members, or by hearing officers duly authorized by the Commission and decided within the mandatory
period of twenty (20) days after the submission of the evidence. The filing, determination and settlement of
disputes shall be governed by the rules and regulations promulgated by the Commission.
(b) Appeal to Courts. — Any decision of the Commission, in the absence of an appeal therefrom as herein
provided, shall become final and executory fifteen (15) days after the date of notification, and judicial
review thereof shall be permitted only after any party claiming to be aggrieved thereby has exhausted his
remedies before the Commission. The Commission shall be deemed to be a party to any judicial action
involving any such decision and may be represented by an attorney employed by the Commission, or
when requested by the Commission, by the Solicitor General or any public prosecutor. (Emphasis supplied)
In Luzon Stevedoring Corporation v. Social Security Commission,62 this Court upheld the jurisdiction and
competence of the Social Security Commission with regard to the grant of authority under the
unambiguous provisions of the Republic Act No. 8282.63 This Court stated:
Section 5 of the Social Security Act . . . on its face, would show that any dispute arising therein "with respect
to coverage entitlement to benefits, collection and settlement of premium contributions and penalties
thereon, or any other matter related thereto, shall be cognizable by the Commission . . . ." On its face,
support for the competence of respondent Commission to decide . . . would thus seem to be
evident.64 (Emphasis supplied, citations omitted)
In Enorme v. Social Security System,65 this Court categorically sustained the Social Security Commission's
exclusive power and jurisdiction to take cognizance of all disputes covered under the Social Security
Act.66 Consequently, plaintiffs must first exhaust all administrative remedies before judicial recourse is
allowed.67
In Social Security Commission v. Court of Appeals,68 this Court upheld the rules of procedure of the Social
Security Commission with regard to the rule on exhaustion of administrative remedies before a resort to the
courts may be permitted:
It now becomes apparent that the permissive nature of a motion for reconsideration with the SSC must be
read in conjunction with the requirements for judicial review, or the conditions sine qua non before a party
can institute certain civil actions. A combined reading of Section 5 of Rule VI, quoted earlier, and Section 1
of Rule VII of the SSC's 1997 Revised Rules of Procedure reveals that the petitioners are correct in asserting
that a motion for reconsideration is mandatory in the sense that it is a precondition to the institution of an
appeal or a petition for review before the Court of Appeals. Stated differently, while Rago certainly had
the option to file a motion for reconsideration before the SSC, it was nevertheless mandatory that he do so
if he wanted to subsequently avail of judicial remedies.
....
The policy of judicial bodies to give quasi-judicial agencies, such as the SSC, an opportunity to correct its
mistakes by way of motions for reconsideration or other statutory remedies before accepting appeals
therefrom finds extensive doctrinal support in the well-entrenched principle of exhaustion of administrative
remedies.
The reason for the principle rests upon the presumption that the administrative body, if given the chance
to correct its mistake or error, may amend its decision on a given matter and decide it properly. The
principle insures orderly procedure and withholds judicial interference until the administrative process
would have been allowed to duly run its course. This is but practical since availing of administrative
remedies entails lesser expenses and provides for a speedier disposition of controversies. Even comity
dictates that unless the available administrative remedies have been resorted to and appropriate
authorities given an opportunity to act and correct the errors committed in the administrative forum,
judicial recourse must be held to be inappropriate, impermissible, premature, and even
unnecessary.69 (Emphasis supplied, citations omitted)
Furthermore, jurisdiction is determined by laws enacted by Congress. The doctrine of exhaustion of
administrative remedies ensures that this legislative power is respected by courts. Courts cannot ignore
Congress' determination that the Social Security Commission is the entity with jurisdiction over any dispute
arising from the Social Security Act with respect to coverage, benefits, contributions, and penalties.
Here, nothing in the records shows that petitioners filed a case before the Social Security Commission or
asked for a reconsideration of the assailed issuances. Moreover, petitioners did not even try to show that
their Petition falls under one (1) of the exceptions to the doctrine of exhaustion of administrative remedies:
However, we are not unmindful of the doctrine that the principle of exhaustion of administrative remedies
is not an ironclad rule. It may be disregarded (1) when there is a violation of due process, (2) when the
issue involved is purely a legal question, (3) when the administrative action is patently illegal amounting to
lack or excess of jurisdiction, (4) when there is estoppel on the part of the administrative agency
concerned, (5) when there is irreparable injury, (6) when the respondent is a department secretary whose
acts as an alter ego of the President bears the implied and assumed approval of the latter, (7) when to
require exhaustion of administrative remedies would be unreasonable, (8) when it would amount to a
nullification of a claim, (9) when the subject matter is a private land in land case proceedings, (10) when
the rule does not provide a plain, speedy and adequate remedy, (11) when there are circumstances
indicating the urgency of judicial intervention, (12) when no administrative review is provided by law, (13)
where the rule of qualified political agency applies, and (14) when the issue of non-exhaustion of
administrative remedies has been rendered moot.70 (Emphasis in the original, citations omitted)
The doctrine of exhaustion of administrative remedies is settled in jurisprudence.71
As early as 1967, this
Court has recognized the requirement that parties must exhaust all administrative remedies available
before the Social Security Commission.72 The Social Security Commission, then, must be given a chance to
render a decision on the issue, or to correct any alleged mistake or error, before the courts can exercise
their power of judicial review. This Court ruled:
In the case at bar, plaintiff has not exhausted its remedies before the Commission. The Commission has not
even been given a chance to render a decision on the issue raised by plaintiff herein, because the latter
has not appealed to the Commission from the action taken by the System in insisting upon the
enforcement of Circular No. 34.73 (Emphasis in the original)
Thus, petitioners have prematurely invoked this Court's power of judicial review in violation of the doctrine
of exhaustion of administrative remedies.
Notably, petitioners failed to abide by the principle of primary administrative jurisdiction. This principle
states that:
. . . courts cannot or will not determine a controversy involving a question which is within the jurisdiction of
the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to determine technical and intricate matters of
fact.74
In Republic v. Gallo:75
[U]nder the doctrine of primary administrative jurisdiction, if an administrative tribunal has jurisdiction over a
controversy, courts should not resolve the issue even if it may be within its proper jurisdiction. This is
especially true when the question involves its sound discretion requiring special knowledge, experience,
and services to determine technical and intricate matters of fact.
In Republic v. Lacap:
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary jurisdiction; that
is, courts cannot or will not determine a controversy involving a question which is within the jurisdiction of
the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to determine technical and intricate matters of fact.
...
Thus, the doctrine of primary administrative jurisdiction refers to the competence of a court to take
cognizance of a case at first instance. Unlike the doctrine of exhaustion of administrative remedies, it
cannot be waived.76 (Emphasis in the original, citations omitted)
Here, respondent Social Security Commission qualifies as an administrative tribunal, given sound
administrative discretion requiring the special knowledge, experience, and services of the administrative
tribunal to determine technical and intricate matters of fact. This is evident from the qualifications of its
members and its powers and duties under Sections 3 and 4 of the Social Security Act:
SECTION 3. Social Security System. — (a) . . . The SSS shall be directed and controlled by a Social Security
Commission, hereinafter referred to as 'Commission', composed of the Secretary of Labor and Employment
or his duly designated undersecretary, the SSS president and seven (7) appointive members, three (3) of
whom shall represent the workers' group, at least one (1) of whom shall be a woman; three (3), the
employers' group, at least one (1) of whom shall be a woman; and one (1), the general public whose
representative shall have adequate knowledge and experience regarding social security, to be
appointed by the President of the Philippines. The six (6) members representing workers and employers shall
be chosen from among the nominees of workers' and employers' organizations, respectively. . . .
(b) The general conduct of the operations and management functions of the SSS shall be vested in the SSS
President who shall serve as the chief executive officer immediately responsible for carrying out the
program of the SSS and the policies of the Commission. The SSS President shall be a person who has had
previous experience in technical and administrative fields related to the purposes of this Act. . . .
(c) The Commission, upon the recommendation of the SSS President, shall appoint an actuary and such
other personnel as may be deemed necessary; fix their reasonable compensation, allowances and other
benefits; prescribe their duties and establish such methods and procedures as may be necessary to insure
the efficient, honest and economical administration of the provisions and purposes of this Act: . .
. Provided, further, That the personnel of the SSS shall be selected only from civil service eligibles and be
subject to civil service rules and regulations:. . .
SECTION 4. Powers and Duties of the Commission and SSS. — (a) The Commission. — For the attainment of
its main objectives as set forth in Section 2 hereof, the Commission shall have the following powers and
duties:
(1) To adopt, amend and rescind, subject to the approval of the President of the Philippines, such
rules and regulations as may be necessary to carry out the provisions and purposes of this Act;
(2) To establish a provident fund for the members which will consist of voluntary contributions of
employers and/or employees, self-employed and voluntary members and their earnings, for the
payment of benefits to such members or their beneficiaries, subject to such rules and regulations
as it may promulgate and approved by the President of the Philippines;

(3) To maintain a Provident Fund which consists of contributions made by both the SSS and its officials
and employees and their earnings, for the payment of benefits to such officials and employees or
their heirs under such terms and conditions as it may prescribe;
(4) To approve restructuring proposals for the payment of due but unremitted contributions and
unpaid loan amortizations under such terms and conditions as it may prescribe;
(5) To authorize cooperatives registered with the cooperative development authority or associations
registered with the appropriate government agency to act as collecting agents of the SSS with
respect to their members: Provided, That the SSS shall accredit the cooperative or
association: Provided, further, That the persons authorized to collect are bonded;
(6) To compromise or release, in whole or in part any interest, penalty or any civil liability to SSS in
connection with the investments authorized under Section 26 hereof, under such terms and
conditions as it may prescribe and approved by the President of the Philippines; and
(7) To approve, confirm, pass upon or review any and all actions of the SSS in the proper and
necessary exercise of its powers and duties hereinafter enumerated. (Emphasis supplied)
Thus, under the doctrine of primary administrative jurisdiction, petitioners should have first filed their case
before respondent Social Security Commission.
I (C)
As for mootness, as earlier mentioned, moot cases prevent the actual case or controversy from becoming
justiciable. Courts cannot render judgment after the issue has already been resolved by or through
external developments. This entails that they can no longer grant or deny the relief prayed for by the
complaining party.77
This is consistent with this Court's deference to the powers of the other branches of government. This Court
must be wary that it is ruling on existing facts before it invalidates any act or rule.78
Nonetheless, this Court has enumerated circumstances when it may still rule on moot issues. In David:
Courts will decide cases, otherwise moot and academic, if: first, there is a grave violation of the
Constitution; second, the exceptional character of the situation and the paramount public interest is
involved; third, when constitutional issue raised requires formulation of controlling principles to guide the
bench, the bar, and the public; and fourth, the case is capable of repetition yet evading
review.79 (Emphasis in the original, citations omitted)
The third exception is corollary to this Court's power under Article VIII, Section 5(5) of the 1987
Constitution.80 This Court has the power to promulgate rules and procedures for the protection and
enforcement of constitutional rights, pleading, practice, and procedure in all courts. It applies where there
is a clear need to clarify principles and processes for the protection of rights.
As for the rest of the exceptions, however, all three (3) circumstances must be present before this Court
may rule on a moot issue. There must be an issue raising a grave violation of the Constitution, involving an
exceptional situation of paramount public interest that is capable of repetition yet evading review.
Here, since respondent Social Security Commission is set to issue new resolutions for the Social Security
System members' contributions, the issue on the assailed issuances' validity may be rendered moot.
Nonetheless, all the discussed exceptions are present: (1) petitioners raise violations of constitutional rights;
(2) the situation is of paramount public interest; (3) there is a need to guide the bench, the bar, and the
public on the power of respondent Social Security Commission to increase the contributions; and (4) the
matter is capable of repetition yet evading review, as it involves a question of law that can recur. Thus, this
Court may rule on this case.
I (D)
Petitioners argue that they have the legal standing to file the Petition since: (1) a majority of them are
Social Security System members and are directly affected by the increase in contributions;81 and (2) other
petitioners argue that the standing requirement must be relaxed since the issues they raise are of
transcendental importance.82
On the contrary, not all petitioners have shown the requisite legal standing to bring the case before this
Court.
Legal standing is the personal and substantial interest of a party in a case "such that the party has
sustained or will sustain direct injury as a result of the governmental act that is being challenged, alleging
more than a generalized grievance."83
Petitioners Joselito Ustarez, Salvador T. Carranza, Nenita Gonzaga, Prescila A. Maniquiz, Reden R.
Alcantara, and Anakpawis Party-List Representative Fernando Hicap, for himself, are Social Security System
members who stand to suffer direct and material injury from the assailed issuances' enforcement. They are,
thus, clothed with legal personality to assail the imposed increase in contribution rates and maximum
monthly salary credit.
On the other hand, petitioners Kilusang Mayo Uno, Anakpawis Party-List, Center for Trade Union and
Human Rights, and National Federation of Labor Unions-Kilusang Mayo Uno all failed to show how they will
suffer direct and material injury from the enforcement of the assailed issuances.
However, jurisprudence is replete with instances when a liberal approach to determining legal standing
was adopted. This has allowed "ordinary citizens, members of Congress, and civic organizations to
prosecute actions involving the constitutionality or validity of laws, regulations[,] and rulings." 84
This Court has provided instructive guides to determine whether a matter is of transcendental importance:
"(1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of
disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of
the government; and (3) the lack of any other party with a more direct and specific interest in the
questions being raised."85
Here, the assailed issuances set the new contribution rate and its date of effectivity. The increase in
contributions has been in effect since January 2014. As such, the issue of the validity of increase in
contributions is of transcendental importance. The required legal standing for petitioners must be relaxed.
It is worth noting that this issue affects millions of Filipinos working here and abroad. A substantial portion of
members' salaries goes to the Social Security System fund. To delay the resolution of such an important
issue would be a great disservice to this Court's duty enshrined in the Constitution.
For all these reasons, and despite the technical infirmities in this Petition, this Court reviews the assailed
issuances.
II
Petitioners' attack on the increase in contribution rate and maximum monthly salary credit is two (2)-tiered:
(1) they assail the validity of the exercise of respondents Social Security System and Social Security
Commission's power under the law; and (2) they assail the validity of the delegation of power to
respondent Social Security Commission.
Petitioners argue that the assailed issuances are void for being issued under vague and unclear standards
under the Social Security Act. They admit that Section 18 allows the Social Security Commission to fix the
MONTHLY
contribution rate subject to several conditions. However, petitioners claim that the term "actuarial SALARY RANGE OF MONTHLY
SALARY
calculations" is too vague and general, and the relationship between the rate of benefits and actuarial BRACKET COMPENSATION CONTRIBUTION
CREDIT
calculations is not clearly defined. Thus, they conclude that the delegation of power to fix the contribution
rate is incomplete in all its terms and conditions.
Petitioners' argument lacks merit.
Petitioners are putting in issue not only the validity of the exercise of the delegated power, but also the EMPLOYER EMPLOYEE TOTAL
validity of the delegation itself. They are, thus, collaterally attacking the validity of the Social Security Act's
provisions.
Collateral attacks on a presumably valid law are not allowed. Unless a law, rule, or act is annulled in a I 1,000.00-1,249.99 1000 50.70 33.30 84.00
direct proceeding, it is presumed valid.86
Furthermore, the "delegation of legislative power to various specialized administrative agencies is allowed II 1,250.00-1,749.99 1500 76.00 50.00 126.00
in the face of increasing complexity of modern life."87 In Equi-Asia Placement, Inc. v. Department of Foreign
Affairs:88 III 1,750.00-2,249.99 2000 101.30 66.70 168.00
Given the volume and variety of interactions involving the members of today's society, it is doubtful if the
legislature can promulgate laws dealing with the minutiae aspects of everyday life. Hence, the need to
IV 2,250.00-2,749.99 2500 126.70 83.30 210.00
delegate to administrative bodies, as the principal agencies tasked to execute laws with respect to their
specialized fields, the authority to promulgate rules and regulations to implement a given statute and
effectuate its policies.89 V 2,750.00-3,249.99 3000 152.00 100.00 252.00
For a valid exercise of delegation, this Court enumerated the following requisites:
All that is required for the valid exercise of this power of subordinate legislation is that the regulation must VI 3,250.00-3,749.99 3500 177.30 116.70 294.00
be germane to the objects and purposes of the law; and that the regulation be not in contradiction to,
but in conformity with, the standards prescribed by the law. Under the first test or the so-called VII 3,750.00-4,249.99 4000 202.70 133.30 336.00
completeness test, the law must be complete in all its terms and conditions when it leaves the legislature
such that when it reaches the delegate, the only thing he will have to do is to enforce it. The second test or
the sufficient standard test, mandates that there should be adequate guidelines or limitations in the law to VIII 4,250.00-4,749.99 4500 228.00 150.00 378.00
determine the boundaries of the delegate's authority and prevent the delegation from running riot.90
Simply put, what are needed for a valid delegation are: (1) the completeness of the statute making the IX 4,750.00-5,249.99 5000 253.30 166.70 420.00
delegation; and (2) the presence of a sufficient standard.91
To determine completeness, all of the terms and provisions of the law must leave nothing to the delegate X 5,250.00-5,749.99 5500 278.70 183.70 462.40
except to implement it. "What only can be delegated is not the discretion to determine what the law shall
be but the discretion to determine how the law shall be enforced."92
XI 5,750.00-6,249.99 6000 304.00 200.00 504.00
More relevant here, however, is the presence of a sufficient standard under the law. Enforcement of a
delegated power may only be effected in conformity with a sufficient standard, which is used "to map out
XII 6,250.00-6,749.99 6500 329.30 216.70 546.00
the boundaries of the delegate's authority and thus 'prevent the delegation from running riot.'"93 The law
must contain the limitations or guidelines to determine the scope of authority of the delegate.
Not only is the Social Security Act complete in its terms; it also contains a sufficient standard for the Social XIII 6,750.00-7,249.99 7000 354.70 233.30 588.00
Security Commission to fix the monthly contribution rate and the minimum and maximum monthly salary
credits. XIV 7,250.00-7,749.99 7500 380.00 250.00 630.00
Section 18 states:
SECTION 18. Employee's Contribution. — (a) Beginning as of the last day of the calendar month when an XV 7,750.00-8,249.99 8000 405.30 266.70 672.00
employee's compulsory coverage takes effect and every month thereafter during his employment, the
employer shall deduct and withhold from such employee's monthly salary, wage, compensation or
XVI 8,250.00-8,749.99 8500 430.70 283.30 714.00
earnings, the employee's contribution in an amount corresponding to his salary, wage, compensation or
earnings during the month in accordance with the following schedule:
XVII 8,750.00-OVER 9000 456.00 300.00 756.00

The foregoing schedule of contribution shall also apply to self-employed and voluntary members.
The maximum monthly salary credit shall be Nine thousand pesos (P9,000.00) effective January Nineteen
hundred and ninety six (1996): Provided, That it shall be increased by One thousand pesos (P1,000.00)
every year thereafter until it shall have reached Twelve thousand pesos (P12,000.00) by Nineteen hundred
and ninety nine (1999): Provided, further, That the minimum and maximum monthly salary credits as well as
the rate of contributions may be fixed from time to time by the Commission through rules and regulations
taking into consideration actuarial calculations and rate of benefits, subject to the approval of the
President of the Philippines. (Emphasis supplied)
In relation to Section 18, Section 4(a) prescribes the powers and duties of the Social Security Commission. It
provides:
SECTION 4. Powers and Duties of the Commission and SSS. — (a) The Commission. — For the attainment of
its main objectives as set forth in Section 2 hereof, the Commission shall have the following powers and
duties:
(1) To adopt, amend and rescind, subject to the approval of the President of the Philippines, such rules and
regulations as may be necessary to carry out the provisions and purposes of this Act;
....
(7) To approve, confirm, pass upon or review any and all actions of the SSS in the proper and necessary
exercise of its powers and duties hereinafter enumerated.
It is evident from these provisions that the legislature has vested the necessary powers in the Social Security
Commission to fix the minimum and maximum amounts of monthly salary credits and the contribution rate.
The agency does not have to do anything except implement the provisions based on the standards and
limitations provided by law.
In fixing the contribution rate and the minimum and maximum amounts of monthly salary credits, the
legislature specified the factors that should be considered: "actuarial calculations and rate of benefits"94 as
an additional limit to the Social Security Commission's rate fixing power under Section 18, the legislature
required the approval of the President of the Philippines.
The Social Security Act clearly specifies the limitations and identifies when and how the Social Security
Commission will fix the contribution rate and the monthly salary credits.
Actuarial science is derived from the concepts of utilitarianism and risk aversion. Thus:
Just as economic systems are the realm of the economist, social systems are the realm of the sociologist,
and electrical systems are the realm of the electrical engineer, financial security systems have become the
realm of the actuary. The uniqueness of the actuarial profession lies in the actuary's understanding of
financial security systems in general, and the inner workings of the many different types in particular. The
role of the actuary is that of the designer, the adaptor, the problem solver, the risk estimator, the innovator,
and the technician of the continually changing field of financial security systems.
....
Utilitarianism as a philosophy, and risk aversion as a feature of human psychology, lead to the evolution of
financial security systems as a means of reducing the financial consequences of unfavorable events.
Actuaries are those professionals with a deep understanding of, and training in, financial security systems;
their reason for being, their complexity, their mathematics, and the way they work.95 (Emphasis supplied)
Actuarial science is "primarily concerned with the study of consequences of events that involve risk and
uncertainty. Actuarial practice identifies, analyzes and assists in the management of the outcomes—
including costs and benefits—associated with events that involve risk and uncertainty."96
Actuarial science is relevant to the operation of a social security system, in that "the actuary plays a crucial
role in analysing [the system's] financial status and recommending appropriate action to ensure its viability.
More specifically, the work of the actuary includes assessing the financial implications of establishing a new
scheme, regularly following up its financial status and estimating the effect of various modifications that
might have a bearing on the scheme during its existence."97
The application of actuarial calculations in the operation of a social system scheme requires the
determination of benefits.98 To question the use of "actual calculations" as factor for fixing rates is to
question the policy or wisdom of the legislature, which is a co-equal branch of government.
As a component of the doctrine of separation of powers, courts must never go into the question of the
wisdom of the policy of the law.99 In Magtajas v. Pryce Properties Corporation, Inc.,100 where this Court
resolved the issue of the morality of gambling, this Court held:
The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally
considered inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to deal
with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit gambling
altogether or allow it without limitation or it may prohibit some forms of gambling and allow others for
whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but permits lotteries,
cockfighting and horse-racing. In making such choices, Congress has consulted its own wisdom, which this
Court has no authority to review, much less reverse. Well has it been said that courts do no[t] sit to resolve
the merits of conflicting theories. That is the prerogative of the political departments. It is settled that
questions regarding the wisdom, morality, or practicibility of statutes are not addressed to the judiciary but
may be resolved only by the legislative and executive departments, to which the function belongs in our
scheme of government. That function is exclusive. Whichever way these branches decide, they are
answerable only to their own conscience and the constituents who will ultimately judge their acts, and not
to the courts of justice.101 (Emphasis supplied, citation omitted)
Recently, in Garcia v. Drilon,102 this Court has upheld the long-settled principle that courts do not go into
the wisdom of the law:
It is settled that courts are not concerned with the wisdom, justice, policy, or expediency of a statute.
Hence, we dare not venture into the real motivations and wisdom of the members of Congress . .
. Congress has made its choice and it is not our prerogative to supplant this judgment. The choice may be
perceived as erroneous but even then, the remedy against it is to seek its amendment or repeal by the
legislative. By the principle of separation of powers, it is the legislative that determines the necessity,
adequacy, wisdom and expediency of any law. We only step in when there is a violation of the
Constitution.103 (Emphasis supplied, citations omitted)
Hence, the Social Security Act has validly delegated the power to fix the contribution rate and the
minimum and maximum amounts for the monthly salary credits. It is within the scope of the Social Security
Commission's power to fix them, as clearly laid out in the law.
III
On the question of the validity of the exercise of respondents Social Security Commission and Social
Security System's powers, this Court disagrees with petitioners' argument that the increase in contribution
rate is prohibited by Section 4(b)(2) of the Social Security Act. The provision states:
SECTION 4. Powers and Duties of the Commission and SSS. . . .
(b) The Social Security System. — Subject to the provision of Section four (4), paragraph seven (7) hereof,
the SSS shall have the following powers and duties:
....
(2) To require the actuary to submit a valuation report on the SSS benefit program every four (4) years, or
more frequently as may be necessary, to undertake the necessary actuarial studies and calculations
concerning increases in benefits taking into account inflation and the financial stability of the SSS, and to
provide for feasible increases in benefits every four (4) years, including the addition of new ones, under
such rules and regulations as the Commission may adopt, subject to the approval of the President of the
Philippines: Provided, That the actuarial soundness of the reserve fund shall be guaranteed: Provided,
further, That such increases in benefits shall not require any increase in the rate of contribution[.] (Emphasis
supplied)
However, an examination of the provision and the assailed issuances reveals that the questioned increase
in contribution rate was not solely for the increase in members' benefits, but also to extend actuarial life.
Social Security Commission Resolution No. 262-s.2013 provides:
RESOLVED, That the Commission approve and confirm, as it hereby approves and confirms, the SSS 2013
Reform Agenda, the effectivity of which shall be as approved by the President of the Philippines, which
aims to address SSS' unfunded liability, extend SSS' fund life to a more secure level and provide improved
benefits for current and future generations of SSS members, consisting of the following:
1. Increase in the contribution rate from 10.4% to 11%; and
2. Increase in the maximum monthly salary credit (MSC) from P15,000 to P16,000.
The above is based on the recommendation of the President and CEO in his memorandum dated 19
November 2012.104
The provisos in Section 4(b)(2) must not be read in isolation, but within the context of the provision, as well
as the policy of the law.
The two (2) provisos refer to the last part of Section 4(b)(2), or on the System's duty to "provide for feasible
increases in benefits every four (4) years, including the addition of new ones[.]" Section 4(b)(2) states that
the "actuarial soundness of the reserve fund shall be guaranteed" in providing any increase in benefits. As
established earlier, Congress has expressly provided the Social Security System, through the Social Security
Commission, power to fix the minimum and maximum monthly salary credits and the contribution rate.
To disregard actuarial soundness of the reserves would be to go against the policy of the law on
maintaining a sustainable social security system:
SECTION 2. Declaration of Policy. — It is the policy of the State to establish, develop, promote and
perfect a sound and viable tax-exempt social security system suitable to the needs of the people
throughout the Philippines which shall promote social justice and provide meaningful protection to
members and their beneficiaries against the hazards of disability, sickness, maternity, old age, death, and
other contingencies resulting in loss of income or financial burden. Towards this end, the State shall
endeavor to extend social security protection to workers and their beneficiaries. (Emphasis supplied)
Petitioners' argument is, thus, bereft of merit.
In arguing that the increase in contributions is unduly oppressive upon the labor sector, petitioners are
again asking this Court to inquire into the wisdom of the policy behind the issuances made by the
executive branch. This, as earlier said, we cannot and will not do.105
Furthermore, this Court is not persuaded by petitioners' argument that the increase in contributions
constitutes an unlawful exercise of police power.
Police power has been defined as:
. . . state authority to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare. Persons and property could thus "be subjected to all kinds of restraints and
burdens in order to secure the general comfort, health and prosperity of the state." [It is] "the power to
prescribe regulations to promote the health, morals, peace, education, good order or safety, and general
welfare of the people."106
To be a valid exercise of police power, there must be a lawful subject and the power is exercised through
lawful means.107 The second requisite requires a reasonable relation between the purpose and the
means.108
Using the parameters above, we hold that the increases reflected in the issuances of respondents are
reasonably necessary to observe the constitutional mandate of promoting social justice under the Social
Security Act. The public interest involved here refers to the State's goal of establishing, developing,
promoting, and perfecting a sound and viable tax-exempt social security system. To achieve this, the
Social Security System and the Social Security Commission are empowered to adjust from time to time the
contribution rate and the monthly salary credits. Given the past increases since the inception of the law,
the contribution rate increase of 0.6% applied to the corresponding monthly salary credit does not scream
of unreasonableness or injustice.
Moreover, this Court will not delve into petitioners' argument that the revised ratio of contributions was
supposedly inconsistent with previous schemes.109 Nothing in the law requires that the ratio of contributions
must be set at a 70%-30% sharing in favor of the employee. Supplanting the executive branch's
determination of the proper ratio of contribution would result in judicial legislation, which is beyond this
Court's power.
A parameter of judicial review is determining who can read the Constitution. Interpreting its text has never
been within the exclusive province of the courts. Other branches of government are equally able to
provide their own interpretation of the provisions of our organic law, especially on the powers conferred by
the Constitution and those delegated by Congress to administrative agencies.
However, other departments' reading or interpretation is limited only to a preliminary determination. Only
this Court can read the text of the Constitution with finality.
In People v. Vera,110 Associate Justice Jose Laurel elucidated on how laws must be accorded presumption
of constitutionality due to the premise that the Constitution binds all three (3) branches of government. He
explained:
Under a doctrine peculiarly American, it is the office and duty of the judiciary to enforce the Constitution.
This court, by clear implication from the provisions of section 2, subsection 1, and section 10, of Article VIII of
the Constitution, may declare an act of the national legislature invalid because in conflict with the
fundamental law. It will not shirk from its sworn duty to enforce the Constitution. And, in clear cases, it will
not hesitate to give effect to the supreme law by setting aside a statute in conflict therewith. This is of the
essence of judicial duty.
This court is not unmindful of the fundamental criteria in cases of this nature that all reasonable doubts
should be resolved in favor of the constitutionality of a statute. An act of the legislature approved by the
executive, is presumed to be within constitutional limitations. The responsibility of upholding the Constitution
rests not on the courts alone but on the legislature as well. "The question of the validity of every statute is
first determined by the legislative department of the government itself." . . . And a statute finally comes
before the courts sustained by the sanction of the executive. The members of the Legislature and the Chief
Executive have taken an oath to support the Constitution and it must be presumed that they have been
true to this oath and that in enacting and sanctioning a particular law they did not intend to violate the
Constitution. The courts cannot but cautiously exercise its power to overturn the solemn declarations of two
of the three grand departments of the government. . . . Then, there is that peculiar political philosophy
which bids the judiciary to reflect the wisdom of the people as expressed through an elective Legislature
and an elective Chief Executive. It follows, therefore, that the courts will not set aside a law as violative of
the Constitution except in a clear case. This is a proposition too plain to require a citation of
authorities.111 (Emphasis supplied, citations omitted)
As such, courts, in exercising judicial review, should also account for the concept of "pragmatic
adjudication."112 As another parameter of judicial review, adjudicative pragmatism entails deciding a case
with regard to the "present and the future, unchecked by any felt duty to secure consistency in principle
with what other officials have done in the past[.]"113 The pragmatist judge is:
. . . not uninterested in past decisions, in statutes, and so forth. Far from it. For one thing, these are
repositories of knowledge, even, sometimes, of wisdom, and so it would be folly to ignore them even if they
had no authoritative significance. For another, a decision that destabilized the law by departing too
abruptly from precedent might have, on balance, bad results. There is often a trade-off between
rendering substantive justice in the case under consideration and maintaining the law's certainty and
predictability. This trade-off, which is perhaps clearest in cases in which a defense of statute of limitations is
raised, will sometimes justify sacrificing substantive justice in the individual case to consistency with previous
cases or with statutes or, in short, with well-founded expectations necessary to the orderly management of
society's business. Another reason not to ignore the past is that often it is difficult to determine the purpose
and scope of a rule without tracing the rule to its origins.
The pragmatist judge thus regards precedent, statutes, and constitutions both as sources of potentially
valuable information about the likely best result in the present case and as signposts that must not be
obliterated or obscured gratuitously, because people may be relying upon them.114
Going into the validity of respondents' actions, petitioners must show that the assailed issuances were
made without any reference to any law, or that respondents knowingly issued resolutions in excess of the
authority granted to them under the Social Security Act to constitute grave abuse of discretion.
Grave abuse of discretion denotes a "capricious, arbitrary[,] and whimsical exercise of power. The abuse
of discretion must be patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform a duty enjoined by law, as not to act at all in contemplation of law, or where the power is
exercised in an arbitrary and despotic manner by reason of passion or hostility."115
Any act of a government branch, agency, or instrumentality that violates a statute or a treaty is grave
abuse of discretion.116 However, grave abuse of discretion pertains to acts of discretion exercised in
areas outside an agency's granted authority and, thus, abusing the power granted to it.117 Moreover, it is
the agency's exercise of its power that is examined and adjudged, not whether its application of the law is
correct.118
Here, respondents were only complying with their duties under the Social Security Act when they issued the
assailed issuances. There is no showing that respondents went beyond the powers under the law that
amounts to lack of or in excess of their jurisdiction. Petitioners' claims are unsubstantiated and, as such,
merit no finding of grave abuse of discretion.
IV
Petitioners have failed to show that there was an invasion of a material and substantial right, or that they
were entitled to such a right. Moreover, they failed to show that "there is an urgent and paramount
necessity for the writ to prevent serious and irreparable damage."119 Accordingly, petitioners' prayer for the
issuance of a temporary restraining order and/or writ of preliminary injunction is denied.
WHEREFORE, the Petition is DENIED for lack of merit. Resolution Nos. 262-s. 2013 and 711-s. 2013 issued by the
Social Security Commission, as well as Circular No. 2013-010 issued by the Social Security System, are valid.
The prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction is
also DENIED.
SO ORDERED.